Since President Jimmy Carter said in the 70s that we needed to become energy independent, we have been sold a bill of goods by the government and the US press that we are at the mercy of the middle east when it comes to petroleum. Would you be surprised to learn that for the first time since the big war ended, we are now a net exporter of petroleum?
Yes friends, this year we exported 753.4 million barrels of everything from gasoline to jet fuel, while we imported only 689.4 barrels, according to the US Energy Information Administration. How, you may ask, could this be, when gas has run over $3 per gallon most of this year? Well friends, it’s called the old law of supply and demand; and the gas producers have realized they can keep our prices high by selling to the ever growing third world markets and other countries across the globe, keeping our supply short.
In August of this year, US drivers burned 7.7% less gasoline than 4 years earlier; partly because of government mandates to the auto industry to improve mileage, and partly because we just plain could not afford to buy any more gasoline. Yet, did this reduction in demand bring down prices?
No-sirree, because the refiners knew they could sell it across the pond and keep prices up.
Furthermore, their insistence that we need to supplement our gasoline by adding up to10 per cent corn-based ethynol alcohol is specious, too. Look at what has happened to the price of corn-based food products as a result of the demand for corn. And yet we continue to give exorbitant tax credits for mixing gasoline and ethynol.
Now, don’t misunderstand me. I am a capitalist and I believe in free trade, but not at the expense of the citizens of this nation, for the benefit of China, et al. In September alone, we exported nearly 1 billion barrels of gasoline. Gasoline and low-sulfur diesel used by our truckers were the biggest lures for foreign customers, and look at the premium our truckers have to pay over gasoline for a product which requires much less refining. It’s insulting to us all.
According to the Wall Street Journal, Singapore’s petroleum imports from the US quadrupled in the last 5 years, while Mexico’s petroleum imports rose by two-thirds.
Growing domestic output means our refineries are producing more fuel than the US market demands, so they look overseas to keep demand up, and the prices high domestically. Corporate profits are rising for Royal Dutch Shell, Exxon, Valero and Marathon.
And the domestic petroleum industry continues to push for the Keystone XL pipeline carrying petroleum tar sands from Canada across our Midwest to refineries in Port Arthur, Texas. I am all for the pipeline, but I do not think we should see these sands refined, and then shipped across the world, so our $3 plus per gallon price can be retained. It is past time we all should join the occupy Wall Street movement and bombard Congress with the demand that restrictive tariffs be placed on US oil exports, and that all ethynol credits be ceased immediately.
Friday, December 23, 2011
Thursday, November 3, 2011
WHO OWNS YOUR GOVERNMENT?
This is a column to illustrate whether your government does its best to provide a stable economy for the average American citizen, or whether it represents the fat cats who spend the big bucks. You decide.
Following the crash of 1929, one of every five banks in America failed, and their depositors were completely wiped out. In 1933, the Glass-Steagall Act was passed in an attempt to prevent this ever happening again. The law prevented banks from underwriting either debt or equity securities, or owning insurance companies. Thus, they had to choose between being a deposit/lending institution, or a Wall Street financier. In 1956, under the President called “do nothing” Eisenhower, Congress passed the Bank Holding Company Act, stating that a holding company owning two or more banks could not engage in the securities or insurance business either.
Shortly thereafter, in the 60s, banks began to lobby Congress to let them slip into the municipal bond market, underwriting debt securities for cities. In 1986, the Federal Reserve Board, which regulates banks, re-interpreted Section 20 of the Act, which prevents banks from being engaged in securities, to allow up to 5% of their revenue to come from securities transactions. They also allowed Bankers Trust, a bank, to engage in commercial paper (unsecured short term business loans.) We should note here the “independent” Reserve Board was formulated by financiers and established by Congress in 1913, to control our money supply. It is a totally private corporation owned by the banks.
In 1987, over the objections of Chairman Paul Volcker, the board voted 3-2 in favor of proposals from Citicorp, J. P. Morgan and the aforementioned Bankers Trust to allow these banks to handle commercial paper as described above; and to underwrite revenue bonds and mortgage backed securities (the instrument which so recently wrecked the housing market and the whole economy). Chairman Volcker warned that banks would likely lower loan standards in pursuit of lucrative security offerings, and market bad loans to the public.
In March 1987, the Fed allowed Chase Manhattan Bank to enter the commercial paper market. It also stated it planned to raise the 5% securities revenue limit to a 10% limit. In August 1987, Alan Greenspan, a former Director at J. P. Morgan, was named to replace Volcker as Fed Chairman. Most of the world considered him a financial genius, but only until the crash of 2008-9.
In January 1989, the Fed voted to allow banks into both corporate debt and equity securities, and raised the revenue limit to 10%. All during the 80s and 90s, Congress debated legislation to repeal Glass-Steagall, but always failed to act. In 1996, with the support of Greenspan, the Fed raised the bank securities revenue limit to 25%. About the only teeth left in Glass-Steagall was preventing banks from entering the insurance business. In 1997, the Fed gave banks the right to buy and own securities firms outright. Bankers Trust started it by buying Alex Brown, a brokerage firm.
In fall of 1997, Sandy Weill, chairman of Travelers Insurance, tried to merge with J. P. Morgan, but failed. He then bought Salomon Smith Barney, a brokerage firm, and then proposed a merger with Citigroup, owner of Citibank. This was clearly a violation of what was left of Glass-Steagall, because it involved an insurance company.
Greenspan, with the support of President Bill Clinton and his Treasury Secretary Robert Rubin, leads the Fed to approve this merger which clearly violates the law. In order to protect us (what a ruse), Greenspan says that unless Congress repeals Glass-Steagall within 2 years, the merger will have to unwind. Deep within the Regs was the possibility of three additional 1 year extensions to Weill which could be provided by the Fed. Just days after announcing the administration would support the repeal, Treasury Secretary Robert Rubin, who had previously been Chairman of Goldman-Sachs investment firm, left the administration to take a top executive post at Citigroup, under Sandy Weill.
In the 1997-98 election cycle, the finance, insurance and real estate industry spends $200 million on lobbying, Citibank alone spent $100 million. The industry spent another $150 million on campaign contributions. And on November 4, 1999, Glass-Steagall is finally repealed, less than 2 years after the merger. Remember the mortgage debacle which started in 2007? Remember the crash of our economy? Remember Paul Volcker’s warning? You decide who Congress was representing.
Following the crash of 1929, one of every five banks in America failed, and their depositors were completely wiped out. In 1933, the Glass-Steagall Act was passed in an attempt to prevent this ever happening again. The law prevented banks from underwriting either debt or equity securities, or owning insurance companies. Thus, they had to choose between being a deposit/lending institution, or a Wall Street financier. In 1956, under the President called “do nothing” Eisenhower, Congress passed the Bank Holding Company Act, stating that a holding company owning two or more banks could not engage in the securities or insurance business either.
Shortly thereafter, in the 60s, banks began to lobby Congress to let them slip into the municipal bond market, underwriting debt securities for cities. In 1986, the Federal Reserve Board, which regulates banks, re-interpreted Section 20 of the Act, which prevents banks from being engaged in securities, to allow up to 5% of their revenue to come from securities transactions. They also allowed Bankers Trust, a bank, to engage in commercial paper (unsecured short term business loans.) We should note here the “independent” Reserve Board was formulated by financiers and established by Congress in 1913, to control our money supply. It is a totally private corporation owned by the banks.
In 1987, over the objections of Chairman Paul Volcker, the board voted 3-2 in favor of proposals from Citicorp, J. P. Morgan and the aforementioned Bankers Trust to allow these banks to handle commercial paper as described above; and to underwrite revenue bonds and mortgage backed securities (the instrument which so recently wrecked the housing market and the whole economy). Chairman Volcker warned that banks would likely lower loan standards in pursuit of lucrative security offerings, and market bad loans to the public.
In March 1987, the Fed allowed Chase Manhattan Bank to enter the commercial paper market. It also stated it planned to raise the 5% securities revenue limit to a 10% limit. In August 1987, Alan Greenspan, a former Director at J. P. Morgan, was named to replace Volcker as Fed Chairman. Most of the world considered him a financial genius, but only until the crash of 2008-9.
In January 1989, the Fed voted to allow banks into both corporate debt and equity securities, and raised the revenue limit to 10%. All during the 80s and 90s, Congress debated legislation to repeal Glass-Steagall, but always failed to act. In 1996, with the support of Greenspan, the Fed raised the bank securities revenue limit to 25%. About the only teeth left in Glass-Steagall was preventing banks from entering the insurance business. In 1997, the Fed gave banks the right to buy and own securities firms outright. Bankers Trust started it by buying Alex Brown, a brokerage firm.
In fall of 1997, Sandy Weill, chairman of Travelers Insurance, tried to merge with J. P. Morgan, but failed. He then bought Salomon Smith Barney, a brokerage firm, and then proposed a merger with Citigroup, owner of Citibank. This was clearly a violation of what was left of Glass-Steagall, because it involved an insurance company.
Greenspan, with the support of President Bill Clinton and his Treasury Secretary Robert Rubin, leads the Fed to approve this merger which clearly violates the law. In order to protect us (what a ruse), Greenspan says that unless Congress repeals Glass-Steagall within 2 years, the merger will have to unwind. Deep within the Regs was the possibility of three additional 1 year extensions to Weill which could be provided by the Fed. Just days after announcing the administration would support the repeal, Treasury Secretary Robert Rubin, who had previously been Chairman of Goldman-Sachs investment firm, left the administration to take a top executive post at Citigroup, under Sandy Weill.
In the 1997-98 election cycle, the finance, insurance and real estate industry spends $200 million on lobbying, Citibank alone spent $100 million. The industry spent another $150 million on campaign contributions. And on November 4, 1999, Glass-Steagall is finally repealed, less than 2 years after the merger. Remember the mortgage debacle which started in 2007? Remember the crash of our economy? Remember Paul Volcker’s warning? You decide who Congress was representing.
Thursday, January 27, 2011
THE FLAT INCOME TAX
The US income tax is broken. One answer to the revenue problems of the US government is so simple, that it defies the imagination. And so fair, it would make the Equal Employment Opportunity Commission blush. The problem is that the answer leaves the highly paid Washington lobbyists totally out of the equation, and as well reduces the size and scope of the IRS. It also makes everyone pay their fair share of operating our federal government. Therefore, until you, Mr. and Mrs. John Q. Public arise, and demand to be heard, our Congress will only hear from them. And people like me, who try to pose a reasonable solution, may find themselves ushered to a mental hospital to keep our voices silent.
According to the US census, the population of the United States in 2010 was some 308 million people. There were just under 140 million income tax returns made. According to the US Government Superintendant of Documents, the top half of those taxpayers paid 97.3 per cent of all the income taxes collected, and the bottom half paid only 2.7 per cent of the income taxes collected. The average rate of their income paid by the top 50 per cent of payers after deductions was 13.65 %. The average rate of their income paid by the bottom 50 per cent of payers after deductions was 2.59 per cent. So, you see the published progressive income tax rates of 10% through 35% are a farce, and just provide work for the lobbyists.
It does not take a genius to see that every able, adult working person in this country is not paying their fair share to operate the Federal government, and those who do pay are largely paying more of their income to make up what is collected. In fact, the top earning 1 per cent of the nation pays a 37% share of all the tax. The top earning 10 per cent of the nation pays a 68 % share of all the tax. The bottom earning 50 per cent of the nation pays only a 2.59% share of the tax. There are 43 per cent of working Americans who pay in little income tax, and some still receive Federal refunds, called Earned Income Tax Credits, for much more than they pay. A low income couple with three qualifying children may get an annual check as large as $5,666 from the IRS, without paying anything in first. This is wealth transfer at its finest.
The total federal income taxes collected last year was $1.031 trillion. If we were to charge every person who earned any income, no matter how small or how large, a flat 15% income tax while keeping all present deductions, the US Government personal income tax collections would have been about 25% higher, or $1.263 trillion, again leaving all deductions intact. If we disallowed all deductions, the total collected would be much higher. This would probably double the personal income taxes collected to $2 trillion plus, and be eminently more fair to every taxpayer. And it should please the socialistic thinkers among you, because the rich would suffer the loss of all their tax shelters.
Altogether, we spent about $3.721 billion last fiscal year. According to the Associated Press, therefore, forty cents of every dollar spent in the 2010 budget was borrowed. Federal debt last year totaled over $13 trillion. The debt is now crawling close to the $14.3 trillion debt limit, which Congress must soon raise, or we will be in default.
Alexander Tytler, 18th century Scottish lawyer and historian, is reported to have said words to this effect, abut the time our nation was born: “A democracy will last only until a majority of the electorate determines they can vote themselves money from the Federal treasury, by electing the people who will promise to give it to them.” History records the average lifetime of previous great nations as 200 years. This is today called by some the “Tytler cycle.” Tytler did not even mention borrowed money, which for us has made it all possible, thus far. But now comes the day of reckoning.
If we instituted the 15% flat income tax with no exemptions or deductions, we would probably double our income tax collections, and more important, everyone would be paying their fair share, even though the bottom half would still pay in much less of the taxes. And if everyone was paying taxes, there would be much less demand for free public services. Anyone interested?
According to the US census, the population of the United States in 2010 was some 308 million people. There were just under 140 million income tax returns made. According to the US Government Superintendant of Documents, the top half of those taxpayers paid 97.3 per cent of all the income taxes collected, and the bottom half paid only 2.7 per cent of the income taxes collected. The average rate of their income paid by the top 50 per cent of payers after deductions was 13.65 %. The average rate of their income paid by the bottom 50 per cent of payers after deductions was 2.59 per cent. So, you see the published progressive income tax rates of 10% through 35% are a farce, and just provide work for the lobbyists.
It does not take a genius to see that every able, adult working person in this country is not paying their fair share to operate the Federal government, and those who do pay are largely paying more of their income to make up what is collected. In fact, the top earning 1 per cent of the nation pays a 37% share of all the tax. The top earning 10 per cent of the nation pays a 68 % share of all the tax. The bottom earning 50 per cent of the nation pays only a 2.59% share of the tax. There are 43 per cent of working Americans who pay in little income tax, and some still receive Federal refunds, called Earned Income Tax Credits, for much more than they pay. A low income couple with three qualifying children may get an annual check as large as $5,666 from the IRS, without paying anything in first. This is wealth transfer at its finest.
The total federal income taxes collected last year was $1.031 trillion. If we were to charge every person who earned any income, no matter how small or how large, a flat 15% income tax while keeping all present deductions, the US Government personal income tax collections would have been about 25% higher, or $1.263 trillion, again leaving all deductions intact. If we disallowed all deductions, the total collected would be much higher. This would probably double the personal income taxes collected to $2 trillion plus, and be eminently more fair to every taxpayer. And it should please the socialistic thinkers among you, because the rich would suffer the loss of all their tax shelters.
Altogether, we spent about $3.721 billion last fiscal year. According to the Associated Press, therefore, forty cents of every dollar spent in the 2010 budget was borrowed. Federal debt last year totaled over $13 trillion. The debt is now crawling close to the $14.3 trillion debt limit, which Congress must soon raise, or we will be in default.
Alexander Tytler, 18th century Scottish lawyer and historian, is reported to have said words to this effect, abut the time our nation was born: “A democracy will last only until a majority of the electorate determines they can vote themselves money from the Federal treasury, by electing the people who will promise to give it to them.” History records the average lifetime of previous great nations as 200 years. This is today called by some the “Tytler cycle.” Tytler did not even mention borrowed money, which for us has made it all possible, thus far. But now comes the day of reckoning.
If we instituted the 15% flat income tax with no exemptions or deductions, we would probably double our income tax collections, and more important, everyone would be paying their fair share, even though the bottom half would still pay in much less of the taxes. And if everyone was paying taxes, there would be much less demand for free public services. Anyone interested?
Thursday, October 28, 2010
WHERE THE TEA PARTY?
I would say I am surprised at how the tea party has exploded in popularity with the public, until I remember what the Federal government did to cause it. Naturally, many patriots finally had enough and revolted.
I voted for Dwight Eisenhower in 1956, and have never looked back, until now. The national GOP, in my humble opinion, is no longer the representative of the conservative common man which it had always tried to be, and still pretends it is. I am a dues paying member of the Morgan GOP, but blind allegiance and financial contribution to any national party because you think they are pursuing your ideals alone is what got us here. On the other hand, the Democrat Party is certainly not representing any tax-paying citizen either. Wake up America!
Dwight Eisenhower, a military genius, warned us in his departing speech as President, to beware of the military/industrial complex, who, perhaps with all good intentions, would become so powerful in the name of national defense; that they would in effect, control the country’s economy and direction. Whatever you believe in terms of government’s role among its citizens; rest assured there is a counterpart in the other party who believes you are nothing but a complete radical, and is willing to invest and work to stop you. This is what drives the funding of both parties and keeps them both alive and strong. Both of them send the same message, and both succeed with it. Send me money, because the other guy is the bogeyman!
Both parties now belong to the money, and the grassroots needs to face it. Washington is run by lobbyists, who are paid by people wanting special legislation for their own selfish interests. Many fired elected representatives simply graduate to lobbying, probably at higher pay. And I am talking about both parties. Yet, I predict the tea party will never be able to acquire control of the Republican Party, and they certainly won’t gain control of the Democrat party. I also predict that no third political party will ever supplant either of the other two, whose main objective is to see who will get to control and spend the money. The third party always costs one side or the other an election, but never wins one itself. What then can the tea party do to help?
Today 40% of every dollar the Congress appropriates is borrowed money. Now Ben Bernanke says he is going to print even more artificial dough; by buying back the same debt the Treasury has already issued, from the banks who bought it from them in the first place, with more counterfeit fiat money. This is inflation personified! The US dollar continues to sink to a new low in the index basket comparing it to other major currencies --- 77 cents against the average basket of international currencies.
I watched Republican minority leader John Boehner earlier this year on television in Pennsylvania, where he said: “We need to tell the nation we are broke, and tell them Social Security retirement age needs to go up to age 70, and further it needs to be means tested. This means if you have worked your tail off to accumulate any assets of your own, you will be denied SS. This is from the man who wants to be the next Speaker of the House. One of the possible solutions, I would offer for the SS problem, is not to raise the retirement age, but to remove the SS tax cap on all income above the present $106,000 annual limit. Most Americans pay SS tax on every dollar they make. But the man, or woman who makes $1 million per year, pays SS tax on only 10% of his income. If you agree, please let all three of your elected Federal representatives know how you feel!
I watched Senator Corker (R-Tennessee), whom I personally like, tell CNBC last Friday morning that everything was on the table, including means testing for SS, which means if you make too much in retirement, you will not ever get it Yes, I can live without it, but I paid for it for 51 years, and I feel I am due it.
Don’t think they will never do means testing. Already Medicare premiums are means tested. I have never made over $250,000 annually in my life. But I was told two years ago my Medicare premiums were going up because my retirement income was too high, and they did go up. But the national GOP wants to tell us a tax increase for those making over $250,000 in annual income will penalize nearly every small business in America. How many small businesses do you know who really “net” over $250,000 a year? I ran a small business for 40 years, and I never did. But I can tell you there are thousands of Wall Street financiers who do. And they are saying to both parties, “If you take my money, you darn sure better not raise my taxes, and I have plenty of money to give.” The Wall Street cats play the middle income class against the poor among us, and laugh all the way to the bank.
You may not know the average 2009 income of the top 25 hedge fund managers, who are largely responsible for the mortgage debacle which caused our recent economic collapse, was over $1 billion each. Why are they partially responsible? Because when Greenspan kept rates at one per cent for eighteen months after 9/11, they said to the money market, “This one per cent is killing us. Figure out how to get us ten per cent return, and we will buy as much as you can provide.” Some unscrupulous mortgage brokers, with Barney Frank’s encouragement, figured how to do it. Make ten per cent mortgages to people who can’t pay, and don’t care; but they will sign anything if you tell them they are getting a house with no money down. These fund managers each made one billion with a “B.” The poor beggars only averaged $464 million each in 2008, a really bad year because of the crash. Before the crash in 2007, they averaged $900 million each. So they, alone in America, are better off already than they were before the crash. Yet, their income tax rate on all this earned income is 15% capital gains, because of a huge tax loophole called “carried interests.” The national GOP will not even consider talking about changing it, even entirely apart from the Bush tax cuts, which are a separate issue.
Two years ago, Goldman-Sachs was on the verge of being broke, and they borrowed $5 billion at 10% interest from Warren Buffett, America’s second richest man, to gain capital. Now the government has bailed out all the Wall Street cats. And Goldman is now sitting on $390 billion in net liquid cash, and wants to pay Buffett back early, even with a penalty. They already paid back TARP, because they wanted out from under any government scrutiny on their payroll bonuses.
Meanwhile, the government is bragging now about how the TARP program is actually returning $25 billion profit to the government. Good, but they say nothing about the estimated 154 Billion dollar bail-out cost of AIG Insurance. Nor did they mention Fanny and Freddy at a bail-out cost of from possibly 221 Billion to 363 Billion
This bailout is what allowed AIG to pay off all the billions of dollars of insurance Goldman had bought from them on this crappy mortgage mess, by purchasing credit default swaps from AIG. Without the insurance being paid them, Goldman was in danger of collapse. But now, thanks to you and me, and the money we borrowed to rescue AIG; Goldman is in great shape, and has no supervision over how many billion dollar bonuses they pay.
What then, do I see as the answer? The tea party can make a real difference! It needs to continue to grow, and to organize and focus itself nationally, so that it will have real clout. It should not spend all its efforts on individual races. Then it needs to have a national convention, not for naming candidates; its sole purpose to prepare a slate of demands for the 2012 Federal election platform planks. It needs to divest itself of its Republican bias, and present to both major parties the opportunity to endorse its platforms and objectives, with the pledge that whichever party embraces the most points from the tea party platform, will be assured the support of the tea party across the board. Let’s hope at least one of the parties would recognize the threat and awaken to reality. There are more us of than there are of them, and to quote---we are mad as hell, and we are not going to take it anymore.
One more thing about the FAIR TAX and I am through. I truly believe the ultra rich are actually providing the money to support this movement because of the enormous benefits it will mean to them. Please stop and think about it. It makes no difference to the ultra rich whether the FAIR TAX is 23%, 29%, or 35%. They will save either way because it is only charged on what you spend. The average American will pay that rate on nearly every dollar he makes, allowing that he may be lucky enough to save 10% of his income. Do you think the average billionaire, making $1 billion per year, is actually going to spend anywhere near that much on consumer purchases, even including his multi-million dollar mansion? But he will be taxed only on what he spends, not his investments.
Steve Forbes had it nearly right. We need instead a flat tax, with no deductions, including church or home interest, so that everyone, including the richest and the poorest, does pay their fair share. And if the poorest, who are nearly totally subsidized by the government, knew they had to pay a fair share, there would be less demand for government services, and fewer votes could be bought by political parties with a promise to pay. I highly suspect if every one paid just 15% flat tax, we could fund a decent Federal budget, as opposed to a FAIR TAX of between 23 and 35 per cent on consumer purchases only.
We can not win by helping one party. Only by playing the two major parties against each other for election, will those of us who call ourselves patriots have any chance to really make a difference.
I voted for Dwight Eisenhower in 1956, and have never looked back, until now. The national GOP, in my humble opinion, is no longer the representative of the conservative common man which it had always tried to be, and still pretends it is. I am a dues paying member of the Morgan GOP, but blind allegiance and financial contribution to any national party because you think they are pursuing your ideals alone is what got us here. On the other hand, the Democrat Party is certainly not representing any tax-paying citizen either. Wake up America!
Dwight Eisenhower, a military genius, warned us in his departing speech as President, to beware of the military/industrial complex, who, perhaps with all good intentions, would become so powerful in the name of national defense; that they would in effect, control the country’s economy and direction. Whatever you believe in terms of government’s role among its citizens; rest assured there is a counterpart in the other party who believes you are nothing but a complete radical, and is willing to invest and work to stop you. This is what drives the funding of both parties and keeps them both alive and strong. Both of them send the same message, and both succeed with it. Send me money, because the other guy is the bogeyman!
Both parties now belong to the money, and the grassroots needs to face it. Washington is run by lobbyists, who are paid by people wanting special legislation for their own selfish interests. Many fired elected representatives simply graduate to lobbying, probably at higher pay. And I am talking about both parties. Yet, I predict the tea party will never be able to acquire control of the Republican Party, and they certainly won’t gain control of the Democrat party. I also predict that no third political party will ever supplant either of the other two, whose main objective is to see who will get to control and spend the money. The third party always costs one side or the other an election, but never wins one itself. What then can the tea party do to help?
Today 40% of every dollar the Congress appropriates is borrowed money. Now Ben Bernanke says he is going to print even more artificial dough; by buying back the same debt the Treasury has already issued, from the banks who bought it from them in the first place, with more counterfeit fiat money. This is inflation personified! The US dollar continues to sink to a new low in the index basket comparing it to other major currencies --- 77 cents against the average basket of international currencies.
I watched Republican minority leader John Boehner earlier this year on television in Pennsylvania, where he said: “We need to tell the nation we are broke, and tell them Social Security retirement age needs to go up to age 70, and further it needs to be means tested. This means if you have worked your tail off to accumulate any assets of your own, you will be denied SS. This is from the man who wants to be the next Speaker of the House. One of the possible solutions, I would offer for the SS problem, is not to raise the retirement age, but to remove the SS tax cap on all income above the present $106,000 annual limit. Most Americans pay SS tax on every dollar they make. But the man, or woman who makes $1 million per year, pays SS tax on only 10% of his income. If you agree, please let all three of your elected Federal representatives know how you feel!
I watched Senator Corker (R-Tennessee), whom I personally like, tell CNBC last Friday morning that everything was on the table, including means testing for SS, which means if you make too much in retirement, you will not ever get it Yes, I can live without it, but I paid for it for 51 years, and I feel I am due it.
Don’t think they will never do means testing. Already Medicare premiums are means tested. I have never made over $250,000 annually in my life. But I was told two years ago my Medicare premiums were going up because my retirement income was too high, and they did go up. But the national GOP wants to tell us a tax increase for those making over $250,000 in annual income will penalize nearly every small business in America. How many small businesses do you know who really “net” over $250,000 a year? I ran a small business for 40 years, and I never did. But I can tell you there are thousands of Wall Street financiers who do. And they are saying to both parties, “If you take my money, you darn sure better not raise my taxes, and I have plenty of money to give.” The Wall Street cats play the middle income class against the poor among us, and laugh all the way to the bank.
You may not know the average 2009 income of the top 25 hedge fund managers, who are largely responsible for the mortgage debacle which caused our recent economic collapse, was over $1 billion each. Why are they partially responsible? Because when Greenspan kept rates at one per cent for eighteen months after 9/11, they said to the money market, “This one per cent is killing us. Figure out how to get us ten per cent return, and we will buy as much as you can provide.” Some unscrupulous mortgage brokers, with Barney Frank’s encouragement, figured how to do it. Make ten per cent mortgages to people who can’t pay, and don’t care; but they will sign anything if you tell them they are getting a house with no money down. These fund managers each made one billion with a “B.” The poor beggars only averaged $464 million each in 2008, a really bad year because of the crash. Before the crash in 2007, they averaged $900 million each. So they, alone in America, are better off already than they were before the crash. Yet, their income tax rate on all this earned income is 15% capital gains, because of a huge tax loophole called “carried interests.” The national GOP will not even consider talking about changing it, even entirely apart from the Bush tax cuts, which are a separate issue.
Two years ago, Goldman-Sachs was on the verge of being broke, and they borrowed $5 billion at 10% interest from Warren Buffett, America’s second richest man, to gain capital. Now the government has bailed out all the Wall Street cats. And Goldman is now sitting on $390 billion in net liquid cash, and wants to pay Buffett back early, even with a penalty. They already paid back TARP, because they wanted out from under any government scrutiny on their payroll bonuses.
Meanwhile, the government is bragging now about how the TARP program is actually returning $25 billion profit to the government. Good, but they say nothing about the estimated 154 Billion dollar bail-out cost of AIG Insurance. Nor did they mention Fanny and Freddy at a bail-out cost of from possibly 221 Billion to 363 Billion
This bailout is what allowed AIG to pay off all the billions of dollars of insurance Goldman had bought from them on this crappy mortgage mess, by purchasing credit default swaps from AIG. Without the insurance being paid them, Goldman was in danger of collapse. But now, thanks to you and me, and the money we borrowed to rescue AIG; Goldman is in great shape, and has no supervision over how many billion dollar bonuses they pay.
What then, do I see as the answer? The tea party can make a real difference! It needs to continue to grow, and to organize and focus itself nationally, so that it will have real clout. It should not spend all its efforts on individual races. Then it needs to have a national convention, not for naming candidates; its sole purpose to prepare a slate of demands for the 2012 Federal election platform planks. It needs to divest itself of its Republican bias, and present to both major parties the opportunity to endorse its platforms and objectives, with the pledge that whichever party embraces the most points from the tea party platform, will be assured the support of the tea party across the board. Let’s hope at least one of the parties would recognize the threat and awaken to reality. There are more us of than there are of them, and to quote---we are mad as hell, and we are not going to take it anymore.
One more thing about the FAIR TAX and I am through. I truly believe the ultra rich are actually providing the money to support this movement because of the enormous benefits it will mean to them. Please stop and think about it. It makes no difference to the ultra rich whether the FAIR TAX is 23%, 29%, or 35%. They will save either way because it is only charged on what you spend. The average American will pay that rate on nearly every dollar he makes, allowing that he may be lucky enough to save 10% of his income. Do you think the average billionaire, making $1 billion per year, is actually going to spend anywhere near that much on consumer purchases, even including his multi-million dollar mansion? But he will be taxed only on what he spends, not his investments.
Steve Forbes had it nearly right. We need instead a flat tax, with no deductions, including church or home interest, so that everyone, including the richest and the poorest, does pay their fair share. And if the poorest, who are nearly totally subsidized by the government, knew they had to pay a fair share, there would be less demand for government services, and fewer votes could be bought by political parties with a promise to pay. I highly suspect if every one paid just 15% flat tax, we could fund a decent Federal budget, as opposed to a FAIR TAX of between 23 and 35 per cent on consumer purchases only.
We can not win by helping one party. Only by playing the two major parties against each other for election, will those of us who call ourselves patriots have any chance to really make a difference.
Wednesday, July 7, 2010
WHAT NOW?
There is an old stock market mantra, “Sell in May and go away.” It could not be more true this year. In the last 2 months, the Dow is down more than ten per cent, or $1,200. Volatility is increasing, up or down over $200 in a given day. The stock market is saying, look out below. If it goes as low as $9,600; look out below ‘til we reach $9,000 and possibly $8,700.
These are the reasons why. One, the recent recovery was paid for with borrowed stimulus money, over $2 trillion in government spending. Now the money is running out.
Two, despite everything Washington has tried to do, about ten per cent of normal workers are trying to get by without a paycheck. And our conservative Republican friends, who let Wall Street out of the corral without a whimper, causing a housing debacle; are reluctant to extend any unemployment benefits, saying we cannot afford it. What can we afford? And John Boehner, House Minority leader, says retirement age should go up to seventy, and means testing should prohibit Social Security checks to those who have been wise enough to set aside their own capital.
Three, while we were once the world’s largest producer, we are now the world’s largest consumer. And now we are failing in that, too. Our economy is now seventy per cent consumer spending, and they are becoming scared again and cutting back purchases.
Four, the housing debacle, first home values fall since the great depression, was helped somewhat by the promised $8,000 government check for buying. Now its over, and sales are down and foreclosures are going up.
Five, many states are drowning in fiscal deficits, and unlike the US government, they can’t print money. The fifty state cumulative deficit is about $127 billion. New York, California and a few others are about to sink. Not to mention the underfunding of their defined benefit guaranteed employee pension plans.
Six, the sovereign debt crisis of individual nations; beginning in Europe with Greece, is just a harbinger of what will happen when it finally reaches us. The dollar will lose its status as the world reserve currency, eventually to be replaced with the Chinese yuan. China has the world’s largest natural gold reserves, and yet has just made a deal to buy most of an American company’s gold production.
The only way I see the US is going to be able to repay our debts is devalue the dollar and repay with cheaper dollars. This means eventually, inflation is going to raise its ugly head with a vengeance.
What can you do to fight it? While it won’t help the economy, try to set aside some savings. Consider a purchase of gold or silver. If you have any long term loans, consider refinancing them now while interest rates are at a pretty good low. Send John Boehner a first class letter telling him what you think about his Social Security proposal. And be careful for whom you vote in July and November.
There is an old stock market mantra, “Sell in May and go away.” It could not be more true this year. In the last 2 months, the Dow is down more than ten per cent, or $1,200. Volatility is increasing, up or down over $200 in a given day. The stock market is saying, look out below. If it goes as low as $9,600; look out below ‘til we reach $9,000 and possibly $8,700.
These are the reasons why. One, the recent recovery was paid for with borrowed stimulus money, over $2 trillion in government spending. Now the money is running out.
Two, despite everything Washington has tried to do, about ten per cent of normal workers are trying to get by without a paycheck. And our conservative Republican friends, who let Wall Street out of the corral without a whimper, causing a housing debacle; are reluctant to extend any unemployment benefits, saying we cannot afford it. What can we afford? And John Boehner, House Minority leader, says retirement age should go up to seventy, and means testing should prohibit Social Security checks to those who have been wise enough to set aside their own capital.
Three, while we were once the world’s largest producer, we are now the world’s largest consumer. And now we are failing in that, too. Our economy is now seventy per cent consumer spending, and they are becoming scared again and cutting back purchases.
Four, the housing debacle, first home values fall since the great depression, was helped somewhat by the promised $8,000 government check for buying. Now its over, and sales are down and foreclosures are going up.
Five, many states are drowning in fiscal deficits, and unlike the US government, they can’t print money. The fifty state cumulative deficit is about $127 billion. New York, California and a few others are about to sink. Not to mention the underfunding of their defined benefit guaranteed employee pension plans.
Six, the sovereign debt crisis of individual nations; beginning in Europe with Greece, is just a harbinger of what will happen when it finally reaches us. The dollar will lose its status as the world reserve currency, eventually to be replaced with the Chinese yuan. China has the world’s largest natural gold reserves, and yet has just made a deal to buy most of an American company’s gold production.
The only way I see the US is going to be able to repay our debts is devalue the dollar and repay with cheaper dollars. This means eventually, inflation is going to raise its ugly head with a vengeance.
What can you do to fight it? While it won’t help the economy, try to set aside some savings. Consider a purchase of gold or silver. If you have any long term loans, consider refinancing them now while interest rates are at a pretty good low. Send John Boehner a first class letter telling him what you think about his Social Security proposal. And be careful for whom you vote in July and November.
Monday, September 21, 2009
DOLLAR VALUE
The recent TEA (Taxed enough already) parties around the nation culminating with one in Washington, DC showed that most Americans are sick of the way the Federal government is continuing to take more and more of our hard earned income to pay for government expenditures (or at least use it for down payments on more financed borrowing). Unfortunately, what most Americans don’t realize is that we are mad about only the part of the iceberg above water, while 90% more lurks underneath the deep.
Fed Chairman Ben Bernanke advises us that we have probably seen the worst of the “recession”, and that things are looking up. From a purely “nominal” point of view, he is probably right. We may see GDP growth in this quarter and the next. Unemployment may be close to peaking, with gradual improvement into the distant future. But at what cost?
Governments can play with money supply, and they can play with interest rates. This is the method just recently used to prevent the US sky from falling in, with repercussions heard around the world. They can even play with the values of previous metals, by selling from their own stock, or even leasing their own stock to others. But they cannot really totally control the value of precious metals as compared to the value of paper money.
Incidentally, you should know that the US, richest nation in the world after World War II, held 20,000 metric tons of gold, and it was the backing for our paper money. Because we agreed in 1944, at an international conference in Bretton Woods, New Hampshire; to redeem dollars for gold to anybody in the world, the world considered the US dollar king of the hill. By the time LBJ decided to win the war in Viet Nam, while he won the battle against domestic poverty at the same time; the world decided they would rather hold gold than US dollars. They required us to give them 12,000 metric tons of our gold, leaving us only 8,000 metric tons. And history records LBJ lost both wars. Finally, Richard Nixon had to tell the world we could no longer redeem dollars with gold, lest we give away all we held, and we went off the gold standard.
Now our dollar is worth only what the rest of the world believes it is worth. Because Nixon made a deal with Saudi Arabia to require all oil sales to be paid for in US dollars, for 30 years, the dollar held up pretty well from the outside view, as compared to other world currencies. But when Nixon refused to redeem dollars, he also began to allow private ownership of gold, which FDR had confiscated during the depression, and private ownership led to real market prices.
Since the depths of the depression in 1932, the dollar has lost 98% of its purchasing power. Put another way, two pennies in the depression would buy the equivalent of what one dollar buys today. You laugh at your grandpa for making $2,000 per year, but if you are not making over $100,000 per year, he was better off than you are! At the same time, gold soared in value by 4,300 per cent. Put another way, $100,000 cash in 1932 is really worth $2,000 today. $100,000 gold in 1932 is now worth well over $4.3 million in paper dollars.
The dollar index compares the dollar to a basket of other world currencies. The US dollar is now at 76 cents, just 5 points away from its all time low, and headed lower. The Fed is now buying US bonds, which is the equivalent of you loaning yourself money. How long can it last? This is why I still call for a march on Washington for July 4, 2010.We absolutely must save our Republic.
Fed Chairman Ben Bernanke advises us that we have probably seen the worst of the “recession”, and that things are looking up. From a purely “nominal” point of view, he is probably right. We may see GDP growth in this quarter and the next. Unemployment may be close to peaking, with gradual improvement into the distant future. But at what cost?
Governments can play with money supply, and they can play with interest rates. This is the method just recently used to prevent the US sky from falling in, with repercussions heard around the world. They can even play with the values of previous metals, by selling from their own stock, or even leasing their own stock to others. But they cannot really totally control the value of precious metals as compared to the value of paper money.
Incidentally, you should know that the US, richest nation in the world after World War II, held 20,000 metric tons of gold, and it was the backing for our paper money. Because we agreed in 1944, at an international conference in Bretton Woods, New Hampshire; to redeem dollars for gold to anybody in the world, the world considered the US dollar king of the hill. By the time LBJ decided to win the war in Viet Nam, while he won the battle against domestic poverty at the same time; the world decided they would rather hold gold than US dollars. They required us to give them 12,000 metric tons of our gold, leaving us only 8,000 metric tons. And history records LBJ lost both wars. Finally, Richard Nixon had to tell the world we could no longer redeem dollars with gold, lest we give away all we held, and we went off the gold standard.
Now our dollar is worth only what the rest of the world believes it is worth. Because Nixon made a deal with Saudi Arabia to require all oil sales to be paid for in US dollars, for 30 years, the dollar held up pretty well from the outside view, as compared to other world currencies. But when Nixon refused to redeem dollars, he also began to allow private ownership of gold, which FDR had confiscated during the depression, and private ownership led to real market prices.
Since the depths of the depression in 1932, the dollar has lost 98% of its purchasing power. Put another way, two pennies in the depression would buy the equivalent of what one dollar buys today. You laugh at your grandpa for making $2,000 per year, but if you are not making over $100,000 per year, he was better off than you are! At the same time, gold soared in value by 4,300 per cent. Put another way, $100,000 cash in 1932 is really worth $2,000 today. $100,000 gold in 1932 is now worth well over $4.3 million in paper dollars.
The dollar index compares the dollar to a basket of other world currencies. The US dollar is now at 76 cents, just 5 points away from its all time low, and headed lower. The Fed is now buying US bonds, which is the equivalent of you loaning yourself money. How long can it last? This is why I still call for a march on Washington for July 4, 2010.We absolutely must save our Republic.
Thursday, March 5, 2009
I WISH PRESIDENT OBAMA WELL
I wish President Obama well, I really do. And I think he won the presidency with good intentions to change Washington for the benefit of most average Americans. But it seems he has already begun to come under the influence of special interests, which would protect their own turf at the expense of the general populace.
On May 15, 2008, when gasoline was heading toward $4 plus per gallon, I wrote that we had enough oil shale reserve in the Rocky Mountain States to provide our domestic gasoline needs for 110 years, over 2.5 trillion potential gallons. The problem is designing an efficient way to separate the oil from the rock. Royal Dutch Shell Oil led the way, and has made tremendous strides toward solving this problem. But with the national gas price now averaging under $2 per gallon, new Energy Secretary Ken Salazar has just reversed plans to lease oil shale land in Colorado, Utah and Wyoming. The nation loses, and the environmental groups, who oppose any oil shale development, win. I see this as a major mistake.
On another vein, we face a frozen banking system, which I acknowledge was allowed to develop by the Bush administration. Interest rates, which were kept too low for too long, brought into being complex mortgage backed securities to satisfy the demand of greedy investors for higher returns. When greedy investment bankers figured how to package bad mortgages into securities rated AAA investment grade; greedy mortgage brokers figured ways to approve unconscionable loans, and the die was cast for a disaster. And it does not help our national reputation that these products were sold to investors all over the world. This is one reason the remaining world is in worse financial shape than we are. But, our banking system is still frozen, and the federal government has already invested over $200 billion of taxpayer money into the largest banks in America, with no appreciable results. Furthermore, all the dying investment banks suddenly became commercial bank holding companies, so they could line up at the same trough.
Now, the Obama administration has announced a new “stress test” for the 19 largest bank holding companies, which hold assets of $100 billion or more each. There are two criteria used for the test. One assumes the economy will continue at its lackluster pace through 2010, and the second presumes things will worsen, with housing values falling another 29%, while unemployment rises to over 10%. This second scenario is probably a good idea. After the stress tests, Treasury Secretary Timothy Geithner will advise these banks how much new capital is required, and give them six months to raise it privately. If they can’t raise it, more of our tax money will go into buying 9% interest bearing preferred stock, which can be converted into common stock. The funds would come from the second half of the original $700 billion TARP plan. Every effort is being made to call this something other than nationalization.
I stated in a September column that our TARP money should be invested only in saving our commercial banks, which hold our hard earned money, rather than investment banks and insurance companies. The government has tried to do both.
It is imperative we learn from the mistakes of Japan in the 1990’s. They allowed their banks to carry bad real estate paper on the books as good assets for over ten years, before they finally wrote off about 96 trillion yen, or the equivalent of nearly 20% of their gross annual domestic output. During that delay, their stock index fell about 75%, and real estate prices declined for 15 straight years. We don’t want such results.
When the tests are completed, and the nation’s capital is invested, these bad investments must be written off the books. Only then, can we start building toward recovery.
On May 15, 2008, when gasoline was heading toward $4 plus per gallon, I wrote that we had enough oil shale reserve in the Rocky Mountain States to provide our domestic gasoline needs for 110 years, over 2.5 trillion potential gallons. The problem is designing an efficient way to separate the oil from the rock. Royal Dutch Shell Oil led the way, and has made tremendous strides toward solving this problem. But with the national gas price now averaging under $2 per gallon, new Energy Secretary Ken Salazar has just reversed plans to lease oil shale land in Colorado, Utah and Wyoming. The nation loses, and the environmental groups, who oppose any oil shale development, win. I see this as a major mistake.
On another vein, we face a frozen banking system, which I acknowledge was allowed to develop by the Bush administration. Interest rates, which were kept too low for too long, brought into being complex mortgage backed securities to satisfy the demand of greedy investors for higher returns. When greedy investment bankers figured how to package bad mortgages into securities rated AAA investment grade; greedy mortgage brokers figured ways to approve unconscionable loans, and the die was cast for a disaster. And it does not help our national reputation that these products were sold to investors all over the world. This is one reason the remaining world is in worse financial shape than we are. But, our banking system is still frozen, and the federal government has already invested over $200 billion of taxpayer money into the largest banks in America, with no appreciable results. Furthermore, all the dying investment banks suddenly became commercial bank holding companies, so they could line up at the same trough.
Now, the Obama administration has announced a new “stress test” for the 19 largest bank holding companies, which hold assets of $100 billion or more each. There are two criteria used for the test. One assumes the economy will continue at its lackluster pace through 2010, and the second presumes things will worsen, with housing values falling another 29%, while unemployment rises to over 10%. This second scenario is probably a good idea. After the stress tests, Treasury Secretary Timothy Geithner will advise these banks how much new capital is required, and give them six months to raise it privately. If they can’t raise it, more of our tax money will go into buying 9% interest bearing preferred stock, which can be converted into common stock. The funds would come from the second half of the original $700 billion TARP plan. Every effort is being made to call this something other than nationalization.
I stated in a September column that our TARP money should be invested only in saving our commercial banks, which hold our hard earned money, rather than investment banks and insurance companies. The government has tried to do both.
It is imperative we learn from the mistakes of Japan in the 1990’s. They allowed their banks to carry bad real estate paper on the books as good assets for over ten years, before they finally wrote off about 96 trillion yen, or the equivalent of nearly 20% of their gross annual domestic output. During that delay, their stock index fell about 75%, and real estate prices declined for 15 straight years. We don’t want such results.
When the tests are completed, and the nation’s capital is invested, these bad investments must be written off the books. Only then, can we start building toward recovery.
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