Archive for the ‘Finance’ Category

Double Dip?

The Dow is down 275 points this morning, below 9900 and falling like a safe dropped from a helicopter. It just touched beneath the absolute low hit in the “flash crash” of May 6th. Consumer confidence plunged from 62.7 to 52.9 in one month. Recent polling shows that over 62% of Americans think the nation is on “the wrong track.” Exactly what is this market, supposedly a leading indicator of economic activity, trying to tell us?

The market is telegraphing that there is no confidence in the present government trajectory toward tax increases, more borrowing, and higher deficits. It also dislikes the dead hand of government in the management of financial institutions, automakers, and health care. It deplores the idea of saddling the economy with cap & trade costs, and realizes that “stimulus” spending largely directed toward the public sector is totally non-productive. Investors and businesses have seen this movie before – when the very similar activist policies of FDR failed to cure the Great Depression which lasted well into his 3rd term.

Vice president Joe Biden has said that we “need to spend money to keep from going bankrupt.” Nancy Pelosi has stated about the Health Care Bill that “we have to pass the bill so we can see what’s in it.” Christopher Dodd comments on his financial reform legislation: “No one will know until this is actually in place how it works”. Of course no one can forget candidate Obama’s comments on cap & trade: “electricity rates will necessarily skyrocket,” and on taxes: “it is better for everyone when we spread the wealth around.”

Peter Orszag, the OMB director responsible for planning budget deficits beyond contemplation and cooking the books to make Health Care appear feasible is bailing out. President Obama just got slapped around by the leaders of the G-20 when he floated a trial balloon involving more massive “stimulus” spending. These heads of state are belatedly awakening to the fact that Keynesian economic theories eventually crash, but Obama, Summers, Geithner, and Biden have yet to catch on. Unfortunately, they never will because they are so completely wed to big government along with massive spending, taxing and regulation schemes. Of course, buying votes from SEIU and UAW members is the prime benefit to the administration of the mix.

This administration is stealing from our grandchildren and spending our national future down the drain. The red ink must be staunched, entitlement spending reformed, Health Care repealed, and government cut back. Obama will never consider it, so the only way to begin a reversal is to elect a Congress that will refuse to fund these massive programs.

The next time you see a baby, stop and wonder how he or she will think of our generation in about 50 years. Then promise that baby that you will vote now to stop this insanity before it is too late. No American has the right to live in the present off the future earnings of another.

The Gift

In late 1941, WW II had been raging for over two years.  Britain was holding out alone in Europe and Hitler’s Panzers were within sight of Moscow.  With the horrors of WW I fresh, the United States wanted no more foreign entanglements.

FDR knew the US would have to enter the war on the side of the Allies.  Allowing the Axis Powers to absorb huge populations and untold natural resources would eventually create powers too big to defeat.  Every farm, oil well, rubber tree, factory, and military age man absorbed by the Axis meant another increment of strength to our enemies.  What – if anything – could awaken the American people to the growing and imminent threat to our very existence as a free republic?

Admiral Isoroku Yamamoto stepped up with a perverse and tragic gift on December 7th.  The horrific news of the attack on Pearl Harbor galvanized the American people as nothing else could.  The intense anger following that sneak attack combined with the sober realization that half the world’s modern military strength was arrayed against us stoked the determination to destroy our enemies.  The acute realization that our nation was in mortal danger of becoming an Axis conquest awoke the instinct of self preservation.  From that moment on, America was at war to win.

The Obama Administration is our generation’s domestic Pearl Harbor.  We must take advantage of it to preserve our country for future generations.  Barack Obama has given us a priceless gift if we are strong, smart, and organized enough to use it to our advantage. It is an attack on our freedom, liberties, way of life, and our children’s future, from within. It is an assault on America’s greatness, the destruction of her exceptionalism, and the squandering of her prosperity.  It is up to us and like minded people throughout the land to seize on this gift and turn it to our advantage.

In my adult lifetime, America’s population has increased about 40%.  In that same time, the proportion of people dependent on, or working for government has increased by over 270%.  A whopping 30% of all Americans are currently either working for government or receiving some sort of assistance, transfer payment, or entitlement.

The currently employed labor force is about 45% of our total population.  Almost half of them pay no taxes whatsoever, so that further dilutes the number supporting the 30% to around 22.5%.  If you pay taxes, you are not only supporting yourself, but also more than one person on government programs or employment.  The imbalance of these numbers gets worse by the year.  It is the slow bleeding of our fiscal stability on the path to inevitable to economic suicide.

Obama and his cadre of hacks, elitists, sycophants, czars, camp followers, and assorted & sundry buffoons are ratcheting up every handout, entitlement, and subsidy they can to increase dependency on government.  These burgeoning government giveaways are no different than the farms, oil wells, factories, mills, and young men that were being swept into the maw of the Axis war machine. Each new handout buys strength for the Obama welfare state juggernaut.  Senator Jim DeMint stated that “A dependent voter is a dependable vote.” Obama is buying as many as he can with money as yet unearned by those yet unborn.

This is the path so disastrously trod before us by Greece, and being quickly followed by Italy, Spain, Portugal, Ireland, and Hungary.  Our future is unfolding before us in Europe this very minute.  The only preventative measure that will save us from a similar fate is to emasculate the Obama Administration in November with our votes. While we are at it, let’s broom out a few dozen Bush-era RINOs who don’t concern themselves with our future any more than the current regime.

Here is deficit spending compared to a cross country road trip.  It will give some perspective:

Now is the time for all good men to come to the aid of their country!

Just for clarification; that line did not come from the mouth of some famous leader back in history.  It originated as a typing class drill by a teacher named Charles E. Weller in about 1867.

Just the Facts

Here is Daniel Hannan, Member of the European Parliament chastising former Prime Minister Gordon Brown about deficit spending and borrowing. This exact same speech could and should be delivered in our own Congress, on the Sunday talk shows, and from every rooftop in America. Keep in mind that when Mr. Hannan mentions that every child in Britain is born owing “Twenty Thousand Pounds”; in America every child is born owing just shy of $400,000!

Our own Senator Murray and Representative Inslee are so wrapped around the axle with myopic liberal orthodoxy that neither of them would ever think of opposing the dangers of the nation’s present path toward future bankruptcy. Both ignore the past, are blind to the future, and concerned only with personal power. It is our job to elect replacements for them with Mr. Hannan’s common sense and courage. They are out there and running in the primaries this very moment and deserve our support.

This November General Election may well be the most important in our lifetimes. Don’t miss this opportunity to make a difference. Your little loved ones, too young to vote or yet unborn, are depending on you.

Devil to Pay

Greek citizens are angry because their government spent and promised too much, is broke, and has had to reduce wages, benefits, and pensions. Ironically, one of the requirements of the proposed EU and IMF bailout of Greece is that it privatize its single payer health care system!

Based on concerns that this situation could spread to several other European countries, the Euro is weakening and stock markets are falling. With the massive debt being rung up by our own government, could the dollar be next on the list?

In the US; local, county, state, and federal governments have vastly expanded regulation and ladled on layer upon layer of additional “services”. They have hired too many, promised too much, and spent themselves into a descending spiral of debt. High wages, big benefits packages, and generous pensions are quickly threatening to bankrupt many cities and states. Huge entitlement programs are fast approaching insolvency at the federal level.

What will the American people do when the rubber hits the road and all these promises cannot be kept? They were promised these programs and benefits in good faith, and are bound to be extremely angry when they find out their “services”, wages, and benefits will be reduced.

United Airlines pensions were trashed a few years ago. GM and Chrysler pensions are still paying out only because the US government is supporting the firms with TARP money. Social Security went into the red this year. Many states’ pension liabilities are underfunded and approaching critical breakdowns. College students are demonstrating against tuition increases. What will happen when California defaults on its pension liabilities? Will LA become “Athens West”?

If we do not address these looming problems immediately, we may be seeing serious unrest in our own cities. We must elect LEADERS with the principles, backbone, and ability to start adjusting these situations before the ax drops suddenly. We need office holders with the guts to look the American people in the eye and say “Enough!” If these unrealistic and underfunded programs are not scaled back, they will fail, and there will be the devil to pay.

The Greek government made the Faustian bargain of buying loyalty and labor peace by spending future revenues that would never materialize. The citizens are now being told they will get less free stuff, and they are violently reacting. Are the millions of Americans who are dependent on or expecting free stuff going to behave any differently when the gravy train grinds to a halt?

If you have children you care for in your life, now is the time to think of their future. Political business as usual should go into the dustbin of history. It depends on you and your vote to determine whether it will be a peaceful readjustment over time or a blind plunge over a fiscal cliff into conditions that will make the Great Depression look like a cakewalk. Preventing such a future will require most Americans to sacrifice some of the future benefits they are expecting – that goes for you and me. Can you face and handle the truth?

Don’t wake up some morning and see scenes like the above playing out in our major cities. Your country needs your attention, your love, and your vote at this approaching crossroads of history.

Fix it Right

Social security is nearing its moment of truth. If this massive time bomb is not drastically modified before the fuse gets too short, we may well have a violent backlash. Say “Greece”. Future generations will realize they are being taxed beyond their capacity to pay to support growing numbers of retirees with Social Security benefits as they live well into their 80s and 90s. The graph below demonstrates the decay of Social Security deficit projections in just the past year. Where will that money come from?

CBO Social Security Deficits

There are three options:

1. Do nothing, allowing the future to unfold leading to national financial ruin.
2. Kick the can along to the next generation with tax increases and band aid fixes.
3. Fix it now- forever- while the popular inertia is behind the idea.

1 and 2 are already discredited having been practiced over the past 50 years. Buying votes from senior citizens over the past 3 generations and fearing their retribution every other November has brought the system to the breaking point. The third choice is the only realistic path and we may just be witnessing the grass roots support to get it done.

Social Security was passed as a self sustaining government run plan to provide a minimum level of benefits to retirees, many of whom were entering old age destitute from enduring the Great Depression. Over the years it was larded with additional benefits, recipients, and the billions collected from payers were squandered on present spending. The money was replaced with government IOUs. The system just went into the red and those IOUs must be covered through additional taxes, deficits, and borrowing.

One way to save the system would be to ratchet the retirement age up over time to the equivalent of what it was in 1935. If it was a fair age of eligibility then, it is fair now. In 1935 life expectancy was 61.7 and eligibility began at 65. Today the average is 77.8. Using the original formula, benefits should start at just under 82 years of age. Although many seniors would be able to work well into their 70s, expecting them to do so until 82 is not realistic.

An alternative would be to allow anyone to retire at any age but be eligible for only monthly benefits based on lifetime contributions, and accrued interest divided by the number of months actuarial tables show as additional lifespan. These benefits could be paid until death based on this formula since half the recipients will pass on prior, and half after the expected life years point arrives. The longer one works before retirement, the higher their benefits would be.

Neither of these ideas will be palatable to seniors, but something like this has to be done to save our young and unborn from the consequences of an overly generous and unsustainable retirement program. The follow-on benefit will be that a majority of folks approaching retirement age will be highly motivated to save and invest on their own behalf well ahead of reaching their golden years.

These are just a couple ideas from which to start discussion. However no such dialogue can possibly start; and this huge problem cannot ever be solved without a tectonic change of leadership in Washington. There may be a loophole in history forming right now that could lead to such a move. The growing rage at the grass roots level, if coordinated and successful, could well bring a flock of principled and courageous new legislators to Congress in November. They would join the remaining battle scarred incumbents who after fighting for their political lives may indeed be ready to do the right things.

Let us hope the power and inertia of the tea party movement does not metastasize into a third party fiasco, but instead elevates strong, fiscally responsible candidates from both parties into office. There are good Democrats in the field who are running far to the right of the present administration, understanding that courageously breaking with past party orthodoxy is the only hope of being elected. There are mediocre Republicans presently in office who will be broomed out as happened to Bob Bennett of Utah.

It is our responsibility as voting citizens to elevate to office those who swear to address this entitlement Tsunami immediately for the benefit of our nation and its future generations.

Then and Now

Huey Long rose to power in the grinding years of the Great Depression on promises of wealth redistribution. He firmly believed that the economic pie was finite, and that the “haves” of the day only got that way by taking from the “have-nots.” His motto was “Every Man a King”, and he spread his mantra far and wide garnering enthusiastic support from those suffering truly hard times with no end in sight. Long had a rather direct outlook on how to overcome his political adversaries. “I used to try to get things done by saying “please.”  Now…I dynamite ’em out of my path.”

Barack Obama rose from obscurity to the highest office in the land with similar methods. He has great charisma and an outlook similar to Long’s. He also believes that wealth earned or possessed by those of means was somehow stolen from the more deserving poor. The destitution of certain sectors of society is in Obama’s view; not the result of their own actions or lack thereof, but instead the fault of those better off.

President Obama seems to enjoy the role of demagogue; railing against bankers, doctors, insurance companies, financial executives, and even a Cambridge cop who arrested one of his pals. He is pushing for yet higher taxes on “the rich” while doubling the Food Stamp program, increasing domestic discretionary spending by 25%, and borrowing almost $3 Trillion to fund his policies.

President Obama sincerely believes that bigger government, more regulation, and massive deficit spending will cure all ills. His cabinet members and assorted “czars” with similar views encourage him to frantically push huge legislative acts toward law as fast as possible knowing their window will close with the loss of Congress in 2011. If he is successful at enacting Cap & Trade, Financial Reform, and Immigration Reform on top of Health Care, our national economy will be choking on the myriad unintended consequences of thousands of pages of new laws and regulations. An exponential expansion of debt and entitlement promises that will destroy our future accompanies these grandiose visions of European style “social justice”.

Here are 3 short clips where President Obama states his true intentions prior to the election. Americans should have paid a bit more attention then:

Governor Long and President Obama share important similarities. Both had admirable charisma when campaigning, and promised: “If you vote for me I will give you free stuff”. Both skillfully wielded the weapon of demonizing their chosen targets – the “rich”, the business world, and, and their political opponents. Lastly, they share a compelling need to exercise total power over their opponents. Ramming Health Care through Congress with procedural legerdemain against the will of nearly 60% of the American people comes pretty close to “dynamite them out of my path.”

Now have a quick peek at the dirty baggage the Obama Administration has empowered. If this does not shock the beejesus out of any sane American – nothing will:

Obama’s Hockey Stick

“I say after eight years of this Administration we have just as much unemployment as when we started. … and an enormous debt to boot.”

These were the words of Treasury Secretary Henry Morgenthau spoken to Congress in May, 1939. Exasperated after experiencing massive unemployment for 10 years and spending heavily year after year to try to end it, Morgenthau was a beaten man. He was admitting that massive government spending and make-work projects had failed to revive the American economy. Over that period, unemployment had peaked at 25%, never went below 14%, and was 20% again when those words were spoken.

Now we have an administration in office that is mimicking the acts of the Roosevelt years with unprecedented borrowing and spending in their attempt to revive the economy. No less than Vice President Joe Biden recently stated: “We have to go spend money to keep from going bankrupt.” These people refuse to acknowledge history.

Below is a graph which I call “Obama’s Hockey Stick”. The environmental “hockey stick graph” has been discredited, but this one is frighteningly real. It shows that the US Budget Deficit has gone over a cliff; the deficit quadrupling between 2008 & 2009.

The next graph is projected future deficits based on present government budget plans. One estimate is from the Obama Administration, the other from the Congressional Budget Office (CBO):

The plunge in 2009 (which added $6,065 of debt for every living American) appears to begin to recede in 2010 and after until retracing back deeper starting in 2013. Note that the White House projections are far more optimistic than CBO. Who are we to believe; an administration attempting to cling to power, or a non-partisan budget watchdog? No matter which is right, the scenario is dire.

Based on 1933-41 experience, the above projected deficits appear a recipe for disaster. Government borrowing sucks available capital out of the system starving business of loans to expand and hire. Interest rates will rise choking off recovery of the housing market. Taxes will be raised to pay both the debt and interest; draining vital earnings of firms and individuals for decades to come.

Deficit spending does not create recovery; it only buys votes today with the fruits of future labor. Our government is selling our children’s future down a rat hole. Next time you see a baby, think seriously about apologizing in advance.

Here is a cute one that has been around a while about the TARP bailout: