Fed Chairment Bernanke spoke yesterday at that Economic Club of Minneapolis. In his speech he recapped the financial crisis that has gripped the economy going back to 2008. While he did reinforce his belief that the recovery and end to the recession began back in June of 2009, he also disappointingly stated that "it is clear that the recovery from the crisis has been much less robust than we had hoped." Most notably is his remark that "The pattern of sluggish economic growth was particularly evident in the
first half of this year, with real gross domestic product (GDP)
estimated to have increased at an annual rate of less than 1 percent, on
average, in the first and second quarters."
Bernanke then proceeds in his speech to list various reasons for why the economy is so sluggish and explains the major headwinds that are apt to lead to even further slowness including fiscal drag and general uncertainty over Federal policy and taxes. Then he goes on to dismiss inflation as any threat in the near term, and by the time he is 4/5ths through his speech he has completely cleared the way for the Federal Reserve to take greater actions in order to focus on the other of its two mandates, "full employment." This is clear in the closing sentence of his speech, "The Federal Reserve will certainly do all that it can to help restore
high rates of growth and employment in a context of price stability."
You know what I got from his speech? A whole lot of nothing! (Or, maybe something much worse!) I didn't need a history or an economics lesson. Or, are we supposed to feel more confident because Bernanke can outline the series of events and issues so succinctly? If so, it didn't work for me at least and I don't think the market felt any sense of relief either. Frankly, knowing how we got here is a lot different than knowing where we are heading or what to do next!! Besides, the situation today is long past needing "Fed Speak" as way to address the many severe depressionary challenges the world faces!
Bernanke ... take a page from Christine Lagarde, the new Managing Director of the International Monetary
Fund, who warned today that the global economy is entering a "dangerous new phase" and that "as time goes by, there's a danger of (the economy) getting worse rather than better." Lagarde is pretty straight about the fact that "The world is collectively suffering from a crisis of confidence, in the
face of a deteriorating economic outlook and rising concerns about the
health of sovereigns and banks." It sure seems that Lagarde sees the need for "strong action and even refers to more action to support the recovery, including through unconventional measures."
I am beginning to sense fear in Bernanke of late. There appears to be a reluctance to take real action and to lean impotently on the power of speech. What's more, it is troubling to think that Bernanke's expressed surprise over the consumers' behavior are indicative of a Fed Chairmen who is confused and has lost self-confidence. For heavens sake Ben, do NOT lose your nerve now!!! This is NO TIME for you to be timid, let alone fearful of how your outspoken critics will respond to your decisions. With Obama and all of congress locked in all out political battle, and practically unable to tie their shoes, we need the one person on the planet who can take meaningful, albeit controversial, actions to move the economy forward to do so. Be bold Ben Bernanke. To quote a famous phrase used by the last man to face the challenge of a depression and a world war, "We have nothing to fear but fear itself!"
There is way too much inaction or negative action going on around the world when it comes to getting the USA and European economies on an upward trajectory! We need bold moves by the monetary powers around the world while we still have an economy that can be stimulated! And we need those actions put forth in a strong, confident, and collective voice! NOW!!!
Friday, September 9, 2011
Monday, September 5, 2011
Tough To Say!
On so many levels it's tough to say where things are heading! There
is so much uncertainty: Recession, 50/50; Super Committee's plan for
deficit reduction and how will it be received, who knows; The
presidential election, anyone's guess; What type of governments emerge
in Egypt, Libya and will they be stabilizing? What's next for Syria?
Is Iran after that? Where does it all leave Israel and will they be
forced to mitigate the nuclear threat from Iran? How will we cope with
climate change? There's a thousand really tough questions and very few
solid answers. I can't remember a time in my life when there seemed to
be so much uncertainty over so many substantial issues worldwide. If
you're a pessimist it is an awful time! Even if you're an optimist is
still an unnerving. A pragmatist could throw up their hands trying to
come up with a calculated answer. It's really to tough to say where
things are heading.
People hate uncertainty. Stock markets hate uncertainty. I think the only people who love uncertainty are anarchistic and doomsayers. This is a great time for someone who would like to lead a rebellion. And, as the political season heats up around the USA I'm betting some of the political stumping sounds as close to a call for overthrowing the government as you can get without seriously meaning it. No doubt that some of them will mean it. (Get your pitchfork ready.)
It's getting ugly and austerity hasn't even really kicked in yet. If Euro countries, the UK, and the USA take the austerity steps they seem to be that are needed to rein in deficit spending from a gallop to a cantor, let alone a fast trot, there will be much more pain and protest to deal with. Scenes like the ones we saw in Greece earlier this year will be much more common across Europe. In the USA, expect to see Tea Party rallies so large that they fill stadiums. No security could safely escort Harry Reid through those tailgating parties.
We are about half way through the Hurricane season, and already FEMA is broke. Let Katia or whatever storms or other kinds of natural disasters cause another few billion dollars of damage and leave a few more millions without power or homeless and then even the weather is a big factor in turning an already tumultuous time for society into a downright out of control situation.
Is it a coincidence that next year is 2012? Movies about Armageddon went into production years ago. Their producers may be starting to get worried about the box office receipts if we are actually having it. Wouldn't that be the ultimate irony!
OK, let me try to rise above all this. The world is not coming to an end! But if it is, consider yourself lucky to have lived to see it. There's no denying the parallels with the Mayan calendar, and that recent geopolitical events appear to play into the "end-of-days" prophets. If it's enough to scare you then go ahead and get your house in order - worship and repent, tell people you love them, cherish every day, and take the vacation you've always dreamed of ... it's all good even if the world goes on for another ten thousand years.
Generation after generation have had to face tough times and frightening thoughts about the future. I don't have to list history to prove that. The key thing to keep in mind is that we always got through it! Mankind finds a way. Humans are amazing and resourceful creatures. Overall, we tend to get our way. And while Americans may have grown soft we are bred from the stock of the people who founded this nation, got through the civil war, the Great Depression, and won two world wars. We got "enough tuff" in us to handle just about anything Obama or Bernanke can throw at us!
What we need is a little perspective in order to see where the situation with the economy is heading. I will take a stab at it.
Various governments around the world are broke and the only way they can get through this mess we are in is through more aggressive monetary policy. Forget about fiscal stimulus or new taxes raising enough money to deal with the debt. Call the solution whatever you like, but I like to call it what it is, printing money. That sounds bad but first let's get this fact straight. ALL the money in circulation is fake!! None of it is backed by material assets. We've been off the Gold Standard for decades. Money js just printed pieces of paper or digital numbers with lots of zeros. It only has value because we believe it has value! And, money only has value for two reasons: 1) People accept it in exchange for what really does have value (goods and services). 2) There is NOT so much money floating around that there is more it chasing the supply of goods and services than there is a supply of those goods and services. With those two facts firmly in mind, ask yourself the following three questions: 1) Do you really expect people to refuse any legitimate currency in circulation? 2) Are you worried about having too much money? 3) Do you expect the Exon/Mobile to say they are out of gas? If you answered "NO freak'n way" to those three questions then I believe we all need to stop worrying about QE anything causing too much inflation! There is way too much fear of inflation. I like the way Bernanke put it ... I believe he called recent inflation concerns "transitory!" What a perfect way to put it!!
Even if oil did go to $120 a barrel again it's only going to accelerate the rate at which America becomes non-dependent on foreign oil. Watch how many more businesses and households take real steps to reduce their demand for oil and gasoline as oil prices go back up again. People will be going solar, pulling up to the pump in hybrids that get 2x mileage, recycling every ounce of metal or plastic, and replacing their windows, doors, furnace, and every inefficient appliance they have before they pay $140 a barrel again. Oil and gas supply towns like Williston North Dakota will be booming across the USA and oil will be coming out of every pour before we become dependent on a Libya, let alone Iran, for their oil. I think just about every American wants to tell OPEC to pound sea salt and it's about time we did!!! I'm not worried about higher oil prices. In fact I say, bring it on!!
I'm not worried about food inflation either. America has the greatest agricultural supply industry in the world. And in the process we've learned to manufacturer the most amazing farming machinery and equipment the world has every seen. We have corn combine tractors that need their own zip code. That bodes well for many American firms who are positioned fantastically to profit from the demand coming from developing and emerging continents like Africa and Asia, as well as South America. Food inflation will be tackled with the tools and other farming technology. that America leads the world in. (And by the way, our cheap dollar isn't hurting the firms that make and supply this equipment.) A tangential benefit that I see coming from food inflation is how it will cause Americans to rediscover something wonderful that we gave up to the giant industrial farms - family farms. One way American's can address food inflation, let alone the effects of all the additives in processed foods, is to get back to "home grown" or at least locally grown produce, meats, and dairy. This isn't just good for our health, it's good for jobs in our communities as we source more of our table from local farmers and markets.
No matter what we do to turn our economy around it isn't going to happen until we fix the housing industry! Given the fact that the housing industry is at depression levels it's a wonder that unemployment isn't as well above where it is today. Personally, I see that as evidence of how strong and diverse our economy really is. But the housing industry is still vital to the health of our economy and just like the automotive industry, the housing industry needs to make a comeback. I believe it will and with it will come the jobs. And, with both we will be pulling ourselves out of the economic malaise and seeing brighter days
I know I can't get off that easily with just saying "I believe housing will make a comeback" without giving some reasonable logic for why it will. So here is the reason and it's much simpler than you than you think. The solution for the housing industry plays a lot like a game of musical chairs. Only instead of players getting out of their chairs there are lots of distressed homeowners who need to get up out of the homes and slide over to another home a lot like it. Now I will explain.
The game begins with Bernanke's "operation twist" in order to drive down long term interest rates. As if they aren't low enough already, the 30 year mortgage is apt to go a level we haven't seen in our lifetime and our children will never see in their lifetime. Couple historically low interests rates with a remarkably attractive pricing index and fantastic supply and people have an opportunity to buy a home is that is possibly the deal of the century!!
The great housing values and affordability is all well and good but if people can't qualify for a mortgage it's not going to do a lot of good for home buying or the housing industry. I believe that is about to change. It makes no sense for someone to be disqualified for a home that they truly can afford because they failed to make the payments on an overly priced house with the mortgage that they never should have been given. The situation in the housing industry is just insane and government regulators and the private sector have got to come to terms with the fact that someone who was just foreclosed on or who simply handed back the title and keys and walked away can be highly qualified to buy another home right away regardless if they have a 200 credit score. When we stop the insanity and let those people get a mortgage with some reasonable down payment, or even to refinance their current mortgage with no equity, that will be the day when we start to turn back the housing industry crisis, for that is the day when the musical starts and a lot of desperate homeowners will get out of their "chairs" and move to a home they can afford and start to make payments they can easily live with. And when the banks and other holders of mortgages start eliminating their non-performing loans and liquidating their properties we will all start to see brighter days!!
What about the government and size of entitlements you may ask. OK, I saved the best (or the worst) for last. If you ask me that could well be the biggest prize for having to live through this painful recession. For the first time in over a generation we may actually begin to shrink government! That includes Federal, State, and every level and agency. Hallelujah!! Less government means less spending and less spending means less government borrowing. That means businesses are in less competition with the government for capital borrowing or workers. No apologies to many greedy Union leaders who had it coming and have been destroying rather than helping our country!! (When the Unions recognize how they can be part of the solution I will applaud you, but thus far it has been far the opposite.) The problem with our deficit and debt is simply that there are just too many living off of too few. Let's stop calling this overhead "entitlements" because it starts off with the premiss that people are entitled!! Too many people have been given pensions and benefits that they should not be entitled to! That is the tough truth! I don't say that rolling back entitlements won't be painful for some, but it can be done and it has to be done! If I agree with the Tea Party on anything that is it. And, I'm including the military in this. Enough already! No, too much already! While there are some tax loopholes that have to be closed, we can not tax our way out of this deficit. In fact, if we want American company profits made overseas to be repatriated and invested in the USA we actually have to cut corporate taxes! Every dollar that goes into government has to be looked at as a dollar that could have been better spent by you! Every dollar a business has to hand over to government is a dollar that the business could have been spent on labor or invested in research, development, plant & equipment or even distributed as dividends to help fund someone's retirement income.
As government shrinks the economy can grow, but only if there is sufficient monetary stimulus to ride us through a truly soft patch. And, only if regulators encourage more energy self-sufficiency by letting more towns like Williston to raise domestic supply. And, if we get reasonable about who qualifies for a mortgage today regardless of what happened with their last home mortgage. Entitlements are the past, America needs to invest in the future. The biggest crisis we have in America is finding the leadership that sees our problems for what they are and has the courage and ability to articulate the problems and solutions and inspire us to tackle them. That is what I really mean by the title for this post "tough to say!"
People hate uncertainty. Stock markets hate uncertainty. I think the only people who love uncertainty are anarchistic and doomsayers. This is a great time for someone who would like to lead a rebellion. And, as the political season heats up around the USA I'm betting some of the political stumping sounds as close to a call for overthrowing the government as you can get without seriously meaning it. No doubt that some of them will mean it. (Get your pitchfork ready.)
It's getting ugly and austerity hasn't even really kicked in yet. If Euro countries, the UK, and the USA take the austerity steps they seem to be that are needed to rein in deficit spending from a gallop to a cantor, let alone a fast trot, there will be much more pain and protest to deal with. Scenes like the ones we saw in Greece earlier this year will be much more common across Europe. In the USA, expect to see Tea Party rallies so large that they fill stadiums. No security could safely escort Harry Reid through those tailgating parties.
We are about half way through the Hurricane season, and already FEMA is broke. Let Katia or whatever storms or other kinds of natural disasters cause another few billion dollars of damage and leave a few more millions without power or homeless and then even the weather is a big factor in turning an already tumultuous time for society into a downright out of control situation.
Is it a coincidence that next year is 2012? Movies about Armageddon went into production years ago. Their producers may be starting to get worried about the box office receipts if we are actually having it. Wouldn't that be the ultimate irony!
OK, let me try to rise above all this. The world is not coming to an end! But if it is, consider yourself lucky to have lived to see it. There's no denying the parallels with the Mayan calendar, and that recent geopolitical events appear to play into the "end-of-days" prophets. If it's enough to scare you then go ahead and get your house in order - worship and repent, tell people you love them, cherish every day, and take the vacation you've always dreamed of ... it's all good even if the world goes on for another ten thousand years.
Generation after generation have had to face tough times and frightening thoughts about the future. I don't have to list history to prove that. The key thing to keep in mind is that we always got through it! Mankind finds a way. Humans are amazing and resourceful creatures. Overall, we tend to get our way. And while Americans may have grown soft we are bred from the stock of the people who founded this nation, got through the civil war, the Great Depression, and won two world wars. We got "enough tuff" in us to handle just about anything Obama or Bernanke can throw at us!
What we need is a little perspective in order to see where the situation with the economy is heading. I will take a stab at it.
Various governments around the world are broke and the only way they can get through this mess we are in is through more aggressive monetary policy. Forget about fiscal stimulus or new taxes raising enough money to deal with the debt. Call the solution whatever you like, but I like to call it what it is, printing money. That sounds bad but first let's get this fact straight. ALL the money in circulation is fake!! None of it is backed by material assets. We've been off the Gold Standard for decades. Money js just printed pieces of paper or digital numbers with lots of zeros. It only has value because we believe it has value! And, money only has value for two reasons: 1) People accept it in exchange for what really does have value (goods and services). 2) There is NOT so much money floating around that there is more it chasing the supply of goods and services than there is a supply of those goods and services. With those two facts firmly in mind, ask yourself the following three questions: 1) Do you really expect people to refuse any legitimate currency in circulation? 2) Are you worried about having too much money? 3) Do you expect the Exon/Mobile to say they are out of gas? If you answered "NO freak'n way" to those three questions then I believe we all need to stop worrying about QE anything causing too much inflation! There is way too much fear of inflation. I like the way Bernanke put it ... I believe he called recent inflation concerns "transitory!" What a perfect way to put it!!
Even if oil did go to $120 a barrel again it's only going to accelerate the rate at which America becomes non-dependent on foreign oil. Watch how many more businesses and households take real steps to reduce their demand for oil and gasoline as oil prices go back up again. People will be going solar, pulling up to the pump in hybrids that get 2x mileage, recycling every ounce of metal or plastic, and replacing their windows, doors, furnace, and every inefficient appliance they have before they pay $140 a barrel again. Oil and gas supply towns like Williston North Dakota will be booming across the USA and oil will be coming out of every pour before we become dependent on a Libya, let alone Iran, for their oil. I think just about every American wants to tell OPEC to pound sea salt and it's about time we did!!! I'm not worried about higher oil prices. In fact I say, bring it on!!
I'm not worried about food inflation either. America has the greatest agricultural supply industry in the world. And in the process we've learned to manufacturer the most amazing farming machinery and equipment the world has every seen. We have corn combine tractors that need their own zip code. That bodes well for many American firms who are positioned fantastically to profit from the demand coming from developing and emerging continents like Africa and Asia, as well as South America. Food inflation will be tackled with the tools and other farming technology. that America leads the world in. (And by the way, our cheap dollar isn't hurting the firms that make and supply this equipment.) A tangential benefit that I see coming from food inflation is how it will cause Americans to rediscover something wonderful that we gave up to the giant industrial farms - family farms. One way American's can address food inflation, let alone the effects of all the additives in processed foods, is to get back to "home grown" or at least locally grown produce, meats, and dairy. This isn't just good for our health, it's good for jobs in our communities as we source more of our table from local farmers and markets.
No matter what we do to turn our economy around it isn't going to happen until we fix the housing industry! Given the fact that the housing industry is at depression levels it's a wonder that unemployment isn't as well above where it is today. Personally, I see that as evidence of how strong and diverse our economy really is. But the housing industry is still vital to the health of our economy and just like the automotive industry, the housing industry needs to make a comeback. I believe it will and with it will come the jobs. And, with both we will be pulling ourselves out of the economic malaise and seeing brighter days
I know I can't get off that easily with just saying "I believe housing will make a comeback" without giving some reasonable logic for why it will. So here is the reason and it's much simpler than you than you think. The solution for the housing industry plays a lot like a game of musical chairs. Only instead of players getting out of their chairs there are lots of distressed homeowners who need to get up out of the homes and slide over to another home a lot like it. Now I will explain.
The game begins with Bernanke's "operation twist" in order to drive down long term interest rates. As if they aren't low enough already, the 30 year mortgage is apt to go a level we haven't seen in our lifetime and our children will never see in their lifetime. Couple historically low interests rates with a remarkably attractive pricing index and fantastic supply and people have an opportunity to buy a home is that is possibly the deal of the century!!
The great housing values and affordability is all well and good but if people can't qualify for a mortgage it's not going to do a lot of good for home buying or the housing industry. I believe that is about to change. It makes no sense for someone to be disqualified for a home that they truly can afford because they failed to make the payments on an overly priced house with the mortgage that they never should have been given. The situation in the housing industry is just insane and government regulators and the private sector have got to come to terms with the fact that someone who was just foreclosed on or who simply handed back the title and keys and walked away can be highly qualified to buy another home right away regardless if they have a 200 credit score. When we stop the insanity and let those people get a mortgage with some reasonable down payment, or even to refinance their current mortgage with no equity, that will be the day when we start to turn back the housing industry crisis, for that is the day when the musical starts and a lot of desperate homeowners will get out of their "chairs" and move to a home they can afford and start to make payments they can easily live with. And when the banks and other holders of mortgages start eliminating their non-performing loans and liquidating their properties we will all start to see brighter days!!
What about the government and size of entitlements you may ask. OK, I saved the best (or the worst) for last. If you ask me that could well be the biggest prize for having to live through this painful recession. For the first time in over a generation we may actually begin to shrink government! That includes Federal, State, and every level and agency. Hallelujah!! Less government means less spending and less spending means less government borrowing. That means businesses are in less competition with the government for capital borrowing or workers. No apologies to many greedy Union leaders who had it coming and have been destroying rather than helping our country!! (When the Unions recognize how they can be part of the solution I will applaud you, but thus far it has been far the opposite.) The problem with our deficit and debt is simply that there are just too many living off of too few. Let's stop calling this overhead "entitlements" because it starts off with the premiss that people are entitled!! Too many people have been given pensions and benefits that they should not be entitled to! That is the tough truth! I don't say that rolling back entitlements won't be painful for some, but it can be done and it has to be done! If I agree with the Tea Party on anything that is it. And, I'm including the military in this. Enough already! No, too much already! While there are some tax loopholes that have to be closed, we can not tax our way out of this deficit. In fact, if we want American company profits made overseas to be repatriated and invested in the USA we actually have to cut corporate taxes! Every dollar that goes into government has to be looked at as a dollar that could have been better spent by you! Every dollar a business has to hand over to government is a dollar that the business could have been spent on labor or invested in research, development, plant & equipment or even distributed as dividends to help fund someone's retirement income.
As government shrinks the economy can grow, but only if there is sufficient monetary stimulus to ride us through a truly soft patch. And, only if regulators encourage more energy self-sufficiency by letting more towns like Williston to raise domestic supply. And, if we get reasonable about who qualifies for a mortgage today regardless of what happened with their last home mortgage. Entitlements are the past, America needs to invest in the future. The biggest crisis we have in America is finding the leadership that sees our problems for what they are and has the courage and ability to articulate the problems and solutions and inspire us to tackle them. That is what I really mean by the title for this post "tough to say!"
Wednesday, August 17, 2011
Laugh at the Recession
US RECESSION
The recession has hit everybody really hard...
And, finally....
I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement funds, etc., I called the Suicide Hot-line. I got a call centre in Pakistan, and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.
The recession has hit everybody really hard...
- My neighbor got a pre-declined credit card in the mail.
- Wives are having sex with their husbands because they can't afford batteries.
- CEO's are now playing miniature golf.
- Exxon-Mobil laid off 25 Congressmen.
- I saw a Mormon with only one wife.
- If the bank returns your check marked "Insufficient Funds," you call them
- and ask if they meant you or them.
- McDonald's is selling the 1/4 ouncer.
- Angelina Jolie adopted a child from America .
- Parents in Beverly Hills fired their nannies and learned their children's names.
- My cousin had an exorcism but couldn't afford to pay for it, and they re-possessed her!
- A truckload of Americans was caught sneaking into Mexico .
- A picture is now only worth 200 words.
- When Bill and Hillary travel together, they now have to share a room.
- The Treasure Island casino in Las Vegas is now managed by Somali pirates.
And, finally....
I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement funds, etc., I called the Suicide Hot-line. I got a call centre in Pakistan, and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.
Sunday, July 31, 2011
Lead, Follow, or get out of the way
Using the phrase "lead, follow, or get out of the way" I evoke the spirit of Thomas Paine, with this commonly, albeit incorrectly, attributed quote to open this blog post.
Thomas Paine was a Father of the Revolution so influential that John Adams reportedly said, "Without the pen of the author of 'Common Sense,' the sword of Washington would have been raised in vain.” It's been said that 'Common Sense', which Paine originally called the 'Plain Truth,' was "oriented to the future in a way that compels the reader to make an immediate choice. It offers a solution for Americans disgusted and alarmed at the threat of tyranny."
The debate over our deficit and debt ceiling pails in comparison to the debate that raged in Paine's time over the revolution. Nonetheless, we can draw inspiration and resolve from these words Paine used in his inspirational 'Crisis Papers' at the time of the American Revolution:
"These are the times that try men's souls: ... What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as freedom should not be highly rated."
I contend that today American is trying to free itself from another yoke on our freedom and a great threat to our Republic and the way of life that we wish our children to enjoy. This would be our national debt.
Surely the solution must include a simpler, flatter, and broader tax code. By the same token to put us on the road to a balanced budget some say "tax the rich" while others say to reduce loopholes. Either way these answers miss the point that we are paying nearly 40% of every dollar that comes in on taxes to pay our cost of carrying the debt which has mushroomed out of proportion because of too much spending. When government spends too much it creates waste and leads to corruption, as well as competing with the private sector for capital and labor.
Taxes should come from a prosperous nation, not a rich few! To achieve prosperity our nation needs to reward innovation and risk! Our tax structure should reward the people and firms that risk their possessions by investing their wealth. They lead America to prosperity and as a nation we all benefit from their success.
Another great Thomas, and great inventor, Thomas Edison, said of Paine, "I have always regarded Paine as one of the greatest of all Americans. Never have we had a sounder intelligence in this republic." Paine was one of the first to promote social programs, progressive taxation, and the abolition of slavery. If he were alive today I have to believe Thomas Paine would produce inspiring words which speak to America's ability to muster the will to defeat the debt burden.
Our great economy is the result of great developments, not great spending or great taxes. For example in the list below you see that America leads the world in patents. (China isn't even in the top ten. Even the Netherlands leads China! Why should China invent when is can easily get away with stealing!) America lead the world's agricultural revolution, the industrial revolution, and we lead the technological revolution. We can compete with any country in the world - if they compete fairly. And when China steals our intellectual property they steal the jobs that go with it!
As we face the plain truth about our spending and debt we will also recognize that the only sensible way to raise our national prosperity and tax revenues is the promotion of free enterprise and the entrepreneurial spirit! America will lead if Government will get out of the way while steadfastly protecting the rights of its citizens. (And and this includes our intellectual property rights!) The world will follow as it always has.
World Top Ten Patent Registering Countries
Country - Patents Registered
USA 157,496
Japan 125,880
Germany 41,585
France 36,404
South Korea 34,956
UK 33,756
Italy 19,652
Russia 17,592
Netherlands 17,052
Spain 15,809
Thomas Paine was a Father of the Revolution so influential that John Adams reportedly said, "Without the pen of the author of 'Common Sense,' the sword of Washington would have been raised in vain.” It's been said that 'Common Sense', which Paine originally called the 'Plain Truth,' was "oriented to the future in a way that compels the reader to make an immediate choice. It offers a solution for Americans disgusted and alarmed at the threat of tyranny."
The debate over our deficit and debt ceiling pails in comparison to the debate that raged in Paine's time over the revolution. Nonetheless, we can draw inspiration and resolve from these words Paine used in his inspirational 'Crisis Papers' at the time of the American Revolution:
"These are the times that try men's souls: ... What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as freedom should not be highly rated."
I contend that today American is trying to free itself from another yoke on our freedom and a great threat to our Republic and the way of life that we wish our children to enjoy. This would be our national debt.
Surely the solution must include a simpler, flatter, and broader tax code. By the same token to put us on the road to a balanced budget some say "tax the rich" while others say to reduce loopholes. Either way these answers miss the point that we are paying nearly 40% of every dollar that comes in on taxes to pay our cost of carrying the debt which has mushroomed out of proportion because of too much spending. When government spends too much it creates waste and leads to corruption, as well as competing with the private sector for capital and labor.
Taxes should come from a prosperous nation, not a rich few! To achieve prosperity our nation needs to reward innovation and risk! Our tax structure should reward the people and firms that risk their possessions by investing their wealth. They lead America to prosperity and as a nation we all benefit from their success.
Another great Thomas, and great inventor, Thomas Edison, said of Paine, "I have always regarded Paine as one of the greatest of all Americans. Never have we had a sounder intelligence in this republic." Paine was one of the first to promote social programs, progressive taxation, and the abolition of slavery. If he were alive today I have to believe Thomas Paine would produce inspiring words which speak to America's ability to muster the will to defeat the debt burden.
Our great economy is the result of great developments, not great spending or great taxes. For example in the list below you see that America leads the world in patents. (China isn't even in the top ten. Even the Netherlands leads China! Why should China invent when is can easily get away with stealing!) America lead the world's agricultural revolution, the industrial revolution, and we lead the technological revolution. We can compete with any country in the world - if they compete fairly. And when China steals our intellectual property they steal the jobs that go with it!
As we face the plain truth about our spending and debt we will also recognize that the only sensible way to raise our national prosperity and tax revenues is the promotion of free enterprise and the entrepreneurial spirit! America will lead if Government will get out of the way while steadfastly protecting the rights of its citizens. (And and this includes our intellectual property rights!) The world will follow as it always has.
World Top Ten Patent Registering Countries
Country - Patents Registered
USA 157,496
Japan 125,880
Germany 41,585
France 36,404
South Korea 34,956
UK 33,756
Italy 19,652
Russia 17,592
Netherlands 17,052
Spain 15,809
Thursday, July 14, 2011
Never Say Never
The USA would probably never default. But the odds of "probably" are looking less and less in our favor. A year ago they were slim to none, however as we are quickly approaching the alleged day when the debt ceiling is going to be reached according to Treasury Secretary Gietner, the odds of default are getting downright frightening. The problem is politics of course. The disaster can be easily averted. But ideologies, egos, and presidential politics are forming the perfect storm that could just make the road to a debt ceiling increase vote impassable!
Time is skewed to shorten the window available for reconciliation because the ratings agencies and the markets are not apt to give us till the 9th hour, and it's anybodies guess when that freak attack will come.
Furthermore, even if the parties who would more likely be able to settle their broad and angry differences in a boxing ring than a conference room do somehow manage to see eye to eye in the spirit of compromise for the good of the country over the good of party (wow, that sounds like a dream world we are most definitely not living in) then there would still be the not so minor matter of passage by the full houses of congress. Imagine we get down to the wire and a faction of the Tea Party caucus manages to string together a senate filibuster that takes us over the edge!
The stand-off between President Obama and Rep. Cantor is beginning to feel like the financial markets version of the Cuban Missile Crisis. I'm wondering when we should start planning to run to our financial mutual destruction bomb shelters. Where is that again??
Time is skewed to shorten the window available for reconciliation because the ratings agencies and the markets are not apt to give us till the 9th hour, and it's anybodies guess when that freak attack will come.
Furthermore, even if the parties who would more likely be able to settle their broad and angry differences in a boxing ring than a conference room do somehow manage to see eye to eye in the spirit of compromise for the good of the country over the good of party (wow, that sounds like a dream world we are most definitely not living in) then there would still be the not so minor matter of passage by the full houses of congress. Imagine we get down to the wire and a faction of the Tea Party caucus manages to string together a senate filibuster that takes us over the edge!
The stand-off between President Obama and Rep. Cantor is beginning to feel like the financial markets version of the Cuban Missile Crisis. I'm wondering when we should start planning to run to our financial mutual destruction bomb shelters. Where is that again??
Wednesday, June 15, 2011
HOT Summer
Things are going to really heat up this summer! Greece is already boiling over. A heatwave of unrest is moving into the UK where union protests and civil disobedience may be reminiscent of PM Thatcher's coal union busting days. Europe will not be high on the list of travel destinations as entitlements get scaled back throughout insolvent Euro member countries and the shear size of the protests will put a strain on police forces and leave most governments with no choice but to bring in their military to function as police. There is bound to be disruption in public services and transportation systems. Business will certainly not be as usual. All of it will take its toll on the social system and we're sure to see some tears in the fabric. Some citizens are bound to crack and who knows what bizarre acts we may see. Things could spiral out of control and those responsible for keeping the peace may ultimately end up fueling the flames. What will rise from these frames? A leader, a charismatic anarchist, a savior, or a phoenix? I think we may soon find out.
Tuesday, June 7, 2011
What Will We Call It? Maybe the The Great Default.
If you ask me, there's a growing sense that this time around it's different. There is an odd expectation that we've come to the end of our economic road. It's as though between Europe, Japan, and the USA that we've kicked the debt can as far as we can get away with.
Like the story of the Emperor's Cloths there's no denying that the obligations of so many nations are too large to think they can be met. There's no believable logical plan that squares away the liabilities using realistic revenue and growth projections. I think the experts know it and most ordinary people, without any economic or accounting knowledge and just plain common sense, know it too.
Recently Moody's stated publicly that schemes being considered to "modify" Greece's debt would constitute a "default." It reminded me of the expression, "putting lipstick on a pig." There's just no denying the pig.
The debt problems around the world are like a tinder box ready to be ignited by a spark - an event that causes the world to declare one debtor nation in default. The flames of default will be fanned from the PIIGS to Japan, burning a giant path of financial destruction. It would be an event for the record books. What shall we call this historic economic catastrophe? Surely the Great Recession is to weak, and besides, that was declared over. While it may technically be a "Double Dip" that hardly seems a sufficient or worthy monicker. There was WWI and WWII so maybe labeling it The Great Depression II is appropriate. I kinda like the idea of calling it what it will be, The Great Default.
The part that's confusing is that while everyone's insolvent, we have different mechanisms for forestalling the seemingly inevitable. In the USA, congress can spend money that it doesn't have by telling the Treasury, which is like America's banker, to just lend it the money (as long as congress let's them) and the Federal Reserve can print (I'd like to say "out of thin air") all the money it needs to buy the Treasury's debt and thus fund the government. Whereas, in the case of Greece and other insolvent Euro countries they have to borrow from responsible bankers who follow rigid guidelines and formulas to calculate and limit how much a country can afford to borrow. And, after they've effectively lent the country that amount the bankers then proceed to make up ways to let the countries borrow many fold more than the country can ever hope to repay. The mechanisms are different but in the end it is the same story of ridiculous unsustainable debt.
There is lies the $64 trillion dollar question. When does sustainable debt become unsustainable? We've gotten away with unsustainable debt for so long that the phrase is becoming an oxymoron. (Pause to think about that one.)
Maybe not. Maybe the reckoning I've blogged about (and emailed about before I discovered blogging) and that real economists and writers have written about is finally and inexorably at our doorstep. Gosh I hope not! Just because I write about it doesn't mean I want it to happen. Frankly it scares the heck out of me!
But back to the purpose of this post. I'm looking for a name. What will we all call this historic collapse of world debt? Again, I say call it what it is. After all, if our failure to face financial realities is largely what got us all in this mess, then it seems proper to begin to solve our problems by admitting to ourselves and everyone the insolvent entities we've become. As such, the most suitable name for the event that marks our coming awareness of this historic moment is The Great Default.
The thing about a default is that the debts go away, but the debtors and creditors do not. Portugal, Ireland, Italy, and Greece are not going away. Neither is Belgium, Sweden, Denmark, Spain, Japan, or the USA. Assets can be shifted around, but countries can't be. So what are Germany and France going to do when Greece defaults? Recently economist Andrew Lilico wrote an article that appeared in The Telegraph, and which I've linked to, entitled "What will happen when Greece Defaults." Andrew's article is a succinct blow-by-blow rundown of the way you'd think the dominoes should fall and while I agree with him we all know that things seldom go exactly according to plan.
I wonder if any self-respecting and reputable economist has conjectured in a readable white paper the way it might play out if what I've dubbed The Great Default where to happen, say next week or so? If one of my few but highly worldly and intelligent readers (brown nosing blog style) has come across such a document please direct me to it in a comment to this post..
It seems to me that the Great Default may play out a bit like a game of Monopoly that the players don't want to end. When I was a kid we used to play that game quite a bit at my friend Seth's house. In our little make believe world of high finance "The Banker" would just dole out more money. This would happen until the Bank was out of money because the one of us with all the money never wanted to give their money back to the bank. I'd have to agree that he analogy between a played out game of Monopoly and the world's debt crisis is an over simplification. By the same token, there is a natural yearning to find a simple way out of the mess we've gotten ourselves in.
Why the yearning? To answer this question I return the point I made above about why I hope I am wrong about the need to call this The Great Default or any other thing. The yearning for a simple solution is because the thought of it really happening it terribly frightening! If we look past the mechanics of the economics and consider the likely social and individual consequences, the realities that matter the most on a human scale are very hard to think about.
Ultimately, if you're an optimist like me, you have to believe that we'll work our way out of this and come out the other end stronger for it. So I am sure we'll find a way to kick the can over the wall and find ourselves on whole new open stretch of road to go down!
Like the story of the Emperor's Cloths there's no denying that the obligations of so many nations are too large to think they can be met. There's no believable logical plan that squares away the liabilities using realistic revenue and growth projections. I think the experts know it and most ordinary people, without any economic or accounting knowledge and just plain common sense, know it too.
Recently Moody's stated publicly that schemes being considered to "modify" Greece's debt would constitute a "default." It reminded me of the expression, "putting lipstick on a pig." There's just no denying the pig.
The debt problems around the world are like a tinder box ready to be ignited by a spark - an event that causes the world to declare one debtor nation in default. The flames of default will be fanned from the PIIGS to Japan, burning a giant path of financial destruction. It would be an event for the record books. What shall we call this historic economic catastrophe? Surely the Great Recession is to weak, and besides, that was declared over. While it may technically be a "Double Dip" that hardly seems a sufficient or worthy monicker. There was WWI and WWII so maybe labeling it The Great Depression II is appropriate. I kinda like the idea of calling it what it will be, The Great Default.
The part that's confusing is that while everyone's insolvent, we have different mechanisms for forestalling the seemingly inevitable. In the USA, congress can spend money that it doesn't have by telling the Treasury, which is like America's banker, to just lend it the money (as long as congress let's them) and the Federal Reserve can print (I'd like to say "out of thin air") all the money it needs to buy the Treasury's debt and thus fund the government. Whereas, in the case of Greece and other insolvent Euro countries they have to borrow from responsible bankers who follow rigid guidelines and formulas to calculate and limit how much a country can afford to borrow. And, after they've effectively lent the country that amount the bankers then proceed to make up ways to let the countries borrow many fold more than the country can ever hope to repay. The mechanisms are different but in the end it is the same story of ridiculous unsustainable debt.
There is lies the $64 trillion dollar question. When does sustainable debt become unsustainable? We've gotten away with unsustainable debt for so long that the phrase is becoming an oxymoron. (Pause to think about that one.)
Maybe not. Maybe the reckoning I've blogged about (and emailed about before I discovered blogging) and that real economists and writers have written about is finally and inexorably at our doorstep. Gosh I hope not! Just because I write about it doesn't mean I want it to happen. Frankly it scares the heck out of me!
But back to the purpose of this post. I'm looking for a name. What will we all call this historic collapse of world debt? Again, I say call it what it is. After all, if our failure to face financial realities is largely what got us all in this mess, then it seems proper to begin to solve our problems by admitting to ourselves and everyone the insolvent entities we've become. As such, the most suitable name for the event that marks our coming awareness of this historic moment is The Great Default.
The thing about a default is that the debts go away, but the debtors and creditors do not. Portugal, Ireland, Italy, and Greece are not going away. Neither is Belgium, Sweden, Denmark, Spain, Japan, or the USA. Assets can be shifted around, but countries can't be. So what are Germany and France going to do when Greece defaults? Recently economist Andrew Lilico wrote an article that appeared in The Telegraph, and which I've linked to, entitled "What will happen when Greece Defaults." Andrew's article is a succinct blow-by-blow rundown of the way you'd think the dominoes should fall and while I agree with him we all know that things seldom go exactly according to plan.
I wonder if any self-respecting and reputable economist has conjectured in a readable white paper the way it might play out if what I've dubbed The Great Default where to happen, say next week or so? If one of my few but highly worldly and intelligent readers (brown nosing blog style) has come across such a document please direct me to it in a comment to this post..
It seems to me that the Great Default may play out a bit like a game of Monopoly that the players don't want to end. When I was a kid we used to play that game quite a bit at my friend Seth's house. In our little make believe world of high finance "The Banker" would just dole out more money. This would happen until the Bank was out of money because the one of us with all the money never wanted to give their money back to the bank. I'd have to agree that he analogy between a played out game of Monopoly and the world's debt crisis is an over simplification. By the same token, there is a natural yearning to find a simple way out of the mess we've gotten ourselves in.
Why the yearning? To answer this question I return the point I made above about why I hope I am wrong about the need to call this The Great Default or any other thing. The yearning for a simple solution is because the thought of it really happening it terribly frightening! If we look past the mechanics of the economics and consider the likely social and individual consequences, the realities that matter the most on a human scale are very hard to think about.
Ultimately, if you're an optimist like me, you have to believe that we'll work our way out of this and come out the other end stronger for it. So I am sure we'll find a way to kick the can over the wall and find ourselves on whole new open stretch of road to go down!
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