Consequences of Things as Usual

I will be publishing only on Monday for the next couple of months. Corporate Greed, Excessive CEO Pay, and Corporate Loopholes seriously affect Joe Citizen. The world is changing as Washington DC and Wall Street slowly recognize that “Houston, we have a problem!” False prophets arise in the darkness proclaiming, “Lower Interest Rates, Bailout the Financial institutions from their ills and all will be well!”

The United States is suffering from Structural Dislocations. Tax Rebates, Lower Fed Funds Rates and other stimulus packages will do little more than slow the decline while boosting up foreign economies supplying the US. All this will come at the expense of our children who will be left holding the bag. The US government is acting like the homeowner who bought too much house for their earning capacity and then refinanced every year leveraging up each time. At a certain point the bubble bursts and the faux earnings come out of the system leaving the homeowner upside down in his house. This is where we are with the US economy. We continue to spend our nation’s equity without increasing our productive capabilities. The result is always bad.

In some areas the decline is breathtaking while other areas still do not show the perilous times ahead of us. When the US dollar traded at 1.44 Euro I said it would go to 1.75 Euro. I believed that to happen over the next year not the next 30 days. Continuing Unemployment Claims are at historically high levels as the Labor Department says that we will not see the 20% unemployment of the 1930s. I suggest we are well past that level when calculated with the same formula used in the 1930s not the faux calculations imparted after the beginning of Reaganomics.

Eliot Spitzer has been shown for what he is: a corrupt public servant that used his office for his own personal gain. Corruption is the only result that can come from collusion between unscrupulous business executives and lying politicians.

Bear Stearns, the financial institution, has to be bailed out by JP Morgan. JP Morgan will only do the deal if the Federal Reserve guarantees their investment. Yes your tax dollars are going to buy out Bear Stearns. All this while the government is trying to unilaterally reduce Social Security Benefits for which you paid your entire working life. This is just the latest example of why legislation must be passed to limit CEO pay. The CEO of Bear Stearns has received more compensation in the last five years than the entire net worth of the company!

Our politicians continue to squawk about the war in IRAQ, tax cuts, buying entire neighborhoods, relaxing regulations to allow companies to employ more unethical and illegal practices instead of looking at the real problem: The United States no longer produces a reasonable portion of its internal consumption.

Washington must go cold turkey. They must break all ties with business and lobbies. They must take a hard look at our economy, our culture, and our nation and create a framework in which hard work is valued and entrepreneurs can actually create businesses and not Ponzy Schemes. They must allow Americans to have hope for a better tomorrow for themselves and their children.

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Reducing Deficits – Can the FED

The United States Government has been running increasing deficits. The Government continues to spend excess liquidity from the Social Security fund paid by workers over the past 75 years. The government knows that the contractual agreement of Social Security will bankrupt the government if they do not replace these funds or cut costs. Their answer is to reduce contractually agreed benefits placing the burden on those who contributed to the fund.

I suggest a different answer. Let’s eliminate useless agencies. The FED has become nothing more than a Sugar Daddy for speculative financial institutions. When the cute smoke and mirrors service sector known as Wall Street makes mistakes the FED intervenes and congress bails them out. This makes the real economy, what is left of it, uncompetitive on the world markets. Originally the FED was designed to control dislocations and excesses of the financial markets however in today’s Reaganomic based financial scam Wall Street completely dictates the actions of the FED.
The FED costs the US taxpayer a great deal of money. Additionally it is responsible for bubble creation and facilitates the devaluation of the dollar by increasing M3, conveniently eliminated from FED policy several years ago. Banks are encouraged to enter into speculative operations by easy money. Individuals are encouraged to spend more than they make because there is no return on savings.

The FED is thinking only about the short term. It does exactly what Wall Street calls for but we have learned that short term focus is usually not in the best interest of any entity. I guess the old adage, “Eat drink and be Merry for Tomorrow We Die!” is the FED’s motto. The FED is doing exactly the opposite of what it should be doing in the long term. We see the disastrous policy expressed as LIBOR spreads continue to increase. In fact we see other interest rates remaining high while the FED lowers rates. The dollar is sold as the Economic Policies of the US are seen as creating greater future problems. All said, the FED is creating more problems than it solves. If an agency costs money and we need to reduce the deficit and the agency is not performing its mandate then get rid of it.

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US Government’s Economic Policy ravages US markets – Financial Stocks Tank

The piper has come for payment. In August the Fed bailed out their buddies in the major US financial institutions. After years of speculating in credit derivatives the collapse of the housing bubble threatened the existence of most financial institutions. Instead of requiring the institutions to write down their bad positions the FED pumped in almost $1trillion in liquidity and piloted the purchase of Country Wide Financial, the poster child of bad lending practices, by 4 major banks utilizing funds lent by the Federal Reserve to these institutions. The FED lowered interest rates even though real inflation is through the roof. This was a really bad move but right in line with the disastrous ideology of Reaganomics.

The US dollar has been losing value for the past 5 years. A country’s currency can be seen as shares representing the country’s equity. Just like shares if you spend more money than you earn the currency diminishes in value to represent the new economic reality. If a company creates more shares the value of existing shares is diminished. If the company pays a dividend it receives a higher valuation. The dividend for currency is interest rates. A company may also receive a higher price if the future outlook for earnings (retained equity) is positive. The dollar has devalued because of the current account deficit, budget deficits, artificially low interest rates, and the lack of faith in the United States as a going concern.

The US has eliminated internal production of goods and services. The US only produces 20% of the goods it produces. The US is completely dependent on countries that do not have our values or our product safety laws. The excuse is for cheap labor but the reality is that products may be produced using materials and processes banned in the US. If a worker dies, well, “C’est la vi.” That glue is not available well GHB will do just fine for a child’s toy. The shipping costs are offset by cheap energy produced by high polluting processes. The US cannot complain about quality or the producer will stop shipping goods and stores in the US will have empty shelves. The economic impact of Free Trade at all costs is a reduction of middleclass jobs, lower wages across all segments, and a migration of wealth from the middleclass to the upper class.

The US lives on a smoke and mirrors “Service Economy”. US corporations have become nothing more than marketing companies. Research and Development, Intellectual property, quality workmanship are no longer important. We now make money without working. Wow! Experienced and educated professionals are the latest in the outsourcing scheme. In countries where University is free the PHDs abound and corporate America wants a piece of these low cost professionals. We are now emptying the US production machine, basis of any country, of the last remaining resource, educated scientists, engineers, and top managers.

Corruption is widespread in both Government and Business. Taxes are a cost of doing business. Corruption is a hidden tax on the economy. Corruption is paid for by the collective while the benefits are limited to the parties involved. Corruption is considered a victimless crime. This is like saying that dumping toxic waste into the watershed is a victimless crime. There are victims it is just harder to find the direct correlation. Corruption affects everyone in the country. It reduces GDP just a higher taxes or high interest rates. It causes the loss of jobs. I consider governmental corruption up there with mass murder because the economic effects are felt by rich and poor alike. This in turn results in people not being able to pay their bills, have homes or sometimes even eat. Corruption should carry a mandatory life sentence and lobbying by corporations should be made illegal.

Collusion between politicians and Corporate America has distracted resources from internal infrastructures. Lobbying is legalized bribes. In any other developed country the activities of lobbies would be considered criminal. In the early 90s Italy went through a cleansing process eliminating entire political parties and incarcerating corrupt politicians. The activities were no different than our politicians taking vacations (or the many other perks) on the corporate dime. Italy has since maintained a stable government, reasonable growth, and contained inflation. It would be valuable to discuss the pros and cons of corporate lobbies. It is a good thing that citizens can petition their government for change. It is a bad thing that corporations can petition anyone considering the fact that corporations are not citizens. Corporations have one objective: to make money and the corporation is often misused to further an individual’s greed such as a CEO that makes hundreds of millions of dollars.

Our system is on the verge of collapse. We need to make changes to the underlying system. The problem is grave. The difficulties we are current facing have been brewing for thirty years and cannot be overcome with a change in interest rates or throwing money at the problems. Change will not come without sacrifice but it is time to pay the piper because the piper will always get his due. Our politicians have no vested interest in change. They are more powerful and receive higher compensation than any time in history. To start to fix the problem we need to change the players. We need real working people in Congress. We need a President who represents us and will think about his country before he thinks about his legacy or other personal gain. We need an individual who is not a politician, someone who actually works for a living (or would if he had a job left). Perhaps one of the workers from middle America who has seen his job outsourced or the scientist who cannot pay his university loans because wages for professionals have been trending downward.

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Divided We Fall

I was reading an article about the anti-war protests in San Francisco. One of the promoters stated, “Where's the outcry? Where's the horror that almost 4,000 Americans have died in a foreign country that we invaded?" Robbins said. "I'm almost as angry at the American people as I am the president. I think Americans have become apathetic and placid about the whole thing.” These words hit me with astounding force. They did not hit me because I think we should be demonstrating against the war in Iraq or that we should hightail it out of there. No, they hit me hard because this individual strongly believes in what she is doing and is pissed off because other Americans will not support her quest. I do not get upset with other Americans because they continue to buy Chinese goods putting their children’s health at risk or because they will not push for alternative energy sources but the seeming apathy does affect my consideration of my fellow Americans.

Last night I was chatting with my cooking buddies. Among the topics of conversation were “the land of fruits and nuts”, the apparent conflict of “why someone can die in a war but not drink a beer”, the fallacy that “illegal immigration cannot be enforced for lack of manpower while we actively throw teenagers in jail for breaking local curfew laws”, and “prohibiting smoking while air born pollutants skyrocket.” I thought about “our dreams”. As college students, we talked about changing the world by eliminating poverty, making education available to all no matter what their social class, and world peace. That was a time when social movement rallies had as many student participants as football games (well maybe not as many but it was acceptable to be socially involved).

Some time ago these same cooking buddies expressed how our political machine had been so successful in dividing the nation. We can no longer act as a people because it is now thousands of specific “us and them”. The religious right believes that abortion and gay marriage are the most important questions, others believe we must “save the environment from humanity”, still others believe that we must “protect ourselves from the evil Muslims.” So here we are, the most informed and financially capable segment of American society, divided, fighting this or that symptom of the greater illness. We are not getting at the cause. We are unable to come together to fight for what made us see a better future because we are heads down, concentrated on the minutia. Our politicians have one. World order is safe. Poverty, wars, despair will be with us for many generations because we are divided and Divided We Fall.

Tags: Government Politics Recession Corporate America Finance Illegal Immigration Economy Reaganomics

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Just give the Speculators $ 1 Trillion – It will cost less

Our great public servants were on capital hill today answering questions about the economy and the credit crisis. Mr. Paulsen explained how strong the US economy is. In a separate press conference Mr. Bush explained how optimistic he is about the strong US economy. Mr. Bernanke explained that the Federal Reserve moved so aggressively because the US economy risked a depression due to the credit markets freezing up. WTF?

What is it? Is the economy great or has irrational exuberance taken its toll on the US economy? The dollar hit historic lows again today. Oil is going to historic highs and gold moved up another $14. Little known is the fact that the Congress must pass new legislation to increase the public debt ceiling otherwise the government will shut down again. Every two years we have to increase the ceiling because we continue to raise the level at which we consider safe our public debt.

The situation of the US economy is serious. Inflation is rampant. Many middleclass families here in Texas are using their credit cards to buy food. Over the past year they have sold their vacation timeshares, they have decreased the number of times they go out to dinner during the week. One of the two parents has taken a second job. Yet they are using their credit cards to pay for food. Interestingly they have a fixed rate mortgage…

Much to the delight of Wall Street the administration is talking about using the GSEs (federally mandated corporations) to take on more of the bad debts floating around. These are the same companies who last year lost 50% of their market value because they had been cooking the books for many years. Under the guise of a limited period of time, in reality these corporations will enter larger markets and never get out creating greater exposure for the US Taxpayer.

When asked about inflation pressures from the falling dollar Mr. Bernanke responded, “It could be a problem, we are keeping a watchful eye…” We know that this is a government “of, by and for the corporation” so let’s get this out of the way. Just take $ 1 trillion and hand it out to all of the speculators who lost money by making bad investments. It will cost us less and we can start taking on the real problems of the US economy. Perhaps we can talk about rebuilding our infrastructures. We might even be able to afford healthcare for the US taxpayer. Who knows we may even be able to protect our borders and inspect imported goods.

Tags: Government Politics Recession Corporate America Finance Economy Reaganomics

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America under Siege – The ills of Collusion between Corporations and Government

US corporations have knowingly flooded the US market with unsafe products. The latest are Mattel and Disney. Their mega salaries are more important that your child’s life. Congress was outraged! They called hearings to bring to task these bad corporations. Humbly the leaders of Mattel and Disney testified that they had no clue that the Chinese did not follow the same safety procedures that a US manufacturer would employ. They used fancy charts to explain how they would do better in the future. It reminds me of the little boy who throws his sister down the stairs and when questioned by his parents he responds, “You say she’s an angel. I thought she could fly.”

The US dollar is tanking on its way to $ 1.50 against the Euro. A falling dollar is inflationary since our economy imports 72% of the goods it consumes and run a $ 1 trillion annual trade deficit. The dollar is falling because we are using our national equity to fund purchases, spending money like drunken sailors in some far away port. Inflation is high even though governmental data has decided to remove food and energy from their data points. Unemployment is estimated somewhere around 12% even though the government only counts people unemployed for 4 months then they simply disappear.

In this scenario, because greedy corporations have made bad loans corporate America has called for reduced interest rates and it seems that the FED will accommodate them. This is a really bad decision. First of all, companies should take their licking. They made bad business decisions. I have not seen the government offering to replenish citizens savings lost during the period of irrational exuberance. Most importantly the reducing the FED funds rate will make investments in US securities less attractive. This will further pressure the dollar in its downward death dive. Lower interest rates will make money more available for bad investments by companies looking for their million dollar bonuses. More money supply will create greater internal inflationary pressures.

I will not even talk about how US unions, since they have falling membership rates among Americans, are filing proceedings intended simply to stop ICE from enforcing immigration. Because corporations want cheap slave labor we have jailed agents who simply are doing their jobs.

We have gone to war to fight an invisible enemy. How about a war against real enemies? We say we do not have sufficient law enforcement personnel to take on illegal immigration but we have sufficient law enforcement to send 30 police cars from two cities to break into a private home during the 18th birthday party of a teenager. The house had about 20 dangerous criminals sitting around the living rooms chatting and drinking beer.

There is something wrong with our country when we think that someone is old enough to fight and die for their country but not old enough to have a beer. There is something even more wrong when we dedicate law enforcement personnel to enforcing religious legislation and we totally ignore criminals.

Tags: Government Politics Recession Corporate America Finance Illegal Immigration Economy Reaganomics

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Will The US Government Bailout the Chinese Banks on Sub Prime?

Bad economic policy by the US Government, corporate cronyism, comprehensive financial incompetence, and 30 years of disastrous interior and trade policies of Reaganomics will force you and I to bailout the Chinese Banks for about $ 300 billion. Impossible? On August 23rd the major Chinese Banks announced their exposure to US Sub Prime mortgages. The Chinese banks are in to the US homeowner for about $300 billion. That is more than any group of US based banks.

The banks immediately explained, “Standard & Poors, the US debt-rating agency, rated these loans within our statute parameters."

This sounds like a threat for future legal action to procure retribution. China also owns a great portion of US governmental debt. China has threatened to sell their holdings of both US currency and Governmental paper over much less important things. The US economy only produces 18% of consumption. A trade war would result in public panic, hoarding and empty store shelves.

The US cannot allow the Chinese to get upset about their loss. The politicians may determine they are less scared of the US voter than the Chinese government and intervene directly. It seems more likely that the US government will act more covertly. Today the Federal Reserve weakened its requirements even further. The FED is now allowing banks to provide “commercial paper” as guarantees and significantly increased the amount of money these banks can borrow.

Yesterday, it seems, the FED bailed out Countrywide Financial. Today it started financing the repurchase of Chinese owned Sub Prime debt. Nice to know that our government is using our tax dollars to take care of the US citizen instead of protecting greedy financial operators from losses. Justification for the FEDs action came so ingenuously truthful from a primary economic analyst.

“What did you want the FED to do, allow the country to enter a prolonged period of depression that will make the 1930s seem like an economic boom?”

The financial, economic and internal production situation in the US is precarious at best. Our Government must stop playing games and come clean with the American people so we can take on these problems. We are not talking about protecting America from a few terrorists who want to blow us up. We are talking about protecting America from the destruction of our economy that will leave hundreds of thousands dying of hunger. Come to think of it this may be Bush’s legacy. The only President except Hoover to reduce America’s waist size.


Tags: Government Politics China Corporate America Finance Economy Reaganomics

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Responsibility? – $100 million CEOs – What a bunch of spoiled brats

I know some are really hurting financially right now. The markets are tanking. Well, not really. The Dow is still above 13,000. It is still up about 6% in 2007 and 30% since late 2005. If you were to listen to the “important people” you would think the world has come to the end. If the economic measuring stick is still up from the beginning of the year why are all these CEOs and Wall Street boys crying,

“The end of the world is coming!”

Simply because the “most intelligent” people in America, the ones who are “worth” $100 million salaries, made bad choices, ran their businesses into the ground and are paying the price for lack of basic understanding of economic policy. These foolish individuals, who are “worth” $100 million salaries, have broken every rule of business 101. They are about to lose a great deal of money because they have chosen to create procedures instead of paying for experienced employees.

These CEOs, who are “worth” $100 million salaries, lobbied to change the bankruptcy rules so that poor individuals who had their jobs outsourced have no chance to start over. The corporate cry babies do not want to take responsibility for their actions. These CEOs want a government bailout. The FED must lower rates. The FED must increase liquidity. These CEOs are having a brief glimpse of what the rest of the country has been living for the past 5 years. They want a bailout and the bad thing is that the FED is bailing them out by injecting liquidity. Increased liquidity means increased inflation, the thing the FED is supposed to fight. The FED will most likely help them even further by decreasing the FED FUNDS rate.

This will decrease, even further, the value of the dollar bringing ever more inflation since the US produces only 18% of what it consumes.

Why is the FED going against its mandate and bailing out a bunch of cry babies?
Why is the FED breaking every rule of stabile economic policy, sacrificing economic stability to save the butts of a few individuals who speculated on an obviously overheating and inflated housing market?

One can only imagine but I would put money on it that the definition of collusion and corruption would somehow be appropriate.

The fact is we are arriving at a turning point where all of the negative aspects of Reaganomics will come to haunt us. The piper must be paid. Stop gaps do nothing but increase the problem. Many of the cry babies have talked about 1930s type depression. They believe that it will be due to FED not doing what they want. We are heading toward a depression because we will not take a serious look at our economy and our culture. Since we will not look at the problems we will not take them on before they take on us.

Tags: Government Politics Corporate America Finance Economy Reaganomics

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Signs of the times

This week ex Federal Reserve Chairman Alan Greenspan said that a recession was a possibility in the immediate future. Obviously this did not sit well with the Administration, or should I say with the Administration’s corporate buddies. By the end of the week every public official and his uncle, including Alan Greenspan, indicated that a recession was absolutely not in the cards. This week the stock exchanges experienced the worse declines in four years as mortgage companies are starting to die like flies in a cold winter storm. Consumer confidence is also declining as job cuts continue and real unemployment, the one that actually counts people that want to work but cannot find a job, is at historically high levels.

The other night I was talking with some friends. During the discussion, an eternal optimist indicated ironically “we should all cut our wrists and give up.” I am also an optimist and I understand exactly her point but my entrepreneurial background has also taught me that it is imperative to see problems, analyze them and take them on with full force. Just plugging along will always result in failure. We should not despair but looking at the world through rose-colored glasses may result in serious consequences. Our government wants us to think that they have the solutions and that they know the best path for the future. WE THE PEOPLE are too stupid to take on these problems.

We cannot allow our politicians to play this game. They are the ones who have taken us down this path in the first place. It is their greed that has sold our great nation to corporate America. It is their shortsighted view of the world that has destroyed our capability to produce even the minimum of what we consume in favor of a “service economy.” It is this group of selfish individuals who have taken our public debt to 47% of GDP. They have spent our future and given our equity to corporate America. They cannot be trusted to do anything. WE THE PEOPLE must take back our government. We need not despair, but we do need to understand and discuss the grave problems we face, without the political rhetoric.

Most importantly we must hold our government and our politicians responsible for the lies they tell us. We must find a way to permanently end their political career when they blatantly lie to us. The fact is that our economy is failing, our currency will continue to slide because we no longer produce goods, the money we have paid into Social Security has been spent by politicians to give tax breaks to corporate America, and you have “no expectation of privacy” as corporate America is involved in every aspect of your life.

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Do you Believe Government Data on the Economy?

I have the opportunity to stay constantly updated on the various data sets that the government puts out every month. I am always amazed at the huge adjustments made on the previous month’s data and how data is manipulated during political battles. Whether the battle be for the elections or some law the congress and administrations want to pass. Look at the data provided when the last Amnesty law was passed under Regan. The Regan Administration estimated that there were 2.5 million illegal immigrants. When all was said and done that number became 4.5 million individual, without considering spouses, children and others who then became eligible for citizenship.

The most recent example is the Bush Administration’s data on GDP. In May the government revised upward its estimates of 2006 GDP to 5.3%. This week the same Government indicated that 2006 GDP will be just over 3% and 2007 GDP will be just under 3%. Strangely enough just after the elections the government realized that our country is growing at 50% of the rate it had indicated just 6 months earlier. I am not saying that our government, paid for by you and me, is lying to us. Perhaps they are just terribly incompetent.

There are those who continue to say that the US is the #1 economy in the world. That the entire world would like to be the US, yet our immigration arrives only from third world countries. The government says that unemployment is 4.4%. At 4.4% everyone who wants a job, has a job. What are you complaining about Joe Worker? Get a job!

I propose that the data provided by the government and so widely pimped by politicians is worth less than cow manure. You can use cow manure to fertilize land and in some cases it can be a fuel source but data like this is misleading and in some cases just plain false. My opponents will immediately ask, “Why would the government lie to us?” Simply, if they provide official data that the economy is good then you and me, Joe Worker, when we are working at a job that pays ½ the salary as 5 years ago, well we are just unlucky or unqualified.

How do we see when the governmental data is bullhonkey? Look at what is going on around you. Last month Toyota opened a new plant in Texas, for 2,000 jobs they received 110,000 applications. That should tell you that labor markets are flush with supply and very little demand. An easier verification of the strength of the job market is looking at employer’s job offers. You can see them on many different job sites. If you see a company looking for a degree in Business Administration for an office manager then you know that labor markets are extremely flush. If you see companies doing credit checks on employees then labor markets are extremely flush. If you see your salary stagnating over a 5 year period, less than a 10% increase after adjusting for inflation, the labor markets are extremely flush.

This same concept can be applied to everything the government proposes. From immigration to public debt, the most valuable indicator is what is happening around you. As for the question that the US is the number 1 economy in the world and globalization is a good thing and the trade deficit does not matter, the best indicator is the Dollar / Euro exchange. In 1998, $0.79 bought 1 Euro, today it takes $1.30 to buy 1 Euro. It seems to me that the European market is doing better than the US.

So why is all of this important?
The best way to control a people and strip it of its rights is to keep the people in the dark. If you do not know better you think this is normal and you will accept your fate and be content allowing the politicians to live the fat life on your back. Talking points and governmental data and studies are the book burnings of the emperor class. Our politicians must keep us in the dark so that they can move ahead with their private agenda. We can stop them. All we have to do is look at what is happening around us and turn off the noise from the politicians.

Tags: Politics Corporate America Corrupt Politicians Government Data War on the Middle Class Border Security Port Security Stop Pork Spending Illegal Immigration

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