BAILOUTS for Wall Street and Corporate America; Is the US Economy Safe?

The US government has spent unfathomable amounts of money attempting to attenuate the consequences of thirty years of Reaganomics. Still there are signs that the economy is deteriorating as more people realize that the polyannesque view of the US is not realistic. Banks do not lend to each other because they do not believe the financial statements of their counterparts. Financial institutions do not lend to individuals because they have realized that credit ratings mean little or nothing. People cannot buy products and services because they have always bought things on credit in fact living past their means. Companies are firing people, foreclosures are increasing, and the latest shoe to drop is the credit card defaults.


Bank of America, just before announcing it would attempt to raise an additional $ 10 billion, released its financial statements. Among the normal $ 6 billion in additional mortgage right-downs slipped in that is was taking a “prudential” $ 1.2 billion in credit card losses. As other institutions announce their results we will see that the credit card losses will rival the CDO and mortgage paper sectors.

This week Corporate America announced another 100k firings of employees and new unemployment claims has been touching 500k. The government says Unemployment is at 6.1 %. Unfortunately if you do not find a job in 6 months or are new to the labor market you do not count. Perhaps the most telling sign of the disastrous economy is that retailers have decided we are going to skip Thanksgiving altogether and start the Christmas sales right after Halloween!

Some “talking heads” are telling us to have patience that all will be well. Others are telling us that the problem was caused by the EU and they must make the same mistakes the US administration is making to “Save us All”. How dare the Europeans employ the wisdom and experience of 3,000 years of finance and trade instead of tanking their economies to support the USA. WE ARE NUMBER 1!

The worst is not here yet. The depression has just begun and we will not be able to stabilize the decline until we recognize the real problem and start working as a nation to fix it. The problem is the service economy. We no longer produce anything. Our greed has focused us on the short-term gains to the detriment of long term stability while borrowing more and more money from the future. Yes we are consumption junkies, always searching for the next fix.

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Blueberries and the Death of Supply Side Economics

Yesterday I made Abbacchio Brodettato. I went to the store to pick up some fresh fruit to make dessert. Once in the Fresh Produce section I had a brutal surprise. Blueberries priced at $9 for a couple of ounces! Wow, it is a good thing that inflation is not the primary concern of our government. In fact, the price of Blueberries is emblematic of what is going on with all basic materials. The pundits will tell you the price increases are due to increased demand across the world. While this may account for about 10% of upward pressures the true culprit is the weak dollar.

Our government has destroyed the primary productive infrastructure of the United States shipping facilities and jobs to nations where quantity beats quality and producers can skirt US regulations. The result of “Supply Side Economics” better known as Reaganomics is that the US no longer produces even a minimal amount of what it consumes. The destruction of productive sectors has resulted in numerous speculative booms and successive busts. The most recent is the credit crisis. The failure of the housing and financial sectors has left the US naked to elements.

The government realizes the gravity of our current economic situation. Rising unemployment will be the final straw sending the US economy in a downward spiral. The traditional response is to forget inflation and drop interest rates. The FED acted according to plan and the dollar plummeted. Normally this would make US products cheaper and stimulate growth but in this era of Smoke and Mirrors where the US has no significant internal production, the result is simply increased prices.

Now to Blueberries. In a normal economy when Blueberries became a cash crop farmers would plant more Blueberries. The problem is that the farmers that would have produced Blueberries no longer exist having been driven into bankruptcy by shortsighted economic and trade policies. The farmers remaining in the US are conglomerates specialized in mechanized farming. Products that actually require work are now produced elsewhere.

Free markets would cause resources to go into the production of these high margin foodstuffs but farming is not like reallocating your 401k. It cannot be done by pushing a button. Farmers must be convinced that prices will remain sufficient for them to invest in new plots. They must plant, grow and care for their facilities for several years before they ever see a penny. Most farm products have the same characteristics.

Today prices are higher because of the falling dollar. Think what would happen if there were embargos or other types of political disruptions. America would not starve. We could always eat protein mush made from wheat germ and corn but it would be a different meal than what we are used to today. Unfortunately the commodities dislocations are not limited to fresh fruits and vegetables. Every basic sector from clothing to toys is under the same stresses.
Supply Side Economics is a bad idea. The proof is in the results. There is no need for discussion or debate. If a tree bears apples it is an apple tree even if the most persuasive of CEOs tries to tell you that those red juicy fruits are pears.

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The FED is a victim of its own SPIN

In the ongoing saga of the disastrous US economic situation the FED dropped interest rates an additional % 0.50 today. This makes % 1.25 in the past 8 days. The Reaganomic Pimps applauded the FED’s action. The Dow Jones Industrial Index went up 200 pts only to close 40 points down by the end of the day. Some time ago I wrote that the FED could drop rates to a negative return rate and it would make no difference. I suggested they drop by % 1.00 just to get the monkeys to shut up so we could talk about the real problems. As I proposed the FED rate cuts have not made any difference. Even the Administration’s plan to pump $150 billion will do little more than create a short-term bump in the economy. The real problem is structural and band-aids just will not heal the patient.

The last 2 years have seen the Administration and the FED to say that the economy was strong. FED Chairman Alan Greenspan, when asked if housing was a bubble, he stated that data did not support this. He stopped short of using the popular phrase, “They are not making any more land!” It was obvious to all that the housing market was in an abnormal cycle but the FED’s data did not support it.

The current downtown, recession or depression, was also obvious to most thinking people. Still today the FED’s data does not support that opinion. The illness is the FED’s data. Since the inception of Reaganomics the FED has been tweaking the way data is counted and elaborated. Just as soon a real data would show that the economy was having problems the data was either discarded or superceded by some other type of calculation. Some economists believe that it would be impossible to have negative GDP under the current system. These changes were effected for the sole purpose of allowing the destructive forces of Free Trade to progress without raising alarm signals and creating a national debate.

The current situation, augmented by the BIOTECH-Internet-Housing-Financial bubble, is now disastrous. Still today with all the DOOM and GLOOM we are still underestimating the structural damage to the US economy and America’s pocketbook. I do not believe that the FED is clueless. I do believe that either they are not scholastically prepared to understand the data or the data no longer has any value. In the latter case the FED would be a victim of its own spin.

Just a final note: The pundants are predicting great growth in stock prices over the next six months. I believe we will see a historically significant down day in the next 10 days followed by a slow and painfull slide. The slide will end as WE start taking on the real problems. The dollar will continue its move toward 1.75 against the EURO and inflation will skyrocket.

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The Inevitability of the Destruction of the Middle Class – War on the Middle Class

A father opens the door in the early evening just as the family has finished dinner. The sharp explosions of gunshots break the peaceful silence in a quiet neighborhood and a normal family ends its existence. The police investigate and find no reason for the tragedy. No apparent enemies, a simple family with a simple life. Stories like these find their way on to the front pages of our newspapers with increasing frequency. An unknown killer choosing a house at random in places where “these things just do not happen!”

We discussed these events over a plate of Cincinnati Spaghetti. Incredulous, we wondered what is happening to our world. My profession requires that I study tendencies and perceptions. I am subjected to hours of financial programs and news services. Some interesting things have been published recently. Raw data that may explain what would drive a person to knock on the door of a stranger and kill a family in cold blood without a moment’s hesitation:

Over the last 10 years the increase in earnings of the top 0.5% was more than the total earnings of entire bottom 20% of the population.

Greenspan and others state that inequality in earnings has been going on for 100 years. It is inevitable and cannot be stopped.

Successful people say that they work harder or have sacrificed more than people who are less successful. This is a fallacy. Success, as measured by earnings, has a great deal to do with social status, education and opportunity (knowing other successful people creates opportunities).

Legislation allows financially stable individuals to take advantage of difficult times. Financial institutions are allowed to charge usury rates on loans on credit cards. This reduces the disposable income of the lower income or rising classes. The result is less demand for products that can then be purchased with cash at significantly lower prices. A simple example is that one individual does not pay bank fees, credit card dues or any other type of utilization costs while an individual with a lower salary will pay 50$ annual dues, 12$ monthly service fee, 18% interest which can accelerate to 30% even though the debtor is making the payments in accordance with the contract. These fees can be the difference between eating dinner and going hungry for many families.

Rich people get bailouts from government when they make bad investments while working class gets bankruptcy.

The US working class mentality sides with the rich on policy because they believe they will become rich (the lottery syndrome).

Government uses tax dollars to protect America’s interests (only rich people). The latest example is the mortgage bailout. The only people helped by the various plans suggested will be the investors in bank stocks.

Government allows powerful individuals to close US production facilities and move their facilities to poor countries to avoid health and safety standards. They will say it is to reduce labor costs but the only real reason to produce outside the US is to avoid regulation.

It seems that the world is stacked against the working class. It is tough to make it to the end of the month much less think about the future. Should this individual get sick they are hit with a double whammy, healthcare costs they cannot afford and must go into debt just to stay alive and loss of wages since sick leave has been practically eliminated. God forbid that an individual should become part of the 35% of Americans who are not employed. They will be homeless in a few weeks and left to die.

With this type of future, always present in the mind of 98% of Americans, the pressure is intense. It is a short road from despair to anger against the world thus any door in quiet neighborhood is the perfect place to express that anger.

Free Markets work under enlightened self interest. They can last for centuries but take away the enlightened part and free markets bring their own type of enlightenment. We have seen it over the centuries with all great empires. The French Revolution, the fall of the Roman Empire, Macedonia, Egypt, Napoleon all learned why all members of society must have hope for a better future for themselves and their children. Perhaps the US is simply another fallen empire learning a lesson in humanity.

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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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Gap Production facility buys children slaves as young as 10 to work sewing jeans

Authorities uncover Gap, the US retailer of jeans and young teen clothing, buying children from impoverished families in India to work as slave labour sewing jeans in their production facilities. As I read this article to my wife she fought back the tears and asked me to go on to something else. In a quiet and slightly trembling voice she asked me to talk about something else. We have travelled the world and lived in various countries. Both of us have run companies, not big by US standards, but big enough. We are not naïve. Poverty exists, human tragedies occur every day in every country in the world including the US. We cannot stop them.

We have always treated the employees of the companies we were responsible for, with respect and dignity. Many of these same employees would not agree and many did not give a fair return to the company but this is part of running a business. We understand the pressures a CEO and Board feel to secure returns for investors however there must be a line. There must be a boundary that no CEO will cross for financial gain.

The company responded on Sunday that it:

“launched an investigation after it was told earlier this week about an allegation of child labor at a factory in India that was working on one product for GapKids.
The company said a very small portion of a particular order placed with one of its vendors was given to an unauthorized subcontractor without its knowledge, which violated its agreement with the vendor.

The company said it stopped the work order as soon as it was alerted and prevented product from being sold in stores.

It said it strictly prohibits the use of child labor.”

This evokes memories of Mattel CEO whining before Congress about how they did not know about lead in all their toys for children and that it was limited to just a “few and isolated, unauthorized facilities” and that the company had no prior knowledge. All this just days before Mattel went to the Chinese government and apologized publicly for the outrage in the US over shoddy Chinese workmanship and unhealthy materials.

These Multimillion Dollar CEOs are lying to you, me and Congress. They know full well what is going on. They are willing to poison American children in the name of profits, why does it seem so strange that they would buy children slaves for profits. These CEOs cannot hide behind guise “Don’t look, Don’t tell”. They know full well what is going on, they just do not care. A prominent promoter of Reaganomics recently asked why CEOs are always portrayed as crooks, dishonest, lying bastards in films. The answer is simple, while there are exceptions, CEOS are mostly very bad people. How can you tell if a CEO is bad?

A CEO is bad when he makes millions of dollars a year and has people on his payroll who do not make more than the poverty level. A CEO is bad when he moves production facilities offshore so he can use child labour, not clean up the pollution generated by his production process, and/or utilize chemical, elements and materials banned from US production facilities. In other words just about every company listed on the US exchanges.

The American consumer is caught in the middle. Very few Americans approve of using child slavery. Americans have already banned dangerous pesticides, lead in paint, and created legislation requiring production facilities to clean up their pollutants but our corporations have found a way around it. Just move the facility to some poor country where these things are not prohibited. They indicate that Americans are not required to purchase their goods. No one is twisting the consumer’s arms. No one forces shoppers to go to Walmart or Target or to buy Mattel’s and Disney’s toys however when the US only produces 18% of what it consumes onshore there is little choice.

Unfortunately we must depend on our elected officials to regulate, control and verify what corporations do. We must trust the same politicians who receive millions of dollars in kick-backs and contributions to make corporations live up to US standards. This is a losing battle. All that remains is for each American to shed a silent tear as we enjoy that new pair of jeans our teenage daughter just had to have and remember, “there, but for the grace of God, go I.”

Tags: Government Politics Recession Corporate America Finance Child Labor Economy Reaganomics

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Tell me again, What does the FDA do?

The Food and Drug Administration should verify the quality and safety of food and drugs for human consumption. In the light of scandalous recalls, E.Coli and Salmonella infections the FDA told a congressional panel that they were not able to guarantee the food source. In fact the extent of their controls were more procedural than operative. This week’s testimony before Congress evidenced something more interesting. More than 50% of drugs consumed in the US actually come from China. The FDA has no oversight authority on foreign suppliers. They can request that the Chinese government accompany them to inspect a producer if the producer agrees to receive a visit from the FDA. In any case the supplier must be given 30days advanced notice.

WTF?!? This is another example of the stupidity of Reaganomics and greed of corporate America. If a company were to produce drugs in the US, producers would be subject to regulations, documentation, and surprise inspections. Needless to say the FDA indicated that no drugs are produced in America. I wonder how this all plays into the hoopla about how Canada’s drugs were less safe and lower quality than US drugs. Sounds like lobbies buying the congress, corrupt politicians and outright lies to me.

I guess we are as stupid as the politicians think we are. I believed that our pharmaceutical industry actually produced something. Why wasn’t the opposition out there telling us this instead of their stupid “talking points”. We have abandoned by our government. It is not “all Mr. Bush’s fault.” This is the direct result of Reaganomics. It began thirty years ago and has gone unchecked. Think about our economy as a brand new Cadillac. Reagan and his cronies figured out that if they use a lower grade of oil instead of the synthetic their maintenance costs would decrease. Then they figured out that they could change the air filter every 12 months instead of at six months. Then the oil changes came every 15,000 miles instead of every 5,000. The next plausible solution was to eliminate the 40,000 review and adjustments. The new tires were retreads from China. The garage was sold and the car left out in the hot Texas sun.

Our economy, like that Cadillac, now clicks, leaks a bit of oil here and there and strangely enough the car jumps when the automatic transmission shifts from first to second. It still starts in the morning but it sure has a hard time and a black plume of smoke funnels out the tail pipe. Strangely when we push the accelerator the engine floods and almost dies. It is still a Cadillac but it needs some serious TLC.

Our country and our economy needs a full check-up. It may need a valve job and the head gasket may be gone. The tires may explode on the expressway but we can fix that with a little preventative care. Who knows, the transmission my only need a new flywheel or a simple cable adjustment.

Unfortunately our technicians are wiping down the leather and polishing the body instead of making sure this economy will take us from point A to point B. The process of Reaganomics must be stopped. We must tell our politicians to fight against Reaganomics in all its forms. This can be the power train of the world once again but we must eliminate corporate influence in government and hang corrupt politicians. If goods are not produced under the same regulations, including inspections that US corporations would be subject to, they must not be allowed to cross the US borders.

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

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Reaganomics – A Lesson in short-sighted Stupidity

Most economists today will tout the values of Free Trade and open markets. This is the equivalent of Federal Reserve Chairman Ben Bernanke flooding the financial markets with additional liquidity and dropping interests rates to fight inflation. Oh well, at one time the smartest people in the room believed the world was flat. Another day, another recall, is the morning wake-up call. There are so many, across all product lines and quality levels that it would take less space and be more efficient to list the products that are not being recalled. The sad thing is that even with all of this attention, the products available in stores for the holiday season will be the same products, the recalls for these versions will occur after the retail stores have made their end of year bucks. “What do you want to do? Recalling all these products would send us into a great depression and cost jobs.”

It is somewhat interesting that the same people trying to make it easier to send jobs offshore, by decreasing our controls and regulations, are justifying the sale of dangerous goods to children to save jobs.

Some will say that CEOs do not knowingly put the public at risk. These are good people, “right… and the Yankees are going to win the World Series in 2007.” Turns out that the management of Mattel, the same guys who prostrated themselves in front of Congress, indicating how they took control of the situation as soon as they were aware, and this would never happen again, knew about the lead and design defaults in their toys over two years ago. They began programmed sale of stock and when a child died they increased their sales to the maximum allowed by law. Oh well, so much for good people in corporate America.

It is not necessary to have these scandals to know that these guys are all corrupt. A good CEO will not take a $ multi-million salary while any of his employees do not make enough money to live on. A good CEO will not do it because it is bad business. A company that has this type of structure will go bankrupt. They just have not received the papers yet.

No matter what you hear about wages, companies shift production offshore because they can produce a lower quality product with lower raw goods costs. These costs most importantly are products that are regulated in the US, paint and lead is one example, DDT and fruit is another. Did you know that 100% of Apple Juice in the US comes from China and that pesticide levels in the juice are higher than US law allows?

Free trade can be a good thing but it must be controlled. The country that imports goods must verify that the imported goods meet all existing quality and regulatory legislation. This is not the case with our modern society. If it is made in China, Korea, Taiwan or anywhere else, where “labor costs are inferior” what companies are really saying is that they do not care about the quality of the products they are selling. They are saying that their bonuses and bottom line are more important than the life of your children.

The current US culture is one of extremes. There is no excuse for the actions of unscrupulous managers and boards of directors. We should not be amazed that corporate profits are more important than principles and human life. How many of our stalwart companies have operations or investments in countries hostile, or even at war, with the US? We serve our country, our children die to protect it and these companies actively support hostile regimes in the name of “the bottom line.”

Reaganomics has not made America stronger. It has eliminated quality producers and artisans. Reaganomics has brought our country to the brink of disaster. We only produce 18% of the goods necessary to keep the economy going. The FDA estimates that over 50% of medicines sold in the US are made in China. Proponents of the unregulated new world will say that Americans must adapt to the smoke and mirrors “service economy”. They contend that any manual labor is something that Americans should not do. Hard work, quality and a fair day’s work for a fair day’s pay is no longer valued.

Free trade can be a valuable tool in increasing the wealth of all nations but it must not be left to corrupt corporate managers to decide how and when. First we must guarantee that products entering the US meet US standards both in the materials and the way things are produced.


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

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Republican Presidential Debate – Candidates say 1930 like Depression Imminent

On the day of the Republican Debate for Presidential Candidates, the FED released the minutes of the most recent meeting where the 50 basis point cut in interest rates was decided. Oddly enough no reference was made to increasing inflation. Even more interesting is that the discussion about the labor statistics were surprisingly missing. Unanimously the entire board decided to drop the FED reference point by 0.50%. Hmmmmmmm. No inflation, no referral to labor data and the entire board decided to bailout the financial institutions for billions of dollars of speculative losses.

While the debate was going, Alcoa announced its numbers. Alcoa makes aluminum products and sells goods across the world. Alcoa missed its earning numbers by about 4%. Total revenues were up but strangely enough cost of goods sold increased and they were unable to pass on the increases to their customers.

We know that a weakening dollar makes commodities increase in price while they were unable to sell their goods at a higher dollar price. So not only do we have inflation across the US economy but we have exported it across the world through our irresponsible interest rate policy.

Politicians are comparing this period to the 1930s. They are saying that “protectionism” will result in another great depression. Protectionism, as they call it, cannot do anything. We are heading for the greatest depression the US has ever known because of the disastrous policies of Reaganomics and the wholesale auction of America’s equity. The candidates are convinced that Americans are not intelligent enough to understand jobs, economy or finance. The same people who are advocating that the US government not respect its contractual agreements with the American people think that US citizens are not educated enough to know about how to run a business or spend their money.

The reason Americans are upset with the economy is that the economy is bad. Inflation is incredibly high and families cannot pay their bills. The Pollyannesque view that politicians are presenting does not correspond to what we are experiencing. It’s the economy stupid! Politicians think that we are jealous because some people are making a lot of money. This is not the case. We do not like people making a lot of money when they do not deserve it and our investments suffer. We do not like spending $ 2 billion a week on a war to protect corporate interests and then hear that we do not have enough money in the governmental coffers to pay for social security. Social Security is a contract. If the government cannot respect its responsibilities then the government must liquidate its assets and it cannot take on new financial responsibilities.

Dear Presidential Candidates,

we are not as dumb as you think. Most of us understand financial responsibility. Many of us are enticed into the stupidity of Wall Street speculation because if we do not take these risks we are unable to compete in today’s “service economy” where quality and hard work no longer mean anything. If we do not play the games we are unable to feed our families. This must stop. Americans can handle the truth. Give us real information. Tell it like it is. Let the greedy traders in the financial institutions go bankrupt. Perhaps we will then be able to value skilled labor, hard work, and sacrifice for our future.

Smoke and mirrors eventually dissipate. The piper must be paid. We know how to work hard and make a better future but we must have a true vision of today’s reality. It is not by chance that Americans do not trust politicians. Show some balls and tell it like it is.

One Citizen.

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

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Another Day, Another Recall of Children’s Toys

Numerous toy recalls, Mattel, Disney, Target and now Dollar stores are just a few examples of the unscrupulous outsourcing by Corporate America and the ineptitude of our Government. Children have died, been poisoned by lead, and this is just in the toy sector. There is not enough space or time to talk about food poisoning, tires blowing apart and other design and manufacturing infractions of US law. One might say that Corporate America is trying to clean up its act. I believe that the number of products that do not conform to US law is so great that shelves in US stores would be empty should we actually control everything.

Who cares if Americans die? We can always get new ones through illegal immigration. Long live the donkey, oops, I mean the consumer! Our government and Corporate America is working very hard to return the US to the days of the cowboy. No regulations, no respect for laws, and no advancement of society are the common goals. Many seem to like this scenario. I think they believe that they have sufficient money to enforce their lifestyle. A return to the days of the cowboys would strengthen the class structure in the US. Those who have and then everyone else. Working Joe must take responsibility. He must work 3 jobs, live in poverty and succumb to the whims of the haves.

Perhaps this is not a bad idea. The days of the cowboy meant small government and primarily no laws. If a company ripped you off, you could get immediate retribution. Your six shooter and rifle in hand you could walk up to the CEO of the scam company and shoot him in honor. Just think about how the financial markets would look today under that scenario. If your elected official lied to you he lost his word, the only thing of value, and you could give him a good lickin’. Perhaps people would think more about the consequences of their decisions.

The fact is that what is called globalization is not true free market. It simply moves the costs to produce goods from one segment to another. We have banned lead in paint for a good reason. It is a poison. Lead paint will last much longer than non lead based paint. It is cheaper purchase. Under today’s Free Trade concepts Americans are stupid for not using lead based paint. So what does corporate America do? It shifts production to a place that can used lead based paint and then sells the products to the dumb Americans. They then tell Americans that they have lost their jobs because Americans are stupid, unkempt and do not want to work. Americans are surely stupid for banning lead in paint. The production of toys would still be here in the US if a bunch of left winged radicals had not pushed to eliminate lead from paint.

Your congress and corporate America do not want you informed about where the products are made and the safety of those products. They are spending Billions of Dollars fighting labeling requirements indicating point of origin (where the product is made). An informed consumer is most likely going to purchase a product made where health and safety regulation are followed. This would mean that the $ 100 million CEOs could no longer get there bonuses because they know their products are not safe. Informing the consumer is a direct attack on their scams, I mean business model.

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

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Corporate Greed Endangers US Children – The Never Ending Story

Another recall, another story of US corporations putting US citizens at risk to make a few bucks. Target just announced the recall of hundreds of thousands of gardening toys. Obviously these products were made in China. I think we see a pattern. US corporations knowingly commissioning the production of products, in places where US style regulations do not exist or are unenforceable, destined for the US market. Children’s toys are the current products. Tires that fly apart while driving down the expressway, dog food that poisons dogs, and foods for human consumption laced with poisonous hormones and fertilizers.

Surely we will see a remorseful CEO tell of how he did not know. He will go on national television and tell that his company found the illegal toys due to Target’s commitment to quality and service. We will believe him. Just like we believed Disney and Mattel. These products have been on the market for years. They have been poisoning our kids ever since they figured out that they could produce goods in places where labor was cheap and people are more concerned about survival than health or safety hazards. We had this attitude in the US well into WWII. Just think of how many men died building the Empire State Building and the Hoover Dam. Perhaps the falling testing scores of our youth should be researched in level of the lead in their blood and the residual brain damage and not in the scholastic system.

Some of you are old enough to remember what Made in Japan, Made in Taiwan and Made in Singapore meant. Made in China is the same thing. Poor Quality, faulty controls and illegal production processes are synonyms of Made in China. As our politicians have so aptly stated, “Buyer Beware, Purchase at your own Peril!”

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

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UAW / GM – A New Beginning or a death blow to America's Fabric

I have never been part of a union. When Ciba Geigy became a union shop I did not join. I left a job, as a young pup, from General Motors because I simply got board. As managing director or CEO, over the years I have found the unions to be difficult to work with. They made unreasonable requests and took up a great deal of time. The thing I hated the most was them wanting to favor certain members or to insert some friend.

Initially the public was led to believe that GM needed to eliminate health care costs to be competitive with other producers. Over the years they had negotiated contracts with employees offering benefits. They had a contract that they now want to breach. Contracts with US companies mean nothing. Corporate America uses bankruptcy to not pay their debts and break their contracts while maintaining management perks and major financial interests equity positions.

It seemed obvious that the strike would be avoided and an agreement could be reached. It would be simple for GM to set up an annuity that would be able to cover the associated future liabilities. Monday the union went on strike. In the press conference the union indicated that their sticking point was US production. The union wants guarantees that GM will keep part of its production here in the US. GM, as the rest of Corporate America, wants access to US markets while taking advantage of the disastrous trade agreements negotiated over the years by the government. Reaganomics at its best.

I have written about how producing offshore does not reduce costs, it simply shifts costs from the company to the government and general population. GM wants to become another marketing company selling its name to cover made in China. We have seen why companies do this. Mattel, Disney and others prefer to produce goods where they have fewer safety and quality regulations.

If the union caves, America loses. A union loss will mean the final blow to an America that actually produces a good. It will mean the death of the union by loss of members and would be the final step toward a “service” economy. It will mean the loss of America that produces physical goods. It will mean the loss of America’s capability to regulate quality. It will mean that America will live in fear other countries shutting off the supply of food and goods. Once we have consumed the equity in our nation built by our ancestors we will be less than Mexico. Americans will have to migrate around the world to find work.

The unions do not realize it but they are fighting a battle of epic proportions. This battle will determine the future of America. It will determine if WE THE PEOPLE have a future. The type of agreement will tell us whether or not the US will continue to be a super power.

Tags: Government Politics Recession Corporate America Finance GM Economy Reaganomics

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Congress Spews Words of Wisdom – Buyer Beware!

Recent recalls of faulty and dangerous products and food are too numerous to list. People have died, children have been poisoned and pets have been killed. While congress runs around talking a lot and doing very little, words of great wisdom arrive from our hallowed halls, “Buyer BEWARE!”

Perhaps these are the most truthful words we have heard from our elected representatives in a long time. It seems that the numerous products recalled is simply the tip of the iceberg. Watchdog groups suggest that there are thousands of product lines that do not meet US safety standards sitting in warehouses waiting to hit the shelves for the holiday season. Yes our government knows about the problem however because of the trade agreements signed by the Whitehouse and ratified by Congress we would be held in breach and subject to fines under the WTO. Incredible as it may seem, our country must reduce its safety laws to conform to China’s laws under the trade agreements.

I am always impressed by the lack of intelligence or scruples expressed by corporate America and our elected representatives. Unfortunately what is done is done. The US government cannot, or will not, do anything to resolve the safety and quality concerns. You do have a choice. Perhaps you, as the consumer, are the only one who can really change anything. Be careful about the products you choose this holiday season. Remember every company (even the ones like Mattel and Disney) produce their toys in China where safety and quality standards are significantly lower.

The US only produces 18% of the goods is consumes. That means that only 1 in 5 products available in US stores actually conforms to legislative standards. I do not know what to suggest for gifts this year, perhaps fewer things of higher quality is a reasonable solution.

This is an important problem. The health and well being of our children has no price. Corporate profits are not worth the life of future our kids. Take a stand. Let these unscrupulous Corporate CEOs know that we are not as stupid as they think we are.

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

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Parents should not look to the government to protect their children from unsafe toys

The war wages on and the US government surrenders to the Chinese. The current administration has reached an agreement with the Chinese to eliminate the recalls of Chinese goods. Did the Chinese agree to implement laws and penalties to enforce US product safety laws? No. The US just eliminated our capability to check the incoming goods. WTF?

We must not get upset with the Chinese. They are doing their own best interest. They do not care if their population dies from unsafe products or that child labor is rampant. They have too many people. You can go to jail if you have more than one child. Just to put this into perspective. A Chinese couple will abandon in an orphanage or kill a female child born because male children have greater value. Why would you think they are interested in providing safe products for American children.

Most Americans will say, “you cannot buy toys without purchasing Chinese products.” Translated, “Who cares if my child will suffer brain damage from lead paint. They want this toy now.” We cannot expect our government to protect us. They are all in bed with Corporate America. Corporate America does not give a rat’s ass about the individual. Just look at their $100 million salaries while the employees are making barely above minimum wage and have no insurance.

If you care about your children it is your responsibility to purchase products that are safe. You cannot say I did not know. You cannot shift the blame later to someone else. If you choose to purchase a product from China, you know that it is not made to US standards. That includes safety. I am not saying that someone should boycott products. I am saying you are making a choice to compromise your child’s health to save a few bucks. Do what you like. If our economy continues changing its structure we will need an ever greater number of brain dead youth to fill the menial jobs that will remain.

Tags: Government Politics Recession Corporate America Finance China Economy Reaganomics

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US-China Trade War is on – Are you ready to fight?

Have you heard? Not only does your government think that Americans lazy, unkempt and uneducated but China says that we complain too much. Endless recalls of products produced in China that violate US consumer protection laws have pissed off China’s government. In retaliation, China is slowing the flow through of goods. The US retailers are desperate! The very reasons why I have been suggesting that America needs to produce more of its goods locally are coming to pass. Ludicrous you say. China cannot afford not to export to the US.

Let’s look at this in a different light. During the bubonic plague there was a great change in the economic system and the powerful fell to poverty while the working man became the new lord. Before the plague there was too much labor and too little work. The plague reduced the labor force by about 30%. The rich dudes, much like our $100 million CEOs, who could not screw in a light bulb if their life depended on it, no longer could find slave labor to work their lands. They began selling their properties to buy food and those who actually produced something became the new landowners. In less than two decades the face of the economic world had changed.

We can see ourselves as the rich dudes. We only produce 18% of what we consume. Everything else is dependent on slave labor. This is why Corporate America and the traditional politicians all want amnesty. The Chinese are the poor laborers. A Trade War is the plague. The Chinese will do just fine. They may grow at a slower pace but the people without goods, services and food are the US citizens.

It is shameful for our government to talk about national security when it clearly does not give a rat’s ass about the security of our nation. We are in the weakest position we have ever been. We are simply hoping that somehow things will blow over. That everyone in the world will understand that it is in their best interest to make US corporations richer.

The war we should be fighting is not about capitalism. It is about survival. This is our Alamo. We must defend our nation from the real enemies not those that Corporate America says are our enemies. We must fight against outsourcing of the production of goods and services necessary to our survival. We must fight against open borders and amnesty for those who have broken the law. We must fight Collusion and Corruption between our politicians and Corporate America.

If we think that China, North Korea, and/or Iran are our enemies we must see Corporate America as their facilitators. Let these countries do what they will. We can resolve this problem by eliminating the power of the facilitators. Stop Corporate Lobbying now!

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

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Reaganomics has made America Less Productive

The California Agricultural Industry believes that there will be less illegal immigrants to pick their fruits and vegetables. Strangely enough wages are rising for California farm workers. I could go on for several articles talking about how the California example relates to the rest of America’s workers and how the government has sold out Joe Citizen but there is something even more interesting emerging from the California experiment. The unintended consequences of California’s rising farm wages clearly evidences that Reaganomics has made America less competitive on the world’s stage. All economies following the Cowboy Capitalism model should take note.

As a short premise I was somewhat amazed at how technologically backward the United States was when compared to everyday business in Europe. A simple example is the digital cell phone network just implemented this year in the US. Something Europe did with GSM back in the middle 90s, a good 15 years before the US.

The California farmers are investing millions of dollars in technology to improve food safety and time to market. A $ 1 million investment reduces the number of laborers from 30 to 18 with a payback, even with slave labor wages, of just 3 years. The addiction to low cost labor resulted in loss of productivity. The predictions of 1000 percent cost increases were exaggerated. Simply put, Reaganomics and the open border policy kept the California farmers from implementing modern technology solutions that will result in better quality controls, fresher products and lower costs.

It is obvious that necessity is the mother of invention. Take away the need and there is no reason for companies to innovate. Reaganomics has seriously impeded the United States innovation favoring outdated production methods and processing and costing the US economy in both productivity and social distress. The same concepts are true across all sectors of our economy. We have favored outsourcing for short-term gains instead of investing in the infrastructures necessary for a competitive America. Our roads and bridges are failing. The US has one of the lowest broadband penetration rates of the free world. Our best and brightest, because they are poor, never get the formal training to allow them to express their full potential. Our craftsmen and artisans are making telemarketing calls because they cannot compete with contractors using illegal immigrants.

These are the fruits of Reaganomics. The supporters will scream and shout. There are many these days who vehemently defend the stupidity of Reaganomics and risk coronary failure to express their discontent with the Federal Reserves position to fight inflation. Do not listen to the verbiage. Opinions are like assholes… Take a look at the results. Reaganism and Cowboy Capitalism weaken America’s capacity to compete on global markets. Savage immigration policies like open borders reduce the number of qualified, experienced workers necessary to avoid little things like the Subprime Tsunami.

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

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Sub Prime Tsunami – A Lesson in Unending Superficial Stupidity

Interest rates are rising. Home Mortgages with adjustable rates are starting to index to the higher interest rates. People are not seeing the increases in their salaries that they had anticipated. Many homeowners will find themselves having to choose between eating and paying their mortgages. The spin machine is saying that this scenario is limited to a few unqualified buyers and a few unscrupulous mortgage lenders. People will loose their homes. Greedy investors will loose their investments. The truth is much more drastic and will touch every part of the US economy.

The simpleminded, or those wanting to spin to the simpleminded, will say that the individuals headed for foreclosure should never have been able to get a loan. The Bush administration is pimping that this is a great economy. Federal Reserve Chairman Bernanke is pumping liquidity into the financial system. The FED is also lowering its lending standards enabling financial institutions to access these funds. The FED’s intervention to protect Corporate America has long term and far reaching consequences. It can be argued that were it not for the FED’s stance artificially stimulating financial services that the “ALT A” borrower would not be in the trouble they are today.

Excess liquidity and low interest rates created easy access to money. Interest rates were negative in real money (Interest return – Inflation). Too much money at low interest rates made houses easier to buy. More houses without a significant increase in supply drives up housing prices. Investors looking for greater returns start buying property and houses for investment returns further exasperating the problem. Returning to “ALT A” citizen, with housing prices now twice what they should be, “ALTA A” borrower has to take a second mortgage or pay a higher rate because his 20% no longer is 20%.

The problem will only get worse. The extra liquidity will not resolve the problem. The problem is that people do not make enough money to pay their bills. The FED will decrease interest rates to stimulate the economy instead of allowing the market to work out its problems. So we will have more of the Service Economy, no meat just more smoke and mirrors. As the money supply increases inflation will increase. It is a never-ending cycle of stupidity. We will continue to intervene, to patch this failing economy until it will no longer be able to be fixed.

The Administration will claim that our current economic instability is due to this period of credit instability. They will not talk about the negative results of Reaganomics. They will not talk about the disastrous fiscal policies of the past 30 years. They will not talk about 12% unemployment or how open borders distort the free market.

We can talk about that. We can ask our politicians to be upfront about our difficulties. They will not listen. They are too busy trying to figure out how to save Corporate America’s balance sheets at the expense of the taxpayer.

Tags: Government Politics China Corporate America Finance Economy

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Regulating Imports and the Free Market

Free Market theory is based on producing goods in the area where the total costs associated with that product are lowest. The idea is that dislocation in resources will move production to eliminate excesses. Today many economists and Reaganomics supporters tout Free Market policies. I believe that these individuals have translated lowest cost of production to highest corporate margin. In a Free Market economy all costs, direct and indirect, are associated with each product produced.

A simple example of this concept is the production of a widget. The direct costs are raw materials, labor and infrastructure depreciation. The indirect costs are environmental costs, security, lost opportunity, quality control and any other costs that arise as a result of using this product. If a head of lettuce produced in Mexico costs $1 and a head of lettuce produced in Texas costs $1.50 one would say that the Mexican product costs less. This may or may not be true. If the head of lettuce from Mexico requires additional controls or has some bacteria. All of the costs verifying the head of lettuce and any health costs to individuals plus lost productivity while the person is in bed instead of working are all part of the costs of that head of lettuce.

Free Trade agreements strictly define how many controls may be made on an imported product. This is based on the concept of equals. Products produced in China or Mexico, under free trade agreements, are exactly the same quality. Most recently we have proof that this is not true. We have also found that the regulators responsible to control these products are not properly staffed to do their jobs. This is because these agencies are paid with tax dollars instead of charging the companies importing goods with the costs associated. We are in fact subsidizing imports.

Why should I, as a consumer and tax payer, be required to pay for an agency that controls quality of imports if I only use US made products?

More importantly why should US based production facilities be forced, not only to compete with subsidized imports, to pay the costs of those subsidized products?

I am all for Free Markets. I am also for each company paying for all costs associated with the production of those products. This means that oil companies should pay for international security in the Middle East. This means that every product imported must be inspected and the company importing that product must pay the costs associated. The companies importing products should also be required to verify that the product is made in a country where environmental costs are not superior to those in the US otherwise they should be required to pay a cost tariff to truly represent cost of goods.

The recent recall of toys with lead paint is a perfect example. It just so happens that my father drafted the legislation to remove lead from paint and spent the latest years of his career at CDC heading the Lead Poisoning Prevention program. This is a big deal. The damages from lead in paint are serious even at low levels. We can only assume that in China paint may contain lead. This means that the playing field is not equal and that every painted product entering the US from China should be tested for trace lead. The importer should pay the cost associated with these controls.

We can talk about tires from China, fruit from Mexico or South America, Oil from the Middle East. The facts are the same for all goods, imported goods receive direct and indirect subsidies. To have a true Free Market we must create an environment where the Free Market can exist.

Tags: Government Politics China Corporate America Finance Economy Reaganomics

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Infrastructures, Economy Tanking and Food Poisoning

So many events, what to discuss this week? It seems, thinking about politics and politicians, only negative things come to mind. Some will say that Americans want someone to blame for everything bad that happens. I believe it is more that Americans are very lucky. Notwithstanding our superficial “what have you done for me today” mentality, the United States has not suffered too much. I am not sure if it is just the law of probability working in our favor or somehow we are more resilient than other nations. Any way you look at it, we are lucky.

Our infrastructures need several trillion dollars in repairs, not new construction, simply repairs. One third of our population is “Food Insecure”. Product recalls for dangerous and poisonous products occur at about 1 a week. Some come from China. Some are homegrown. All are the result of economic policy that favors short-term thinking and is the result of corruption. Someone is making a buck at the expense of our nation’s physical and economic health.

The most recent data suggests that Hillary Clinton will win the next election and that most Americans are not concerned about political dynasties. In other words, most Americans do not see a need for change. Change cannot occur if it is not desired. We cannot build a better future if we do not see anything to improve today. A baby boomer friend explained it to me this way. “I suffered, I paid the price. I have been there and got the T Shirt. My children and grandchildren can pay their dues.”

What can I respond to that? A government really is the face of the people.

Tags: Government Politics Corporate America Corruption

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The Smartest Guys in the Room – Hank Paulsen & Corporate America

Are Governmental officials and executives of Corporate America stupid or just really bad people?

Globalization, unregulated free trade, open borders, resistance to eliminating an oil based economy are all parts of the disaster known as Reganomics. Larry Kudlow calls it Cowboy Capitalism. All of the supporters say this is the free market. That is like saying that a Volkswagon with Rolls Royce body kit is actually a Rolls Royce. Free Market requires that all costs, direct and indirect, are included in production costs. What we have today is the US taxpayer’s money being spent to subsidize foreign goods to increase corporate profits. Just think if all the costs of a barrel of oil including State Department, Department of Defense, and others were actually included. We would find that other sources of energy would be considerably cheaper. However that would hurt Big Oil’s bottom line.


In the last couple of weeks we have had numerous examples of inappropriate cost accounting. One of the primary reasons why Chinese goods cost less than US produced goods is that corporations can produce goods without controls and use ingredients that are illegal here in the US. Why are they illegal? They are illegal because they kill people. Just think about the Colgate toothpaste.




When price is the only concern the quality of products is reduced. Look at the most recent tire recall. You just changed your tires because you want to take care of your family and those around you. You are traveling down the expressway at 70 and pop. The tire disintegrates!



If a dummy like me can understand the cost of producing goods these people who have been so successful in their lives must know everything I know. I cannot believe that these Harvard grads cannot see past the end of their nose. This leaves only one conclusion. They do not care how their actions influence those around them. In my book, since I do not think they are stupid, I can only assume they are bad people, without principle or scruple. They are willing to exchange human life for their bottom line.

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