U.S. Economy: There Are No Problems, Only Solutions 46 comments
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People asking questions lost in confusion,U.
Well I tell them there's no problem,
Only solutions,
Well they shake their heads and they look at me as if I've lost my mind,
I tell them there's no hurry...
I'm just sitting here doing time,
I'm just sitting here watching the wheels go round and round,
I really love to watch them roll,
No longer riding on the merry-go-round,
I just had to let it go.(John Lennon, Watching the Wheels)
Barack Obama is the President-elect of the United States of America. I do not envy him. He has a few problems to deal with. It would be beneficial for him to take the wise advice of John Lennon. He needs to slow down and not let the extremists in his party push him to hurry and make short term oriented decisions. His legacy will depend on his solutions to major issues, that will impact our country decades after his presidency. Ronald Reagan bravely made a decision early in his Presidency to support Paul Volcker’s tough economic medicine of high interest rates to kill inflation, knowing that it would cause a deep recession. He knew that what mattered was how the economy looked in 1984, when he ran for re-election. Mr. Obama will need to get off the merry-go-round of the political campaign and false promises. Short-term stimulus packages are the solution of weak minded politicians, like George Bush, Nancy Pelosi and Chris Dodd. Long-term thinking is what is required at this juncture of history.
The U.S. financial system is like a heart attack patient. Joe America (financial system) ate fast food (spent more than he made) at every meal, didn’t exercise (ran up debt), and worked late (didn’t save) at the office 6 days per week for the last 30 years. This ultimately led to a massive heart attack (worldwide financial crisis) and the patient has been kept alive through tremendous doses of drugs (interest rate cuts, Federal Reserve injections) and quadruple bypass surgery (bank, insurance company and car company bailouts) to keep the blood (money) flowing to the heart.
The Chief Surgeon (President Obama) now needs to convince the patient (America) to change his ways and eat right (spend less than you make), exercise (reduce debt) and live a more balanced stress free life (save for the future). If the patient hangs around with the same crowd (Nancy Pelosi, Barney Frank & Congress) and goes back to the old lifestyle (spend & borrow), it will be only a matter of time before he has a relapse (another financial crisis) and dies (collapse of capitalism). It is essential that the Chief Surgeon (President Obama) take the long view (farther than the next election) and lead the patient (America) to do the right thing (live within its means).
Barack Obama ran one of the best Presidential campaigns in history. At his first press conference after the victory, he looked a bit lost. It reminded me of the final scene in the movie The Candidate when Robert Redford’s character has just surprisingly won his Senate campaign and says:
What do we do now?
Hopefully, one of Mr. Obama’s brighter economic advisors, such as Paul Volcker, will sit him down before the inauguration and explain to him that the United States has no money. We are broke. Not only do we have no money, we owe $10.6 trillion for things we have already done, and $53 trillion for things we have committed to. Adding to these deficits will not be beneficial. He doesn’t have to look back too far in history to see what happened the last time interest rates were at 1%, tax rebates were sent out to consumers, and government spending was ramped up. These actions after 9/11 led to the near collapse of our system. It is time for sacrifice, reduced expectations and some real blunt talk about the future. We did not get in this predicament because American consumers and the Government didn’t spend enough or because banks and credit card companies didn’t lend enough.
5% Solution
Tax cuts for 95% of Americans was a great campaign slogan. Forget it. Mr. Obama can not and should not follow through on this promise. I have no problem with him following through with a tax increase on the top 5% of earners. It is true that the top 5% pay 60% of the taxes. It is also true that the vast majority of these people are hard working, productive people who employ a huge number of Americans. These hard working people should be particularly angry with the small number of greedy, corrupt, gambling CEOs of large banks, investment banks and mortgage companies who raped and pillaged their way through our economic system. The American public is outraged at the immoral behavior of these highly educated MBA scumbags who sacrificed thousands of employees and billions of shareholder wealth for their own enrichment. A partial list of these excessive risk addicts, their compensation and impact on America follows:
click to enlarge images
One glance at this chart and you can see why the vast majority of Americans are furious and would like to deal out physical retribution to these villains. The reason that Mr. Obama’s populist pledge to increase taxes on only the top 5% of earners resonated with so many Americans is the men listed above. Angelo Mozilo was selling his company stock so fast during the summer before his company collapsed, that he had to skip multiple sessions at his tanning salon. These 7 CEOs robbed $1.4 billion of compensation from their companies, while leading those companies to losses of $64 billion and inflicting 75% to 100% losses to shareholders. At least 123,000 workers, with families & children have lost or will lose their jobs due to CEO greed, incompetence, reckless risk taking, and hubris. Watching Dick Fuld tell Congress he deserved the $354 million of compensation, after he destroyed the lives of so many Lehman Brother employees is beyond comprehension. So, I say go ahead and increase taxes on the top 5% of earners. Blame the greedy CEOs for this increase. If you happen to fall in this top 5% and run into one of these CEOs at your country club, spit in their eye and tell them thanks.
Tax Solutions
Mr. Obama needs to understand the meaning of the number above. The National Debt of the United States is $10.6 trillion. We have spent $10.6 trillion more than we have collected. This is $100,000 owed by every household in America. The annual deficit will reach $1 trillion in Mr. Obama’s 1st year on the job. For some perspective - we will add to the debt above at a rate of: $2.7 billion per day; $114 million per hour; $1.9 million per minute; $32,000 per second. How any politician can consider tax cuts in this situation is beyond comprehension. The size of government must be reduced in order to make a dent in this debt. During the campaign, Mr. Obama promised a tax cut for 95% of Americans. The problem is that 40% of Americans pay no Federal income tax. This “tax cut” would just be another version of the Bush rebate checks. They do nothing to benefit the country. What we do know is that people with a better education make more money. Wouldn’t it be a more worthwhile effort to try and move some of the 40% of people who pay no taxes into the 60% of taxpayers? Use some of the taxes collected from Angelo Mozilo and increase financial aid for college students.
Forget the stimulus packages, Mr. Obama. You don’t have to run again until 2012. Do the tough stuff now. My preference would be scraping all 66,000 pages of the tax code. Impose a national sales tax. We consume like no nation on earth. Tax consumption and reward savings. This is a simple solution, so it doesn’t have a chance. Our shallow politicians would lose the levers of their power. Now that gasoline has dropped back toward $2.00 per gallon, our strategic thinking Congressmen believe our energy problems are over. They are dead wrong. By 2013 we will no longer be supplied with the 1.7 million barrels of oil per day from Mexico, as their major oil field goes dry. Long term for a Congressman is next week. Now that the pressure is off, Mr. Obama should propose a $1.00 per gallon tax. Tax consumption, not investment. The $130 billion of annual revenue would be used to rebuild and repair our crumbling infrastructure. We could rebuild 156,000 structurally deficient bridges, replace millions of miles of ancient pipes under our streets, and overhaul the overburdened power grid, while creating millions of new jobs. Everyone would like to hurt the Tools who drive Lincoln Navigators with Save the Environment license plates.
Housing Solution
The solution to the housing crisis is detailed in the charts below. The average price of a house in California dropped 40.9% in September. Amazingly, home sales increased by 96.7%. Capitalism worked without a government bureaucrat instructing everyone what they should do. When prices fall far enough, all houses will sell.
The Democrats, and even some Republicans, seem to think that we need to stabilize home prices. That is a ridiculous idea. Home prices need to fall to their natural level of affordability. If the government attempts to artificially prop up home prices, the market will not recover for a decade. If we let supply, demand, and price work its magic, the housing market will be stabilized by 2011. The top 10 cities in the U.S. are expected to see significant declines in 2009. These price decreases will ultimately lead to higher sales. Artificially keeping prices higher through government intervention will deny affordable housing to future buyers.
Based on the chart below, prices have a long way to go before reaching an equilibrium level.
Foreclosures are currently running at an annual rate of close to 2 million. There are approximately 2.3 million vacant houses in the United States. Close to 15% of all homes (approximately 11 million homes) in the U.S. have a mortgage balance that is higher than their value. There are thousands of adjustable rate mortgages that will reset in 2009. The lowlife politicians who make it sound like a foreclosure is the end of the world are wrong. If you cannot afford your mortgage payment, you should not own a home. My solution for someone who is losing their home to foreclosure is: RENT! There are 4 million vacant rental units in the U.S. Rent for a few years, save your money until you have a 20% down payment and then buy a home you can afford this time.
Bailout Solutions
Bailing out banks, insurance companies, and now car companies is a bastardization of our capitalist system. The $850 billion bank bailout was supposed to bring confidence back to our financial system and allow banks to lend. The markets were so confident with the actions of our “leaders” that it has declined 17% since President Bush showed so much courage by signing a bill. We are now propping up banks that should have gone bankrupt. It is good to see we’ve learned the lessons of Japan’s miss steps, and have made the identical mistakes they made in the 1990s. Zombie banks that will not lend are the result of government intervention with the natural process of capitalism. The supposed excuse for “saving” Bear Stearns and AIG was the systematic risk. These lowlife shallow bureaucrats don’t even bother with this fake argument anymore. What systematic risk is posed by letting General Motors, Ford, or Capital One go bankrupt? Bankruptcy is an essential part of capitalism. These companies would not liquidate, they would downsize and restructure. Stockholders would be wiped out, bondholders would lose money, workers would be fired, inefficient plants would be closed, union contracts would be renegotiated and leaner more competitive companies would resurface.
Instead, Congress will pour billions of our grandchildren’s tax money into these bloated companies, while retaining their short-sighted, worthless management. This is the same management that staked their companies on trucks and SUVs. There are 251 million passenger vehicles in the U.S., an average of 2.4 vehicles per household in the U.S. GM and Ford have been horribly run for decades. How could people who reached the top management of these companies extrapolate the 17 million annual sales pace of 2005? Don’t they get paid millions to think strategically? Sales trends are currently 11 million. Both GM & Ford are burning through billions of cash per month. GM will run out of cash in 2 months. The message we send to banks and all large companies when taxpayers bail them out is that bad decisions, excessive risk taking and poor planning has no consequences. The Democratic Congressional leaders will say that we need to save these “essential” companies. The truth is that they will bail out these companies as a payoff for Union votes during the election. As millions of average Americans lose their jobs and see Corporations and CEOs bailed out, they are angrier thanthey have been since the 1970’s. People in this country are feeling a mixture of hopelessness, fear, anger and denial.
Congressional Solution
Mr. Obama should tell the big mouths in Congress to shut up. Nancy Pelosi, Barney Frank and Harry Reid should not and cannot set the agenda for his Presidency. Congress has earned its 17% approval rating. I’d like to meet someone from the 17% to see if they are mentally defective. During the two months before taking the reins of government, I would suggest that Mr. Obama read the writings of some of our Founding Fathers to gain some wisdom. I recommend Thomas Paine and Thomas Jefferson.
Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one. (Thomas Paine)
I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. (Thomas Jefferson)
He who is the author of a war lets loose the whole contagion of hell and opens a vein that bleeds a nation to death. (Thomas Paine)
Mr. Obama needs to think long-term and ignore short-term popular decision making. He needs to scrap what isn’t working. The American people do not need to be taken care of. We spend $56 billion annually on a Department of Education that has led us to the 25th position in the world in scores for math and science. If a Department fails, it should be scrapped. We spend $25 billion annually on the Department of Energy with the result being no strategic plan for our energy future. We spend $67 billion annually on the Department of Transportation resulting in 156,000 structurally deficient bridges. These expenditures appear to be just pouring money down a rat hole. More government bureaucracy will not solve our long-term issues. Outside the box thinking is required.
Expanding government is not possible. We have a $10.6 trillion debt, with $53 trillion of unfunded liabilities looming in the near future. We cannot grow our way out of these problems. We must cut spending, cut benefits and generate more revenue. It is disingenuous to blame FDR for all of our unfunded liability problems. George W. Bush, Mr. Fiscal responsibility himself, signed an expansion of the Medicare program in 2006 that has committed far more money than FDR did with Social Security in 1937. Both parties are great at spending our money without making the hard choices of cutting something or increasing taxes. Increasing spending without a plan to pay for it is a tax on future generations, and is immoral.
Winding down our two wars would save the country $150 billion per year. Billions would be saved by withdrawing the 57,000 military personnel in Germany, 33,000 in Japan and thousands more in another 115 countries throughout the world. Our vast overseas military empire cannot be supported if we want to pay for our domestic obligations.
Imagine
John Lennon was murdered on December 8, 1980. He was truly a gentle soul. The country was in the midst of a terrible recession in 1980. His lyrics were hopeful and optimistic. His brutal death seemed to usher in a more divisive, materialistic, greedy, selfish, consumer society. Lennon’s lyrics from his song, Imagine, are farther from today’s reality than ever before.
Imagine no possessions
I wonder if you can
No need for greed or hunger
A brotherhood of man
Imagine all the people
Sharing all the world...
You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the world will live as one(John Lennon, Imagine)
The spirit of change that has swept the country offers us a chance to imagine how our country could be.
- Imagine Washington DC not being dominated by lobbyists, lawyers, PACs, money, lifetime bureaucrats, media consultants and political hacks.
- Imagine a Congress that operated under term limits so that high quality people ran for election, knowing that they were giving the country six years of service, rather than seeking a lifetime profession.
- Imagine a President who understands history, our Constitution, and makes decisions based on facts, rather than ideology.
- Imagine a President who would tell the American people the truth, not just what they want to hear.
- Imagine a President that will surround himself with smart, honest, non-partisan advisors.
- Imagine a government that did not spend more money than it brought into its coffers.
- Imagine a government that would get rid of Departments that did not accomplish what they were supposed to do.
- Imagine a government that allowed its citizens to have liberty, freedom of speech, and freedom to live their lives as they choose.
- Imagine a country that was respected throughout the world because of its principles, actions, and example.
- Imagine CEOs who led by example, managed for the long-term, made ethical decisions, and were satisfied with compensation 20 times the average worker, rather than 500 times the average worker.
- Imagine a financial system that allowed failure and did not reward poor decision making.
- Imagine a government that did not bailout companies that should be in bankruptcy.
- Imagine a financial system that did not depend on a Federal Reserve to print money in order to keep the Ponzi scheme going, while devaluing the dollar.
- Imagine a currency backed by gold that would automatically restrict overspending by Congress.
- Imagine a military that was used to protect our country, rather than start pre-emptive wars.
- Imagine what could be accomplished if 50% of the $1.4 trillion annual military related budget was redirected to debt reduction, energy independence, and infrastructure rebuilding.
- Imagine a “Manhattan Project” to develop new energy sources which would eliminate the $700 billion per year that we send overseas for foreign oil.
- Imagine the number of high paying jobs that would be created rebuilding the crumbling infrastructure of the United States.
- Imagine the number of jobs that could be created by building nuclear power plants, wind farms, and converting vehicles to natural gas.
- Imagine a simple tax system based on a national sales tax, rather than taxing earnings and investment.
- Imagine Americans who lived within their means, used debt only for long-term assets, and saved for their retirement.
- Imagine Americans who were satisfied with what they have, rather than desiring what their neighbor has.
- Imagine a country where home prices were low enough that someone with an average income could buy a home with 20% down.
- Imagine a country where two cars per household were satisfactory.
- Imagine an education system that produced the best and brightest students in the world.
- Imagine parents who demanded excellence in school, rather than excellence on the playing field.
- Imagine that Americans treated their fellow man with civility, honesty, trust and openness.
- Imagine Americans giving more to deserving charities than they spend on Ipods and HDTVs.
- Imagine a world where people respected all religions and didn’t vilify those with different beliefs.
- Imagine a society where people listened to other opinions, debated issues without screaming, and compromised for the overall benefit of society.
- Imagine that your voice counts, your actions matter, and your opinions are heard.
- Imagine a brotherhood of man where all children did not go to sleep hungry, did not die from common illnesses, and had the love of a family.
I believe that the internet can be used to spread the message of the people. I leave you with more words of wisdom from a Founding Father.
“One man with courage is a majority.” (Thomas Jefferson)
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This article has 46 comments:
Today, the energy situation is dire and Detroit, through its myopic vision, is going under. It amazes me how shortsighted we are as a nation.
Cheers!
I'll just mention one thing that I don't like, which is the suggestion that more money should go to university students. In one sense that's a good idea, assuming that they are studying what the country needs. The people who are doing that and getting 'decent' grades should definitely receive some assistance if they need it. I went to engineering school on the GI Bill, and that must have been one of the best investments the government ever made.
I was 'disagreeing' with somebody on this site about what the US could and could not do where obtaining the nuclear inventory that I believe will be needed, and he explained to me that there was a shortage of engineers and so on and so forth, I countered by referring to the Second World War, and the production miracles that were achieved in the US at that time. The industrial build-up in the first part of the war was phenomenal, although millions of men and women were in the service.
That gentleman thought that I was doing readers a disservice, but the reason was that he hasn't studied - as I have - the acceleration in US production from late l943 to l944. What about students who are not studying science, engineering, etc. They should also be helped if they produce. Otherwise they can receive their educations via the lyrics of John Lennon and Bob Dillon songs, and that ain't much..
F.Y.I. The final scene in the Candidate was shot at 201 Locust Street in San Raphael, CA. The 53 room house was built in 1903 as the Embassy for Russia. Since the Russian Port of Vladavostoc was their only year round port, the California location was practical.
At the time of the filming, the house was owned by an heir of the Klieber Fire Engine Company fortune, Minerva, who lived there with her brother, whose name escapes me. The garage was graced with a 1948 Rolls, previously owned by Princess Anne, a Bently of unknown history, and a mint Kleiber fire engine.
The scene was set on the main staircase of the house, on the first set of steps from the ground floor, below a stained glass window.
Regardz
We had the chance to vote for this guy in the Republican Primary. His name is Ron Paul.
Naturally he was villified in the media and ignored or ridiculed during the debates. This is the last thing that the ruling elites want to see happen. It would end their gravy train at everyone else's expense.
"... I countered by referring to the Second World War, and the production miracles that were achieved in the US at that time. "
Yup, wars are a great way to stimulate our economy. Not only is war a foreign policy of the United States, it is also an intregal part of our economic policy. Eisenhower rightly warned us of the "military industrial complex ".
Ron Paul would be a good economic advisor, but not a good president. A good president must be a leader, be able to communicate, inspire people, etc. Having good ideas is not enough.
James Quinn - - -
Another one hit out of the park.
Some additional thoughts:
1. I would propose that gasoline (and petroleum diesel) be taxed incrementally over time, with a 10 cent per year increase in the federal gasoline tax every year for 20 years. This would provide a transportation migration incentive without a serious economic shock.
2. Tax policy needs to be formulated with a better understanding of the Laffer curve than now exists. Laffer implies that there is a sweet spot for tax rates vs. tax revenue where a maximum in revenue exists. What is very likely is that the maximum is not fixed at a specific tax rate, but moves over a range of tax rates over time, depending on economic conditions. Understanding this and combining with the Keynes ideas of fiscal policy management of the business cycle could be a powerful tool for tax policy. The past decades have tried to manage the business cycle with monetary policy alone and ignored the tools of fiscal policy.
Perhaps, but that's as it should be. All those who 'fail', whether personally or commercially will lose their assets and be forced to start over again while the assets they have accumulated will be sold to those who have savings to buy them in bankruptcy auctions.
What that means is that people who behaved in ways that led to failure will be punished and those who behaved in ways that led to success will be rewarded. This is how economies advance over the long run. Successful behavior is rewarded and is seen as an example for others to follow leading to more success. Joseph Schumpeter coined the term "creative destruction" to describe such results in a free market economy.
Automobiles led to the demise of the buggy whip industry. The gub'mint didn't bail out buggy whip makers. They went bankrupt and some other business bought their equipment or real estate and used it to build other things that people were buying.
The gub'mint's current bailout is nothing more than rewarding behavior that has been shown to lead to failure. This will only serve to generate more failure-oriented behavior in the future, much to our detriment.
I guess "leading" doesn't mean setting the lone example in Congress by actually upholding his oath of office and voting only in accordance with the Constitution's terms.
I guess thousands of people weren't "inspired" to show up at political events waving Ron Paul signs at their own expense for months on end.
Or they weren't "inspired" to self-organize and donate their hard earned money by the millions to a candidate who not only spoke the truth but acted truthfully over 20 years of service in Congress.
Or they weren't "inspired" enough to show up in Minneapolis for his shadow convention by the thousands at their own expense.
I guess the reason why many of the network media talking heads asked Ron Paul for his opinion on the economic problems and bailout bills was because he wasn't able to "communicate" the conceptual ideas to the public at large in terms everyone could understand instead of talking in endless platitudes without substance.
The only problem Ron Paul would have as President is the large headwind of expected public largess he would have to overcome to address the many problems this country faces. Too many are too dependent on the gub'mint for his ideas to be enacted.
His policies would be opposed by everyone from the permanent welfare class to the fascist, looting capitalist class. Only by those who wish for a chance to make their own way without gub'mint charity or without being forced to pay for someone else's gub'mint charity would support him.
In my humble opinion he's the best man for the job, but that doesn't mean I think he'd ever be able to do everything that needs to be done. There are too many entrenched special interest groups leaching off the honest and hard working class for that.
Still, you have to start somewhere if you want to set things right. Ignoring the problem or saying you can't do those things won't help. That's how we got into this mess in the first place.
Let it go, the good banks didn't make these loans for the most part.
On Nov 10 10:26 AM Lok Sang Ho wrote:
> The problem with continued home price declines is that this will
> continue to erode the balance sheets of banks and other financial
> institutions potentially resulting in more failures of financial
> institutions and a worsening of the credit crunch. More jobs will
> be lost, more personal bankruptcies will occur, more businesses will
> go down the drain. Home prices may be very low, yet they may still
> remain unaffordable for many. Hard working people lose their life
> time savings, and the economy could suffer years of deflation and
> prolonged recession.
True but the bust following a boom caused by fractional reserve lending can pull down businesses that might otherwise have remained successful. Plus, during the boom phase, saving is actually discouraged by inflation and low interest rates. Speculation is encouraged.
Not the ideal economic system, to say the least.
You be hard on the wimps and I like that. All this crying and begging for bailouts and rewarding failure is un-American. When you deserve to be taken behind the woodshed, you should take it like a man. It's time to give the bankers and insurers a good beating.
There are many neglected, abused, hungry , and needy children in this world right now, and because of the direct and indirect incompetence of some of the American people and their chosen leaders(?) during the last 8 years, there will be millions more of them very soon.
Aggressively seek out and help needy children, and in addition, take all steps necessary to make Mr. Quinn's excellent list of ideals/goals happen in America as soon as possible! He continues to do us a great service, and I, for one, am extremely grateful.
If the business was soundly run and built from savings then the only way such a business can fail is if there is insufficient true demand to support it. This would imply that the business cannot be made profitable in any case and that it was supported only because the fractional reserve banking allowed 'excessive' demand to arise via borrowing. A truly free economy wouldn't support such a business so its continued existance would only mis-use limited resources.
All other means of failure result from errors on the part of the owner in establishing the business (too much debt) or in running it (expenses too high, inefficiencies in production, insufficient capital cushion, etc.).
There's a reason why buggy whips aren't big sellers today, regardless of how well any buggy whip factory could be run.
Any business with sufficient true demand for its product that is not debt dependent and is well run will survive until its product is no longer needed. Others either will or should fail.
What his idiotic ideas of atheism and oneness have to do with settling the nation’s and the world’s problems are beyond me. But the oneness crowd thinks (and has brainwashed young pups like Quinn) into believing that we can solve anything if we’ll simply converge into one big lump of colors.
Well, so far, since the creation of the United Nations the world has seen nothing but turmoil, the overthrow of nations, and the complete and utter raping and ravaging of one whole continent: Africa. And monthly new wars on practically every continent that sometimes last for decades.
Europe joined into one big fifteen nation union and look at them—broke, in debt, and haven’t created a net job since the EU’s creation. All they know how to do is print more fiat money—and blame the US for their problems.
Oneness has not solved one single problem. It’s brought us nothing but deformed DNA resulting in thousands of genetic diseases and indebted nations resulting in their having to grovel at the feet of Central Banks (more oneness) to borrow more money so there will be more busted out nations.
A simple solution to the world’s problems is for nations to disconnect and each one work on its own problems—individually and independently. More oneness will cause more turmoil, more debt, more wasteful spending, and more indebtedness to Oneness Banks.
Taxing energy is another idiotic idea—invented by leftists who think the planet is about to burn up and explode (or who are using that hoax to create more government and have more control over the people).
Stop it all now! Before it’s too late.
True, tax cuts for 95% of Americans seems ludicrous during a period of such national debt. Neverthless, middle to lower class Americas are suffering the most from the economic mishaps made by greedy and corrupt financiers, who have taken advantage of those who do not enjoy their financial comfort. While tax cuts may not be the best solution, tax increases on those who can least afford it seems equally illogical.
Moreover, a dollar tax on gas is the most ludicrous idea ever. Our national economy groaned as oil prices peaked. Who groaned and suffered the most? Those who live month to month. Contrary to popular opinion, many live month to month not because they are financially irresponsible, but because thereis no other alternative. The annual cost of living increases rapidly, while income for some of the hardest workers continues to stagnate. Placing a dollar tax on gas is clearly a regressive tax. Although would benefit the country in many ways, it would do so greatly at the exspense of those who could least afford it.
Overall, this is a good piece. Caution and moderation is always good political advice.
Well Smarty,
Since fractional reserve banking is criminal (though legal) it seems logical to assume there will be innocent victims. Of course the strongest will survive and more power to them but that does not mean that FRB is a victimless (can there be such a thing?) crime.
But I am in deep waters now so I will have to cogitate and read Rothbard and others some more.
Yep. Think home builders. How many companies formed to build "too many" homes and are now in a position to do nothing better than go under?
At the time, there was an endless demand for building homes, so companies were formed to build them. Now that the lending craze behind the 'false' demand is gone, the companies are bust through no fault of their own.
That doesn't mean that we should expect them to continue building even more homes when there is a glut already. There never was a need for ALL those companies. The homes truly 'needed' could have been built by a portion of the companies formed to address the artificial demand.
The excess fractional reserve lending generated false economic signals and wound up wasting scarce resources building houses people couldn't afford.
The most efficient and well run construction companies will survive. Others will not because there is no need for them.
"But I am in deep waters now" - moonbat
Aren't we all? Blurb, blurb, blurb ...
The free market can really suck if you do the wrong thing, but it's the best game in town.
Unfortunately, the standard of living to which the American people are accustomed to is built on a very complex system of production, distribution and financial interaction that is worldwide. Whether this is a good or a bad idea is less relevant than the facts that it is a reality and that making dramatic changes will have convulsive and unpredictable consequences.
Of course, it is also possible to observe that continuing down the current path of financial and technological integration around the globe is already having convulsive and unpredictable consequences. True enough.
The only point I am trying to make is that we have to be both visionary and careful in how we proceed and recognize that, as usual, it is likely that neither extreme is liable to be right to the exclusion of the other. There is nothing in the globalization of food production, for instance, that prevents me from growing food on my one-half acre.
Fortunately, the American people in their wisdom, have elected whose capacity for vision and care seem to be well balanced. My opinion is that Barack Obama will deserve and need our support in order to chart a course forward.
You say it well. Live long and prosper.
Also, after John wrote his Imagine song, he created Nutopia at the Dakota,where he wanted to live out the whole idea behind song. But as in fantasy must be interupted by reality he was gunned down outside of "Nutopia" proving that desire of a utopia or proper behavior by mankind is great, but there is such a thing as "human nature" the only true constant throughout time.
I for one agree with the premise that we let the failing business fail, let those who ignorantly bought homes with mortgages they couldn't afford foreclose, and let our economy right itself by allowing pricing to return to what it should be. Have those of you making the argument for the poor "innocents" considered that this is the exact mentality that makes American one of the fattest and most ignorant in the world? Everyone is so busy sitting on their couches watching their big screen TV's and eating processed "food" that contains little, if any actual food grown by an American farmer that they forgot to go out and work, set a budget and live by it, or try practicing a little self control.
Do I sound angry? Well, I am. My husband and I have both worked hard to get college educations (without any assistance from parents, government, or anyone else) so we could get jobs paying a fair wage. In turn we have chosen to live in a home identical to our neighbor's, who makes 1/2 what we do. We choose to drive small, economical cars; grow some of our own food, eat out only when we find we have some "extra" left over after we've put a nice chunk into savings each payday, and consume only what is necessary (perhaps part of the reason we are very healthy and not overweight). All so we can live securely knowing that when a rainy day comes our savings account will be there to take care of us. And now as a reward for our hard work we get to pay for the freeloader who won't get off their couch. If some twist of fate were to cause us to lose our home, that would be fine, we'd go rent, that would mean we hadn't planned properly.
Keep the great writing coming, Jim! It's nice to hear a voice of reason in this crazy society of ours.
Thanks for the kind words. It is good to see there are others who take responsibility for their actions. You must have a great husband. He told me to say that.
Why do you think that so many nations hold our Treasury Bills? Our ability to produce and our political stability. After your curative methodology was installed our ability to finance our future would be severely compromised.
What the hell planet are all you financial geniuses from who would cut off your nose to spite your face? Get real!
If we want the rest of the world to continuing trusting us we had better get an honest (and therefore STABLE) banking and financial system going.
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." -- Lord Acton
Fractional reserve banking with a monopoly currency is legalized THEFT by inflation. It is also UNSTABLE as the Austrian economists point out.
Lord Acton said a lot of things, some of them intrinsically true and others debateable. However, just like you, he certainly was no economist nor financial maven. You seem to intimate that because he said it, it must be true.
Your Austrian School comment provides more insight into your commentary. There are no reputable economists currently considered to be members of the Austrian School, unless you consider Ron Paul an economist. Give me a break on this back to the Gold Standard drivel.
I said nothing about a gold standard. I believe in "free banking" with competing currencies backed by anything or nothing but with NO government interference other than enforcing the usual laws against fraud and insolvency.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." Thomas Jefferson
There are many more quotes by famous people about banking including bankers themselves. Goggle "banking quotes" if interested.
Give it time.
Then what did you imply by your comment on the Austrian School and fractional reserve banking?
If the good Mr. Jefferson was with us now, I believe that he would have been pleasantly surprised by the service that our banking system has provided to us over the centuries. And yes, there has been some disservice. However, the positives have certainly outweighrd the negatives. Lets not "throw out the baby with the bath water"! (Sorry, I don't know who receives credit for that quote).
Moon, lets call it a truce. We know where we each stand on the issue. I feel that I have learned from our dialoque.
Regards,
Chasam
P.S. Who said "knowledge is power"?
It's an honor to deal with an open mind. Murray N. Rothbard's "The Mystery of Banking" is a classic on fractional reserve banking and its history. It is available (brand new 2nd edition) as a free download at:
mises.org/Books/myster...
I wish you well.
CONGRESS: Here’s a radical plan…
pacificgatepost.blogsp...
It’s this, or bankruptcy. The American Auto industry should be saved but under new conditions.
''I pray Heaven to Bestow the best of Blessings on THIS HOUSE and on All that shall hereafter inhabit it. May none but honest and wise men ever rule under the roof"
We had 8 years of dishonest and stupid ruling. I hope Obama proves John Adams right. Anyone knows Obama PLEASE forward James' article to him.
For anyone who have read the brief American history, you'd agree that it's a miracle that US is where it is. We had some amazingly smart, just and honest founding fathers. Looking at the condition right now, it will take another miracle to pull US out of this mess.
Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should be just; it must be philanthropic. Nor is it sufficient that the law should guarantee to every citizen the free and inoffensive use of his faculties for physical, intellectual, and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation.
This is the seductive lure of socialism. And I repeat again: These two uses of the law are in direct contradiction to each other. We must choose between them. A citizen cannot at the same time be free and not free.
by Frédéric Bastiat, 1850
Our nation is comprised of 300 million "PEOPLE", not balance sheets and hedge funds. If you think for a minute that even a quarter of those people are going to go homeless and hungry without some blood letting of the fatted calves in government and finance you are kidding yourselves. Obama is tasked with keeping your kind alive long enough to see the economy rebound, not adhere to some pseudo intellectual picture of what Wall St should look like in 10 years. The only way he will do this is by keeping those of us on the bottom of the food chain sufficiently supplied with basic essentials to prevent us from simply taking them from you. When you drive people to the bottom of the pyramid of needs you can't expect them to respond to your lofty ideals. This is especially true when you didn't adhere to your own blathering of nonsense when the trough was full.
You may think that you keep the earth in rotation around the sun with your theories, but those of us who keep the machine running with our blood and sweat everyday have only to take a week off to show you the value of "bottom up" thinking. If your grand plan doesn't include our pittance of basic necessities then I would advise you to raise the drawbridge. What, you didn't plan a drawbridge into your new mansion? Boy, are you screwed.
What bothers me honestly as I watch people all around me from coast to coast is their misplaced (or outraegous) sense of 'entitlement'. Coupled with poor education (just look at how many prime time shows you need with likes of Suze and Ramsey to tell people that they cannot forever spend more than they earn!) amongst rank and file that work in the largest of corporations and you have a recipe for an economic calamity.
Yet - I think the author in his excellent narrative has not tried to answer a fundamental question that has been bugging me - America has potentially the largest reserves of umpteen types of natural resources that they have not begun to even tap into (all the while borrowing and importing) while providing for its populace with government issued IOUs.
What happens when we do get a chance to leverage all of our vast agrarian lands in the plains to crank out all the grain the world would need and drill ANWAR and get rid of imported oil and on and on till we get rid of our IOUs? Its doable IMHO but it would require will and commitment to work ourselves out of this 'I WANT IT NOW' culture.
What bothers me honestly as I watch people all around me from coast to coast is their misplaced (or outraegous) sense of 'entitlement'. Coupled with poor education (just look at how many prime time shows you need with likes of Suze and Ramsey to tell people that they cannot forever spend more than they earn!) amongst rank and file that work in the largest of corporations and you have a recipe for an economic calamity.
Yet - I think the author in his excellent narrative has not tried to answer a fundamental question that has been bugging me - America has potentially the largest reserves of umpteen types of natural resources that they have not begun to even tap into (all the while borrowing and importing) while providing for its populace with government issued IOUs.
What happens when we do get a chance to leverage all of our vast agrarian lands in the plains to crank out all the grain the world would need and drill ANWAR and get rid of imported oil and on and on till we get rid of our IOUs? Its doable IMHO but it would require will and commitment to work ourselves out of this 'I WANT IT NOW' culture.
Rather, it's a simple fact: those in the top 5% income streams earn far more money from government benefits, and thus, ought to pay more. Think about it: the companies they work for - corporations - are creatures born by acts of government. The roads their employees drive on, the power they consume, the money printed, every single item taken for granted that makes a corporation operate has roots in government and law. Bill Gates can only create Microsoft because he lives in a country that protects intellectual property. Warren Buffett can only create Berkshire because he lives in a country that honors contractual obligations.
If a person had no employees, earned his money from the sweat of his own brow exclusively, and not from buying or selling products to others who benefited from government protections, then perhaps there'd be some reason not to tax the highest income earners proportionately with the benefits they reap from the government. Of course, no such person exists in the real world - because end of the day, the bulk of all wealth in a capitalist society is born from the cooperation of a well-run government and hard working individuals.
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At the conclusion of the Second World War, Betrand Russell declared
that Europe was "morally bankrupt." The U.S. economy has been ravaged by reckless MBA's, Wall Street financial 'rocket scientists' and
the hedge funds so called 'masters of the universe.' As of this writing
it would appear that they are not finished with us either.
The S.E.C. sanctioned shoddy accounting practices and lack of transparency in corporations and on Wall Street have ruined the trust
and dreams of many market participants. How much more damage
must we endure before the mass of market participants declares that
the U.S. financial system is "morally bankrupt ?"
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