alajac

Rational Exuberance?

"By all accounts, recovery has arrived or is imminent."

Since "all accounts" didn't see the crash coming in the first place, I put NO stock in "general opinion" on anything, ever.

Credit is imploding, print as much as you like, we are going down BIG, in a combination that will "rhyme" (as Mark Twain put it) with both 1929 (where the drop after the initial relief rally was MANY times as deep as the original drop, and 1938 with its sharp rally (does "3 weeks almost straight up" sound familiar?) off of a retest of support followed by about 3 weeks of mostly sideways action (again, sound familiar?) that put in a top that was to last for the next 7 years, the next four of which were successively lower. The top should be put in by next Monday. (There are too many expiring puts for it to start going down much this week.)

The Facts Behind the Coming Congressional Mortgage Bailout Bill

Anybody who thinks that the Federal Reserve or government regulators are ``on their side``, also probably believed that `dot com` and housing prices were going to keep `going up` forever.


I won`t say anything about the government regulators except that `by their fruit you will know them`, but the Federal Reserve is owned by the banks, so get a clue. The banks have a virtual `call option` on a hefty chunk of our labor and wealth provided to them by the Federal Reserve. In other words, even if they lose money, their downside is limited, just like it was for the income-challenged people who took out low-up-front-cost loans for housing that they couldn`t otherwise afford, people who could live in a nice house for at least awhile and maybe even make a bunch of money on the deal `down the road`. It would be the fiduciary duty of anyone offered a deal like that to grab it and run, especially if they had children who had never had a chance `to live in a nice house in nice neighborhood`.


And who can blame the banks for taking us up on a similar deal? If the deal goes well, then they get `filthy rich`, if not, they get time to spend all the money OUR SYSTEM has tossed into their laps. Tough choice.


As we learned in `Quality Improvement Process 101`, the problem is never `the people`. The problem is always THE SYSTEM. Unless (and until) we fix THE SYSTEM, the same bad things will keep happening, over and over. The fault lies not with the borrowers and the banks wo profit from THE SYSTEM, but with our ancestors for letting this SYSTEM get set up, and with ourselves for letting a SYSTEM continue which incentivizes activities that lead to our own destruction.


First thing we need for our NEW SYSTEM is our own, debt-free U.S. Government currency, backed by all the real estate within the nation`s borders (of which property the U.S. government is the actual owner...`legal` owners are granted `legal exclusive right of use` by an `actual` owner, valid until such time as the actual owner changes its mind or becomes unable to defend its ownership claim). Since banks will no longer be able to print the our new currency to cover their losses, and since we will no longer be dependent upon banks to maintain a flow of credit, banks should become more conservative in their lending and speculation. We should also get rid of FDIC insurance to further encourage such a change.


While we are at it, we should replace all income-related taxes with a 1/2% electronic transfer (aka debit) tax which will be avoidable by the use of cash. This will not only rid us of the IRS (saving us the billions of dollars currently spent on `tax reporting`), it will also end the current system`s penalization of work and entrepreneurism, and release for investment purposes untold billions currently spent on `tax avoidance`. This debit tax will not only be more of a tax on wealth than labor and be (arguably) voluntarily-paid, it will also act to discourage excessive short-term market speculation and will raise enough revenue to begin paying off the National Debt, a debt which will no longer be growing once we have switched over to our own debt-free currency. We will also apply any Federal Reserve dollars that are swapped for our new currency toward paying off the National Debt.


Since the U.S. government has, by granting `exclusive rights of use`, denied everyone free access to all of its property, and since the U.S. government has not compensated everyone for that `taking`, we should elect a Congress that will pay every legal U.S. resident `Adequate and Equal Just Compensation for Denial of Free Access to U.S. Property`, compensation which WILL FUNCTIONALLY REPLACE ALL FORMS OF PERSONAL AND CORPORATE WELFARE, SUBSIDIES AND BOONDOGGLES, including the rescindance of Federal Minimum Wage laws and a phase-out of the Social Security system. (Once everyone is getting `Denial of Free Access` compensation their whole lives, it would seem arguable that the vast majority of people will be able to save enough to be able to comfortably cease working at some point in their lives.)


As a starting point, $1000 per month (of the new, non-Federal-Reserve, non-Debt-Money, as described above) should be paid to every legal adult resident (compensation of minors should, of course, be held `in trust` to avoid incentivizing baby factories). Since everyone gets the same amount, this compensation plan is not wealth redistributive, but will give the least wealthy the biggest advantage (in terms of monthly percentage increase of wealth) and a better chance to `catch up` than the current system that keeps the rich getting relatively richer through good times and bad.


Once this NEW SYSTEM gets going, we should expect people in other countries to insist that their governments either emulate our NEW SYSTEM, or else apply for U.S. statehood as The Republic of Texas did in 1845.


Benefits of the new system should include better childcare, less poverty, less crime, cheaper government and a safer world. All in favor, help spread the word.

Is the U.S. Banking System Safe?

Bank stocks bounced because there are many clueless people with lots of money, as evidenced by many of the above comments, I've been warning people about this crash since 2006 (due to an article I read about the lagging correspondence of the S&P500 with the Housing Index); anybody who didn't see this coming shouldn't be trusted with a checkbook, much less funds and banks and the Federal Reserve System.

If the bank owners were personally responsible for loan losses do you think they would have made all those bad loans? They can socialize the losses and take all the profits, so they do. As noted in this great piece, fractional reserve loaning is totally corrupt, a government-approved Ponzi scheme.

Loans from fractional reserve banks are inherently “liar’s loans”, the lie being, the bank is loaning money that it really doesn’t have. The Fed and the thousands of banks creating these liar loans create inflationary conditions that actively discourage thrift: people throw their money at something that hopefully will go up in a lot in price in order to hold onto the buying power of their money, trading the certainty of being screwed in the long run for the chance to possibly avoid being screwed at that future time. Debt-money leaks out value like a bucket with a hole in the bottom leaks out water. This is just going to keep happening until the basic cause gets fixed.

First of all, WE NEED OUR OWN DEBT-FREE CURRENCY, backed by all of the real estate owned by the United States (which is, in fact, all of the real estate within the national boundaries, and really more than that including other nations whose continued claim to existence depends on U.S. defense of that claim; case-in-point, Kuwait, 1991), we should distribute that new currency in monthly equi-dollar amounts to all legal residents (amounts due minors to be held in trust accounts). Also, we need bankers to be held financially responsible for any loss of depositors’ money (if they want to gamble with fractional reserves, it’s the bank owners who should pay, not taxpayers, and if you lose your own money by depositing it in a fractional reserve bank, again, it’s YOU who should pay, not taxpayers. How can we ever expect things to get right with a system based on socializing losses?

Next, we should REPLACE ALL FEDERAL NON-CONSUMPTION TAXES with a one-half percent(+/-) Tobin-type tax on ALL outgoing electronic transactions (avoidable by using cash for all transactions, and, since avoidable, the tax will be arguably being paid voluntarily) in order to:

1. Pay off the national debt,

2. Repair the damage that the U.S. government has done to persons and the free market by favoritism (reparations for having “Constitutionalized” slavery might be considered) and excessive regulation (e.g., we need about 4 times as many doctors and healthcare professionals as we currently have in order to have enough competition extant to get medical costs back to the realm of affordability, and we would have had them had there been a free market in medical education), and

3. Extract and destroy excess currency as required to avoid inflation.

No other form of Federal non-consumption tax would be allowed (this tax could go to zero when it has done its job if there is no inflation in the system).

The monthly equi-dollar distribution amounts should be of sufficient quantity (assuming $1000, that’s $24,000 Federal tax-free per couple, plus whatever wages and other income they bring in) to be considered sufficient replacement for all forms of corporate, farm and personal welfare, including subsidies, welfare, tax incentives, Social Security (to be phased out), Medicare, the Federal Minimum Wage law, and ALL OTHER forms of Federal financial redistribution schemes; there won’t be any need for separate Federal retirement accounts since there won’t be any income or investment taxes.
For those who like their political solutions morally justified, the monthly equi-dollar distribution amounts can be considered “justified compensation” for the denial of free access to all the property that the government has privatized.

With everybody getting the same monthly amount, and everybody paying the same percentage increase of fiat money, there is no redistribution nor inherent injustice in the plan.