Howard_T

Recession Is Over; Depression Has Just Begun

Thank you, Mr. Harrison, for this excellent analysis. Until I read it, I would have been one screaming for an end to profligate federal spending that would only lead us on the road to rapid inflation. I am now convinced that government must spend in order to temporarily provide the means to get the economy moving forward once again.

More government spending comes with one huge stipulation: the spending must be targeted, intelligently planned, and diligently regulated. Any unnecessary spending must be curtailed. As a start, forget any ideas of health care reform or energy cap-and-trade taxes. These can be left for later, although immediate action to begin work toward reducing the cost of health care (that is, how much it costs to see the doctor, not how much you pay for insurance) can start immediately.

Targeting of spending means putting the money directly into the hands of those who can use it to develop the economy and create jobs. Propping up state and local governments, while not an entirely bad idea, does little to create jobs and can be left for later. In the meantime, the states should be allowed to operate at a deficit, issuing bonds to keep them going, and make up the debt with increased income and fiscal austerity once tax revenues have come back. The money needs to be placed in the hands of small and medium-size businesses, in the form of grants or low-interest loans, to allow these businesses to expand, innovate, develop new products, and put people to work. Bailing out an already sick industry is not the answer. We see now that Chrysler will not be able to introduce new models based on Fiat products for several years. We also see that GM has not been successful in selling the Saturn brand, and will now abandon it. Despite the bailouts, the ship continues to the bottom. Spending does not have to be in the form of cash or credit. One of the most effective things that could be done is to revise the federal tax code to ease the burden on business, stop penalizing the re-investment of profits, and make it more attractive to keep one's manufacturing operations in the US.

Regulation simply means forcing those who benefit from federal spending to give an honest and accurate accounting of where it goes. Here I'm looking directly at the financial industry. It's too late to stop the creation of the mega-banks that has happened over the last few decades, and was accelerated by the government-assisted mergers of the last 2 years. What can be done is to force these large institutions, and indeed all financial institutions, to separate their banking, financial services, and brokerage operations. Ownership of such operations can continue under the existing corporate heads, but tall and stout firewalls would need to be put in place to prevent abuses such as the the banking operation placing depositors money into questionable financial products sold by the brokerage arm. Restoration of Glass-Steagle, perhaps with some updates to account for technology, would be the obvious start.

I am not an economist, nor am I involved with the financial industry in any way other than as a customer. I am a retired engineer living on my wife's small income, a pension, social security, and savings. In the meantime, I'm putting a kid through college. My debt load is low; if I were forced into it, I could pay it off tomorrow without real hardship. What little I know about finance I learned from my father, who worked for many years at the Federal Reserve Bank of Boston. I write the above as one who thinks that common sense has been abandoned in the corridors of government, greed and insensitivity have become the watchwords of the financial elites, and despair is increasing among those of us who are at their mercy. So please, Mr. Harrison, keep your ideas flowing, but please temper them with common sense.

What's the U.S.'s Energy Policy?

Energy policy under the Obama administration:

1. Move to a 10-acre woodlot.
2. Build a windmill and hook it to a generator.
3. Put in a solar array and hook it to another generator.
4. On days when the sun isn't shining and the wind isn't blowing cut some of your wood, build a campfire, and huddle around it.
5. When the Carbon Police show up, pay the hefty fine with worthless dollars.

Jim Rogers: Lessons from a Legend

Please let this retired engineer add his thoughts to the MBA question.

It appears that several of the commenters believe the MBA is most useful as a networking tool. This is likely true when it comes to gaining initial employment or changing employers. As far as job performance goes, the MBA is no indicator of excellence. Over my last 15 years or so in the engineering profession, I was increasingly subjected to direction by finance people, many of whom had MBAs. A few of them were also equipped with eyes and ears and a brain, and thus were able to understand the solid engineering principles behind what we engineers attempted to do. These guys were gold! Some MBAs tried to cut us short on funds or manpower in an effort to hold the "bottom line". The best of these figured out that it cost more in the long run (due to lengthened schedules and unavailability of critical equipment, for example) than giving us what we needed when we needed it would have cost. I will admit that many engineers are prone to padding the requirements, but reasonable parties can find the middle ground. The final category of MBA was the type that forced his financial opinion onto the engineers, compressing schedules, cutting budget, keeping critical skill positions from being filled, and generally getting in the way. We engineers had a clever way of dealing with that. It was known as finding another project with better management, and transferring. Our higher management was astute enough to recognize what was going on when a lot of transfer requests began to come out of one program. The usual result was a finance guy and a program manager looking for another program to screw up, and the engineers getting down to what they do best.

To sum it up, the MBA is useful on the job only when it is accompanied by the ability to see the whole situation, understand what is going on, and being able to work with others toward the common end. Of course, anyone with those attributes will be successful, MBA or not; he just will have a more difficult time getting hired without the MBA.

The Non-Stimulating Stimulus Bill

Today's news included an article about $2M in stimulus funds being used to buy 4 new coach style buses that are to be given (!) to the companies that provides bus service between southern NH and Boston. One will be used on the US Rte 3 corridor from Nashua, one on the I-93 corridor from Manchester, and the other 2 on the I-95 corridor from Portsmouth. Before I go off the deep end, I need to say that I have used this service, and it is an excellent way of getting to and from the city. Also, in fairness, I have to say that the buses don't actually belong to the companies involved, but belong to the NH Department of Transportation.

The addition of the buses will mean that the companies involved will be able to hire 4 or 5 new drivers. Let's think about that for a moment. 4 or 5 new jobs at the cost of $2M; that equates to $400K or $500K per job. It would seem to me that it would be a better idea to find 4 or 5 entrepreneurs, lend each of them the $400K or $500K at a low interest rate for a long term, let them each buy a reliable used bus, and go into the business. I would bet that it wouldn't be too long before their business had grown (in the absence of excessive government interference and taxation) to the point where each of them had been able to buy another bus or 2 and hire more drivers. That is what the stimulus should have been, but instead it winds up paying for increased bureaucracy and providing minimal benefit.

Much of the criticism of the stimulus plan is the few jobs that have been saved (not created) all seem to lie in the public sector at the state and local level (police, fire, teachers, etc.). While these are certainly necessary and beneficial, there is no real impact upon the economy. For those who decry the lack of job creation, the plan is designed to have its maximum impact in 2010. Gee, that's odd. There's an election in 2010. Am I the only one who sees a connection here?

The Escalator of Life Is Going Down (Part 2)

Why wait until 2012? We can start in 2010 with the congressional elections. Involve yourself in your party's selection of its candidate. Insist on a fiscal conservative who will bring the spending spree to a screeching halt, make sure that failing institutions really fail and are not artificially propped up, remove the influence of politics from business, promote effective regulation, and in general restore some sanity to government. If the incumbent does not pass this test, THROW HIM (or her) OUT!!! Do not let the sideshows distract you from the events in the center ring. Never mind about abortion, gay rights, global warming (except where it affects the economy), and all of the other issues that politicians put forth to keep you from looking too closely at the real problems. Stay focused, stay intense, and take back our country. Do it legally now before some feel they have to do it with viloence.

Is the Populist Mob Right?

The captain of the Titanic went down with his ship, but then he had a lot more integrity than some of the bankers.

My dad used to tell me that near his 8th birthday, when news of the Titanic disaster reached his remote Nova Scotia fishing town, the people were not sad, but rather were celebrating. You see, the liners had a habit of speeding through the fishing grounds and causing dories to capsize and the occupants to suffer drowning. Contrary to the laws of the sea, they never slowed down to attempt rescue. What drove this behavior was the desire of passengers to book their passage on the fastest and most luxurious ships, and anything that slowed the ships down was bad for business.

Perhaps you see where I am going with this. We are the passengers who through ignorance or greed allowed the captains (the investment bankers) and their agents (the politicians and those who headed federal agencies) to continue a course of conduct that would eventually result in disaster. Well, the disaster has happened, the Titanic has struck the 'berg and sunk, and we are left to celebrate or to swim for it. After 1912, some changes were put into effect for safety. They did not address the practices that had caused the disaster, but rather made loss of life less likely. The opportunity we have now is to throw the politicians out of office at our earliest opportunity. We must also identify exactly who is culpable in all this mess, whether out of ignorance or greed, and remove them from any position of trust or leadership in government or the financial industry. Finally, we must change the laws so that safe, conservative financial practices must be followed, and anything else must be punished.

Democrats Headed for a Train Wreck

The CARS (or Cash for Clunkers, if you must) is by most current assessments considered a success. (Let's disregard for the moment the arguments of short-term gains being offset by long-term effects) As good as CARS might have been for sales, I read this morning that roughly half of the 425 dealers in the Greater New York Automobile Dealers Association are no longer offering the program. The reason is that they have not yet been reimbursed by the government for the rebates that they have given to their customers. In short, they just don't have the cash to continue. Now imagine you are a health care provider servicing patients under a government health care plan (This is the case right now under Medicare/Medicaid). You provide the services, using your valuable time and some material resources, but have to wait a long time to receive your "pay". How long will it be until providers begin dropping out. This is already the case in Great Britain, where vacancies in health care jobs have risen greatly in the past year. The arrogance of the Obama administration is frightening, but then I suppose I shouldn't worry. Any liberal will tell me that it's all for my own good to save me from myself.

Winter's Coming for the Boomers: Part 2

The only thing that the people in the Congress fear is not being re-elected. Thus, they will support anything that they feel their constituents want. Unless enough of us get the message to them that their days in DC are numbered unless they make decisions based on what is necessary and practical and effective, not on what is popular, we are doomed.

On July 13, at 1:23PM, spartacuss wrote:

>We can postulate all kinds of things, but one thing for sure is that >the people in congress are scared to death and are taking on >draconian measures to deal with this crisis.

Grading Obama on the Economy

I found it very revealing that most of the so-called stimulus package programs are designed to start showing results in about 2-years' time. Gee, that's just about in time for the next congressional elections. Is there some sort of really odd coincidence here, or did someone plan it that way?

Dropping the Bomb on Healthcare

Very early in the health care legislative process, before the first bills were filed in the Congress, President Obama promised that he would get all of the "players" around the table and come up with a plan. This has not happened, but before any legislation is passed, it must.

The physicians must be asked what are their largest cost drivers and how can they be reduced and controlled. By so doing, they can provide the same level of service at reduced costs to the patient, and still maintain their income.

Ask the hospitals the same questions. What needs to be done to make care more available, better, and cheaper? How about wellness and non-traditional medicine programs? Perhaps these need more research, but would they not help keep people out of the hospital in the first place?

Medical educators must be asked how more people can be put through medical schools, not only to become physicians and surgeons, but also to become physician's assistants, nurses, and emergency care providers. From my experience with Navy Corpsmen, you don't need the MD degree with all of its internships and expensive training in order to provide damned good first and second level patient care.

Insurance companies need to be told that they can no longer refuse policies for pre-existing conditions, nor can they drop a policy when a policy holder becomes ill or reaches a certain level of benefit payments. With that in mind, the insurance companies should be encouraged to give their ideas on how they can better compete and provide the necessary levels of coverage at more affordable prices.

Businessmen, particularly those running small businesses, must have their say on what can be done so that they may offer health insurance to their employees. Business cooperatives that can pool their employees and purchase insurance across state lines might be an idea here.

It might be a good idea to have an economist and a couple of sharp accountants present to keep the financial picture clear. The checkbook is not without limit, despite the Fed's best efforts.

The last members of the group will be the politicians. They may attend, but will be required to listen. None will be allowed to speak. Once all of the interested parties have had their say, the politicians can get to work crafting legislation. As they do so, at each step of the way, they must report back to the interested groups and receive their comments and criticisms.

All of the above reveals that I have a firm grasp of the obvious. Of course, if it were so obvious, why did it not happen? I have my own feelings about that, but they are partisan in nature, so I will not go into them. Suffice it to say that certain politicians decided that they knew more than those who had a stake in the industry. We can but hope.

The Costs of Not Fixing a Broken Financial System

The banking bailouts: A majority of voters are not in favor.
Bailouts of GM and Chrysler: Majority unfavorable.
First Obama Stimulus Plan: Generally found inadequate or worse and not favored by the majority.
Current Health Care legislation: Majority of voters is against it.
Cap and Trade: Businesses and individuals believe it will be an economic disaster.

All of the above are disliked by the American public, yet the current administration persists in trying to push its agenda. If real reform is not soon forthcoming from those currently in office, the pitchfork and torch method of reform will soon follow. This of course is not a good thing, as the tendency of a hungry mob is to burn down the bakery. The first chance we will have at real change will be in 11 months. Let's not waste it.

Stop Calling This 'Recovery'

We will see just enough of a change in direction, from negative or flat to positive, in the next 9 - 10 months that some will call it a valid recovery. When that happens, the present administration and its party, abetted by their yapping lapdogs in the main stream media, will proclaim from the rooftops how wonderful they have been in making all of this happen. Alas, enough people might be fooled into re-electing those who are mainly responsible for placing us into the current mess, and causing the long term aggravation of it with their spending policies.

How the AIG Bailout Scuttles the Chance for a Second Stimulus

Today's headlines are about Obama warning of a possible "double-dip" recession. He also talked to the effect that too much government spending could be harmful, and any stimulus would have to be in the form of tax cuts. Sounds to me like he finally picked up a year old newspaper and read the financial pages. Either that, or he just read the weather vane and saw which way the political winds are blowing. It's amazing what a couple of lost governorships can do to your political arrogance.

GE's $8 Billion Downgrade Timebomb

I have an electric mantle clock with Westminster chimes. It was willed to me by my great uncle who had owned it for many years before his death. It was manufactured in the 1920s by the Telchron Corporation, which had then just become a part of General Electric. The clock has been running for over 80 years with no maintenance beyond an occasional cleaning. The company that made this clock obviously has a great many good things going for it. Perhaps a Chapter 11 proceeding, resulting in GE getting back to its core competencies, will be the best way out of its present difficulties. GE is a classic case of what happens when you forget what got you as good as you are, and you try to do things you have no business trying.

Obama's Financial Reform - A Distraction from the Real Issues

Here's a sure-fire way of regulating the largest banks. Convince the underworld mobs that they must put all of their assets into securities issued by the large financial corporations. Tell them also that if they suffer loss due to fraud that certain retaliatory measures will not be thoroughly investigated. When the first Wall Street banker shows up at the bottom of the harbor wearing concrete overshoes, the problem will disappear.

Obviously, I jest with the above. Too big to fail equates to being too big to exist. Reinstate Glass-Steagall and force all banks, regardless of size to break themselves up into separate brokerage houses and banks. These may be held under the same parent company, but must have completely independent management and direction. Abolish companies that do nothing but lend money to consumers. If any sort of fraud does occur, then punish it with fines and jail time (and not in a country club prison).

Obama's near-daily address is designed for more than one purpose. That is to keep his image of the beloved leader always before the public and to continually distract us from the ever-increasing shadow government he is carefully putting into place. (Check out the number of "czars" who were not appointed through the constitutionally required process of advice and consent, but have full authority to make and enforce decisions within their departments.)