|
chuckm1
|
read my profile
sign my guestbook
Name: Chuck
Country: United States
Gender: Male
Interests: Trying to keep my head above water
Expertise: I can hurl tennis rackets at small moving objects with deadly accuracy. I cook Thirty-Minute Brownies in twenty minutes. I am an expert in stucco, a veteran in love, and an outlaw in Peru.
Occupation: Manufacturing/production
Industry: Manufacturing
Message: message me
Member Since:
5/11/2005
|
|
| Town Hall for HopeJust came back from the webcast of Town Hall for Hope. Awesome! Looks like better than 1 million saw it. Some interesting facts I've learned.
1) This is not the worst recession since the Great Depression. The recession of 72 and of 81 were worse in terms of employment figures and inflation.
2) Economist John Maynard Keynes had the ear of FDR and was probably THE reason for the New Deal. A couple of the economic tenets he handed FDR were: a) government should employ deficit spending during recessions, b) 100% employment is possible and c) government should hire the unemployed.
The idea that the New Deal was "successful" needs to be laid against the backdrop of history. The New Deal really got started in 1938. The US started getting on a wartime footing in 1941, even before Pearl Harbor. Once the US was fully engaged in the war, the economy understandably is "stimulated." By 1944, the GDP had almost tripled from 1938. But was it the New Deal, or the war?
Other item: while a laudable goal, is 100% employment really a good idea? In manufacturing, do you really want all of your assets running at full capacity? No, you want some protective capacity to allow for growth. If the government were to provide employment to all the unemployed, new businesses, serving any real economic growth, would have trouble starting.
| | |
| So it passed...... and the world is still turning. The question is, will it help? The short answer is, "No."
Why? The problem is that we, as a nation, are vastly overextended. And it's not just the federal debt I'm referring to. The chart below shows federal, corporate and consumer debt combined as a % of GDP.
  
Hypothetically, it would take 3.5 years of dedicating the entire economy to debt reduction to pay it all off.
During post-WWI lead-up to the Great Depression, buying on credit really caught on, artificially pushing the GDP up, as happened again in the 90s. For example, going into the Depression, 60% of cars and 80% of radios were
bought on credit (Robert S. McElvaine, The Great Depression: America
1929-1941). Although radios are a bit cheaper today, I would guess
that a similar number of cars are financed and at a similar percentage of
annual personal income. There are several differences that prevented a
similar outcome back in 2000-2001, but one particularly noteworthy was
the Federal Reserve pumping cash into the economy by lowering interest
rates. Additionally, the tremendous surge in deficit spending during a
wartime economy (that is when the government decides to spend like a bunch of
drunken monkeys), kept it afloat a bit longer. But now, how much lower
can the Fed lower interest rates?
Do I think we are headed for a depression? No. But the
foundations are shaking. Consider that all the current rumblings are
resulting from 9% of all mortgages being behind or in some stage of
foreclosure. That's an awful lot of defaults, but should that result in
bonds being valued at 20 cents on the dollar? Even with the real estate
bubble apparent in different areas, the collateral backing those mortgages has
not lost 80% of their value. This is the logic behind the "Common
Sense Plan" mentioned below. By refinancing and insuring the
mortgages, the risk is no longer lumped into the grossly devalued bonds, but in
the individual mortgages. The homeowners get a fighting chance at keeping
their homes. The risk of default is lowered by the refinancing, and
transferred from the banks by the government insurance. Rather than
buying the entire "troubled asset" at enormous cost, the government
insures the difference between the outstanding mortgage and the money reclaimed
at the foreclosure sale.
Even if the Common Sense Plan had been passed instead,
the root cause of the current mess would remain: debt. And that's the
scary part of this whole situation.
And no, I won't be voting for Rodney Alexander tomorrow. He decided to be bought by pork today.
| | |
| Proud of my Louisiana SenatorsI can hardly believe it, but both Vitter and Landrieu opposed the recent bailout bill in the Senate. It's terrible that it still passed, but I'm truly glad that these two voted against the expansion of government interventionism. Besides that, the bill was LOADED with all kinds of pork (see below)
It was this kind of interventionism that led to the current mess. Example? Look up ACORN mortgage program, where the government helped people buy houses they couldn't afford. (Yes, owning a home is good thing, but giving somebody a mortgage they can't pay is not a good plan.)
I emailed and called both my senators, telling them to oppose this bill and I am thankful that they did.
PORK examples:
Sec. 502. Provisions related to film and television productions.
Sec. 503. Exemption from excise tax for certain wooden arrows designed for
use by children.
Sec. 504. Income averaging for amounts received in connection with the Exxon
Valdez litigation.
Sec. 505. Certain farming business machinery and equipment treated as 5-year
property.
Subtitle B—Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008
Sec. 602. Transfer to abandoned mine reclamation fund.
And about 400 pages of additional crap that had nothing to do with the current situation.
What would I support? Here's what I sent to my senators:
The Common Sense Fix
Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three step Common Sense Plan.
I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.
Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.
b. In order for a company to accept the government-backed insurance, they must do two things:
1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.
2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.
II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.
b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.
III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.
b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.
This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.
| | |
| One Christian's idea of governmentI've not blogged with any consistency in more than a year. Really, I've never blogged consistently. But with the upcoming election, I wanted to put some thoughts down.
First, let me just say that I don't think either party in the upcoming election "has it all right." Twisting John F. Kennedy's oft heard phrase, both presidential candidates seem to have bought into the idea that we (the public) should be asking, "What can my country do for me?", and say nothing of what we can do for our country. Both candidates, sensing the public's unhappiness with government, are now running reform campaigns. Change? Baloney! Both candidates are offering more of the same, but in different flavors. Yes, I do find one "flavor" more distasteful than the other. But in the larger scope of things, that's almost beside the point.
In looking at the scope of government, I really like the preamble to the Constitution:
We the People of the United States, in Order to
form a more perfect Union, establish Justice, insure domestic
Tranquility, provide for the common defence, promote
the general Welfare, and secure the Blessings of Liberty to ourselves
and our Posterity, do ordain and establish this Constitution for the
United States of America.
This is one of the best and most succinct statements of governmental philosophy in existence.
More to come later.
| | |
| It's been a long time... Xanga just sent me an email saying that they were cleaning up unused blogs. You know it's been a while when the web host tells you to blog or get off the pot.
I'll try to be a better blogger.
FYI, MK just signed up on facebook. Guess we're finally joining the 21st century.
| | |
|
