Mr. Moderate

Anybody who believes we ought to just adopt the proposal put forth by Secretary Henry Paulson needs to study the “Mega-Million Dollar CEO Payouts” article from ABC News. Look for Henry Paulson under Goldman Sachs. Secretary Paulson was paid nearly $164 million by Goldman Sachs when he left to become the Secretary of the Treasury. I’m sorry, but that smells an awful lot like a pre-bribe, given that Paulson made a “mere” $4 million the year before and only about $12 million the year before that.

Can anybody honestly believe that there isn’t going to be a good chunk of the $700 billion bailout going to help Paulson’s friends at Goldman Sachs? Even if it is just $7 billion of good taxpayer money going to Goldman Sachs, that is still a pretty good payoff for a $164 million “pre-bribe.” I rather strongly smell a rat, and I’m a long way from Washington DC!

Let me begin by quoting the final words of my previous blog post:

The Republican kleptocrats have probably stolen over $1 trillion this time around, and the United States is hovering ever closer to bankruptcy as a consequence. How much more taxpayer wealth are we going to allow them to suck out of the Treasury before we decide that deregulation is the real source of this fiasco? I don’t know, but it sure seems to me that the American voters just don’t get it (yet)!

In a fine above-the-fold article in USA Today, David Lynch notes that the seeds of the recent meltdown on Wall Street were sewn back in 1999 with the repeal of key provisions of the Glass-Steagall Act of 1933:

By the time of the 1990s boom, the financial services industry was campaigning to repeal Glass-Steagall, arguing that foreign rivals were hobbled by no similar restraints. In 1999, Congress assented.

“The pressure was so great that Congress really couldn’t resist it,” says economist Peter Bernstein. “Nothing really bad had happened since 1982, and those bad things that did happen were transitory.”

If important financial institutions failed, market participants and lawmakers alike felt that market forces could restore order on their own, with only minimal government aid.

Maybe they were wrong.

It isn’t just that they were wrong. This isn’t a case of bad judgment. This is a case of deliberate theft where these large financial institutions effectively socialized their risks while privatizing their profits, as many commentators have noted, among them Professor Nouriel Roubini in his recent blog post. Roubini is referenced in the Lynch article:

Former White House economist Nouriel Roubini, who forecast the current financial storm two years ago, has a harsher verdict. He says the USA is turning into “the United Socialist State Republic of America.”

Those may seem like harsh words to use on alleged “conservative” politicians. However, as I’ve noted in a previous blog post, there is actually very little overall difference between communism and fascism, so it isn’t surprising that a fascist Republican Party would act to socialize those business entities they feel they need to preserve in order to continue ruling the nation.
Continue reading ‘Welcome to the Fascist States of America!’ »

Then I’ll get on my knees and pray
We don’t get fooled again
Don’t get fooled again
…

Meet the new boss
Same as the old boss
– Won’t Get Fooled Again by The Who

One of my favorite quotes of all time is by George Santayana (from The Life of Reason [1905 1906], Volume I, Reason in Common Sense, Chapter 12):

Progress, far from consisting in change, depends on retentiveness. . . . Those who cannot remember the past are condemned to repeat it.

Ronald Reagan came to power in 1981, and a large part of what he pledged to accomplish was to “get government off our backs” by deregulating various industries. One of the deregulated industries was the Savings and Loan industry which, I’m afraid, you need to be fairly old to understand how critical that industry used to be to the American economy. But in its zeal to eliminate government regulations that prevented businesses from seeking profits wherever they could be found, the Reagan administration convinced a Democratic Congress to vote away the governmental controls which ensured that industry remained healthy. However, they did not vote away, but actually increased, the guarantee of health provided by the US taxpayer through the Federal Savings and Loan Insurance Corporation (FSLIC). This was, of course, a recipe for disaster as the greedy owners and managers of savings and loan corporations sought vast personal wealth for themselves without one thought for the safety of the federally-insured funds they were using to create that wealth. This led to the Savings and Loan Crisis (or S&L Crisis) of the late 1980s, which was the precursor to the current subprime mortgage crisis. Apparently, we never did really learn our lessons from the S&L Crisis so I’m going to begin with a discussion of what went on with that mess.
Continue reading ‘We’re Getting Fooled Again!’ »

I hate to harp on the housing crisis but several new articles came out today and if you didn’t know what the underlying story was you might tend to believe that everything was well here in America. The housing market will not be cured for many months, and perhaps years to come. However, that does not mean that certain local markets might not experience a short-term boom on occasion. If you are “flipping houses,” there may yet be some room to maneuver if you are in the right market. But sooner or later, if you are not careful, you will get caught holding the bag and one bad deal can destroy all of your profits.
Continue reading ‘Denial Is Not A River’ »

Back on May 6 (Don’t Get Your Bubble Burst!) and again on May 16 (Housing: Whistling Through The Graveyard) I wrote about the ongoing collapse of the housing market in the United States. On Tuesday, June 19, USA Today wrote a length piece which verified what I had said earlier: the optimistic statements were wrong and things were settling in for a long decline (Subprime storm winds will keep blowing). The scope of the problem is clear from that article:

Home foreclosures in Minneapolis doubled in 2006 and are on pace to double again this year.

…

The Mortgage Bankers Association predicts that adjustable-rate subprime foreclosures, already at a record, will rise into 2008, …

If I can give any prospective homeowner a word (or two) of advice, it is this: be conservative!
Continue reading ‘Housing Nightmare Settles In’ »

The one thing which is most broken here in the United States is the health care system. I believe that the reason it is broken is rooted in the economics of health care. When it comes to individual doctors treating individual patients, I believe that the free market economy, as ruled by the law of supply and demand, ought to produce a good outcome for everybody. However, for almost a century now, there has not been a free market in health care.

If we look back a century and a half or more in America, all it took to become a doctor was enough learning from books to absorb the concepts of how the human body worked and what could be done (based upon what was known at the time) to repair whatever was deemed to be wrong. Many of my ancestral cousins in the old south were deemed to be “doctors” because they had enough learning from books to be able to treat slaves and assist mothers to give birth to babies. Of course, so little was known about “proper health care” in that day and age, that the concept of medical malpractice rarely entered the picture. Even today, it is difficult to find one “expert witness” doctor who will tell a jury that what another doctor did was absolutely wrong and caused injury to the plaintiff. In the distant past, juries were supposed to use common sense in deciding cases, and “expert witness” testimony was rarely used.

But my real point here is that the law of supply and demand is broken now when it comes to health care. All of the changes in how medicine is practiced have led to a situation where there isn’t any real free market in health care, and thus it is easy to understand why costs are out of control.
Continue reading ‘Economical Health’ »

Before World War II (1939-1940), about 31% of all jobs were manufacturing jobs. Recently (March, 2007), manufacturing jobs represented only about 10.2% of all jobs. (All numbers quoted in this report are either extracted from the Bureau of Labor Statistics web site or are computed directly from those numbers.) As recently as 1956, we still had 30% of the workforce employed in manufacturing, which was about 15.9 million jobs. In terms of absolute numbers of jobs, the peak was reached in 1979, with about 19.4 million manufacturing jobs. Ever since then, the number of manufacturing jobs has been declining on an absolute basis, and it has been declining even faster in terms of a percentage of the total workforce. We are no longer a nation of factories that manufacture things.
Continue reading ‘Losing Our Factories’ »

The Bureau of Labor Statistics (BLS) seemingly makes it hard to extract some facts about the workforce. I won’t dig deep enough to even begin to conclude that it is a deliberate attempt to hide some inconvenient truth. But I will note that the figures normally presented for women in the workforce seem to be almost deliberately misleading of the truth.

A typical statistic asserts that 76.1% of men over the age of 20 participate in the labor force while only 59.5% of women over the age of 20 participate. From these statistics you might conclude that there are still a lot of “stay-at-home moms” out there who are staying home with the kids and not participating in the workforce. Nothing could be further from the truth.
Continue reading ‘Most Moms Work!’ »

The most powerful instrument in Judeo-Christian theology is the obligation to tithe (the very word “tithe” is derived from the old-English word for “tenth,” so “tithing” is to give one-tenth of your income or estate either as a tax or for religious works, depending on usage). The concept is extremely ancient, tracing back to at least Babylonian times, roughly 4,000 years ago, and probably arises further back in time than that. Religious groups which adhere to a strict concept of tithing tend to survive and grow strong while those which do not will tend to perish over time for lack of funds to keep things going.
Continue reading ‘The Power Of Tithing’ »

It was announced recently that the first quarter of 2007 experienced a further decline in year-over-year housing prices. This was blamed on an unexpectedly-large decline in the month of March. Well now, why could that be? Could it be the housing bubble bursting?

Of course, the announcement was inflated by much optimism in that the quarterly number was less than the reduction in the previous quarter, so the announcement argues that the decline is bottoming-out and recovery (higher prices) should occur in the second half of 2007. Buried deep in the details of the underlying article was the statement that the effects of the collapse of the sub-prime mortgage market were yet to be fully factored into the market, and if that kept buyers away, then further declines might occur. Oh, really? Well, then, I predict further declines!
Continue reading ‘Housing: Whistling Through The Graveyard’ »