Tuesday, June 30, 2009
Goldman Sachs Manipulates Markets
Rolling Stone has a great, great article about Goldman Sachs and their involvement, creation and manipulation of markets.
Saturday, June 20, 2009
Barrack Obama
Conservatives will tell you what they think.
Liberals will tell you what they think you want to hear.
Democrats accused Ronald Reagan of being simply a teflon president, who was able to deliver a line. They used to discount him for being a "B movie actor" and a "teflon" president.
Democrats accused George W. Bush of being a puppet of Dick Cheney. They thought he was a simpleton who had made it to Yale and Harvard on his Dad's coattails, and who couldn't string two syllables together without tying the string to his tongue. They criticized him for not being open to criticism, that he wouldn't admit when he was wrong. That he was controlled by neo-Cons who thought the the US could spread freedom around the world with military power.
But the people of America knew the heart and sole of these two men. They knew their ideology, their philosophy and they knew the people that surrounded them because they have been in government for generations. They were to be trusted.
While the Democrats made these claims about Republicans, they find themselves with a real empty suit of their own. The vacuous philosophical and political ideology of Barrack H. Obama has never been seen before in America. And we don't know about the people around them either because we never know what a Democrat thinks because they never tell you what they really believe. All politicians, but in particular, Democrat politicians, only tell you what they think you want to hear.
The people around Barrack Obama are changing America. They are doing it at breakneck speed. Barrack Obama is just going along for the ride but we know nothing about the people who are in charge of the changes. Just look at the major changes they are rushing through Congress in the next month.
Major Health Care Nationalization. They are not simply adding a government program to address health care for uninsured. They are changing the entire system into a single payer system. They are building a structure to destroy and rebuild an entire industry. By July? I might suggest this is a little bit of a stretch, considering we are spending $2.5 trillion more than we are taking in this year.
Major Global Climate Change Legislation. Having a carbon securitization system started from scratch in the entire world? Has anyone learned anything from the mortgage securitization system that just about collapsed the entire world economy? And to complete it by the first week of July? Really?
Major Banking Regulation Reform. I haven't heard a definitive report on the causes of the economic collapse. Last I heard Barney Frank and Chris Dodd haven't accepted one bit of responsibility. Before any reform happens, we should know who is to blame in government and industry and make sure they are in jail, not writing major banking reform.
Scary?
No, just change we can believe in...and know nothing about.
Where does the future lead?
If knowledge is power, the lack of knowledge must be helplessness. Helplessness and being a victim are synonyms offered by radical, liberal, and socialist ideology.
I have shied away from partisanship because I have generally found a vicious cycle of vote buying from politicians of both parties. But the recent actions of the federal government under Barrack Obama has accelerated the growth of government to a point which I simply do not recognize the country in which I live.
But as bad as it seems, I am more certain than ever that this rapid growth of government will change people in very important ways. We all will understand conservative economics before this recession/depression is over. We are watching it every day.
State after state are cutting back the size of their government to control spending because they have spent more than they should have spent. More importantly, state after state is considering raising taxes on the wealthy in order to pay for previously bloated government spending.
My prediction is very simple. People are going to learn that they have to live within their means, save for a rainy day, and rely on their own efforts instead of some government program coming from Washington.
Oh, we may try to experiment with larger government. We may even try to create nationalized health care. We can try to punish business and enterprise to be more fair. But as we watch capital, innovation and productivity move overseas, we will have example after example of the effects of excessive taxation and intrusive government.
But the future is about knowledge. And as we discover the important principles of conservative economic principles, we will soon have the collective knowledge to begin turning back the feel good liberal policies that are simply unsustainable.
Sunday, June 7, 2009
Garn-St. Germain Depository Institutions Act
Paul Krugman, an avowed liberal economist with the New York Times, writes a definitive piece about the Garn-St. Germain Depository Institutions Act as the cause of the todays economic crisis. He blames Reagan deregulation for the demise of lending standards and points to events set in place in 1982 for the savings and loan crisis in 1988 and the housing bubble today.
But as I have learned over the last several months, nothing is ever simple, rarely definitive, and one has to look closely for an agenda in every written word. Krugman makes a simple correlation to a policy pushed by Reagan (with overwhelming bipartisan support) to 1. address different lending practices of savings and loans and traditional banks, 2. create new accounting standards for capital investment in savings and loans, and 3. to address failing savings and loans due to extreme volatility and transitions from high interest rates to lower interest rates.
One of the minor changes in a complex law allowed savings and loans to alter the debt to income ratio lending standards, a move designed to free up and encourage capital investment through tinkering with the availability of the money supply.
Krugman boldly and singularly blames this last effort for causing the 1988 savings and loan bailout (Reagan's fault) and the housing bubble last year.
Reagan's policy may have some relevance to today's economic crisis, but Krugman's tome is a purely partisan attack, for several reasons. First, an obvious and very relevant cause of the real estate failure in the late eighties was due to a Democrat effort to close loopholes for real estate investments in the 1986 tax bill. For several years, there was an incentive to invest in real estate written in the tax code. One can debate the validity of this tax incentive, but the removal of the tax incentives immediately dried up investments in real estate and billions of dollars of investment became worthless. This was a large contributing factor to the failure of savings and loans, which was completely ignored in Krugman's definitive case against Reagan.
You can read a fair analysis of the savings and loan crisis here.
More interesting, and pertinent to todays discussion are the following topics.
First, many of our legislators today failed to learn from the savings and loan crisis. If Krugman is correct that lowered lending standards caused the savings and loan crisis, you would think Washington politicians would have been opposed and appalled at the creation of artificially low interest rates (Federal Reserve), lowered lending standards to encourage home ownership (President Clinton, President Bush, Congress, Fannie Mae, and Freddie Mac), and the securitization of debt (Fannie Mae, Freddie Mac and Wall Street).
Second, you would think voters would start to second guess the economic estimates from our politicians as to the severity of our economic crisis. If you read the fair analysis of the crisis, you will be intrigued by the terrible estimates of the severity of the problem. Initial estimates of the savings and loan crisis began at $30-50 billion. In the end, the cost of the crisis approached $200 billion.
The real lesson is this. Government intervention always has unintended consequences and government predictions are always wrong. Today, the Obama Administration is predicting 3.5% annual growth for this year. My previous posts have clearly discredited that number. Just 3 months ago, White House projections said the worst case scenario for unemployment was 9.5% (the basis for the banking stress tests). Today, we are already at that number. Finally, losses due to the economic crisis are estimated to be $1.2 trillion. If history is our guide, each of these estimates will be significantly low. My previous posts indicate unemployment may reach 12-15%, and total projected losses due to the real estate bubble will be around $3 trillion.
For Krugman to offer a fair analysis, he should admit the economic problems can not be attributed to any political party, but to the entire Washington political culture. As long as politicians and the Federal Reserve believe the economy can be managed through monetary and tax policy, there will be uncontrolled bubbles because there is never political will to put the brakes on credit, and a recognition that government can not change common sense economic principles because the laws of unintended consequences are always present.
The actual reason for the economic bubble is a Keynesian theory that government can manage an economy--the very heart of Krugmans liberal ideology.
May Ronald Reagan rest in peace.
Update. It looks like I am not the only one pointing out Krugman's bias. Here is a link to an MSNBC economic report that has a different take on the same Krugman column.
But as I have learned over the last several months, nothing is ever simple, rarely definitive, and one has to look closely for an agenda in every written word. Krugman makes a simple correlation to a policy pushed by Reagan (with overwhelming bipartisan support) to 1. address different lending practices of savings and loans and traditional banks, 2. create new accounting standards for capital investment in savings and loans, and 3. to address failing savings and loans due to extreme volatility and transitions from high interest rates to lower interest rates.
One of the minor changes in a complex law allowed savings and loans to alter the debt to income ratio lending standards, a move designed to free up and encourage capital investment through tinkering with the availability of the money supply.
Krugman boldly and singularly blames this last effort for causing the 1988 savings and loan bailout (Reagan's fault) and the housing bubble last year.
Reagan's policy may have some relevance to today's economic crisis, but Krugman's tome is a purely partisan attack, for several reasons. First, an obvious and very relevant cause of the real estate failure in the late eighties was due to a Democrat effort to close loopholes for real estate investments in the 1986 tax bill. For several years, there was an incentive to invest in real estate written in the tax code. One can debate the validity of this tax incentive, but the removal of the tax incentives immediately dried up investments in real estate and billions of dollars of investment became worthless. This was a large contributing factor to the failure of savings and loans, which was completely ignored in Krugman's definitive case against Reagan.
You can read a fair analysis of the savings and loan crisis here.
More interesting, and pertinent to todays discussion are the following topics.
First, many of our legislators today failed to learn from the savings and loan crisis. If Krugman is correct that lowered lending standards caused the savings and loan crisis, you would think Washington politicians would have been opposed and appalled at the creation of artificially low interest rates (Federal Reserve), lowered lending standards to encourage home ownership (President Clinton, President Bush, Congress, Fannie Mae, and Freddie Mac), and the securitization of debt (Fannie Mae, Freddie Mac and Wall Street).
Second, you would think voters would start to second guess the economic estimates from our politicians as to the severity of our economic crisis. If you read the fair analysis of the crisis, you will be intrigued by the terrible estimates of the severity of the problem. Initial estimates of the savings and loan crisis began at $30-50 billion. In the end, the cost of the crisis approached $200 billion.
The real lesson is this. Government intervention always has unintended consequences and government predictions are always wrong. Today, the Obama Administration is predicting 3.5% annual growth for this year. My previous posts have clearly discredited that number. Just 3 months ago, White House projections said the worst case scenario for unemployment was 9.5% (the basis for the banking stress tests). Today, we are already at that number. Finally, losses due to the economic crisis are estimated to be $1.2 trillion. If history is our guide, each of these estimates will be significantly low. My previous posts indicate unemployment may reach 12-15%, and total projected losses due to the real estate bubble will be around $3 trillion.
For Krugman to offer a fair analysis, he should admit the economic problems can not be attributed to any political party, but to the entire Washington political culture. As long as politicians and the Federal Reserve believe the economy can be managed through monetary and tax policy, there will be uncontrolled bubbles because there is never political will to put the brakes on credit, and a recognition that government can not change common sense economic principles because the laws of unintended consequences are always present.
The actual reason for the economic bubble is a Keynesian theory that government can manage an economy--the very heart of Krugmans liberal ideology.
May Ronald Reagan rest in peace.
Update. It looks like I am not the only one pointing out Krugman's bias. Here is a link to an MSNBC economic report that has a different take on the same Krugman column.
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