23 June 2009

Doing the right thing

The president was and is right on point today with his position on Iran. As horrific a situation is going on there, we cannot just jump into that conflict because that is an internal affair. So what does the desperate right want him to do? He is not being tough enough. Huh?

So he is supposed to ratchet up rhetoric to incite what? Our faux war party that is the republican part would just love that. You have to be very wise in leadership and if he starts waging verbal tirades against Iran then we will never get anywhere. Can you imagine if the President starts spewing Republican rhetoric and cannot back it up, which he could not because of economic reasons, thanks to the republicans, what kind of light that would put on the U.S.? That is why they are the party on the out.

Ultimately it will be up to the Iranians to determine the outcome and direction of their country. And what ever that government determines, will be a reflection on them and no one else. It is like destiny is in their hand. This is their opportunity to step up to the plate and do the right thing and treat their citizens fairly and allow them to express their grievances peacefully and make some type of restorative gesture so the people of Iran can have a sense that the government does pay attention to their concerns, men and women alike. And we should rather they can take those steps on their own without external interventions. The Iranian government should realize, the way they handle this situation will determine how they are treated in the international arena. This is what the world is watching out for. Not only is this a time of change for the people in Iran, this also gives the Iranian government the opportunity to change as well

24 April 2009

It’s not about the Banks

The banks are not going to lend. Who can they lend to? Frivolous lending is how we got into this in the first place. But as the saying goes, the way you start a thing is the way you will finish it. So at this point, I believe if the leader in this country really want to fix what is going on is to go straight to the tax payer and give them back their money, the tax payer’s dollars, so they can put it back into circulation to get the economy flowing.

I don’t know about anyone else, but how does this sound: the tax payer’s dollars are given to the banks and they lend that money, the tax payer’s money, back to the tax payer with interest. And the banks then make a profit off of the tax payer’s hard earned money while you the tax payer struggle to pay back the money you gave to the bank in the first place with the meager wage you are paid. Think about it.

It is so amazing how you hear these economic advisers and pundits go on these TV shows go on and on about “the tax payer’s dollar” and being accountable for “the tax payer’s dollar”. Cut the bull. What does it look like for the tax payer to borrow his own hard earned money which a percentage goes toward paying taxes,( and I do not mind paying taxes to help shore up our infrastructure, help the elderly, disabled, etc., etc.) and then the government takes that hard earned tax dollar and use it for purposes not intended, and that is give it to the banks.

The banks, if the government has it way, would lend you your hard earned tax dollars, with interest mind you, and they make a profit while you are struggling to pay back the loan and are left holding the bag. But the banks are still not lending because they are trying to cover themselves at the expense of the tax payer. They are using the tax payers money to cover their obligations for those credit default swaps.

I refuse to borrow because it would only be the banks making a profit and they are making their money the easy way they are not really working for it. They should earn profits from the tax payer instead of just getting free tax payer money. Tax payer dollars should go back to the source, the tax payer so the money can be spent at some local or national businesses. As a result of this spending, commerce would increase and business can hire more people. And in turn those new hires earn money and that money is spent at local and national businesses and so on and so forth. Those businesses in turn can take their earnings and make deposits giving banks the cash capital they need to lend out or do whatever else they need to do. The banks should not be getting fresh batches of printed money.

The banks would have to experience some pain because in the meantime, the banks would probably have to wait a period of time until the economic wheels start rolling again to see their coffers increase. During that waiting period some banks my fail others may not but I would suppose that would be the natural order of things. That would be the real stress test, the survival of the fitness test. It is not a stress test going through the banks books and seeing how sound they are according to the assets or how well capitalized they are. The banks already know how they stand and do not really need anyone to tell them. Their soundness should be determined by the number of assets that can go from being bad to being a good. And the way an asset can go from being bad to being good is to change the whole economic dynamic.

Give the tax payer their own money so the consumption can pick up. The tax payer can turn the bad assets bank into good assets because they would have the money available to make payments on outstanding debts and bring them current so the assets can be brought back into good standing. And as a side note, a decent wage would not hurt but would be very helpful in making sure those assets are good and valuable.

This one track mind of thinking that lending is the key to get the economy going is old and washed up as well as mind boggling seeing that is how we got to where we are now. And besides, the banks are not going to lend for two reasons in my opinion. One, they are trying to shore themselves up and two, the lack of credit worthiness on the part of the consumer. Hmmm, now I wonder how that happened.

This is why the economic engine has stopped and it will not start without the consumer doing their 70% part of the macro equation. And let’s face it, the honchos on Wall Street made their millions the easy way. It was an easy flow of money into their hands and now it is the tax payer’s turn. Joe and Jane Consumer want the same easy money Mr. Bill Wallstreet was able to get, and if easy money started at the top, it will fall to the bottom. It is time for the wall street people to sit on the side lines and wait for Joe and Jane Consumer to enter the market and spend so businesses can earn solid, consistent profits from the bottom up, instead of printing fresh batches of money which is degrading the value of the dollar and creating potential future economic problems as well as National Security problems.

21 November 2008

I found the clip of the debate between Pat Buchanan and Steven Pearlstein. Check it out...

Defying Logic in Action

I was just looking at Morning Joe and there was a discussion between Pat Buchanan and Steven Pearlstein of the wall street journal and Mr. Buchanan was asking questions on the line of does it make sense to bail out the banks and not the automakers and the discussion went to another level of the reality light getting turned on. Mr. Buchanan started talking about how all the manufacturing jobs are going over seas and the auto workers who are out of a job are now working for Wal-Mart and not making nearly as much as they were and Mr. Pearlstein came back with the lamest response about how services going to be the job base and auto workers are considered unskilled workers blah, blah, blah and he never answered the underlying question which concerns income that is lost. He had absolutely no coherent logical response nothing but that grin on his face because he was being asked the questions that they (those like Mr. Pearlstein) don't want to face and answer. I hope a clip of that comes available today because I will surely post it. It was a classic light bulb comes on moment and reality kicking in.

19 November 2008

Defying Logic

It has been one year and few months since the credit crisis started and we find ourselves in the same economic conundrum with no sight of light at the end of the tunnel and none yet to be found. And I have said it before and I will say it again until something is done at the consumer level we will continue to wonder in the wilderness of this economic no man’s land. I cannot see the logic of giving the $700 billion Wall Street bailout to banks who are still not lending to anyone. The reason they are not lending is because when they make the loan they may have to write down the value because of the prospect the loan will not get paid back.

So if you know you are skeptical to lend because the loan may default due to the inability of the debtor to pay back then what is the logical conclusion in these economic times? Their conclusion is not to lend because of fear of the loan defaulting. But when the banks do not lend they will not make any money and thus you have what happened today the stock market takes a dive with the financial sector leading the way (notwithstanding other factors that contribute to the nose dive).

This is why I continue to say that everything that is being done, i.e. aiding the financial institutions, defies logic. And every day they continue to defy logic the market and our economy will continue to be subject to deep sea diving. Think about it, simple or not, the banks should be taken out of the equation at this point. And if our elected officials are serious about rectifying the situation they need to start thinking outside of the box and outside of the normal monetary flow because after all we are living in abnormal times. Stop defying logic and get to the root of solving the problem which starts with the consumer and not the banks. And once this is rectified the economic wheels should begin to turn.

Lastly, job creation is good but what good is a job if the wage is lacking? And I wonder how many jobs can actually be created? Have we not just about exhausted all possible job generating industries? I keep hearing infrastructure but is there truly enough new infrastructure projects to keep us from going over the economic edge? And can these jobs be created expeditiously and in a timely fashion to help kick start the economy before a collapse? Just some logical questions I think are logically in order to be asked

02 November 2008

You're just 6 kilometres away from the Centre of Europe!

Open letter to any senator on the financial services committee

Dear Senator:

Let me first thank you for allowing the privilege and opportunity to write to you to express my concern on the pressing issue of the day that is the economy.

Since this historic economic event started in August 2007 when BNP Paribas froze one of its money funds to prevent investors from making a run for their money I have just been amazed at the antidotes that have been conjured up to fix the gaping bottomless hole that has been left by this financial crisis and are threatening the country and our standing in the world.

I am sure you are already aware that continually printing more money to bail out this one and to bail out that one (not John McCain’s that one) is making the dollar more worthless everyday because at the end of the day when it is all said and done that is all that is happening is the printing of money to help rescue banks and that will eventually lead to a devalued currency. And printing more money for business and corporations appears to be like putting money in a bag with holes.

This is not a letter to criticize the efforts but a letter of concern and to say there is I believe an alternative. Looking at it from a macro economic perspective, two thirds of the economic make up of the country is consumption via the consumer, and it is that two thirds that drive the economy. The one third that the Treasury and the Federal Reserve feel is so necessary to rescue depend on the two thirds as we have noted the effect the inability of the consumer to keep up with mortgage payments is having on the banks.

Shoring up the base, the two thirds, would go a lot further than shoring up the one third that threw out the debt ratio rule when lending money for home mortgages. I propose this as an antidote: The portion of the 700 billion that has not been used plus some additional monies be injected like a shot in the arm to businesses directly for payroll purposes and mandate an increase in the minimum wage to at least 10.00/hr, since the U.S. Government would be the guarantor.

Additionally if the banks must have a rescue at the taxpayer’s expense place a deposit of equal size into the account of every American citizen that has a checking account or savings account and pays income taxes, mandate a portion of their deposit be held in reserve at their bank for a period of time, like a 401k, which at maturity they can earn some type of interest which could be very helpful in encouraging the citizenry to save especially if they know they can earn a little bit of extra money by keeping it in savings. Offer incentives maybe such as the longer you keep your money in the bank the more interest you can earn. And let the portion of the amount that is held in reserve be the same amount say, that would prevent a bank from insolvency. In other words, if a bank needs 10,000 dollars to prevent insolvency, and the bank has 2 depositors, then inject say, 12,000 dollars or two deposits 6,000 dollars each for the depositors of that bank, hold 5,000 dollars in reserves and pay 3% interest on the 5,000 dollars at 1 year maturity.

By doing this, the banks could have money in reserves and sort of like start from the beginning without any market disruptions. Also by raising the minimum wage instead of a one shot stimulus check you have a more long term effect and it avoids the socialism stigma, because you have to work for your wage.

Lastly and not least, there should be an across the board interest rate cut to homeowners. Maybe take all the interest rate ranges that are currently on these mortgages and average them out and let that be the rate the homeowner pays for his mortgage or add the highest rate and the lowest rate and let the resulting average be the across the board rate that every homeowner pays for their mortgage. The banks are no longer in the driver seat on this so this can serve as punitive

Any mortgage that is in arrears, mandate across the board that those mortgages be brought current without penalty with a quick fix of adding the delinquent payments to the end of the term of the loan. (Which reminds me when my father had a mortgage on his home with First Union bank every now and then throughout the year they would send him a letter saying you deserve a break you can waive paying your mortgage this month to pay another bill…hint). The benefit for the banks is they don’t skip a beat in their transactions, they are still making money and receiving money on a monthly basis and eventually they can go back to adjusting interest rates on their mortgage products to their liking that would benefit their bottom line and investors can go back to being happy and fighting with each other on Wall Street and CNBC

I know what I am suggesting may be over simplifying the matter but it just makes sense to shore up the economy by helping the two thirds of the macro economic equation that actually drive the economy. And as an American citizen I believe in this country and every thing this country was founded on. I put my country first by taking the time to write down my ideas about what I think would help because I do not want to see America loose her standing in the world due to a bad economy and due to poor diplomacy. Allies came to our aid on 9-11-2001. This time around they might not be so merciful. From the top down and from the bottom up we need to all do what we can to help each other on the inside of the country so we can be strong to the outside world.