Many years ago I read an article that tried to explain why people think the way they do. Basically the author said that early in life we all develop a view of how the world looks and we keep that with us. As we encounter new information we adapt that to fit our view of the world. It is easier to see this concept play out in others and difficult to see it in ourselves. Politics is an excellent place to observe this behavior. A group of politicians get together to work on a problem but they can’t get the other side to see their point of view. Each side has the same set of facts to work with but each side sees things through their eyes or as Shakespeare said, “beauty is in the eye of the beholder”.
If I am a liberal I see myself as the kind of person who is concerned about others and my job is taking care of those who are less fortunate. The idea of reducing benefits to the elderly will not fit into my view of who I am. It involves not just adjusting some government program but it means adjusting who I am. I see it as a threat to my basic principles.
If I am a conservative I believe that people are capable of caring for themselves. I want to devise a system that allows people to be free to carry out their life plan without interference. I want the fewest restrictions placed on their activities and to control their behavior with regulations and taxes is contrary to my personal beliefs.
In political terms we say a person who sticks by their personal beliefs is an ideologist and one who is willing to change is a pragmatist. I have never been in politics but I have been in business and the way it works there can be seen in the decision making process. If I am faced with an important decision, I gather all available information, discuss it with co-workers and decide on a course of action. However if I am later given new information I will re-evaluate and if necessary change direction. If my core principals were challenged by new information I would have to re-evaluate my core positions.
Sunday, November 27, 2011
Tax the rich
There is an old adage that says, don’t tax you and don’t tax me but tax the man behind the tree. In this case it is the millionaires. I am all for taxing rich people but it should be a means to help out the economy and I am not so sure that is the thing to do, at least at this time.
The top 1% earn 19% of the income and pay 37% of the income tax. The bottom 50% earn 13% of the income and pay 3% of the income tax. Since total income tax collect was $900 billion the top 1% paid $330 billion. It is suggested that we institute a millionaires surtax of 5% which would bring in an extra $16 billion. This would reduce the current deficit from 1400 billion to 1384 billion so it is not going to do much toward deficit reduction. What it would mean is another 16 billion to give to states to slow down the layoffs of government employees.
If the government fails to renew the Bush tax cuts at the end of 2012, that will bring in an extra 400 billion and that indeed would make a dent in the deficit, assuming it is used to offset the deficit, which is in itself a very dubious assumption. The reason it would bring in so much money is that it hits the middle class taxpayers as well as the rich. If you fail to renew for those making more than $250,000 that will bring in 130 billion which is significant compared to the 5% surtax. That would mean that the top 1% would pay 50% of the income tax. I have no idea how much is too much but I get the feeling that would be close.
The top 1% earn 19% of the income and pay 37% of the income tax. The bottom 50% earn 13% of the income and pay 3% of the income tax. Since total income tax collect was $900 billion the top 1% paid $330 billion. It is suggested that we institute a millionaires surtax of 5% which would bring in an extra $16 billion. This would reduce the current deficit from 1400 billion to 1384 billion so it is not going to do much toward deficit reduction. What it would mean is another 16 billion to give to states to slow down the layoffs of government employees.
If the government fails to renew the Bush tax cuts at the end of 2012, that will bring in an extra 400 billion and that indeed would make a dent in the deficit, assuming it is used to offset the deficit, which is in itself a very dubious assumption. The reason it would bring in so much money is that it hits the middle class taxpayers as well as the rich. If you fail to renew for those making more than $250,000 that will bring in 130 billion which is significant compared to the 5% surtax. That would mean that the top 1% would pay 50% of the income tax. I have no idea how much is too much but I get the feeling that would be close.
Social security
Social security is and always has been slanted toward the poor. Benefits are based on life time earnings. If I earned an average of $12,000 per year my benefit would be $500 per month and if you earned an average of $50,000 per year your benefit would be $1,500 per month. In other words you paid in 4 times more than I did but your benefit is only 3 times more. I point this out because one of the suggested ways to strengthen the program is called means testing which means that your benefit will be adjusted based on your other income. Right now there are more than 4 million windows receiving less than $800 per month and on the other end of the scale there are 50,000 with incomes over one million who receive the maximum benefit of over $2,000.
It has been suggested that social security benefits be phased out for higher income people. For single people with income of $100,000 the benefit would be reduced by 20% for each $10,000 above that so by $150,000 there would be no benefit. For couples it would be phased out between $150,000 and $200,000.
Since most of the 750 billion paid out by social security goes to those in the under $100,000 group the annual savings is estimated to be one percent or about 7 billion.
While it is popular to say that Warren Buffett doesn’t need his social security taking it away doesn’t help that much.
Currently we collect payroll tax on the first $106,000 of earnings. If we collected on all earnings but froze the benefits at the current maximums this would go a long way to solving the problem. If we add to that, increasing the retirement age gradually to age 72 this would solve the problem completely. Realize that you can still retire at age 62 but at a lesser amount.
That remark about age 62 benefits needs further explanation. I spent 25 years as a financial planner specializing in retirement planning which means I spent a lot of time explaining social security benefits to people. I can tell you that most people have very little understanding of this program including benefits. Prior to 1983 the full retirement age was 65 and you could retire early at age 62 with 80% of your full benefit. Today the full retirement age is 67 and you can retire at 62 with 75% of your full benefit. This change is not causing much of a stir since most people don’t know that their benefit should be. For example if your full retirement benefit is $2,000 per month your age 62 benefit has decreased from $1,600 to $1,500. If the retirement age is raised gradually to 72 the age 62 benefit will decrease to $1,200.
It has been suggested that social security benefits be phased out for higher income people. For single people with income of $100,000 the benefit would be reduced by 20% for each $10,000 above that so by $150,000 there would be no benefit. For couples it would be phased out between $150,000 and $200,000.
Since most of the 750 billion paid out by social security goes to those in the under $100,000 group the annual savings is estimated to be one percent or about 7 billion.
While it is popular to say that Warren Buffett doesn’t need his social security taking it away doesn’t help that much.
Currently we collect payroll tax on the first $106,000 of earnings. If we collected on all earnings but froze the benefits at the current maximums this would go a long way to solving the problem. If we add to that, increasing the retirement age gradually to age 72 this would solve the problem completely. Realize that you can still retire at age 62 but at a lesser amount.
That remark about age 62 benefits needs further explanation. I spent 25 years as a financial planner specializing in retirement planning which means I spent a lot of time explaining social security benefits to people. I can tell you that most people have very little understanding of this program including benefits. Prior to 1983 the full retirement age was 65 and you could retire early at age 62 with 80% of your full benefit. Today the full retirement age is 67 and you can retire at 62 with 75% of your full benefit. This change is not causing much of a stir since most people don’t know that their benefit should be. For example if your full retirement benefit is $2,000 per month your age 62 benefit has decreased from $1,600 to $1,500. If the retirement age is raised gradually to 72 the age 62 benefit will decrease to $1,200.
Bank question
The Troubled Asset Relief Program (TARP) was designed to prevent bank failures during the mortgage crisis of late 2008. The money was used to purchase toxic assets, mostly underperforming mortgages. The experts say this saved the financial industry from collapse and I do not have the knowledge to challenge that. Since TARP was instituted the banks have repaid most of the money. They did this when Quantitative Easy came about. Under this program the government offered money to the banks at very low rates and the banks used the money to purchase government bonds that paid 3% thus making substantial profits. The government used the money to finance the deficit spending thus driving our debt to 15 trillion. The government then complained that the banks did not loan out the money to consumers but the government could have easily forced the banks to do this by charging a penalty on any money the banks did not loan but instead they paid interest on the money.
The government needed that money to finance itself and did so at the expense of consumer loans. This is the classic example of government competing with the private sector. When the president complains about the banks not making consumer loans he knows full well why they are not. They can earn 3% risk free instead of making high risk consumer loans
Here is one example and there are many more showing how the banks used the QE money.
During one three-month period in 2009, Bank of America borrowed more than $48 billion at rates ranging from 0.25 to 0.5 percent. Meanwhile, the largest U.S. lender tripled its holdings of Treasuries and other taxpayer-backed debt to about $15 billion -- securities that yielded 3.5 percent.
I am quite sure that the people protesting throughout the country have very little understanding of these banking maneuvers but they know in their hearts that something is not right or as Shakespeare would say, they smell a rat.
The government needed that money to finance itself and did so at the expense of consumer loans. This is the classic example of government competing with the private sector. When the president complains about the banks not making consumer loans he knows full well why they are not. They can earn 3% risk free instead of making high risk consumer loans
Here is one example and there are many more showing how the banks used the QE money.
During one three-month period in 2009, Bank of America borrowed more than $48 billion at rates ranging from 0.25 to 0.5 percent. Meanwhile, the largest U.S. lender tripled its holdings of Treasuries and other taxpayer-backed debt to about $15 billion -- securities that yielded 3.5 percent.
I am quite sure that the people protesting throughout the country have very little understanding of these banking maneuvers but they know in their hearts that something is not right or as Shakespeare would say, they smell a rat.
Public unions
It is difficult to find union membership numbers in individual states, counties and cities but throughout the country public union membership is 36%. In Hennipen County which includes the city of Minneapolis there were 80 candidates running for 7 county commissioner seats and in primaries eliminated 59 of those leaving three candidate for each of the seven districts. To win one of these the candidate needed about 10,000 votes. There are about 8,000 employees in Hennipen County and according to the national average there would be 2,800 union employees. If they and their spouses and the parents of both all vote, and they do, they can elect the person of their choice.
The can tell that person in advance of the election that they will be elected and then they follow up with their prediction. They can not only vote for this person they can hold coffees in their homes, they can go door to door and they can donate money.
Once they have their candidates elected they now sit down across the table from them and bargain for wages and benefits. On average public union employees have benefits 45% higher than their non-union counterparts.
From 1945 to the present union membership in private companies fell from 45% to 7%. During this time public union membership grew from 2% to 36%. The question is why did this happen. The answer is obvious when you see who pays. In a private union the company pays with company funds which come from profits earned by labor and capital supplied by stockholders. In public unions the money comes from the taxpayers.
Originally public unions were not allowed and public employee wages and benefits were much less than those in private industry. Beginning in the 50’s laws were changed across the country making public unions legal and that is when the benefit structure began to change and now heavily favors public employees.
Like so often happens in our country the pendulum swings and while public employees were underpaid compared to private employees they are now overpaid. This was all well and good until the public sector ran out of money which is where we are today. When the private employees were making substantially more than the public employees they did not get upset when taxes were raised to pay public employees more but when they realized that these public employees were making more than they were they decided enough is enough.
The can tell that person in advance of the election that they will be elected and then they follow up with their prediction. They can not only vote for this person they can hold coffees in their homes, they can go door to door and they can donate money.
Once they have their candidates elected they now sit down across the table from them and bargain for wages and benefits. On average public union employees have benefits 45% higher than their non-union counterparts.
From 1945 to the present union membership in private companies fell from 45% to 7%. During this time public union membership grew from 2% to 36%. The question is why did this happen. The answer is obvious when you see who pays. In a private union the company pays with company funds which come from profits earned by labor and capital supplied by stockholders. In public unions the money comes from the taxpayers.
Originally public unions were not allowed and public employee wages and benefits were much less than those in private industry. Beginning in the 50’s laws were changed across the country making public unions legal and that is when the benefit structure began to change and now heavily favors public employees.
Like so often happens in our country the pendulum swings and while public employees were underpaid compared to private employees they are now overpaid. This was all well and good until the public sector ran out of money which is where we are today. When the private employees were making substantially more than the public employees they did not get upset when taxes were raised to pay public employees more but when they realized that these public employees were making more than they were they decided enough is enough.
Supreme court
All across the news media today it was announced that the Supreme Court has agreed to rule on Obama care but that is misleading. The Court in fact said they would look at four aspects of the law and one of these was the main question concerning the individual mandate. This is the provision supposedly under the Commerce Clause that allows the Court to permit the government to regulate Interstate Commerce. The question is can the government mandate that people purchase a product from a private company. While that issue is getting all the attention another issue may postpone the whole thing until after the next election. That issue has to do with standing. In court parlance standing means does the person bringing the case have the right (standing) to do so. The law states that if a person refuses to purchase health insurance they will be fined and the question is, does the fine represent a penalty or a tax. If the Court decides it is a tax then a person would not have standing until they actually paid the tax which will not take place until after the election.
Recall that when Obama care was passed the administration said the fine for not having insurance was not a tax but a penalty. They had promised not to raise taxes on the poor and middle class. In order to get a delay on determining the constitutionality they might now say it is a tax.
If the court rules it is a tax then they will likely not rule on the rest of the program and ask for the process to start all over when the tax is paid. That will be sometime in 2014. On the other hand of a Republican is elected President and the Republicans get a filibuster proof senate (60 seats) they can just rescind Obama care.
Recall that when Obama care was passed the administration said the fine for not having insurance was not a tax but a penalty. They had promised not to raise taxes on the poor and middle class. In order to get a delay on determining the constitutionality they might now say it is a tax.
If the court rules it is a tax then they will likely not rule on the rest of the program and ask for the process to start all over when the tax is paid. That will be sometime in 2014. On the other hand of a Republican is elected President and the Republicans get a filibuster proof senate (60 seats) they can just rescind Obama care.
Super committee
Over the next two weeks the news will be filled with articles about the super committee. Recall that the super committee is a group of 12 congressmen, six from the senate and six from the house half Republican and half Democrat. Their job is to cut 1.2 trillion from the budget and if they fail to do so there will be automatic cuts across the board, half from defense and half from domestic. What is not reported is that the cuts will not take place until 2013 which means after the next election which means nothing will be done. After the election no matter who is president the whole program will be re-evaluated and most likely dumped. The purpose of this committee was to give the impression that congress was doing something but everyone knows that it was just an excuse to do nothing until after the election.
Friday, November 11, 2011
Grand bargain
As the day of reckoning approaches and some in congress are telling the super committee to go big, to go for the grand bargain, I see new faces on TV. These faces belong to congressmen who are normally not on news shows. I don’t know their names but they all say the same thing. They say we need to put politics aside and put the country first which means we put everything on the table. To Democrats that means entitlements and to the Republicans it means taxes. If a Democrat really meant this he would say, Ok I will agree to fix entitlements and we will work on taxes at some later time or if a Republican said Ok I will agree to increase taxes and we will work on entitlements later then they would be credible. They would be statesmen. One way to overcome this dilemma is to go into a room together and both agree to cut entitlements and to raise taxes and come out and make the announcement. This by the way is what Boehner and Obama could have done months ago and we would be on our way to solving the major economic problems we face
Creation
I never know why certain things catch my attention but today the subject of a candidate’s religious beliefs was in the news because Governor Perry suggested the he believes in the biblical explanation of creation. Well surprise, I have an unusual take on this issue. Some years ago I was very interested in particle physics and one of the basic tenets of that subject is the concept of the observer creates the observed. In essence this means that in the sub atomic world you always find what you are looking for where you look. Experiments show that if you and I are both looking for the same particle, we will both find it at the same time in different places. Don’t be alarmed as there is much about particle physics that is contrary to common sense. A further understanding of this strange happening states that without consciousness there is nothing. It is only when there is a conscience mind that we have the material universe that we know. If I were the last living being in the entire cosmos with a conscience mind and I died the entirety of creation would disappear. Let’s examine the reverse of that. At some point in our past according to the theory of evolution humans evolved from some other species. During the process the human brain grew and especially the frontal lobes where our humanness resides but the evolution of the pelvic area of the female had to evolve at the same time to allow the birth canal to pass this larger head. If that dual development occurred some 10,000 years ago then the entire history of the universe came into existence at that instant, the moment that consciousness was born. I bring this up as a possible explanation of events that would bridge the gap between evolution and creation. I am not a religious person but the bible does show some credibility to this idea.
And the Lord God formed man of the dust of the ground, and breathed into his nostrils the breath of life; and man became a living soul."
The breath of life could well be consciousness
And the Lord God formed man of the dust of the ground, and breathed into his nostrils the breath of life; and man became a living soul."
The breath of life could well be consciousness
God and shame
There are a number of changes that occur in Mid-Life and some are better known than others. One of the lesser known is a man suddenly feeling the need to reconnect with the kind of relationship he had with God when he was younger. It often starts with a vague uneasiness and leads to questioning about his purpose for being here. He begins a journey to find out more about this and generally uses the wrong approach. I would like to use the analogy of a house to illustrate his misguided efforts.
He goes home one day and throws out all of his old furniture, rips up the old carpet and cleans from top to bottom. He paints, adds new floor coverings and furniture. He puts new siding on the house, new roofing shingles, new windows and finishes off with a brand new front door. Then he takes a big breath and stands back to admire all of his efforts and then throwing open the door says, OK God, I’m ready, come on in. And then he waits. Days, weeks, months and finally years pass but nothing happens.
One day while standing at the door his eyes wander across the room to the door leading to the basement and he finds himself drawn by some mysterious force to the door. He opens the door and closing it behind him, he finds himself standing on the landing in the dark. While standing there he comes face to face with his anger. He recalls the many times when things didn’t go his way and he just pushed the anger in and suddenly all of the pent up anger was sucked into the darkness and he felt a sense of relief.
He makes his way down the steps to the basement floor and there in the pitch black he sees his hidden fears and these too are pulled into the darkness.
Next he inches his way across the room to the coalbin and closing the door behind him he stands quietly in the dark and looks into the abyss of his hurts. All of the times that someone said or did something that hurt him but he never said anything. These too eased their way out of his inner soul into the dark room and he felt a tremendous sense of peace.
Then he sees an opening in the floor in the corner and getting down on hands and knees he crawls in and soon he is crawling on his belly down there with the slimy creatures of the dark and looking ahead he sees a rock and written the moss on the rock is the word, shame. He knows that when he turns over the rock he will have to face the shame that is hidden in the deepest recesses of his soul. He turns over the rock and suddenly he is upstairs standing in the front door with the bright sunlight shinning throughout the house.
It is then that he comes to understand that God does not come in through the front door of your ego but rather through the back door of your shame. When you expose your shame to the sunlight, you open the door for God
He goes home one day and throws out all of his old furniture, rips up the old carpet and cleans from top to bottom. He paints, adds new floor coverings and furniture. He puts new siding on the house, new roofing shingles, new windows and finishes off with a brand new front door. Then he takes a big breath and stands back to admire all of his efforts and then throwing open the door says, OK God, I’m ready, come on in. And then he waits. Days, weeks, months and finally years pass but nothing happens.
One day while standing at the door his eyes wander across the room to the door leading to the basement and he finds himself drawn by some mysterious force to the door. He opens the door and closing it behind him, he finds himself standing on the landing in the dark. While standing there he comes face to face with his anger. He recalls the many times when things didn’t go his way and he just pushed the anger in and suddenly all of the pent up anger was sucked into the darkness and he felt a sense of relief.
He makes his way down the steps to the basement floor and there in the pitch black he sees his hidden fears and these too are pulled into the darkness.
Next he inches his way across the room to the coalbin and closing the door behind him he stands quietly in the dark and looks into the abyss of his hurts. All of the times that someone said or did something that hurt him but he never said anything. These too eased their way out of his inner soul into the dark room and he felt a tremendous sense of peace.
Then he sees an opening in the floor in the corner and getting down on hands and knees he crawls in and soon he is crawling on his belly down there with the slimy creatures of the dark and looking ahead he sees a rock and written the moss on the rock is the word, shame. He knows that when he turns over the rock he will have to face the shame that is hidden in the deepest recesses of his soul. He turns over the rock and suddenly he is upstairs standing in the front door with the bright sunlight shinning throughout the house.
It is then that he comes to understand that God does not come in through the front door of your ego but rather through the back door of your shame. When you expose your shame to the sunlight, you open the door for God
FERS
I was a financial planner for many years before I retired in 1995 and I specialized in retirement planning. Before 1984 federal employees belonged to something called Civil Service and they had their own retirement plan. At that time the system changed over to social security but they had the option of choosing the new system called FERS (federal employee retirement system) or staying with the Civil Service. Almost all stayed with the Civil Service but all employees hired since were required to join FERS. FERS members pay into social security but can pay in extra for extra benefits. Congressmen were all required to join Social Security. This means that congressmen who have been in office starting before 1984 may still be in Civil Service or some combination of Civil Service and social security but all those who were elected for the first time after 1984 are in social security.
European bailout
The Greek government along with other governments purchased mortgage bundles(collateralized debt obligations CDO’s) from the US because they liked the high interest rate these bundles were paying. They got the money to buys these by selling Greek government bonds. At the same time they also purchased insurance against default called credit-default swaps(CDS’s). Now the big question is since the insurance protects against the mortgage bundles does it also protect the bonds. This is very important to the US banks since they sold about $500 billion in CDS’s to the European investors. ISDA(International Swaps and Derivatives Association) has made the right decision: the Greek bond default does not and should not count as a “credit event” for the purposes of whether Greek credit default swaps will get triggered. In other words if the insurance is only for the mortgage bundles and not for the bonds that provided the money to buy the bundles, the insurance will not have to pay.
Wages
Recently news reports have pointed out that wages among the middle class have been stagnant for the past 40 years. The reasons given are the decline of unions and the global market where Americans must compete against lower paid people in places like China. I believe there is another reason that is rarely if ever considered and that is the process of how wages are negotiated. I offer a specific example. In my years as a financial planner, starting in 1971, I had many clients who were teachers at the University of North Dakota. In those days they paid in ten percent of their salary into the pension plan and the university added two percent. As the years passed the university always seemed to be short on cash, so they kept offering a better deal on the pension in lieu of increased wages. Soon the employees paid in 8% and the university 4% and then 6% each and finally the university was paying in 10% and the teachers 2% which was a complete reversal over about a 25 year period. This same thing happened in state, county and municipal government negotiations. It also was going on in the private sector with companies like General Motors offering better pensions instead of increased wages. The end result of all this is the fact that wages did not increase as rapidly as they might otherwise and pension promises made are not going to be kept.
Two party system
The two party system is maintained by two forces. First each has a strong grass roots organization and second they provide a means for collecting money. Some have suggested that their stronghold on US politics may be threatened by the Internet. It is possible and some say likely that a very popular person with a large Blog following could collect money and spread ideas and become a viable candidate. As an example think of a person like Steve Jobs who has great name recognition and popularity. If a person like that had political ambitions chose to run an Internet campaign could they bypass the parties?
Latest on conspiracy
Here is the latest on my theory reviewed below about Iran.
Prime Minister Benjamin Netanyahu’s decision to execute a 1,000-for-1 prisoner exchange last week despite his frequently voiced opposition to such lopsided deals is seen by several Israeli military commentators as an effort to “clear the deck” before possibly undertaking an attack on Iran’s nuclear facilities.
I am normally not into conspiracy theories but I have one. Several months ago after Saudi Arabia gave Israel permission to overfly their territory President Obama reversed an earlier decision and agreed to send 55 buster bunker bombs to Israel. Saudi Arabia wants to encourage Israel to take out Iran’s nuke program which is deep underground. The Israeli planes could not make the round trip to Iran and back unless they could fly over Saudi Arabia. They could not bomb the underground facilities unless they had bunker busters and now they have both.
My theory was that Obama was going to come up with an October surprise just before next year’s election by backing Israel in a strike against Iran’s nuke sites. Now two new bits of information help to confirm my theory. First this Iranian American who was caught in a plot to kill the Saudi Ambassador while he was in the US and the plot was so amateurish that many have doubts that Iran had anything to do with it. Next Obama announced the withdrawal of all troops from Iraq by the end of the year and warned Iran not to intervene in the internal affairs of Iraq. Everyone knows that Iran can hardly wait for the US to leave so they can get into mischief.
Is Obama laying the ground work to justify backing an Israeli strike against Iran? Will he set back the Iranian nuke program and gain the Jewish vote? I must be getting too cynical in my old age.
Prime Minister Benjamin Netanyahu’s decision to execute a 1,000-for-1 prisoner exchange last week despite his frequently voiced opposition to such lopsided deals is seen by several Israeli military commentators as an effort to “clear the deck” before possibly undertaking an attack on Iran’s nuclear facilities.
I am normally not into conspiracy theories but I have one. Several months ago after Saudi Arabia gave Israel permission to overfly their territory President Obama reversed an earlier decision and agreed to send 55 buster bunker bombs to Israel. Saudi Arabia wants to encourage Israel to take out Iran’s nuke program which is deep underground. The Israeli planes could not make the round trip to Iran and back unless they could fly over Saudi Arabia. They could not bomb the underground facilities unless they had bunker busters and now they have both.
My theory was that Obama was going to come up with an October surprise just before next year’s election by backing Israel in a strike against Iran’s nuke sites. Now two new bits of information help to confirm my theory. First this Iranian American who was caught in a plot to kill the Saudi Ambassador while he was in the US and the plot was so amateurish that many have doubts that Iran had anything to do with it. Next Obama announced the withdrawal of all troops from Iraq by the end of the year and warned Iran not to intervene in the internal affairs of Iraq. Everyone knows that Iran can hardly wait for the US to leave so they can get into mischief.
Is Obama laying the ground work to justify backing an Israeli strike against Iran? Will he set back the Iranian nuke program and gain the Jewish vote? I must be getting too cynical in my old age.
Robert Rubin
Robert Rubin, former Secretary of the Treasury under Bill Clinton was on TV today offering advice on the economy. This guy was a genius graduating summa cum laude in Economics from Harvard and later getting a LLD from Yale. He worked his way up the ladder at Goldman Sachs and joined the Clinton administration in 1993.
In 1997 he worked with Larry Summers to prevent the government getting the power to oversee the credit derivatives which later led to the mortgage crisis. In 1999 he repealed Glass/Steagall which allowed investment banks to act like commercial banks and use depositor money to purchase derivatives. These two moves set the stage for the mortgage disaster which hit the country in 2008.
Time Magazine said that Summers, Greenspan and Rubin were the committee that would save the world and what followed their policies was the near collapse of the entire financial system.
When Rubin retired from the Treasury Clinton praised him but in an ABC interview in 2010 Clinton said Rubin gave him bad advice telling him not to regulate derivatives.
He next joined Citigroup and proceeded to lose 88% of the companies value by pushing his employees to take more risk and purchase derivatives. Some say he knew the government would bail them out if they guessed wrong and that is just what happened. They got 45 billion from TARP to save them from going under.
During his ten years at Citigroup during which time the company declined and nearly collapsed Rubin earned 126 million dollars in salary. He resigned under pressure and became Obama’s economic advisor where he regularly advises the president.
This is the kind of stuff that the Wall Street protestors are upset about.
In 1997 he worked with Larry Summers to prevent the government getting the power to oversee the credit derivatives which later led to the mortgage crisis. In 1999 he repealed Glass/Steagall which allowed investment banks to act like commercial banks and use depositor money to purchase derivatives. These two moves set the stage for the mortgage disaster which hit the country in 2008.
Time Magazine said that Summers, Greenspan and Rubin were the committee that would save the world and what followed their policies was the near collapse of the entire financial system.
When Rubin retired from the Treasury Clinton praised him but in an ABC interview in 2010 Clinton said Rubin gave him bad advice telling him not to regulate derivatives.
He next joined Citigroup and proceeded to lose 88% of the companies value by pushing his employees to take more risk and purchase derivatives. Some say he knew the government would bail them out if they guessed wrong and that is just what happened. They got 45 billion from TARP to save them from going under.
During his ten years at Citigroup during which time the company declined and nearly collapsed Rubin earned 126 million dollars in salary. He resigned under pressure and became Obama’s economic advisor where he regularly advises the president.
This is the kind of stuff that the Wall Street protestors are upset about.
Stimulus 1
The first stimulus was signed into law in February of 2009 so I believe enough time has passed to properly evaluate the results.
The 787 billion dollar stimulus included 275 billion in tax credits and 512 billion to stimulate jobs. The CBO said it was difficult to precisely determine how many jobs were created but the administration claims that 3 million jobs were created or saved. If we accept this number the math show the cost was $170,000 per job. In September of 2010 there were 153,854,000 people working and in September of 2011 there were 154,022,000 working for an increase of 168,000. This tells me that most of the jobs were in the jobs saved category not the jobs created. Many of the jobs saved were public sector employees including teachers but the money given to the states just postponed the layoffs which are now occurring and adding to the unemployment problem.
The 787 billion dollar stimulus included 275 billion in tax credits and 512 billion to stimulate jobs. The CBO said it was difficult to precisely determine how many jobs were created but the administration claims that 3 million jobs were created or saved. If we accept this number the math show the cost was $170,000 per job. In September of 2010 there were 153,854,000 people working and in September of 2011 there were 154,022,000 working for an increase of 168,000. This tells me that most of the jobs were in the jobs saved category not the jobs created. Many of the jobs saved were public sector employees including teachers but the money given to the states just postponed the layoffs which are now occurring and adding to the unemployment problem.
Borrow and Spend
The so called Wall Street protestors have been an enigma to most people as were the Viet Nam war protestors in the 60’s. They were a disorganized group of mostly young people but they had a common message from the start. They wanted the war to end and to bring the troops home and to end the draft. The current protestors had trouble developing a theme but have settled on “we are the 99” which is pretty good. As they evolve, a clearer message is emerging. They are upset with the difference in money and power between the citizens and the elite. These differences have grown over the past 50 years starting with the fact that about 90% of our congressmen are reelected and much of the incumbent advantage is the result of gerrymandering.
Back 30 years ago the CEO salary was about 25 times that of the employees but today it is 250 times. This is not the result of increased performance by these execs but because they sit on each other’s boards and give each other raises.
Unions started out with the legitimate goal of help employees to negotiate with employers and that brought many badly needed changes in the work place. Then the old adage of power corrupts took over and unions began to hurt companies and finally the legacy benefits became so overwhelming that the companies could no longer compete. This was especially evident in the auto industry.
Public unions started with the same goal of helping employees but they too corrupted the system. They used their power to elect the vary officials they would later negotiate with and got themselves legacy benefits that were unsustainable.
The investment industry invented new products that were so sophisticated that the regulatory people could not keep up and the result led to procedures that gave the upside of profits to the investors while reserving the downside loses to the taxpayers. This skewed the risk to return ratio and allowed people to speculate and call it investing, the so called moral hazard. This led to the too big to fail syndrome.
And last, we the citizenry spent the last 40 years borrowing and spending, a process which was accelerated by the rising home prices and the use of credit cards.
Now comes the day of reckoning and we must prepare to pay the piper. It will take us a while to get through the blame game since there is plenty of blame to go around but eventually we must all learn to get by on less. We will slowly and painfully move from a consumer driving economy to a save and invest economy. In the long run this will be a positive but in the short run it will require sacrifice. Get ready, the world is changing.
Back 30 years ago the CEO salary was about 25 times that of the employees but today it is 250 times. This is not the result of increased performance by these execs but because they sit on each other’s boards and give each other raises.
Unions started out with the legitimate goal of help employees to negotiate with employers and that brought many badly needed changes in the work place. Then the old adage of power corrupts took over and unions began to hurt companies and finally the legacy benefits became so overwhelming that the companies could no longer compete. This was especially evident in the auto industry.
Public unions started with the same goal of helping employees but they too corrupted the system. They used their power to elect the vary officials they would later negotiate with and got themselves legacy benefits that were unsustainable.
The investment industry invented new products that were so sophisticated that the regulatory people could not keep up and the result led to procedures that gave the upside of profits to the investors while reserving the downside loses to the taxpayers. This skewed the risk to return ratio and allowed people to speculate and call it investing, the so called moral hazard. This led to the too big to fail syndrome.
And last, we the citizenry spent the last 40 years borrowing and spending, a process which was accelerated by the rising home prices and the use of credit cards.
Now comes the day of reckoning and we must prepare to pay the piper. It will take us a while to get through the blame game since there is plenty of blame to go around but eventually we must all learn to get by on less. We will slowly and painfully move from a consumer driving economy to a save and invest economy. In the long run this will be a positive but in the short run it will require sacrifice. Get ready, the world is changing.
October surprise
I am not usually interested in conspiracy theories but I have recently developed one of my own and now I have more evidence to support it. Here is what I wrote some weeks ago.
The President may be secretly changing his mind on Israel. Publically he seems not to be interested in helping the Jews but a chance to deal with Iran may be causing him to rethink his position. Israeli planes cannot make the round trip to Iran without violating Syrian and Jordanian airspace. A couple of years ago Saudi Arabia gave Israel permission to fly over their country which means that Israeli planes could make the round trip.
The head of Mossad, Israel’s overseas intelligence service, has assured Benjamin Netanyahu, its prime minister, that Saudi Arabia would turn a blind eye to Israeli jets flying over the kingdom during any future raid on Iran’s nuclear sites.
In addition to fly space the Israelis would need our bunker buster bombs but Obama early in his term refused to sell them. This past week news surfaced indicating he had changed his mind.
WASHINGTON: President Barack Obama secretly authorized the sale of 55 powerful bunker-busting bombs to Israel, Newsweek magazine reported on its online edition Friday.
With these bombs Israel could destroy the underground facilities in Iran and cripple their Nuke program. Do not be surprised if one day soon we awake to find that the Jews had bombed Iran. This could be an October surprise next year to help Obama with his reelection. It would reaffirm his relations with the Jewish voters and show that he is tough on defense.
Since then the president has announced our withdrawal from Iraq and has warned Iran not to move into Iraq when we leave. Then it was announced that an Iranian American was charged in the plot to kill a Saudi Ambassador here in the US and it is claimed that Iran is behind the plot. This is suspicious since the plan was so clumsy and Iran is very careful about such things.
Once again is this all building toward a surprise attach by Israel against Iran with our covert help.
The President may be secretly changing his mind on Israel. Publically he seems not to be interested in helping the Jews but a chance to deal with Iran may be causing him to rethink his position. Israeli planes cannot make the round trip to Iran without violating Syrian and Jordanian airspace. A couple of years ago Saudi Arabia gave Israel permission to fly over their country which means that Israeli planes could make the round trip.
The head of Mossad, Israel’s overseas intelligence service, has assured Benjamin Netanyahu, its prime minister, that Saudi Arabia would turn a blind eye to Israeli jets flying over the kingdom during any future raid on Iran’s nuclear sites.
In addition to fly space the Israelis would need our bunker buster bombs but Obama early in his term refused to sell them. This past week news surfaced indicating he had changed his mind.
WASHINGTON: President Barack Obama secretly authorized the sale of 55 powerful bunker-busting bombs to Israel, Newsweek magazine reported on its online edition Friday.
With these bombs Israel could destroy the underground facilities in Iran and cripple their Nuke program. Do not be surprised if one day soon we awake to find that the Jews had bombed Iran. This could be an October surprise next year to help Obama with his reelection. It would reaffirm his relations with the Jewish voters and show that he is tough on defense.
Since then the president has announced our withdrawal from Iraq and has warned Iran not to move into Iraq when we leave. Then it was announced that an Iranian American was charged in the plot to kill a Saudi Ambassador here in the US and it is claimed that Iran is behind the plot. This is suspicious since the plan was so clumsy and Iran is very careful about such things.
Once again is this all building toward a surprise attach by Israel against Iran with our covert help.
Super committee
The so called Super Committee is a group of 12 congressmen who are supposed to get together and cut the deficit by 1.2 trillion. They must reach a decision by Thanksgiving or there will be automatic cuts to discretionary spending and defense spending. They will not reach an agreement because the only way the Republicans would agree to tax increases is if the Democrats agree to cuts in Medicare and the Dems will not do that since their reelection and chance to recapture the house is based on the plan to demagogue the Republicans who voted for the Ryan plan.
Many think that the Republicans will have to agree to a deal to prevent cuts to the military but that is not the case since even if cuts are ordered by the committee the Republican controlled house can immediately authorize more money to balance out the cuts.
I predict no deal by the committee.
Many think that the Republicans will have to agree to a deal to prevent cuts to the military but that is not the case since even if cuts are ordered by the committee the Republican controlled house can immediately authorize more money to balance out the cuts.
I predict no deal by the committee.
Monday, November 7, 2011
illegals
It was announced on the news today that ICE sent back 400,000 illegal aliens last year. The report stated that 55% were convicted felons and 1,000 of those were for murder. 55% of 400,000 is 220,000 and 1,000 if those were for murder for a rate of 454 per 100,000
Of the convicted criminals deported last year, 1,119 were convicted of homicide, 5,848 of sexual offenses, 44,653 of drug-related offenses and 35,927 of driving under the influence, according to the Homeland Security figures.
The overall crime rate in the US shows 192 felonies per 100,000 and of that the murder rate is 4 per 100,000. This means that the conviction rate for murder of illegals is more than 100 times greater than the general population. How is that possible? What happens to the 1,119 convicted murderers who are deported?
Of the convicted criminals deported last year, 1,119 were convicted of homicide, 5,848 of sexual offenses, 44,653 of drug-related offenses and 35,927 of driving under the influence, according to the Homeland Security figures.
The overall crime rate in the US shows 192 felonies per 100,000 and of that the murder rate is 4 per 100,000. This means that the conviction rate for murder of illegals is more than 100 times greater than the general population. How is that possible? What happens to the 1,119 convicted murderers who are deported?
Cain
The Cain people have now released more information about his tax plan called 999 and it would hurt the poor people because it would get rid of the child tax credit and the earned income credit and these provide benefits to lower income people. For example a family of four with $30,000 of income receives an additional $7,000 in tax refunds even though they pay no income tax. Under Cain’s plan this family would not have to pay any payroll tax which would save them $2,300 but they would lose the $7,000 plus they would have to pay 9% national sales tax on all new items they purchase. Unless some changes are made to this plan I don’t think it will be acceptable to most people.
I think what is going to happen is to follow the Reagan plan of getting rid of loop holes and lowering the rates. Maybe one day something along the line of what Cain is proposing might have a chance but not now.
I think what is going to happen is to follow the Reagan plan of getting rid of loop holes and lowering the rates. Maybe one day something along the line of what Cain is proposing might have a chance but not now.
Protestors
While watching the Wall Street demonstrations I noticed several signs saying we are the 99% meaning that these people represent 99% of the population and the superrich represent the other one percent. Upon more careful inspection, it appears that this group of protestors, actually represent about 1% of the population. Many are students demanding bailouts on their student loans and others are out of work young people who are being paid to be there. This reminds me of the Russian revolution when the Lenin’s adherents called themselves The Bolsheviks, the Russian word for majority even though they were a minority. Most low and middle income people have more productive things to do with their time than to stand around in New York City for a month. Most are at home trying to figure out how to pay the light bill.
I recall a similar situation with the Woodstock people who were most rich kids who lived off their parents. I was at work.
I recall a similar situation with the Woodstock people who were most rich kids who lived off their parents. I was at work.
999 Plan
There are many parts of Herman Cain’s 999 plan that are still not clear. One of the most important has to do with the payroll tax. This is the money that is taken from your check to pay for social security and Medicare and the two parts amount to 7.65%. In addition the employer pays in 7.65%. The unanswered question is what happens to the employer portion. If it is given to the employee then this easily offsets the 9% national sales tax but if it is retained by the employer this makes it very close for most working people. Here is an example:
A family of four that makes $50,000 per year currently pays no income tax but does pay $3,825 per year in payroll tax (50,000 times 7.65%). In the 999 plan food is exempt from the sales tax. Food cost for families in this earning bracket are ten percent or $5,000. If you assume that the family will spend all of their income, the tax on the remaining $45,000 would be $4,050 or $225 more than the payroll tax. If the family saves 5% of their income or $2,500 there would be no change in their net income.
Poor families would be hurt because the current income tax system gives them benefits even if the pay no income tax. Right now a family of four earning $20,000 per year takes home a net of $30,000 because of benefits like the earned income credit and child tax credit. If these benefits were retained they would pay $2,700 in sales tax and save $1,530 in payroll tax unless they get the employer share in which case they would save $3,060 which is more than the sale tax they would pay.
In the case of most retired people they would pay more since their income is not subject to payroll tax but they would still pay the sales tax.
The really important part of the 999 plan is that it changes us from a consumption economy to an investment economy and in the long run this will benefit everyone.
It would cost the jobs of the estimated 2 million people who work in the tax industry but it would save individuals and companies tens of millions in tax preparation not to mention the headache
A family of four that makes $50,000 per year currently pays no income tax but does pay $3,825 per year in payroll tax (50,000 times 7.65%). In the 999 plan food is exempt from the sales tax. Food cost for families in this earning bracket are ten percent or $5,000. If you assume that the family will spend all of their income, the tax on the remaining $45,000 would be $4,050 or $225 more than the payroll tax. If the family saves 5% of their income or $2,500 there would be no change in their net income.
Poor families would be hurt because the current income tax system gives them benefits even if the pay no income tax. Right now a family of four earning $20,000 per year takes home a net of $30,000 because of benefits like the earned income credit and child tax credit. If these benefits were retained they would pay $2,700 in sales tax and save $1,530 in payroll tax unless they get the employer share in which case they would save $3,060 which is more than the sale tax they would pay.
In the case of most retired people they would pay more since their income is not subject to payroll tax but they would still pay the sales tax.
The really important part of the 999 plan is that it changes us from a consumption economy to an investment economy and in the long run this will benefit everyone.
It would cost the jobs of the estimated 2 million people who work in the tax industry but it would save individuals and companies tens of millions in tax preparation not to mention the headache
Tax cuts
Will Obama trick the Republicans once again? In 1982 Reagan agreed to raise taxes on business with a promise from the democratically controlled congress to cut spending. Taxes were raised but no spending cuts materialized.
When Bush 41 agreed to go back on his pledge of read my lips no new taxes he lost his bid for a second term. He agreed to raise taxes when the democrats said they would lower spending to reduce the budget deficit. He raised taxes but the spending cuts never came.
Bush 43 pushed through tax cuts but then he joined in with the democrats to increase spending
When Bush 41 agreed to go back on his pledge of read my lips no new taxes he lost his bid for a second term. He agreed to raise taxes when the democrats said they would lower spending to reduce the budget deficit. He raised taxes but the spending cuts never came.
Bush 43 pushed through tax cuts but then he joined in with the democrats to increase spending
Wall Street
While watching video of the Wall Street protestors I was reminded of my Arab chat room discussions. Often times someone would suggest that the world would be better served if the United States would collapse. When hearing this I would point out that if the US economy went into a depression people around the world would suffer and the poor would suffer the most. There is an old adage that says when America sneezes the rest of the world gets a cold. I would make the point that bad times take a deeper toll on the poor than on the rich and if you want to help the poor around the world you don’t do it by bringing down the rich. The same thing is now happening on Wall Street. These people do not understand that if you hurt the rich you also hurt the poor only more so.
There are two inequities that I would like to see resolved. The first is CEO pay. I have no objection to the board of directors determining the pay of the CEO but I do object to cross membership of the boards. Mr. A in on the board of company B and Mr. B is on the board of company A and they are both CEO’s and they are giving each other a raise. This is a distortion of the free market system and must be changed. This is the reason that CEO salaries which 40 years ago were 30 times the average pay and today they are 500 times the average pay. Not only is a salary of 25 million ridiculous but when they company losses money and these people are replaced they leave with huge golden parachutes because the collusion starts when they are hired and given bonuses even if they are fired.
The second is the too big to fail concept. Dodd/Frank was supposed to take care of the too big to fail problem but it actually made it worse. It separated the banks into two groups, those with assets greater than 50 billion and those with less. The big banks, of which there are six, are now called systemically important entities which is a euphemism for too big to fail. Before Dodd/Frank these six banks had a value equal to 17% of GDP and after Dodd/Frank they grew to 64% of GDP. Too big became too too too big. These banks must be broken up quickly as the European bank crisis may soon spread here and we will once again have to bail out these monsters.
If these protestors were asking for changes in the above two areas I would join them but instead they are trying to throw the baby out with the bath water by trying to bring down the free market system.
There are two inequities that I would like to see resolved. The first is CEO pay. I have no objection to the board of directors determining the pay of the CEO but I do object to cross membership of the boards. Mr. A in on the board of company B and Mr. B is on the board of company A and they are both CEO’s and they are giving each other a raise. This is a distortion of the free market system and must be changed. This is the reason that CEO salaries which 40 years ago were 30 times the average pay and today they are 500 times the average pay. Not only is a salary of 25 million ridiculous but when they company losses money and these people are replaced they leave with huge golden parachutes because the collusion starts when they are hired and given bonuses even if they are fired.
The second is the too big to fail concept. Dodd/Frank was supposed to take care of the too big to fail problem but it actually made it worse. It separated the banks into two groups, those with assets greater than 50 billion and those with less. The big banks, of which there are six, are now called systemically important entities which is a euphemism for too big to fail. Before Dodd/Frank these six banks had a value equal to 17% of GDP and after Dodd/Frank they grew to 64% of GDP. Too big became too too too big. These banks must be broken up quickly as the European bank crisis may soon spread here and we will once again have to bail out these monsters.
If these protestors were asking for changes in the above two areas I would join them but instead they are trying to throw the baby out with the bath water by trying to bring down the free market system.
Words
Recently I was once again reminded of just how much I have to learn and this has happened so many times you would think that it would not be a surprise but it always catches me off guard.
I have known for years that I was not very good at reading between the lines and this was most evident in my inability to figure people out. I would always say that attributing motives to peoples remarks was unfair and to be avoided. Recently I have had an epiphany. It started when I tried to figure out why my wife and I never seemed to understand one another. It seems I listen to her and respond to her words accordingly but her words are not what she means. When I speak to her my words are what I mean but she assumes that what I mean is what she hears and often that has very little to do with my words. Often times she will respond to my questioning her remarks by saying you know what I mean or after all these years you should know what I mean.
I have been watching the talking heads on TV discuss various issues and it is obvious that they are not listening to the words that each is using but they are instead hearing what they believe the other person meant to say. The result is that the end up talking past each other. This of course leads to mass confusion but it is the way it is.
It is obvious to me that most people understand this idea of hearing more than the words but it is not the norm for me. Yes I realize that occasionally I get an insight based on something other than what is said but that only occurs infrequently and I am always suspect of what I think is going on. I can’t put any numbers on this but I am quite sure that most people are far more adept at this than I am.
I have known for years that I was not very good at reading between the lines and this was most evident in my inability to figure people out. I would always say that attributing motives to peoples remarks was unfair and to be avoided. Recently I have had an epiphany. It started when I tried to figure out why my wife and I never seemed to understand one another. It seems I listen to her and respond to her words accordingly but her words are not what she means. When I speak to her my words are what I mean but she assumes that what I mean is what she hears and often that has very little to do with my words. Often times she will respond to my questioning her remarks by saying you know what I mean or after all these years you should know what I mean.
I have been watching the talking heads on TV discuss various issues and it is obvious that they are not listening to the words that each is using but they are instead hearing what they believe the other person meant to say. The result is that the end up talking past each other. This of course leads to mass confusion but it is the way it is.
It is obvious to me that most people understand this idea of hearing more than the words but it is not the norm for me. Yes I realize that occasionally I get an insight based on something other than what is said but that only occurs infrequently and I am always suspect of what I think is going on. I can’t put any numbers on this but I am quite sure that most people are far more adept at this than I am.
Consumer protection
Under the appealing title of consumer protection we now what I call deception. While the purpose may be to protect the consumer, in practice these rules and laws protect our elected officials, in what in the current vernacular is euphemistically referred to as CYA. For you innocents out there is stands for cover your ass.
I offer three examples out of many that I could list.
Back in the 60’s it was brought to the attention of the government that there were many widows walking around short on cash. Upon investigating they found that the husbands signed up for the type of pension that only paid him and left nothing for his wife after he died. How did this come about? The guy is making $2,000 a month and retires and the boss says your pension will be $1,000. While this is a sacrifice the guy says he will just have to make do. Then the boss says that after you die your wife gets nothing but if you agree to take $800 we will pay her $800 after you die for as long as she lives. Well he thought it over, realizing that he was in good health and that it will be tough to give up an additional $200 after he just took a big cut so he chose the pension just for his self and then he died and his wife has no money. Here is the part where the government comes to the rescue. In 1974 they passed the ERISA bill (employee retirement income security act). This act said that if a man wanted to cut his wife out of the pension she had to sign a document agreeing to that. Since that time the men have gone home with the document and said just sign here dear which she promptly did and we still have widows with no pension.
When I bought my first house in 1959 I signed three pages and the last house I bought ten years ago I signed 20 pagers. These extra pages involve many laws that are designed to protect the consumer from getting shafted. We have recently gone through a mortgage crisis where the experts say the consumers were tricked into buy houses they couldn’t afford. All these laws don’t help if no one understands them but they do serve their main purpose which is to show that the elected officials are doing their job.
The health insurance portability and accountability act known as HIPPA was designed to protect consumer’s privacy when it comes to medical history. The doctors, nurses and other health professionals can lose their licenses if they reveal medical information but others that work in the area seem to fall through the net. If you call for an appointment some appointment secretary takes your call and it goes something like this. I want to see Dr. Jones. What is this about? Well I am a closet gay and I have AIDS and I need some medicine. Ok I the Dr. can see you Wednesday at 2PM. Now the lady sitting next to the appointment secretary hears the conversation and looks up Dr. Jones at Wed 2PM and sees that Joe Smith had the appointment. Turns out that Joe Smith is a friend of her husbands and that night she asks her husband if he knew that Joe was gay. I recently purchased some life insurance and it took six months to get my application approved and most of that time was spend sending HIPPA reports back and forth between various health agencies.
I offer three examples out of many that I could list.
Back in the 60’s it was brought to the attention of the government that there were many widows walking around short on cash. Upon investigating they found that the husbands signed up for the type of pension that only paid him and left nothing for his wife after he died. How did this come about? The guy is making $2,000 a month and retires and the boss says your pension will be $1,000. While this is a sacrifice the guy says he will just have to make do. Then the boss says that after you die your wife gets nothing but if you agree to take $800 we will pay her $800 after you die for as long as she lives. Well he thought it over, realizing that he was in good health and that it will be tough to give up an additional $200 after he just took a big cut so he chose the pension just for his self and then he died and his wife has no money. Here is the part where the government comes to the rescue. In 1974 they passed the ERISA bill (employee retirement income security act). This act said that if a man wanted to cut his wife out of the pension she had to sign a document agreeing to that. Since that time the men have gone home with the document and said just sign here dear which she promptly did and we still have widows with no pension.
When I bought my first house in 1959 I signed three pages and the last house I bought ten years ago I signed 20 pagers. These extra pages involve many laws that are designed to protect the consumer from getting shafted. We have recently gone through a mortgage crisis where the experts say the consumers were tricked into buy houses they couldn’t afford. All these laws don’t help if no one understands them but they do serve their main purpose which is to show that the elected officials are doing their job.
The health insurance portability and accountability act known as HIPPA was designed to protect consumer’s privacy when it comes to medical history. The doctors, nurses and other health professionals can lose their licenses if they reveal medical information but others that work in the area seem to fall through the net. If you call for an appointment some appointment secretary takes your call and it goes something like this. I want to see Dr. Jones. What is this about? Well I am a closet gay and I have AIDS and I need some medicine. Ok I the Dr. can see you Wednesday at 2PM. Now the lady sitting next to the appointment secretary hears the conversation and looks up Dr. Jones at Wed 2PM and sees that Joe Smith had the appointment. Turns out that Joe Smith is a friend of her husbands and that night she asks her husband if he knew that Joe was gay. I recently purchased some life insurance and it took six months to get my application approved and most of that time was spend sending HIPPA reports back and forth between various health agencies.
Read between the lines
Recently I was once again reminded of just how much I have to learn and this has happened so many times you would think that it would not be a surprise but it always catches me off guard.
I have known for years that I was not very good at reading between the lines and this was most evident in my inability to figure people out. I would always say that attributing motives to peoples remarks was unfair and to be avoided. Recently I have had an epiphany. It started when I tried to figure out why my wife and I never seemed to understand one another. It seems I listen to her and respond to her words accordingly but her words are not what she means. When I speak to her my words are what I mean but she assumes that what I mean is what she hears and often that has very little to do with my words. Often times she will respond to my questioning her remarks by saying you know what I mean or after all these years you should know what I mean.
I have been watching the talking heads on TV discuss various issues and it is obvious that they are not listening to the words that each is using but they are instead hearing what they believe the other person meant to say. The result is that the end up talking past each other. This of course leads to mass confusion but it is the way it is.
It is obvious to me that most people understand this idea of hearing more than the words but it is not the norm for me. Yes I realize that occasionally I get an insight based on something other than what is said but that only occurs infrequently and I am always suspect of what I think is going on. I can’t put any numbers on this but I am quite sure that most people are far more adept at this than I am.
I have known for years that I was not very good at reading between the lines and this was most evident in my inability to figure people out. I would always say that attributing motives to peoples remarks was unfair and to be avoided. Recently I have had an epiphany. It started when I tried to figure out why my wife and I never seemed to understand one another. It seems I listen to her and respond to her words accordingly but her words are not what she means. When I speak to her my words are what I mean but she assumes that what I mean is what she hears and often that has very little to do with my words. Often times she will respond to my questioning her remarks by saying you know what I mean or after all these years you should know what I mean.
I have been watching the talking heads on TV discuss various issues and it is obvious that they are not listening to the words that each is using but they are instead hearing what they believe the other person meant to say. The result is that the end up talking past each other. This of course leads to mass confusion but it is the way it is.
It is obvious to me that most people understand this idea of hearing more than the words but it is not the norm for me. Yes I realize that occasionally I get an insight based on something other than what is said but that only occurs infrequently and I am always suspect of what I think is going on. I can’t put any numbers on this but I am quite sure that most people are far more adept at this than I am.
Money supply
There has been a new addition to Economics 101. When I was in school we were taught that there were three ways that the Federal Reserve Bank could deal with monetary policy. Before I go forward I will explain monetary policy. It is another name for the money supply which is generally the total amount of cash plus checking accounts and savings accounts and that is currently about 8 trillion. So what are the three ways that The Fed can change the money supply? The first and most common is buy or selling government bonds. Several times each month there is an auction where government bonds are sold. When the government sells a bond it takes money out of circulation and the money supply decreases. If it buys government bonds it put money into the system and increases the money supply. If they want to take more drastic steps they can raise or lower the discount rate. This is the rate that the Fed charges banks for short term loans. Recall that a bank can loan out ten times the amount is has so if the bank borrows a million dollars from The Fed it can then loan out 10 million. If The Fed lowers the discount rate the banks are encouraged to borrow more and then have more to loan which increases the money supply. The third and most drastic way is to change the reserve requirements. That is the requirement that banks keep at least 10% in the bank to back up loans. If The Fed would change that to 20% the banks would have to call in loans since they would only be able to loan out five times their reserve instead of ten.
So what is the new forth way the banks can increase the money supply. Simple, they just print more. Since Obama took office the money supply has increased about 1.5 trillion to a total of 9.5 trillion. It used this newly printed money to buy up toxic assets like mortgage bundles.
So what is the new forth way the banks can increase the money supply. Simple, they just print more. Since Obama took office the money supply has increased about 1.5 trillion to a total of 9.5 trillion. It used this newly printed money to buy up toxic assets like mortgage bundles.
Education
There is an interesting dichotomy between education and health care and it illustrates a difference in a person’s world view. We spend more money on health care than any country and we don’t rank in the top ten countries with the best health care. Some say that if we moved heath care from the private sector to the public things would improve. On the other hand we spend more money on education than any country and we don’t rank in the top ten countries with the best education. Some say that if we moved education from the public sector to the private sector things would improve.
The way to improve education is to get more fathers in the homes and the way to improve health care is to get rid of the third party payer and to introduce the idea of public and private is a straw dog that merely misdirects our attention.
The way to improve education is to get more fathers in the homes and the way to improve health care is to get rid of the third party payer and to introduce the idea of public and private is a straw dog that merely misdirects our attention.
Israel
The President may be secretly changing his mind on Israel. Publically he seems not to be interested in helping the Jews but a chance to deal with Iran may be causing him to rethink his position. Israeli planes cannot make the round trip to Iran without violating Syrian and Jordanian airspace. A couple of years ago Saudi Arabia gave Israel permission to fly over their country which means that Israeli planes could make the round trip.
The head of Mossad, Israel’s overseas intelligence service, has assured Benjamin Netanyahu, its prime minister, that Saudi Arabia would turn a blind eye to Israeli jets flying over the kingdom during any future raid on Iran’s nuclear sites.
In addition to fly space the Israelis would need our bunker buster bombs but Obama early in his term refused to sell them. This past week news surfaced indicating he had changed his mind.
WASHINGTON: President Barack Obama secretly authorized the sale of 55 powerful bunker-busting bombs to Israel, Newsweek magazine reported on its online edition Friday.
With these bombs Israel could destroy the underground facilities in Iran and cripple their Nuke program. Do not be surprised if one day soon we awake to find that the Jews had bombed Iran. This could be an October surprise next year to help Obama with his reelection. It would reaffirm his relations with the Jewish voters and show that he is tough on defense.
The head of Mossad, Israel’s overseas intelligence service, has assured Benjamin Netanyahu, its prime minister, that Saudi Arabia would turn a blind eye to Israeli jets flying over the kingdom during any future raid on Iran’s nuclear sites.
In addition to fly space the Israelis would need our bunker buster bombs but Obama early in his term refused to sell them. This past week news surfaced indicating he had changed his mind.
WASHINGTON: President Barack Obama secretly authorized the sale of 55 powerful bunker-busting bombs to Israel, Newsweek magazine reported on its online edition Friday.
With these bombs Israel could destroy the underground facilities in Iran and cripple their Nuke program. Do not be surprised if one day soon we awake to find that the Jews had bombed Iran. This could be an October surprise next year to help Obama with his reelection. It would reaffirm his relations with the Jewish voters and show that he is tough on defense.
Church committee
For those of you not old enough to remember the Church Committee investigations of the CIA in 1970 I offer this review. It was deemed by our government that the CIA with its covert activities had strayed too far and needed to be reined in. They were instructed among other things not to use unsavory characters to gather information. This pretty much destroyed their ability to gather information and left the country vulnerable. When 9-11 hit us many asked how this could happen without any warning and the answer was the Church commission. For the past ten years we have reintroduced the idea of working with undesirables and the result is that we are now dealing with informants who are providing us with targets. The drones that we have used so effectively to kill terrorist only work when we have CIA operatives working on the ground. We have now come full circle and are able to better protect ourselves by working closely with the types of people that are called euphemistically the bad guys. While information is always valuable during war time it is imperative in wars against terrorist. We are transitioning from wars of heavy equipment and air power to wars of information gathering. The military of the future will be hi tech and quick to respond and this will save lives and money. Too bad we had to learn this lesson the hard way. I wonder what all of those who cut the wings from the CIA are thinking.
Volt
The story of the Chevy Volt is filled with mysterious twists and turns. First off it is very difficult to get accurate figures on total sales unlike any other car where these figures are readily available. Top estimates show sales of about 3,000 cars per year with production facilities capable of producing 750 per week. The price is $40,000 less a $7,500 rebate from the federal government. Over the past two years the US government has doled out 2.5 billion to subsidize the development of batteries for these cars. Recently General Electric has said they will purchase 12,000 Volts for their company use and GE has a part in the production of these cars.
Most experts now conclude that the Volt will not be the winner that GM had predicted but in fact will lose the company a bundle. In order to survive this marketing misjudgment GM has made a deal to produce the Volt in China. China has agreed to offer a $19,000 rebate to GM for each Volt sold but only on the Volts made in China. This large rebate will allow GM to make a handsome profit on the Volt and turn a lemon into lemonade. With this kind of incentive it will not be long before the Volt production in the US will stop and GM will import Volts from China for its American customers.
Another green job financed by the American taxpayers to grow jobs in China. Even the union members at GM see this as a good thing since they realize that the Volt would be a loser for the company and jobs would be hard to justify now that the union is part owner of the company.
Most experts now conclude that the Volt will not be the winner that GM had predicted but in fact will lose the company a bundle. In order to survive this marketing misjudgment GM has made a deal to produce the Volt in China. China has agreed to offer a $19,000 rebate to GM for each Volt sold but only on the Volts made in China. This large rebate will allow GM to make a handsome profit on the Volt and turn a lemon into lemonade. With this kind of incentive it will not be long before the Volt production in the US will stop and GM will import Volts from China for its American customers.
Another green job financed by the American taxpayers to grow jobs in China. Even the union members at GM see this as a good thing since they realize that the Volt would be a loser for the company and jobs would be hard to justify now that the union is part owner of the company.
Taxes
Since the top tax rates here in Minnesota is about 8% and the top federal rate is 35% a wealthy person net is 57% of what they gross. Suppose a man earns 1.75 million and after tax nets 1 million. He puts that in an interest bearing account and earns 5% which is a very good rate in today’s market. His interest on the million would be $50,000 and now he pays 43% in taxes so he nets $28,500. Let’s say instead he invests in stocks and earns a 5% dividend and then he would pay 22% tax and net $39,000. Or he could invest in municipal bonds and pay 0 tax and net $50,000. Compare that to a typical family with two children whose income is $50,000. They would pay no income tax but they would pay payroll tax (social security and Medicare) and net $46,000.
The president’s plan to be released on Monday will increase the dividend tax rate to the regular rate which means the rich person would likely just invest in an interest account since that entails less risk than dividends. The result will be less investment in business and more into fixed interest accounts like money markets. It is also suggested that Obama will raise the tax on capital gains like dividends. Both today are taxed at 15% and this will rise to 35% for the rich. Both will make investing in business less desirable We might expect a big increase in investments in municipal bonds as I don’t for see any change in this area. But who knows what might happen next.
The president’s plan to be released on Monday will increase the dividend tax rate to the regular rate which means the rich person would likely just invest in an interest account since that entails less risk than dividends. The result will be less investment in business and more into fixed interest accounts like money markets. It is also suggested that Obama will raise the tax on capital gains like dividends. Both today are taxed at 15% and this will rise to 35% for the rich. Both will make investing in business less desirable We might expect a big increase in investments in municipal bonds as I don’t for see any change in this area. But who knows what might happen next.
Welfare
A family man in Minnesota with a wife and two small children is making $800 per week and gets laid off and starts collecting unemployment at $400 per week. Since his new income is below the poverty level for a family of four, which is currently $22,000 he is eligible for public assistance. First he qualifies for low income housing which means he gets a three bedroom apartment for $500 per month or 30% of his gross income. Next his children get free health care through Medicaid and he and his wife get health care through Minnesota Care for $15 per month. They qualify for $190 per month in food stamps plus they can purchase food through MN Fair Share program. Here you pay $15 and get $35 worth of food or any multiple of $15 meaning that for $150 you get $350 in food. They also qualify for WIC and MAC programs that provide additional healthy foods. They also qualify for free school lunch plans. They get fuel assistance credits for utilities. With these benefits it cost about $300 per month to feed the family, $15 per month for a health care plan with no deductible and no co-pay, $100 per month for utilities and $500 for rent.
Prior to going on unemployment he paid $800 in rent, $250 for utilities, $200 for health insurance, and $900 for food. This is about $1,200 per month less than he was paying before. Since his net pay when he was working was $40,000 per year less social security or about $3,000 per month his new income is $1,200 per month less or $1,800. His unemployment is $20,000 per year or $1,660. If his boss calls him back to work he will gain $140 per month for working 40 hours per week or about 85 cents per hour. Will he be anxious to go back to work for this low pay or would he rather just stay at home.
It is likely that his health care at work would cost more than $15 per month plus by working he has transportation cost and other cost associated with work.
If this same guy owned his home with a $200,000 mortgage he would have been paying about $1,400 per month for principal, interest, taxes and insurance on the home so by letting his house go back to the bank his monthly housing cost decrease from $1,400 to $500. For this guy is his home loan is under water and he loses his job, he comes out better off.
I don’t know how many people fit into this category but there are many.
Prior to going on unemployment he paid $800 in rent, $250 for utilities, $200 for health insurance, and $900 for food. This is about $1,200 per month less than he was paying before. Since his net pay when he was working was $40,000 per year less social security or about $3,000 per month his new income is $1,200 per month less or $1,800. His unemployment is $20,000 per year or $1,660. If his boss calls him back to work he will gain $140 per month for working 40 hours per week or about 85 cents per hour. Will he be anxious to go back to work for this low pay or would he rather just stay at home.
It is likely that his health care at work would cost more than $15 per month plus by working he has transportation cost and other cost associated with work.
If this same guy owned his home with a $200,000 mortgage he would have been paying about $1,400 per month for principal, interest, taxes and insurance on the home so by letting his house go back to the bank his monthly housing cost decrease from $1,400 to $500. For this guy is his home loan is under water and he loses his job, he comes out better off.
I don’t know how many people fit into this category but there are many.
Common sense
I have a theory that ordinary people using their life’s experience and their God given common sense can come to an understanding of complex issues with the same degree of accuracy as the so called experts. I believe that for a number of reasons. First in every complicated modern day issue there are groups of experts who have spent their lives investigating the various aspects of the situation and about equal numbers come down on each side of the issue. You could flip a coin and have the same odds of coming up with the right approach.
Let’s look at some recent examples. President Obama said his health care plan would insure 31 million new people and it would not cost anything. Does your common sense tell you that if you read and understood the 2,100 pages of this bill that you would come to the conclusion that this was an accurate statement? When you hear that there is very little difference between Obama Care and Romney Care but then you find out that Romney’s plan is 75 pages and Obama’s plan is 2,100 pages. Does that sound reasonable to you? When experts tell you that we can solve our debt problem by taxing the rich without making changes to entitlements, does that make sense?
When you evaluate the War on Poverty that started in the 60’s with President Johnson’s Great Society do you see it as a success for the Black community? When you see that single moms increased from 25% to 75%, when inner city crime increased, when drug use increased, when dropout rates increased and we spent trillions, do you see this as something we should continue or do you believe we should try a new approach?
Do you think our schools have improved when the cost per pupil (in constant dollars) has quadrupled and achievement has remained flat, and when the gap between whites and blacks had widened?
This is what we get for listening to experts. Maybe it is time to let common sense take over.
Let’s look at some recent examples. President Obama said his health care plan would insure 31 million new people and it would not cost anything. Does your common sense tell you that if you read and understood the 2,100 pages of this bill that you would come to the conclusion that this was an accurate statement? When you hear that there is very little difference between Obama Care and Romney Care but then you find out that Romney’s plan is 75 pages and Obama’s plan is 2,100 pages. Does that sound reasonable to you? When experts tell you that we can solve our debt problem by taxing the rich without making changes to entitlements, does that make sense?
When you evaluate the War on Poverty that started in the 60’s with President Johnson’s Great Society do you see it as a success for the Black community? When you see that single moms increased from 25% to 75%, when inner city crime increased, when drug use increased, when dropout rates increased and we spent trillions, do you see this as something we should continue or do you believe we should try a new approach?
Do you think our schools have improved when the cost per pupil (in constant dollars) has quadrupled and achievement has remained flat, and when the gap between whites and blacks had widened?
This is what we get for listening to experts. Maybe it is time to let common sense take over.
Money
Recently I discovered a confluence between two episodes in my life that surprised me. During my years as a financial planner I came to understand that how much money you earned was less important than how you handled your money. I saw many situations where people who earned more faced more severe money problems than those who earned less. I came to understand that some people were good at managing their finances and others were not.
In my retirement years I volunteered to help people file their income tax through the AARP and here I discovered the same idea of handling your money but from a different perspective. Case in point. A young man married with three children and a stay at home wife works at Walmart making $9 per hour. Although his gross income is only $18,000 per year he received benefits from various government programs that brought that up to $29,000 per year. In addition he has about $6,000 per year in benefits. What he gets for this is a lot more than his income. He has a job which requires very little formal education, (no college debt), very little training and very little stress. He works a forty hour week and has time to concentrate on being a good husband and father.
The point I am making is there are people who are far from rich, monetarily speaking but because they know how to deal with money have lives that are very rich
In my retirement years I volunteered to help people file their income tax through the AARP and here I discovered the same idea of handling your money but from a different perspective. Case in point. A young man married with three children and a stay at home wife works at Walmart making $9 per hour. Although his gross income is only $18,000 per year he received benefits from various government programs that brought that up to $29,000 per year. In addition he has about $6,000 per year in benefits. What he gets for this is a lot more than his income. He has a job which requires very little formal education, (no college debt), very little training and very little stress. He works a forty hour week and has time to concentrate on being a good husband and father.
The point I am making is there are people who are far from rich, monetarily speaking but because they know how to deal with money have lives that are very rich
Death panels
In the past I have discussed rationing with Medicare and Medicaid and how we have been doing that for many years but no one wants to talk about it. Sara Palin let the cat out of the bag when she used the phrase “death panels”. If you are a very wealthy person rationing does not apply to you but if you are relying on the government it does.
I am currently involved in a situation that illustrates what I have been referring to. My brother in law has been in Eldercare for about three years and at a cost of $7,000 per month he must use Medicaid to pay. About a year ago he developed problems with his gall bladder and some liver problems. They kept postponing the bladder surgery and recently found cancer in the liver. The doctor told him that the cancer would not likely respond favorably to treatments like chemo and surgery and that they would keep him comfortable and since he is unable to leave the Eldercare that Hospice would come there to help.
I have no way of knowing how effective further treatment would be and perhaps this is best for him but be advised that this is what Palin meant by death panels. It is subtle but effective.
I am currently involved in a situation that illustrates what I have been referring to. My brother in law has been in Eldercare for about three years and at a cost of $7,000 per month he must use Medicaid to pay. About a year ago he developed problems with his gall bladder and some liver problems. They kept postponing the bladder surgery and recently found cancer in the liver. The doctor told him that the cancer would not likely respond favorably to treatments like chemo and surgery and that they would keep him comfortable and since he is unable to leave the Eldercare that Hospice would come there to help.
I have no way of knowing how effective further treatment would be and perhaps this is best for him but be advised that this is what Palin meant by death panels. It is subtle but effective.
Creation
I never know why certain things catch my attention but today the subject of a candidate’s religious beliefs was in the news because Governor Perry suggested the he believes in the biblical explanation of creation. Well surprise, I have an unusual take on this issue. Some years ago I was very interested in particle physics and one of the basic tenets of that subject is the concept of the observer creates the observed. In essence this means that in the sub atomic world you always find what you are looking for where you look. Experiments show that if you and I are both looking for the same particle, we will both find it at the same time in different places. Don’t be alarmed as there is much about particle physics that is contrary to common sense. A further understanding of this strange happening states that without consciousness there is nothing. It is only when there is a conscience mind that we have the material universe that we know. If I were the last living being in the entire cosmos with a conscience mind and I died the entirety of creation would disappear. Let’s examine the reverse of that. At some point in our past according to the theory of evolution humans evolved from some other species. During the process the human brain grew and especially the frontal lobes where our humanness resides but the evolution of the pelvic area of the female had to evolve at the same time to allow the birth canal to pass this larger head. If that dual development occurred some 10,000 years ago then the entire history of the universe came into existence at that instant, the moment that consciousness was born. I bring this up as a possible explanation of events that would bridge the gap between evolution and creation. I am not a religious person but the bible does show some credibility to this idea.
And the Lord God formed man of the dust of the ground, and breathed into his nostrils the breath of life; and man became a living soul."
The breath of life could well be consciousness
And the Lord God formed man of the dust of the ground, and breathed into his nostrils the breath of life; and man became a living soul."
The breath of life could well be consciousness
Libya
Now that the war in Libya is winding down it has been revealed that the NATO countries real motive was regime change and not just protecting innocent civilians and the reason for this is oil.
And this is what the information manager at the rebel-controlled Arabian Gulf Oil Company, Libya's largest oil producer, had to say about who it now intends to trade with: "We don't have a problem with Western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil." Those last three countries weren't involved in the NATO mission in Libya.
The US will get no oil from Libya but recall that many said the reason the US went into Iraq was to get oil.
Those who claim that the U.S. invaded Iraq in 2003 to get control of the country's giant oil reserves will be left scratching their heads by the results of last weekend's auction of Iraqi oil contracts: Not a single U.S. company secured a deal in the auction of contracts that will shape the Iraqi oil industry for the next couple of decades. Two of the most lucrative of the multi-billion-dollar oil contracts went to two countries which bitterly opposed the U.S. invasion — Russia and China — while even Total Oil of France, which led the charge to deny international approval for the war at the U.N. Security Council in 2003, won a bigger stake than the Americans in the most recent auction. "[The distribution of oil contracts] certainly answers the theory that the war was for the benefit of big U.S. oil interests," says Alex Munton, Middle East oil analyst for the energy consultancy Wood Mackenzie, whose clients include major U.S. companies. "That has not been demonstrated by what has happened this week."
This is similar to what happened after WW11 where Russia took half of Europe and the US took a cemetery in France to bury the dead. In addition the US spent time, money and energy rebuilding Europe and Japan. How many times in history has that happened.
The US can rightfully be blamed for mistakes in foreign policy but we have some things honorably.
What are your thoughts on how Libya is working out and what do you think should be done in Syria as they kill innocent people
And this is what the information manager at the rebel-controlled Arabian Gulf Oil Company, Libya's largest oil producer, had to say about who it now intends to trade with: "We don't have a problem with Western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil." Those last three countries weren't involved in the NATO mission in Libya.
The US will get no oil from Libya but recall that many said the reason the US went into Iraq was to get oil.
Those who claim that the U.S. invaded Iraq in 2003 to get control of the country's giant oil reserves will be left scratching their heads by the results of last weekend's auction of Iraqi oil contracts: Not a single U.S. company secured a deal in the auction of contracts that will shape the Iraqi oil industry for the next couple of decades. Two of the most lucrative of the multi-billion-dollar oil contracts went to two countries which bitterly opposed the U.S. invasion — Russia and China — while even Total Oil of France, which led the charge to deny international approval for the war at the U.N. Security Council in 2003, won a bigger stake than the Americans in the most recent auction. "[The distribution of oil contracts] certainly answers the theory that the war was for the benefit of big U.S. oil interests," says Alex Munton, Middle East oil analyst for the energy consultancy Wood Mackenzie, whose clients include major U.S. companies. "That has not been demonstrated by what has happened this week."
This is similar to what happened after WW11 where Russia took half of Europe and the US took a cemetery in France to bury the dead. In addition the US spent time, money and energy rebuilding Europe and Japan. How many times in history has that happened.
The US can rightfully be blamed for mistakes in foreign policy but we have some things honorably.
What are your thoughts on how Libya is working out and what do you think should be done in Syria as they kill innocent people
Big banks
For several months now the various financial experts have expressed concerns about the big banks. Even though they received large handouts from the government they were still saddled with huge debt from the mortgage fiasco and so their health was in question. Recently Warren Buffett talked with President Obama about the situation at Bank of America and this week Berkshire Hathaway, (Buffett’s company) invested 5 billion in the bank. For his 5 billion he received 50,000 shares of preferred stock valued at $100,000 per share. Understand that if the bank gets in trouble the preferred stock holders take preference over the common stock holders. This stock pays a dividend of 6% so Buffett gets $300 million per year and dividends are currently taxed at 15%. In addition he gets the right to purchase 700 million shares of common stock at $7.14 per share. Now when he made this deal the stock was selling at $6.50 but when the deal was announced the stock rose to $8.00. If this infusion of cash saves the company and the stock rises he can sell and make a handsome profit and if he waits one year or more to sell his profit will be taxed at the long term capital gain rate of 15%. This is the upside, but what about the down side. If the junk mortgages are more than the bank can handle and it goes under all stock holders are in jeopardy so why would Buffett take such a risk. Some have suggested that in the conversation Buffett had with the president, Obama assured him that the federal government would not allow Bank of America to go under. In other words when it comes to the old adage risk determines return Buffett found a way to get the upside of the deal and pass on the downside to the government. It is the same game of moral hazard that has been played by the too big to fail idea. The investors take the profits when they guess right and the tax payers take the losses when they guess wrong.
Elect Obama
This letter is for Bill and offers a strategy to re-elect President Obama. Contrary to popular belief the secret is to focus on the economy and not on the debt. When he speaks about the economy he is on the offence but when the conversation turns to the debt he is on the defense. He should make use of his considerable oratorical skills and talk about jobs. He can use the bully pulpit and keep his message alive by giving the press something to report every week. He can extend unemployment benefits and he can get the Fed to print more money. The money will be directed to the states to minimize layoffs with state, county and municipal employees. He will not be able to make a significant reduction in the unemployment rate but he can keep it from rising. He must utilize the Clinton principal of I feel your pain. Through his words alone he can show that he is serious about attacking the jobs problem and with the proper reporting this can carry him through to the late winter of next year. At that point the next step in the re-election strategy begins with the campaign against those who voted for the Ryan plan. He starts the drum beat and he will be joined by liberals in congress to demagogue those who want to change Medicare. By doing this, the seniors will join the Democratic base of unions, blacks and Hispanics and this will put him over the top. In addition it will allow the Democrats to maintain the senate and to recapture the house. It will be a triumph of politics over statesmanship and party over country but it will win the election. It will play into the hands of all those who want benefits at the expense of the debt but the debt will be a dead issue, having disappeared into the mysterious kick the can down the road metaphor.
One of the events that can disrupt this plan is the situation in Europe. If they keep experiencing serious problems with their debt, it may not be possible to keep that issue on the back burner. Many European countries must deal with the same problems that face states like California and Illinois. If the experts are correct, at some point in the future the debt will overrun the economy and it will be impossible to ignore but that time may still be a long way off for the United States. My entire adult life, I have heard people say that you can’t keep spending more than you take in, but that hasn’t stopped us. We can probably milk a few more election cycles out of this. Who knows by the time the day of reckoning comes, if it comes, we may be dead.
I realize I have interjected a bit of sarcasm but I am serious about the general strategy. If the name of the game is to win, and it is, then this has a very good chance of succeeding. Remember all’s fair in love, war and politics.
One of the events that can disrupt this plan is the situation in Europe. If they keep experiencing serious problems with their debt, it may not be possible to keep that issue on the back burner. Many European countries must deal with the same problems that face states like California and Illinois. If the experts are correct, at some point in the future the debt will overrun the economy and it will be impossible to ignore but that time may still be a long way off for the United States. My entire adult life, I have heard people say that you can’t keep spending more than you take in, but that hasn’t stopped us. We can probably milk a few more election cycles out of this. Who knows by the time the day of reckoning comes, if it comes, we may be dead.
I realize I have interjected a bit of sarcasm but I am serious about the general strategy. If the name of the game is to win, and it is, then this has a very good chance of succeeding. Remember all’s fair in love, war and politics.
WMD
The second George Bush administration made a number of mistakes and one of the biggest had to do with weapons of mass destruction mainly chemical and biological. When the US invaded Iraq the big question was are there any WMD and the question should have been where are they?Here is a partial list of WMD given to Iraq during the 80’s and 90’s. About 100 tons of mustard gas also came from Brazil.] The non-profit American Type Culture Collection and the Centers for Disease Control sold or sent biological samples of anthrax, West Nile virus and botulism to Iraq up until 1989 the Iraqi military settled on the American Type Culture Collection strain 14578 as the exclusive anthrax strain for use as a biological weapon, according to Charles Duelfer.[31]The British government also financed a chlorine factory that was intended to be used for manufacturing mustard gas.[33]Singapore gave 4,515 tons of precursors for VX, sarin, tabun, and mustard gases to Iraq. The Dutch gave 4,261 tons of precursors for sarin, tabun, mustard, and tear gases to Iraq. Egypt gave 2,400 tons of tabun and sarin precursors to Iraq and 28,500 tons of weapons designed for carrying chemical munitions. India gave 2,343 tons of precursors to VX, tabun, Sarin, and mustard gases. Luxembourg gave Iraq 650 tons of mustard gas precursors. Spain gave Iraq 57,500 munitions designed for carrying chemical weapons. In addition, they provided reactors, condensers, columns and tanks for Iraq’s chemical warfare program, 4.4% of the international sales. China provided 45,000 munitions designed for chemical warfare. Portugal provided yellowcake between 1980 and 1982. Niger provided yellowcake in 1981.[34]
The US Defence Secretary, Donald H. Rumsfeld, is a strong supporter of president Bush's plan to invade Iraq, yet a few years ago he personally helped to supply Iraq with many tons of biological and chemical weapons!
Donald H. Rumsfeld attended a secret meeting with Saddam Hussein in Iraq on behalf of the US government in December 1983, and agreed to sell Iraq weapons of mass destruction and arranged a loan to give Saddam Hussein the money to buy them. At that time, Iraq was using weapons of mass destruction against its neighbours, and the US not only allowed this but actively supported it.
So the answer to what happened to them has been revealed in data collected from files stored in Iraq since the war ended
One forth were sold to Arab neighbors
The Russians took another forth
The final half was sent to Syria and were moved under the noses of the US as they invaded
The US Defence Secretary, Donald H. Rumsfeld, is a strong supporter of president Bush's plan to invade Iraq, yet a few years ago he personally helped to supply Iraq with many tons of biological and chemical weapons!
Donald H. Rumsfeld attended a secret meeting with Saddam Hussein in Iraq on behalf of the US government in December 1983, and agreed to sell Iraq weapons of mass destruction and arranged a loan to give Saddam Hussein the money to buy them. At that time, Iraq was using weapons of mass destruction against its neighbours, and the US not only allowed this but actively supported it.
So the answer to what happened to them has been revealed in data collected from files stored in Iraq since the war ended
One forth were sold to Arab neighbors
The Russians took another forth
The final half was sent to Syria and were moved under the noses of the US as they invaded
Slipper slope
When it comes to the abortion issue you can call me a middle of the roader as I feel that in the first trimester the mother in consultation with her doctor and husband, if available, should be able to choose. The third trimester it should only be allowed for rape, incest or physical life of the mother and in the second trimester it must be on a case by case basis with experts from different areas involved.
I bring this up because pro-choice people often argue about rape and incest to make their point and this is often brought up in the press. One argument for the pro-life people I have not heard involves late term abortion. Would you allow an abortion at 8 months and 30 days? Would you allow an abortion at 8 months and 30 days if the mother did not like the color of the baby’s eyes? If the answer is no then you ask about 8 months and 29 days and so on. I bring up these argument, to show the weakness in the arguments on both sides where abortions are allowed for any reason and abortions are not allowed for any reason. Each side is unwilling to give an inch because the fear the slippery slope and it has been my experience when that is the excuse for any decision it is likely to be faulty.
You can see this same reasoning when it comes to gun control. Those for do not want any restrictions on guns and those against want to get rid of all guns. Once again the driving factor is the slippery slope argument.
I bring this up because pro-choice people often argue about rape and incest to make their point and this is often brought up in the press. One argument for the pro-life people I have not heard involves late term abortion. Would you allow an abortion at 8 months and 30 days? Would you allow an abortion at 8 months and 30 days if the mother did not like the color of the baby’s eyes? If the answer is no then you ask about 8 months and 29 days and so on. I bring up these argument, to show the weakness in the arguments on both sides where abortions are allowed for any reason and abortions are not allowed for any reason. Each side is unwilling to give an inch because the fear the slippery slope and it has been my experience when that is the excuse for any decision it is likely to be faulty.
You can see this same reasoning when it comes to gun control. Those for do not want any restrictions on guns and those against want to get rid of all guns. Once again the driving factor is the slippery slope argument.
Student loans
Student loans is the latest potential bailout. Starting about 30 years ago the government began to actively offer financial aid to college students under the belief that poor people should have as much right to and education as the rich. Since that time tuition has increased at three times the rate of inflation. Colleges realized that if the government was going to provide aid that they could increase their tuition. The same thing happened to health care when Medicare was introduced in 1965. At that time they projected the cost in the year 1990 would be 12 billion and in inflation adjusted dollars it was 107 billion. I recall when Medicare was introduce there was a rush of doctors buying hospitals knowing that profits would follow.
Bilderbergs
I found it interesting that you brought up the Bilderbergs. Many years ago a good friend of mine was active in the John Birch Society and they were big proponents of a conspiracy theory involving the one world government and the Bilderbergs were often mentioned as the leader of this movement. I went with him to a couple of Birch meetings and found them to be too far out for me. The final nail in the coffin for me came when at one meeting a so called scientist was there saying that if a radioactive material did not burn your hand when you held it, it was not dangerous. This was back when they were pushing for more nuke power plants.
The reason I finally drifted away from my friend is that he was like the mayor in a Washington Irving story by the name of Wooter Van Twiller. He was described as someone who conceived of every idea on such a grand scale that he had not room in his head to turn it over and examine both sides. I have always felt that most conspiracy theorist have this problem so I never give them much credibility.
The reason I finally drifted away from my friend is that he was like the mayor in a Washington Irving story by the name of Wooter Van Twiller. He was described as someone who conceived of every idea on such a grand scale that he had not room in his head to turn it over and examine both sides. I have always felt that most conspiracy theorist have this problem so I never give them much credibility.
Buffett
Warren Buffett CEO of Berkshire Hathaway has been saying that the rich should pay more taxes and he believes the top tax rate should be raised from the current 35% to the 39.6% it was in the Clinton administration. Buffett is seen as a grandfatherly old guy who gives a lot of money to charity. In fact, his plan was to pass on his estate to his wife but she died so he set up his children with enough money to run charities and gave most of the rest to the Bill Gates Foundation. This was an admirable thing to do and the recipients of these charities will have better lives.
Having said all of this, there is another side to his demand that the rich pay a higher tax rate. Buffett pays only 17% in taxes and the reason is that most of his income is from capital gains and dividends which are taxed at 15% and there is no payroll tax on these items. Recall that the payroll tax is the 7.65% that we all pay for social security and Medicare. In addition many of the rich have large investments in municipal bonds and the interest on these bonds is tax free. If the tax rate is increased it will have little effect on the super-rich but it will hit small business since these people get their income from wages which is taxed at the 35% rate plus the 7.65% payroll tax and includes state income tax which averages 7.5% for a total tax of over 50%.
In addition Buffett urged the President to reinstate the estate tax which means that the super-rich will pay 55% of their estate to the government when they die. This will have very little effect on Buffett since he has disposed of most of his estate through gifts. He could have given that money to the government but chose instead to pass it on to his children and charities. What is interesting about this is that Buffett’s company owns several life insurance companies and these companies benefit since many rich people purchase large life insurance policies to pay off the estate tax when they die so their heirs can inherit their estate. In addition life insurance policies can accumulate cash value without being taxed and finally life companies sell deferred annuities and both of these products become more valuable when tax rates increase.
If you want to go after the super-rich by taxation you must go after capital gains, dividends and municipal bonds. When I see the politicians doing that then I will know they are serious about attacking the wealth gap between the super-rich and the rest of us.
Having said all of this, there is another side to his demand that the rich pay a higher tax rate. Buffett pays only 17% in taxes and the reason is that most of his income is from capital gains and dividends which are taxed at 15% and there is no payroll tax on these items. Recall that the payroll tax is the 7.65% that we all pay for social security and Medicare. In addition many of the rich have large investments in municipal bonds and the interest on these bonds is tax free. If the tax rate is increased it will have little effect on the super-rich but it will hit small business since these people get their income from wages which is taxed at the 35% rate plus the 7.65% payroll tax and includes state income tax which averages 7.5% for a total tax of over 50%.
In addition Buffett urged the President to reinstate the estate tax which means that the super-rich will pay 55% of their estate to the government when they die. This will have very little effect on Buffett since he has disposed of most of his estate through gifts. He could have given that money to the government but chose instead to pass it on to his children and charities. What is interesting about this is that Buffett’s company owns several life insurance companies and these companies benefit since many rich people purchase large life insurance policies to pay off the estate tax when they die so their heirs can inherit their estate. In addition life insurance policies can accumulate cash value without being taxed and finally life companies sell deferred annuities and both of these products become more valuable when tax rates increase.
If you want to go after the super-rich by taxation you must go after capital gains, dividends and municipal bonds. When I see the politicians doing that then I will know they are serious about attacking the wealth gap between the super-rich and the rest of us.
FERS
I was a financial planner for many years before I retired in 1995 and I specialized in retirement planning. Before 1984 federal employees belonged to something called Civil Service and they had their own retirement plan. At that time the system changed over to social security but they had the option of choosing the new system called FERS (federal employee retirement system) or staying with the Civil Service. Almost all stayed with the Civil Service but all employees hired since were required to join FERS. FERS members pay into social security but can pay in extra for extra benefits. Congressmen were all required to join Social Security. This means that congressmen who have been in office starting before 1984 may still be in Civil Service or some combination of Civil Service and social security but all those who were elected for the first time after 1984 are in social security.
Doctors
When Medicare was in the works and looked like it was going to become law groups of doctors got together and started buying hospitals. They knew that when the government started paying for health care the money would flow freely. They were right of course and the cost of Medicare turned out to be ten times more than projected.
With Obama care on the horizon suddenly big health insurance companies are buying up hospitals and physician groups especially those with GP’s. I am not sure what is going in but you can bet that they believe that Obama care is going to cost a lot more that what is projected and the more is going to the insurance companies. We shall see.
With Obama care on the horizon suddenly big health insurance companies are buying up hospitals and physician groups especially those with GP’s. I am not sure what is going in but you can bet that they believe that Obama care is going to cost a lot more that what is projected and the more is going to the insurance companies. We shall see.
Select committee
Our congressional leaders have once again passed the buck to a committee. They are afraid to make the tough decisions that we expect from our elected officials so they have chosen the time worn practice of pushing things off to a committee. There will be 12 members, six from each party and six from each house. They are assigned the task of reducing spending by 1.5 trillion. If they fail to come up with a plan then the deductions will come automatically and half must come from defense and half from discretionary spending. This opens an opportunity for an agreement. The Republicans fear increases in the top tax rate which is currently 35% for individuals and corporations. The Democrats fear cuts in Entitlements like Medicare and Social Security.
The two parties could agree to lower the tax rate to 25% and close many of the deductions that have been introduced by various self interest groups. This would help business compete in the world market but it would cost individuals whose income is considered upper middle class, that is, the 50% of people who pay income tax. Typical is the deduction for home mortgage interest, deductions for health insurance premiums and charitable deductions. These people would pay more income tax than they now pay. Next they could agree to make changes to Medicare. The cost could be income based, that is, the higher income people would pay more. This is currently the case but the highest cost is only $400 per month and this would be much higher, perhaps as high as several thousands. They could also agree to phase in an increase in the age of eligibility to 67.
This would be a tough sell to the rank and file democrats since they are planning on winning the house back in the next election through demagoguery. When Paul Ryan came out with the Republican backed plan to revise Medicare the Democrats jumped on that saying that this would take Medicare away from Grandma and this was going to be their ticket to winning. To give that up will be giving up the chance to retake the house.
This is a tough sell for Republicans since it will be seen as a tax increase, even though the tax rates are lowered, many of the newly elected Republicans are opposed to any tax increase.
Even if the committee comes up with a plan it must go to the congress for an up or down vote and that could be tough and the President can veto the final vote. If they put the Medicare changes in the plan the house can pass it since they have a majority and that is where the big objection lies. Nancy Pelosi has said that bad mouthing the Republican plan to change Medicare is her path to the Speakership. If it passed the Senate and it is sent to the President he will through Pelosi under the bus if he does not veto the plan. If he veto’s he risks his reelection and if he doesn’t he risks losing the house. I believe if it comes down to a choice between his getting a second term and Pelosi regaining control of the house he will dump her.
The two parties could agree to lower the tax rate to 25% and close many of the deductions that have been introduced by various self interest groups. This would help business compete in the world market but it would cost individuals whose income is considered upper middle class, that is, the 50% of people who pay income tax. Typical is the deduction for home mortgage interest, deductions for health insurance premiums and charitable deductions. These people would pay more income tax than they now pay. Next they could agree to make changes to Medicare. The cost could be income based, that is, the higher income people would pay more. This is currently the case but the highest cost is only $400 per month and this would be much higher, perhaps as high as several thousands. They could also agree to phase in an increase in the age of eligibility to 67.
This would be a tough sell to the rank and file democrats since they are planning on winning the house back in the next election through demagoguery. When Paul Ryan came out with the Republican backed plan to revise Medicare the Democrats jumped on that saying that this would take Medicare away from Grandma and this was going to be their ticket to winning. To give that up will be giving up the chance to retake the house.
This is a tough sell for Republicans since it will be seen as a tax increase, even though the tax rates are lowered, many of the newly elected Republicans are opposed to any tax increase.
Even if the committee comes up with a plan it must go to the congress for an up or down vote and that could be tough and the President can veto the final vote. If they put the Medicare changes in the plan the house can pass it since they have a majority and that is where the big objection lies. Nancy Pelosi has said that bad mouthing the Republican plan to change Medicare is her path to the Speakership. If it passed the Senate and it is sent to the President he will through Pelosi under the bus if he does not veto the plan. If he veto’s he risks his reelection and if he doesn’t he risks losing the house. I believe if it comes down to a choice between his getting a second term and Pelosi regaining control of the house he will dump her.
Obama speach
What the President should have said in his speech today.
1 I will immediately ask congress to repeal Obamacare
2 I will offer to make modest changes in Medicare
A Gradually raise the age from 65 to 67
B Means test the monthly premium up to $4,000 per month based on income
3 Get rid of loopholes and lower the top tax rate to 25% for business and individuals
4 Repeal Dodd Frank
5 Get rid of all Czars
6 Pass a law to prohibit departments like EPA from acting without permission from congress…no regs by unelected bureaucrats unless approved by congress
7 Repeal Sarbanes Oxley
1 I will immediately ask congress to repeal Obamacare
2 I will offer to make modest changes in Medicare
A Gradually raise the age from 65 to 67
B Means test the monthly premium up to $4,000 per month based on income
3 Get rid of loopholes and lower the top tax rate to 25% for business and individuals
4 Repeal Dodd Frank
5 Get rid of all Czars
6 Pass a law to prohibit departments like EPA from acting without permission from congress…no regs by unelected bureaucrats unless approved by congress
7 Repeal Sarbanes Oxley
Ratings
I just finished reading a new book about the economic collapse of the mortgage bank system entitled. “Reckless Endangerment”. The one thing that concerned me most was the author’s surprise that the rating companies like S&P and Moody’s were not aware of the danger that various companies were in until it was too late. They mentioned that Enron, WorldCom and Fanny Mae were all highly rated until a few days before they went under.
Why does this surprise me? Some 40 years ago a large insurance company Mutual of New York was rated triple A just a week before they went under. I investigated to find out why this happened and learned that the rating companies base their rating on data provided to them by the companies they are rating. I have previously written about my experience with Equitable in this regards. A French Company named AXA wanted to get into the US insurance market and they agreed to invest one billion dollars to purchase part of Equitable. Before doing this AXA spent 20 million dollars appraising Equitable holdings and only then did they make the investment. It was obvious to me at that time that no rating company could afford to check out anyone they were rating in that manner. It was then I learned that they just accept the data from the company they are rating. From that day on I realized that the ratings given by rating companies were worthless. This was proven by the three named companies above who gave false information to the rating companies.
My question is, why did I know this and not the experts in the field. Even today when I see a financial firm advertising that they have triple A ratings, I just chuckle to myself.
Why does this surprise me? Some 40 years ago a large insurance company Mutual of New York was rated triple A just a week before they went under. I investigated to find out why this happened and learned that the rating companies base their rating on data provided to them by the companies they are rating. I have previously written about my experience with Equitable in this regards. A French Company named AXA wanted to get into the US insurance market and they agreed to invest one billion dollars to purchase part of Equitable. Before doing this AXA spent 20 million dollars appraising Equitable holdings and only then did they make the investment. It was obvious to me at that time that no rating company could afford to check out anyone they were rating in that manner. It was then I learned that they just accept the data from the company they are rating. From that day on I realized that the ratings given by rating companies were worthless. This was proven by the three named companies above who gave false information to the rating companies.
My question is, why did I know this and not the experts in the field. Even today when I see a financial firm advertising that they have triple A ratings, I just chuckle to myself.
Debt deal
We are hearing in the news that the debt reduction deal was for 917 billion in spending cuts over the next It reminds me of my wife who found something on sale and says she saved $50. The difference is that she takes our $100 and spends $50 and says we saved $50. The government borrows $100, spends $50 and claims to have saved $50 when in fact they are now $150 in the hole when you count the $50 they spent and the $100 they borrowed.
There is a big difference in spending less than you planned and spending less.
ten years. Please understand that this is Washington speak. What they mean is that they have lowered expected increases in spending over the next ten years. As far as actual cuts there is very little.
It is like me saying I was going to increase my spending next month by $100 but I decided to only spend $80 so I saved $20. If that would work I would say I am going to increase spending next month by one million but instead I only increased by $100 so I saved $999,900 and with that savings I am going to retire.
There is a big difference in spending less than you planned and spending less.
ten years. Please understand that this is Washington speak. What they mean is that they have lowered expected increases in spending over the next ten years. As far as actual cuts there is very little.
It is like me saying I was going to increase my spending next month by $100 but I decided to only spend $80 so I saved $20. If that would work I would say I am going to increase spending next month by one million but instead I only increased by $100 so I saved $999,900 and with that savings I am going to retire.
WI Unions
This past spring there was an uprising by unions, in particular the teachers union, in Wisconsin. The people had elected a Republican governor and legislature and these new representatives wanted to reduce the cost of government by gaining more control over government unions including State and Municipal employees and teachers. The debate centered around employees paying more toward their health and retirement benefits and more importantly the state wanted to limit collective bargaining.
After a few weeks of turmoil the state won the day and now we are beginning to see some of the results. The Kaukauna School district near Appleton was able to turn a $400,000 deficit into a $1,500,000 surplus by asking the teachers to pay more for their health insurance and to contribute more to their retirement plan. This sort of thing will be happening to districts around the state. This will allow the district to avoid teacher layoffs and possible hire new teachers and this will reduce class size.
There is another potential savings coming soon. In Wisconsin the teachers union own a health insurance company called WEA Trust and as a part of bargaining the schools were forced to purchase their health plans from this company. Under the new rules, the districts will send out bids to find the best deal. As you might expect since this company was the only game in town their cost escalated and the profits were used to promote the union. This Trust has already announced it will match any offer. They apparently do not know how bids work since a bidder is not given the option to match, they just submit their best offer and hope.
An article appeared in the Washington Times written by Byron York and here is an excerpt.
In the past, Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust -- a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.
Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, 'We can match the lowest bid,'" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.
In addition there will be changes in the work rules that were not previously allowed by the union, including asking teachers to work six periods per day instead of five and increasing the work week from 37 hours to 40 hours. This will reduce class size from 26 to 23.
After a few weeks of turmoil the state won the day and now we are beginning to see some of the results. The Kaukauna School district near Appleton was able to turn a $400,000 deficit into a $1,500,000 surplus by asking the teachers to pay more for their health insurance and to contribute more to their retirement plan. This sort of thing will be happening to districts around the state. This will allow the district to avoid teacher layoffs and possible hire new teachers and this will reduce class size.
There is another potential savings coming soon. In Wisconsin the teachers union own a health insurance company called WEA Trust and as a part of bargaining the schools were forced to purchase their health plans from this company. Under the new rules, the districts will send out bids to find the best deal. As you might expect since this company was the only game in town their cost escalated and the profits were used to promote the union. This Trust has already announced it will match any offer. They apparently do not know how bids work since a bidder is not given the option to match, they just submit their best offer and hope.
An article appeared in the Washington Times written by Byron York and here is an excerpt.
In the past, Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust -- a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.
Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, 'We can match the lowest bid,'" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.
In addition there will be changes in the work rules that were not previously allowed by the union, including asking teachers to work six periods per day instead of five and increasing the work week from 37 hours to 40 hours. This will reduce class size from 26 to 23.
Debt crisis
With all the news about the deal to raise the debt ceiling it is hard to find specifics but here is what I found about the first two years.
In return for this increase, nearly $1 trillion in cuts over 10 years are planned through spending caps. A cut of about $7 billion in discretionary funding is seen for 2012 compared to 2011, and 2013 discretionary spending would be $3 billion below current levels
During these two years the US budget will be over 3000 billion per year and out of this 6000 billion we will cut 10 billion. By 2014 we will have a new congress that is not bound by anything this congress passes so it is any bodies guess as to what will happen at that point. After all of the fighting, scare tactics, name calling, and demagoguery they cut 10 billion out of 6000 billion.
This would be like me cutting my $6,000 per month budget to $5,990. I guess I am willing to make the sacrifice and do my share so we can spread the pain. I guess I’m just a patriot.
In return for this increase, nearly $1 trillion in cuts over 10 years are planned through spending caps. A cut of about $7 billion in discretionary funding is seen for 2012 compared to 2011, and 2013 discretionary spending would be $3 billion below current levels
During these two years the US budget will be over 3000 billion per year and out of this 6000 billion we will cut 10 billion. By 2014 we will have a new congress that is not bound by anything this congress passes so it is any bodies guess as to what will happen at that point. After all of the fighting, scare tactics, name calling, and demagoguery they cut 10 billion out of 6000 billion.
This would be like me cutting my $6,000 per month budget to $5,990. I guess I am willing to make the sacrifice and do my share so we can spread the pain. I guess I’m just a patriot.
Legacy benefits
Back in the 1950’s the CEO of a company had a ten or twenty year plan. He laid out the policies that would guide the corporation to a strategy of long term growth. When you went to work for these companies it was employment for life or as they said from the womb to the tomb. Somewhere in the late 60’s things began to change. The pressure on the CEO to perform shortened his horizon and the stockholders demanded better returns. By the late 70’s the next quarterly dividend was the new target for the CEO and if he did not perform, investors would sell the stock and move the money to some other company.
Then he was faced with the union and their threat to strike which of course would completely destroy the dividend so he told his negotiators that they must avoid a strike at all cost. The union was told that there was very little room for wage increases but the company could offer to increase the pension and other long term benefits like health care at early retirement. These type benefits were referred to as legacy benefits since they accrued at some future date.
Fast forward to today and we find General Motors with 200,000 employees and 670,000 retirees and they spend about $5,000 per car to pay for legacy benefits. Toyota and Honda who have very few retirees spend far less so GM goes broke. This was an early warning signal to what is going on in other areas.
Unionized Municipal employees get together and help elect certain individuals to the city council and later negotiate contracts with these people. The city says we don’t have much money for wages but we can offer you a better pension plan.
The teachers union selects candidates for the school board and helps to elect them and later they negotiate with these same people. The school board says we don’t have much money to offer in wages but we can increase your pension.
Forty years ago the federal government came to me and said, John from now on we will be taking money from your check so we can provide you with health care when you are 65. I said never mind I will take care of my own expenses and they said that was not an option. So I was forced to sign up for Medicare just as I was forced to sign up for Medicaid.
The day of reckoning is here and we all face the same situation that General Motors faced and there is not much we can do about it. You can whine and complain about the unfairness of it all but these various groups over the years have promised more than they can deliver. It’s plain and simple. The benefits we thought were there are not there
Then he was faced with the union and their threat to strike which of course would completely destroy the dividend so he told his negotiators that they must avoid a strike at all cost. The union was told that there was very little room for wage increases but the company could offer to increase the pension and other long term benefits like health care at early retirement. These type benefits were referred to as legacy benefits since they accrued at some future date.
Fast forward to today and we find General Motors with 200,000 employees and 670,000 retirees and they spend about $5,000 per car to pay for legacy benefits. Toyota and Honda who have very few retirees spend far less so GM goes broke. This was an early warning signal to what is going on in other areas.
Unionized Municipal employees get together and help elect certain individuals to the city council and later negotiate contracts with these people. The city says we don’t have much money for wages but we can offer you a better pension plan.
The teachers union selects candidates for the school board and helps to elect them and later they negotiate with these same people. The school board says we don’t have much money to offer in wages but we can increase your pension.
Forty years ago the federal government came to me and said, John from now on we will be taking money from your check so we can provide you with health care when you are 65. I said never mind I will take care of my own expenses and they said that was not an option. So I was forced to sign up for Medicare just as I was forced to sign up for Medicaid.
The day of reckoning is here and we all face the same situation that General Motors faced and there is not much we can do about it. You can whine and complain about the unfairness of it all but these various groups over the years have promised more than they can deliver. It’s plain and simple. The benefits we thought were there are not there
God and shame
There are a number of changes that occur in Mid-Life and some are better known than others. One of the lesser known is a man suddenly feeling the need to reconnect with the kind of relationship he had with God when he was younger. It often starts with a vague uneasiness and leads to questioning about his purpose for being here. He begins a journey to find out more about this and generally uses the wrong approach. I would like to use the analogy of a house to illustrate his misguided efforts.
He goes home one day and throws out all of his old furniture, rips up the old carpet and cleans from top to bottom. He paints, adds new floor coverings and furniture. He puts new siding on the house, new roofing shingles, new windows and finishes off with a brand new front door. Then he takes a big breath and stands back to admire all of his efforts and then throwing open the door says, OK God, I’m ready, come on in. And then he waits. Days, weeks, months and finally years pass but nothing happens.
One day while standing at the door his eyes wander across the room to the door leading to the basement and he finds himself drawn by some mysterious force to the door. He opens the door and closing it behind him, he finds himself standing on the landing in the dark. While standing there he comes face to face with his anger. He recalls the many times when things didn’t go his way and he just pushed the anger in and suddenly all of the pent up anger was sucked into the darkness and he felt a sense of relief.
He makes his way down the steps to the basement floor and there in the pitch black he sees his hidden fears and these too are pulled into the darkness.
Next he inches his way across the room to the coalbin and closing the door behind him he stands quietly in the dark and looks into the abyss of his hurts. All of the times that someone said or did something that hurt him but he never said anything. These too eased their way out of his inner soul into the dark room and he felt a tremendous sense of peace.
Then he sees an opening in the floor in the corner and getting down on hands and knees he crawls in and soon he is crawling on his belly down there with the slimy creatures of the dark and looking ahead he sees a rock and written the moss on the rock is the word, shame. He knows that when he turns over the rock he will have to face the shame that is hidden in the deepest recesses of his soul. He turns over the rock and suddenly he is upstairs standing in the front door with the bright sunlight shinning throughout the house.
It is then that he comes to understand that God does not come in through the front door of your ego but rather through the back door of your shame. When you expose your shame to the sunlight, you open the door for God
He goes home one day and throws out all of his old furniture, rips up the old carpet and cleans from top to bottom. He paints, adds new floor coverings and furniture. He puts new siding on the house, new roofing shingles, new windows and finishes off with a brand new front door. Then he takes a big breath and stands back to admire all of his efforts and then throwing open the door says, OK God, I’m ready, come on in. And then he waits. Days, weeks, months and finally years pass but nothing happens.
One day while standing at the door his eyes wander across the room to the door leading to the basement and he finds himself drawn by some mysterious force to the door. He opens the door and closing it behind him, he finds himself standing on the landing in the dark. While standing there he comes face to face with his anger. He recalls the many times when things didn’t go his way and he just pushed the anger in and suddenly all of the pent up anger was sucked into the darkness and he felt a sense of relief.
He makes his way down the steps to the basement floor and there in the pitch black he sees his hidden fears and these too are pulled into the darkness.
Next he inches his way across the room to the coalbin and closing the door behind him he stands quietly in the dark and looks into the abyss of his hurts. All of the times that someone said or did something that hurt him but he never said anything. These too eased their way out of his inner soul into the dark room and he felt a tremendous sense of peace.
Then he sees an opening in the floor in the corner and getting down on hands and knees he crawls in and soon he is crawling on his belly down there with the slimy creatures of the dark and looking ahead he sees a rock and written the moss on the rock is the word, shame. He knows that when he turns over the rock he will have to face the shame that is hidden in the deepest recesses of his soul. He turns over the rock and suddenly he is upstairs standing in the front door with the bright sunlight shinning throughout the house.
It is then that he comes to understand that God does not come in through the front door of your ego but rather through the back door of your shame. When you expose your shame to the sunlight, you open the door for God
Unions
At one time in my career I worked in a union plant in Ohio. We had a cafeteria and part of a new contract with the union was that they could run the lunch room and the profits would go to the union. Shortly after this change became effective the employees in the lunch room had their pay cut. I mention this because President Obama has portrayed himself as a champion of the unions but when they negotiated the new contract with GM and Chrysler they put in a no strike clause which in effect pulls the teeth out of the union. Funny how things change, when you find yourself on the other side of the fence. I experienced a similar incident when I lived in Grand Forks. A good friend of mine was the head of the Teamsters for about 30 years and when he retired he ran for and was elected to the office of county commissioner. In this new position he had to negotiate contracts for the county with the county employees who were unionized. He was just at tight with the county money and the companies used to be against the Teamsters.
Fish flour
Back in the 60’s during one of the recurring famines in Africa a man on the east coast came up with an idea for what he called fish flour. He would net fish from the ocean, the kind of fish that are plentiful but not salable since they were too bony. These would be ground up and a solvent added to remove the oil. The water soluble part was then dried and ground into a fine white powder. At that point the oil was added back and the product was a high protein, high calorie flour and two table spoons per day would keep a person alive. He wanted to manufacture this product on a commercial level and use it as an inexpensive form of food for the people who were starving in Africa. His request for a permit was denied. The product contained the entire fish but it was safe since the drying process killed all micro-organism. The government said that since it was not good enough for the people of the United States, they could not allow it to be sold to others. Today the people in Africa are once again starving and we watch daily on the news unable to help. My guess is that those people would gladly eat this type of fish flour.
Bank bonus
In the news daily we read about QE 2 (quantitative easing) and we wonder what it is. This time around QE 2 is set at 600 billion dollars. You recall that last year the Federal Reserve (Central Bank) came up with QE 1 and the bought up 1.7 trillion dollars in mortgages and this money went into the banks that owned these mortgages. The idea was that the banks would then have money to loan out to businesses and this would move the economy forward. The banks however chose to just buy no risk government bonds instead of risky loans to business. Since QE 1 did not stimulate the economy the Fed is now trying QE 2 and we will see what happens. Many experts say they are doing this just to show they are doing something but these same experts don’t expect this to improve the economy.
Normally when the Federal Reserve buys bonds they issue a government check and this check is deposited in some bank and the bank can now loan money. Since the law says that a bank must keep 10% of its loans in reserve the bank can loan out 90%. So how does this create money? Say the Fed buys a $1000 government bond and the bank
The fed gets its money from interest on the US bonds it owns
It the government needs money the fed can just write a check and it immediately creates the money
If the government needs money it goes to the fed and the fed writes a check and creates the money. The fed gets its money from thin air (writing checks) or from fees it collects from member banks or from interest it earns on government bonds that it has purchased in the past.
When the fed writes a check it is deposited in a bank and the bank can now loan out 90% of that money. When you turn government bonds into circulating money that is called monetizing the debt or what the man on the street calls printing money. So if the check was for $1000 and the bank loans $900 we have expanded the money supply by $900. Even though the fed has been doing this in large amounts QE1 was 1.2 trillion and QE 2 is 600 billion the money supply has not increased because so many mortgages have been called in though default and these shrink the money supply. Even today banks are not loaning money because they can purchase government bonds at three percent with no risk and they expect interest rates to rise in the future so rather than giving a home loan today at 5% they choose to wait until the rate goes up before making a loan
The Federal Reserve (Central Bank) is privately owned by member banks. The Fed gets its money from fees paid by these banks and from interest on it own portfolio which is primarily government bonds.
The Fed needed a lot of money to purchase the troubled mortgage bonds that the banks owned and for the first time in history the Treasury sold government bonds and gave the money to the Fed to buy these bonds. The member banks then received a large influx of good money to replace the toxic mortgage bonds with the idea that they would loan the money to expand business. However they used the money to purchase government bonds that pay three percent with no risk. By doing this they have made huge profits and have paid equally huge bonuses to their investment managers. How much skill does it take to buy government bonds. These bonuses totaled 143 billion in 2010. 37% of all profits are set aside for bonus pay.
TABLE 1: Bonuses and Compensation at the Top Six Banks (2010)
Bank
2010 Bonuses and
Compensation
Bank of America $35.1 billion
Wells Fargo $26.1 billion
JPMorgan Chase $25.4 billion
Citigroup $22.6 billion
Goldman Sachs $17.5 billion
Morgan Stanley $16.0 billion
Total for Top Six $142.7 billion
Normally when the Federal Reserve buys bonds they issue a government check and this check is deposited in some bank and the bank can now loan money. Since the law says that a bank must keep 10% of its loans in reserve the bank can loan out 90%. So how does this create money? Say the Fed buys a $1000 government bond and the bank
The fed gets its money from interest on the US bonds it owns
It the government needs money the fed can just write a check and it immediately creates the money
If the government needs money it goes to the fed and the fed writes a check and creates the money. The fed gets its money from thin air (writing checks) or from fees it collects from member banks or from interest it earns on government bonds that it has purchased in the past.
When the fed writes a check it is deposited in a bank and the bank can now loan out 90% of that money. When you turn government bonds into circulating money that is called monetizing the debt or what the man on the street calls printing money. So if the check was for $1000 and the bank loans $900 we have expanded the money supply by $900. Even though the fed has been doing this in large amounts QE1 was 1.2 trillion and QE 2 is 600 billion the money supply has not increased because so many mortgages have been called in though default and these shrink the money supply. Even today banks are not loaning money because they can purchase government bonds at three percent with no risk and they expect interest rates to rise in the future so rather than giving a home loan today at 5% they choose to wait until the rate goes up before making a loan
The Federal Reserve (Central Bank) is privately owned by member banks. The Fed gets its money from fees paid by these banks and from interest on it own portfolio which is primarily government bonds.
The Fed needed a lot of money to purchase the troubled mortgage bonds that the banks owned and for the first time in history the Treasury sold government bonds and gave the money to the Fed to buy these bonds. The member banks then received a large influx of good money to replace the toxic mortgage bonds with the idea that they would loan the money to expand business. However they used the money to purchase government bonds that pay three percent with no risk. By doing this they have made huge profits and have paid equally huge bonuses to their investment managers. How much skill does it take to buy government bonds. These bonuses totaled 143 billion in 2010. 37% of all profits are set aside for bonus pay.
TABLE 1: Bonuses and Compensation at the Top Six Banks (2010)
Bank
2010 Bonuses and
Compensation
Bank of America $35.1 billion
Wells Fargo $26.1 billion
JPMorgan Chase $25.4 billion
Citigroup $22.6 billion
Goldman Sachs $17.5 billion
Morgan Stanley $16.0 billion
Total for Top Six $142.7 billion
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