The President says he wants to pursue all forms of energy which as far as I can tell is what everyone wants. He has stopped drilling in the Gulf and has asked Saudi Arabia to increase production. Some say he is concerned about global warming but burning oil from Saudi Arabia instead of oil from the Gulf makes no difference as far as global warming. Obama followed up on a Bush pledge made in 2007 to provide government loan guarantees to build nuke power plants but the EPA ask for such large fees that companies cannot afford to build. This way the President can say he gave permission to build a nuke plant knowing that it will not be built. The President is pushing a new process called fracking to develop natural gas. Using this process we have enough natural gas to last for 100 years. He is ignoring complaints from environmentalists who oppose fracking. It would make sense to start funding natural gas stations around the country since the use of natural gas as a fuel for diesel trucks would replace all of the oil we buy from Saudi Arabia. He is pushing for electric cars but does not answer the question as to where the electricity will come from. The Obama policy on coal, our most abundant source of energy, is that we should not use it and he has proposed taxes and fees on coal to eliminate its use. Once again the concern about global warming but China is building six new coal fired power plants every month. He has pushed for solar and wind and these are good sources of energy but they are not ready at this time. To use electricity to run trains, planes and semis is a long way off. We are having problems getting cars to run on batteries.
What all this tells me is that we do not have a coherent energy policy. What should be done?
Step one. Issue permits without fees for nuclear power plants and for oil refineries and offer loan guarantees to build them.
Step two. Start drilling for oil in the Gulf and on the continental shelf in the Atlantic and Pacific. Start drilling on government lands, including ANWAR in Alaska.
Step three. Offer tax incentives and low interest loans to build natural gas fueling at all gas stations and truck stops. Offer low interest loans to purchase kits to change Semi’s over to natural gas.
Step four. Build new clean coal power plants
Step five. Provide research money for solar, wind and hydrogen energy. Then let private companies build plants to make use of new ways.
In conclusion it is necessary to separate US markets from world markets and to separate gasoline from oil. The US is in a position to reap huge profits from exporting refined products. It takes three years to build a refinery. If business knew that the country was committed to maximizing oil production and offering permits and incentives to build refineries the country could finally make a dent in our negative trade balance by selling gasoline and diesel to China and India.
It is obvious that I should be President
Thursday, March 22, 2012
Buffett rule
Warren Buffett, one of the world’s richest men suggested that he and his other rich friends should pay more tax, so the President thought it was a good idea and promoted it in the state of the union speech. This idea became known as the Buffett Rule and was widely touted as a way to help us out of the economic mess. Today the government accounting office came out and said that this plan if instituted would bring in 5 billion dollars per year and that is great but it doesn’t do much to offset the deficit which this year is 1,270 billion. Well 1,265 billion does sound better, doesn’t it!
Millionaires
The President has proposed that we tax millionaires and billionaires to help balance the budget. He has not stated the specific tax rate. There are 80,000 Americans who earn more than 1 million and they average 4 million. If we take all of their money we would bring in 320 billion dollars. (80,000 x 4,000,000). That would reduce this year’s deficit from 1,270 billion to 950 billion. Taxing the rich is OK by me but we must tackle the entitlements. Social security, Medicare and Medicaid cost 1,600 billion dollars per year. We have to reduce spending as well as increase revenue something like the Boles/Simpson plan prepared last year but ignored.
The advantage of arguing over taxing the rich is that no one has to talk about entitlements. The President doesn’t want to talk about them neither do the Republican candidates. They all saw what happened when Paul Ryan came out with his plan which he reiterated today. He proposed changes in entitlements and got crucified.
There is a tendency to blame elected officials for lack of courage but taking on entitlements is a sure way to get kicked out of office and for that you can blame the voters. It reminds me of what Pogo said about the government, “we have met the enemy and they is us”.
Until we voters are willing to bite the bullet and reduce some of our benefits the politicians will continue down the path we are on.
The advantage of arguing over taxing the rich is that no one has to talk about entitlements. The President doesn’t want to talk about them neither do the Republican candidates. They all saw what happened when Paul Ryan came out with his plan which he reiterated today. He proposed changes in entitlements and got crucified.
There is a tendency to blame elected officials for lack of courage but taking on entitlements is a sure way to get kicked out of office and for that you can blame the voters. It reminds me of what Pogo said about the government, “we have met the enemy and they is us”.
Until we voters are willing to bite the bullet and reduce some of our benefits the politicians will continue down the path we are on.
more on millionaires
More on millionaires and billionaires. Take the example of a very rich person. This person only pays 15% on income since most is from capital gains. That means they have invested their money in some type of risk taking adventure, like financing a new company or just buying stock in a company. Just what choices does a rich person have when it comes to their money? They can spend it and that of course helps the economy. The can invest it in some type of business and that helps the economy. The can put it in the bank and banks are allowed by law to loan out 9 dollars for every one dollar they have so the banks have more money to loan which means lower interest rates and that is good for the economy. So there is nothing economically wrong with rich people having lots of money, so what is the problem. The problem is that the rich are getting richer and the poor are getting poorer and people feel there is something inherently wrong with that. This feeling is exacerbated when people feel that there is an uneven playing field. They feel that the rich using insider information are gaming the system and there is good reason to feel that way, since there are many recent examples of illegal activities on the part of certain wealthy people. The main objection by groups like the Tea Party and the Occupy Wall Street is corruption in government and business. To talk about taxing these rich people more is a distraction from the real problem which is corruption. One thing that will have a profound effect on corruption is penalties. We have yet to see anyone go to jail on the recent fiasco of the home mortgage derivatives. Fines are no deterrent but jail time is and not just a couple of years in a country club prison.
Brits and us
President Obama met with British PM Cameron and the news media has been comparing the Brits approach to the economic downturn with the US approach. They have chosen austerity and spending cuts and we have chosen stimulus spending and no cuts. So far our economy is growing faster so the experts conclude that we have the best plan. This is typical short term thinking and assuming that you can change one part of the economy without effect the other parts.
We will pull out ahead over the next couple of years but in about five years when we pay for our spending with inflation things will change. Most of the debt the US has incurred is short term meaning a few years as opposed to long term, things like the 30 year bond. We have to refinance out debt every couple of years because we have mostly short term bonds. As inflation rises so does interest rates and we have gotten off cheap these past three years because of low interest rates. The average interest rate these past three years has been about 2.5% and the interest payment last year was 250 billion. If interest rates would increase to 7.5% the interest payments would exceed social security payments. Recall that just a few years ago at the end of the Carter administration the prime rate was 13%. If that happens we will be like Greece.
Everyone understands that printing money is followed by inflation. What we don’t know is how much and when.
We will pull out ahead over the next couple of years but in about five years when we pay for our spending with inflation things will change. Most of the debt the US has incurred is short term meaning a few years as opposed to long term, things like the 30 year bond. We have to refinance out debt every couple of years because we have mostly short term bonds. As inflation rises so does interest rates and we have gotten off cheap these past three years because of low interest rates. The average interest rate these past three years has been about 2.5% and the interest payment last year was 250 billion. If interest rates would increase to 7.5% the interest payments would exceed social security payments. Recall that just a few years ago at the end of the Carter administration the prime rate was 13%. If that happens we will be like Greece.
Everyone understands that printing money is followed by inflation. What we don’t know is how much and when.
Futures market
The news is filled with stories about oil speculators driving up the price of oil and thus gasoline. Some ask why we allow speculators. To answer that, assume you are farmer Jones up in North Dakota. It is spring and you are figuring your cost for the coming year and you realize that you have to get $3 per bushel for your wheat or you won’t make enough to live on. You are also aware of all of the many things that can happen during a crop year that can affect your wheat. You go to the futures market where there are individuals who are willing to pay a set price for your crop next fall. Mr. Smith is a commodities trader and he feels that wheat will be selling for $3.10 per bushel next fall. His full time job is to check factors around the world and come up with the price. He is just the guy you have been looking for since he will guarantee the price you need to live. You sign a futures contract with him and you agree to deliver 50,000 bushels of wheat on November 1st and he agrees to buy your wheat at $3 per bushel.
Meanwhile Mr. Smith has contacted Cargill and they agree to buy 50,000 bushels at $3.10 from him on November 1st. Mr. Smith will not take delivery on the wheat but will arrange for Farmer Jones to ship it directly to Cargill. Now one day Mr. Smith hears from his friend, who works in the agriculture department in Argentina, that there is an insect problem that will hurt the wheat crop and Argentina is a big wheat producer. He will soon be offering $3.20 then $3.30 and so on driving up the price. Smith immediately starts to buy as many contracts as he can and that brings us to margin requirements. Currently Smith only has to have five dollars in cash to buy 100 dollars in wheat contracts. The present margin requirement is 5%. One thing than can be done and is done on a regular basis is to raise the margins and that limits speculation.
Wheat is like oil in that it is traded on the world markets as a commodity and margin requirements can be changed by regulators at any time and that time may be near.
Meanwhile Mr. Smith has contacted Cargill and they agree to buy 50,000 bushels at $3.10 from him on November 1st. Mr. Smith will not take delivery on the wheat but will arrange for Farmer Jones to ship it directly to Cargill. Now one day Mr. Smith hears from his friend, who works in the agriculture department in Argentina, that there is an insect problem that will hurt the wheat crop and Argentina is a big wheat producer. He will soon be offering $3.20 then $3.30 and so on driving up the price. Smith immediately starts to buy as many contracts as he can and that brings us to margin requirements. Currently Smith only has to have five dollars in cash to buy 100 dollars in wheat contracts. The present margin requirement is 5%. One thing than can be done and is done on a regular basis is to raise the margins and that limits speculation.
Wheat is like oil in that it is traded on the world markets as a commodity and margin requirements can be changed by regulators at any time and that time may be near.
Obama care
Big surprise! The GAO (government accounting office) announced today that Obama Care would cost twice the original estimate. How could this happen? Recall that the original cost was based on the ten years between 2010 and 2020, but 95% of the program was not scheduled to begin until 2014. So now as we near that starting point the projection is between 2014 and 2024 and the ten year cost went from 900 billion to 1.8 trillion or twice as much. This kind of accounting gives the impression that the government thinks we are stupid. I can understand why the government might think that since they came out and said they were going to insure 31 million new people and it wouldn’t cost anything. I don’t know about you but I feel insulted. Wake up America!
New subject but still about health care. Because of how nice it sounds people feel that preventive medicine will save money but every study shows this not to be the case. While prevention is admirable, it is not cost effective. The reason is obvious when you think it through. Many people must be tested to find a positive and cost/benefit ratios become unsustainable. Please don’t ask how you can place a price on human life as this is done on a regular basis. We have limited resources and it is wise to spend where the return is the greatest and, as I said, studies show that preventive testing does not give an acceptable return on investment. The best prevention is not through the medical profession but by individuals who follow a healthy life style and we all know what that means. Eat a well-balanced diet, exercise, get proper rest, be moderate in the use of stimulants and watch your weight.
Dr. John
New subject but still about health care. Because of how nice it sounds people feel that preventive medicine will save money but every study shows this not to be the case. While prevention is admirable, it is not cost effective. The reason is obvious when you think it through. Many people must be tested to find a positive and cost/benefit ratios become unsustainable. Please don’t ask how you can place a price on human life as this is done on a regular basis. We have limited resources and it is wise to spend where the return is the greatest and, as I said, studies show that preventive testing does not give an acceptable return on investment. The best prevention is not through the medical profession but by individuals who follow a healthy life style and we all know what that means. Eat a well-balanced diet, exercise, get proper rest, be moderate in the use of stimulants and watch your weight.
Dr. John
Sunni Shia
The Muslim world is made up of Sunni and Shia groups and 90% are Suni. Iran is 90% Sunni and most of the other countries are 90% or more Shia. In other words Iran stands alone in the Muslim world as the only dominant Shia country and this is and has been an irritation. Iraq is a unique situation since it is 60% Sunni and 40% Shia and so Saddam, a Sunni, could dominate the country. The current leader in Iraq, al-Maliki, is a Shia and some say he is becoming a Shia Saddam. A few days after the US forces left, al-Maliki got rid of the highest ranking Sunni in the government, Tariq al-Hashemi. Now we get word that al-Maliki is allowing Iran to overfly Iraq with planes loaded with military equipment for Syria. Fighting between different religious sects is called sectarian and this is what has been going on in Iraq between Sunni and Shia for many years. It appears that one of the main differences between Iraq before the war and after the war is the change in power from Sunni to Shia.
Apple jobs
Apple employs 47,000 direct jobs here in the US and 700,000 jobs overseas.
Exxon Mobil employs 31,000 in the US and 52,000 overseas.
In 2011 Apple had total sales of 108 billion and profit before tax of 28 billion and profit is 25% of sales.
Exxon had total sales of 470 billion and profit of 32 billion and profit is 7% of sales.
The way to increase your profit margin is to have more overseas employees and pay them less. Apple employees in Chine earn on average 51 cents per hour.
Apple seems to get lots of favorable publicity while Exxon is the evil empire gouging us at the pump. What gives here?
Exxon Mobil employs 31,000 in the US and 52,000 overseas.
In 2011 Apple had total sales of 108 billion and profit before tax of 28 billion and profit is 25% of sales.
Exxon had total sales of 470 billion and profit of 32 billion and profit is 7% of sales.
The way to increase your profit margin is to have more overseas employees and pay them less. Apple employees in Chine earn on average 51 cents per hour.
Apple seems to get lots of favorable publicity while Exxon is the evil empire gouging us at the pump. What gives here?
O'Reilly gas price
Bill O’Reilly is once again on the rampage saying that the big oil companies are gouging us at the pump. He cannot get it through his head that the oil companies make money selling oil not gasoline.
HOUSTON — Exxon Mobil Corp. said Thursday it’s getting out of the retail gasoline business, following other major oil companies who’ve been selling their low-margin stations to gasoline distributors.
Exxon Mobil is not alone among Big Oil exiting the retail gas business, a market where profits have gotten tougher as crude oil prices have risen. In fact, industry officials say the major oil companies own fewer than 5 percent of U.S. gas stations.
Current capacity of US oil refineries is 17.7 million barrels per day and they are producing 16.9 million or at 95%. Some refineries are always down for maintenance and repair.
There are plenty of reasons gas costs so much, but one of them is that the United States doesn't have enough refineries. The National Petrochemicals and Refiners Association says that the last new refinery built in the United States was Marathon Ashland's Garyville, La., plant —and it was completed in 1976.
If President Obama would come out tomorrow saying he was issuing permits for 100 new refineries and the government would offer low interest loans to finance them and at the same time announce that he would issue permits to drill for oil off both coast and in the Gulf and in Alaska and on federal lands the price of gas would begin to fall. In addition these are high paying jobs.
When he says there is no magic bullet to bring down the price of gas he means there is no way without increasing the use of fossil fuel.
HOUSTON — Exxon Mobil Corp. said Thursday it’s getting out of the retail gasoline business, following other major oil companies who’ve been selling their low-margin stations to gasoline distributors.
Exxon Mobil is not alone among Big Oil exiting the retail gas business, a market where profits have gotten tougher as crude oil prices have risen. In fact, industry officials say the major oil companies own fewer than 5 percent of U.S. gas stations.
Current capacity of US oil refineries is 17.7 million barrels per day and they are producing 16.9 million or at 95%. Some refineries are always down for maintenance and repair.
There are plenty of reasons gas costs so much, but one of them is that the United States doesn't have enough refineries. The National Petrochemicals and Refiners Association says that the last new refinery built in the United States was Marathon Ashland's Garyville, La., plant —and it was completed in 1976.
If President Obama would come out tomorrow saying he was issuing permits for 100 new refineries and the government would offer low interest loans to finance them and at the same time announce that he would issue permits to drill for oil off both coast and in the Gulf and in Alaska and on federal lands the price of gas would begin to fall. In addition these are high paying jobs.
When he says there is no magic bullet to bring down the price of gas he means there is no way without increasing the use of fossil fuel.
China gas and oil
In 1984 China/India used 10 million barrels per day of oil and by 2008 it had risen to 25 million per day. The US used 19 million in 1984 and in 2008 used 24 million. Not only does China/India use more oil than the US, their use is growing much faster. In fact it is growing 7 times faster. This growth in China/India will continue into the future so the price of oil, which is determined on the world market by supply and demand, will continue to rise. In addition China started a few years ago to stock pile oil for emergency reserves. The world refining capacity is now less than demand so this is one more reason for gasoline prices to rise and one very good reason for the US to build more refineries. Refined oil products are now our biggest export and the demand is great enough that we could export more but our refineries are working at capacity. What are we waiting for?
Fatwa
With the threat of war looming in Iran a little noticed incident that occurred last August may be a way out. Ayatollah Khamenei issue a fatwa against nuclear weapons last August.
A fatwa is a final religious decision absolutely binding on all Shiites within that marja'a's domain. All fatwas issued by a maja'a are written down and publicly announced. They carry almost as much weight as sacred scripture. Ayatollah Khamenei issue a fatwa against nuclear weapons last August.
Since Iran has maintained all along that their nuke program was for peaceful use they now have an out. They can save face by pointing out that Islam prohibits the use of nuclear weapons. This way they can continue their peaceful use of nuclear and move away from any military use.
I hope that President Obama can make use of this religious objection and by keeping inspectors in Iran convince the Israelis that the situation is under control.
A fatwa is a final religious decision absolutely binding on all Shiites within that marja'a's domain. All fatwas issued by a maja'a are written down and publicly announced. They carry almost as much weight as sacred scripture. Ayatollah Khamenei issue a fatwa against nuclear weapons last August.
Since Iran has maintained all along that their nuke program was for peaceful use they now have an out. They can save face by pointing out that Islam prohibits the use of nuclear weapons. This way they can continue their peaceful use of nuclear and move away from any military use.
I hope that President Obama can make use of this religious objection and by keeping inspectors in Iran convince the Israelis that the situation is under control.
Iran gas
Would blocking gasoline imports to Iran put pressure on the government? While Iran exports oil it imports gasoline because it does not have the refining capacity to meet its needs. Thus they have to pay the world price for much of their gasoline. The government subsidizes gasoline so the cost to consumers is low. If a blockade is put in place the people will pay more for their gas and there will be rationing and the thinking is that this would cause them to revolt.
The other argument is that the Iranian government would say this is a plot by the west to hurt Iran and the people would rally around the government. A third possibility is that China would increase its exports of gasoline to Iran to offset the blockade. The danger here is that China is growing so fast it needs more of its own gasoline and exports last year dropped by 21%. China has recently proposed building 7 new refineries in Iran. EU sanctions on shipping oil from Iran have hurt because most of the insurance companies that cover shipping are in Europe, primarily in London.
New subject
The Chevy Volt was voted the car of the year by Motor Trend Magazine and it was also voted the European Car of the Year. Following these honors GM has stopped producing the Volt because of low sales. Apparently the value of a car is not determined by sales but rather by some experts sitting in an office somewhere.
The other argument is that the Iranian government would say this is a plot by the west to hurt Iran and the people would rally around the government. A third possibility is that China would increase its exports of gasoline to Iran to offset the blockade. The danger here is that China is growing so fast it needs more of its own gasoline and exports last year dropped by 21%. China has recently proposed building 7 new refineries in Iran. EU sanctions on shipping oil from Iran have hurt because most of the insurance companies that cover shipping are in Europe, primarily in London.
New subject
The Chevy Volt was voted the car of the year by Motor Trend Magazine and it was also voted the European Car of the Year. Following these honors GM has stopped producing the Volt because of low sales. Apparently the value of a car is not determined by sales but rather by some experts sitting in an office somewhere.
Iran nuke
This may sound a bit technical but I want to prove my idea that Iran is not trying to produce a nuclear bomb. When Uranium comes out of the ground it is primarily in two isotopes called U 235 and U 238. The U 235 is the active one used in bombs but it is only .7% so it must be separated from the U 238 to make a bomb. This is done by mixing the ore with hydrofluoric acid which changes the uranium into a gas called uranium hexafluoride. The slight difference in the weight between the two isotopes is the means to separate them. The gas is placed into a centrifuge and the lighter molecules move to the outside and this is done over and over through a series of centrifuges and slowly the concentration of U 235 is increased. When it gets to five percent it can be used in a reactor to produce electricity. It must be close to 90% to make a bomb.
This was the procedure used in the Manhattan Project by the US to make the first nuclear bomb. It took the US about 2 years to make enough U 235 for the bomb that was dropped over Japan. Iran has been working on this same procedure for ten years and using centrifuges that are more efficient they and have not yet made enough for a bomb. The only logical explanation is that they are not trying.
If that is the case what are they up to? To answer that look back to Saddam Hussein. He was selling oil for food and medical supplies but he was using the money to buy arms and build castles for himself. He wanted that process to continue. He would invite inspectors in and after a while say you can’t go there. Or sometimes just before the inspectors arrived at a site he would have a whole convoy of trucks leave the area. He wanted the world to think he was up to mischief so he could continue the rues of building WMD. It worked for many years.
Now how does this relate to Iran? Every time Iran spooks the world about a nuke bomb it creates tension which causes the price of oil to spike. Since oil sales are over 50% of Iran’s GDP they want to keep the price as high as possible.
They will keep this little game going on forever if they can so I see no need to bomb their centrifuges. Let’s not get sucked into another war.
This was the procedure used in the Manhattan Project by the US to make the first nuclear bomb. It took the US about 2 years to make enough U 235 for the bomb that was dropped over Japan. Iran has been working on this same procedure for ten years and using centrifuges that are more efficient they and have not yet made enough for a bomb. The only logical explanation is that they are not trying.
If that is the case what are they up to? To answer that look back to Saddam Hussein. He was selling oil for food and medical supplies but he was using the money to buy arms and build castles for himself. He wanted that process to continue. He would invite inspectors in and after a while say you can’t go there. Or sometimes just before the inspectors arrived at a site he would have a whole convoy of trucks leave the area. He wanted the world to think he was up to mischief so he could continue the rues of building WMD. It worked for many years.
Now how does this relate to Iran? Every time Iran spooks the world about a nuke bomb it creates tension which causes the price of oil to spike. Since oil sales are over 50% of Iran’s GDP they want to keep the price as high as possible.
They will keep this little game going on forever if they can so I see no need to bomb their centrifuges. Let’s not get sucked into another war.
Gas price refinary
The price of gas is the big item in the news today and many experts are telling us why. Some say the rising price of oil is the cause and for them I ask the following: In 1998 oil was $10 per barrel and gas was one dollar per gallon. If you do the math that ratio tells you that oil at $100 per barrel should be gas at $10 per gallon.
Some say it is because we are exporting gasoline instead of selling it here in the US. Because of the slow economy we currently have an excess of gas in this country. Refineries are running at near capacity and we are producing more than we can use.
The cost at the refinery are broken down as follows:
• Taxes: 13%
• Distribution and Marketing: 8%
• Refining: 14%
• Crude oil: 65%
Gas at $3.50 breaks down as follows:
Oil $2.28
Refining $.49
Taxes $.46
Distribution and Marketing $.28
Refining is a costly business – not just because it’s heavily taxed at about 10% before a single barrel of gasoline is even sold, but because of the massive shipping, storage and actual product and refinery costs.
And though refining can experience periods when it has higher profit margins, on the average, it’s pretty low on the totem pole when it comes to profit margins. The average for the industry is somewhere between 3-5%
If the gross profit is 5% that means that the .49 cents per gallon cost above represents 2.5 cents per gallon.
So if it is not the cost of oil and not the cost of refining the oil what is it?
The price of gas is based on the world price as is all commodities and so long as China and India are willing to pay any price to get product the price will continue to rise. While the supply exceeds the demand in the US this is not the case in the world market. These two countries which represent 40% of the world’s population are growing at 9% per year and there is no end in sight. If the US would increase production of oil, like we are capable of, that would put downward pressure on the speculators and help some so if the president is looking for something to do he could open up drilling.
About the only thing on the horizon that would lower gas prices is if Europe goes into a recession.
Some say it is because we are exporting gasoline instead of selling it here in the US. Because of the slow economy we currently have an excess of gas in this country. Refineries are running at near capacity and we are producing more than we can use.
The cost at the refinery are broken down as follows:
• Taxes: 13%
• Distribution and Marketing: 8%
• Refining: 14%
• Crude oil: 65%
Gas at $3.50 breaks down as follows:
Oil $2.28
Refining $.49
Taxes $.46
Distribution and Marketing $.28
Refining is a costly business – not just because it’s heavily taxed at about 10% before a single barrel of gasoline is even sold, but because of the massive shipping, storage and actual product and refinery costs.
And though refining can experience periods when it has higher profit margins, on the average, it’s pretty low on the totem pole when it comes to profit margins. The average for the industry is somewhere between 3-5%
If the gross profit is 5% that means that the .49 cents per gallon cost above represents 2.5 cents per gallon.
So if it is not the cost of oil and not the cost of refining the oil what is it?
The price of gas is based on the world price as is all commodities and so long as China and India are willing to pay any price to get product the price will continue to rise. While the supply exceeds the demand in the US this is not the case in the world market. These two countries which represent 40% of the world’s population are growing at 9% per year and there is no end in sight. If the US would increase production of oil, like we are capable of, that would put downward pressure on the speculators and help some so if the president is looking for something to do he could open up drilling.
About the only thing on the horizon that would lower gas prices is if Europe goes into a recession.
Conspiracy
Here is the latest on my conspiracy theory of the October surprise of the US backing Israel on an attack against the Iranian nukes. On the Chris Mathews show tonight he said that if this happens before the election it will be a game changer and assure the Obama re-election. He was using the same logic that I expressed. Obama would be seen as strong on defense, as a friend of Israel and the country always rallies around a President when we are at war. Stay tuned
Oil supply
There seems to be a lot of confusion about the price of oil and its refined products mainly gasoline. The facts show that we currently have an excess of oil here in the US mostly because of the Bakken range in North Dakota has increased US production by 10%. We also have an excess of gasoline because the slow economy has reduced usage. The question is why the price rising if we are using less and the answer is that the price is set on the world market and there is large demand in places like China and India. Some say that speculators are driving up the price but prices on the futures market only rise when there is a demand and there is only demand when supply is low. People are getting mixed up between the US market and the world market. Some are upset that the US is exporting gasoline but that adds to the world supply which lowers demand which lowers future prices.
US refineries are running at near capacity and if we are interested in lowering the price of refined products we need more refineries. Once we have increased our capacity for refining then we can use the excess oil to increase the supply of gasoline which will lower the price. We have not built a refinery in this country for more than 30 years.
If the permit requirements were expedited we can build a refinery in three years. If they started building a hundred refineries today and started drilling in the Gulf and on the continental shelf we could cut the price of gas in half by 2015. The immediate effect would be speculators would stop bidding up the price because they would know that the supply will be increasing rapidly in the near future.
If however your objective is to move away from oil and use other sources for energy then you would oppose further development in the production and use of oil. You might even see the rising price of oil and gasoline as the direction you want to go.
For those who want to decrease the use of fossil fuels there are some important questions that need to be addressed. First is where will the electric cars get their electricity. Since electricity can’t be stored and since the wind doesn’t always blow and since solar cells don’t work at night we are stuck with nuclear. It takes ten years to build a nuke power plant assuming you can speed up the permit process. Don’t hold your breath on that since environmentalists wield a lot of power in the courts.
In the past few days President Obama has adjusted his green talk to say we need to explore all possible ways to meet our energy needs. This is double talk for saying we need more oil and gas. If this satisfies the opposition to fossil fuels we can proceed to build new refineries but once again, don’t hold your breath.
US refineries are running at near capacity and if we are interested in lowering the price of refined products we need more refineries. Once we have increased our capacity for refining then we can use the excess oil to increase the supply of gasoline which will lower the price. We have not built a refinery in this country for more than 30 years.
If the permit requirements were expedited we can build a refinery in three years. If they started building a hundred refineries today and started drilling in the Gulf and on the continental shelf we could cut the price of gas in half by 2015. The immediate effect would be speculators would stop bidding up the price because they would know that the supply will be increasing rapidly in the near future.
If however your objective is to move away from oil and use other sources for energy then you would oppose further development in the production and use of oil. You might even see the rising price of oil and gasoline as the direction you want to go.
For those who want to decrease the use of fossil fuels there are some important questions that need to be addressed. First is where will the electric cars get their electricity. Since electricity can’t be stored and since the wind doesn’t always blow and since solar cells don’t work at night we are stuck with nuclear. It takes ten years to build a nuke power plant assuming you can speed up the permit process. Don’t hold your breath on that since environmentalists wield a lot of power in the courts.
In the past few days President Obama has adjusted his green talk to say we need to explore all possible ways to meet our energy needs. This is double talk for saying we need more oil and gas. If this satisfies the opposition to fossil fuels we can proceed to build new refineries but once again, don’t hold your breath.
Afghan Woman
As the problems in Afghanistan continue and the people here become more convinced we should get out, one group is being ignored and that group represents one half of the people in Afghanistan. Guess who? On a recent cover of Time Magazine there appeared a picture of an Afghani woman with her nose cut off. This was punishment for her alleged infidelity. Our President recently agreed to go into Libya because civilians were threatened. How does this relate to what may happened to women when we leave Afghanistan. It seems to me that we use altruistic motives when it suits us. Maybe we would be better served if we just stayed away from trying to right moral wrongs and stuck to national defense. That is a question we as a country are going to face as the Arab Spring continues to spread Sharia Law across the Muslim world. Do we intervene to protect the dignity of women or do we stand by and watch as they are degraded by things like female castration and honor killings. Is this worse than the Holocaust?
Fannie Mae
I have written about Franklin Raines who was head of Fanny Mae and was charged with cooking the books to increase his bonus. He was charged but not convicted but agreed to pay a 3 million dollar fine and give back some stock options valued at 15 million and other pension type benefits valued at 5 million. After giving back some 23 million he walked off with 90 million in excess bonus money. He incurred some 30 million in legal fees which the Fanny Mae insurance policy paid. Since then the case has been drawn out by lawyers who are paid by the government. Since it cost Raines nothing his strategy is to drag out the proceedings with various legal maneuvers. As of today the legal fees are up to 194 million and still rising.
The interesting thing about this is that the agreement that the government would pay his legal fees was drawn up by him after the investigation into his activities started. The government says they don’t want to, “not pay”, his fees because he might sue them but this argument doesn’t hold up because if they don’t pay and he sues all they are liable for is his legal expenses.
The interesting thing about this is that the agreement that the government would pay his legal fees was drawn up by him after the investigation into his activities started. The government says they don’t want to, “not pay”, his fees because he might sue them but this argument doesn’t hold up because if they don’t pay and he sues all they are liable for is his legal expenses.
October surprise
I have more news on my conspiracy theory that the President may be planning an October surprise to win re-election. It was revealed today that the FBI has known for a couple of years that Iran has targeted 800 sites within the United States to attack if Israel takes out the Iranian nuke sites. Since they have known about this for some time why release it now. Perhaps they want to let the American people know that Iran is a threat to our homeland.
North Korea
North Korea has announced they are willing to stop producing nukes if we give them some food. This is standard procedure for them and after they get the food they start up their nuke program. They know we will do this because the politicians get to say that they have a breakthrough in negotiations and peace is on the way.
Since we will do it, I have a suggestion. Back in the 50’s I worked at the Pillsbury Mill in Springfield and we put whole wheat flour into ten pound bags to send to Saudi Arabia. We sent them 14 million ten pound bags and on the front of each bag in English and on the back in Arabic it said, “This flour is a gift from the people of the United States of America to the people of Saudi Arabia”.
At least we can get some PR out of this and make it difficult for the Korean government taking credit
Since we will do it, I have a suggestion. Back in the 50’s I worked at the Pillsbury Mill in Springfield and we put whole wheat flour into ten pound bags to send to Saudi Arabia. We sent them 14 million ten pound bags and on the front of each bag in English and on the back in Arabic it said, “This flour is a gift from the people of the United States of America to the people of Saudi Arabia”.
At least we can get some PR out of this and make it difficult for the Korean government taking credit
Military
President Obama is taking flack for proposing that military people contribute to their retirement. I am all for helping our service people and we already do a good job of that.
I used to do financial planning for military people at the Grand Forks Air Base.
When an active duty service person is killed the family is entitled to benefits from the DIC (disability and indemnity compensation) program as well as social security survivor benefits. The benefits are based on rank and service time. For example an E5 (sergeant) with four years of service earns $2,424 per month. Let’s say he has a wife and two children. They would receive $1,154 per month for the spouse and $700 per month for the children. They would also qualify for social security at $1,500 per month for a total monthly income of $3,300. There are many other benefits such as free health care, housing allowance, pensions, vacations and life insurance that continue to the family. In addition if you live near and base you can get discounts on food.
The benefits for a service person who is disabled are similar to those who are killed.
I used to do financial planning for military people at the Grand Forks Air Base.
When an active duty service person is killed the family is entitled to benefits from the DIC (disability and indemnity compensation) program as well as social security survivor benefits. The benefits are based on rank and service time. For example an E5 (sergeant) with four years of service earns $2,424 per month. Let’s say he has a wife and two children. They would receive $1,154 per month for the spouse and $700 per month for the children. They would also qualify for social security at $1,500 per month for a total monthly income of $3,300. There are many other benefits such as free health care, housing allowance, pensions, vacations and life insurance that continue to the family. In addition if you live near and base you can get discounts on food.
The benefits for a service person who is disabled are similar to those who are killed.
Unemployment
According to the best statistics I can find 3.6 million people reach retirement age (65) each year and 3.1 million graduate from high school each year. Add to that the 1.3 million who drop out each year and you can see we must create 800,000 jobs to stay even. We need 70,000 new jobs each month to take care of the new people coming into the work force. There are 12.8 million people unemployed and if the unemployment rate is 8.3% that means that 141 million are working.
Cut debt
Proposition 1. The national debt is rising and will continue to rise over the next decade.
Proposition 2. The debt is primarily caused by Medicare, Medicaid and Social Security.
Proposition 3. Candidates who propose cuts in these programs will not get elected.
If the above is correct then the re-election of President Obama is our best chance to control the debt because he will be in his second term and not have to be concerned about the election. He could resurrect the Simpson/Boles recommendations to cut entitlements and raise taxes which would get us on the road toward reducing the debt.
The question remains will his concern about the debt and the long term health of the country override his ideology of government taking care of people. Can he cut these sacred programs to prevent us from becoming like Greece?
Proposition 2. The debt is primarily caused by Medicare, Medicaid and Social Security.
Proposition 3. Candidates who propose cuts in these programs will not get elected.
If the above is correct then the re-election of President Obama is our best chance to control the debt because he will be in his second term and not have to be concerned about the election. He could resurrect the Simpson/Boles recommendations to cut entitlements and raise taxes which would get us on the road toward reducing the debt.
The question remains will his concern about the debt and the long term health of the country override his ideology of government taking care of people. Can he cut these sacred programs to prevent us from becoming like Greece?
Iran
In 2007 Bush was planning on destroying Iran’s nuke program.
American preparations for invading Iran are complete, Dan Plesch reveals. Plus Rageh Omaar's insights from Iran and Andrew Stephen on fears George Bush's administration will blunder into war
At that time Mohamed ElBarade head of IAEA came forth and said that there was no evidence that Iran was building a bomb.
After that report Bush backed off.
In 2010 the IAEA announced that Iran had moved their enrichment program underground and had added more centrifuges to speed up the program.
In 2011 the pressure to attack Iran was again building with sale of bunker busters to Israel and Saudi Arabia giving permission for Israel to fly over their territory if Israel wanted to launch an attack on Iran
Into early 2012 the pressure to go after Iran’s nuke program continued to increase.
Iran has dramatically accelerated its production of enriched uranium in recent months while refusing to cooperate with an investigation of evidence that it may have worked on designing a bomb, a confidential report by the UN nuclear watchdog has said on Friday.
American preparations for invading Iran are complete, Dan Plesch reveals. Plus Rageh Omaar's insights from Iran and Andrew Stephen on fears George Bush's administration will blunder into war
At that time Mohamed ElBarade head of IAEA came forth and said that there was no evidence that Iran was building a bomb.
After that report Bush backed off.
In 2010 the IAEA announced that Iran had moved their enrichment program underground and had added more centrifuges to speed up the program.
In 2011 the pressure to attack Iran was again building with sale of bunker busters to Israel and Saudi Arabia giving permission for Israel to fly over their territory if Israel wanted to launch an attack on Iran
Into early 2012 the pressure to go after Iran’s nuke program continued to increase.
Iran has dramatically accelerated its production of enriched uranium in recent months while refusing to cooperate with an investigation of evidence that it may have worked on designing a bomb, a confidential report by the UN nuclear watchdog has said on Friday.
0 Tax
The Vice President Joe Biden recently said it was our patriotic duty to pay taxes and this week Treasury Secretary Geithner said we should pay taxes for the privilege of living in America. Whether you agree or not it should be pointed out that 50% of all wage earners in the country pay zero income tax. When you don’t pay federal income tax you don’t pay state income tax or in many cases city income tax. Does that mean that half of our citizens are unpatriotic or do not have the privilege of living here. It should be pointed out that everyone pays payroll taxes (social security and Medicare) and that payroll taxes bring in 80% of the amount that income tax brings in. A family of four has to earn $95,000 before they pay 7.65% of their income in income tax and this is the percent of income that lower income people pay in payroll tax. I point this out because many articles give the impression that the payroll tax is not much of a burden. Keep in mind that the family of four that pays income tax also pays payroll tax. These figures tell us that if you want to raise a significant amount from taxes you have to tax everyone. Taxing the rich just doesn’t cut it.
moms
The President has made the fairness issue an integral part of his re-election campaign but I believe he has missed an important opportunity to make a difference. Instead of concentrating on bringing the rich down he should look at lifting up those at the bottom.
He should make a concerted effort to make badly needed changes in the inner cities.
The question was asked why the rate of black teen pregnancy has increased at the same time contraception has been more available. The answer is these young women are getting pregnant by choice. 72% of black children are born to single moms and 50% of those moms fail to graduate from high school. Now what does that mean for their future?
The Brookings Institution has spent a great deal of effort studying this issue.
Brookings whittled down a lot of analysis into three simple rules. You can avoid poverty by:
1. Graduating from high school.
2. Waiting to get married until after 21 and do not have children till after being married.
3. Having a full-time job.
If you do all those three things, your chance of falling into poverty is just 2 percent. Meanwhile, you’ll have a 74 percent chance of being in the middle class.
I believe the President could use his stature as the first black president to convince these young women to change their life style. I cannot be sure how successful he would be but it is certainly worth the effort. Of the three rules above the individual is in total control of rules one and two but needs some outside opportunity for rule three. There are minimum wage jobs available at fast food places but many see these as dead end instead of building steps. This is another attitude that the President can make a difference. Leadership is not about helping others but about encouraging others to help themselves. I believe President Obama could help the country a lot more if he would spend more time talking to these young women and less time railing against the millionaires and billionaires.
He should make a concerted effort to make badly needed changes in the inner cities.
The question was asked why the rate of black teen pregnancy has increased at the same time contraception has been more available. The answer is these young women are getting pregnant by choice. 72% of black children are born to single moms and 50% of those moms fail to graduate from high school. Now what does that mean for their future?
The Brookings Institution has spent a great deal of effort studying this issue.
Brookings whittled down a lot of analysis into three simple rules. You can avoid poverty by:
1. Graduating from high school.
2. Waiting to get married until after 21 and do not have children till after being married.
3. Having a full-time job.
If you do all those three things, your chance of falling into poverty is just 2 percent. Meanwhile, you’ll have a 74 percent chance of being in the middle class.
I believe the President could use his stature as the first black president to convince these young women to change their life style. I cannot be sure how successful he would be but it is certainly worth the effort. Of the three rules above the individual is in total control of rules one and two but needs some outside opportunity for rule three. There are minimum wage jobs available at fast food places but many see these as dead end instead of building steps. This is another attitude that the President can make a difference. Leadership is not about helping others but about encouraging others to help themselves. I believe President Obama could help the country a lot more if he would spend more time talking to these young women and less time railing against the millionaires and billionaires.
Mysterious inner person
Have you heard someone after making a remark that seemed to startle them, say something like, “I never say things like that”, or “that’s not like me to say something like that”. Does that mean that there is some mysterious entity that resides inside of them that is making strange statements? Do they have any control over this entity? Is that what people mean when they justify some behavior by saying, “that’s just the way I am”. Who is the “I” they are referring to? This happens frequently when people worry about something they have no control over. They say, “I can’t help myself”. Does this mean they are not in control of their thoughts or their feelings? All of us have many times experienced situations where we changed our minds by making a deliberate effort. Many people change their feelings by careful analysis of events. When I answer a question by saying that’s just the way I am, is that really just a cop out. Is that my way of admitting that I don’t want to do the hard work it takes to find out what is really going on? Most people know that they cannot control the thoughts and feelings that pop into their minds but they also know that they can decide on how they deal with these feelings. I bring this up because I once wrote an essay on worry and someone near and dear to me told me that I have a lot to learn about feelings. Here is the essay. Tell me where I am going astray.
Worry
Worry like many emotions can be productive or not depending on it is handled. Under normal circumstances, worry is the way the psyche gets our attention. Worry begins when we are uncomfortable with some person or some incident and after a period of time it requires our attention. If we take some action to relieve the tension then worry has served a productive purpose and the tension level is lowered. For example a student who is worried about an upcoming exam and the tension builds to the point where he gets out the books and starts to study. At this point the tension decreases and the probable result will be a better grade. If we just allow it to fester then the tension builds and at some point can cause other physical, mental, emotional and/or spiritual problems. It is well known that among other things worry can cause our immune system to weaken and thus make us more susceptible to health problems.
The classic example is the man whose father died prematurely from heart failure and he is plagued by thoughts of having a heart attack. This chronic concern has an adverse effect on his overall health and can actually lead to a situation that promotes heart trouble, the self-fulfilling prophecy concept. If, on the other hand, this same man would take action in the form of proper diet, exercise, no smoking or drinking the tension from worry would decrease and his health would improve and he might live years longer before any heart trouble sets in. The point is that worry can be the stimulant that causes us to take action that can prevent problems before these same problems adversely affect our life style.
Since worry can be a positive thing or a negative thing depending on how we deal with it, the question arises as to why some people worry but do not do anything about it. For some they do not realize that worry without action can be harmful, while others may know this but are not capable of taking any action. There are some however that are aware of the dangers of excess worry but seem to want to stay in this state of tension and do not give any thought to what, if anything, they could do about it. What could be the reason that these people choose to stay in this condition? For some, rather than admit there is nothing they can do about the situation, they hang on thinking that giving up is like losing control over something they only imagine they have control over to begin with. Take the situation where a relative or close friend is engaged in some unhealthy behavior and they have been told but telling them only makes the situation worse. Now the worrier realizes that the only way this person can be helped is that they must decide to help themselves and until that happens nothing can be done for them. At this point a logical person would set aside the worry knowing that further worry on their part is no help and can be detrimental to their own health. Logic, however, does not prevail and they continue to worry to the point where they themselves become ill. Why is it so difficult for these people to see how fruitless it is to continue to worry over something about which they can do nothing? It is possible that worry is their way of holding on to hope. For others it may be that the mere process of worry is confused with actually doing something and for others it is a deliberate act of self-destruction as punishment for some past failure, perceived or otherwise. This is closely related to guilt arising from not having taken action earlier or from taking the wrong action. Regardless of the “why” things are the way they are, the fact remains that worry at this point is not productive.
Worry
Worry like many emotions can be productive or not depending on it is handled. Under normal circumstances, worry is the way the psyche gets our attention. Worry begins when we are uncomfortable with some person or some incident and after a period of time it requires our attention. If we take some action to relieve the tension then worry has served a productive purpose and the tension level is lowered. For example a student who is worried about an upcoming exam and the tension builds to the point where he gets out the books and starts to study. At this point the tension decreases and the probable result will be a better grade. If we just allow it to fester then the tension builds and at some point can cause other physical, mental, emotional and/or spiritual problems. It is well known that among other things worry can cause our immune system to weaken and thus make us more susceptible to health problems.
The classic example is the man whose father died prematurely from heart failure and he is plagued by thoughts of having a heart attack. This chronic concern has an adverse effect on his overall health and can actually lead to a situation that promotes heart trouble, the self-fulfilling prophecy concept. If, on the other hand, this same man would take action in the form of proper diet, exercise, no smoking or drinking the tension from worry would decrease and his health would improve and he might live years longer before any heart trouble sets in. The point is that worry can be the stimulant that causes us to take action that can prevent problems before these same problems adversely affect our life style.
Since worry can be a positive thing or a negative thing depending on how we deal with it, the question arises as to why some people worry but do not do anything about it. For some they do not realize that worry without action can be harmful, while others may know this but are not capable of taking any action. There are some however that are aware of the dangers of excess worry but seem to want to stay in this state of tension and do not give any thought to what, if anything, they could do about it. What could be the reason that these people choose to stay in this condition? For some, rather than admit there is nothing they can do about the situation, they hang on thinking that giving up is like losing control over something they only imagine they have control over to begin with. Take the situation where a relative or close friend is engaged in some unhealthy behavior and they have been told but telling them only makes the situation worse. Now the worrier realizes that the only way this person can be helped is that they must decide to help themselves and until that happens nothing can be done for them. At this point a logical person would set aside the worry knowing that further worry on their part is no help and can be detrimental to their own health. Logic, however, does not prevail and they continue to worry to the point where they themselves become ill. Why is it so difficult for these people to see how fruitless it is to continue to worry over something about which they can do nothing? It is possible that worry is their way of holding on to hope. For others it may be that the mere process of worry is confused with actually doing something and for others it is a deliberate act of self-destruction as punishment for some past failure, perceived or otherwise. This is closely related to guilt arising from not having taken action earlier or from taking the wrong action. Regardless of the “why” things are the way they are, the fact remains that worry at this point is not productive.
Money supply
Economists say that when you increase the money supply you can expect inflation to follow. Since we have increased the money supply by 1.5 trillion over the past three years can we expect inflation in the near future? The answer is yes, but how bad will it be? One way to offset the adverse effects of inflation is to increase productivity but companies over the past few years have increased efficiency and don’t have a lot more room to cut. The government has put money into the system by way of stimulus. It was used to lower taxes, to invest in new green businesses, and to hire more state employees. All three of these put money into the hands of consumers. Suppose all of these consumers decided to use their new found income to buy X boxes. They all head to Walmart. Now Walmart doesn’t have enough to meet the demand so they raise the price on the boxes they have. This is how increasing the money supply causes inflation. This is called demand pull inflation. If everyone got a raise in pay the same thing would happen and this is called wage price inflation. Anyone knows that if we doubled everyone’s salary in a short time prices would double. The next president, whoever it is will have to deal with inflation. Reagan faced that problem and he had Volker cut the money supply and it was very painful. I am not sure that Obama would do that and the problem will drag on and on.
Five dollar gas
In a 2008 interview with the Wall Street Journal now Energy Secretary Chu said
Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.
The price in Europe averages $8 per gallon
In a 2008 interview with John Harwood then Senator Obama said he would like to see the price of gas rise gradually to $4.00 per gallon. His idea is that higher gas prices will encourage consumers to use less and look toward electric cars. This of course ignores the question as to where the electricity comes from.
Gas prices hit $4.11 per gallon in July of 2008 when oil spiked to $145 per barrel. Today in the news they reported that gas was $3.57 because oil was up to $105 per barrel. Using these ratios oil should be selling at $125 per barrel so there are other forces at work.
It seems to be a mystery to all the talking heads because they do not understand the fact the gasoline is traded as commodity on the world market. In the US we currently have excess oil and gasoline. The oil excess is the result of the new production from North Dakota. The excess gasoline is because demand in the US is down due to the slow economy. Right now the US refineries are running at capacity and they are producing more gasoline that what we currently use. Many talking heads, most notably Bill O’Reilly, cannot figure out why if we have excess supply and slow demand the price is still rising. They do not understand that the price is set by the world market and China and India are buying up all the gasoline they can get and their demand is going to keep increasing. The US is currently selling the excess gasoline to these growing economies. If we didn’t sell them our excess the world supply would decrease and the world market price would rise even faster. If the US had more refineries and we could increase the world supply then perhaps the world price would come down, but it takes years to build a refinery something we haven’t done since 1976.
There has been a shortage of refinery capacity for 20 years so why haven’t more refineries been built. The answer is complex but here is one example:
One company, Arizona Clean Fuels, has been trying to construct a refinery in the Southwest since 1998. Getting a permit to build took seven years, and the company twice changed the plant's proposed location because of environmental restrictions and land disputes. The refinery is projected to have a $3.7 billion total price tag. The EIA recorded per-barrel profits of $5.29 in 2006; at that rate, the 150,000-barrel-per-day refinery would need to operate for almost 13 years before its profits outweighed the cost of building it.
Get ready for five dollar gas
Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.
The price in Europe averages $8 per gallon
In a 2008 interview with John Harwood then Senator Obama said he would like to see the price of gas rise gradually to $4.00 per gallon. His idea is that higher gas prices will encourage consumers to use less and look toward electric cars. This of course ignores the question as to where the electricity comes from.
Gas prices hit $4.11 per gallon in July of 2008 when oil spiked to $145 per barrel. Today in the news they reported that gas was $3.57 because oil was up to $105 per barrel. Using these ratios oil should be selling at $125 per barrel so there are other forces at work.
It seems to be a mystery to all the talking heads because they do not understand the fact the gasoline is traded as commodity on the world market. In the US we currently have excess oil and gasoline. The oil excess is the result of the new production from North Dakota. The excess gasoline is because demand in the US is down due to the slow economy. Right now the US refineries are running at capacity and they are producing more gasoline that what we currently use. Many talking heads, most notably Bill O’Reilly, cannot figure out why if we have excess supply and slow demand the price is still rising. They do not understand that the price is set by the world market and China and India are buying up all the gasoline they can get and their demand is going to keep increasing. The US is currently selling the excess gasoline to these growing economies. If we didn’t sell them our excess the world supply would decrease and the world market price would rise even faster. If the US had more refineries and we could increase the world supply then perhaps the world price would come down, but it takes years to build a refinery something we haven’t done since 1976.
There has been a shortage of refinery capacity for 20 years so why haven’t more refineries been built. The answer is complex but here is one example:
One company, Arizona Clean Fuels, has been trying to construct a refinery in the Southwest since 1998. Getting a permit to build took seven years, and the company twice changed the plant's proposed location because of environmental restrictions and land disputes. The refinery is projected to have a $3.7 billion total price tag. The EIA recorded per-barrel profits of $5.29 in 2006; at that rate, the 150,000-barrel-per-day refinery would need to operate for almost 13 years before its profits outweighed the cost of building it.
Get ready for five dollar gas
College grads
I was watching a news show and they announced that 3 million graduated from college last year. This figure startled me so I checked it out and was unable to verify that but did see on several sites that 19.7 million are enrolled in college so I assume that the three million figure is reasonable. That represents 250,000 new people looking for work every month. During 2011 the economy added about half that many each month and the unemployment rate went down from 9 to 8.5. Either these new grads are not looking for work or they are not counted as looking for work or who knows, in this day and age maybe they don’t want to work
Gas price
Gasoline is traded on the world market as commodity like wheat or cotton. Speculators buy futures contracts in order to make money. If I believe that the price of gas is going to rise I look to the futures contracts. Gasoline is selling today at $3.02 per gallon whole sale. If the July market is selling at $3.45 and I believe because of increased demand in China the market will go higher, I purchase a futures contract. I tell my broker I want to buy a million dollars worth of July gasoline at $3.45. When July gets here and the price is $3.50 I sell and make a profit. If the price is $3.40 I take a loss. Every day there are buyers and sellers and the combined activity of all of them determines the price.
Some people want to blame the oil companies for the high price of gasoline. Right now the US refineries are close to capacity and the demand for gasoline in the US is down so they are producing more gasoline than is needed to supply the US market. They are selling the excess to China. This has no effect on the price of gasoline here in the US. These refineries do not set the price and neither does demand in the US. The price is determined by world demand and speculators buy and sell every day trying to guess the future demand.
Some people want to blame the oil companies for the high price of gasoline. Right now the US refineries are close to capacity and the demand for gasoline in the US is down so they are producing more gasoline than is needed to supply the US market. They are selling the excess to China. This has no effect on the price of gasoline here in the US. These refineries do not set the price and neither does demand in the US. The price is determined by world demand and speculators buy and sell every day trying to guess the future demand.
Gas production
The US produces about one third of the world’s supply of gasoline but it is still subject to the world price which is currently $3.00. If China needs gasoline to keep expanding at 9% per year they will pay what is necessary. The US refineries are running at capacity and they sell their excess on the world market. As the world demand increases, notice I said world not US the price will rise. This will continue into the foreseeable future.
Also when you say they oil companies are gouging us at the pump be advised that the big five oil companies operate 32 of the 141 refineries and the rest are run by independent operators. When the world price goes to $4.00 they could continue to sell on the US market at $3.00 and that would stop the rise in price here but is that what you call good business practice.
Also when you say they oil companies are gouging us at the pump be advised that the big five oil companies operate 32 of the 141 refineries and the rest are run by independent operators. When the world price goes to $4.00 they could continue to sell on the US market at $3.00 and that would stop the rise in price here but is that what you call good business practice.
Recession
When President Obama took office, he said the economy was the worst since the Great Depression. A year later he said it was worse than he thought. The recession of the early 80’s was statistically worse. In that recession inflation was 13%, interest rates were 21%, home mortgage rates were 16%, unemployment was 10.8. In the recent recession, unemployment reached 10.1% but interest rates have been zero and home mortgage rates under 4% and inflation is less than 3%. After two and one half years the Reagan recovery had created 7.5 million jobs and since Obama took office 1.4 million jobs have been created and since the low point of the recession 2.6 million. At that time in the Reagan recovery, disposable income rose 5.4% but under Obama it has only risen 0.8%. Within two years the unemployment rate had decreased from a high of 10.8% to 7.4%. This is why many today, say that the way out of a recession is through the private sector and that government cannot spend its way out of a recession.
The difference was that Reagan clamped down on inflation and it was a very difficult two years but then the economy took off. With Obama he has tried to soften the blow by government spending and it has caused the economy to follow a path of slow recovery.
No two recessions are alike but we can infer from this data that maybe allowing the economy to sink on its own might have caused the recovery to be stronger but that is only inference.
I bring this up only because we are facing a similar situation with housing. Some say that Obama’s attempt at softening the blow is slowing the recovery. They say it is best to let the market run its course. It could be that Obamas core belief that government can solve problems won’t allow him to let the market decide. Perhaps he feels that he would appear heartless if he just stood by and let market forces work.
The difference was that Reagan clamped down on inflation and it was a very difficult two years but then the economy took off. With Obama he has tried to soften the blow by government spending and it has caused the economy to follow a path of slow recovery.
No two recessions are alike but we can infer from this data that maybe allowing the economy to sink on its own might have caused the recovery to be stronger but that is only inference.
I bring this up only because we are facing a similar situation with housing. Some say that Obama’s attempt at softening the blow is slowing the recovery. They say it is best to let the market run its course. It could be that Obamas core belief that government can solve problems won’t allow him to let the market decide. Perhaps he feels that he would appear heartless if he just stood by and let market forces work.
Inner city
In the 1964 President Johnson said “when the family collapses it is the children that suffer and when it collapses on a massive scale the whole community suffers”. Part of Johnson’s Great Society was the so called War on Poverty, which was designed to help the poor black inner city community. One of the main parts of this program was how to deal with the problems of single mothers. The solution was to put them up at government expense in their own apartment and offer food and health care at no charge. In other words the first time a young girl got in a dispute with her mother all she had to do was have baby and she could have her own home. In 1965 some 25% of black children were born to single moms and today that number is 70%. Experts will tell you that the road out of poverty for young women is to finish high school and not have a child until they are married. Johnson was right when he said it will affect the entire community. Today we have 2.5 black men in prison for every one black man in college. The drop-out rate for blacks is higher even though we went through a period where students were promoted just to get them out of school. This resulted in high school graduates who are barely literate.
The situation would likely have been worse if it were not for abortion. Black’s have 40% of abortions even though they are only 13% of the population. Since there have been 52 million abortions since 1973 this means that 21 million black kids were never born.
In the years since 1965 we have spent 9 trillion dollars on the War on Poverty. This was money taken from those who earned it and given to those who did not. It would have been acceptable to most of the givers if it had worked but it has failed. The poverty rate in 1965 was 13% and today it is 15%.
Over this same time period we have increased spending on education by 300% using inflation adjusted dollars but our test scored have remained constant. Perhaps spending money to solve community problems is not the right approach.
The situation would likely have been worse if it were not for abortion. Black’s have 40% of abortions even though they are only 13% of the population. Since there have been 52 million abortions since 1973 this means that 21 million black kids were never born.
In the years since 1965 we have spent 9 trillion dollars on the War on Poverty. This was money taken from those who earned it and given to those who did not. It would have been acceptable to most of the givers if it had worked but it has failed. The poverty rate in 1965 was 13% and today it is 15%.
Over this same time period we have increased spending on education by 300% using inflation adjusted dollars but our test scored have remained constant. Perhaps spending money to solve community problems is not the right approach.
oil refineries
In 1981 the US had 324 oil refineries. We have not built a new one since 1976 and today we have 141 refineries. The top five biggest oil companies own 32.
Exon Mobile 6, Chevron 5, Conoco Phillips 11, Shell 4, and BP 6. The rest are owned by small independent operators.
The economy is in a slump, we have had a warm winter and people are driving less and all of this has lowered the demand so why is the price rising. The answer is the world market. Refineries can sell their gasoline in foreign markets and even with the increase in shipping cost they can make more money. As long as the world price is higher than the US price these refineries will continue to ship out of the country. China and India are growing rapidly and need gasoline so they are driving up the price.
Refineries in the US have been running at 98% of capacity spurred on by recent oil production from North Dakota. Unless something totally unexpected happens gasoline prices will continue to rise
Exon Mobile 6, Chevron 5, Conoco Phillips 11, Shell 4, and BP 6. The rest are owned by small independent operators.
The economy is in a slump, we have had a warm winter and people are driving less and all of this has lowered the demand so why is the price rising. The answer is the world market. Refineries can sell their gasoline in foreign markets and even with the increase in shipping cost they can make more money. As long as the world price is higher than the US price these refineries will continue to ship out of the country. China and India are growing rapidly and need gasoline so they are driving up the price.
Refineries in the US have been running at 98% of capacity spurred on by recent oil production from North Dakota. Unless something totally unexpected happens gasoline prices will continue to rise
Friday, March 16, 2012
Government
Recently I noticed another difference between government and private business when it comes to economics. Government sees things as static and business sees things as dynamic. Static means that if you change one thing the other things will remain constant. The President is proposing changes in the tax law and he is predicting additional revenue because of the changes. He wants to increase the tax on dividends from the current 15% to 39.6%. The Government Accounting Office (GAO) then calculates how much revenue this will bring in. Any financial planner worth his salt will immediately recommend that all of his client replace their high dividend stock for high growth stock and this will destroy any government estimates. In business when a decision is made all the known possible side effects are first evaluated. If they did not operate in this dynamic matter they would soon be out of business.
GM
Bain Capital, a hedge fund run by Romney is in the news as a company that bleeds companies dry and provides profits to the investors. A hedge fund is a pile of money provided by individuals and the purpose is to return a profit. This money is sometimes referred to as venture capital. When banks think the risk is too high, companies turn to venture capitalist to get funding to keep going. Sometimes they win and sometimes they lose. To give an idea of how it would operate in a specific case you can think of the US Government as the venture capitalist in the General Motors bailout. Here is what happened.
When GM filed bankruptcy they had 80 billion in assets and 172 billion in liabilities, so the question is who took the losses.
GM bond holders lost 27 billion
650,000 GM retirees lost part of their health care benefits
GM stockholders lost all of their equity
GM shut down 14 US plants and that involves shedding 30,000 blue collar jobs and 14,000 white collar jobs.
The union gets a ten percent ownership in the new company and agrees to pay for half of the pension cost.
2,400 of 6,000 dealerships were closed.
Sold Hummer, Saab, Saturn, Pontiac and Olds.
By the time it was all over the company was half the size it was before but it was still in business. Without venture capital the entire company would have failed.
If GM had gone through Chapter 11 bankruptcy the end result would have been similar to what we have now except the bondholders and not the union would have made out better.
When GM filed bankruptcy they had 80 billion in assets and 172 billion in liabilities, so the question is who took the losses.
GM bond holders lost 27 billion
650,000 GM retirees lost part of their health care benefits
GM stockholders lost all of their equity
GM shut down 14 US plants and that involves shedding 30,000 blue collar jobs and 14,000 white collar jobs.
The union gets a ten percent ownership in the new company and agrees to pay for half of the pension cost.
2,400 of 6,000 dealerships were closed.
Sold Hummer, Saab, Saturn, Pontiac and Olds.
By the time it was all over the company was half the size it was before but it was still in business. Without venture capital the entire company would have failed.
If GM had gone through Chapter 11 bankruptcy the end result would have been similar to what we have now except the bondholders and not the union would have made out better.
More welfare
I believe that there is a misunderstanding about government assistance as to who gets what and why. For example, if a person pays into social security and collects that is one type of benefit. If the company you work for pays into unemployment compensation and you get laid off and collect unemployment that is another type. If you itemized deductions and reduced your taxes by deducting your home mortgage interest, that is again another type. If you had a work career and you paid taxes and then became disabled and collected public assistance you have another type. These programs all have one thing in common, that being, you were actively participating in the work world and you were in some way contributing to these programs. You were giving and taking.
Sometimes due to circumstances people never contribute but are still entitled to collect. If you were born with a serious disability and you were unable to care for yourself you would receive government help even though you never contributed.
Now let’s move into a less clear situation. You were the daughter of a welfare mother and you grew up on welfare and had a daughter who was on welfare and she grew up on welfare and had a daughter and so on. Is there a point in this life style where someone should break the chain? The answer is yes but not everyone does it and the reason is often because they don’t know how or maybe they are satisfied with their situation. In any event it is the responsibility of society to have safety net but not one that continues generationally. We owe it to these people to get them back into society. In cases like this there are many people who have a vested interest in managing the welfare program and they would like to reduce their work load and place people in productive situations.
Sometimes due to circumstances people never contribute but are still entitled to collect. If you were born with a serious disability and you were unable to care for yourself you would receive government help even though you never contributed.
Now let’s move into a less clear situation. You were the daughter of a welfare mother and you grew up on welfare and had a daughter who was on welfare and she grew up on welfare and had a daughter and so on. Is there a point in this life style where someone should break the chain? The answer is yes but not everyone does it and the reason is often because they don’t know how or maybe they are satisfied with their situation. In any event it is the responsibility of society to have safety net but not one that continues generationally. We owe it to these people to get them back into society. In cases like this there are many people who have a vested interest in managing the welfare program and they would like to reduce their work load and place people in productive situations.
Gas Jews
One year ago this month, I sent out a letter stating that most voters will not be influenced by the national debt or deficit or even unemployment but they will be upset about the price of gas. I said that if gas is five dollars it will cost Obama the election. I still see that as a strong possibility.
A few months ago I said I have a conspiracy theory that Obama may attack Iran using Israel as the front man. This would show him to be a strong president and a man who backs our allies. This is now looking more likely and this is how it would be done. The campaign will start much like what happened in Libya. We have two air craft carriers in the Persian Gulf. Our radar proof planes will first destroy the Iranian ground radar systems and then our central control will allow the Israeli, American made jets to destroy the Iranian air force much like we did in Iraq. Next will come the buster bunker bombs. The Israeli planes can carry 5,000 pound bombs but the larger 15,000 pounder and 30,000 pounder will have to be delivered by American bombers. Once the underground nuke facilities are destroyed the Israelis will declare victory and go home.
The price of gas will fade into the background as the Iran war takes the news time. Obama will record another foreign policy victory one much bigger than killing bin Laden.
A few months ago I said I have a conspiracy theory that Obama may attack Iran using Israel as the front man. This would show him to be a strong president and a man who backs our allies. This is now looking more likely and this is how it would be done. The campaign will start much like what happened in Libya. We have two air craft carriers in the Persian Gulf. Our radar proof planes will first destroy the Iranian ground radar systems and then our central control will allow the Israeli, American made jets to destroy the Iranian air force much like we did in Iraq. Next will come the buster bunker bombs. The Israeli planes can carry 5,000 pound bombs but the larger 15,000 pounder and 30,000 pounder will have to be delivered by American bombers. Once the underground nuke facilities are destroyed the Israelis will declare victory and go home.
The price of gas will fade into the background as the Iran war takes the news time. Obama will record another foreign policy victory one much bigger than killing bin Laden.
Budget law
For almost three years now the Democratic controlled Senate has not passed a budget and Senate majority leader Reed says they will not pass one this year. The House of Representatives passed the budget proposed by Paul Ryan and sent it to the Senate as required.
Congress is required under the Congressional Budget and Impoundment Control Act of 1974 to pass a spending plan and then have it scored by the Congressional Budget Office and signed by the president. That none of this happens suggests a level of disrespect for the law and the people found only among criminals.
Since the Senate is in violation what is the penalty and if there is no penalty the law is useless.
Congress is required under the Congressional Budget and Impoundment Control Act of 1974 to pass a spending plan and then have it scored by the Congressional Budget Office and signed by the president. That none of this happens suggests a level of disrespect for the law and the people found only among criminals.
Since the Senate is in violation what is the penalty and if there is no penalty the law is useless.
Budget
When the President came out with his budget this week most of the news outlets complained that the Republican House would not pass it. They said it would be DOA (dead on arrival). What they fail to point out is that this is the fourth year that Obama has proposed budgets that the Democratic Senate is afraid to pass. Last year the senate voted against the President’s budget by a 97 to 0 margin. Senate leader Reed will not bring this year’s budget to a vote to prevent embarrassing the President once again. On top of that the senate which is required by law to present a budget has not done so for more than a thousand days and Senate leader Reed says they will not have a budget this year either. The senate is ashamed to propose budgets with trillion dollar deficits, something that does not seem to bother the President.
Last year the US government spent 3.6 trillion and the President’s budget for this year is 3.8 trillion and since income to the government is only 2.5 trillion this is a 1.3 trillion dollar deficit. The debt was 10.6 trillion when Obama took office and this year it will top 16.2 trillion. When the President took office he promised he would cut the deficit in half by the end of his first term.
This is big,” wrote White House director of new media Macon Phillips in a February 23, 2009 blog post, ”the President today promised that by the end of his first term, he will cut in half the massive federal deficit we’ve inherited. And we’ll do it in a new way: honestly and candidly.”
Instead of the 5 trillion that Obama promised by cutting in half what he inherited, it is 16 trillion or three times more
Once again this year the President is projecting that the deficit will be cut over his next term. This is easy to do since most of future spending and debt depends on what rate of growth is projected. If you want smaller deficits just predict a larger rate of growth. You don’t have to be an economist to understand this.
For the first time in history, our deficit now exceeds our gross domestic product. We will not feel the full impact of all of this spending for a couple more elections and by that time the President will be retired and someone else like your children will have to deal with things. Just to aggravate the future situation will be the high inflation that always follows any country that prints money to pay debt.
Last year the US government spent 3.6 trillion and the President’s budget for this year is 3.8 trillion and since income to the government is only 2.5 trillion this is a 1.3 trillion dollar deficit. The debt was 10.6 trillion when Obama took office and this year it will top 16.2 trillion. When the President took office he promised he would cut the deficit in half by the end of his first term.
This is big,” wrote White House director of new media Macon Phillips in a February 23, 2009 blog post, ”the President today promised that by the end of his first term, he will cut in half the massive federal deficit we’ve inherited. And we’ll do it in a new way: honestly and candidly.”
Instead of the 5 trillion that Obama promised by cutting in half what he inherited, it is 16 trillion or three times more
Once again this year the President is projecting that the deficit will be cut over his next term. This is easy to do since most of future spending and debt depends on what rate of growth is projected. If you want smaller deficits just predict a larger rate of growth. You don’t have to be an economist to understand this.
For the first time in history, our deficit now exceeds our gross domestic product. We will not feel the full impact of all of this spending for a couple more elections and by that time the President will be retired and someone else like your children will have to deal with things. Just to aggravate the future situation will be the high inflation that always follows any country that prints money to pay debt.
Budget
When the President came out with his budget this week most of the news outlets complained that the Republican House would not pass it. They said it would be DOA (dead on arrival). What they fail to point out is that this is the fourth year that Obama has proposed budgets that the Democratic Senate is afraid to pass. Last year the senate voted against the President’s budget by a 97 to 0 margin. Senate leader Reed will not bring this year’s budget to a vote to prevent embarrassing the President once again. On top of that the senate which is required by law to present a budget has not done so for more than a thousand days and Senate leader Reed says they will not have a budget this year either. The senate is ashamed to propose budgets with trillion dollar deficits, something that does not seem to bother the President.
Last year the US government spent 3.6 trillion and the President’s budget for this year is 3.8 trillion and since income to the government is only 2.5 trillion this is a 1.3 trillion dollar deficit. The debt was 10.6 trillion when Obama took office and this year it will top 16.2 trillion. When the President took office he promised he would cut the deficit in half by the end of his first term.
This is big,” wrote White House director of new media Macon Phillips in a February 23, 2009 blog post, ”the President today promised that by the end of his first term, he will cut in half the massive federal deficit we’ve inherited. And we’ll do it in a new way: honestly and candidly.”
Instead of the 5 trillion that Obama promised by cutting in half what he inherited, it is 16 trillion or three times more
Once again this year the President is projecting that the deficit will be cut over his next term. This is easy to do since most of future spending and debt depends on what rate of growth is projected. If you want smaller deficits just predict a larger rate of growth. You don’t have to be an economist to understand this.
For the first time in history, our deficit now exceeds our gross domestic product. We will not feel the full impact of all of this spending for a couple more elections and by that time the President will be retired and someone else like your children will have to deal with things. Just to aggravate the future situation will be the high inflation that always follows any country that prints money to pay debt.
Last year the US government spent 3.6 trillion and the President’s budget for this year is 3.8 trillion and since income to the government is only 2.5 trillion this is a 1.3 trillion dollar deficit. The debt was 10.6 trillion when Obama took office and this year it will top 16.2 trillion. When the President took office he promised he would cut the deficit in half by the end of his first term.
This is big,” wrote White House director of new media Macon Phillips in a February 23, 2009 blog post, ”the President today promised that by the end of his first term, he will cut in half the massive federal deficit we’ve inherited. And we’ll do it in a new way: honestly and candidly.”
Instead of the 5 trillion that Obama promised by cutting in half what he inherited, it is 16 trillion or three times more
Once again this year the President is projecting that the deficit will be cut over his next term. This is easy to do since most of future spending and debt depends on what rate of growth is projected. If you want smaller deficits just predict a larger rate of growth. You don’t have to be an economist to understand this.
For the first time in history, our deficit now exceeds our gross domestic product. We will not feel the full impact of all of this spending for a couple more elections and by that time the President will be retired and someone else like your children will have to deal with things. Just to aggravate the future situation will be the high inflation that always follows any country that prints money to pay debt.
Arab spring
To recap some recent history the first free Iraqi elections took place in 2005 and led to a certain amount internal fighting between dissident groups called sectarian since they were represented by different fractions of Muslims. The Surge that followed in 2007 and 2008 quieted things down and the rest of the Middle East took note. It is my contention that the purple thumbs were the impetus for the so called Arab Spring. The first of these revolts took place in neighboring Iran when in 2009 the people took to the streets to protest. Unfortunately the United States sat quietly by and the regime was able to squelch the uprising. The next event was the Algerian revolution in early 2010 and this was closely followed by Libya and Egypt and we are now witnessing the revolt in Syria.
I am not sure why news people have not connected the dots between the elections in Iraq and the Arab Spring but to me it is more than coincidence. Perhaps more time is required as is sometimes the case when it comes to historical events.
I am not sure why news people have not connected the dots between the elections in Iraq and the Arab Spring but to me it is more than coincidence. Perhaps more time is required as is sometimes the case when it comes to historical events.
election
The Presidential election of 1988 between Bill Clinton and Bush Sr was typical for me, in that I waited right up until the end, to make my decision and I remember clearly the deciding factor was when Clinton said, welfare should be a helping hand not a way of life. With that he got my vote. As I look back on that statement, I realize that it is the essence of my entire view of government. Unlike Reagan who said government is the problem, I say that government is the problem sometimes and sometimes the government is the solution. It is the reach of government that explains the differences between liberal and conservative. As parents we know that we can do too much for our children and we can do too little and most of the time it is our love that keeps us from going overboard, one way or the other. We cannot depend on love from government to guide us. We must depend on our common sense but our common sense has been distorted by our politics. Ideologues on both sides can no longer be trusted to make logical decisions. Our two parties are like a married couple on the road to divorce. They have made up their minds and spend their time talking past each other. For the next nine months they will do nothing as they await a signal from the voters in November.
On a recent news show the topic of good government was brought up and the speaker pointed out the good that Social Security and Medicare have done in helping seniors. Everyone agreed but no one pointed out that these two programs are the cause of our long term debt problems, which if left unchecked, will turn us into Greece. The point here is that sometimes a good government program can grow into a problem. Similar things are happening in private and public pension plans in that they started out with good intentions and grew into unexpected consequences. The potential problems we see in our various pensions are being played out in Greece and other Southern European countries. For those who think that we are not like Greece, I ask you, if we cut all pensions by 22% like Greece is having to do, would we have riots in the streets. Will we see the writing on the wall or will our ideological vision blind us to the inevitable train wreck. Will we continue to place party above country and refuse to raise taxes and cut spending? It is not that our elected officials do not know what to do, as this was pointed out to them in the Boles/Simpson report. It laid out a road map to solve the long term debt problems but once again ideology raised its ugly head. Winning next year’s election is far more important than solving the debt problem.
Let’s first tackle the problem of raising taxes. One of the historical signs of a nation heading for trouble, is when the gap between the rich and the poor keeps widening, as has happened here and has been going on for 50 years. Our problem has been exacerbated by corruption of government by money and influence. Both the Tea Party and the Wall Street Protestors understand this and are fed up. The first step should be total and immediate disclosure of all political donations. Reports can be updated daily on the Internet. Secondly the Bush tax cuts should be allowed to expire and this will bring in enough money to cover one-third of this year’s deficit.
On the spending side we much look to entitlements (Social Security, Medicare and Medicaid). We can seriously impact these programs with changes in the age of eligibility and means testing.
Taking these steps will be the start of a long journey that will ultimately get us back on a fiscally responsible path but this is unlikely until after the election.
On a recent news show the topic of good government was brought up and the speaker pointed out the good that Social Security and Medicare have done in helping seniors. Everyone agreed but no one pointed out that these two programs are the cause of our long term debt problems, which if left unchecked, will turn us into Greece. The point here is that sometimes a good government program can grow into a problem. Similar things are happening in private and public pension plans in that they started out with good intentions and grew into unexpected consequences. The potential problems we see in our various pensions are being played out in Greece and other Southern European countries. For those who think that we are not like Greece, I ask you, if we cut all pensions by 22% like Greece is having to do, would we have riots in the streets. Will we see the writing on the wall or will our ideological vision blind us to the inevitable train wreck. Will we continue to place party above country and refuse to raise taxes and cut spending? It is not that our elected officials do not know what to do, as this was pointed out to them in the Boles/Simpson report. It laid out a road map to solve the long term debt problems but once again ideology raised its ugly head. Winning next year’s election is far more important than solving the debt problem.
Let’s first tackle the problem of raising taxes. One of the historical signs of a nation heading for trouble, is when the gap between the rich and the poor keeps widening, as has happened here and has been going on for 50 years. Our problem has been exacerbated by corruption of government by money and influence. Both the Tea Party and the Wall Street Protestors understand this and are fed up. The first step should be total and immediate disclosure of all political donations. Reports can be updated daily on the Internet. Secondly the Bush tax cuts should be allowed to expire and this will bring in enough money to cover one-third of this year’s deficit.
On the spending side we much look to entitlements (Social Security, Medicare and Medicaid). We can seriously impact these programs with changes in the age of eligibility and means testing.
Taking these steps will be the start of a long journey that will ultimately get us back on a fiscally responsible path but this is unlikely until after the election.
election
The Presidential election of 1988 between Bill Clinton and Bush Sr was typical for me, in that I waited right up until the end, to make my decision and I remember clearly the deciding factor was when Clinton said, welfare should be a helping hand not a way of life. With that he got my vote. As I look back on that statement, I realize that it is the essence of my entire view of government. Unlike Reagan who said government is the problem, I say that government is the problem sometimes and sometimes the government is the solution. It is the reach of government that explains the differences between liberal and conservative. As parents we know that we can do too much for our children and we can do too little and most of the time it is our love that keeps us from going overboard, one way or the other. We cannot depend on love from government to guide us. We must depend on our common sense but our common sense has been distorted by our politics. Ideologues on both sides can no longer be trusted to make logical decisions. Our two parties are like a married couple on the road to divorce. They have made up their minds and spend their time talking past each other. For the next nine months they will do nothing as they await a signal from the voters in November.
On a recent news show the topic of good government was brought up and the speaker pointed out the good that Social Security and Medicare have done in helping seniors. Everyone agreed but no one pointed out that these two programs are the cause of our long term debt problems, which if left unchecked, will turn us into Greece. The point here is that sometimes a good government program can grow into a problem. Similar things are happening in private and public pension plans in that they started out with good intentions and grew into unexpected consequences. The potential problems we see in our various pensions are being played out in Greece and other Southern European countries. For those who think that we are not like Greece, I ask you, if we cut all pensions by 22% like Greece is having to do, would we have riots in the streets. Will we see the writing on the wall or will our ideological vision blind us to the inevitable train wreck. Will we continue to place party above country and refuse to raise taxes and cut spending? It is not that our elected officials do not know what to do, as this was pointed out to them in the Boles/Simpson report. It laid out a road map to solve the long term debt problems but once again ideology raised its ugly head. Winning next year’s election is far more important than solving the debt problem.
Let’s first tackle the problem of raising taxes. One of the historical signs of a nation heading for trouble, is when the gap between the rich and the poor keeps widening, as has happened here and has been going on for 50 years. Our problem has been exacerbated by corruption of government by money and influence. Both the Tea Party and the Wall Street Protestors understand this and are fed up. The first step should be total and immediate disclosure of all political donations. Reports can be updated daily on the Internet. Secondly the Bush tax cuts should be allowed to expire and this will bring in enough money to cover one-third of this year’s deficit.
On the spending side we much look to entitlements (Social Security, Medicare and Medicaid). We can seriously impact these programs with changes in the age of eligibility and means testing.
Taking these steps will be the start of a long journey that will ultimately get us back on a fiscally responsible path but this is unlikely until after the election.
On a recent news show the topic of good government was brought up and the speaker pointed out the good that Social Security and Medicare have done in helping seniors. Everyone agreed but no one pointed out that these two programs are the cause of our long term debt problems, which if left unchecked, will turn us into Greece. The point here is that sometimes a good government program can grow into a problem. Similar things are happening in private and public pension plans in that they started out with good intentions and grew into unexpected consequences. The potential problems we see in our various pensions are being played out in Greece and other Southern European countries. For those who think that we are not like Greece, I ask you, if we cut all pensions by 22% like Greece is having to do, would we have riots in the streets. Will we see the writing on the wall or will our ideological vision blind us to the inevitable train wreck. Will we continue to place party above country and refuse to raise taxes and cut spending? It is not that our elected officials do not know what to do, as this was pointed out to them in the Boles/Simpson report. It laid out a road map to solve the long term debt problems but once again ideology raised its ugly head. Winning next year’s election is far more important than solving the debt problem.
Let’s first tackle the problem of raising taxes. One of the historical signs of a nation heading for trouble, is when the gap between the rich and the poor keeps widening, as has happened here and has been going on for 50 years. Our problem has been exacerbated by corruption of government by money and influence. Both the Tea Party and the Wall Street Protestors understand this and are fed up. The first step should be total and immediate disclosure of all political donations. Reports can be updated daily on the Internet. Secondly the Bush tax cuts should be allowed to expire and this will bring in enough money to cover one-third of this year’s deficit.
On the spending side we much look to entitlements (Social Security, Medicare and Medicaid). We can seriously impact these programs with changes in the age of eligibility and means testing.
Taking these steps will be the start of a long journey that will ultimately get us back on a fiscally responsible path but this is unlikely until after the election.
Bank of America
A few months back when Bank of America was in financial trouble Warren Buffett came to the rescue and invested 5 billion in B of A. Part of the deal allows Buffett to purchase 700 million shares at a price of $7.14 per share. The stock was trading at $4.94 when Obama announced the 25 billion dollar bank payout program for customers with mortgage problems. The stock then rose to $8.35 per share. Buffett could have exercised his options at that point and made 847 million but he chose to hold waiting for a higher price.
Buffett’s group owns the Burlington-Northern Rail Road which they bought in 2009 for 44 billion. If the Keystone Pipeline is not approved then the BN RR will move the oil to the west coast for shipment to China. A spokesman for BN said if the Keystone doesn’t work we are here to haul.
There is nothing illegal about any of this but it adds to the perception that small investors do not play on the same field with the rich. Duh!
Buffett’s group owns the Burlington-Northern Rail Road which they bought in 2009 for 44 billion. If the Keystone Pipeline is not approved then the BN RR will move the oil to the west coast for shipment to China. A spokesman for BN said if the Keystone doesn’t work we are here to haul.
There is nothing illegal about any of this but it adds to the perception that small investors do not play on the same field with the rich. Duh!
Business budget
If business experts were called in to revamp a company, they would use a standard three step approach. First they would collect data. Second they would arrange the data in categories of importance and third they would apply solutions to these categories. If the same methods were followed with our failing US Government, we could solve our problems. First we would collect data, most of which is already available. Second we would quickly see that the major problems are Social Security, Medicare and Medicaid. Third we would concentrate on those areas. Instead what we are doing is looking at minor adjustments to minor areas of the budget. President Obama’s 2012 budget has cuts in 211 programs totaling 33 billion dollars. His budget is 3,730 billion. He ignores the 808 billion in social security, and the 1,111 billion in Medicare and Medicaid. The reason government does not follow the business approach is politics. When Paul Ryan put forth his plan, which contained cuts to entitlements, he was vilified for throwing Grandma over the cliff in her wheel chair. This is demagoguery at its finest and as long as voters can be swayed by this behavior, we will not solve our debt problem, which has now exceeded our GDP. We are going down the road that many European countries have followed and we see the results in the riots in Greece.
Super majority
Obama care was passed because the Democrats had a majority in the House and a super majority in the Senate. The vote included the 59 Democrats and one Independent, Sanders, a self-declared socialist. The 60 vote total overcame a filibuster by the 39 Republicans who all voted against the plan. In the house one Republican, Cao, voted with the Democrats. Cao is the most liberal Republican elected in a strong Democratic district because the man he ran against, Jefferson, was found guilty of corruption and sentenced to 13 years in prison. This is history repeating itself in that FDR had super majorities when the New Deal was passed and LBJ had super majorities when Medicare was passed. The Republicans have only had a super majority once and that was in 1910.
Holocaust
I was watching a TV show about the Holocaust and it occurred to me that while the Jews and their families suffered great losses, the world in general lost. In 1939 there were 17 million Jews worldwide and by the end of the war there were only 11 million. Today there are about 15 million Jews and one third of those live in the United States.
Since 1901 there have been 850 Noble Prize winners and 170 of those were Jews. If those 6 million that died in the Holocaust had lived we could reasonable assume that we would have had 70 more winners. How can we ever calculate the loss to the world.
This leads me to wonder what the world has lost because of the 50 million abortions that have occurred since 1973 and that is just in the United States. Was there another Beethoven or Shakespeare or Einstein? Or maybe just a very kind person!
No way to have answers to these questions but it is stuff I think about
Since 1901 there have been 850 Noble Prize winners and 170 of those were Jews. If those 6 million that died in the Holocaust had lived we could reasonable assume that we would have had 70 more winners. How can we ever calculate the loss to the world.
This leads me to wonder what the world has lost because of the 50 million abortions that have occurred since 1973 and that is just in the United States. Was there another Beethoven or Shakespeare or Einstein? Or maybe just a very kind person!
No way to have answers to these questions but it is stuff I think about
Tea Party
I now live in Southern Minnesota in the suburbs of Minneapolis/St Paul and we are having a very mild winter. This is quite different from Grand Forks, ND where we lived when our children were small. Also we are prepared so we have many snow plows and our roads are usually cleared by the next day.
I think you have a misunderstanding of the Tea Party. Their main complaint is the corruption in government and they would like to throw the bums out like they did in 2010. We have something here called Gerrymandering. The constitution requires that every ten years we have a census and one of the outcomes of the census is called redistricting. We have 435 representatives in congress and they are supposed to be equal numbers of people in each district so every ten years the district boundary lines must be withdrawn and this is where the problem starts. The lines are drawn not just based on population but also on how the people voted. By making the lines in very crooked ways they can push a majority of one party into a district thus assuring the re-election of that party. In almost every election over 90% of incumbents are re-elected. This makes them less responsive to their constituents and this is way the Tea Party say vote them all out.
One of the concerns of many here is that the US is heading in the same direction as Europe in regards to pensions and health care. I don’t know if you can see this but to me the problems in Europe today are caused by the government doing more for the people than the government can afford. When you try to take away benefits people revolt like they are doing in some Southern European countries. We can start making changes in our government programs now in order to avoid what is happening in Greece but our politicians are too afraid to touch what we call entitlements, things like social security, Medicare and Medicaid. These programs are all going broke but we keep putting off dealing with them. This is called kicking the can down the road and we have been doing that for many years and if we keep doing that we will end up like Greece. When Social Security was started here by President Franklin Roosevelt in 1936 there were 15 people working for each person retired. Today there are only 3 people working for each person retired and in a few more years it will be only 2 people working.
Just as Social Security, the federal government’s retirement plan, is going broke so are the state, county and city plans going broke. The same thing is happening to private pension plans. Over the years these plans offered better pensions instead of pay increases and now they have to pay up and they don’t have the money. Some say we should take the money from the rich to pay for these things but there is not enough money there. Of the 140 million taxpayers there were 235,000 who earned more than 1 million and the total earned was 726 billion or an average of 3 million. Our deficit for this year is 1.3 trillion so even if we took all of their money it would not even cover this year’s deficit.
The latest idea proposed by the 99 percenters is to take from the rich and here is how that works out.
During the last Presidential campaign Candidate Obama made the news when he spoke to Joe the Plumber and said he was going to spread the wealth around. This has widely been interpreted as spreading income around. I have calculated that if all of the income from the 1 percent was taken from them and given to the 99% it would provide each family with $15,000. This would be a nice gift but not a life changing event. However, if we take Obama at his word and redistribute the wealth that is a different story. The wealth of the country is estimated at 60 trillion and the 1% own half of that so if we take their half which is 30 trillion and give that to the 99% each family would get an extra $200,000.
Now that is a substantial amount but my guess is that even that big chunk of dough would be used up in a short time and the 99% would be back in the same boat they are in now. I say this because studies have shown that lottery winners of less than one million experience only a short term change in their life styles.
The point of all this is that redistribution sounds like a great plan for the 99% but the truth is that there are not enough rich people to make a difference.
To illustrate the point on a larger basis if all the money in the world was redistributed each US family instead of having a net worth of $160,000 would have a net worth of $16,000.
If there is any lesson in all this, it is that if you want to increase your net worth, don’t wait for redistribution but get out there and go to work. You might be surprised at how much you can accomplish. Of course the first thing you need is a job. A job is the best safety net and the best way to increase the size of the pie. When the economy begins to grow and the pie gets larger everyone benefits. Obama believes that the government can grow the economy but I believe it takes private companies. When the government spends money they got that money from the private sector and this limits growth. President Obama is fond of using the word fairness and I say that since the average family income is $50,000, why not pass a law that says every family should earn $50,000. What could be fairer than that? But then who would hire you.
I think you have a misunderstanding of the Tea Party. Their main complaint is the corruption in government and they would like to throw the bums out like they did in 2010. We have something here called Gerrymandering. The constitution requires that every ten years we have a census and one of the outcomes of the census is called redistricting. We have 435 representatives in congress and they are supposed to be equal numbers of people in each district so every ten years the district boundary lines must be withdrawn and this is where the problem starts. The lines are drawn not just based on population but also on how the people voted. By making the lines in very crooked ways they can push a majority of one party into a district thus assuring the re-election of that party. In almost every election over 90% of incumbents are re-elected. This makes them less responsive to their constituents and this is way the Tea Party say vote them all out.
One of the concerns of many here is that the US is heading in the same direction as Europe in regards to pensions and health care. I don’t know if you can see this but to me the problems in Europe today are caused by the government doing more for the people than the government can afford. When you try to take away benefits people revolt like they are doing in some Southern European countries. We can start making changes in our government programs now in order to avoid what is happening in Greece but our politicians are too afraid to touch what we call entitlements, things like social security, Medicare and Medicaid. These programs are all going broke but we keep putting off dealing with them. This is called kicking the can down the road and we have been doing that for many years and if we keep doing that we will end up like Greece. When Social Security was started here by President Franklin Roosevelt in 1936 there were 15 people working for each person retired. Today there are only 3 people working for each person retired and in a few more years it will be only 2 people working.
Just as Social Security, the federal government’s retirement plan, is going broke so are the state, county and city plans going broke. The same thing is happening to private pension plans. Over the years these plans offered better pensions instead of pay increases and now they have to pay up and they don’t have the money. Some say we should take the money from the rich to pay for these things but there is not enough money there. Of the 140 million taxpayers there were 235,000 who earned more than 1 million and the total earned was 726 billion or an average of 3 million. Our deficit for this year is 1.3 trillion so even if we took all of their money it would not even cover this year’s deficit.
The latest idea proposed by the 99 percenters is to take from the rich and here is how that works out.
During the last Presidential campaign Candidate Obama made the news when he spoke to Joe the Plumber and said he was going to spread the wealth around. This has widely been interpreted as spreading income around. I have calculated that if all of the income from the 1 percent was taken from them and given to the 99% it would provide each family with $15,000. This would be a nice gift but not a life changing event. However, if we take Obama at his word and redistribute the wealth that is a different story. The wealth of the country is estimated at 60 trillion and the 1% own half of that so if we take their half which is 30 trillion and give that to the 99% each family would get an extra $200,000.
Now that is a substantial amount but my guess is that even that big chunk of dough would be used up in a short time and the 99% would be back in the same boat they are in now. I say this because studies have shown that lottery winners of less than one million experience only a short term change in their life styles.
The point of all this is that redistribution sounds like a great plan for the 99% but the truth is that there are not enough rich people to make a difference.
To illustrate the point on a larger basis if all the money in the world was redistributed each US family instead of having a net worth of $160,000 would have a net worth of $16,000.
If there is any lesson in all this, it is that if you want to increase your net worth, don’t wait for redistribution but get out there and go to work. You might be surprised at how much you can accomplish. Of course the first thing you need is a job. A job is the best safety net and the best way to increase the size of the pie. When the economy begins to grow and the pie gets larger everyone benefits. Obama believes that the government can grow the economy but I believe it takes private companies. When the government spends money they got that money from the private sector and this limits growth. President Obama is fond of using the word fairness and I say that since the average family income is $50,000, why not pass a law that says every family should earn $50,000. What could be fairer than that? But then who would hire you.
Income vs wealth
During the last Presidential campaign Candidate Obama made the news when he spoke to Joe the Plumber and said he was going to spread the wealth around. This has widely been interpreted as spreading income around. I have calculated that if all of the income from the 1 percent was taken from them and given to the 99% it would provide each family with $15,000. This would be a nice gift but not a life changing event. However, if we take Obama at his word and redistribute the wealth that is a different story. The wealth of the country is estimated at 60 trillion and the 1% own half of that so if we take their half which is 30 trillion and give that to the 99% each family would get an extra $200,000.
Now that is a substantial amount but my guess is that even that big chunk of dough would be used up in a short time and the 99% would be back in the same boat they are in now. I say this because studies have shown that lottery winners of less than one million experience only a short term change in their life styles.
The point of all this is that redistribution sounds like a great plan for the 99% but the truth is that there are not enough rich people to make a difference.
To illustrate the point on a larger basis if all the money in the world was redistributed each US family instead of having a net worth of $160,000 would have a net worth of $16,000.
If there is any lesson in all this, it is that if you want to increase your net worth, don’t wait for redistribution but get out there and go to work. You might be surprised at how much you can accomplish. Of course the first thing you need is a job.
Now that is a substantial amount but my guess is that even that big chunk of dough would be used up in a short time and the 99% would be back in the same boat they are in now. I say this because studies have shown that lottery winners of less than one million experience only a short term change in their life styles.
The point of all this is that redistribution sounds like a great plan for the 99% but the truth is that there are not enough rich people to make a difference.
To illustrate the point on a larger basis if all the money in the world was redistributed each US family instead of having a net worth of $160,000 would have a net worth of $16,000.
If there is any lesson in all this, it is that if you want to increase your net worth, don’t wait for redistribution but get out there and go to work. You might be surprised at how much you can accomplish. Of course the first thing you need is a job.
Glass/Steagall
In the past I have discussed the “China Wall”. I started in the finance business in the early 70’s and one of the first oddities I encountered was the China Wall. This mythical wall was the result of the Glass-Steagall Act of 1933. Many banks have a commercial side that uses savings from depositors to make loans. Most of these loans are for business inventory, cars and some home mortgages. Banks also have an investment side that evaluates companies and helps them to sell stocks and bonds. Now the rub comes in when the banks use the profits they made on the commercial side to invest in the investment side. Glass-Steagall said that the commercial side is separated from the investment side by the invisible China Wall meaning that the investment people would not discuss business with the commercial side.
Let’s suppose that I work in the investment side and I am helping a company with a business plan so I have access to inside information. I see that they have just developed a new product which is going to make them a lot of money. I arrange a lunch meeting with the CEO and just by accident a member of the commercial side is sitting at the table next to us. This person overhears our conversation and then goes back to the bank and using profits from the commercial side purchases a large amount of stock in the company I am helping. The China Wall has been breached.
This sort of thing was quite common so when Clinton did away with Glass-Steagall in 1999 it didn’t cause much of a stir to the people who really knew what was going on. Later this was blamed for the mortgage fiasco but in fact it had very little to do with it. In an attempt to look as if the government was doing something about this they brought in the Volker Rule which was somewhat similar to Glass. This is for show but can easily be by passed.
Let’s suppose that I work in the investment side and I am helping a company with a business plan so I have access to inside information. I see that they have just developed a new product which is going to make them a lot of money. I arrange a lunch meeting with the CEO and just by accident a member of the commercial side is sitting at the table next to us. This person overhears our conversation and then goes back to the bank and using profits from the commercial side purchases a large amount of stock in the company I am helping. The China Wall has been breached.
This sort of thing was quite common so when Clinton did away with Glass-Steagall in 1999 it didn’t cause much of a stir to the people who really knew what was going on. Later this was blamed for the mortgage fiasco but in fact it had very little to do with it. In an attempt to look as if the government was doing something about this they brought in the Volker Rule which was somewhat similar to Glass. This is for show but can easily be by passed.
filing taxes
As you know I volunteer to file taxes for people down at the Senior Center. In the news we often hear that the number of people living in poverty is rising. I had a young man come in this week. He worked at Wal Mart and had a stay at home wife with three small children. His Wal Mart income at $9.50 per hour was $19,000 for the year. He of course paid no income tax but he did pay $1,450 in payroll tax (social security and Medicare). Since the government level for poverty for a family of five is $27,000 he would be included in the poverty class. However he received back from the federal and state government $11,000 in credits so his actual income was $30,000 which would move him out of the poverty class. This is typical of what happens to most low income families. This man was a full time employee so he qualified for the Wal Mart health plan and in addition he had a company paid retirement plan, life insurance, disability insurance, vacation, holidays and sick leave. I am not saying his has a good situation but is it better than the living in poverty status would indicate.
Caucus
In 2008 I attended the Democratic Caucus meeting and last night I attended the Republican Caucus. The thing I liked about both is the ease in which a person with no previous experience can get involved. I feel that if you are willing to do some leg work and make some phone calls you could quickly get into a position where you could make a difference.
As I evaluate what is going in this year, I see the Republicans saying that if Obama had not spent all of the government money the economy would have recovered more quickly and the Democrats say that if Obama had not spent all that money the economy would still be in recession. I suppose these are politically safe things to say since neither can be proven, but it doesn’t help a person who is trying to decide for whom to vote.
I have a good friend who is a solid liberal and he always votes democratic because it is the principals that define the party that gets his vote. Perhaps that is a better way to look at things rather than trying to evaluate candidates.
As I evaluate what is going in this year, I see the Republicans saying that if Obama had not spent all of the government money the economy would have recovered more quickly and the Democrats say that if Obama had not spent all that money the economy would still be in recession. I suppose these are politically safe things to say since neither can be proven, but it doesn’t help a person who is trying to decide for whom to vote.
I have a good friend who is a solid liberal and he always votes democratic because it is the principals that define the party that gets his vote. Perhaps that is a better way to look at things rather than trying to evaluate candidates.
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 attack 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 attack by Israel against Iran with our covert help.
Europe
I found it very interesting that you see Europe as going the way of the US and I see the US going the way of Europe. I believe I have given you an incomplete picture of how I see the US. First off, I believe that the occupy wall-street people have a right to protest and I believe in much of what they stand for. I do not think they should turn to violence. The American free enterprise system is under attack from corruption. There is nothing wrong with getting rich but when the rules are bent to favor one group over another that is wrong. When wealthy and powerful people use private information to make money in the market that is wrong. When the board of directors gives a large salary to the CEO because they are friends that is wrong. When elected officials leave office and then make money by influencing their former colleagues that is wrong.
People from the protestors on one side and the tea party on the other side are fed up with this corruption. We have to elect new officials every two years if necessary and keep going this until they get the point.
I am willing to bet right now that if Obama is re-elected the gap between the rich and the poor will continue to increase. The whole system is set up that way. Until people finally get so disgusted that they are willing to through the bums out this will continue. Our real power is in the voting booth and we must learn to use it. Perhaps the occupy group is the beginning of change. We will see.
People from the protestors on one side and the tea party on the other side are fed up with this corruption. We have to elect new officials every two years if necessary and keep going this until they get the point.
I am willing to bet right now that if Obama is re-elected the gap between the rich and the poor will continue to increase. The whole system is set up that way. Until people finally get so disgusted that they are willing to through the bums out this will continue. Our real power is in the voting booth and we must learn to use it. Perhaps the occupy group is the beginning of change. We will see.
Tesla Motors
Tesla Motors has asked for another government loan of an undisclosed amount in addition to the 465 million it previously received. Tesla makes an all-electric car that sells for $109,000 and goes 240 miles on charge. Since 2008 Tesla has sold 2,100 cars worldwide. I was wondering how people could afford this much for a car and then I discovered that the Feds were offering an $8,000 rebate and the State of Colorado was adding $42,000 to that for a total of $50,000 off on a $109,000 car.
This is a short blurb from some guy in Colorado.
Speaking of annoying people with your Tesla. As a Tesla owner in Boulder Colorado I have a bumper sticker on it that says” Environmentalists took money from the poor to pay me to buy this car”
This is a short blurb from some guy in Colorado.
Speaking of annoying people with your Tesla. As a Tesla owner in Boulder Colorado I have a bumper sticker on it that says” Environmentalists took money from the poor to pay me to buy this car”
Liberal vs conservative
Something is currently underway that illustrates the basic difference between the liberal and conservative approach to problem solving. We are all aware of the mortgage crisis and the question is what can be done about it. President Obama has come up with a plan to ease the pressure on home owners by allowing them to refinance at lower rates regardless of their credit or debt. The President admits that the first three attempts at solving this problem did not help and may have made things worse by prolonging the pain. Conservatives say that is exactly what happened. They say the down and dirty way to resolve this situation is to allow the market to bottom. At that time the demand for homes will start to climb as will the prices of homes. This is very difficult for those who lose their homes.
This is similar to the way President Reagan handled the great recession of the 80”s. He told Paul Volker to clamp down on credit to kill inflation and there followed two very tough years but then the economy took off and GDP quickly rose to 9%. President Obama’s approach has been to ease the pain by various government programs and the result after three years is suspect with last year’s GDP at 1.8%.
These are examples that show how these two groups see the responsibilities of government. Obama feels that the government can solve the problem and Reagan said the government was the problem.
This is similar to the way President Reagan handled the great recession of the 80”s. He told Paul Volker to clamp down on credit to kill inflation and there followed two very tough years but then the economy took off and GDP quickly rose to 9%. President Obama’s approach has been to ease the pain by various government programs and the result after three years is suspect with last year’s GDP at 1.8%.
These are examples that show how these two groups see the responsibilities of government. Obama feels that the government can solve the problem and Reagan said the government was the problem.
Double taxation
I will give you an example of how small business owners sometimes get in trouble with dividends.
You own a business and you earn a salary of a million dollars per year. You pay ordinary income tax on this and at the top rate of 35% and your company retains profits of a $100,000. The government does not like retained earnings so they place a limit of $250,000 on the amount the company can retain. If you go over that amount there is a 15% surcharge penalty. The company does not want to pay this out as dividends to the owner since he will pay 15% tax so they look for ways to get it to him without using dividends. One way is to increase his salary but what happens when he is near retirement and no longer working full time. The government steps in and says your salary must be reasonable and in the law it is called reasonable compensation. Let’s say you are retired and living in Florida but you come up once a month to check on the company and you are still paying yourself your full salary. The government will step in and force you to pay dividends under the theory that you are just trying to avoid paying a dividend which in fact is what you are doing. When this happens the owner paid 35% on the earnings and now he will pay 15% on those same earnings when if he takes a dividend.
You might say that it is not the governments business to determine what is reasonable compensation but according to the IRS rules you would be wrong.
One thing to understand about retained earnings is if you can show evidence that you are saving the money to re-invest in some large project they will give you some leeway but you better not try to use this as an excuse to avoid dividends.
The more you understand about the IRS the more you will see why business people do not like it.
You own a business and you earn a salary of a million dollars per year. You pay ordinary income tax on this and at the top rate of 35% and your company retains profits of a $100,000. The government does not like retained earnings so they place a limit of $250,000 on the amount the company can retain. If you go over that amount there is a 15% surcharge penalty. The company does not want to pay this out as dividends to the owner since he will pay 15% tax so they look for ways to get it to him without using dividends. One way is to increase his salary but what happens when he is near retirement and no longer working full time. The government steps in and says your salary must be reasonable and in the law it is called reasonable compensation. Let’s say you are retired and living in Florida but you come up once a month to check on the company and you are still paying yourself your full salary. The government will step in and force you to pay dividends under the theory that you are just trying to avoid paying a dividend which in fact is what you are doing. When this happens the owner paid 35% on the earnings and now he will pay 15% on those same earnings when if he takes a dividend.
You might say that it is not the governments business to determine what is reasonable compensation but according to the IRS rules you would be wrong.
One thing to understand about retained earnings is if you can show evidence that you are saving the money to re-invest in some large project they will give you some leeway but you better not try to use this as an excuse to avoid dividends.
The more you understand about the IRS the more you will see why business people do not like it.
Capital gains
First let’s separate capital gains from dividends. Let’s start with capital gains. If I earn a lot of money, I am in the 35% tax bracket which means that the last dollar I earned is taxed at the 35% rate. Now I save my money and I decide to invest it by buying stock in a company and I hold that stock for a year and a day and then I sell it for a profit. Now I pay 15% tax on the profit so I have paid a total of 50%.The capital gains rate has historically been held low to encourage people to invest. Keep in mind that if I just put the money in the bank and earned interest I would pay 35% tax on the interest.
With regard to dividends a company makes a profit and pays 35% tax on that profit. Now they decide to distribute the profit to the stockholders in the form of dividends. The stockholders now pay tax on the dividends which for rich people is 15%. This is why it is called double taxation. Before the Bush tax cuts capital gains were taxed at 20% and dividends at 35%.
For people like Warren Buffett who get most of their money from return on investment they only pay 15%. The 35% is only on earned income (wages). Same with Romney. He had earned income from speeches but most of his income is unearned or from investments.
With regard to dividends a company makes a profit and pays 35% tax on that profit. Now they decide to distribute the profit to the stockholders in the form of dividends. The stockholders now pay tax on the dividends which for rich people is 15%. This is why it is called double taxation. Before the Bush tax cuts capital gains were taxed at 20% and dividends at 35%.
For people like Warren Buffett who get most of their money from return on investment they only pay 15%. The 35% is only on earned income (wages). Same with Romney. He had earned income from speeches but most of his income is unearned or from investments.
Tax the rich
Of the 140 million taxpayers there were 235,000 who earned more than 1 million and the total earned was 726 billion or an average of 3 million. There were also 70 million who paid no income tax. We could take $1,000 from each of these or take all the money that those over a million made and it would be same. How about taking half of the top and asking the others to pay $500 a year. In either case the 700 billion would cover less than half of the 2011, 1.3 Trillion deficit. The projected deficit for 2012 has just been raised from 1.48 T to 1.6 T. The problem with raising taxes on anyone is that there are no plans to use that money to lower the deficit but there are plans to spend it on programs that are supposed to expand the economy.
Debt
The country of Greece is in the news and I want to comment on it as it may relate to the US economy. There are a number of big banks who have invested in Greek government bonds and they are being asked to take a haircut. That is money talk about devaluing the bonds. Now at first you might ask why would the banks go for this but it is not what it seems. If the banks agree to lower the payments for Greece they will merely adjust interest rates. For example if you have a home loan of $200,000 at 4% for ten years, your monthly payment is $2025 and your total interest payments over the ten years are $42,988. If you exchange that for a loan of $100,000 at 8% for ten years your new payment is $1,213 and your total interest payments are $45,593. The government gets the advantage of lower payments but the total interest doesn’t change that much. The banks may well say that they will cut the loan value in half but you have to pay more interest and longer time and these factors will be negotiated. Greece will then be doing what many states and many individuals have done. California recently exchanged short term bonds for long term bonds to lower payments but in the long run they will pay more interest. The big concern about Greece is that it is itself like a large bank that is too big to fail. It is referred to in the financial news as a contagion meaning that if Greece goes down it will take the rest of the Euro Countries down with it and then the US will be next.
I am reminded of the old adage that if you owe the bank $10,000 they see you as a debtor but if you owe them $10 million they see you as a partner.
I am reminded of the old adage that if you owe the bank $10,000 they see you as a debtor but if you owe them $10 million they see you as a partner.
gouging
I have often pointed out that oil companies do not make money by gouging at the pump. In point of fact they make their money by taking oil from the ground free and selling it for $100 per barrel. Here is addition evidence to prove my point.
HOUSTON — Exxon Mobil Corp. said Thursday it’s getting out of the retail gasoline business, following other major oil companies who’ve been selling their low-margin stations to gasoline distributors.
This has been going on for years and anyone with their eyes open can see how many independents are out there and they are not making their money on gas sales but on convenience store items.
Other stores are owned by individuals who pay oil companies a fee to use their name.
The latest trend is for the oil companies to sell their refineries for the same reason…the profit is in taking oil out of the ground not in processing.
HOUSTON — Exxon Mobil Corp. said Thursday it’s getting out of the retail gasoline business, following other major oil companies who’ve been selling their low-margin stations to gasoline distributors.
This has been going on for years and anyone with their eyes open can see how many independents are out there and they are not making their money on gas sales but on convenience store items.
Other stores are owned by individuals who pay oil companies a fee to use their name.
The latest trend is for the oil companies to sell their refineries for the same reason…the profit is in taking oil out of the ground not in processing.
Attitude
When we lived in Grand Forks, I would drive by the North Dakota School for the Blind and about once per week I would see the students out walking. Each would have a teacher by their side and some would be in wheel chairs. These kids were not just blind but most had serious physical impairments. Their limbs were deformed and they had difficulty in maintaining their balance. As I continued on to work I would realize that whatever is was I was worrying about, it wasn’t worth it. Seeing these students on a regular basis had a rather profound influence on my way of looking at the world. I came to understand, that every morning, I get to choose what kind of day I am going to have. Would I see the glass half full or half empty? The choice would be mine. On days when I tended toward the negative I would think about those kids and I would start to count my blessing. I had two good arms and two good legs. I could see and hear. I had food to eat and a place to sleep. I lived in the greatest country on earth. Soon my attitude would change and I would feel upbeat about the day.
Years later I find myself doing much the same thing even though the Blind School is a thing of the past. When I take my walks in the morning, I go through a verbal ritual where I remind myself of the good things about my life. I have always been blessed with good health but a year ago, I suddenly had some severe pain in my arms and shoulders and I got kind of depressed. I had been spoiled with my good health and this was something new for me. When I realized what was happening, I made up my mind to start counting my blessings and after a while I regained a positive attitude. A few months later I started going to the chiropractor and after a few months he had me back to normal. After that experience I developed a new respect for people who have health problems.
Through all of this I came to understand that the two most powerful words in the English language are the words, “I am”, for whatever follows those words is what I am in fact. My mind hears the words that I speak and acts accordingly. Since I am created in the image of God, I can say with full confidence that I am loving, I am kind, I am gentle, I am caring, I am feeling, I am patient, I am helpful, I am healthy, I am wealthy, I am wise, I am giving, I am forgiving and I am thanksgiving. I am quite convinced that speaking these words out loud has made a real difference in my life.
Years later I find myself doing much the same thing even though the Blind School is a thing of the past. When I take my walks in the morning, I go through a verbal ritual where I remind myself of the good things about my life. I have always been blessed with good health but a year ago, I suddenly had some severe pain in my arms and shoulders and I got kind of depressed. I had been spoiled with my good health and this was something new for me. When I realized what was happening, I made up my mind to start counting my blessings and after a while I regained a positive attitude. A few months later I started going to the chiropractor and after a few months he had me back to normal. After that experience I developed a new respect for people who have health problems.
Through all of this I came to understand that the two most powerful words in the English language are the words, “I am”, for whatever follows those words is what I am in fact. My mind hears the words that I speak and acts accordingly. Since I am created in the image of God, I can say with full confidence that I am loving, I am kind, I am gentle, I am caring, I am feeling, I am patient, I am helpful, I am healthy, I am wealthy, I am wise, I am giving, I am forgiving and I am thanksgiving. I am quite convinced that speaking these words out loud has made a real difference in my life.
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