Uranium One

Ever since the Soviet Union collapsed in 1992, the US has tried to develop a reasonable relationship with Russia. The nuclear arms reductions and the co-operation in space are two major moves. In 1992 Bush 1 negotiated a deal to remove the enriched uranium from Russia disassemble missiles. In 2008 Bush 2 proposed an agreement which was quickly squashed when Russian invaded Georgia. The Russian company who agreed to handle this deal was Tenex USA a subsidiary of Rosatom and the Russian official involved was Vadim Mikerin. When Obama came along he tried with the now famous Hilary reset. Getting along with Russia was deemed a positive. Obama allowed Mikerin to continue his work and this led to bribes to American companies putting them at risk of blackmail. For Mikerin to continue his work he needed a lobbyist and the man he found was a well-known Washington insider, a former federal prosecutor and counsel to the Senate Intelligence Committee. When this man found out what the Russians wanted him to do he was concerned about the legalities so he contacted the FBI and they agreed to use him as an informant called CS-1. At this time the FBI was headed by Robert Meuller who is now the Independent Prosecutor in charge of the Trump-Russian investigation. By May of 2010 the FBI had proof of three schemes of extortion payments. The secret lobbyist is now being allowed to testify and this information will be published in the coming weeks. In 2005, former President Clinton helped his Canadian billionaire friend and benefactor, Frank Giustra, obtain coveted uranium-mining rights from Kazakhstan’s dictator and his company Uranium One stood to profit handsomely. Putin wanted this ore so he leaned on the Kazakhstan leader and the person who made the deal was arrested and the whole deal was in jeopardy and stock in Uranium One plummeted. Then Secretary of State Clinton came to the rescue and brokered a deal with Putin to buy 17% of Uranium One stock and the crisis was averted and Giustra and his friends were saved from a large loss. In thanks for Clinton’s work her husband was paid $500,000 for a speech in Moscow and $145 million dollars Newsweek reports was donated to the Clinton Foundation by sources linked to the Uranium One deal.

Health care problems

In January of 2016 the Republicans in both the house and senate approved a bill to dismantle Obamacare and sent it to President Obama who vetoed the plan. “We have now shown that there is a clear path to repealing Obamacare," House Speaker Paul Ryan (R-WI), said in a statement. “So, next year, if we’re sending this bill to a Republican president, it will get signed into law." One year later the Republicans could not agree on a plan. The fact that they did it the year before indicates that many were not satisfied with the plan but voted for it knowing full well that Obama would veto it. This was done just to try and make the President look like he was an obstructionist. This is it the kind of stuff that goes on all too often in Washington. Just one more reason why people want to throw the bums out.

Sub contractors

Back in my work days I had a client whose job it was to get grants for the government research center at UND. He did not need any equipment or employees just the expertise to fill out the proper forms in the proper way. I was reminded of him this week when the news reported that a small two man company in Montana called Whitefish secured a $300 million dollar project to repair the infra-structure in Puerto Rico. These two gentlemen would sit in their office and hire sub-contractures to do all the work and bill the government. How would they make money doing this? They would simply overcharge the government. The cost of labor has emerged as a key question after NPR and other outlets reported that worker wages can go as high as $336 an hour for general foremen and $319 an hour for linemen. Subcontractors are a major share of Whitefish’s labor force, as CNBC reported. Here’s how NPR reported other costs: Like the old song says,” nice work if you can get and you can get it if you try.”

Work force

Obamacare promised to insure 31 million new people and the cost would go down $2,500 per family. For 2017 11 million people have signed up and 80% of those are getting free or subsidized coverage. People making more than $50,000 are paying the cost of health insurance for those making less than $50,000. This kind of income redistribution will work because there are large numbers of people in each group. Many of the people enrolled in Obamacare are adults without children, a group previously not covered by Medicaid. One of the mysteries facing our economy is the fact that 10 million males between the ages of 25 and 54 are not in the work force. If these men were working they would add a full percent to the GDP. They represent a major portion of those receiving free insurance under Obamacare. Is there a connection here? Does having free health care added to other government benefits allow some to stay out of the work force?

China

Economist Jim O’Neill on public radio suggested that countries around the world will follow China’s economic policies rather than those of the United States. He bases this on China’s phenomenal GDP growth which has been 10% for many years. Does he mean that countries would sacrifice the ability to elect their own leaders, to do without a free press, and be afraid to speak out against the government to increase GDP? I think he is forgetting about the down side to China and just looking at growth. China is a communist country that is ruled by the 7% of the population who belong to the party. 93% have no say in government policy.

Tax changes

Under current tax law a family of four earning $100,000 per year pays $9,800 in federal income tax and the same family earning $200,000 pays $34,000. Under the Trump plan a family of four earning $100,000 pays $9,100 and those earning $200,000 pay $24,000. If they compromise and leave the top rate at 39.6% then there will be no reduction in taxes on the rich except for small business owners whose top rate will drop from 39.6% to 28%. The corporate tax rate will decrease from 35% to 20% and there will be a one-time tax holiday on corporate funds held outside the country at 10%. It is estimated the companies are holding 2 trillion dollars overseas and they would bring that home. The President should use his negotiating skills to convince companies to use the money they get from the tax holiday to grow the economy. This means not just buying back company stock but investing in new businesses.

Health care profits

For those who may have forgotten, the big health insurers were strong backers for Obamacare. In case you wonder why here is some data. Since March 2010, when the Affordable Care Act was signed into law, the managed care companies within the Standard & Poor’s 500-stock index — UnitedHealth, Aetna, Anthem, Cigna, Humana and Centene — have risen far more than the overall stock index. This is no small matter: The stock market soared during that period. The numbers are astonishing. The Standard & Poor’s stock index returned 135.6 percent in those seven years through Thursday, a performance that we may not see again in our lifetimes. But the managed care stocks, as a whole, have gained nearly 300 percent including dividends, according to calculations by Bespoke Investment Group.

Farm welfare

The farm bill is $100 billion expense to the taxpayers. About $80 billion of this goes to food stamps and school lunch programs. About $4 billion goes to farmers in the commodities market and 75% of this goes to 10% of farms. The bulk of this money goes to corporate farms in the agribusiness, companies like Cargill, Tyson Foods and Archer Daniels Midland. These are direct cash payments which is a form of corporate welfare. When some congressman suggest cutting this 3 billion that goes to corporate farms, a cry goes out that they are cutting food stamps. It must be too complicated to separate the money going to farms and that which goes to food stamps.

World income

World income is closing in on $70 trillion as the world population closes in on 7 billion so the average income is $10,000 per year. The total world wealth is $240 trillion. 71% of the people have only 3% or 7.2 trillion of the wealth. People with assets of over $100,000 represent 8% of the population but own 84% or $200 trillion of the total wealth. The 10 richest billionaires own $500 billion in assets. If we took that and gave it to the 71% who are poor they would each get $100. The 500 richest own $7 trillion in assets and giving that to the poor would provide each person with $1,500. For all of China’s history the people have been poor but all that began to change in 1980 when China’s ruling communist opened the door to the free market and allowed individuals to start their own business. Since that time their average income has increased from $1,000 per year to $8,000 per year. That represents and eight fold increase in 40 years. This is the approach that best helps people help themselves. Trying to help the poor by redistributing the money has never worked. Redistribution only works when you have a large number of people in each group. There have always been too many poor and too few rich to make this work. The technological advances in the western world have provided higher paid jobs in Asia which was the driving force behind the progress in China.

Enrichment

I have always maintained the Iran is not trying to make a nuke but they are using the possibility to gain leverage for other things. They already got billions of dollars and sanction relief and they will continue this strategy as long as it works. The US has the right to inspect their non-military sites as long as they get 24 days advanced notice. The US has no right to inspect their military sites. If Iran chose to start making a nuke they could easily hide their activity under the current rules. Anytime they choose they could quickly make enough enriched uranium to make a nuke.. The enrichment of uranium is a non-linear process meaning that it is easier to go from 20% to 90% than it is to go from .7% to 20%. A practical illustration of nonlinearity is that Iran — or any other nuclear hopeful — needs increasingly fewer centrifuges to make uranium 235 increasingly potent. For instance, one industry blueprint features 3,936 centrifuges for enriching up to 4 percent, 1,312 centrifuges to 20 percent, 546 centrifuges to 60 percent and just 128 centrifuges to 90 percent — the level needed for a bomb.

Small busimess

The phrase, small businesses create the new jobs is not entirely correct. It is more accurate to say new business creates jobs. Back in my time it was the big companies like General Motors that caused job creation because when they made profits they would build new factories to produce more product, but all that changed about 30 years ago. The big companies realized that it was more efficient to purchase an existing business rather than building a new business. They had readymade production facilities, well trained personal and no problems with government regulations. It was especially effective when they bought up competitors. A whole new division sprung up called mergers and acquisitions. New business must build new plants, hire and train new people and deal with regulations and the successful ones make it through this maize and become targets for big business. In recent years new tech startups have been purchased and made the entrepreneurs very wealthy. Lowering taxes and reducing regulations will encourage even more new businesses to start. This along with venture capital coming from hedge funds will spur more growth. New business will spur economic growth which will in turn provide more income for the government in the form of taxes and thus help many who are in need. This is a more efficient approach than having the government offer assistance directly to those in need.

Natural gas transportation

It is clear that the increase in carbon dioxide is causing the earth temperatures to rise but the average person is not concerned enough to change their life style. This is evident in a number of ways for example the way people take care of their lawns. A more obvious way is the kind of cars people drive. The U.S. auto industry sold a record 17.55 million light vehicles in 2016 thanks to an increasing consumer preference for larger vehicles such as trucks, SUVs and crossovers. The reason people are not concerned is the way the whole concept was brought to the attention of the public. It started with exaggerated statements designed to get attention and when people found out the truth they begin to have doubts. This was followed up with a push toward solar panels which turned out to be just a way to get campaign contributions. Now the whole idea has been so muddied up that the average person cannot separate the facts from fiction. If the push toward electric cars had been instead a push for natural gas vehicles the rise in atmospheric carbon dioxide would have been abated and even lowered but this approached brought no cash to political candidates. Progress: U.S. Carbon Emissions Decline Thanks mostly to less coal use at power plants, emissions in the first half of 2016 were lowest since 1991 If the transportation industry had moved to natural gas the reduction would been even more pronounced and it is not too late to move to natural gas cars, trucks, locomotives and airplanes. Once the US makes this transition the world will follow.

Transparency

About those tweets! Suppose you are a Washington insider, who has spent your career developing contacts, with the movers and shakers who live in the shadows and suddenly all that secret information, that only you had access to, is now sent out into the world by the President on his twitter account. Even though you preach openness in government this method of operating is stealing your thunder and you find yourself becoming obsolete, so you say that this is no way to run the government. It is ok if you know certain things about the government because you are a sophisticated Washingtonian but if that is just blabbed out to the rest of us non-sophisticates we will not know how to handle it. The press and the public demand transparency and now we have the inside track to what the President is thinking almost as soon as he thinks it but it is frightening. Maybe we want to go back to the old days when all of this was kept secret and only leaked to the press when the need arose. Maybe transparency is just too much for us.

Hollywood

There is a Hollywood mogul name of Harvey Wienstien in the news this week and everyone is totally surprised that he has harassed young women over the years. This man was in a position of power in the movie industry and could have a serious effect on the careers of young actresses. The news that he has been misusing this power over many years has stunned people in the industry. Come on!

Iran

The nuke deal with Iran is under scrutiny and Trump is going to ask congress to review some things about the agreement. The original plan was very narrow and centered only around Iran’s nuke production. This left things like financing and promoting terrorism off the table. It did not include any restrictions on the building of long range rockets capable of carrying nukes. Part of the Iran deal was the release of billions of Iran’s money that was locked up by sanctions. Some say this will help spur the economy and others say it will be used to fund terrorism. In addition Iran received 1.7 billion in cash in Swiss francs and other currencies. This was not used for domestic spending but likely for sponsored terrorist activities. Congress will try to broaden the scope of the agreement to include some restrictions on funding of terrorism and limits on rocket development. This is mostly futile since the horse is out of the barn but it makes for good politics.

Ego

There is a human characteristic that puts a person is a position of power when they have important information that their friends are not privy too. If you are the first to know that someone is getting a divorce or that someone has a serious illness or that someone just won a large prize, you are in the cat bird seat. As you call all your friends and hear the response they have to your news, you are for that moment in a superior position. Now imagine that when you have this news you get the accolades of the national press when you reveal your secret. This is why people close to power have the desire to speak off record to the press. They feel the power they have when they reveal secret conversations, especially any negative news. They become valuable sources and their egos are massaged carefully by the press people.

Guns

Guns, guns, guns! A trend that started back in 1990 has continued to this day. The more guns sold the fewer murders committed. In 1993 Americans owed 185 million guns and today it is 370 million. During this time period the murder rate has declined by 50% and this was accompanied by declines in all violent crime. A reasonable conclusion to this data is that the more guns around the safer people are. There are compelling reasons for limiting the size of magazines, having more extensive back ground checks and getting rid of the gadget that changes a semi-automatic into a fully automatic although there are instructions on the Internet explaining how to make this change without this gadget. These changes will not affect those who do not follow the laws or those who want to kill large numbers of people. Facts show that these changes would not have deterred any of the mass attacks we have suffered. These people have already used pressure cooking pots, pipe bombs, runaway cars and trucks and box cutters to kill so they will find a way. Drones are probably next. If this were not a political issue the subject would not have the news value it currently has.

Knowledge is power

There is a human characteristic that puts a person is a position of power when they have important information that their friends are not privy too. If you are the first to know that someone is getting a divorce or that someone has a serious illness or that someone just won a large prize, you are in the cat bird seat. As you call all your friends and hear the response they have to your news, you are for that moment in a superior position. Now imagine that when you have this news you get the accolades of the national press when you reveal your secret. This is why people close to power have the desire to speak off record to the press. They feel the power they have when they reveal secret conversations, especially any negative news. They become valuable sources and their egos are massaged carefully by the press people.

Puerto Rico debt

Puerto Rico has been on financial thin ice for many years and they were kept afloat by selling bonds to investors. In order to cover the risk they had to pay a high interest rate and over the years they sold many bonds paying 8% or higher. Many US hedge funds invested heavily in these bonds and are now at risk of losing their shirts. The question comes up as to why they were willing to take this risk and this question is about to be answered. Recall that the big banks a few years ago were willing to buy a lot of junk mortgage bonds because they knew that the government would have to bail them out if things went bad and thus the term moral hazard came into the vernacular. Remember too big to fail! The Puerto Rican investors are counting on the same thing. If the US wipes out their debt these hedge funds will lose but if the government backs these funds then the investors win. Will Uncle Sam once again use taxpayer money to save the big hedge funds? When the US sends aid will part of that be used to pay off the bond debt? The question arises will the bond holders get paid directly from a bail out by the US or will they receive payment by way of aid?

Estate tax

The subject of estate tax is once more in the news as the congress prepares for tax reform. This is a tax that falls on a small number of very wealthy people. The tax is mostly avoided by good tax planning using trust and such and purchasing life insurance to pay what is due. It still represents a 29 billion dollar per year tax to the government. The easy out is to eliminate the loophole and have these few individuals pay that tax to the government. This brings back the old argument of what do the rich do with their money. They have three options. First they can save it, second they can invest and third they can spend it. Each one of these options has benefits for the economy. It they save it, it becomes available for others to invest it. If they invest it, it helps grow the economy. If they spend it also helps the economy. The question then arises will these private individuals using their own money create more economic growth than giving it to the government and having the government spend the money. It is an argument that has been around for a long time.

Puerto Rico

My daughter in law goes around the world building production plants and she built one in Puerto Rico some years ago but the past year she has been building one in Costa Rica because the financial situation with the Puerto Rico government has deteriorated to the point where her company decided not to expand their facility. Puerto Rico has been relying on US aid for many years to keep their economy afloat but all that came to a head last May when the country filed for bankruptcy. Their economy was rapidly sinking and this hurricane put the final nail in the coffin. To get them back on their feet will take a lot more than just storm recovery. Unlike Texas and Florida the infrastructure has been allowed to deteriorate to the point where storm aid cannot be delivered to where it is needed. The power grid along with roads and bridges has been in disrepair for years and now just compounds the storm problem. Regular upkeep in power plants and water treatment facilities has been curtailed due to lack of funds. In this way it resembles New Orleans during Katrina. Federal money that was supposed to be spent on keeping the sea walls in proper shape was spent on other projects and when the storm hit the walls collapsed. It is like a family that lives from paycheck to paycheck and suddenly encounters and unexpected expense. They just go under.