WMD

In previous notes, I pointed out that Iraq received thousands of tons of chemical weapons from about dozen different countries including the US. In the months leading up to the Iraq war truck convoys were observed moving products to Syria. A Russian General was on the scene supposedly to make sure there was no trace of Russian activity in the transferring of these materials. It was at this time that Saddam was to explain how he had destroyed his chemical weapons but he would not say where this was done, since soil samples in that area would reveal whether it happened on not. I mention this because if Syria falls, the inspection of chemical weapons will reveal their source and perhaps finally answer the question as to what happened to Iraq’s chemical arsenal.

Money supply

Many of my friends have not studied Economics and most of those who did have forgotten most of what they learned. One of the terms used in economics is money supply. This refers to the amount of money in circulation including cash, checking and savings and the velocity of money refers to how many times each dollar is spent. If you multiply the money supply times the velocity you get the GDP. The government has three ways to influence the money supply. The first is when the government buys or sells government bonds. If they sell bonds they take money out of the system and if they buy bonds they add money to the system. The second way is to change the discount rate. This is the rate that banks pay to get money from the government. If they lower the rate the banks get more money and if they raise the rate the banks get less money. The third way is to change the reserve requirements. This is the amount of cash banks must keep on hand to back up their loans in case of default. The current requirement is 3 to 10 percent depending on the size of the bank. The reason I bring these things up at this time is to understand why the money supply is not increasing at the expected rate. Under normal conditions when the government buys a bond from a bank and deposits $1,000 in the bank, the bank can then loan out $10,000 and that is how banks increase the money supply. Banks are not making loans. They are investing the money in various vehicles and making a sizable profit. They are taking greater and greater risk with these investments knowing that if they guess wrong the government will come to the rescue. Bank reserves are increasing and bank stocks are rising but if things turn, which often happens, the taxpayer will once again have to ante up. In the meantime the bank stockholders are making money as are the bank executives. This is from an article dated May 16, 2012. May 16 (Reuters) - Big banks are expected to use a larger portion of profits for employee bonuses this year, despite extensive job cuts and a recent outcry from shareholders over excessive pay, according to a closely watched survey of Wall Street compensation.

Health care

If you are interested in one more example showing that the elected officials who designed Obamacare did not know what they were doing, here is the latest. Officials are concerned that young healthy people are not interested in signing up for health care and this is the group whose premiums were expected to offset the cost of covering those with pre-existing conditions. If they had asked anyone who was in the business of selling health care they would have discovered that these sales people do not even waste their time on contacting young singles as they are well aware these people are not good prospects. The penalty for these young people who refuse to get health care is $100 per year and they will just pay that. The penalty does increase to $625 by 2014 but that will still not do it. When people file their federal income tax in April of 2104 there will be a question asking if the person has health care and they will be required to submit proof. If they cannot they will be charged the penalty. One more addition to our tax forms is just what we needed.

NY police

I have mentioned a number of times that the biggest economic problem facing cities, counties and state is what are called legacy benefits. These are payments made to retirees, mostly in the form of health care and pensions. In many large cities, policemen are permitted to retire after 20 years of service with pensions equal to one-half to three-quarters pay. New York city is an example. Uniformed city workers can start collecting after 20 years, while others have to wait until their normal retirement age. The pension time bomb is starkly illustrated by the fact that 10,381 retired cops between 40 and 49 are now collecting. On average these retirees will live another 40 years during which time they will collect over 2 million dollars in pension benefits. The city currently has 44,000 retired police and 34,000 active duty police.

White Guilt

When you use averages and compare Minnesota with other states, we look pretty good but when you did into the numbers we look pretty bad. Our problem has to do with the widening gap between whites and people of color particularly blacks. When you look at graduation rates, drop-out rates, test scores, income, crime, unemployment, jobs, welfare and housing the gap is embarrassing. Our state like many others has been aware of this worsening problem for many years and attempts have been made from time to time to correct the situation but all have failed. They have failed because most of what is done is just spending more money on the problem. This is what the white people who say they are concerned recommend. This is what some people see as an example of white guilt. This is what people who see the problem but don’t have the time or the knowledge to do anything about it.

How Obama got elected

Recently a number of people have asked me how Obama ever got elected and I was surprised to find out how soon people forget. Obama held a steady lead in the polls over McCain all during the spring and summer leading up to the election in November. Then in August things began to change and on August 29th he selected Palin as his running mate and the polls turned sharply in favor of McCain. By mid-September the McCain-Palin ticket held a firm 5 point lead and the momentum swung in their favor. Then on September 15th the Treasury headed by Paulson and the NY Fed headed by Geithner refused to come to the aid of Lehman Brothers and they filed for bankruptcy and that ended the McCain chances, as the polls reversed the trend and he fell five points behind within a few days. Since then many people have asked why Lehman was allowed to fail but other banks were bailed. Most experts agree that Lehman should have been bailed and the panic that followed could have been avoided. The overnight drop in the market and the concern of other banks which were in trouble, contributed to the downward economic spiral, that ensued. Some conspiracy theorist point out, that Geithner became Obama’s Secretary of the Treasury and imply a connection between that and the election results. That may have happened but Obama likely had nothing to do with it. It could be that the money lenders felt more comfortable with an amateur like Obama vs an Washington insider like McCain. In any event, the presence of Wall Streeters in Obama’s cabinet, are about the same as the Bush Administration and in both cases almost too many to count.

Movies and Blacks

About a year ago I purchased an Apple TV. For those of you not familiar, this is a device that allows me to view youtube on my TV. I did this because of the music. It is not easy to find the kind of music that I like in stores but on youtube there is an abundance of performances from artist like Sarah Vaughn. What I discovered were hundreds of old movies from the 30’s and 40’s. When I was growing up we did not go to that many movies so most of these I have not seen. While watching them I noticed something quite different from today’s movies and this is especially evident in crime films. The criminals are almost always white males but in today’s movies blacks are prominently represented among the bad guys. In looking further I find that blacks when the do appear are as butlers or servant types. Although black crime in the 30’s was much less than today it was still higher on a percentage basis than white crime, so why was it absent in the movies? I believe the answer to that question lies in the way cities were segregated. When I was growing up all of the black people lived in one part of town. They shopped in that part of town, went to school in that part of town and attended church and other social function in that part of town. White people were mostly unaware of what was going on in the black community so to see a black criminal in a movie would be foreign to their perception of the world. Years later when TV came along and we saw the struggles of the blacks we were surprised. Our ignorance had protected us from reality. This was one of the main reasons for the uprisings in the 60’s and how the baby boomers thought their parents were hypocrites. The greatest generation had always told their children to treat people with respect and when these 60’s kids saw the way blacks were treated they felt their parents lied to them. They never stopped to understand that their parents had no idea what was happening. On a very personal level I knew more about blacks than most of my friends because I often went with my Dad on his milk route which was in the black part of town and I knew they struggled economically but I was still unaware of their true plight. Or is all this just a rationalization of bad behavior!