Tag Archives: Bernancke

2 Cents Worth On Life Its Ownself

The surprise isn’t that history repeats but that folks are surprised when the same thing occurs again and they think it is something new.

If you  searched or stumbled across the back pages of the news today you may have seen the article about the arctic sea ice.   Since spring of this year we have seen repeated stories about the allegedly alarming reduction in the arctic sea ice and as a harbinger of global warming doom.  Yet, today in the small print we note that the sea ice there has actually increased by 30% this year.  But the media types immediately in the same articles continue the warming that the “models” show that the ice will decline rapidly.  Where’s Groucho when you need him–who you going to believe your lying eyes or what these smart folks tell you?

Both the message and the messenger are important on the major issues of the day.  Syria is a case in point.   Hitler was a great messenger regardless of his evil.  His message was evil for the most part.  Yet it can’t be denied that he could sell the message extremely well.   Check out those old videos of his speeches.  He was very effective with his audience and that is what counts.   In Syria we have the bad combination of a terrible message and an ineffective and arrogant messenger.    The I, Me, My guy in the White House is so egocentric that he makes the issue all about him.  That wears thin after a while and has in this instance.  There needs to be a compelling message and that hasn’t been presented.  Exactly what are we attempting to achieve in Syria?   Whatever that may be, do the facts at hand regarding the combatants there and their goals match up with any vital interests of the US?

Harry Truman was not my guy.  Didn’t like him but he did speak plainly which is appreciated.  At least you knew the devil and his designs.  When faced with a similar conundrum about picking sides between two abhorrent foes he was direct.  When Hitler invaded Stalin’s play pen old Harry said clearly that he didn’t like either of them and he hoped that would slaughter each other.  This was before he become vice president.  At least he knew evil when he saw it.

Vladimir Putin, the great peace maker.    That is something for an old KGB hired hand and ruffian.   I believe he has read his Machiavelli more carefully than our guy.

After a long hot summer it is hard to believe that in only a few weeks some parts of the country will see the first flights of Canadian geese heading south.

We are all familiar with  the basic story of William the Conqueror and his conquest of England and the Battle of Hastings in 1066.   The Normans were on the move during this period of history.  What very few know is that a relative of his Robert Guiscard was during the same time frame conquering and liberating much of central and southern Italy and Sicily.  He and his quite small army threw out the Muslims from Sicily and areas of southern Italy and at the same time dominated Rome and the Pope.  The Pope was glad to have him because he was Christian and was fighting the Muslims and restoring the prestige and power of the Church.  Old Robert also was about gaining power and dominion over as much land as he could.  He even expelled the Byzantine empire from those central portions of Italy.  His children were married off to cement alliances and his 12 sons aided in the conquests.   Those independent Italian  principalities lasted well into the 19th century.  Napoleon’s son become the King of Naples centuries later.  Robert never had more than 10,000 Normans to accomplish all this.  He formed alliances with local groups who had their own  reasons to want the Muslims out and have different rulers in other areas that weren’t dominated by Constantinople.

It is a truism of investing that you don’t buy or sell stocks of feelings or emotions.  But I guess those green tree -huggers slept through that part of the class.  They are still buying Tesla even though the stock is selling at a negative, yes, negative 89 times earnings.  And about 80% of their “earnings” come from selling those energy tax credits to others, not selling and making a profit on  cars.   Good luck to you if you are one of those investors.  Sooner or later morning comes and one has to face the reality of the day, not the dreams of the night.

The Great Pyramid of Cheops is the largest.  The square base is aligned correctly on a north /south and east/west setting.   From the chamber of the Pharaoh buried in the middle there are two passage ways that run at about a 45 degree angle up to the surface hundreds of feet about ground level.  The one facing south points directly at the belt of Orion; Orion was the Egyptian Osiris God.  The one pointing north faces true with the North Star.   Clearly those two markers in the sky were very important to them for whatever reason.  We’ll likely never know for sure why but we know when they constructed these huge structures that those stars were very important.  They went to a lot of trouble to make those alignments happen.

Even as late as this summer Bernancke has continued to insist that the Federal Reserve is not monetizing the debt.  That simply means printing up new money to cover the Federal deficit.  Let’s see, they have been buying 45 billion per month of US Treasuries for well over a year.  The US has run a deficit over or near one trillion dollars for 5 years now.  The Fed now owns more US Treasuries than even China even though some politicians keep talking about the Chinese being our largest creditor.  The Fed is buying about 75% of all US Treasuries trying to keeping rates low. Those rates have jumped dramatically this summer from 1.4 in May to near 3.0 as of today.   Would the US treasury have been able to borrow all those trillions without the Fed at such low rates?   And remember when the Fed “buys” treasuries it does so with a keystroke on a computer, not real money.  But not to worry we’re aren’t monetizing the debt.

“The law is silent during war.”  Cicero.  http://www.olcranky.wordpress.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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2 Cents Worth On Life Its Ownself

If you can spare a dime, I’ll give you two cents worth of unvarnished wisdom in exchange…or at least stoutly stated opinions on life and the world.

What is it with all this dithering at the White House about which side to choose in Egypt?  There are clear lines of demarcation.  The Muslim Brotherhood is the enemy of democracy as we know it and are definitely prone to violence and suppression.  The Generals are a bunch of angels but at least there would be much more stability under their rule and a greatly reduced risk of violence and terrorism being spread from Egypt or indeed fomented by the Brotherhood.   In the real world you have to deal with those in power and those more closely aligned with your own country’s interest.   That doesn’t make the Generals are best friends forever but they are clearly the best alternative.  Get on with it and support them and foster as much influence as we can in that region.  The other course is self-destructive to our own interest unless we want even more terrorist attacks.

Go back a few months to those headlines in the Spring about the global warming threat de jour.  You may recall that we were scheduled, due to global warming per the Al Gore ideologues,that we were going to have a really bad hurricane season with 11 predicted and four making landfall; also we were to have a very bad wildfire season and a significant increase in tornadoes.  The facts so far this year–zero hurricanes, and in spite of the real problems for those directly affected, the wildfire season is much less than a normal year so far and lastly, even the NOAA folks have acknowledged that the tornado season has been remarkably quiet even with the tragedy in Moore.   I predict boldly we will have extreme weather somewhere ever year.  Giant blizzards and searing heat waves and outbreaks of hurricanes and tornadoes.  Thus it has ever been in recorded history and thus it will be.   Oh, the IPCC draft also owns up to the standstill in warming worldwide for the last 16 years.   According to the wizards of smart it is the Sun (duh), ocean bottoms heating up or even as they admit, maybe, just maybe they overestimated the effects of CO2 in the atmosphere.   Stay tuned, the report will change when the politicos at the UN get their hands on it.

Like bureaucrats everywhere ever time the Fed when it gets caught doing something generally viewed as wrong they simply re-define the issue.  Bernancke with a straight face says he is not monetizing the national debt.  Yet for two years now the Fed has been buying 75% of all the Treasuries issued.   But he says that is monetary policy and investing and not simply allowing the US government to spend money it doesn’t have by printing more money every time it buys those Treasuries to fund deficit spending.   It would be different if real investors from around the world were buying up those Treasuries and putting real money into the coffers but the Fed with a keystroke on its computer merely creates money out of thin air.

It is still hot as the devil, but you can look at the calender and take hope.  Fall is approaching and the start of school, high school football and the hunting season.  When all those get going it just feels cooler.

All that hype about Musk’s hyperlink or hyperloop transportation made us smile.  That idea has been around for decades.   Any casual reader of science fiction will have come across descriptions of such transportation methods.  They all involve a tunnel and the carriage being suspended by magnetic opposing forces or air and they always travel in their own self-contained system because you couldn’t have two of those carriages traveling at those speeds passing each other.  The wind vortex would dislodge them.   It is a quite old idea and very feasible with one huge caveat.  The cost would be prohibitive.   Like the New York subways system on steroids but the tunnels even more structurally secure and the carriages would have to be more or less bullets in motion.

Anyone besides me remember that phrase the guy in the White House repeated ad nauseam in the run up to the passage of the Obamacare law where he stated over and over that “the average family will save $2500.00 a year in premiums”.    All those who expect to save that much be advised we are meeting in the phone booth on the corner next week.  Have ANY of you or any of your friends or relatives reported to you they are going to be saving $2500.00 next year on their health care?

In view of the alleged gas attacks in Syria I read like you did that our military was “updating” its target list for Syria to attack the manufacture or distribution of gas weapons.  I suppose we’ll never get away from political spin and propaganda.   They issue such press releases and nonsense to give the great unwashed the impression they are doing something special in response to those alleged gas attacks.  Some facts and clarity–it is the military’s job to constantly “update” potential targets around the world.  That is their job.  Don’t know if they do it daily, weekly or whatever but the process is always ongoing.   The Air Force and Navy intelligence guys are doing that as part of their regular duties.    And no doubt our drones are watching carefully for any signs of gas weapon deployment daily.   There is no “updating” going on just the routine duties of our guys in uniform.

“Truth is the greatest of all national possessions.  A State, a people, a system which suppresses the truth or fears to publish it, deserves to collapse.”  K. Eisner  19th century Bavarian journalist.  http://www.olcranky.wordpress.com

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2 Cents Worth On Life Its Ownself

Let those with ears, hear……we’ll sort through the flotsam and jetsam of the world events and random thoughts of the inquiring mind….

One wonders how folks 25 years from now will try to explain to their kids what “sequester” means or was all about.  When it is googled their kids will find some reference to a writ of sequestration issued by a court and they’ll really be confused about what the Congress or President was trying to sequester and who was issuing the writ.

Interesting to note that our chief lawyer in the land, Attorney General Holder spoke just a day ago about the drastic and dreadful cutbacks as a result of the sequester and the “cuts” in federal spending.  He was predicting how difficult such cuts would be on our vital Federal programs under his purview.  What was interesting and telling was the location of the remarks.   He spoke at a local Ritz-Carlton in the DC area.  Naturally, only the Feds could talk about the need to spend, spend spend and avoid any reduction in Federal spending by doing so at a Ritz-Carlton.  Haven’t they ever heard of a local community center, a Y, or thought of using the Holiday Inn conference room?

I got the physics of what makes those jet planes lift up into the sky but it is still counter intuitive to me.   We have all at one time or another held our hand out the window of the moving car and felt the wind as the car moves lift and push our hand higher.  You would think the same thing applies to those jets moving through the sky but it is actually the vacuum created above the wings as it moves through the sky that gives the lift.  The plane moves up into the vacuum.   I got that but it still just doesn’t seem right.

You want proof that the world is a dangerous place?  Let’s  make a quick list without referring to any Google or Yahoo searches or news media of all the locales where there are active ongoing wars of one level or another.  Colombia, Mexico?, Mali, Nigeria, Congo, Somalia, Yemen, Syria, Iraq, Afghanistan, Malaysia, Southern Philippines, Chechnya, Timor, Bangladesh, Pakistan, and Burma.  How many did I leave out? And of course this doesn’t count the low-grade conflicts within some countries.

It is not the gasses or elements in our atmosphere that make the sky blue.  It is the rays (radiation) from the Sun that get refracted by those elements into the blue spectrum of the electromagnetic field that give us that bright blue sky.  At night those rays are not hitting the atmosphere and thus no refraction and a black sky.

There is nothing more peaceful to the heart than watching a toddler taking a nap holding their favorite stuffed animal.  Not to mention the momentary respite for mom to quickly get some of those chores done around the house during that short thirty minute rest time.

Just watched Maxine Waters asking questions of Bernancke.  I have a rule in life that has stood me well over the years.  Never trust anyone who wears a wig!   Man or woman.  If they are so vain or so willing to present a false front of themselves then why do you think they would be honest with you about anything else if they can’t even show who they really are.  Only exception is for those in chemo,  God Bless ’em and they can do whatever they want.    Had a professor in college who taught Philosophy of all things who wore a wig.  I guess he never really got the message about to thine own self be true.

Who are these people that spend all their time tweeting or reading tweets or making posts on Facebook?  That is not rhetorical.  Don’t they have anything to do.  With those and all the countless online sites available for all manner of interests you can sit all day doing nothing but following pointless info.  I mean who really cares what Justin Timberlake thinks about Sequestration or the Yankees?   We have always had an interest in pop culture from the old dime novels to the daily comics but those were momentary indulgences not 24 hour obsessions.    Do students study anymore and do folks on the assembly line or in the office do any work?  If they do, then really, who are those doing all that junk communicating.

Compromise if the big word these days in all the news outlets as they comment on the current political disputes regarding our debts and deficits.  Compromise is good, standing by your principles is bad.  That is the message.  How are you supposed to compromise with a policy you believe will lead to ruin?  Compromise–Britain tried that with Hitler and still didn’t delay or avoid WWII.  Even the Vatican entered into a compromise with Hitler which most don’t like to  remember.  It had  a concordant with Nazi Germany.   Compromise is necessarily a good thing.  Compromise is only ok if you agree on the end you wish to reach but have disagreements about the means to achieve that goal.  At present the two parties want completely different results and futures for the country.  Like it or not there will be a victor for that future and the loser will buckle and accommodate to that reality or there will be civil discord.   Those different versions of the future can’t co-exist so why should rational men expect a compromise at this time?   Like it has always been politics is a winner take all game.

“He that hath no rule over his own spirit is like a city that is broken down, and without walls.”  Proverbs 25, 28  http://www.olcranky.wordpress.com

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2 Cents Worth On Life Its Ownself

Let’s take a quick turn around the old attic of the mind and clear some cobwebs and peek into those dark corners of memory and reflections on the world of today.

How long did it take you to do that special Halloween decoration the little lady wanted for the front of the house?  Why is they always seem to think you can do these creations in a few minutes and that you  will have fun doing it?   My miserable looking scarecrow took a total of five hours and two trips to Home Depot and one to the drug store and no, I did not have fun.    But it makes them happy and she lied and said how good it looked.   Just think you are only a couple more weeks away from starting on the Thanksgiving lay out and then on to Christmas decorations.

Would you want BO or Biden in a foxhole with you when the bullets were flying?   BO would never fire his weapon and want to negotiate and let the bad guys know how much he loves them in spite of the incoming fire.  Biden, my Lord those shiny teeth would be a dead give away to the enemy, drawing fire like the bees to the hive.   Give me Clint any day.

The Federal Reserve now controls about 20% of our GDP and is buying about 75% of all the new debt issued by the Treasury with freshly printed dollars.   If you read the international news you may have noticed that Bernancke not only has critics at home but the international finance community last week had some pretty harsh criticism of his printing mania and machine.   Some may think he is the smartest guy in the room but do they really believe he is the smartest guy in the world?

In spite of last year’s agreement to increase the national debt limit to a depressing and eye-popping 16.3 trillion we are already within less than two hundred billion of reaching that limit.  It might well happen before year end.  One more headache in addition to the fiscal cliff we are approaching.   The debt limit has been lost somehow in the current political debate.  That is too bad for all of us because we need to know the intentions of the politicos regarding our unsustainable debt.

One must wonder if Alsace and Lorraine in eastern France are still happy to be part of the French nation.  They have floated back and forth over the centuries between German and French control.   Some in the area still speak
German more than French.  Would you rather be living in the German economy or the French?  Well, sometimes you get leadership and nationhood  remorse.   But they can dine well, that is if they can afford it.

A123 battery filed for Chapter 11 this week.  That is another crony renewable outfit that has bit the dust after taking hundreds of millions in grant money from the current administration.  They have all kinds of excuses for why things haven’t worked out.  The bottom line those is success or no.  Does the administration have even one real success story for its renewable energy program of government “investment” and government central planning?  Remember that A123 and Solyndra were celebrated by BO as huge success stories at one time but the congratulations were premature.   Maybe you have noted that people are much more careful and thoughtful when they have their own money at risk rather than playing with other people’s’ money–in this case our money.  The investment was made not by us though but by politicians.    Would you have allowed your 401 or IRA money to have been invested in such ventures?  If the answer is no then why would you tolerate the government doing it?

Democrats often criticize Republicans for spending on defense items.  They reference Reagan’s large increase in defense spending and his SDI program (strategic defense initiative, Star Wars) and that he didn’t fully pay for it.   Well, those decisions of Reagan directly resulted in us finally winning the Cold War and the consequential “peace dividend”.  Clinton benefited from that peace dividend  to the tune of hundreds of billions of dollars in savings and in fact we still are.   The Democrats were vicious in their attacks on Reagan at the time.  Thank God he stood firm.

You will hear regularly that big oil has so many special tax breaks and tax loopholes working in their favor.  What they are talking about is the depletion allowance for oil and gas wells.  It is not really a mystery or hard to understand why they get to take that deduction from income.  If you had a landscaping company and bought a truck for your business you would get to depreciate the value of the truck over a period of years because the value of the truck would decline with age.  It is the same for an oil and gas well.  As you pump the oil or gas out the amount remaining is diminished.  No well last forever, each one has a finite limit.  Just like you with your truck that get to take a deduction for that depletion of the well as it ages.  It is an ordinary business expense like any other.  It is ok if you don’t like the oil companies for whatever reason but don’t argue they get “special” breaks any different from any other company like Apple or Google for all their hardware purchases they depreciate.

The British Meteorological Office recently reported that world temperatures have remained the same for the last 15 years.  There is a very thoughtful and comprehensive article in The Mail from last week you can look up.  You should regardless of your position on global warming.   It is rather long but worth the read.  It doesn’t take a position really but does rely more on actual data for the article rather than so much interpretation.  It also noted as was mentioned here that while the Arctic ice field is reduced at the moment the Antarctic ice fields are at record highs.

Is there any tool more useful and used more than the common pocket knife?  When I was a kid virtually every man carried a small pocket knife.  Not many do today but guess they are carry a Leatherman in the glove box of the car.

“These are the times that try men’s souls.  The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now deserves the love and thanks of man and woman.”  Thomas Paine, patriot pamphleteer, 1776  http://www.oldcranky.wordpress.com

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2 Cents Worth On Life Its Ownself

Let’s reach into the lottery ball container and see what we can pull out for rumination or amusement…..

Notice that Datsun is going for a comeback with an ultra cheap care.  It will sell in the  3k to 5k range and is directed to the third world market.  It is a car with all the basics but eliminates those electric windows, electric seats, minimal air bags, etc.  Hmm, with our economy continuing to head south one can’t help but wonder if they might want to consider selling a few of those in the USA.  For getting around town for routine errands it beats a Vespa and sure is economical to operate.  Give them some cutesy distinctive paint jobs and there is as segment that would take pride in flaunting their down-sizing life or some would just appreciate the cheap transportation.   There might be a bigger market here than they think.

Is there any worse feeling in the whole world than when you cause an injury to your own child?  If you have raised kids then you know what I mean.  Sooner or later when you are tired or distracted for just that couple of seconds you will do something that hurts your child.  It could be as simple as not noticing them when you are mad and slam that door to the laundry room without noticing that they are ankle-biting their way right behind you.  I did it a couple of times.  Once my second daughter was getting out of the car along with her three brothers and sisters and Mom pregnant with number 5 on the way, we were tired and wanting to get in the house.  I shut the car door and heard her cry.  I had shut in on her hand, her fingers were caught in the door jam.   Thankfully, there were no broken bones, her little fingers were so small that she only had a really bad bruise.  But I had a huge bruise on my heart.   Had could I have been so careless?  Once I also made my oldest son wait much longer than necessary when he fell on the tennis court and cut his chin.  He wailed. I went over and checked but didn’t see any blood and calmed him and told him to sit still and we continued our tennis.  He kept crying really loud and I went back and looked closer.  There was a huge gash just under his chin and obviously needed stitches; it was bleeding, strange but true.  Why didn’t I look closer the first time.  We did get him to the ER right away for those stitches.  Even after 40 years you can still feel that sinking feeling of being the worst parent in the world.

Maybe you noticed that another solar panel outfit with Dept. of Energy loans just filed Chapter 7 bankruptcy ( a liquidation process).  It had recently renegotiated its 465 million dollar loan with the Feds.  It publicly blamed unfair competition from the Chinese for its failure but an internal memo indicated it might have been, er, a faulty product.  It said that their panels worked just fine except in sunlight!

How can Bernancke stand there and lie through his teeth that the Fed’s buying new Treasuries and mortgage-backed securities is not “printing” money nor enabling the Feds from continuing the deficits and running up the national debt?  Does Ben have a secret room at the Fed with Trillions of dollars just lying around for him to use that the rest of us Hoi Polloi don’t know about?   Yeah, it is technically true they don’t “print” the money, they just hit the keystrokes on the computer.   This to the tune of at least 40 billion per month, forever apparently.  What is really deplorable is that the business press and media will not call him out on it.   Make him explain where the money comes from that he uses to buy all those instruments.  From the thin air of the Fed Wizard of Oz machine is where.   Oh, and by the way, the revised numbers show that in the last year the Fed bought 77% of all those new Treasury bills, notes and bonds.   Not that many folks wanting to loan us money any more, at least not at the current ridiculously low rates of interest.

Because of the dangerous world we live in with the threats from Islamist terrorists I urge you to read just a little of the history of the early days of the Prophet.   There are ample sources available to you.  For a Prophet of peace he sure engaged in lots of warfare and battles with those who opposed his message.  Yes, he won over some very devoted and fanatic followers but he also subdued many, many more with brute force.  It wasn’t the message that won over most of the people it was the sword of Islam.  Please don’t take my word for it, read just an hour or two of his and Islam early history.

Rather than debates on TV I really wish the modern way of our Presidential candidates to present their arguments, positions and policies was with written essays if you will.  You know as well as I do that these modern campaigns are all about appearance, sound bites and platitudes to appeal to the base and the frankly uniformed.  I would much prefer if each candidate would issues thoughtful and meaty essays on the various issues of the day.  Take tax matters for example, wouldn’t we all be better off if each candidate wrote a really long, 5000 words or so, piece on his view of what tax policy should be.  I am fine with him having as many aides, experts and whoever helping him write the article.  It would be so much more detailed and it would be in writing.  He could only change it with a really good explanation.  Sure they would nuance their words and try to be as vague as they could on lots of points but they couldn’t get by with nearly the flippancy now that is used to cover important topics of the day.  They could do the same thing foreign policy, Immigration, judicial appointments, national security, etc.  We would be so much more informed and have a better idea of what would happen under the administration of each of them.  Those articles could be published in the newspapers, online, etc.  They would have to be thoughtful, precise and forthcoming.  Boy, I wish that could become the new tradition in Presidential campaigning.    They should have all their written pieces published by the time of the conventions and then debate which written and detailed approach is best for the future.  Ah, but then they slew Socrates.

“fanaticism obliterates the feelings of humanity.”  E. Gibbon, English Historian extraordinaire.   http://www.olcranky.wordpress.com

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Quirky Economics Or QE3

Ok, let’s buckle up the tool kit and look under the hood of what our Federal Reserve has been doing lately and indeed for the last few years.   A little historical review is necessary to put matters in a proper perspective.   It wasn’t but a few years ago that most of us would have had a really hard time naming the Fed Chairman and we certainly didn’t see many news items about the Fed meetings or the actions of the Fed.  They were few and far between and there sure weren’t any press conferences given by any of the Fed Chairmen.  About the only time the Chairman made any public announcements was twice a year when he testified to Congress and maybe a really short time answering a couple of questions from the press afterward and even then the new items were buried somewhere on page 9 of the paper.  Today we have a celebrity Fed Chairman who talks all the time and when he isn’t the various Fed Committee members are holding forth with interviews and news conferences constantly.  Back when those Federal Open Market Committee members were never heard from and they went about their work without notice or comment.

In ’08 the Fed had a balance sheet with a bit over 800 billion in assets.  Now that balance sheet has ballooned to almost 3 trillion.  The Fed has worked with the Government to pump huge sums into our economy and allow deficits to exist and rise and for the national debt to increase exponentially.   In very late  ’08 we had the TARP program which was Congress but it had the enthusiastic support of the Fed.  That was about 700 billion and was sold as a fund to buy mortgages and mortgage-backed securities to shore up the collapsing housing market.   In fact the TARP money was used to buy positions in the various banks deemed to big to fail and for the bailouts of AIG and those darn car companies.  Then we had the first real QE which was over 1 trillion in Treasury purchases and other government paper and other mortgage securities; that lasted over a year.   Overlapping that was the  roughly 800 billion stimulus program under BO for all those “shovel-ready” jobs but which in fact went mostly to favored special interest groups in the electorate such as “activist” groups and unions and those public sector employees.   Then along came QE2 which was another 600 billion bond buying program by the Fed for more bonds of various sorts and right on the heels of that came the Operation Twist program to exchange the long-term Treasuries for short-term Treasuries to the tune of about another 600 billion but that didn’t really add to the balance sheet significantly because they were selling as they  bought.  Now before Operation Twist has concluded they have announced the new QE3 which will run at least 40 billion per month to buy–they say they will start with more mortgage securities but the field is open for anything else they set their hearts on.   There is no commitment that the purchases will only be 40 billion per month, it could be more, and there is no time limit and thus no monetary limit on how much money will be spent.    They will continue QE 3 they say until there is “substantial” improvement in the unemployment figures.  They don’t say exactly which figures–the rate, the participation rate, rate of employed to population, etc.  Hope you have been trying add some of this up.   You can double-check my figures all you want, I ain’t off but a rounding error.

Now let’s review what we got for this and what these programs in concert with the Administration have gotten us.  The Administration of course promised a 5.6% unemployment rate if the Stimulus package was passed and Biden even went so far as to state in the summer of ’10 that that was the summer of recovery.  Those claims were false.  Also we were told that the food stamps and other welfare payments had a multiplier effect and would produce something like 1.72 in economic activity for every dollar spent for those programs.  You can believe that one if you want.  If that were really true then why don’t we just all go on welfare, spend the money with that tremendous mark-up in economic activity and I guess we would all be very well-to-do.  AIG is being wound down and the Government is going to make a profit from its takeover.  I never liked Greenberg or AIG but it sure makes one wonder if he wasn’t right back in ’08 when he said the Feds were making a mistake and that the company didn’t need to be confiscated and nationalized.  I hope he and the other shareholders existing at that time  of the takeover sue the pants off the Government and win.   Are we really better off having bailed out the big banks?  A few might have gone under and their shareholders and investors would have been banged but that is the risk all investors take.  Our banking system as a system would have survived and might have thrived.  Remember there were over 7000 banks then and only a handful were in trouble.  The car companies could have done a regular and legal Chapter 11 and come out still in business; it would be owned by some one other than the unions however.  That was the whole point of the BO bailout, to foster union loyalty forever and give them a bonus.  The various QE’s have certainly added to our national debt.  It has gone from about 11 trillion to 16 trillion.  Those QEs have allowed the Government to run deficits.  Remember that in the last couple of years the Fed has purchased more that 70% of all the Treasuries sold.  That is monetizing the debt.  Who else would have bought those Treasuries?  All investors around the world have cut back on them.  Yes, there still would have been buyers but what rate of interest would they have demanded for their loan?  The Fed bought 1.7 trillion of all that debt in the last couple of years.

QE has driven down interest rates.  That has some benefit but also the unintended consequences and outright harm to some.  The savers and prudent people that lived carefully for the last few decades are getting hammered.  They saved their money and get virtually nothing for it if they put it in the bank.  Will sales of homes really go up significantly if the mortgage rates drop a little more?  That rates are already about 3.5% for a 30 year, that is historically very, very low.  So what if it drops to 2.8%?  Will that really spur more buyers and the banks have all tightened their mortgages requirements greatly under duress and threat from the regulators.   Will more debt get us out of debt?    Any way you cut if the Fed is simply printing money to buy those Treasuries and other securities.  It doesn’t have any money really, it literally just creates or prints more money with a computer stroke to buy those.  That diminishes the value of the dollar and will lead to inflation. We will have inflation because of what they have already done.  Barring a complete collapse of the economy, the only question is when and how bad the inflation will be.   You already see the price of gold moving up and so will all  other commodities over time.

We will examine more another day.  Please ponder these thoughts.  You might disagree with the analysis but the facts are not in doubt.  The outcome can’t be good.  Let the market work.  The Fed IS the speculator and market manipulator-in-chief and we all are watching it happen right before our eyes.   The wisdom of millions of us in a non-manipulated market will coalesce into a far better place if allowed to happen.
“the human fancy can paint with more energy the misery than the bliss of a future life”, from the Decline and Fall Of the Roman Empire.  E. Gibbon, English historian extraordinaire.   http://www.olcranky.wordpress.com

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Class Warfare And The Federal Reserve

The administration oozes daily rhetoric about issues and concerns that focuses on the allegation that there are different classes in the US and that those at the top of the socio-economic spectrum are taking advantage of those the WH deems not receiving a fair shake.   It is a class warfare campaign and has strong populists overtones.  We’ve seen this movie before in our history–actually several times.   There were the same arguments between Adams and Jefferson in the very earliest days.   Similar arguments were made by T. Roosevelt to some extent and the really hammered by Woodrow Wilson and then of course FDR.  Surely everyone remembers Williams Jennings Bryant and his cross of gold message.   No one was more anti-elite in rhetoric than Harry Truman yet his administration was filled with exactly those types in all positions  of influence.   Now we are hearing the same theme again. 

Those adopting this line always rail against Wall Street, “moneyed interest” , bankers or the alleged privileged and well-connected.  What is always interesting about these arguments is that they are advanced by those who are in fact part of the 1% and among the elites themselves and are usually surrounded by elites a la the current administration.   Bankers are always at the top of the list of those attacked because they control some of the flow of money.   Jefferson opposed the original bank of america but Hamilton won the argument with Washington and it was created and then died shortly thereafter due in part to the same old argument that it favored and worked only for the benefit of the wealthy.    Well of course banks do deal with those who have some money.  Money is their business so is it surprising that they mostly interact with those who have money to deposit or wish to float a loan. 

We created the Second Bank of the US in 1816 under Madison but it only had a 20 year charter.   It was conservative and restricted credit to those who were credit worthy and the banking system functioned quite well during this period.  We grew and prospered.  The economic growth was uneven and the common man didn’t directly benefit that much from the bank but they sure did overall because the overall economy was improving steadily in the long view.   The class warfare rhetoric rose again to the fore when Andrew Jackson ran for President.  He was rough and tumble and came from modest backgrounds and sure had “baggage”.  I mean how many men today would have a chance to be President that had been involved in duels and even killed men doing so?  What about being a bigamist which he was technically.   Makes Newt look like a choir boy by comparison.   But elected he was.  He didn’t like the Second Bank or the bankers in general.  There was a strong geographic element to the class warfare talk of that day because the populists were mostly from the South and the West.  It was the elites and money interest of the East that were the target.   That remained true for generations.  Somewhat ironic today that those mostly shouting the class warfare language are from the elite East where the money interest still reside.   The big banks then just as today were mostly in the East because that is where the big money was.  The money came from the trade of the big ports of the East and the fledgling industrial growth of that nation which was concentrated in the area. 

When the charter for the Second Bank came up for renewal Jackson vetoed the bill.  He took the reasonable position that it was unconstitutional since it was not a power granted to Congress under the Constitution and that foreign interests profited too much and influenced it too much with their money.  He also said it favored the East over the other regions of the country which was mostly true and that it only made those rich bankers get richer.  He chose to ignore the fact that even though those things might be true we were growing, expanding and had a great GDP for those days.   He was a very determined warrior against the Bank and even before it formal demise in 1836 he withdrew the funds of the US from the Bank and deposited them with local and regional banks.    Those banks in turn began to practice what we would call easy credit and the loans flew out the doors and the speculations especially in western lands took off again.  Those bank issued paper money supposedly backed by gold.  The speculation became so intense that even Jackson got concerned and required in future that all land purchases had to be paid for in “specie” gold and silver.  That naturally caused an immediate credit crunch.  People started wanting to withdraw their money from the banks by submitting their paper money for gold or silve and the banks couldn’t meet the demand and many of them collapsed.  That led to a great panic of 1837 and a severe depression which lasted well into the next decade.  

Monetary and fiscal policies are critical to the proper functioning of our economy and yes those policies will always have to be implemented by banks and bankers.   We must have them.  We can’t run our economy without them because then you would be left with an anarchic trade  and barter system which is not very efficient or practical.   The Federal Reserve system doesn’t “favor” the rich currently.  It favors us all.   The Federal Reserve system is no inherently evil or there only to enrich the 1% as established.  It was set up to be run by bankers with only limited political influence through the board.  The Fed isn’t our problem it is the politicians wanting to tinker with it and control it even more.  I sure don’t like many of the things it has done in the last few years and don’t like most of the current members of the board and especially Bernancke.  But do you want the politicians to have even more control over our monetary policy?   You want the politicians with a simple vote or threat of reprisal or regulation to control the money flow and money supply.  Ever time there was the slightest advantage for some more inflation to make people feel good temporarily they would be opening the spigots.  If anything we need more independence of the Federal Reserve board.  We need more members who elected by the regional banks and fewer appointed by the politicians in Washington of whatever party.   Before all those 99% ers destroy the Wall Street banks we best think long and hard about what will replace them.  There will have to be something to replace them for sure.  I would not want Barney Frank to control our monetary policy and would not want Dodd to be in charge of the money flow from the Federal Reserve or Elizabeth Warren to be the regulator of banks around the country.    It ain’t perfect by a long shot but it has served us pretty darn well for almost a century.   We can have bankers or czars.  I’ll take the bankers any day.  At least they can be sued for fraud and set to jail for criminal acts but czars?   It takes revolution to get rid of them if my remembrance of history is correct.   An important aside–Jackson before he went off the rails did pay off the entire national debt only to have it balloon again after the closure of the Second Bank.   If only….

“If a national debt is considered a blessing, then we can get on by borrowing.   But as I believe it is a national curse, my vow shall be to pay the national debt.  A. Jackson.   www.olcranky.wordpress.com

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2 Cents Worth On Life Its Ownself

The gray matter churns and turns out these thoughts even when we try to restrain them.  So let’s see what comes out of the lost and found bin this week.

Don’t know about you but that recent ad by Ford with the guy talking about how he wanted to buy a car from an American company that didn’t take government handouts and that failure was a step along the path to maturity and character really struck a positive cord with me.  It was right.  It reflected the way I feel about Government Motors and Obama Chrysler and the obscene way the Feds pounded that Chapter 11 through the courts.   Very ominous that they pulled the ad after “complaints” from the White House.   The White House can write an op ed if they want or hold a news conference stating their position but to employ that kind of pressure on a private company is unconscionable.

Now the Fed is embarking on Operation Twist to manipulate the bond and mortgage markets even more.  They and the Treasury have already pumped trillions into the economy in ill-advised schemes to bolster the economy, a state planned and dominated economy, with miserable results thus far.  They used to refer to Bernancke as “Helicopter Ben” due to his reference to just throwing money out of a helicopter to stimulate the economy.  That analogy is so yesterday now.  It doesn’t get close to describing the actions of the Fed under him.  A more apt description would be “Bomber Ben”.  It would take a B-29 or B-52 to unload the amounts of money he has bombed onto the economy.  I just wonder where the target area was because I never saw any of it floating down my way.

The next time you hear the Left shouting about green jobs just think Solyndra.   The Feds under the Energy Department are acting just like hedge funds or venture captilists.  I mean those are supposed to be those mean guys on Wall Street.  They accuse Wall Street of playing favorites all the time but if you are a big fund raiser apparently that is ok and you are not trading on inside information.  I think it is a terrible idea for the Feds to be our collective stock broker picking the risks in the market to back with our money.  Let the government do the things it is authorized to do under Article One of the Constitution and not else and we’ll all be much better off with our accounts.   Oops, this just in, the Feds unloaded another 1 billion of our money into two more solar outfits just yesterday.  If those are good deals why aren’t private investors willing to put their money on the line?

Speaking of Warren Buffet’s secretary, one wonders just how much she makes.  You gotta believe his secretary is at least in the $150,000.00 range.  Probably in the 28% range but that only kicks in after well over 100k in earnings.  She is bound to itemize her deductions and probably has a child or two.  You know she has received stock options and bonuses over the years and cashes those in now and again.  Her effective rate is probably well below 20%.  Of course we don’t know the exact facts but those are reasonable estimates.  Warren baby pays most of his taxes on capital gains which are taxed at 15%.  His salary will be taxed at the regular rates.   Warren seems to forget that the capital gain rate is applied to millions of other people in the country trying to become as rish as he is and create new companies and ideas that peopl want.  Hell, like lots of the world we shouldn’t charge anything for capital gains to encourage growth.  Unless we finally get to a flat tax he should stick to investing and quit trying to preach.  His congregation is getting restless.

It seems that sometimes Mother Nature knows just how and when to give us a little pick-me-up.  Ever had those times when things are bit troubling but then just outside the window you see a Cardinal or Bluebird (not a bluejay but the real thing) or hearing the distinctive honk of the geese on the move and go out to see those Vees flying high above.  There is something always truly refreshing about those moments.   Nice things do happen even when we are in the midst of concern.

Why is it that Oprah Dr. Phil and The View and all those other shows of similar stripe so often remind me of my childhood when my mom used to listen to “Queen For the Day”.  It was a radio show that moved to TV for a few years in the early 50’s.  Some poor soul would come on and tell her story of woe.  The more woe the better.  They always cried and if the could get the audience to cry also that was like hitting the brass ring.   Bad marriages, illnesses, lost jobs, troubles with children were all fodder for the show.  At the end the one with the saddest tale of all would receive a prize or prizes.  Ironing boards, washers, dryers, TV’s and clothes were always the standard reward but sometimes they would go overboard with a car or some such.  Not much new in the media world after all.  It is an old format.

No one knows for sure how we ended up with the 24 hour day.  It could be whatever we wanted it to be, ten hours or 15.  Long, long ago people watched and paid more attention to the sky; it was cheap entertainment after all.   All the days of the week are named after the Sun, Moon and planets.  Then we have the signs of the Zodiac.  The ancients thought of the day as two parts, day and night and early own began to divide it into segments.  But much later we did the 12 hours of daylight and 12 hours of night, regardless of the length of them.   That 12 came from the Zodiac.  Times didn’t become uniform around the world until the 19th century and the railroads came along needing uniform times for scheduling.

“This Republic was not established by cowards; and cowards will not preserve it.”  Elmer Davis, American writer.  www.olcranky.wordpress.com

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2 Cents Worth On Life Its Ownself

Human foibles and money issues dominant the current thoughts of most.  So, let’s take a gander out some of those matters together.

We all know that the Fed Reserve has enormously increased it balance sheet by buying Treasuries and other securities to hold down rates and “pump” money into the economy.  Now that QE2 is ending there is discussion about how the Fed will reduce its balance sheet and remove that excess liquidity.  The most often mentioned method mentioned is for the Fed to sell it Treasuries and thereby reduce its balance sheet.  We still wonder how that works since the Fed will be getting cash for the Treasuries when they are sold.  They are replacing one asset with another and the balance sheet shouldn’t change.   Yeah, they might sell at a discount but it wouldn’t be that much to have a significant effect.  What is the explanation for this oft- quoted method of reducing the balance sheet.

Weiner Roasted.  Enough said.  But, but, but there will undoubtedly be lots more said until he wakes up and smells the coffee and resigns.

Bernancke talks again and the Market drops again.  What’s new?  Does it occur to anyone else we would all be better off if he only spoke two or three times a year when he gives his testimony before Congress and otherwise keeps his mouth shut.  The guy must have some secret desire to be a Bono-type rock star of economics.  

The possibility of sovereign default be a number of nations is all the news today–Greece, Portugal, Ireland and others around the world.  As always the current generation acts and some even actually believe this is something new under the Sun.  It has happened before, many times.  The 1890’s in Latin America and then again after WWI with Latin America mostly.  Of course the biggest was in the 1930’s.  You recall that under the Treaty of Versailles the Germans were required to pay billions in reparations for the cost of the War.  Those payments in turn were supposed to be used to repay the war loans made by the US to Britain and France during the War.  Germany had revolutions, tumult and hyperinflation during the 1920’s but demand for payment relief was denied by the Allies.  Some in the US wanted to grant relief but not Britain or France.  Then came Hitler and the payments stopped.  Sanctions (a familiar term today–Libya, Iran, North Korea) were threatened but Germany moved on with tremendous economic growth in the ’30’s and no one was willing to take military action.  The obligations were defaulted.   Some how the world survived.  I think we will survive Greece.

There were many eyebrows raised when Utah passed its recent laws regarding gold and silver as legal tender for transactions in that State.  Lots of man on the streets comments were how can they do that?  Well, it is refreshing that someone actually still reads the US Constitution.  Its right there for all to read.  It states that the States may make no coin except gold and silver.  They can do that and could have all along.  If our US economy gets noticeably worse Utah might have a bit of trading edge on other States because of that new provision and the availability of gold and silver coins there.

The cognoscenti in Washington so often speak about the Constitution as one formed by the people and our government one approved by the people.  Well, that is true only indirectly at best.  Yes, the preamble starts off talking about “we the people” but when the rubber meets the road and you look at the concluding Article and sections of the Constitution you will clearly see that the Constitution was NOT approved by the people.  It was ratified by the individual States, not some popular vote.  That approval only came after the first ten amendments were made part of the deal and confirmed the reserved powers of the sovereign States in the 9th and 10th amendments.  Without those the Constitution would likely not have received approval.

Even though over 90% of all the species that have ever existed on planet earth are now extinct we are here.  We and the planet survived without any dinosaurs for example and there were gazillions of them.  So what if the sand lizard becomes extinct in far West Texas and Eastern New Mexico?  The EPA seems to take the position that life as we know it will evaporate.   Get out of that academic cocoon.  The EPA has destroyed more jobs than any downturn.  All with no proof of their contention that the world needs these obscure species.  Life is a struggle and always has been as Darwin noted and only the species that adapt will make it.  Guess those eggheads at EPA forgot that part of their courses in evolution when taking their biology classes.   I would rather see a rough neck keep his job than save the lives of a thousand sand lizards.   If you love them then adopt one and take it home.

Think how much trouble we are in when Washington DC is the fastest growing and strongest housing market in the country.   This is not a good thing.  www.olcranky.wordpress.com

 

 

 

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King Dollar, Gold and Globalization

Our economy faces vexing problems today regarding the value of the dollar compared to the other world currencies and its effect on our own economy.  We’ve been off the gold standard now for decades and the lack of a linchpin for the dollar has allowed the Federal Reserve to print money based on its “feel” for what is best for the US economy.  Gold is high today and you can find a variety of opinions about where it will go from here.  Some predict a crash in the price of gold and that only fools would own it now others take a contrary position.  Whatever the future for gold it is interesting to note that all the major central banks still own substantial gold reserves as does the US government and even many other major institutions.  The University of Texas Endowment Fund for example is reported to own almost a billion dollars worth of gold at present.

During the War Between the States the Yankees went  off the gold standard to finance the war.  That was the first use of the “greenbacks” to pay government debts and for private use.  Shortly after the war under pressure from European creditors the US returned to the gold standard to bolster the dollar value and its credit standing in the world.  In fact the period after the war until WWI saw tremendous growth in the US economy (with the South lagging far behind due to the effects of the war).  There were panics and downturns to be sure but the overall trend was moving up substantially.   By the 1890’s there was a great deal of anguish over the value of the dollar and the peg to gold.  This was the cause celebre for William Jennings Bryan and his cohort of mainly farmer followers. 

They wanted cheaper dollars so they could pay off their debts with those cheaper dollars to the bankers and industrialists back East.   We were still a mainly agrarian society in raw numbers of population but changing with each decade.  It was a battle between those groups.  Of course that over simplifies everything.  Those bankers and industrialists also produced all those jobs back East that the working men loved.  As grim as their existence was often in the factories and mines and on the railroads it was a vast improvement over the grinding poverty most had known only a generation before on the farm. 

Even then we had globalization.   Those farmers were concerned with the costs of their loans and the transportation costs to move their crops to market back East or even exported.  Europe was still mostly self-sufficient agriculturally but that was changing and our wheat and corn were much cheaper and more abundant than theirs.   It was more of  city versus rural dispute rather than the classic class warfare so often described.   The price of crops had been dropping and thus the revenues of the farmers and they were pushing hard for a move off the gold standard so more money would flow into the economy and they could use those de-valued dollars to pay their loans.  This was when Bryan made his famous “Cross of Gold” speech.  The European creditors were becoming increasingly alarmed over the threat to the value of the dollar.  They started moving gold out of the US.  Literally taking it and putting onboard ships and moving it to London.   As the gold stocks sunk the confidence in the dollar began to sink also.  The House of Morgan with support from its London office and few others stepped in and bought gold and issued gold backed bonds.  They had to move quickly to prevent a collapse of the dollar.  It worked temporarily and some gold was actually taken off ships and returned to the Federal Reserve in New York. 

But capital and confidence in the business atmosphere on any government are not cast in stone and must be maintained.  The threat kept returning and the gold was drained more.  But then we found gold in Alaska and the Europeans had a couple of really bad crops.  The price of US agriculture zoomed for a while and the price of both gold and the dollar stabilized.  It really wasn’t any brilliant government policy that stabilized things but frankly sheer luck.  But that state of affairs managed until WWI when we underwent a real boom in industry to build everything needed for the War and that lasted through the ’20’s before the Great Depression came along. 

With the Depression Roosevelt removed the gold standard for debt payments and required everyone to turn in their gold for dollars.   The Depression lasted until WWII.  Making those cheap dollars again and killing off what the Feds considered “excess” hogs and cattle and plowing under crops the bolster prices for everything didn’t seem to help much.  Some think it did.  I don’t think you would find many ordinary folks and farmers of that era who believed those  government policies improved their lot.

Maybe we’ll get lucky again before the Feds come up with programs that aim for the stars but hit us in the backside.

“When we hear news we should always wait for the sacrament of confirmation.”  Voltaire www.olcranky.wordpress.coml

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