2 Cents Worth On Life Its Ownself

Do we laugh, cry or just go into our hole when we read the headlines from today?…thoughts and reflections on same follow.

Well, it is Yellen for the new Fed Chairmanship.  One wonders  a year from now who will be yelling for Yellen or yelling at her.   The elderly and the prudent savers of the US certainly won’t benefit from her severe easy money policies and extremely low interest rate regime.  The ants will continue to get crushed for their diligence and hard work and the grasshoppers will continue to eat off the fat of the land produced by the ants.

The arguments and conflict over the debt ceiling and payment of the Federal debt has been around since literally the inception of the country.  As we transitioned from the interregnum after the Revolutionary War to our current Constitution we had a big argument then about the debts run up by the Colonies to fund the War.  There were many who advocated not paying all that debt especially to the foreigners who had bought it i.e. the Dutch and French and even some Brits.   But Hamilton’s view prevailed and the Constitution honored all the outstanding debt of the US, Colonies.  Yes, there were some “fat cats” in the US who also profited enormously from this decision because they had bought up many of those bonds for pennies on the dollar.  But Hamilton and the like-minded believed we had to pay all those bonds to protect our credit and against the future need to borrow more and that meant paying all creditors regardless of their moral worth.  They were all paid 100 cents on the dollar with interest.

We are not yet bankrupt or a dead beat because the US does have the capacity to pay all its debts in full.  The current argument is correctly about future fiscal policy to see we remain that way.  The current trajectory of the Democrats will indeed drive us to bankruptcy.  That can and must be changed so we remain solvent.  The existing fight truly is about making the Democrats recognize that reality and adjust our spending accordingly.  Yes, the guy in the White House has it right–the numbers do not lie.   Houston, we have a problem!

Unless you keep up with the foreign press reports you would not know that the Arctic sea ice has in fact increased this year by 60%.  Strange that the Europeans are even more paranoid about the global warming hysteria than we are but they are the ones that most often report the facts and critiques of the IPCC reports and global warming alarmists excesses.

Historically, the Democrats and the Paul Krugman’s of this world have taken the position that the US debt is not a major worry because with just a little tinkering we can grow our way out of it.  They believe that increases in population will result in constantly growing GDP and thus the size of the debt will be manageable in relation to that larger economy.  Many arguments can be made against that proposition on the merits and the numbers especially when you include in the off balance sheet liabilities like Social Security and Medicare.   However there is one other flaw in the dialectic, who can guarantee they we will continue to grow?  Japan and Europe are already in the midst of a significant population slow as is China.  Why wouldn’t that happen here?    Then the debt would loom even larger not seem manageable relative to the size of the overall economy.   Those Democratic liberals are making a gamble on the future based on what scientific evidence?  They love to talk science.  But that theory is faith, not fact.

We’ve passed the Harvest Moon and already the moms in our neighborhood are putting out their Halloween stuff in the yards and on the doors.

I want to be safe and secure in the US and have no problem at all with taking out  the bad guys around the world.   The radical Muslims are our enemy and we do need to be vigilant and aggressive in combating them.  But, but, but….do we really need a million square foot facility in Utah for NSA in addition to all those thousands of worker bees there in the DC area?   Do we really need those 50,000 plus TSA folks doing those ridiculous searches at the cost it requires?  I don’t travel much anymore but when I do I sure don’t feel any safer with them around.  I don’t think they would deter in the slightest a serious terrorist bent on mayhem.  Indeed my last trip through their procedures I was questioned by a black lady wearing her hajib.  That didn’t exactly increase my level of confidence and it sure didn’t help that she was rude to boot to everyone passing through her line.   There are over 35,000 in the FBI and 114,000 in the Justice Department.  There is no way we need that many people protecting us from those breaking Federal criminal statutes.  They need to be cut back, not eliminated but cut back for heaven’s sake.   The FBI used to do most background checks for security clearances but they don’t even do most of that anymore it is done by contractors.    It seems to some of us that we have lost our sense of balance on these issues.

And on that subject why does the EPA, the IRS, Labor department, Interior department and many others have guys running around with guns and badges?  Can’t they have the FBI do the arresting when they come across a crime.

Wouldn’t it be interesting if the Feds were required by law to list all their departments, agencies, bureaus and the zillion other special committees along with their cost and personnel count online.  It wouldn’t be binding of course but then allow the public to “vote” on each one.   Either to eliminate it completely or change the funding level for each identified entity.  Might be a true wake up call for the Feds.

“All I know is what I read in the papers.”  Will Rogers  http://www.olcranky.wordpress.com

 

 

2 Cents Worth On Life Its Ownself

As long as the politicians keep moving their lips we’ll have something to discuss besides the weather….

The recent lively discussions regarding renewed efforts for more gun control mostly avoid or completely avoid the elephant in the room.   Cuomo talks about his restrictions complying with the 2nd Amendment rights of hunters as though hunting was what those folks had in mind with the Amendment was approved.  Not true.  Also so many proponent talk about the abuse of that Amendment or that it leads to abuse.  True that does occur but, my Lord, how many abuses of the 1st Amendment right of freedom of the Press do we have to endure every day?   Some severely challenge our trust in that Amendment right but we stick by it.  Those who use and abuse the 1st Amendment don’t have to explain or justify their use of that right and that is as it should be.  Same should be true for the 2nd Amendment.  I don’t need to justify to anyone for any reason why I wish to exercise my right to own a gun or guns.   Fact is that the most important reason for the citizens to have guns is to let the Government know we do have them and can use them if the Government over reaches or tries to rule in a tyrannical manner.  Yes, the Government should always take pause that a free people can only be pushed so far.   That is the unspoken raison d’etre behind the 2nd Amendment.

The Germans in the last week or so have announced their intention to repatriate over 374 tons of their gold held and the New York Federal Reserve and the central bank in Paris.   I have no special insight into the future price of gold; you can make your own assessment but it is clearly highly valued by even the socialist leaning egg-heads who run the monetary and financial affairs of the Germans.  If gold doesn’t really have any intrinsic value and isn’t a hedge against inflation then what difference could it possibly make where it is stored?   Indeed ask yourself why the Germans have any gold at all if it is of no consequence.    As an aside it is interesting that the New York Fed still stores the physical gold for some many nations around the world.  It is stored in secured bins in the bowels of the building and they literally move the ingots from one cage to another when nation pays nation and such instructions are received.

Japan and China continue their games in the East China sea over those small islands.  Small places can have enormous effects on world affairs.    Look how WWI started in an obscure Balkan nation with the assassination of an obscure prince or archduke.  Most around the world would not have been able to get within a few hundred miles of locating that place or knowing who the archduke was but they certainly learned of the consequences a few months later as the war settled into the trenches from Switzerland to the North Sea.   Japan and China will not go to all out war over those islands but there might well be some shots fired and deaths between the two before all is resolved.   It will be big headlines sometime in the next few years for a while.

Many hate globalization for ideological and social reasons.  They argue that it is capitalism’s way to thwart the ambitions and hopes of the middle class and third world nations.   You have seen their protests in Seattle and other locations over the last decade or so.  Of course some of the greatest beneficiaries and participants in the globalization movement are those paragons of capitalism China and Russia, to say nothing of the socialist European Union.  One factor cannot be denied and that is that globalization whatever its faults, if any, it dramatically reduces the likelihood of another great world war or a war between major powers.  The interconnectedness of globalization makes it very difficult for those large powers to contemplate a major armed conflict.  It could happen of course but the odds have been reduced because regardless of outcome of any future major war even the “winning” side would suffer huge economic loss and its own people would have a much lower standard of living for decades because of the cost and disruption of any such war.

The guy in the White House is either historically challenged or so filled with hubris as to boggle the mind.  That line about “peace in our time” echos such sad mistakes and missteps of the last century.  You recall that Hitler had already invaded the Rhineland and absorbed some of the Czechs and Austria when Neville Chamberlain went to confer with him in Munich.   He negotiated with Hitler without pre condition (like some have proposed with Iran) and even brought back a deal.  That famous quote comes from his remarks after he got off the plane returning to Britain as he waved a piece of paper in his hand saying we have “peace in our time” because of his negotiating skills.   Of course what he and the world got was WWII 18 months later.  He had claimed he could bargain with Herr Hitler.  He showed him respect.   He didn’t say bad things about him.  Chamberlain did all the touchy-feely things some in the Democratic party claim we should be doing with the Muslim world today.    Appeasement is not a winning strategy; it is simply surrender to an opponent just on a more gradual time reference.

The Democrats and press keep harping on the alleged “default” if the debt ceiling isn’t raised.  Well, there wouldn’t need to be a default at all.  The Federal Reserve could simply buy all the Treasury bills and notes as they mature.  The Fed regrettably can print money for any reason it deems appropriate.    Hell, they have bought over 2 trillion dollars worth of mortgages and Treasuries since the guy in the White House took office to fund the deficits of the Federal government.   What’s a few hundred billion more?   Last year the Fed bought 75% of ALL Treasuries issued.   While this would be perfectly legal it is probably more transparency than the Democrats would want; some might start to think long and hard about what the dollar is really worth when they see fake money printed to buy debt to support programs that can’t otherwise be paid for.

Social and economic advice from a strange source–“Call it what you will, incentives are what get people to work harder.”  N. Khrushchev.   Soviet leader of the ‘5o’s and early 60’s.  http://www.olcranky.wordpress.com

 

2 Cents Worth On Life Its Ownself

Well, the Holidays are done and the extra pounds need work and the time off is a memory, back to the grind and does the daily news ever make it a grind….

Ever wonder where the expression about  being a scapegoat originated?   Well, learn it here.  In Leviticus when God was giving His statutes to Moses and Aaron about the sacrifices to be made to Him and their purpose for the people of Israel there was an example of goats to be sacrificed.  One goat was selected for a sin offering and used for that end.  However another goat, the scapegoat, was selected as an atonement sacrifice for the sins of others.  That goat did nothing wrong whatsoever but was killed and placed on the altar for what others did wrong.  That expression has become part of our vernacular and is used when some poor soul is picked out to take the fall or blame for the wrongdoing of others.  The politicians in Washington are particularly adept at finding scapegoats for their own shortcomings.  Shakespeare and the Bible are the two greatest sources of our adages and Shakespeare liberally used those from the Bible.

Some pundits and others are complaining loudly about the possibility that AIG might sue the government over the bailout takeover of that company and its management under government control.   We wrote here months ago that such a suit might be likely.  You might want to recall that the takeover of the company was a complete violation of the 5th Amendment and there never was even a token acknowledgement of following established corporate law.  The shareholders never had a voice in what was to happen to their investment.  It was simply confiscated by the Feds.   Full, disclosure, I had litigation with AIG several years ago and don’t even like the company or its management but I do have a regard for the rule of law as opposed to rule by edict of the anointed ones.   AIG could have filed a Chapter 11 and reorganized itself and paid all its debts and retained value for its shareholders but it and the shareholders were denied that opportunity by the Feds.   Many thoughtful legal scholars agree they have a solid case to make.   Here’s hoping they do sue and win big time.    They didn’t go begging the Feds to give them money and AIG had assets of substantial value as events have proved.   Are we a country of laws or dictators?

We also wrote some time back about the crazy notion of the Trillion dollar platinum coin to be minted by the Treasury and used to “pay” a trillion dollars of debt to the Federal Reserve.  Viola, we reduce the national debt by a trillion dollars.  You may have now noticed that several Democratic Congressmen are actually promoting such a proposal to avoid the argument over raising the debt limit beyond its already staggering 16.4 trillion dollars so even more spending and debt can occur.   Remember that the demand for US notes is manipulated and phoney at this time due to the fact that the Federal Reserve is currently buying 75% of all the new debt issued by the Treasury.  Others in the Democratic Party are beginning to push the idea of simply writing off some of the Treasuries owed to the Federal Reserve.   Either idea is horrific.  It will cause an immediate and steep decline in the stability and confidence in the US dollar.  Even Joe Six Pack at that point would begin to question exactly what is the dollar worth if legitimate debt could be wiped out with a minted coin deemed by the Treasury to be worth one trillion.    The international community would be apoplectic and demand hugely higher rates to lend us money or worse what if they decided to pull the same trick and pay their obligations to the US and US companies with minted coins they deem worth a designated amount?   Its like someone who has maxed out their credit card and then just manufacture their own credit card in their basement and expect all their creditors to accept their self-created credit card as having real value.   How did all these people escape from the institution at the same time?

Would the appointment of Chuck Hagel as Secretary of Defense make Israel more or less likely to strike Iran on its own?

In spite of what Democratic spokesmen may scream the full faith and credit of the US would not be jeopardized if the debt ceiling was not raised.  The phrase refers specifically to the Treasury notes issued by the Feds.  That is the “credit” of the US; by the way that credit and credit worthiness belongs to us, the people, no the politicians.  It is our credit being used.   All the other payments made by the Feds is just statutes and those could be met too.   The Feds will still be collecting billions of dollars ever month to pay bills  and specifically the interest and principal on the Treasury notes.  The employees at Commerce, EPA or HUD or those zillion other departments and agencies are not guaranteed a job, although it is true you can’t hardly fire them even for incompetence.   So what if Planned Parenthood and gobs of other organizations don’t get their monthly dole from the Feds?  The money is there for defense and the three big social programs–Social Security, Medicare and Medicaid.   If the debt is raised there should be cuts real cuts for each dollar it is raised.  And we don’t mean those “baseline” projected growth cuts but an actual reduction in budgetary expenditures year over year.

Our tides are affected by both the Moon and the Sun.  The Moon moves the oceans and seas by about a foot and the Sun by about half that.  Even though the Sun is enormous it is 93 million miles away whereas the Moon is literally right on our doorstep figuratively speaking.  The full Moon and the new Moon produce the high tides and the half Moon creates those small neap tides.

Sherman famously said that War is Hell but a worse Hell is subjugation to a central dictatorial authority.   http://www.olcranky.wordpress.com

2 Cents Worth On Life Its Ownself

The Holidays are upon us but the news cycle never stops for Holidays and thus…..

Already you hear the mantra that if we don’t increase the Debt Ceiling from 16.3 trillion by another 2 trillion plus that such refusal will cause a default on the US Debt.  That is a bald-faced LIE.   The latest estimates are that the US will collect about 2.7 trillion in this fiscal year or maybe a bit more.  The Feds will have money, lots of money.  If the debt wasn’t increased they would have to figure out where they were going to spend that 2.7 trillion and establish priorities.  They w0uld have top live within their means, what a novel idea.  They naturally could pay the interest and principal on the government debt first.  Their choice.  I don’t recommend not raising it some if there is a solid agreement to  reduce spending dramatically.  But we here just can’t abide dishonest conversation and the presentation of optional actions as concrete fact.

If the Feds don’t fix the Alternative Minimum Tax there would be a huge tax revolt and mass confusion.  The latest estimates are that 28 million families could be ensnared in that tax quagmire and many simply wouldn’t have budgeted for the extra taxes they would owe.  Many simply wouldn’t pay or couldn’t pay that higher tax.  There would be at a minimum  a large red tape jam at the IRS.  Maybe that wouldn’t be such a bad thing.  The outrage would be enormous.  These are the truly “middle class” folks all the politicos say they are there to help.

Those of us who cherish our freedom and freedom of the internet should keep an eye on the progress of the push by many countries in the UN to take control of the internet.  There are 193 “countries” that have a vote on this issue and it is likely that a majority will vote to have a UN agency and/or individual countries with the UN imprimatur of this vote take over the internet.  There are many things wrong with the internet now and daily abuses as we all know but I’ll take that hassle any day over any kind of governmental control.  We darn sure shouldn’t want Ghana, Dubai, China or whoever to have any say regarding the free flow of information on the Net, even the silly or erroneous info  that is there.

I can still remember that first Lionel train set I got when I was about 5 years old.  I am sure it cost my mom and dad a fortune at the time.  The engine alone must have weighed almost a pound and it even puffed smoke at the stake up front.  Kept that thing for years and then like so many items it got lost in one of our moves but the memory of it lives on.

Egypt is looking worse and worse with each passing day.  It slowly but inexorably slides into a Islamist fundamentalist trend.  Do those people in the Administration really believe that Syria will be a shining example if and when Assad falls?  We are not likely to come out of that situation  with a dependable or reliable ally in the Mideast.  Indeed the outcome could be far worse with one more hostile Islamist regime in place.

If BO were to attempt to raise the debt limit by executive order the Congress of both parties should advise him that is an impeachable offense.   Such dictatorial action goes beyond any current President or circumstance.  Congress has boatloads of problems and shortcomings but even with all them that is preferrable to the arbitrary whim of a President.  We don’t elect them King, only President.

This constant argument about protecting the 98% we hear from BO I find curious.  Give or take there were about 60 million people who voted against him and for the Republicans last month.  Only a relative handful of them were in the 2% yet they voted to protect everyone.  The vast majority of that 60 million were voting their conscience and what they believed was in the best interest of the country not to benefit their own pocket book.  You can make your own comparison as to the motives of the 60 plus million who voted for BO.   I never found a “beggar thy neighbor” approach to politics or government policy good for the long haul.   Someday sure as the world you’ll be the “neighbor” in the cross hairs of the majority of the voters.

If I were King for a day one of the things I would do would be to repeal thousands of the Federal criminal statutes.  There are so many of them today that no one knows exactly how many there are.  They potentially intrude into every aspect of your life.  The vast majority of them are never used or enforced.  The problem is that they are used selectively to punish those determined to be a difficult for an Administration or one of its Departments, agencies or bureaus or even worse the spite of a US attorney.  Make no mistake those guys are highly political and will go against political enemies in a heartbeat. Further all of our Federal criminal statutes should be in one location, in the US Penal Code and no where else.  Now they are scattered throughout the hundreds of thousands of Federal laws and regulations.  That is a set up for abuse.  It is one thing to say that ignorance of the law is no excuse but our citizens should at least be given a reasonable man standard about knowing some of the arcana of the Federal criminal laws.

“Fame is proof that people are gullible”  W. Emerson, American poet, essayist.  http://www.olcranky.wordpress.com

2 Cents Worth On Life Its Ownself

With interest rates at near zero for banks and very low even for consumers perhaps we should increase the price at this point.  But because we consider ourselves a public service we will hold the line at 2 cents for “an extended period of time” or maybe  into mid 2013.

The stock crash of ’87 was much worse than what we have seen in the last couple of weeks on a percentage basis.  The Dow was about 2200 or so and fell to just above 1500 within a day.  That was a huge sell off and shook the markets for a moment.  But the decline was temporary.   The market started a slow but steady slog back up that continued more or less without serious interruption until the Dot Com crash of 2000.  

The parable of the 99 and 1 sheep is all about the shepherd.   The 99 was safe and ok.  It was the one that was lost and needed help.  The Good shepherd couldn’t rest without going out to seek the lost one.  Not because he loved that one more or valued it more.  That sheep was his charge.  You might note that the parable doesn’t make clear whether or not he even found the lost sheep.  It was the looking, the trying, the doing his duty that is important.  Sometimes it is your attempt at something that is as important as the outcome.  If we all depend on positive outcomes all the time to measure our success as humans then we are likely to endure lots of disappointments.  But if we do our duty always we will meet with constant success.

Remember all those pundits who predicted that gold was overpriced at $1500?  Maybe it is overpriced now but folks are willing to pay over $1750 an ounce for it at the moment.  It is not a currency and will not be anytime soon but it sure is treated like one by the buying public around the world.  The politicians couldn’t allow a gold standard because then they would really have a hard time manipulating the books.  If all those borrowed dollars had to be backed up by gold reserves in some amount it would put the brakes on debt growth and the ability to print money.

The bottom line of the recent debt ceiling negotiations is that the Feds have been authorized to borrow another 2.4 trillion dollars in just a little over 16 months or so.  Think about that one for a moment.   Sooner or later those debts have to be paid.  You think they will be paid back with inflated dollars hot off the printing press?  Yep, and you don’t need a PHd in economics to figure that one out.

Should the SEC be investigating the Federal government to determine whether or not it is making “material misrepresentations” in the offering of its Treasury securities?  That is a classic violation of rule 10b5 of the 1934 Act.  How can the Pres. and others in the Administration go public talking about the US having a AAA rating and being sound financially when the underlying numbers show increasing debt and no reduction forever.   The accounting facts don’t gibe with the salesmanship.

We just passed the 66th anniversary of Hiroshima and Nagasaki.  The Japs still weren’t responding to calls for surrender so our naval forces moved in the following week literally to coastal towns of Japan to pound refineries and other infrastructure facilities.  The Navy brought to bear both air power and the big guns of battleships and cruisers.  The Japanese news agencies still wouldn’t acknowledge that we were now literally at their shores and could do so whenever we pleased.  They still retained over a million troops in Manchuria and had thousands of planes in the homeland for last-ditch kamikaze attacks.   Mercifully they finally threw in the towel about a week later.

At this time of severe drought around much of the world we should recall that 97% of all the water on earth is in the oceans.  Only 3% is fresh water and of that 2% is locked in the great ice sheets of the arctic and Antarctica.  Mankind depends for all its water needs on only 1% of the earth’s water and some of that is not reachable for practical purposes.  A thin margin for some 6 billion plus people.  Hot has it is this summer we quickly forget how cold it was over most of the country last winter.  It was really cold for a long time and the snow fall was tremendous in most areas of the nation.   Remember those pics of the folks in the Northeast shoveling out from all the snow even late into March?

Where do you go these days to buy fine stationery?  With the use of email and faxes it seems the art of penmanship is lost or almost so and that receiving a handwritten letter for a family member or loved one will soon be a relic like the wall art in the ice age caves of southern France.  Our grandkids will look at those old faded letters with their sepia tinge and think how quaint we were and how did we have the time to actually sit down and compose a written letter.   Sad but I suppose it is not to be stopped.  Well, not to worry we probably won’t have a post office to deliver them anyway.

“A little sleep, a little slumber, a little folding of the hands to rest, and poverty will come upon you like a robber.”  Proverbs  www.ocranky.wordpress.comlra

2 Cents On Life Its Ownself

A few memories and a gaggle of headlines and we have new fuel for the under utilized brain…..but we hold the price line in spite of rising costs.

Speaking of which, we are still assured by Helicopter Ben Bernancke that inflation is transitory even though that loaf of bread costs more and you need a small loan to fill the gas tank.  Who are you going to believe — Ben or your own eyes?

Wow.  Wouldn’t any guy be delighted to have a woman like Wendi Murdoch.  Talk about standing by your man, she jumped to the occasion and struck out like a momma lion protecting her cubs.  Good on her as the say down under.

Goodbye Shuttle and goodbye prestige factor.  Whether we will acknowledge it or not we are now by standers in the space exploration game.  Wonder what Reagan would have thought about having to depend on the Russkies for rides.   Mars beckons but we are seemingly entranced with making toys lead free as the national ambition.  How did all of us survive before these protections from the Feds?

The Gang of Six proposal to solve the deficit and fiscal crisis and maybe the debt ceiling problem is all the rage the last news cycle.    Why is it that we don’t immediately have a lot of confidence that comes from a Gang?  Couldn’t they have called themselves something a bit more uplifting and denoting thoughtfulness.  The Consortium of Six, The Sages of the Senate, the Solons’ Solution Confederation.   I am not sure about hooking up to ideas of a Gang.

Do they still make the old-fashioned roller skates that fit on the bottom of hard soled shoes?  The kind made of metal and with movable grips on the front and back that you would adjust to fit any particular shoe.  My mom didn’t like me wearing them because it meant I had to wear my “good” shoes since they had the hard sole.  Everything else was high top tennis shoes.

I suppose in another couple of years there won’t be any real bookstores of size anymore.   Borders is gone and Barnes and Noble are struggling.  Used book shops and specialty stores will be all that are left–a sad thought for those of us who like holding a book in our hands as we read.  Also I like be able to flip back a few pages to refresh my memory about something previously read.  That is so hard to do when scrolling.  Especially if you are wanting to compare 3 or 4 pages at one time, moving back and forth quickly between them.

The heat this summer brings back memories of the drought and heat of the late ’40’s till the late ’50’s.  That went on forever.  My youth until later into being a teenager we had very little rain and the heat was relentless.  The temperature would reach the 90’s even during the winter months.   Hard to remember right now just how cold last winter was.  That was as cold as it has been in my lifetime.

So some news article about Perth becoming a ghost town because it is running out of water.  I doubt that will happen.  Predictions of total destruction and devastation are rarely accurate.  But they are suffering for sure.  But that region of the world has been dry for millenia at least if not eons.   After all our total destruction was regularly predicted during the ’60’s and ’70’s for all manner of reasons.  Of course we were also supposed to be completely out of oil by now if you listened to the pundits of that era.   Gas is expensive but I haven’t noticed a shortage.

We all can deal with treating our children like children and filling our role looking after them and making their decisions for them.  The jolt comes when you have to do that for your own parent if they decline in their abilities.  Not sure you can ever properly adjust to that circumstance, there are too many conflicting emotions.

Apple at $400 and many predict it will go higher.  It is a well run company and clearly provides products and services that the people want.  On top of that they are efficient and very consumer friendly.  Umm, maybe we should put Jobs and group in charge of some of our budget problems in Washington.

Japan  had its debt downgraded years ago but it continues to issue new debt at reasonable rates.   The market still buys Japanese securities.  The last hundred years has seen literally scores of countries default on their sovereign debt, mostly South American countries yet they all returned to the market place soon after their defaults.   Now the world shudders at the thought of tiny Greece defaulting, an economy much smaller than Mexico which has had several defaults and bailouts in its history.  Go figure, interesting.

Don’t forget to get your small sack of sulfur powder for the kids’ legs if you have chiggers around your neighborhood.  A sprinkle when they go out will prevent most bugs and chiggers for biting or stinging.

www.olcranky.wordpress.com

 

Debt Limit Debate Solution?

Virtually every day we see headline news about the ongoing negotiations regarding the possible increase in the Federal Debt Limit.  The predictions of doom and gloom if the debt ceiling is not raised are rife with hyperbole and statements that the world as we know it is at an end.   Timmy Geithner who can’t be trusted to do his how tax return is one of the chief proponents preaching this hell band brimstone version of what will happen if the debt limit is not raised on August 2nd.

Why we are trusting him now with trillion dollar decisions is beyond me but the guy in the White House keeps pushing him out there to tout the party line.  Of course Bernancke who wants to be a rock star makes his pitch on a regular basis.   It is true that attending to our debt problems are very important if we want a future with any economic growth and a standard of living reasonably close to that which we have enjoyed historically.  Of course the Feds will continue to collect money after Aug. 2nd the question if how much and how it will be spent.   The income stream doesn’t come to an end on that date.   Of course we won ‘t have enough money to pay all the bills due at that time.  We haven’t had enough for a very long time now.  We have been living on borrowed money and credit to meet our obligations.  What we are asking Congress to do is just like any borrower going to the bank would do when he can’t pay his loan.  He will ask for an extension and an even larger line of credit with a promise that things will get better down the road and he will catch up sometime down the road.

Of particular interest is the statement that we simply will be out of options if the debt ceiling is not raised.  That we couldn’t survive without a default on our debt.   That is not true.  In addition to the cash stream we will have coming in we can also service the debt and interest by having the Fed simply print more money and buy the Treasuries that are coming due on and after Aug. 2nd. Folks forget that the Government can’t print money; that is what the Fed does.  That is one of the main reasons the Fed was created in the first place to take the power of simply printing money out of the hands of the politicians.    All those thousands and thousands of outstanding Treasuries obligations are coming due at different times .  Some of only a few months long, some a few years like the 2 and 5 year notes and then there are those the stretch out for 30 years.  When Treasuries come due after Aug. 2nd the Fed could announce that they would buy the Treasuries at full face value with interest.  The holders of those Treasuries would be paid in full, there would be no default.

What is scary is that no doubt those brains at the Fed and Treasury have thought of this already.  I am not the smartest guy in the room but they are supposed to be.   Of course there are downsides to doing this.  The first is the obvious one of inflation.  But helicopter Ben keeps assuring us that inflation is nothing to worry about.   They have already printed up a couple of trillion of extra money in the last couple of years, what’s a few trillion more?  

Then the buyers of our Treasuries might get pretty leery of this method of payment and view it as the gimmick it would be.   Every time they get paid it would be with inflated dollars.  Regrettably we are dependent now upon a very sizeable portion of our Treasuries being bought by foreigners.   The Chinese and others might become reluctant to keep buying them.  They have already cut back on the amount of their purchases and they could cut back even more.   That is the real problem we face.  That our creditors might decide to not lend us any more money.  That is why we need to start balancing our books and using legitimate numbers with our books.  They are not required to loan us money.   They have a choice.

The Fed could later forgive the notes  if they so chose.  After all they pay dividends to the member banks and to the Treasury.  They could simply credit the payments due to the Treasury with the matured notes they bought.   For the really slow ones in class, this is not a suggestion, it is a fear that someone might actually do it.  We need financial discipline at the Federal level and elimination of most Fed regulations so our market system can save our bacon again as it has so many times in the past with we faced difficulties.

Thank goodness the weiner roast season is over early this summer.  www.olcranky.wordpress.com

US Debt Default And Doomsday

In Dr. Strangelove the world was threatened with the Doomsday bomb  the Commies had built to destroy everything in the event the US attacked and defeated them.  But the Commies had built secret underground caves to sustain live for years to come and they would emerge years later to rule the world–or so that theory went.   We were left to wonder the ultimate outcome of that scenario as we watched Slim Pickens ride the nuke down to its intended target with an unknown result.  Timmy Geithner our star tax cheat has preached hard and often of recent days that failure to lift the debt ceiling for the US will be the equivalent of the Doomsday bomb on our economy and the world’s.

Paying and honoring our debts goes back to the very foundation of the US.  Hamilton was insistent that we had to honor all our debts incurred during the Revolutionary War and he and others even made that part of the Constitution.   It was a good decision.  We repaid the debts owed and the “speculators” made a lot of money on those bonds that they bought up cheaply before the issue was resolved.   Technical default of sovereign debt has happened many times over the years whether national or at the state or provincial level.   Mexico defaulted in reality only about 12 years ago but was bailed out by the US which fact most have already forgotten.  The list of Latin American countries that has defaulted is too long to list.  Historically, the Kings and Empires defaulted numerous time over the centuries, but you must realize that they eventually satisfied their creditors and those same creditors uniformly came back later to loan them even more.  The Rothchilds, the great banking house in Milan and Venice repeatedly loaned funds as did the Dutch to various sovereigns even after default.

There is also a great deal of talk about some of the States defaulting on their debts such as California and Illinois to mention the most notorious.   They darn sure might and it will crimp their style for a good while to say the least and the unions and special interest groups that depend on government largess for their existence.   They will have to really trim their sails but they will have to do it so they can have access to credit otherwise they will have no credit.  This would not be the first time it has happened.

In the 1830’s the US was still an up and comer, a wannabe.  We weren’t powerful or influential yet in world affairs.  Our industry was still dependent on Europe for our capital.  We desperately needed capital to build infrastructure in our expanding nation.  The canals, post roads, and then the railroads all took tremendous amounts of money.   The US and the States borrowed money from Europe.  The center of lending was England.  Most Americans resented having to borrow from England but we had no funds ourselves to finance the growth of our country.  The individual states borrowed lots of funds on the European market and it was administered from London.  Several of our states in the 1830’s defaulted on the bonds owed to European interests.  The Europeans and the English were very angry.  The value of the bonds dropped like the proverbial stone.  Some of the defaulters were Maryland, Pennsylvania, and Mississippi.  Maryland sent a delegation to London to negotiate with the creditors.  Many of the Maryland politicians didn’t want to pay anything on the bonds.  The Revolutionary War was only a generation old and they didn’t want to punish their voters with higher taxes or cuts in expenditures.   Sound familiar? 

Cooler heads ultimately prevailed.  The lead negotiator for Maryland worked out a new deal to pay the entire amount but restructured the time period for the loans.  Many were very angry about the deal back in the US.  That negotiator was a man named Peabody.  After the deal was done he bought up a lot of the debts of the States for pennies on the dollar.  When the bonds were paid and even when it became clear that the would be paid the value of the bonds soared and he became rich, very rich.  His wealth ultimately was the founding of the JP Morgan company.  Morgan became his partner years later.   Peabody’s wealth was over  one million pounds sterling which was an unimaginable amount of money in those days but he still rode the penny horse carriage to and from work every day.  He was the perfect Scrooge.  Indeed in “Scrooge” you can read the part where Scrooge is horrified that his assets have been turned into “US securities” which were deemed like Confederate money was a generation later.    Ultimately all worked out, but for years the states were cut off from credit and we as a nation were vilified with good reason in the financial markets and in the gentleman’s clubs of England.  We were pariahs for a while.  Like Buffet would have said it was our own damn fault.

It is not good to default.  Of course it is not good to borrow so much in the first place that you have to even consider such a possibility.  That is the real shame with our current situation.  Why the devil did we borrow beyond our means?  Refusing to raise the debt limit is not default.  The government has income.  Just like you and me it decides how it will spend what is in the checking account.  Our history is checkered.  We can do the right thing and get our house in order.   It is not our debt that is the problem it is our continuing plan to keep living on borrowed money.  Geithner should worry about future borrowing more than the current debt.

“Never a lender or borrower be”  B. Franklin.  www.olcranky.wordpress.com