Tag Archives: US deficits

2 Cents Worth On Life Its Ownself

If you can stop crying maybe you can see the humor in some of the political manoeuvering of the WH these days.   What are you going to believe? –your own eyes or what the Administration tells you is true?

As long as the current left-leaning Federal Reserve cooperates with the Administration; it will be able to continue running trillion plus deficits.  If it ever stopped buying the Treasury bills and notes to fund the ever-growing debt the Administration would face real difficulties running so far in the red.  Who else around the world would buy those Treasuries to fund the Federal budget?  At least who would do so at today’s ridiculously low rates? 

Reminds me of the fellow who wanted to make a small loan from the local bank and the banker wanted to see his balance sheet and income and expense statement to determine if he would be able to repay the borrowed money.  Even though his balance sheet was in the red and his income showed he couldn’t even pay his current expenses much less service the new loand he told the banker not to worry.  The fellow told the banker that he had his right pocket write a note to his left pocket and that those notes would serve as great collateral.

Heard an interview with another guy who is propsoing that we go to a cashless society because it would save money and be fairer to everyone and especially the poor.  Well, it might save the cost of fabricating and distributing the currency but not sure how much we would like that.  He argues that criminals and drug dealers and other such menances to society are the only ones who benefit from cash.  Well, another example of big government thinking.  The main thing he totally overlooks is the right to privacy.  The examples of such intrusion into your private life are as big and broad as your own imagination.   Take a 70 year-old fellow going to the drug store to buy viagra or hemorhoid salve or he wants to buy a lottery ticket.  Why should that transaction become a permenant electronic record?  Don’t even try to tell me that such records would be protected and safe from hackers or any government agency that decided it wanted to investigate him.  Such a system of credit or debit card use goes to the very heart of our privacy.  There are no firewalls strong enough to keep your secrets.  Yes, you are entitled to some secrets in your life that are your business and no one else’s.  How you spend your hard earned money is no one else’s business.   Leave us alone for God’s sake in our own affairs.  With all the minicams and surveillance systems and forced GPS monitors there is little enough privacy as it is.

When we have really bad leadership at the national level and we’re headed in the wrong direction I draw encouragement from the history of the Roman Empire.  It had its many ups and downs over the course of centuries.  Sometimes really bad guys worked their way to the top with bribery, buying votes or even assasination but then things would settle again and decent folks would emerge.  Caligula, Nero and others of that stripe were followed by Marcus Aurelleus even though it took a long time.  The people of all levels of society kept the dream alive through all the terrible times to remember their heritage of basic democracy and the rule of the  Senate.  It wasn’t one man, one vote democracy but it was one nevertheless for its age.  Even those who didn’t have a vote still influenced the votes of those who did.  The Senate was after its fashion responsive to the people.  Even after Rome was sacked by the Vandals in 465 AD (which most standard history texts mark as the fall of Rome)  the Empire came back in a few more iterations of itself for over a hundred years.   If most of our people keep as their Pole Stars freedom, liberty and sovereignity of the people over government we have a chance to endure yet for a while.

What do we owe Winston Churchill?  He was our “cousin” since his mom was American.  After the fall of Dunkirk in 1940 and the surrender of France there was no opposition to Hitler on the Continent and he was at peace with Stalin indeed they were still allies; they had just finished their mutual military operation against Poland.  All seemed quite hopeless and in fact there were many in Great Britain that believed they should sue for peace with Hitle from the man on the street to members of the War Cabinet itself.  Even if Hitle didn’t try to invade there was no realistic possibility that they saw to ever defeat him and the land of Avon would be pounded mercilessly by the Luffwaffe.  Churchill beat  back and/or ignored such calls for peace and used all his oratorical skills to rally the people to resist which they did for another long 18 months before the US joined the fray.  The time called for bold and heroic clarion calls to the ramparts.  The people were scared, they had seen what had happened on the Continent and the British army had just been hammered at Dunkirk.  He delievered.  It is hard to imagine the course of history if Great Britain had not held out until we joined.  Remember the anti-war faction was very strong in the US then and there is no way we would have taken on Hitler by ourselves.   A peace with Great Britain would have allowed all the German troops to muster for the assault on the Soviet Union and minimal forces to garrison the West.   If Churchill had heeded the faint of heart and capitulated it is not hard to imagine that the Nazis would have endured for generations.   Why did BO return the bust of such an icon of heroism to Great Britain?  

The latest possible Fed move reported is that it will print more money to buy Government bonds but then borrow that money at short term with low rates.  This supposedly will assure those concerned about money printing leading to inflation.  I am not making this up, Lord I wish I were.  But not to worry those mad scientists in there no how to take care of you; you just aren’t smart enough like Geithner, the tax cheat or fumbler, to understand the wisdom of all this.

“God give me strength to face a fact though it slay me.”  Thomas Huxley, of the famous Huxley family and biologist.   www.olcranky.wordpress.com

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Greek Gag Or Gagging On Greece?

The ebb and flow of events  regarding  the Eurozone and the Greek debt crisis makes it hard to determine whether we are watching a Greek tragedy or comedy.   Their theatrical accomplishments have endured for millenia because of their connection to the human condition.  They might have lost the ability to produce great theater but they still now how to stage great political theater.   The machinations of the Greek technocrats and politicians for the past almost two years now makes the Keystone Kops and the Three Stooges look like the Marine Corps precision drill team.  Maybe there are some lessons to be seen in their predicament but the issue is, will we learn from them.  Like the Good Book says, they hear but they do not listen.

As we go to press it appears that the Greeks have said they will agree to the debt re-work terms with the IMF, ECB and the major European players (Germany and France).  But the latest is that the unions leaders have threatened new strikes and some have foretold of blood in the streets to protect the government payments to all and sundry of the population.   The wonder is that the few who actually work in Greece can possibly support what they have for as long as they have.  Of course they haven’t, they have been living on borrowed money for years, not the product of the labors and capital.   They haven’t been producing enough income collectively and through their corrupt tax system to meet the expenditures to pay for those 50 year-old retirees and bloated government payroll.  You do realize that one in four citizens of Greece are on the public payroll.   The Greeks have made promises over and over for decades about their system and the reform of same.  But they renege on the promise every time.  That is their only consistency–never doing as they promise, including the promise to pay their debts.

Some Greeks are vocally assailing the Germans and asserting that they are trying to dominate them again just as they did during the War.  They can’t even keep their history straight.  It was the Italians that attacked the Greeks during the War, not the Germans.  The Germans only got involved when Mussolini couldn’t finish the deal.  Hitler was building up for his big set-to with the Soviets and was most peeved to have to divert resources to bail out the Italians.   But we humans of a liberal/welfare state mindset only take personal responsiblity as a last resort.  Those welfare staters are always going to look for a bogeyman that caused all their problems.

Again they Greeks have promised big cuts.  You may recall that last year they were going to reduce the public payroll by 30,000 but as of last fall only about one tenth that amount had actually, really been cut.   They have bought into the idea that there is a free lunch.  That the government can provide everything for everyone and keep their taxes low.  Their taxes are pretty high but collections are spotty because everyone cheats.  It is a national pastime just as it is with the Italians to dodge and elude the taxman.  It’s ok for government to pay for everything as long as the money comes from the “bourgeoisie” or “capitalists”.  The problem they have is the same as ours: even if you took all the money of the “rich”, it would only last a couple of years and then the money machine would be busted again except then who are you going to tax?  Everyone would be broke.

Their organizational skills remind of the Anarchists of Spain during the Spanish revolution of the 1930’s.   The Republican Front of Heminways fame and the dream state darling of the Left was a real hodge-podge of groups–Communists, Socialists, Basques and Anarachists who in many areas were the dominant force.   In Barcelona the Republican Front controlled the city and went on a rampage of looting and killing.  The Anarchists took over many industrial plants and utility production facilities.  Great joy!  The bourgeoisie and monied interest and church had been defeated and the workers were no longer subject to any control or exploitation by those hated classes.  Within days though everyone realized that the plants and industrial capacity had to be restored if they were going to eat, have water, prevent street crime and something to sell to the world for the lucre–money to buy necessities.  Of course all agreed that there would be no “bosses” or owners.   The common working man had prevailed and were no longer subject to the dictates of the money and ownership class and the professionals.  Indeed the emotions and rampage was so high that for a short period many men were killed on the spot on the street merely because they were wearing a tie.  The tie was taken as a symbol of belonging the dreaded ruling class.  I am not making this up.  So the workers ruled but guess what?  Everything ground to a halt quickly.  Nothing was working and no one was working.   The C0mmies as always were very tightly organized and disciplined and willing to kill quickly so they eventually gained controlled of the industrial capacity in Barcelona.   The workers were rid on one boss, but that vaccuum was quickly filled with another not necessarily to their liking.

The Greek mob may well win the day and take control of some new government of a sort.  Yes, they no doubt will stiff their hated creditors and all those globalists and capitalists at some point down the road.  What is their in their recent, or ancient, history to indicate otherwise?  They can be in control of their own destiny without those evil German creditors calling the shots.   No one will loan to that group after just watching creditors in front of them get cheated big time.   They can either grow up and earn what they receive or become the beggar nation of Europe.   There is no Alexander the Great on call.  Mayhap they should read their Plato afresh.  Truth was the centerpiece of his discourse.  They should start by being true to their word if they want to participate in the global community of commerce.  We don’t have an interstellar commercial system yet so their  alternatives are pretty limited. 

US debt 16 trillion by fall 2012; US deficits of over 1 trillion a year for the last three years and projected as far as they dare to predict; US debt to GDP 100%; liabilities for Medicaid, Medicare and Social Security of tens of trillions with no plan to have funds on hand to pay them when due; and now one in seven  Americans on the government payroll and many more dependent of government expenditures of one sort or another.   Worse, a Greek-like view among many that we can have the free lunch and that there are always “others” who can pay for everything.   With those cheery thoughts, have a nice day.

“I wish men to be free, as much from mobs as Kings–from you as me”  Lord Byron, English poet and Greek freedom fighter against the Muslim Turks.  www.olcranky.wordpress.com

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Pentagon Pork And Other Budget Cuts

The news is out about the budget cuts in the Pentagon budget for the coming year and for the outlying years.  The proposed cuts will draw flak from all corners and stripes of the political spectrum.  It is to be expected because that budget affects so much of our economy and our feeling of security or insecurity as the case may be.

When discussing the military budget it is always best to reflect on a bit of history so we have a perspective.   During the Cold War we didn’t have much of a choice about the size of the military budget because we were constantly under direct or indirect assault from the Commies around the world.  The direct assaults were in Greece after WWII, the Berlin Airlift, the Berlin wall, the Cuban missile crisis, the Korean War, the various insurgent and rebel movements all over South America and the unrelenting secret but real war at sea with our Boomer subs and the Soviet navy.  The indirect pressures were the Hungarian revolt, the never-ending presence and pressure all over eastern Europe where the Soviets had dozens of armored divisions within striking distance of the West, Viet Nam,  Grenada, and the clandestine war of the intelligence agencies around the world.   The list is much more than those but they give a flavor. 

Reagan won that Cold War for us against tremendous opposition from the Democrats at home.  They opposed his military build-up at every turn and ridiculed the Star Wars program and drummed the “he’s a wild Cowboy” mantra without end.  But the Soviet Union did collapse due to that pressure and steadfast resolve of Reagan.  He didn’t even back off from calling them “evil” which was also highly criticized by the left as being simplistic.    The fact of the matter though is that the strategy was successful and we began in the early ’90’s to save billions annually on the military budget.   It was called the peace dividend.  That dividend along with other factors, such as a Republican Congress for several years to restrain spending, had much to do with the boom of that decade.   Of course the internet came to life then thanks to Al Gore and that lead to an enormous increase in economic activity.

It was really only after 9/11 that references to the peace dividend began to fade from the headlines.   The  threat we face today is from muslim terrorists which are at the front of the line but there is the emerging threat of the Chinese as they continue to expand their military capability exponentially.  You may have notice the increase in their missile defense systems and the recent news of their own version of a stealth fighter/bomber.   That will be a very serious concern in a decade or so and certainly within the next generation.   It can still be a dangerous world at there.

Olcranky believes we should begin to seriously cut the spending programs of the Federal government and that the Pentagon is not a sacred cow in that regard.   There is so much political pressure regarding the Pentagon budget because it has an effect on jobs in many congressional districts around the nation.   What is troubling about this budget proposal is that it removes the cutting edge of the military.  It proposes reducing the number of troops, the submarine service personnel, the destroyer fleet while only reducing the civilian workforce by 1000.  

Like any large organization the Pentagon grows moldy and calcified and ends up with a redundant workforce.  People are doing things simply because those things have been done in the past, not necessarily because they are useful now.  You can rest assured that there are more than 1000 civilian workers at the Pentagon today who don’t really do anything more productive than shuffle paperwork.  The military mission is not complicated.   It is to destroy things and kills people when the political will believes such action is in the best interest of the nation’s security  How much money is the Pentagon spending to implement the don’t ask, don’t tell repeal for example?  If that is the new policy so be it but do we have to spend money on training and sensitivity programs for that policy.  The money spent by the Pentagon should be audited with one focus.  Does this program or procurement put good weapons and bullets in the hands of our troops, give our airmen the best fighters and bombers to accomplish their mission and provide the Navy with the resources to scare the hell out of tin pot dictators and wanna be tyrants around the globe.   The other expenditures should be eliminated. 

The Pentagon budget could be cut even further in the opinion of olcranky than that proposed but it should be done with the above mandate.  We should allow the various military establishments decide the cutting.  Give them a set budget and tell them to pick what they really need to get their job done.   They can’t have every new “toy” that comes along.   Let them decide how many civilians they really need to assist their operations rather than the politicians.  The politicians will always aim high on procurements and personnel simply to “bring home the bacon” for their constituents back home.  We have to trust someone with making the monetary decisions for the military.  Let the politicians give the cap as they should under the
Constitution but then let the military allocate the money where it is most needed to accomplish their mission. 

The military budget will still be large regrettably for years to come in all likelihood but it could be reduced significantly.   Cut the civilian pork and we all can have some bacon back home.

Please recall that we had a very small military budget during all the 1930’s.  Our armed forces were minimal and thus the costs. It was a great savings at the time.   The issue is though, how did that work out for us in 1941?   www.olcranky.wordpress.com

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Learning From History Or Confusing Facts–Which Is Fed Doing

Bernanke has made so many references to the Great Depression over the last 18 months that it is impossible to keep count.  We have all read or heard by now that he spent his academic career studying the Great Depression and therefore he is the pre-eminent expert to guide us through the current financial mess.  It is a good thing he has studied it.  We definitely can learn from our history and for that matter the history of others who have been down similar road before us regarding economic difficulties.  He has stated numerous times the fault of the government during the Depression was to back off of easing monetary policy too soon as a contributing factor in prolonging the duration of the Depression and uses that as the  justification for the printing of trillions of dollars and the “buying” of US Treasuries and other instruments in the market place such as mortgage-backed securities.  He projects continuing those policies for the indefinite future and wants us to believe that is a good thing.

Of course all that activity by the Fed results in the expansion of government control in even more vital sectors of the economy.  There is a significant percentage of folks out there who love that and place complete trust in the role of government.   He constantly makes a comparison to those events of the ’30’s to the events and occurrences of today.  Some of that is legitimate and appropriate.  We can find useful knowledge from past events.  However today’s Fed is far more political than it has ever been.  It is at this moment essentially another cabinet position of the current administration rather than the completely independent body it was intended to be when created.  While we study the similarities between then and now it is also important to recall the differences between the two eras.

Social Security was just starting and the ratio of workers was very high compared to the retirees.  Also the live expectancy was only 62 and most importantly of all the system was not considered a retirement plan but merely a welfare plan for the most needy of the elderly.  The Federal budget was small compared to GDP at that time and the military budget was non-existent.  That lack of military power played its part in  the rise of Mussolini, Stalin and Hitler.  It was certainly not our fault alone but we didn’t exactly step up to the bar and push back against those tyrannies.  Indeed many were embracing Stalin at the time.  We also didn’t have food stamps, subsidized housing, a government program that controlled the mortgage industry like Fannie, Freddie and the Fed do today; there was no Medicaid or Medicare to pay for at that time.  

You are all reminded of what that great philosopher Brother Dave Gardner taught us all decades ago that you can’t do the “same” thing again, ever.  As he taught you can only do something similar to what occurred before.  Unless you know how to do time travel you can never do the same thing again.   Bernanke  is forgetting this valuable lesson in his comparisons to then  and now.  He keeps talking about us doing or not doing the “same” thing today as was done then.  His methods at the moment are working hand in glove with the group in the administration that is promoting a European style economy.  There are lots of positive aspects to that European model, but it has some very negative downsides.

Mostly what the European model lacks is the spirit of rugged individualism and innovation that are the hallmarks of the American economy historically.  They lack that.  Just look at all the major advances in science, medicine, physics, economics and industry over the last 150 years and the US is the clear leader in any category by leaps and bounds.  Sure who wouldn’t want 6 weeks vacation every year, “free” medical care and free higher education and a public dole that allows a comfortable existence without working.  But we need to be objective and also recognize the flip side of all those.  They have had and still have much higher rates of unemployment than we do because it is almost impossible to fire anyone once hired so companies are very reluctant to add employees.  In France now there is great controversy over this issue.  There free higher education system is wonderful but remember only a tiny fraction of their population has access to it; the majority are in “trade” school by about age 16.  They are rapidly reaching the point of insolvency because of the huge debt burdens of their governments to support their welfare programs, see, Greece, Portugal and Spain for starters and then Italy  and Ireland with Britain and France trailing pretty close behind.   Even the EU is finally realizing that someone has to work, wants to work rather than live on the dole, build new things, and that everyone can’t just sit home and write poetry or sip Merlot in front of their 50 inch TV.  

Bernanke is taking the wrong lessons from 75 years ago.  Failure for incompetence or bad decisions is a good thing, a sound dollar is a good thing, low taxes are a good thing, smaller government is a good thing and promotes a more vigorous and growing economy.   Even in the completely non- capitalist Soviet society people had to work, indeed they were required to work for the social justice of all was the theory.  We need the government to be an honest arbiter and referee of our capitalist society but no more than that.  It doesn’t and shouldn’t be in the auto industry, the banking business, the mortgage business, credit card business or the medical industry.  When some of those industries faltered the big government types said we had no choice but to rescue them, excuse me, we did have a choice.  They could have failed and then re-emerged as better companies in every instance and the creditors and shareholders would have suffered no more than should be expected for making bad decisions.  We are seeing the consequences of those decisions now–a growing Nanny government who is morphing into a dictator government to achieve social justice for us all.  Lord protect us from ourselves.  People deserve the government they allow to rule them.  Hopefully, we will deserve better soon.

The health reconciliation bill has a provision to manipulate the accounting with regard to deficits and Social Security. You recall there are changes to Social Security to save money but they say it is revenue neutral because the money is replaced.  What is actually provides is that to the extent enforcement of this act reduces Social security funds they shall  be replaced by the Treasury every quarter.  Sounds good except that is just more IOU’s going to SS from the Treasury, it is not real money, merely another promise of money down the road but it helps balance the books for health care proponents.  www.olcranky.wordpress.com

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The Morphing Of Entitlement Programs

Everyone today in general conversation about Social Security will almost inevitably refer to it as a retirement program or a retirement savings.  This is usually coupled with the concerns about the solvency of the program.   Those concerns are very legitimate.  It is so often referred to as a Trust Fund when it fact it is no such thing.  Remember Gore when he campaigned talking about locking the “box” with those funds and throwing away the key until it was needed.  Pure balderdash.  It never has been a repository of monies collected and then segregated and kept only for  the purpose of paying benefits due to recipients under the program.   Those dollars you pay in today are immediately drained right out of the fund and used by the government to pay its current bills for every one of those bureaucrats that make an average of 67K per year plus benefits and all the other expenses of government.  As the government draws out the money it merely replaces those monies with IOU’s issued from the government.  It is nothing more than a vague promise the government will pay the monies when they come due.    Because of the debt and the deficits and the prospects for a weak economy for years the concerns about the worth and value of that promise are legitimate.

Everyone must be reminded that the SS program was never intended to be a retirement funding program.  It was set up during the Depression to assure that the old folks would not have to go to the Poor House when they got old.  It was to be a minimal payment so their basics needs could be met without them being an undue burden on their family.  In those days it was assumed the old folks would probably be living with their extended family when that got old.   It was designed to keep the old folks off the streets.  It was never intended to supply enough money to for someone to “retire” on and live more or less like they did when they were working.   It assumed a lower standard of living.  When it was implemented in the ’30’s there were about 30 workers for every beneficiary.  Also remember that the actuaries had run the numbers just like those evil old life insurance actuaries and it was known that the average life span then was 62 and the benefits even then were not going to begin to pay out until age 65.   The government assumed there would be lots of people who paid in but would never receive one dime of benefits because they would be dead before they could collect anything.

As the years went by the program got redefined, not in law, but around the edges enough that we reached the point that it was viewed as a retirement plan.  The politicians began promising as only they can that the program was so everyone could retire on their social security.  The benefits increased and the age limit for receiving benefits was also lowered.  At the same time, decade by decade, the number of workers paying into the system declined per recipient.   Today we have only about 3 payers for each beneficiary under the program.  The Democrats viewed it as a sure vote getter over the decades to incrementally increase the benefits and they were mostly right.  They caused the COLA increases to become part of the regular payment program and thus another entitlement feature of the system.  The problem was and is that the COLA was set up so that it did not just keep pace with inflation but actually exceeded it by a percentage point and a half.   Those little increases add up to huge numbers when you are talking about millions of people.  We needed a COLA adjustment because of the inflation under Carter but did it have to exceed the actual inflation rate?

Every time the politicians in power think they need a little extra boost at the polls it is like a moth to the fire and they can’t resist adding a little extra here and there to convince the recipients to vote for them and they will get a few more goodies for that vote.  Entitlement programs always grow and always will as long as we have politicians.  You can bet the ranch on that one.  It is a characteristic in the genes of the political class.    If Social Security was a true trust fund we should all  be getting interest on our money we pay into the system, even if it was only 2% and when you died earlier than when all your money had been paid to you the excess should be paid in a lump sum to your estate or heirs.  If it is a trust fund it is your money, not the government’s.

The average life expectancy today is around 78.  We need to stair step the retirement age upward over a period of couple of decades.  Take it up to 70 over 20 years and the savings would be huge.  If the young people now knew what to expect they would have years to plan their lives accordingly.  Those already receiving benefits should get what they were promised.  At the same time eliminate that early retirement age of 62 completely.  The “early” retirement age should be adjusted upward to 65 at a minimum.  Yeah, lots of folks will complain that is not the deal they were promised and that is true.  But that new promise would probably have a lot more worth and credibility than those IOU’s being issued to the SS every year by the government.  I would rather have that new promise if I was 25 today than the one that exist at the moment.

“The united voice of millions cannot lend the smallest foundation to falsehood.”–Goldsmith  http://www.olcranky.wordpress.com

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Debt Debacle

Sometimes the current economic pundits talk about our current debt and indicate that it is not as severe a problem as others think.  This in spite of the fact that even those in the current administration do give lip service to the notion that the deficits and debt growth are “unsustainable”.    They just want to sustain them for the indefinite future–however long that might turn out to be.  The existing projections from the CBO and administration don’t indicate when there will be any downturn in the debt growth or the deficits.  Indeed the projections show nothing but a continuing debt growth all the way to 2019.  That is ten more years with deficits growing exponentially.    Those seemingly unconcerned about the debt at the moment often speak of the debt not being that bad compared to the debt we had right after the end of WWII.

They use that debt after the War as an indicator that things really aren’t so bad and that we can work down the debt just like we did at that time.  After the War our debt was indeed more than 100% of our GDP.  Other than that fact though the analogy breaks down rather quickly and the circumstances now extant are not similar at all to those existing in the ’40’s after the War.  The first huge difference is the fact that almost all of that debt after the War was owed to ourselves.  Almost all that debt had been incurred to finance the War itself.  You have seen those old movies about the War Bond rallies and surely have at least heard that buying War Bonds was pushed very hard as a patriotic duty.  Besides they were also  promoted as a great way to save for the future.  It is true that millions of Americans during the War bought those War Bonds and even after the War many continued the habit of buying government bonds, the old E bonds.  Just as we have regular auctions now selling our Treasury bonds on the open market to finance our government expenditures we financed them then with those War and E bonds. 

But those bonds were bought and owned by Americans.  They were not owned by foreigners.  Remember the situation during and right after the war.  England and the rest of Europe was devastated both physically and certainly financially.  Europeans couldn’t afford to buy US bonds.  They needed every cent they had to rebuild their infrastructure and societies after the war.  Asia was a very poor place.  The Japanese weren’t buying any US bonds for sure.   We were having to spend money in both Europe and in Japan and throughout other parts of Asia to help them out.  The Middle East was not flush with money yet from oil production.   Believe it or not the US was energy independent in those days.  We didn’t really have to have their oil production to meet our energy and economic growth needs.  Latin Americans didn’t have any money to buy anything to speak of at that time.  The Soviets weren’t buying anything.  They were completely dominated by their communist philosophy and they wouldn’t and couldn’t buy any bonds.  All that debt was owed to ourselves after the war.

Today a very substantial portion and indeed a majority of all our recent debt is owned by foreigners.  They are the ones buying US Treasury bonds and notes.   Yes, we buy some too, no doubt about it, but foreigners now are a very significant creditor group we have to deal with.   Many of them are not necessarily our friends.  The Chinese are not our friends.  They are nothing more than trading partners and they definitely have their own interest at heart with every economic move they make.  Those moves never forget are still controlled by the Communist Party in China.  They will be doing what it their best interest.  They will always be tough creditors.  Yes, they have an incentive to work with us some because we are their major customer for their exports but that willingness will extend only so far. 

When the US debt was owed to ourselves we had much greater flexibility about how we were going to deal with it.  Also we were on the verge of a big boom in our economy as everyone could tell with about 13 millions men returning home and wanting to buy everything from cars to  TVs.  The rest of the world was dependent on us for a great deal of our manufactoring output.  They needed the US for everything at that time and their were all very glad to have US dollars contrary today when our currency is weakening in value against all major foreign currencies.   There isn’t a good analogy between that time frame and today at all.  Any attempt to do so is sophistry at best or an outright effort to mislead and hide the ball from the American people about our current debt crisis.  It is a crisis.  Unless it is brought to heel we face either huge inflation risks or taxes so high that our economy will struggle and sputter for decades to work down the debt load. 

How we want to spend our money is our choice.  How much debt we want it our choice.  The consequences of those choices are also ours.   The Chinese and Europeans will not bear the brunt of unwise decisions, we will.  I don’t propose here the exact remedy.  But we all have some semblance of common sense and lowering expenditures by Government, Inc. is essential if we are going to reduce the debt.  Do the politicians have the gumption to face that reality and disappoint their constitutients who are expecting largese from the government?

Divide 300 million into 11.3 trillion and that is your share of the National debt and that is before it doubles by 2019.  Think about it.  How is it going to be paid?   www.olcranky.wordpress.com

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Stimulus Spending and 1983

Quite often in the last several weeks defenders of the administration’s stimulus plans, bank and auto takeovers, cap and tax and health care reform have made references to how our economy was in 1983.  They especially use the data regarding unemployment from that time to justify the current policies and proposed policies.    Inflation was still high at that time and so was unemployment.  But that is about where the analogy begins to break down.  We are told by the administration apologists that if we will follow their advice and let Government, Inc. take the leading role in our economy and raise taxes through the income tax code and cap and tax and green jobs and government control of banks and the auto industry that everything will turn up roses.  Their position is that if we just trust them that the economy will recover and prosper under their directives and direction.

Well, they have only a couple of their facts right and all their conclusions wrong about comparing 1983 to today.   First, we had been dealing with a decade of inflation.  Gerald Ford even had that silly WIN button he wore to try to promote the fight against inflation.  For those who don’t recall it stood for  “Whip Inflation Now”.   It didn’t work and nothing that Carter did made things better.  Indeed his efforts made things even much worse.  In the late ’70’s and into the election of 1980 there were weekly rumors about what item or items would be in short supply due to FERC and all the other government policies in vogue at that time.  You can’t turn the economy on a dime, it takes time.  Even when an administration is attempting to alter the economic course the general public and the business world have to buy into it and believe in it.   Confidence and expectations are what drive any economy.  Consumers spend more when they are confident about their jobs and what their tax burden will be and even more so if they believe their taxes will be reduced.   Likewise Wall Street and everyone with an IRA or 401K always make their investment deciions on what they believe the future holds.  They never look back except as a learning tool and guidance about what they believe tomorrow will bring.  

In 1983 the atmosphere and confidence level were quite different than they are today.  Today we face the prospect and threatened certainty of much higher taxes across the board.  The income tax rate will jump for high wage earners, the cap and tax legislation will tax everyone that breaths, even the estate taxes will jump up again in 2011 and the price tag for health care reform will be high, very high.  The small business owner will be hit from all sides, his personal taxes will rise, his cost of doing business will rise with health care reform and the cap and tax legislation will make his cost for his product or service more expensive to deliver to his customers.  At the same time the cost for electricity will soar and those who want a new car in a couple of years will find the cost much high due to CAFE standards and the “green” initiatives being proposed.   Add to those factors the overwhelming US debt and the continued borrowing by Government, Inc. and the concommitant interest expense to pay the Chinese and others for buying our bonds and the propects for inflation are plain to be seen by anyone who looks.  We are assured that inflation is not a concern but it is self evident that it is a concern unless spending is dramatically curtailed or tax revenues are sharply increased.  There is virtually no talk of any coherent plan to address the spending debacle and nothing to indicate a drop in borrowing for a far as the eye can see.

In 1983 there was hope–lots of hope and enthusiasm.  Even though inflation was still high and so was unemployment the proposals from Washington were encouraging, not discouraging for small business.  It was indeed a time to celebrate a “Morning in America”.  Optimism abounded because the prospects were for lower taxes for individuals and businesses and for less government intrusion into our daily lives, not more.  When folks thought about the future a year or more out they believed that things would be improving.  They didn’t see the US debt being a insurmountable burden on their shoulders.  They believed that they could achieve success.

Who do you know these days that is optimistic about the future of our economy?  How many do you know who even optimistic about the preservation of our freedoms and a restrained Federal role in our affairs?  The true believers love the proposals.  They like and want the government involved in everything and they like the government controlling all or almost all of our economic activity.  They love Big Brother and want to be a part of his organization.  While that number is significant I don’t believe it is more than a 30% or so range of our population.  I may be wrong.  Maybe I hear a different drummer.  But the one I hear beats the tune of freedom and hope.  I do hope many will go back and refresh their memories about what was occurring during the early ’80’s.  I think it would be great to recycle that approach to government and our c0untry again.  We faced dark clouds hanging over us in 1980 but unleashing the American spirit for entreprise parted them to a bright sky for years.  We face storm clouds today and they are of our own making and we can cast them away if we follow tried and true principles.

American Presidents should not be addressing school kids.  Not any of them of any party.  That is not a wise path to take.  It is too fraught with potential abuse to be allowed.   A President should not speak to captive audiences but only willling citizens.   www.olcranky.wordpress.com

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Numbers

Numbers have always played a significant role in the news of the day.  If there is a natural disaster we want to know how many people were injured or killed, how many homes were destroyed, etc.  If there is a war going on we like to have the casualty reports of dead and wounded.   The world of sports is nothing but filled with stats and numbers for every conceiveable aspect of every sport and each game and season.   Take a look at your typical daily paper or news source on the internet and pay attention to how much of each news item is related to a number.  Many times those numbers are mere curiousities and sometimes they are the very heart of the story and have a great bearing on our lives and futures.  The questions regarding our economy and the disputes about the reality or fiction of Global Warming are all about numbers.  Our economy is doing better if you believe certain numbers and the earth is perilously close to an extinction tipping point if you believe numbers of the Al Gore’s.  What is striking is that so many of the numbers are given with no supporting data and background as to their source or methodology of creation, yet they are accepted as the gospel truth by the average Joe.  Others are plain and true as the nose on your face yet we pass by them without every thinking through the implications of them.

Let’s review some of the numbers that recently have been in the headlines and ponder their impact on our lives.  First we had the AIG rescue.  We know that the number for that Government, Inc. mission is 180 billion give or take to date.  Are you convinced we are better off having advanced that money?  The insurance companies were  sound according to all reports.  No one would have lost their life insurance payments or health benefits or property damage claim reimbursement.  That is a lot of money going to investors, many overseas.  Second, we have the infamous TARP plan which was a smooth 700 billion.  Last report I saw all but 132 billion has been doled out to various banks, not to buy their toxic assets but to purchase preferred stock and warrants in the banks.  Last week we got back 68 billion from 9 of the banks and the Treasury said they would retain the funds for further use with other banks in need.  It has become a revolving line of credit for banks apparently.   Government, Inc. now owns 34 % of Citibank and controls everything that bank does as lender, regulator and majority owner.  Even after the return of the 68 billion Government, Inc. still owns the warrants to acquire common stock in those nine banks as of today.  Next we have the program announced by the Fed to buy over 500 billion of mortgage backed securities in the market to free up money for new lending.  I haven’t seen any accounting of how much of that money has been spent, have you?  What did we get for the money.  Don’t forget the TALF money which  is another reported 650 billion.  Some of that money was to be used to buy credit card debt, student loans and car loans.  Where did it go?  Of course we have lent about 10 billion from last I saw to GMAC for its financing pr0grams. 

Then there is the money for GM and Chrysler–to the tune of 50 billion and counting so far.  Does anyone believe it will top out at that number?   Both entities are now owned by Government, Inc. and the unions to the extent there is any difference between the two.  I am sure the unions believe they bought their politicians fair and square and are merely getting their due. 

Next up is the announced plans of the Treasury to sell notes and bills to support the almost 2 trillion in deficit spending for the current year.  That number alone is staggering when you consider the deficit for this year alone will be 1.7 trillion and counting.  Remember that it has already been reported that tax revenues are down some 44 billion from prior years to date.  Combined with this issuance of Treasury notes is the program of the Fed, in addition to all its other buying programs, to buy 300 billion in Treasury bills this year alone; additionally the Fed is buying as much as 1 trillion in mortgage securities, this is different from their earlier program and in addition to that.  The Fed Reserve has printed up at least 1 Trillion since last September in new money.  Just turned on the printing presses and let them run.   That money has been used to buy some of those Treasury bills.

We have a proposed cap and trade law that will raise taxes by 650 billion over ten years.  The tax will be on anything and everything that consumes energy in its manufacture, transport or use.   That is a tax added to the already existing taxes on gasoline and diesel fuel.  The latest number floated for the health care overhaul is 1 trillion and I believe the administration threw out that number with their fingers crossed behind their back.   

I will let you pick your own number about the unfunded debts for medicare, medicaid and the social security administration.  There have been so many estimates thrown around you have lots to choose from.   Lastly, we are projected to have as much as trillion dollar deficits as far as the eye can see.  When you read the fine print the talk about reducing the deficit is really an intention to reduce the growth of government programs, not a real dollar reduction in anything. The Federal budget will continue to grow.  Almost one in five Americans are now on some type of government payroll be it local, state or the Federal level. 

As an intellectual exercise I would love to know how this story will end.  Be nice to know exactly who is going to pay for all of this.  Won’t be me, I will be pulling on harp strings while others are dealing with this debt.  The short term answer is pretty clear.  The Fed is printing money fast enough to satisfy every drunken sailor in port, but how long can they do that before the drunken sailors destroy the port?

Another day we will talk envoirnmental numbers.   www.olcranky.wordpress.com

“In framing a government which is to be administered by men over men the great difficulty lies in this: You must first enable the government to control the governed, and in the next place, oblige it to control itself. ”  Alexander Hamilton.

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Message From Europe

The election results are finally tallied from all the recent voting in Europe.  We already know the outcome of the California tax issues elections.  Seems that some one in Washington should start paying attention to these results.  The mantra has been around for a few decades that California leads the way in the US on all issues.  They do it first and then it spreads to the nether reaches of this fair land so the theory goes.  In economic, social and cultural aspects there has been a strong element of truth to that adage for a number of years.  Seems as though those Tea Parties carried a bit more heft than some of the politicians would care to acknowledge.   IsCalifornia leading the way again?

The California vote was not only against raising taxes it was also a referendum on the growth of government and the deficit spending that goes with that unrestrained growth.  There was a hue and cry that painful cuts would have to be made in State services if these issues failed even though the California government has added over 150,000 employees in this century already.  The voters get it and still didn’t want any increase in taxes and more expansion of government.  What particularly got my attention was the spread in the vote–the five issues rejected were voted down by virtually a 2 to 1 ratio.  That is a landslide in political terms.   The Washington crowd appears to be moving along blithely ignoring those results as though they didn’t happen.  That vote I hope is only a straw in the wind for a growing rebellion by the taxpayers against Government, Inc. and the desire of politicians to sop up even more of our economy into the maw of government like a cat licking the last drop of milk from the saucer.   It would be nice if all the planned US government expenditures were put to a referendum right now.  I wonder how well, TARP, PIPP, TALF, the mortgage rescue plans, the GM and Chrysler bailouts, the GMAC funding and the insane purchasing of Treasury bills by the Federal Reserve would do in such a vote.  Those guys spending our money might give a moment’s thought to the next election which looms around the corner with each passing day.  The health care plan alone will drown us in debt and higher taxes with no end in sight.  Everyone wants better health insurance but at what price?  

The European elections are even more interesting.  There was a decided lurch to the right by the Europeans across the Continent and the UK.  So many of our academics, pundits and politicians of the liberal wing have been wanting to emulate that European model in socialism and to expand the size and scope of our government and they must be disappointed.  Just as California leads the way in the US  many of our liberal friends they have always looked to the European model as the template for their game plan in the US.  The swing to the right was not isolated to only a couple of countries but was spread from the Dutch to Spain to the UK to France and Germany, Italy and the Scandanvian lands.  Those folks knew what they were voting for and it clearly was for putting the brakes on government growth and higher taxes.  It seems the socialist agenda is waning in favor among the voters of Europe.  They have always been much more “liberal” in social matters than we have been and they are accustomed to the government running and/or owning significant portions of their industries.  The European governments’ percentage of GDP has always been much higher than ours and now ours is heading in that same direction.  But the Continentals are backpedaling in a major way.  Apparently many of them have had about all that Mother Government they can stand and would like a little more freedom and lower taxes for a change.  It was quite strking also when analyzing the results that the left wing parties lost ground from previous years.  It was not only a growth on the right but a loss of the left that produced the rather dramatic European results. 

On immigration matters the Europeans are bringing to rein in their open arms philosophy and intergration policies.  Several of the anti-immigrant parties will have representation for the first time in the European Parlianment.  That is stunning given the history of Europe since the War.  They apparently do want their borders protected and don’t want to be “Balkanized” or “Islamified” as some of the papers stated it.  Maybe those in Washington calling for amnesty for illegal aliens will pay heed to this trend.  The Europeans are tired of their riches and generosity being abused by those who come there illegally. 

You are urged to do your own reading about these vital elections.  Reach your own conclusions.  The British are clearly pulling back from government expansion and higher expenditures and deficits.  Labor is on its way out.   That special relationship we have with them should be used as a learning tool for our politicians.  They are going one way and we are heading in the opposite.   That  is truly an astounding circumstance and only the second time in my lifetime.  Thatcher was the first.  Europe sent us our forefathers four centuries ago and maybe now they will send us lessons about taxes, size of government and restrained government from abroad.

“Any pary which takes credit for the rain must not be surprised if its opp0nents blame it for the drought.”   Dwight Morrow

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