Wednesday, January 21, 2009

An Open Letter

The following appeared in the comments section of my last post. I couldn't see any way to edit it to condense it, but it does give you a feel of the times. I have quoted from articles of this sort from the 1930's and it has the same flavor. I apologize for the length, but you might enjoy it.

An Open Letter:

Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new 'messiah', Pres-elect Obama, to wave his magic wand and make all our problems go away, while at the same time allowing our once great nation to keep 'living the dream'… Believe me folks, The dream is over!

This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded 'laborers' without paying the price for these atrocities…this dream where you still think the masses will line up to buy our products for ever and ever.

Don't even think about telling me I'm wrong. Don't accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM's throughout the Midwest during the past 30 years and what I've seen over those years in these union shops can only be described as disgusting. Troy Clarke, President of General Motors North America, states: 'There is widespread sentiment throughout this country, and our government, and especially via the news media, that the current crisis is completely the result of bad management which it certainly is not.'

You're right Mr. Clarke, it's not JUST management…how about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass…so they can come in on the weekend and make double and triple time…for a job they easily could have done within their normal 40 hour work week. How about the line workers who threaten newbies with all kinds of scare tactics…for putting out too many parts on a shift…and for being too productive (We certainly must not expose those lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?!?)

Do you folks really not know about this stuff?!? How about this great sentiment abridged from Mr. Clarke's sad plea: 'over the last few years …we have closed the quality and efficiency gaps with our competitors.' What the hell has Detroit been doing for the last 40 years?!? Did we really JUST wake up to the gaps in quality and efficiency between us and them? The K car vs. the Accord? The Pinto vs. the Civic?!? Do I need to go on? What a joke!

We are living through the inevitable outcome of the actions of the United States auto industry for decades. It's time to pay for your sins, Detroit.

I attended an economic summit last week where brilliant economist, Alan Beaulieu, from the Institute of Trend Research, surprised the crowd when he said he would not have given the banks a penny of 'bailout money'. 'Yes,' he said, 'this would cause short term problems,' but despite what people like politicians and corporate magnates would have us believe, the sun would in fact rise the next day… and the following very important thing would happen…where there had been greedy and sloppy banks, new efficient ones would pop up…that is how a free market system works…it does work…if we would only let it work…

But for some nondescript reason we are now deciding that the rest of the world is right and that capitalism doesn't work - that we need the government to step in and "save us..." Save us my ass. Hell - we're nationalizing…and unfortunately too many of our once fine nation's citizens don't even have a clue that this is what is really happening…But, they sure can tell you the stats on their favorite sports teams…yeah - THAT'S really important, isn't it…

Does it ever occur to ANYONE that the "competition" has been producing vehicles, EXTREMELY PROFITABLY, for decades in this country?… How can that be??? Let's see… Fuel efficient… Listening to customers… Investing in the proper tooling and automation for the long haul…

Not being too complacent or arrogant to listen to Dr. W. Edwards Deming four decades ago when he taught that by adopting appropriate principles of management, organizations could increase quality and simultaneously reduce costs. Ever increased productivity through quality and intelligent planning… Treating vendors like strategic partners, rather than like 'the enemy'… Efficient front and back offices… Non union environment…

Again, I could go on and on, but I really wouldn't be telling anyone anything they really don't already know down deep in their hearts. I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into - my children do this on a weekly, if not daily basis, as I did when I was their age. I do for them what my parents did for me (one of their greatest gifts, by the way) - I make them stand on their own two feet and accept the consequences of their actions and work through it. Radical concept, huh… Am I there for them in the wings? Of course - but only until such time as they need to be fully on their own as adults.

I don't want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins. Bad news people - it's coming whether we like it or not. The newly elected Messiah really doesn't have a magic wand big enough to 'make it all go away.' I laughed as I heard Obama 'reeling it back in' almost immediately after the final vote count was tallied…'we really might not do it in a year…or in four…' Where the Hell was that kind of talk when he was RUNNING for office.

Stop trying to put off the inevitable folks … That house in Florida really isn't worth $750,000… People who jump across a border really don't deserve free health care benefits… That job driving that forklift for the Big 3 really isn't worth $85,000 a year… We really shouldn't allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe…

That couple whose combined income is less than $50,000 really shouldn't be living in that $485,000 home… Let the market correct itself folks - it will. Yes it will be painful, but it's gonna' be painful either way, and the bright side of my proposal is that on the other side of it all, is a nation that appreciates what it has…and doesn't live beyond its means…and gets back to basics…and redevelops the patriotic work ethic that made it the greatest nation in the history of the world… and probably turns back to God.

Sorry - don't cut my head off, I'm just the messenger sharing with you the 'bad news'. I hope you take it to heart.


Gregory J. Knox,
President, Knox Machinery, Inc. Franklin, Ohio


Shift said...

Gregory J. Knox,

Good one. A bit heavy on the auto biz side of things.

Anonymous said...

An obscene amount of wealth has been destroyed recently, so we're going to get more poverty than before.

The solution thus far has been to print money, which redistributes wealth by way of inflation. It doesn't create new wealth to replace lost wealth.

Work creates wealth. Put people to work and wealth will be created again.

But what kind of work? Any kind that work that can benefit society that people are willing to pay for.

For example, porn. It's nakedly easy and lustily desirable, by people the world over.

Don't feel up to it? Perhaps develop cheaper, cleaner energy.

How about finding another way to educate someone at the collegiate level without bankrupting them?

What better way to motivate someone to work than to have poverty stare at them?

Stop the printing madness. Set up a poverty fund to pay for food stamps and basic needs. Reduce the tax rates and watch people work like dogs and cats to dig themselves out of poverty.

frakrak said...

This commentary has caught my imagination. I have been through over a decade of conservative rule in this country. The pluses have seen our national debt paid off, large budget surpluses in place, huge funds put aside for the proverbial “rainy day” (by the way I think it’s raining). In addition welfare cuts that have inspired people that have been able, to get off their butts and give something back to the society that has given them so much. He has cut back union power to a level where they had lost their arrogant swagger in the work place. Worked out that we are a western society and formed alliances with nations accordingly. He stopped pandering to special interest groups, had no social reform agenda, but got on with the job he was charged to do, and all this from a man that had the charisma of an accountant in a shoe factory.

He was by no means an ultra conservative, was not adverse to the government having a welfare system, and in his tenure got this country working again … literally!

Within one year of leaving office, the new government has squandered the fighting fund, emptied the treasury and we are not yet officially in recession. I want to see hope for America, I really do
Regards …

Anonymous said...

so, whats YOUR salary, then, Gregory?......

The Good Life said...

Gregory makes it sound like it is just the Big 3 that have received government loans....Mr. Knox has had his head in the sand!

Nissan gets loan from Japan:

Mitsubishi gets loan from Japan:

BMW, VW get loans from Germany:

Mr. Knox, may I suggest you learn how to be fair and equitable before pointing the stink finger.

The Good Life said...

To make those URLs useable:




Anonymous said...

Nice Free Market Rant. But can you show me a legitimate example of the economy and society which you propose? If not, why not?

Truly free markets don't exist...for long. Think John D. Rockefeller or Bill Gates.

You must really hate unions.

While some people are angry about the "plight" of America, it is still the largest economy, the most prosperous nation, the leading democracy and the best place to live on the face of the earth.

Anonymous said...

Interesting. Look at all of you squirm due to this Knox letter. Americans can dish out the medicine but surely can't take it. Can't take criticism.

Some key virtues are modesty or humbleness (the opposite of arrogance); non-aggressiveness; self-sufficiency; responsibility; ability to predict consequences of one's actions; productive; fair; prudent; frugal; honest; educated; involved; vigilant; willingess to protect and fight for one's rights; etc.

Virtues and values are an excellent index for determining what is survival and what is non-survival.

Unions are non-survival (socialism), as is bad debt; spending more than one earns; laziness; ignorance; corruption and waste in government; plutocracy; cronyism; lobbyists; expecting government to solve your problems; welfare; imperialism; fiat curreancy; central banks; and so on.

Welcome to America.

We need the crash of this system so that the intelligent leaders of the next generation can build a new one that continues to move toward the original goal of our founders... limited government; strong currency; self sufficient industrious people who solve their own problems; prosperity; happiness; free market capitalism (that never gets a chance due to government intervention); no personal income tax, etc.

If a government and country doesn't parallel strong human virtues and values it is doomed.

Immoral America is doomed unless it makes these fundamental changes. It will go the way of Egypt, Rome, Chaldea, Persia, Rome and all the other empires that decayed from within due to the EXACT SAME social ills.

An Inquiring Mind

Anonymous said...

You make some very valid points regarding unions and government handout.

But sure Mr Knox, let's let the bad banks fail, which would essentially result in the majority of banks failing. How would you then propose small business, corporations and startups fund their operations, obviously credit availability will be gone. We've been down that road before....

You mention it would be painful....under-statement, 15 years of soup lines is more than painfull.

Sure bailing out banks is not ideal, I agree shareholders (they have in many cases) and bondholders should be wiped out. You think bailouts are expensive, do you have ANY idea how much money would be needed to backstop the FDIC if these banks fail?

Anonymous said...

Hey Inquiring Mind?

What exactly was the Original Goal of Our Founders? And if there was actually One Common Vision that they all shared, does that automatically make it legitimate in 2009?

The Constitution is an awesome document, but it is not is not the word of God. Not my God anyhow.

My virtues don't include slavery. Nor to they exclude people on the basis of their religion, their sexual orientation or their gender.

Let's call for a rewrite of the Jefferson said should be done...

The Good Life said...

It's not squirming, Inquiring Mind. It's about being fair.

These are extraordinary circumstances that call for extraordinary actions, and in some cases that will be loans to public corporations such as GM and Chrysler.

Just like virtually every other country with an auto manufacturer has done.

Do I think GM and Chrysler deserve part of the blame? Absolutely. But so does every other American who wasn't out there fighting the excesses that happened in the last decade but instead parked themselves in front of their big screen munching chips and beer. That includes me. And, Mr. Inquiring Mind, you.

Anonymous said...

Mr. The Good Life...

Not to toot my horn, but to not be categorized as one of the lumpen masses: I don't own a flat screen. (I don't watch TV.) I don't drink beer, or any alcohol, nor do I take recreational drugs or medication. I wasn't contributing to the excess over the last 25 years. I'm frugal, prudent and I add value to the economy by what I do. I don't have credit card debt, I'm not a consumer, I'm a saver, I don't squander my time away watching TV or soaking in organized sports or entertainment, I'm industrious, I didn't lie on a loan app and buy a house that I couldn't afford, I pay cash for my cars (and I only buy Toyotas), I'm in excellent health because I exercise and eat an organic, raw, paleolithic diet. I'm proactive and involved in social reform groups. Please don't include me in the category of the pathetic average American.

Anon before you asks: "What exactly was the Original Goal of Our Founders? And if there was actually One Common Vision that they all shared, does that automatically make it legitimate in 2009?"

Well per my earlier post that he was responding too, I did mention... "limited government; strong currency; self sufficient industrious people who solve their own problems; prosperity; happiness; free market capitalism (that never gets a chance due to government intervention); no personal income tax, etc."

You say "be fair". Why? People should pay for their errors and their crimes and their inefficiencies. People should be rewarded for their correctness, their ethics and morality and their effectiveness and contribution to society.

That isn't happening and that is what isn't fair. We have continually voted in government leaders and legislators that reward the bad guys and penalize the good guys. That is what is happening right now. This creates a socialist welfare zombie state... which is where we are headed.

If the government would stop intervening and allow a true free market capitalism to exist it would be survival of the fittest. It would force people to be ethical, productive and work hard. No free lunches. If you run a company like GM does... you fail and someone who knows how to run a business absorbs your resources, takes over and creates a better concern.

Americans have lost the country that its forefathers created due to ignorance, laziness, complacency, fear, materialism and personal greed to name a few. They've allowed a power elite to form and take over.

Let the Big 3 (the little 3 now), companies, banks, government, etc. go under and let's go through the pain and reconstruction NOW. Purge the system of the corrupt and inefficient NOW. Otherwise the postponement will cause this madness to continue on longer and the pain will be so much greater when the inevitable collapse occurs, and the reconstruction so much more protracted.

Responsibility, vision, integrity and REAL change is what is needed now. A whole new system.

An Inquiring Mind

Anonymous said...

Anon @ 4:20:00

Agree real change is needed, but when you say:

"Let the Big 3 (the little 3 now), companies, banks, government, etc. go under and let's go through the pain and reconstruction NOW"

It’s a good idea....but the FDIC had exposure of $4.5 TRILLION BEFORE the FDIC limits were raised, it's much higher. So Mr. Saver, when your banks fail, which MOST would, where will this back-stopped money come from?

Not to mention the mother of all depressions, which would shrink gov receipts by at least a further 30% and send our debt through this solar system!

I hear your argument and agree in principle, but if your laissez faire president hadn't more than doubled our national debt in just 8 years we could possibly have let these suckers burn and financed ourselves through a depression.

Let's get real.

Anonymous said...

Ok, Let's get real...

Our debt problem actually began with Reagan. He, and all the presidents and administrations that followed him, created this debt.

Let's get real... this debt can NEVER be paid off. We're already borrowing just to pay the interest! And the budget deficit will be in the 1-3 trillion from this year onwards (until the collapse). The principle will never be touched or paid down. The idea that we are saddling our children with this debt is a joke. They'll never pay it either. Eventually it will be defaulted on or "cancelled".

Let's get real... the USD has lost tremendous value over the decades. Savers will lose all purchasing power when the hyperinflation finally takes hold. I don't save as in save money in a bank... CASH IS TRASH... I take my money and convert it into assets and stores of wealth. Anyone who doesn't do this will be poor.

Let's get real... tax revenues need to drop LOW so that government can't function any longer and so all but basic governmental activities return to the private sector and this massive, corrupt government gets reduced in size.

Let's get real... and face the music. This system doesn't work. Congress, politicians, educators, priests, economists, and all the other "experts" need to be dumped in the ocean and we need to anew. We need to stop fooling ourselves that we can "fix" or "prop up" or "stimulate" or "save" this system. It's dead and the sooner we bury it the better off we'll be.

Let's get real... we need a depression/correction in order to destroy this corrupt, inefficient, unfair, cumbersome, unworkable system. There is no other way, it is part of the evolution.

Jim in San Marcos said...

Hi Inquiring Mind

You kind of touched on why I published this person's open letter.

I didn't examine it for argument. I put on his shoes and walked with him for a mile. He showed me the world as he sees it. It didn't leave me feeling warm and fuzzy.

Here is a previous Lettter I published from the 1930's, that gives you a glimpse of that authors state of mind.

Thank you for your comments.

Jim in San Marcos said...

Hi Frakrak

I read your post 4 times and I get a different interpretation of it from each reading. You lost me.

Is the first paragraph satire or referral to past accomplishments--I've been known to have a blond (with a lot of gray)moment or two.

Jim in San Marcos said...

Hi Anon 9:45

I agree completely. If we, common people, can come to conclusions like this, it makes me think that there is nothing dumber than a Congressman.

I think porn might be hurting also--you get a shot at getting laid and then get laid off. Can you collect unemployment from that sort of thing? I'd guess yes in Kalifornia.

As for your statement "What better way to motivate someone to work than to have poverty stare at them?" I have a quote hanging from my desk that makes me chuckle that is similar, "The easiest way to teach your children about money is for you not to have any."

Thank you for your comments.

Jim in San Marcos said...

Hi Anon 1:17

I think you are missing one important point here. A dollar earned means something was produced. A dollar printed produced no product.

The banks will fail even with government intervention, it will just take longer.

If we let this mess collapse, it would be over in 6 months. Government intervention will make things worse. The government has no oil wells or gold mines to bring in revenue, just taxpayers.

The thing that boggles my mind is the fact that they want to give us a rebate to stimulate the economy. Where does government money come from???? Gee I don't Know--Hmmm

This is one bail out that I don't want to be a part of funding. It just can't work.

Thank you for your comments.

Jim in San Marcos said...

Hi Anon 6:36

I agree we do need to get real.

The system is not working and things are getting worse.

There has been no natural disaster, but this financial problem is of monstrous proportions. There has been no physical destruction, but the pain is real.

The money is gone and spent, it can't be recalled. We will get a depression, and it could be a real dusey.

Thank you for your comments.

Anonymous said...

What the average American needs to be taught is...

Woodrow Wilson sold out the US in 1913 when he allowed the Federal Reserve and income tax in as the 16th Amendment.

The Federal Reserve is not part of our government (it is a private for profit organization with shareholders... it's about as Federal as Federal Express... it isn't a bank... and it doesn't have any reserves!)

Nixon put the final icing on the cake on Aug 15, 1971 when he took us off the gold standard. Now we don't have money... we just have a currency that is backed by nothing.

Nixon's act put the power elite into full control by allowing them to control our currency. Rothschild said, "Give me control of a country's currency and I care not who makes the laws." (Rothschild sent a representative to the USA in 1913 to orchestrate and get the 16th amendment passed into law.)

Anyone born after 1971 only knows about and has only used fiat money, which is worthless paper.

Banks use "fractional reserve lending" as a result of The Federal Reserve and the central banking system. For every dollar you deposit in the bank, the bank can loan out 12 dollars. The dollars aren't real, they are binary digits on a computer screen. They charge interest on all of that and make a bundle. It isn't fair... it is criminal.

A non-government organization (The Federal Reserve) prints our money out of thin air, thus creating inflation and lessening the value of your dollars. The dollar has lost almost all of its original purchasing power since 1971. Inflation is the hidden tax that the power elite has been using to take your wealth from you. They are playing by different rules than normal, hard working Americans are.

All US economists, Congress, presidential administrations, politicians, banks, etc. operate off of Keynesian Economics (it is an obsolete set of theories that plays into the hands of the power elite).

The power elite and government are destroying our country through ignorance and destructive actions.

You need to get educated and take action. This is a call to arms. Remember "THE BRITISH ARE COMING!". Well... it is the same level of danger. The enemy is just attacking us through Congress the courts and the banks.

Will we all get on the same page and take action, or will we succumb to the dark side?

An Inquiring Mind

Anonymous said...

Mr. Knox's view of the automobile industry is correct... for 1979. Does anybody else think it odd that he uses a Pinto and K-Car as an argument about todays American car quality? Why not take it to the extreme and compare the 2009 Camry to the Model-T? Dear God! No electric starter? Must be the lazy bum union guys.

I am a non-union engineer in a factory that builds airplanes; the majority of our thousands of employees are union. Perhaps 1979 was a very abusive time in union history, but nowadays, most of my union coworkers are fairly productive. They had to be because the corporate executives were moving factories offshore as fast as possible to boost that quarters profits. That may explain why American wages have stagnated (if not fallen) since 2000.

Regardless of how many lazy union electricians Mr. Knox has worked with, there's no way they could have led to the TRILLIONS in damages we are now experiencing.

The true source of todays agony lays right at the feet of executive management. Not middle-management. Not labor unions. Executives have put so much emphasis on quarterly earnings that long-term strategy is a four-letter word to them. They've ridden their corporations hard making ethically challenging decisions to eek out ever larger bonuses. With that short-term view, American companies cannot succeed, regardless of labor costs. And the boards of directors are supposed to look after the interest of the shareholders, but they have long been corrupted by good-ole-boy networks that put union workers to shame.

I'm not the biggest fan of unions, but they did help establish our middle class in the 20th century. Perhaps they've outgrown their usefulness, but they are not the cause of Detroits problems. In fact, Detroits problems are the same as Toyota's and Hondas. In case Mr. Knox has had his head buried, Toyota and Honda are experiencing major reductions in sales, on the same level as the Big-3.

One additional note that Mr. Knox may not know is that of the top-ten most productive car factories in the continental United States (as measured by labor hours per vehicle), the first nine are American, not Japanese. We've come a long way at integrating much of Demings idealogy. American vehicle quality has skyrocketed in the past ten years. Detroit's problem is not labor costs; don't believe the hype about entry-level people making $100K+ in union wages. It's just not true.

Recently, what killed -all- car sales was the oil bubble and that was caused by Wall Street investment banks pouring money into the futures markets. Don't think unions had anything to do with that.

To Mr. Knox's credit, most of what he says about the housing issue is fairly logical.

John in Texas

PS. In addition to being a work-a-day engineer, I've moonlighted as a software entrepreneur for 10 years (profitable for the last 9)... so I know what running a business is like.

Anonymous said...

I read lots of financial blogs, not because I'm trying to make money be finding the next great investment opportunity, but because I am an intelligent, introspective person who saw back in 2005 that we had entered an economic condition which could not be sustained and wanted to educate myself about the possible repercussions of the collapse of the housing market.

Through my gleanings, I have come to the conclusion that too many people equate wealth with prosperity. I know plenty of people who make lots of money who have miserable lives. Case in point, my father in law who is a wealthy real estate developer suffered a stroke last weekend which has left him severely disabled. At 58 years old and very wealthy, he will not be able to relax and enjoy the fruits of his labor. Instead, his fortune will be eaten up in health care costs, and if he recovers, he will never be at the same level of physical and mental capacity he enjoyed just a week ago.

In contrast, my parents both retired in their 50s and live very frugally. They enjoy their lives every day and are always enjoying new adventures (and I don't mean getting on a cruise ship to a different Caribbean island).

I grew up in a home of modest means, but I enjoyed the aspects of life which were relatively inexpensive. I went river rafting, hiking, bike riding. I played basketball, went to the park, watched movies with my friends, played card games, went camping, etc. These things I enjoyed more than most things I need money to do.

I have children, one in high school and one in grade school. They have a much higher monetary standard of living than I ever dreamed of enjoying when I was growing up, but I feel sorry for them because their actual quality of life in Southern California is less than what I enjoyed in Oregon.

Money isn't everything. If you compromise your day to day life in pursuit of accumulating dollars, you ultimately lose.

Rancho Cal

Anonymous said...

Rancho Cal...

Money won't make you happy, but the things that you can buy with it will.

In this day and age, 9/10 of life are economic. If you don't have money you don't have many choices or options and life is miserable.

Affluence and prosperity are highly survival conditions to be in.

Wealth will amplify your personality and character, whether it is good or bad.

Comparing happiness and money is like comparing apples and oranges.

If you don't have money in a capitalist society you won't be very happy and won't be able to achieve very much.

That is my two cents (no pun intended).

Anonymous said...

Hey Two Cents:

I agree with Rancho that money doesn't buy you happiness. Some of the riches people I know are the most miserable people I know.

Studies on the topic of happiness consistently show that money is not the determinative factor. Of course, SOME money is require to meet the bare necessities of life in our modern age...

Studies again find that the basic needs are simply: Food, Shelter, Social Interaction and Work.

I don't NEED a TV in every room of my house. I may WANT it, but I don't need it. Paying for all of our WANTS is what has caused the problems we have today. We have an unbridled amount of Mass Consumerism in America. We have bought everything that the sellers can sell and more...withi money we don't have.

Living frugally is admirable. In the Midwest we have communities of Amish and Mennonites that do exactly that...shunning the "trappings" of modern life.

We could all do with a bit of downsizing, emphasizing our NEEDS rather than our WANTS.

My Parents lived with the memory of The Depression hanging over their heads. They saved before spending on WANTS. They budgeted and stretched dollars to purchase their NEEDS. They delayed gratification until they could actually afford it.

Those are concepts not very popular today....but they may be making a comeback.

It sure wouldn't hurt. But the blaming of the system, the banks, the Congress, it's all very edgy and gets a fast audience. But to throw the baby out with the bathwater is to minimalize the great things that America has accomplished since Teddy Roosevelt days.

We've advanced in every major category: Science, Health, Manufacturing, Medicine, Food Production, Conservation, Literature, Arts, Education, Social Justice and Equality..

These are great accomplishments and we should be proud..not throwing stones from Glass Houses.

Tell me one country doing it better....really....just one.

God Bless America. Now, I have to go, they are having a sale at Circuit City and I need a new plasma..with the credit left on my mastercard...LOL

Anonymous said...

John Kemp of the Guardian says...

Only way out is some combination of defaults, debt writedowns and inflation.

The facts show that most all of this debt (which began accumulating from around 1970 onwards) is private debt not public debt.

The real debt explosion has come from the private sector.

Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.

GDP needs to go up, or the debt ratio needs to go down. One or the other is needed to solve this mess we are in.

Bankrupticies are politically and socially unacceptable so the government is going forward with inflation (stimulus, bailouts, back stopping, etc.).

Attempting to inflate out of this mess won't work because:

The burden of consumer debt will not decrease unless employment recovers, wages rise, and we stop outsourcing jobs to China and India.

Government can't really create and jobs that will be long lasting.

Even if economy did pick up, interest rates would rise. That hurts housing and business. And the interest on the debt increases causing taxes to rise.

Nope... the government won't be able to inflate consumer debt away.

Sadly, the government by taking the course it is on, is indeed the equivalent of a one legged man in an ass kicking contest.

An Inquiring Mind

Anonymous said...

Anon 8:43

I have found that the people who tout that "money can't buy you happiness" are usually broke.

I bet that you are broke or just barely subsisting. You have goals and dreams and things you'd like to do for yourself and your family that can't be done because you don't have the money.

I never said materialism, consumerism or waste is good. That isn't my idea of being wealthy.

You need money and a lot of it in this economic society to have a decent standard of living, achieve your goals, give your children a good education and opportunities and to contribute to social and humanitarian activities. If you are sane and prudent, the wealthier you are the higher your personal survival level, and the more you can help others and help make a better world.

Let's be very honest... anyone who says money isn't important, can't buy you happiness, etc. is POOR and making excuses for themselves.

frakrak said...

Definitely no satire in my contribution Jim, Mr Howard our ex P.M. did try to address some of the many issues mentioned in Mr Knox’s open letter. He took office at a time this country had accumulated staggering amounts of foreign debt, and paid what was owing to creditors, that in essence were from people’s savings from around the world. The re-adjustment in the economy was painful and it was achieved through sacrifice. And this was done at a time Australia still had a fairly healthy line of credit.
As for a history lesson to other countries on how to do it right? Definitely not the purpose of the post, because at the same time this man allowed personal debt to fuel growth in this country, making people susceptible to what some have described as the “perfect storm.” And it was made possible on the coat tails of other countries growth, making it far less spectacular than perhaps it really was! As for Mr Knox’s open letter and Mr Howard’s political achievements, they really don’t break new ground for me in areas of common sense and the moral issues of debt and how we should live our lives; they wouldn’t have stood out in the crowd thirty or forty years ago!
Ten years ago I started buying government issued bonds and gold as a defensive position to what I thought was a huge economic “dump” heading our way, the only surprise I have is that it has taken this long to get here! The pessimistic/optimistic description doesn’t cut it here, think of the words pragmatist/realist and you may get closer to where I live.
As a side note to this I read in one of our financial reviews (yesterday) that the chief economist with one of our major banks (ANZ) expects the U.S. and U.K. economies to be in DEPRESSION in the next few months. Significant only because it is the first time I have read the “D” word not substituted for the “R” word by part of the “official” financial community. I have four dependent children and the news although only “officially” confirmed what I knew to be true anyway, took my breath away….
As for your blond/grey moment Jim, the faults all mine, I will make sure I have a definite point to make in future posts,
Always regards to you …..

Jim in San Marcos said...

Hi Frakrak

I get it now, when you said this country, I was thinking USA. The southern hemisphere never entered my mind. Our country never even came close on any of that. It makes sense now--my mistake.


Jim in San Marcos said...

Hi John in Texas

I beg to differ with you not on what you say, but rather on your assumption that everyone should see things in the same light.

For one thing the gentleman did not hide behind a moniker, he used his real name. His perception of the world is very real to him. That is what impressed me, his frustration with the way he perceives what is happening. It is like one of those connect the dots drawings. If they aren't numbered, they get connected differently by each of us.

His way of life has changed because of the present mess and I think it is very evident as you read his thoughts.

It would take me a couple of days to write something like that, there was a lot of effort with no real reward.

Don't gage what you read for fact so much as the mood it left you with. That mood is what he is living with, we could be next.

Take care and thank you for your comments

KnoxBlox said...

If these unions are so lazy, why does GM sell so many cars? Did union people bring down this economy? And how much money DO these autoworkers make eh? All you have to do is look at the UAW site and its fully disclosed. Hard work resulting in decent pay. It's a good thing. Good for them and good for the economy as they have some money to spend.

Anonymous said...

Let's cut to the chase. This is one of, if not the most, important points that calls for discussion and solutions.

What steps should we—as individual Americans immediately concerned for our families, friends and selves—take to protect ourselves, our existing wealth, maintain a decent standard of living, and make it through the coming storm and not wind up as "collateral damage" as a result of the corrupt and irresponsible actions of our government, Wall St. and the power elite?

Our current situation in a nutshell is:

The U.S. government is running up its budget deficit to historic levels.
The Treasury is printing money like it was newspaper.
Unemployment has soared to a 16-year high.
Consumers are spending far less.
Americans' wealth in housing and stocks has been hit hard and is continuing to fall.
We are currently in a heavy deflationary and deleveraging downward spiral... a recession that most likely will lead to depression, and these conditions can extend for years (maybe decades) into the future.

If we look at our economy relative to other economies and trends, it appears that the US dollar will remain strong and hold its remaining value (maybe grow) for a while longer. (The evidence for this is the fact that the pound and euro is falling hard against the dollar and the world still takes flight to the USD in times of crisis.) In other words, we have a little time before the Fed/Treasury break through and inflation/hyperinflation begins to take hold and destroys the remaining purchasing power we have.

Thus, we have a year or two (hopefully longer) to reconfigure our portfolios and utilize our capital (cash), before it becomes worthless, to set ourselves up for the future (by buying more assets that give cash flow, buying or starting up businesses, etc.).

Who has any plans or strategies that they would like to share?

An Inquiring Mind

Anonymous said...


I'm 57 and healthy. My plan is to: 1) not even think about investing now; 2) not spend one penny that I don't have to (maintain frugal lifestyle); 3) keep my cash in an FDIC money market account; 4) do whatever it takes to preserve my cash (switch it into 4 week treasuries if banks start failing, switch it into the strongest currency if the USD starts rapidly losing purchasing power, etc.); 5) earn as much as I can (use the best tax strategies possible to keep as much as I can) and keep building up my cash reserve; 6) once asset deflation has stopped and the bottom has been reached, act fast and buy income properties (via foreclosures or REOs for the deepest discounts possible) that will give me steady rental income and depreciation as a tax shelter. I plan on the real estate income to give my wife and I a decent standard of living for the rest of our lives.

Per the research done by Rogoff and Rheinhart, and their paper "The Aftermath of Financial Crises"... historical records show that housing plunges 35% and the agony lasts for about 6 years. With this historical data and the fact that the real estate market was at its top in July 2006, it could be that real estate prices don't bottom out until mid 2012 (could be sooner, could be later).

I'm basing my plan on the fact that I'll have approximately 4 years from now to build up as much cash as possible and be prepared to buy my rental properties at bargain basement prices.

I welcome anY feedback, devil's advocates, etc. regarding my plan.

Here to Learn

AngryTaxPayer said...

Hi Jim,

Forget about letters from Knox, here is one from me.

To: The President
From: AngryTaxPayer

Please save us from... terror attacks, global wars, financial ruin, government corruption, poverty, plagues, death and destruction! Oh, don't forget to spend trillions doing it and take as much taxes from us as possible.


Anonymous said...

Hmmmm...I like the nerve that has been struck. It just gets the energy up.

1) We are already in depression. We crossed the horizon back in October. The stock market is just over half of what it was this time last year. We are in, so buckle up. No one "popular" is going to say the D word, but 25 banks blew up last year. THREE have blown up this month. The previous high was 9banks in 1991. Clearly, we have left the world of recession.

2) The Big 3 are producing too many cars. They will have to cut their lineups in half...and they should.

3) We should start planning to manufacture things in the US again. When we had lots of manufacturing, average people used to make good wages without a union. Now, you have to be a genius or a crook to get paid well.

4) The banks can go bye bye. Who is going to lend, you ask? Who is lending now, I ask? Answer, the little banks now that decided not to drink the Kool-Aid. They will be more than happy to lend you money...if you are creditworthy. The big banks are hoarding cash because they are concerned about themselves, not you. What did we do before Citigroup and Wachovia and Wells Fargo? The bank chains were more regional and smaller and had to fight for customers. They had to EARN your business. WHAT A CONCEPT!

5) There are so many businesses that are now off the grid, it isn't even funny. Most of my counterparts sizewise are completely off the grid. The IRS will never catch them. The tax authorities will never catch them. This is what happens when you put regular people on the wall. They will take the risk of evading taxes. I can't say I blame them although I would not do it myself.

6) The TARP urgency indicates that another large bank is about to blow up shortly. If one of these banks go, the FDIC is toast. That is the new worry. The FDIC has to keep all of their lending on the books, so if this bank goes and the other banks ask for a premium of even 0.5%, th FDIC is insolvent.

Anonymous said...

Here to Learn--

Re: your strategy. Looks pretty good. The recent article, "The Aftermath of Financial Crisis" (by Rogoff and Rinehart) has compelling, fact based historical statistics which offer a valid portal from which to view future probabilities for the USA.

I strongly suggest everyone read this report for their own personal financial survival. Accurate prediction is what we all need.

Since this is now a global crisis, and the systemic financial crash in the USA is unprecedented, I would predict that the negative consequences will be worse than the averages given in the article.

The historical average for housing is a 35% decline over a 6 year period. Mind you... that is the average. We could have a 50% decline over a 10 year period or more... this could be hurtful to your idea of buying and owning sustainable rental properties.

Housing will take much longer to rise than equities because business will get back on its feet sooner.

Government debt is going to raise taxes. The cost of living could go up if inflation/hyperinflation kicks in, thus, maintaining a decent standard of living could be tough.

I think a self-owned, successful business or two (or three or four) is the place to put your energy and money, not real estate. The farm idea is good because not only is it a home... it's a business.

Anonymous said...

We have right now too many cars, too many houses, and too many finance companies. These sectors must be allowed to contract/deflate quickly, in order that the economy may reset and reconfigure, likewise, quickly.

We also have too many government employees who are guaranteed a fat pension. These pension plans must be allowed to collapse, and the losses *not* be made whole by taxpayers.

Government action, thus far, has been designed to keep alive the status quo, because the status quo players have entrenched influence. Never underestimate the stomping power of a pack of dinosaurs, I guess.

As an individual, you will get fleeced by higher taxes, higher inflation, and higher unemployment prospects. Fortunately, you can overcome these odds if you approach the problem with some common sense.

A. Increase your cash reserve, and convert some of it (about 15%) to gold & silver coins, and hide the stash in your backyard in deep holes that you dig yourself at night or hide behind walls.

B. Learn to live like a poor person by performing more physical activity to maintain health, and to own few possessions to decrease maintenance costs and to support goal #A.

C. Learn a second-hand trade that you can fall back on should your primary trade suffer serious setback (SSS).

D. Ditch expensive spouses who still live on cloud nine. You don't have to do it right away; get your money's worth first.

E. Be on the lookout for fire sales to buy good assets at dirt cheap prices from desperados who are not so lucky or prudent with money.

Now you have an alphabet plan to survive on this GDP (Great Depression Planet). Good luck to you and to me, coz I plan to ride out this travesty like a humpback on a gypsy girl- with style, that is.

frakrak said...

Another important strategy would be to foster community with people that have other skills (network), no man is an island, total independence may come at a price, strengthen bonds with family and friends ...

Anonymous said...

All we have to fear is fear itself...

Do you really think you won't have food or shelter or socialization? I think Americans can count on those basics for quite some time.

It's work that we need. Keep the masses employed, lest they entertain such unfortunate historical anomalies as revolutions...

"Is that my body....without a head?"

Anonymous said...

One thing that has been clear to younger folks who are paying attention is that the American Way is clearly unsustainable in the long term.

Engery, Food, Water, Clean Air...all necessary for our current way of life - and in abundance in the U.S. - would vanish if the world caught up to our "standard of living".

As stated above, money does not buy you happiness. It may stroke your ego for a while, but bare necessities wise, life goes on quite well without hoards of it.

But fear of losing your money sure buys anxiety, stress, depression and sadly...suicide.

Whilst true that "when you have nothing, you have nothing to lose", it seems to me that there are too may self obsessed people who think their presence on the planet really makes a difference in the big picture. Comical in a world that is 4.5 billion years old and where mankind has a presence for a million or so of those.

So what if you can't pay for your kids' college in full, or buy your teenager a new car at their 16th birthday, or go all spendy on your birthday and buy a new harley-davidson. Those "ideals" are part of the old paradigm, where consumption is king and greed is good. "He who dies with the most toys...wins".

I sense a great amount of anxiety from posters here. It's warranted. Change has come and it will never be the way it was...and I think people know it, but are still in denial...

In case you didn't notice, the world shrank. Alone, there are now 2 billion people in China and India that are "waking up". They look to the U.S. as the standard. Their young people emulate our culture...good and bad. They all want to consume on the same level that we in the West (yes, it's not just the U.S.) do. It just isnt' possible. There aren't enough resources on God's green earth to sustain it.

Scarcity of resources causes stress and war and human suffering. The future is quite bleak if we don't realize the changes necessary and implement them as fast as we possibly can. Bleak indeed.

A new paradigm must emerge...the daze of post WW2, baby boomer generation, I, me, mine, greed are are over. The only question is whether the new paradigm emerges peacefully with cooperation and enlightened understanding of the world and it's history; or whether we cling to the base instincts of humanity and all of the horror that they can bring to mankind.

From the evidence thus far, the latter seems to be ahead...

AngryTaxPayer said...

Hi Anon 2:33:00 PM,

All good points. Change is never embraced by those who do not want it... and always comes at a heavy price.

I have now come to accept that none of us individually can control what it happening around us. Venting on these blogs is just that, nothing but a release of frustration. It takes speaking out, gaining support and taking action as a group that stands for something.

I think its time for me to get off my rump and do something. If its only lobbyist that our government listens to... well, then a lobbyist I will become.


Allen Charles Report said...

A better Plan to save Wall Street and the taxpayers" money.

This article suggest a different approach.