Friday, August 28, 2009

The Federal Reserve's Madoff "Manuer" Maneuver

I was just cleaning up my upstairs office and ran across some correspondence I wrote to Mr Greenspan at the Federal Reserve warning him about the future housing and banking crisis. It was written in 2005, 6 months before I ever even thought of writing a blog. Double click the picture for a larger view.

Here is the letter I got back. I was rather disappointed that it wasn't from Mr Greenspan himself. But it was read and answered by someone in his organization. Everything was under control as far as they were concerned.

My main point in running these two letters was to demonstrate, that this train is set in its direction and is not going to stop. The hand writing is on the wall, all I did was point it out.

Look at the table below, here is where things look very out of whack with our national debt.

How do you explain 4.785 Trillion dollars that are part of our national debt that is held by the Federal Reserve? Is this the total amount of extra printed money stuffed in mattresses around the world? I can see where the rest of the world got their money to buy our debt, but come on, what product does the Federal Reserve make that earned it almost 5 trillion dollars to purchase our Treasury's? Question two; do they get paid interest on those holdings with our tax dollars? It looks like a lot of smoke and mirrors. I guess with this "robust" economy, there is so much smoke; they can cut down on the number of mirrors.

Sunday, August 23, 2009

Leave the Bar of Soap on the Ground

The bad news is that they just yelled “Fire!” in the movie theater, the good news is, there are now seats available. Want to buy a home or a car? Boy, do we have a deal for you! Officials have just declared that the recession is over. Just think about it, the government never knew we were even in one until it became so damn obvious. Now they claim we are out of it--Just who is out of what?

Over consumption got us into this mess. Now, more government spending is the solution? It’s kind of like giving a guy with a broken leg, a second set of crutches so he can move twice as fast.

Here is the latest release on Unemployment figures and it is not good. Add SIX PERCENT to those values to reach more realistic figures.
Then we have the foreclosure reports nationwide. The shading colors dress it up a bit. Compare the unemployment statistics with the foreclosure map. The two together suggests that the problem has some size to it. It could be argued that the foreclosure data is not as current as the labor statistics, which would add more rain to the parade.

Let's color everything from 8% on up as distressed.Here is what it should look like (you know things are getting worse when you need fewer different colored crayons). This problem is not going away. Many state budgets are in a financial crisis. Tax bases are shrinking while expenditures are increasing.

As for a gauge of where we are at, our leaders in Congress appear to be mixing Preparation H with AstroGlide. The thought that they claim to know what they are doing, bothers me.

Wednesday, August 12, 2009

Abstraction Deception

Kind of a weird title, but there is a Political game being played with your mind and here is how it works. Visualize a pencil and a pen. We can put these two items in a group called “Writing Instruments”(notice that a can of spray paint could be considered a "Writing Instrument"--it's in the group by default). Abstracting up another level, the "Writing Instruments" are also in a group called “Communication Media.” We could still be talking about pens and pencils, but the last layer of abstraction also would include TV's and Radios. As one abstracts upward, the groups encompass more items. I am talking about a pencil which I visualize as green; you might see a red one without an eraser. The Senators talks about “Writing Instruments." Congress passes a bill on “Communication Media.” The voter thinks he is choosing between the different colors of pencils. Everybody believes they are on the same page and that is the farthest thing from the truth.

Now let’s visualize some basic health items; health insurance, hospital costs, Doctors compensation, Nurses salaries, insurance company rates, drug company prescription charges, these are the pencils and pens. Let’s group them all together and call it “Health Care.” Then from here we have items not mentioned that fall into the "Health Care" level group; "Government Health care for the retired" and :"Government support for hospital emergency room services." There could be more, but we’ll take the three items and abstract it up another layer and call it; “The Great Health Care Reform.”

What is ticking people off, and they might not know why, is the fact that the people pushing these arguments seem somewhat logical but you know something isn’t quite right. Everyone is talking pens and pencils (health insurance) and the Congress is trying to pass Communication Media (The Great Health Care Reform). The terms "Health Insurance" and “The great Health Care Reform" are used interchangeably. If you buy onto the "Health Insurance" plan, you have just inadvertently signed up for the "Health Care Reform". They are not one and the same. You have been abstracted to a higher level without realizing the shell game in progress.

What Congress knows, is that the socialized retirement plans called Medicare and Medicaid are gigantic black holes. They cannot be funded at the promised rates. Congress is talking about low level items like "Health Insurance" with very little abstraction and then switches to labels like "General Health Care"--used in the high abstraction layer. This Health Care plan, is a very big item that covers a lot more than just Health Insurance. We are being sold a pig in a poke. It's kind of like falling in love with the girl of your dreams, only to find out that she needs another 40 grand to make the sex change operation complete. The question comes to mind "Is it time to cut and run?"

As a post note, if you ever want to read a book that will change the way you think, I recommend "The Tyranny of Words" by Stuart Chase. It was written during the Great Depression. It deals with abstracting to a higher layer. I guarantee once you read it, you will never lose another argument (unless it's with your wife).

As a second post note; some people reading may think that I am just being a hard ass on health care, that is not the case. My mother died of cancer at the age of 54 and had a hospital bill of over a half million dollars (hard money 25 years ago) (my dad had to sue the insurance company to get them to pay the bill). My Dad at the age of 81 (believe it or not) had a triple heart bypass which he survived only to be paralyzed from the shoulders down, by a blood clot. From there he was in the intensive care unit of the rehab wing of the hospital, in physical therapy for 4 months until he passed away. Since he was a World War II prisoner of war, he had free medical. I can’t imagine how much that must have cost the VA. Sadly, we have to admit that the government can't solve all of our problems, we have to learn to accept the reality of old age with responsibility.

Monday, August 10, 2009

Concepts 101

Lately you hear in the same sentence:” We need health insurance, and everyone knows that the present health care system needs to be fixed.” Let’s break it down into two parts. We probably all need health insurance as we grow older. Very few will need it while they are young. Old age leads us to the second half of the sentence. “Everyone knows that the present health care system needs to be fixed.” What idiot can’t figure out that there is no way we can pay for the free health care plan for the over 65 crowd already in place? It is impossible!

The initial concept behind Social Security was everyone contributed towards their own retirement. Look at it from a Congressional point of view. Everyone pays more in taxes and Congress can spend more now. All of the Social Security money has been spent. The new concept is; the kids pay for mom and dad’s retirement through the SSI tax. If you think about it, the real bill that Congress passed was a law that stated the children have to pay their parents retirement income while they are still alive. Your parents don’t have to feel uncomfortable asking you to support them, the government is the intermediary.

Basically the present Medicaid and Medicare programs will fail miserably unless we can tax those who use very little in benefits to insure those that will be using a lot of benefits. Just imagine if everyone over the age of 75 needed $100K worth of health care a year. Who’s your doctor going to treat, the kid with an earache or the 75 year old gentlemen that needs a double hip and knee replacement? The present health care for those over the age of 65 will bankrupt the country; it needs to be cut drastically. Ask a Congressman, how will doing that get them re-elected? So that will not happen, ever!

Tomorrow there is going to be another one of those informal town hall meetings over health care presided over by Obama. This should be a very controlled agenda. The Democrats want to push “health insurance” and combine it with “Medicare and Medicaid.” If I was to write the bill, it wouldn’t be a thousand pages long, it would read: "If mom or dad gets sick the kids have to pay the bill, no matter how much it is."

Look for some key items tomorrow at the town meeting. A large American flag, references to patriotism, and “Doing what is right.” This town meeting will deliver a message, but I think the real message will be after the meeting. People are tired of being manipulated by the press. The real issues are not being questioned by the news media.

Everyone needs health care, the question arises, as we progress into our older years, is the present system really viable for the country? Congress has realized that it needs to be fixed. The concept that it is unaffordable is of no concern to our elected officals. Keep quiet and get re elected to Congress. Go figure

Wednesday, August 05, 2009

Cash for Clunkers

Starting with some trivia, back in the 1930's a little man rose up to save Germany from Communism with Socialism. He put in motion a car company called Volkswagen which translates as "The People's Car." You may have noticed one or two of them on the road. The picture below may suggest what the future has in store for us.

-----------(Satirical Rendition of Batman’s nemesis, The Joker)---------

Let’s see now, your car isn’t worth $1,000 and you can turn it in and buy a new car and get a $4,500 rebate. I wonder if the $4,500 is considered a down payment? Then the dealer is going to drain the oil on the clunker and then add Liquid Glass to it and run the engine until it freezes up. In essence, the government has destroyed the low end of the car market. The new minimum price for a used car is now $4,500—do you wonder how I arrived at the figure? Plus why do we have to destroy vehicles that have real value as spare parts?

California still offers a plan where you can get $1,000 for a clunker that can’t pass a smog check. Of course the only way to get it to fail the test is to disable one or two spark plugs (sshhh). Business has to be slow at the smog return window.

Charity car donations have gone to hell. The services they provided have vaporized (things like food banks and soup kitchens). They don't even need the volunteers anymore, they have nothing to hand out.

I’m not ready to turn in our 95 Dodge Caravan and have them pour Liquid Glass in it. It has another 50,000 miles in it. Why not let anyone that wants a car get the rebate? Not everyone bought a gas guzzler.

Most of those clunkers are probably paid off. Let’s give these new car owners some real debt to help "stimulate the economy" (force them into bankruptcy????). Now, the car buyer has a new car for a couple of months or until the repo man discovers the vehicle's location.

Lost your home and have clunker? Relax, trade up to a new Ford Camper, courtesy of our government. Thank the "Klunkers" in Congress for your new "Mobile home." The great thing with this rebate program, if you keep on the move, you don’t even have to worry about making the payments.

Do you get the idea that the "Fog a Mirror" Real Estate Loan Game works quite well when applied to other products?