Monday, September 06, 2010

Where's the Money?

A while back Congress came out with the 814 billion dollar stimulus program. In essence they borrowed money to pay others who lost money in the grand scheme of investment finance. Today Obama announced a 50 billion dollar work program. Isn’t it missing a zero? It seems rather paltry. And then on top of it he blames the Republicans for our current economic plight because they are opposing his plans for the country. From my vantage point, it looks like the Republicans only have an issue of how do we pay for all of this. It’s a little like taking 10 of your friends to a massage parlor and telling the Madam that the last guy is paying. If the lady of the house is a Republican, the last guy with the money, is going to move to the head of the line—naturally of course he can’t find his wallet.

The Democrats are beginning to look like dead beats in a restaurant with no money,trying to stall for time by ordering another entrée. The New York Times today suggest that the government should let the housing market collapse.

“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”

The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.

The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.

Caught in the middle is an administration that gambled on a recovery that is not happening.
And then we have all of this stuff exploding around us, absurd government salaries, retirement benefits and States going broke. Unemployment is doing just great; too bad it’s not a stock. Most graphical comparisons to historical statistics are off the charts. One news article the other day, called this, “The worst recession since the Great Depression.” When you think about it, most things in life, start out small and get bigger. So we started out with a “small” recession and now it’s getting bigger.

The Democrats think that the solution lies in bigger government and increased spending. The Republicans are not quite so sure. The elections are coming up in November and they could prove quite interesting. California could be the state to watch Jerry Brown Dem vs. Meg Whitman Rep; one’s too old and the other’s too rich. The present Republican Governorator has been giving the Democratic legislature a wedgie, still no budget for the fiscal year that started in July.

The State of California will be writing IOU’s in a couple of weeks. I wonder how that works if your paycheck is direct deposited? The electronic transfer of an IOU to your bank account?? It looks like Halloween pranks are a little early this year.

Copyright 2010 All rights reserved


dearieme said...

I have read recently that States have no bankruptcy provision because they have Sovereign Immunity - they can just renege on any old debt, any old time. Can that be true?

Jim in San Marcos said...

Hi Dearieme

I use to use the word bankruptcy to describe what a state could do to solve its indebtedness. But it got me into trouble in one discussion

In a normal bankruptcy your debts are forgiven. Well the person I was arguing with said that the State could not file for bankruptcy so therefore they had to pay. Technically he was right, but wrong if he thought they were going to have to cut him a check.

The problem is, if the state doesn't pay the debt, you have no judicial relief through the courts the states have sovereign immunity. The 11th amendment of the constitution protects the States from being sued.

Technically if the state owed you a million dollars, they could come up to you and offer you 10 cents on the dollar and if you said yes, the legislature would pass a law granting your agreed payoff. Of course they might pay the whole thing 100 years down the road. The trouble is, can you wait that long? If the state can settle for a dime on the dollar, that's bankruptcy to me, it's just spelled different.

This has happened before, just not in our life time.

AIM said...

Hey Jim,
It is a grim joke, eh?

The White House, Congress and The Fed want to keep borrowing, spending, printing and stimulating. Poor dummies. They really don't understand economics one whit.

The govmt is sucking up all the money by borrowing. No money/credit for small business means no jobs, means lower consumerism, means lower prices, means more layoffs, means less consumerism and around and around and spiraling down we go.

Raising taxes in desperation to pay their debts will really put another nail in the coffin of small business and jobs.

Hey dummies! It's all about jobs. Small business is responsible for 80% of the jobs in the US! Big giant corps shed jobs, small businesses create jobs!

Where is the industry, technical innovations, etc. that are needed to create jobs. That is what you should be thinking about!

Analogy of the economy: This guy has been borrowing and borrowing; partying and partying; buying inflated assets and consumables; drinking and drugging and wining and dining and chasing all the ladies; hasn't been producing anything; continuing to refi and roll over his debts; been using friends, family and credit cards to pay off other credit cards; play play play with no sleep, nutrition or care of himself; he's finally collapsed and now in the ICU at death's door. Our goal is to rescue him and give him a recovery back to the lifestyle he had?!

How can such brilliant men be so stupid?


Ohio Loan Officer said...

The latest 50 Billion Jobs Bill is another Democrat political scam---

It will not create jobs for the masses. What it is intended to do is keep OBama's Construction Union buddies and State Workers working. Who will get the contracts for roads, railways and runways? -- only union contractors. The Union workers will then be able to continue paying their Union dues which then go to promote Democratic Party candidates and Lobbyists.
So a few construction workers making $28.50 an hour (I am doing a loan right now for a Union Concrete Laborer and that is what SHE makes on government jobs) will be kept working. But what about all of the other workers in all of the other fields that are unemployed?


Jim in San Marcos said...

Add on to Dearieme

I guess I could have said, Yes it is true, instead of all of that rambling.

The thing to remember is the State will be very selective as to whom it pays back. Bond holders and vendors would be top on the list. Anyone else can "Go Fish."

Jim in San Marcos said...


I agree completely,

Your analogy points to the absurdity of the government current approach to solving this mess. The theory is, Do something. Action and leadership imply that things are under control.

It's kind of like competing in a bed wetting contest. You don't realize how stupid it was until it's time to go to sleep.

Jim in San Marcos said...

Hi Ohio Loan Officer

You're right is is just about election time, it's time to ply the voter with some government money.

50 billion for roads, railroads and airports---people don't realize that it takes 5 years of planning to get most of this stuff into the building stage.

I get suspicious of any government work that uses shovels. You can't dig while your leaning on the handle.

Rob in Ns said...


I work as a rebar detailer in construction. Some of the infrastructure projects are now in the building stage here in Nova Scotia. What is ironic about all this money being spent is now there isn't enough qualified people to do the work. Once again the government in their rush to fix things has created another distortion in the economy. This means we will either have to turn the work down in some cases or better charge more to do it.

Anonymous said...


That is all governments seem to do today... distort our economies. As long as the population allows govmt to interfere in their private lives and business and the economy they will continue to have problems and become sicker and sicker (the hope of growing prosperity is a ghost). And most every time we thought we had prosperity it turns out it was just inflation and bubbles, and it all comes crashing back to reality.

Not sure about Canada, but in the USA those without jobs are in a depression, the rest of us are in a recession and the rich are doing better than ever. What doesn't seem to be understood though is that we are all circling the bowl and will all be flushed down in this coming decade. Sad but true.

Anonymous said...





Rob in NS said...

In Nova Scotia during the 1930's the people that got rich went around and collected property deeds by hook or crook. One of them from the county I grew up in managed to become the largest private landholder in province.

That said, there are a thousand ways to get rich but if it was a sure thing everybody would be doing it. The sad part is that is how the bubbles that got us into this mess get started anyway. Maybe I should invest in Daffidills it's been almost 400 years since the Dutch decided to get rich trading Tuilps. That's a long time ago and different continent. People want to get back to nature and it can't be any crazier than investing in in 1999.


Tyrone said...


Anon, there are many good sites to read and learn about protecting wealth. If you have much wealth (think hundreds of thousands of fiat dollars), it would be VERY prudent to do something.

I appreciate the writings of FOFOA. Here is an excellent one that he just posted:
Just Another Hyperinflation Post - Part 2


Jim in San Marcos said...

Hi Rob

I wouldn't worry about trying to get rich.

I do think that the majority of people don't really know what they want and sell what they have for a loss when they need cash.

You'll see a lot of that stuff coming up for sale by private parties competing with store retailers. The price could be right for that item you could never justify buying because it was too expensive.

If things do get bad, stocking up on stuff is not really the solution. Your house will be the first looted. You need to keep an eye out for your neighbors well being also.

I do think that a dog is a good investment. Ours is real friendly, but is one hell of a burglar alarm. Those things that go bump in the night don't bother me unless the dog agrees.

Jim in San Marcos said...

Hi Tyrone

Thank you for the link. I read a few of FOFOA previous posts and he has some very good points.

His last post was too verbose for me. His whole article could be summarized into 2 words, "buy gold." I agree, but I bought mine when nobody wanted it. Now I wish I had bought more. Of course when it hit $200 I was wishing that I had bought less. Putting 10% of your paycheck in gold shouldn't hurt much if you don't have any. Silver is a better buy for the money.

Rob in NS said...


Not to worry, I don't plan on getting rich unless I win the lottery. Problem for me is I keep forgetting to buy Lotto tickets.

I live in Nova Scotia where 10 percent unemployment has been considered the norm for last sixty years. What people here do to survive is work in the undeground economy to make ends meet. The govenment does not like this but what they don't know won't hurt them.

The attitude in these parts is the sun will still come up in morning. In Nova Scotia you might not see it but you know it is there.


frontierville secrets said...

I couldn't agree more with Jim's comment about silver. It looks like a better bet than gold right now. It is hard to argue against precious metals on many levels. But a few things jump out at me...(1) We are in the September/October period when financial markets often have their worst month(s) of the year. Is this the calm before the storm. A market crash would present a buying opportunity in select silver & gold stocks that I personally would jump on.(2) This is feeling a lot like the 1970's to me. Does anybody else who was around then have that feeling? (3) There has never been such low returns from what were once considered safe investments such as money market funds and bonds (I know -they are far from safe -especially now). That should be telling us something! There are big changes coming and hiding one's money at a fraction of 1% interest can not possibly be the best thing to do right now. Sorry for the ramble.