Bargaining, How It Really Works

Unions bargain for their workers. One thing not really appreciated is the theory of how this is done. Normally the two sides sit down and reach a compromise. In today’s world it is a little different.

When a union sits down to the bargaining table, it is on this premise, “What’s mine is mine, and what’s yours, is up for negotiation. It’s a little like watching a foreigner haggle over the price for a basket of strawberries. Once they settle on price, the customer proceeds to cherry pick the strawberries that go in the basket they are buying—nothing but the biggest and the most colorful.

Many of the best union deals that could have been made are now coming apart. Retirement benefits seem to be a common denominator. In all of the bargaining in the past, the threat of a strike got concessions from management. Now, it looks like thing have changed somewhat. Hostess Brands decides to go into bankruptcy liquidation rather than deal with unions that had it all their way. It’s kind of humorous to watch unions balk at wage cuts. Their reasoning, “Why should the worker have to pay for the screw-ups of management?” Or, “We need a decent working wage.” The union got deal after deal and management was the frog in the pan of water on the stove, getting hotter and hotter. Management acquiesced too many times and all it took was a bad economy, to see how bad the deal was. Any way you look at it, the union leaders look like Ding Dongs and there will be no Ho Ho’s this Christmas. Of course, the Twinkie murder defense will be a thing of the past.

Illinois and California will be the poster children of the new state governments that claim, “We can have it all.” State governments haven’t figured out one simply principle. Raising tax rates does not in turn increase tax revenues. It only implies more revenue. It does however determine where and when people choose to spend their dollars. Can the consumer justify a new car every 5 years when the sales tax is 10 percent?-- Maybe now it will be every 8 years. A company car instead of a wage increase?-- The list goes on.

During the Great Depression many localities raised taxes and all they got were the taxpayer’s keys to their home. Increased taxes were the last straw. Of course it will be different this time. At times I wonder, are we smarter than those people back in the 1930’s or incredibly more stupid? The jury is still out on this one.

The real drain for the states will be retirement funds for state workers, and of course we aren’t even discussing the Federal programs of Social Security, and Medicare.

The California State retirement fund (CalPER's), among others, can only pay 65 cents on the dollar in benefits to everyone in the plan. The way the legislature looks at it is, everyone gets full benefits for the next 10 years and then we have a problem.

FDR even said that government employees should never be unionized, and they are now. Business profits determine if a pay raise is warranted. In a government job, the guiding hand of profits is not there to determine a realistic wage. What our state governments have contracted us to pay as benefits, border on the absurd in some cases. The unions took advantage of our political system, to get benefits that could never be realistically paid on a long term basis. Where does it go from here?

Hostess Brands had a slow death. They couldn’t make a profit and the company folded. In good times the unions asked for more and always got it. This time they asked for more, thinking it was a poker game they could bluff their way through. How many of those 18,000 employees will even find a job? Of those that do, what will be their starting wage?

It’s time for the taxpayers to realize that they have been ripped by these government unions on a more intense level than private industry. We need state employees that will be underpaid and with training, will find better jobs in the private sector. Government is inherently inefficient, let’s reward this inefficiency with lousy wages and low retirement plans.

Where I grew up as a kid, we had volunteer firemen with no 100k retirement plans at age 50. The argument isn’t over whether or not these firemen or police or teachers are worthy of these wages, the argument is over whether or not we can justifiably pay private sector rates for jobs that could be filled for one third of their present cost. There is no problem filling the jobs, it’s the turnover rate that has to be dealt with, that is the trade-off with higher wages. Government unions always want more, Ronald Regan once said no, and meant it.

Of course in California, who runs the government, the unions or the legislature? Do you get the feeling that the unions can run the state into the ground? Of course, maybe they already have, and are keeping quiet--no need to panic anyone.




Copyright 2012 by Jim Brubaker

The Fiscal Cliff or "Hey Buddy Can You Spare a Dime?"

Mentally picture 4 or 5 dogs all pulling on a towel in different directions, this is Congress in action. The towel represents our budget. So when you come down to it, it’s not a very big towel. The consensus is, Congress needs a bigger towel. How we get there, is more taxes or print more dollars. Both do the job, but when you raise taxes, you can point to who raised them. But when you print dollars, you can’t blame Congress, that’s how the economy is, we live with inflation.

The real problem is that the benefits and entitlements take up almost the entire budget, and we have to borrow to pay the rest of the bills. The President doesn’t have to worry about reelection, but the Congress does; so none of the entitlements and benefits will be cut without a long drawn out fight. Whatever the compromise, it won’t even be close to enough to fix the existing problems of funding.

Figure that total tax collections next year, even with a tax the rich provision, will probably be far below this year’s totals. Remember we are not taxing rich people, only high wage earners. So a doctor making 250k, what does he do to limit tax liability? He forms a Limited Liability Corporation and pays himself about 60K a year and slaps the rest into a retirement fund. If you’re an oil company, forget American investments; drill where you get tax breaks.

State governments’ layoffs will start in the coming week (the election is over), government employees have to be given 90 days’ notice now. If you’re not part of the Police or Fire department, count on layoffs. The teachers will be thrown under the bus. The voting’s over; education is where the first cuts come.

Congress wants to raise taxes on the rich and lower them on the middle class. It sounds great if you’re pandering for votes trying to get reelected. Do we dare assume that rich people are incredibly stupid and will pay more? It’s probably the middle class that is incredibly stupid. They believe Congress has done something constructive by extending the same tax cut another 4 years that will expire time and time again. And of course it will forever be called the Bush tax cut. Realistically, Congress has to drastically reduce entitlements by 50% and/or most probably double everyone’s taxes. That wouldn’t be a bad thing in a robust economy, but in this economy, neither is an option. A legislative solution to our fiscal problems doesn’t exist with the current thinking in place. Entitlements will not be addressed.

As if things couldn’t get worse, Obamacare, will start cutting into many wage earner’s paychecks . The national work week has now been (unofficially) reduced to 32 hours (part time workers don’t qualify for health benefits). And those that paid some federal taxes working 40 hours will now pay none (working less hours). Of course where you once had 4 employees working 40 hours you will pick up one new worker when we go to 32 hours. Your hourly wage stays the same, your paycheck is smaller, your standard of living drops, and more people will be employed--oh goodie!

The real problem just becoming apparent, we are in a depression, greater than the Great Depression. We can’t tax our way out of it, and since we have already borrowed almost every dollar in the banks, it will be impossible to print more money without inflation. Bernie Madoff's problem wasn’t with the money he had in the bank; it was the money he needed to withdraw for redemptions (consumption). As long as everyone keeps their savings in this “FDIC insured piggy bank” there is no problem. The Governments problem starts when everyone wants to spend their saving at the same time. The reward of consumption (instant gratification) is presently a far better value than the saving rates offered by a bank of one percent interest, considering the current 6 percent inflation rate.

The fiscal cliff out there that everyone is referring to is the fact that we are broke. Our government is running out of people to borrow from. A sign from the great depression in a grocery store read, “In God We Trust, all others pay cash.” In 1933 you bought a box of apples and sold them on a street corner to make a living. Now, the government is proposing to buy the box of apples and . . . .—“it’s going to be ‘different’ this time around. “ The trouble is, nobody is sure what that means.



Copyright 2012 by Jim Brubaker

Real Estate is Coming Back??

If you read the papers, it looks like real estate is coming back, prices are rising. The inventory is “drying up.” But look a little deeper. According to Zillow 31 percent of homeowners are underwater. And CNN Money reports, half of mortgage borrowers under 40 are under water. That kind of makes some of this “inventory shortage” a tad bit soggy.

I don’t see anyone lining up for a “Liar Loan,” anymore. The rush to buy before you are priced out of the market is gone. The median housing price is rising for a very simple reason. There are no low priced homes in the statistics to bring the average down. Do you want the 300k 1500 sq ft starter home? Or for 75k more you can buy a McMansion with 2400 sq ft?

Sources are reporting that a large portions of sales 30% are cash only. Kind of boggles the mind unless you figure when a bank wins the bid on a home in foreclosure (by bidding the amount owed by the borrower), that’s considered a cash sale. As a real estate transaction, you have a new owner, the bank, and it is a cash sale. Of course, throw in the words “foreign buyer” and everyone nods, they must be doing the cash sales. That many foreign sales ought to set of sirens at the office of immigration.

Out here in California, earthquake insurance isn’t really affordable, so you let the bank own most of the house and you make payments --- if a quake wrecks the house, give the bank the keys. Paying off a home in this economy isn’t too smart, especially if you lose your job. Banks won’t do a home loan if you’re unemployed.

The economy is just peachy keen, and no one is worried about losing their job, and real estate is doing just great. “Now is the time to buy a home, ” interest rates will never be this low again. I hear that shouted in my ears all of the time. Do you get the feeling that there is inventory out there that they need someone to sign for on the dotted line? If you buy a 300k home in California, you can’t flip it. It isn’t appreciating and the 18K in Realtor commissions is staring you in the face.

There is the normal crowd of people buying homes as there has always been. But the speculative zip is gone. The demand is only about 1/2 of what it was in bubble times. And getting financing is a real chore. When I read these headlines that the housing market is coming back, I have to wonder, coming back to what? 6 cars in front of every home, doesn’t suggest to me that housing is booming.

The one thing that really bothers me, I can’t see any bank in the country writing 30 year loans at 3 percent -- 5 years maybe. Can we believe what we read in the newspapers? Is real estate back like it was in 2006 with a full punch bowl? Did the recession really end in 2010? The election is over, maybe it’s time to take off the rose colored glasses.

Copyright 2012 by Jim Brubaker

Health Insurance, Who is really “Jerking Us Around?”

If you look at an insurance company, it’s a group of people insuring against a certain risk. It could be your home, your car, your life or your health to cite a few. For these insurance companies, it is quite easy to gage the amount of risk involved and charge accordingly. The insurance company is willing to insure to a limited dollar amount, while the the insured and Congress are expecting unlimited coverage.

When the government steps in to fill the void at age 65, it may seem like the right thing to do, but you have to ask only one question, what does government bring to the table to make it affordable to offer it to everyone? Deep pockets are the answer (AKA the National Debt checkbook).

The real issue isn’t that apparent. Once you limit what health insurance companies can and cannot do, and you limit their profit margins, you eliminate their ability to survive. Obama might accuse the insurance companies of “Jerking people around,” but it is the President who is jerking private for-profit-businesses around. The net result, the private health insurance industry will fade out of existence. Profits are the driving engine of competition. Private health insurance cannot compete with Obamacare; the government doesn’t have to make a profit to survive.

People that never even gave a thought to health insurance, (those from the age of 18 to 45) would suddenly find themselves in a situation where health insurance is now mandatory. The question they may ask is; “Why am I forced to pay for something I don’t feel I need?”

What makes Obamacare so insidious is the fact that they are dictating what sort of profit margins are acceptable for insurance companies to have. Bill Gates at Microsoft probably has a profit margin of about 85 percent. Pill factories probably have a 400 percent profit margin. Blue Cross was having problems justifying a 5% profit margin during a recent Congressional investigation.

Forcing insurance companies to insure people with previous conditions is a death sentence. Rates are determined by the number insured without problems. The government is now saying that preexisting conditions have to be insured. This changes the risk for the underwriters and negates all actuary tables that have been used previously. The new risk cannot be calculated, when people can sign up with preexisting conditions.

What happens in this case? The health insurance investors realize that there is no profit in writing coverage and move their funds elsewhere for a better return.

The end result, the insurance industry will continue to write home, auto and life and let you go to the government for your health care insurance. Think about it for one moment, is anybody accusing the life insurance industry or the auto or home insurance industry of “jerking anyone around?” You aren't being forced to take the government insurance as long as you can find a private provider.

So what happens when the health insurance industry drops dead? The government will add it your paycheck deductions and they can adjust your rates for this new “health insurance,” without having to ask Congress. It won’t count as a tax; it’s your health insurance. You might think I am kidding, but it will be about $6,000 to $12,000 a year (Your employer pays half, guffaw, guffaw).

Obama claims that health insurers are "Jerking us around." Let’s rephrase it, health insurers are pointing out the real costs of health insurance, and we have to make decisions on how much of it, we can afford. Life will end for all of us, and for a politician to suggest that government health care insurance will solve our problems is wishful thinking. That is the person “jerking you around.” He wants your vote and that new health care revenue stream. There is no free ride. Of course if you have nothing, the "free ride" is better than nothing.

Obamacare could be the biggest tax increase to ever face our Republic. It is the death knell for private health insurance. I'd rather they force everyone to get car insurance instead. This government is going to harness the working young to pay all of our debts. After you get your first job, here is what the "Company Store" wants from your paycheck: State and Federal taxes, Social Security, Student loan payments and the new one, health insurance. I remember when I was young; I had a hard time trying to afford girls and car insurance. So what Obamacare really boils down to is a tax on being young and dumb.

As a concept, I have no objections to Obamacare. But if you understand how Congress works, this new found money will be spent on anything but health care and will destroy the private health insurance industry by dictating their rates. Show me one thing that the government can do better than private industry for less money. One thing is certain; we are being jerked around, by a bunch of politicians in Congress promising "Surf and Turf" and delivering "biscuits and gravy."

The irony of history (tongue in cheek) it took a Republican to free the slaves, and a Democrat to put the chains back on.


Copyright 2012 by Jim Brubaker

QE3 Makes Gold An Attractive Investment.

Ever wonder why a country buys gold? If you’re a deadbeat country, you might need it for international trade. Of course, if you are printing money like crazy, buy gold now at x dollars and sell it a few years down the pike at 3x dollars. As a Government, you know what you’re doing even if the rest of the world doesn’t. Of course if you’re a country running a tight ship, buying gold could be a way of tightening up the money supply. Not too many countries are in that boat.

Normally holding physical gold for the average investor, was a losing proposition because, gold pays no interest. Well, with 8% inflation and 1% interest rates, gold is a better deal than a printed dollar. Plus if interest rates stay low like this, you’re at least making the difference between the current inflation rate and interest rates.

There is one problem, if everyone starts reaching for gold, the price will climb. The problem is the government needs to stop that from happening. They will again have to outlaw gold possession.

When I was in college in the 1960’s a ten dollar bill bought two full tanks of gas and you had a couple of dollars left over. Today a hundred dollar bill will buy two tanks of gas—maybe. The peculiar thing this time around, is that the hundred dollar bill is our biggest bill in circulation.

To the young people just entering the work force, today’s prices are the only ones they have ever seen. Everything appears normal to them. However if you had put 10 hard dollars earned in 1965 into a savings account, you don’t have the same buying power today that that ten dollars had 60 years ago. Of course the price of gold was 35 dollars in 1964.

With interest rate at 1%, bonds use to be the retirement vehicle for most retirees. Why even bother with them? Convert your savings to gold or put your dollars in a safety deposit box and apply for Supplemental Social Security (if you have no funds in the bank, you qualify).

As long as our government wants to spend a trillion dollars more than they take in in taxes, your savings are being taxed by inflation. Gold and silver have maintained their value over the ages. They are a store of value that pays no interest. If Bernanke thinks that keeping interest rates low is good for the economy, let’s all buy gold and silver. Let him covet his paper dollars, while we laugh at him.

They’ll have to start printing Thousand dollar bills pretty soon,--but doesn’t that pretty much give away what is actually going on? Of course not! If you have been poor all your life and now have a $1,000 dollar bill in your hand, you have made it! You are rich! You’ll earn 5 times more than what your dad did and you’ll be proud. Even though your pay raise each year is just the cost of inflation, it is a pay raise, as far as the average worker is concerned.

Then we have Ben Bernanke saying he will buy all housing paper (40 billion a month) (because the banks aren’t dumb enough to buy it) for two years, kind of blows me away. These people in office are going to save us, but I kind of wonder what they are trying to save us from?

I just wish I had bought gold at $35!

Copyright 2012 by Jim Brubaker

Four More Years of This?

Listened to the Presidential debate the other night and did a ho hum. I went to the gas pump the next day and said what the hell—FIVE DOLLAR gas????

Then I started to review the last 4 years from my perspective. The price of gas has more than doubled. My wages have been frozen for the last three years and they are still laying off people at Camp Pendleton. The price of steak and hamburger has doubled. Can goods on the shelf, are smaller 14 oz vs. 16 oz. Laundry soap is now $8 dollars a box, shampoo is $8 a bottle. The price of coffee is out of sight, and they are messing with the container size. We used to get $10,000 in interest on our saving and I think we’ll get about $700 this year (great interest rates).

Then if you want to add up cable, phone, heat, lights, water and sewage, they are all up 30 percent. Our water and sewer bill is 100 dollars a month. We buy drinking water for about another $40 a month only because the tap water isn’t fit to drink.

The Democrats want to make sure everyone has health insurance because many people can’t afford it. This phrase comes to mind; “In order for government to give money to someone who has none, they have to take it from someone who has some.” The food stamp program is another great vote getter, and remember if you want more food stamps, think carefully before you vote. With food stamps, you get the option to keep the cell phone and cable TV.

When we take our evening walk now, my wife and I marvel over the number of cars parked in front of each house. We are talking three car garages with 3 cars in the driveway and 3 on the roadside for many homes (the garages are now used for storage). Four years ago the street sweeper might have had to dodge one or two cars on our street. Now, people kill for a parking spot at night. Listen to the pundits and you hear that real estate is coming back and I don’t see it. The kids are coming back for sure, to live with mom and dad. Our next door neighbor rents out two rooms of his 4 bedroom home. The lack of privacy would drive me insane.

My Sister and her husband in Colorado gave up looking for jobs and both retired at age 62. Kind of makes you wonder about the unemployment stats they just published. There must be an election coming up. They both voted for Obama last time, and I don’t want to raise my blood pressure by asking them who they are going to vote for this year.

Bernanke using his car salesman rhetoric is trying to keep us “from having a double dip recession.” We never got out of the first one (if you ask me), so if you buy his line, things must be getting better. However, this recession is now labeled the “Greatest Recession since the Great Depression.”

Ben is printing too many dollars, and he will print more. It looks like this will stop when these wantobe million dollar homes out here are finally worth a million dollars. When that happens, bread should be $10 a loaf. Of course if you are in a retirement home, a million dollars might only last a year. Kind of a cruel joke for someone who saved all of their life. But if you spent every dime you had, you’re going to fit right in, to this new economy.

30 days until the election. Four more years of what we just had, kind of sucks. The difference I see, is that Romney will pragmatically work with Democrats. Obama left the Republicans out of the legislative process when he passed Obamacare with an “I don’t need you“ attitude. He burned a bridge that has “payback” written all over it.

During his term in office, Obama has vacationed the world, been on TV every day lecturing us like children, and been campaigning incessantly for re election. His executive powers to enforce the laws have entered the realm of legislative powers when he chooses which laws to enforce. If you are leaning on a shovel, talking to me, you aren't working as far as I'm concerned. A new face with different ideas could be the fresh start this country needs.



Copyright 2012 by Jim Brubaker

Oil Prices Set to Collapse

There are a lot of oil producing countries that depend on oil dollars to pay the bills. With oil at 100 dollars a barrel, they have to pump x barrels of oil to be able to pay to run the government. If oil were to drop $11 like it did last week, and an oversupply surplus is announced of 11%, these countries will fall short of meeting their planned budgets. The prime directive of each country is now to pump more oil to make up the shortfall. Short term, this solves the problem. Only now, the oversupply might be 15% and the price could drop another 11 dollars. The oil producers will quickly realize that the increased production is cutting their own throats. The trouble is, the respective governments need the dollars, not the oil. These countries can’t cut their budgets anymore; their only option is to pump more oil.

With world unemployment at around 20 percent, energy consumption has to drop. This is where people will cut. No air conditioning, no heat, no cooking. A heating bill in California is about zip, but in Colorado, it could be about $200 a month in the winter time. I have seen senior citizens cut off the heat and sit in a stack of blankets to keep warm because they couldn’t afford to pay their heating bill. And of course, Obama the white knight will fix that--more blankets please!
Gasoline consumption stateside could drop from 20 to 50 gallons a week for a family of 4, down to possibly 10 to 25 gallons a week. Multiply this drop in consumption by millions of people, and the lack of demand for product becomes very noticeable.

Look for oil production to continue at present production levels, and for world consumption to drop another 10 -15 percent. The price of oil could collapse and drop below $60 per barrel before December. That would be welcomed news here, but for the rest of the world selling oil, it could translate into serious financial problems. At 50 dollars a barrel, countries would have to pump twice as much oil to obtain the same revenue. And that sort of overproduction could send prices even lower. Remember the Arabs are buying food and other consumables with their oil revenues.

This drop in the consumption of energy is a sign of economic hard times worldwide. A drop in oil prices is a drop in taxation for a country like the United States. Call it a tribute tax. It will make life a little more bearable for the near future, for the US and Europe, but sooner or later, bankers and oil sellers are going to demand a currency linked to gold. You can print money, but you can’t print food or the other things that oil can buy.

Look for the price of oil to collapse in the coming months. And after is does, look for it to be pegged to the price of gold and silver. Do you get the feeling that our currencies are floating on a cesspool of debt? Nah, it must be my imagination acting up again.


Copyright 2012 by Jim Brubaker

Low Interest Rates Make No Cents

The economy is doing just great. If you are retired, your savings are generating just gobs of interest--right! Figure a million dollars in the bank is generating about $10,000 a year. Remember when interest rates were about 8% and your return would be more like $80,000 a year?

If you are into buying bonds, there is no reason to buy any further out than 5 years at these interest rates. They can’t go much lower, and if they do, why even buy them? Do you want to hold a 100K 3% 30 year bond if interest rates double. Can you wait 30 years to redeem them? Or take a 50% haircut when you redeem them early?

The interest carry costs for futures are warped out of place. For a futures contract, 100 oz of gold one year out, a majority of the option cost is figured as interest on the actual amount of money tied up in the contract till delivery, plus storage fees and a volatility premium. So the commodities game right now is in play, with very low interest rates. It’s not rocket science to figure out that borrowing the money to buy gold futures is a money making proposition, the interest costs are negligible. Sounds a little like the housing boom doesn’t it?

Your health care and auto insurance companies invest the premiums received, into the financial markets to get an additional return. These returns allow them to reduce premiums charged on policies. This nice little cost cutter has gone to hell.

Retirement plans like CalPERS have assumed that the return on investment would be around 8.5%%. Guess what, it is not even close. Figure 100% of all state government plans are in some form of denial, “This can’t be happening.” If they were marked to market and held to realistic return rates, a lot more money would have to be ponied up by the states. Naturally the legislatures hope that this problem will just go away given enough time—Translation: After they are dead and gone.

Real Estate loans, you want to buy a home? Fannie and Freddie still offer nothing down loans at competitive low interest rates. If your credit rating isn’t up to par, that will not stop you from getting the loan. The aggravating thing, is that if the government got out of real estate financing, the sale prices would be a hell of a lot lower than what Fannie and Freddie are offering with government financing. To compound matters, there is no one out there to buy 30 year paper at these interest rates. By no one, I mean the banks, investment firms, and anything else you can think of. This is why Mr. Bernanke has decided to go with a 40 billion dollar a month re-purchase of mortgage securities.

The question has to be asked, who really benefits? The government can still borrow at ridiculously low rates. The interest on the national debt remains lower than normal, and Congress can spend more than it takes in in taxes and kick this can further down the road.

The big thing to understand here is that the current interest rate keeps the government debt manageable. Plus it facilitates the borrowing of more money. Why not borrow instead of tax the constituents? The concept of borrowing and putting it on the national debt has no real tie to the world most people live in. The national debt is just a place where we park debt we have no plans of ever repaying.

Americans are led to believe that the Arab crisis is the reason for the doubling of gasoline prices, when in reality; it is due to the massive printing of dollars. The US government is going to tax everyone with a savings account 50%. You have the same amount of dollars in the bank, but it only buys half as much. Bank depositors need to ask one question, why keep your money in the bank at these rates, where is the reward?

Our government has borrowed 17 trillion dollars. As long as interest rates are artificially low Congress will have no problems, but the minute they rise, we as a nation are in serious trouble. The funny thing is, the money they borrowed, was from people preparing for retirement, the silver foxes were going to live off of the interest. It’s a little like having retirees stand on a chair with a rope around their necks. They bought the rope and the chair and now the government wants the chair. Their savings were their lifeline to comfort in retirement. But by God, the government will not fiddle with your Social Security, all $1,200 a month of it. They are going to fiddle with the million you have in the bank. You’ll now get $800 instead of the $6,600 a month in interest; you had counted on for your golden years.

Ben has to buy all paper presented in order to keep interest rates low. If he doesn’t, you'll get more interest on your savings, and we can’t have that, can we? Risk has been taken out of the financial markets. Government guarantees for everyone, drinks on the house. What ever happen to plain old common sense?

Romney says he'll replace Ben if elected, so we do know when the party ends--- November 6th. At that point the movie is over and reality sets in---Got Food Stamps? Looking on the bright side, the Sunday paper is now cheaper than a roll of toilet paper and goes further if cut right.


Copyright 2012 by Jim Brubaker

Idiotic American Foreign Policy (reprinted)

This is a reprint from last October 27. I'm reprinting it to point out how bad our goodie-two-shoes foreign policy is going ("sucks" might be a more apropos verb). I apologize to readers who already read this. Normally I wait a few years to republish previous articles. Next new article should be ready Sunday.

Normally this blog deals with the coming Great Depression so foreign policy is a bit of a stretch. We have just helped kill the leader of Libya. Not much of a big deal, but we did it so these people could have Democracy. That country is totally devoid of any social institutions so there will be no Democracy, the guy with the most bullets will be the new President. Of course if your currency becomes suddenly worthless, you are pretty much in the midst of a depression. Life in Libya looks rather brutal for the foreseeable future.

We are getting out of Iraq. Great idea; Christmas comes early for Iran. There is turmoil in Palestine, Jordan and Egypt; Israel could go bananas and nuke Iran or vice versa.

Oil ties the US to the Middle East; water ties the Middle East people to the land. The real key is not oil, but rather water. Iran and Turkey, China and South East Asia, are building dams that could start a war over water; the hell with the people downstream.

Then in Pakistan, we send a woman (Hillary) (where women are considered property) to tell them how to run their government. Great for women’s lib, but who are we kidding, the Pakistanis would like to chain her up in a basement and teach her what the slang term "airtight" means. These people are not going to listen to a woman, more to the point; they feel insulted having to deal with her.

The US press is selling their readers this "goodie two shoes" idealistic policy of spreading Democracy to the world. The reason we lost in Viet Nam, was because the average farmer could point to his family and land, but he could not point to Democracy. Democracy does not come from the masses who have nothing, but rather from those who have a position of wealth that needs to be preserved. Democracy is not an option for the Middle East; they have always taken what they have wanted. Might is right.

U.S foreign policy towards Libya has been very irresponsible; we can't shoot first and then think about it. Getting rid of Qaddafi accomplished nothing. His supply of stinger missiles is now on the auction block. Leaving Iraq without some advisory troops begs Iran to move in. Obama needs to send Hillary home with a box of cigars for Bill. And while he's at it, he mise well paint a bull's eye on Air Force One. The score is Obama 3 Arabs 0. I feel that the game is only pausing for the half time activities. Got Stingers?

Copyright 2012 by Jim Brubaker

Slow Money Vs Fast Money

Believe it or not, there are two types of money. It sounds implausible, but it’s true. If you live paycheck to paycheck, you have “fast money;” it’s here today and gone tomorrow. “Slow money” is the funds socked away for that rainy day, years in the future.

Enter someone like Bernie Madoff. His investment program was a Ponzi scheme. The money he was using was "slow money,” investors didn't need for several years out. Rich people are rich as long as they don’t spend the money, which goes without saying. Notice though, Bernie’s rich investors were rich up and to the day the scheme was uncovered, they didn’t get poor slowly over time--it happened immediately. What did him in was a bad economy. His investors needed funds to cover losses. As a group, their increased withdrawals, was the monkey wrench that fell into the gears. Bernie’s “slow money” accounts were turning to “fast money” obligations before his eyes.

Our government “borrowed” the 2.6 trillion in the Social Security trust fund and spent it. Then Congress purloined 4 trillion to cover the housing mess and it's gone. Then there is that 8-10 trillion in IRA savings that we have loaned indirectly to the government, spent also. So long as everyone doesn’t decide to retire at the same time, there isn’t much of a problem. The trouble is, that is just what is happening. People unemployed and 62 years old, are not going to wait until age 65 to 70 to retire and they are cashing in their IRAs. These people are no longer paying taxes; they are now receiving tax money (i.e. Social Security benefits). The government’s financial pain is further exacerbated by high unemployment, low tax collections and legislative fiscal irresponsibility.

It's becoming more obvious that the present system cannot last without reducing the massive government spending. “Kicking the can down the road” or “Rearranging deck chairs,” both point to that moment in time where things get real. It’s a little like promising to quit smoking. Everyone quits eventually--- For most, it’s not a planned event.

Our national debt is comprised mostly of “slow money” borrowed from financial institutions worldwide. With the deteriorating economy and the higher than normal redemption of funds, the government needs to borrow more, or an option not available to Bernie, print more dollars.

People are beginning to dip into their “slow money” accounts. As long as the money wasn’t needed, the government had no problem. Everyone assumes that FDIC insurance is to protect the depositor. It isn’t, it’s there to keep depositors from withdrawing their funds from the banking system in times of financial stress. Our government has already borrowed and spent a great deal of this bank money and needs access to the banks in order to borrow more.

Lack of "slow money" was the problem that Bernie Madoff faced. The system works perfectly as long as more is being deposited than is being withdrawn. All of this “slow money” that the government borrowed and spent will suddenly turn to fast money obligations. How do you pay back 17 trillion when you are borrowing an extra trillion a year to add on to it? Just like Bernie Madoff’s clients, you have a piece of paper stating how much you have in your accounts. It isn't a cash balance, its an IOU. The money was spent.

Reality is when your wife puts 170k on the family credit card. There is a complete disconnect when the Federal Government puts 17 trillion on plastic. We don’t have to pay that one—do we??? Bottom line, your retirement funds paid for the party that is still in progress. Learn the full particulars sometime after the next election.


Copyright 2012 by Jim Brubaker