Friday, July 31, 2009

The Depression Has Been Canceled

I think President Hoover ran on a slogan “A chicken in every pot and a car in every garage.” So with the new car rebate program in full force, it’s just a case of which comes first the car or the chicken. We have an old 1995 Dodge Caravan that qualifies. I can’t sell it for $2,000 because no one has two grand lying around. Now the government wants to give me $4,500 for the Caravan so I can buy a new car.

The odd thing, this program is to replace clunkers that get bad gas mileage. The damn thing is, the Caravan gets 25 miles to the gallon which is 3 better than my newer fuel efficient Mazda 626. I guess this is where the chickens come in. If you are stealing them, you want to make as little noise as possible. I wonder if Volkswagen is on the clunker list?

Then we have the meeting of the big three; The President, a Harvard Professor, and a police officer. The Harvard Professor was instructing Obama how to kick in the door if he gets locked out of the White House. And the cop was suggesting what not to add to the word “mother” when greeting a police officer, answering a burglary call. Going to the White house for one can of beer has to be some sort of punishment.

It could be just my imagination, but have you noticed that Obama is always standing in front of one or more American flags? It kind of reminds me of a little man who wrote Mein Kampf, he always had a flag behind him. Plus the President’s face is popping up on every magazine I subscribe too, why?? Let the girl he married enjoy his face; give me and my magazines a break.

If we travel back to the Hoover administration and also to FDR; Government did not get us out of the depression. They made it last longer. They raised the taxes of every worker with the promise of Social Security retirement. There was no income tax back then for the masses.

When the government calculates who pays taxes it always comes out to be the rich, Social Security isn’t even considered, that’s a “retirement plan.” They have been spending this non tax for regular government and handing IOU’s to the Social Security Fund. This new health care will be the same sort of tax. Most people from the age of 20 to the age of 60 will end up paying $5,000 a year into it and maybe have a boil lanced or a cut stitched up. Free medical will raise about 1.5 trillion a year for the government to spend if everyone is working.

With this new clunker rebate program, it looks like we will all be working for a car company.I don’t think that the guy managing the rebate plan for clunkers could get a ride on the short bus, they might be dumb but they’re not stupid. We are financing more debt unless the purchaser can pay cash for the balance. This plan works for all the wrong reasons. It’s a little like mixing Viagra and Ex-lax. The results are guaranteed, the order isn't.

Wednesday, July 22, 2009

Health Insurance An Abused Concept

The basic concept of insurance is to provide immediate coverage that you will pay for, over the life of the policy. It is a zero sum game. The subscribers pay all costs insured as a group.

When someone says 45 million people don’t have health insurance, that is a misnomer, they are self insured. A self insured person is not going to visit three different doctors and have three blood tests as Obama suggests. But if you have health insurance, the health care system will rip your ass with three doctors and three blood tests. It might be long and drawn out, but it’s covered by your insurance. The doctors know how to ride this pony all the way to the bank.

Then there is liability and lawsuits. Most Congressmen started out as lawyers—hmmm. No reason to mess with liability limits, is there? Lawyers work on commission, don't they?

The irritating concept of this health care plan is the concept that 45 million people can’t pay for health care. Look at it this way, 300 million people can’t afford to pay for the coverage being promised. Will we ever really pay for it, or will it become part of our ever growing national debt?

The concept not perceived as real, is that health care treatments have progressed into an area to where the procedures due to their complexity are virtually unaffordable. A liver transplant can cost millions. Daily cancer injections can run $2,000 per shot and a premature baby 200K.

If you were to go out and buy a life insurance policy, a one million dollar policy might run you say $4,000 dollars per year. If you wanted a policy for 100k it should cost $400 per year. This concept is used with many different forms of insurance like Fire, Auto and Homeowners policies. The risks are predetermined and you pay accordingly. Notice you have the option to buy it; it is not forced on you. Insurance is a concept that allows you to cover now what you can pay for later, not what you can foist off onto government without the intent of every paying.

If you want to force insurance on someone, how about making it auto insurance. Over 50 percent of LA drivers have no insurance, “they can’t afford it.” Health insurance is a noble idea, but it is not a practical concept in a Democracy. Of course if you are talking Socialism, then there is no argument, we all deserve the very best. When you get to that point you are gaming the system. Medical treatment with new modern technology is not affordable for most of the human race and never will be. Our resources are finite, and government distribution of them, doesn’t make them go any further. People don’t go to medical school for 10 years just to work for the government; a high school education is all that's necessary.

The concept of living longer during retirement is now a very attainable goal. The idea of the world being populated by nothing but old farts chasing young tarts with a bottle of Viagra is a rather novel one. Modern medicine can enable us to live longer. We can die of other diseases later in life and rack up even more medical bills to boot (a catch 22). At some point we need to realize that socialized medicine puts an unfair burden on the young people just entering the work force.

This seems like a stretch for an article on the Great Depression, but we can’t afford the Medicare\Medicaid plan now in force for the old, coupled with Social Security. It is bankrupting us. It time to wake up and smell the financial ruin we are creating. There is no need to make the problem bigger.

We need health care and we need to be able to afford it as individuals. The government should keep out of this. If the government was to “Health Care” General Motors, we would all want BMW’s. In reality we’d pay for the BMW and end up getting something that would sound like a lawn mower and fail a smog test.

Monday, July 20, 2009

How Much is Too Much?

The National debt is at least 10 trillion dollars. Today pundits are suggesting that it may cost us the government 24 trillion dollars to cover the banking mess, which figures out by their calculations to $80,000 per each person in the US.

Obama-our-mama is suggesting that we will have to spend a trillion a year extra to stimulate the economy, add another 4 trillion (4 year term). Then there is health care, figure another two trillion. So we have 10 +24 +4 +2 for a grand total of 40 trillion dollars. If interest rates go to 10 percent, there is no need for math. An empty gas tank is an empty gas tank, you walk.

The interest on 40 trillion dollars at 5 percent is 2 trillion dollars a year. We can’t possibly pay the interest let alone pay on the principle.

I do not get this Trillion here, Trillion there routine. Our government doesn’t have a trillion dollars in taxes coming in, in a year. We do have some Federal Reserve nut running around saying that this is an approach that has never been attempted and has a good chance of working. The words "Pipe Dream" come to mind.

My only question is this, why do we have to spend to keep this mess going? Let it fail. The poor have nothing to lose except their government check. The drug trade in this country could collapse from that alone. Big conglomerate shopping stores would go broke and Mom and Pop stores would rise up. There wouldn’t be ten restaurants on every block, people would take time to go home and cook.

This administration and the one before seemed to think that we can pull money out of a toilet. These Candy-Asses in charge have no concept of the mind boggling amounts of money they are trying to spend. They are nothing more than drug addicts that need their fix today. Tomorrow is another day. Keep the game in play. They will ruin us.

This can’t last much longer, maybe two or three months. How many American dollars do you want if they are going to triple the amount in circulation? Look for a collapse in the Chinese banking markets (they are on a roll like we had here). From there, the house of cards will fall. Paper money is backed by faith. When faith fails, gold, silver and your wife’s smile are all that is left. I rest my case.

Sunday, July 12, 2009

And You Thought It Couldn’t Get Worse!

California has gone to Hell without the hand basket (they never bought one). The State government is broke (through no fault of their own). You could admonish them for not saving for that rainy day, but hell, it never rains here! Of course what can you expect from the legislature; more taxes or more motel sex? You need a 2/3's majority to raise taxes. Does the motel have a pool?

California is issuing funny money to pay their bills. The Banks stopped cashing these warrants Friday. They are not cash and there is a part of the US Constitution that says:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; . . . ..
Of course the fly-boys running the government are stating that these certificates are securities and need to be treated as such. They are going to sell you a toll booth to go with the bridge you just bought. Most vendors servicing the State will stop delivering product for good reason. Instead of taking a roll home every week, State workers will now be packing toilet paper in their lunch box for personal use.

In theory, a warrant has to be discounted to raise cash today. The trouble is, it might be 50 cents on the dollar. Many people in this State live from paycheck to paycheck. It kind of makes you wonder what happens to them.

Someone sooner or later will latch on to the idea of buying these warrants at half price and paying their property taxes with them. The last thing the state needs is this stuff coming back at them. It’s like a snake eating its own tail.

Then there is the rumor that the Governator is going to sell Boardwalk and Park Place . . . . and as we pass GO, Obama is going to give us a $200 stimulus package . . . . . .It kind of has the feel of a Parker Brother's board game.

Friday, July 03, 2009

The Funnel Effect (Reprint Feb 2007)

People are waiting for real estate to fall flat, and there is going to be a long wait. Not that it won’t happen, it’s almost a certainty that it will. But by the time it does come to fruition, it will be a moot point.

Here is a concept, let's call it the "Funnel Effect." Individual items drop into the funnel and combine with others. As they drop through this funnel as a group, they become more concentrated.

The easiest way to view the funnel effect is from bad housing loans, Visa and Master Card accounts. If you are a credit card company or a real estate lender, these problems are quite apparent; they could have hundreds if not thousands of people in a distressed state. This funneling effect of each individual, demonstrates what happens higher up in the retail/wholesale chain. We have consumers all over the world that purchase goods and carry on with their lives. When the economy starts to go bad, we have a situation where many people cannot manage to live in their accustomed manner and cut back on consumption in some form or manner.

Using a Starbucks Coffee Shop or Home Depot, the Funnel Effect (lack of consumption) would be reflected as a drop in sales. Individuals decide to spend less or not pay for an item like real estate taxes. Notice, that these choices of not to consume or pay a bill, converge into a group category. Housing funnels into lenders who made the loan. Bankruptcy’s funnel into credit card losses for the card issuer. The real estate tax base funnels into County Governments and School Districts.

Each home owner facing foreclosure will fight hard to survive and keep his house. What will happen, will be the funneling effect of their lack of consumption. They may go into foreclosure, but the lender's pain is far more evident earlier on, than the individual homeowner.

The thing not realized until it’s too late is that government expected receipts are projected out several years. In a declining market, this optimistic view of the future can lead to severe cutbacks in government spending. It's kind of like hitting a brick wall at 60 miles an hour. The wall wasn't there a minute ago.

Our government is the ultimate “Canary in the Coal Mine.” The City of San Diego is a deer in the headlights!