Saturday, May 21, 2011

The Village Idiot

Right now we have political unrest in the Arab world. Our President tends to interpret it as a move towards Democracy. Last month Obama pumped 100 missiles into Libya to speed up the process. The people in Libya don’t want Democracy; they want to be rich like the American tourist who visits their country. Wealth is Democracy to them. Expect nothing more than a regime change, there is no middle class to sustain a Democracy. If we really wanted to to exercise our military might in a constructive way, why not in Somali? That country has a thriving Pirate and hostage program (600 hostages and growing). Our country is paying millions in ransom fees and here we attack a country doing nothing more than selling us oil?

There is one true Democracy in the Middle East, Israel. A country with a population of about 7.5 million people, surrounded by 40 million Muslims and Arabs who want the Jews dead or gone. Here our President stands up, and tells Israel “return the land to the Arabs.” The Grand Wizard has spoken. Israel is our only true ally in the Middle East. What is macho Obama thinking?

The Arabs want a piece of our Democracy, just like everyone else; a Mercedes and several young wives and that is as far as it goes. The Muslims offer the “Pilgrim Economy Package,” an explosive vest and 70 virgins in the afterlife. The plan has been pretty successful; sex sells, people are going to pieces over it. The Arabs negotiate using the principle “What’s mine is mine, and what’s yours is up for discussion.” Real compromise isn’t an option using that modus operandi. Obama's going to give the Middle East Democracy (yawn) (rah! rah! rah!).

The President’s foreign policy has been defined by a lack of direction. Oddly enough, the news media has kept silent. They give him air time and offer no hint of criticism. Here is a guy blaming our problems on 100 dollar a barrel Arab oil when the problem is a government printing too much currency. Our 14 trillion dollar national debt is what makes gas four dollars a gallon. I guess the press figures that they will document how deep Obama can dig this hole.

His domestic solutions are part of our present financial crisis. Government health care is a noble concept, but there is no way, we as a nation can afford it. Social Security and Medicare have grown to an unmanageable size. Now Congress is haggling over increasing the debt limit by 2 trillion dollars just for this fiscal year. The size of the increase is mind boggling, but I guess that is of no concern to the media, it’s not news.

I get the feeling when listening to Obama that he is talking down to us. We are children that need his guidance. This beet-head needs to be called out on the carpet. His policies are incredibly expensive and poorly thought out, considering the current economic conditions. How can he presume that government has access to unlimited resources?

I saw a license plate frame the other day. On top it said “Your village called.” And on the bottom it said “Their Idiot is missing.”

Receiving the Nobel Peace Prize for winning a Presidential election, should have been a clue. We can put our minds at ease now; the idiot is no longer missing (and that’s only the good news). Our newspapers are curiously silent, apparently Obama can do no wrong.

Friday, May 13, 2011

The Abstractification of the American Mind

We have names thrown at us every day. Big Oil, The Bankers, Wall Street Barons, The Rich, Democrats, Republicans, Liberals, Conservatives and the list goes on.

We are looking at abstract names for groups of things, not individual items. This analogy will make more sense, if we picture ourselves making cookies in the kitchen. These cookies are going to be very different. We might use a hubcap as a cookie mold for making Democrat cookies. Follow me here. For Republicans, we might use a Jello mold. What we are doing is taking a container and stuffing it full of cookie dough and the shape represents our visualization of the group we are talking about.

There is where the problem lies. If the two of us were both discussing Democrats, the only part of the concept we share is the word. I’m using a hubcap as a mold for Democrats while you may be using a mop bucket.

Let’s make up a group. Combine Banker and Gangster and you get Bankster. For this cookie mold, I will use a cigar box and lace the cookie dough with bullets and a couple hundred copper pennies. Someone else may choose to use a chamber pot for a cookie mold mixing in expensive cigar butts and a 100 or so Mercedes car keys. We both end up with a cookie, with the same name, but mine won’t have that hint of ammonia fragrance. The thing to realize here is that we are talking about imaginary groups or abstract concepts. We created a container in our mind, given it a name and stuffed it full of cookie dough and whatever else suits us. The guy next to you is doing the same thing.

So when we all get together to discuss a concept like government health care, you wonder what rock some of these people crawled out from under.

We need to be very careful of using words that are abstract. They give us a false sense of understanding that isn’t shared. For example, many Americans probably believe that the rest of the world should encompass Democracy with open arms. We lost the Viet Nam war because of that abstract concept called Democracy. The villager could point to his wife, kids and his land, he couldn’t point to Democracy. In undeveloped countries, you have a very hard time selling life insurance; it’s an abstract concept that sounds more like a con game to the average person.

The other day I was reading about a Congressional investigation of the oil industry. They wanted to know why the consumer was being gouged 4 dollars a gallon for gasoline. The answer is plain enough, inflation. But what is inflation? To most people, that’s where prices rise every year. But if you are worth your weight in salt, you know Congress is spending more than they are taking in. Inflation is a very abstract word. It’s kind of like the lost Viet Nam war, all over again. You can point to the price of gas, it’s real, but you can’t point to inflation.

Wednesday, May 04, 2011

Disneyland Economics

Most of us pay taxes. This is money; we were paid for producing something. Tax dollars are for government consumption. Our savings are kind of like taxes also, we are not consuming product if we save our dollars. In order to save for retirement, we have to forgo consumption now, for consumption in our retirement years 20 to 40 years out.

From there, our saving flow into a bank. Lately you hear about all of the money the government has thrown at the “Banksters.” Let’s step back and take a second look. From 1999 to 2006 the banks threw money (your deposits) at anyone that wanted to sell a house (not buy, follow me). An 80 year old with a bad cough in a wheel chair, could qualify to buy a home. Nothing down and the owner got a cashiers check from the bank. Real money was paid by the bank for the home sale. By 2008 it was rather obvious that real estate loans with nothing down, were performing rather poorly. The banking system as a whole, had lent about (your estimate here or mine) 12 trillion dollars. The money was given to the sellers of the real estate. Now with homeowners walking away from their loans, the FDIC has to make the depositors “Whole again.” In order to do it, the FDIC prints dollars to cover depositor’s losses. The investors/owners in the failed banks lose their whole investment. FDIC insurance only eliminates bank runs.

Next, consider our government, they collect 2.1 trillion in taxes and spend 3.5 trillion. Congress is spending 50% more than they take in taxes. OK so it is a loan, but look at it this way, it is pure consumption. Government doesn’t produce anything. They had to borrow the dollars from us savers in order to spend them. The product consumed by government is now gone.

Just as a rough estimate, the National Debt is about 14 trillion. Add another 4 trillion for the worthless debt held as collateral at the Federal Reserve. Add another 1.5 trillion dollars a year, from now on, as part of the Federal budget.

There comes a point to where educated people figure out that the game is over. I don’t think we are quite there yet. The government is both printing money and taxing us at the same time. Taxes work great, but you don’t have to raise taxes if you print money. Inflation is a silent and invisible tax and it pays government bills just as slick as taxes.

Congress has no idea of the mess they are in. FDR started the snowball rolling and it has gotten bigger. Today there isn’t enough product to satisfy the demand made by the savers, who over time, opted out for immediate gratification for consumption, by saving. Indirectly the money borrowed by government came from the banks and our Ira's. Without FDIC insurance in place the banks would have failed, and the government's source of funds to finance the deficit would have disappeared. (Can't have that happen, can we???)

In the truest sense, if our government was to pay back the 18 trillion dollars borrowed (laugh if you feel the urge), everyone would be whole, the trouble is, it is not going to happen. If Treasury rates were to hit 12%, it would take all of our taxes to pay the interest on the National debt. We have stepped into a new realm of economics I would like to label “Disneyland Economics.” You wish for what you want and Congress will provide it. The trouble is, real life doesn’t work that way. Congress borrowed 18 trillion of real money and wants to borrow more. It’s a little like buying a car and your only concern is, "Can I borrow enough to make the next payment?"

Looking at the bright side, this isn't the handbasket to hell drill, Congress is going to drive our nation to the new Disneyland in style. I'm so excited. Are we there yet?