Bank of America is going to sell another 825 million shares of stock at $10 a share. What the Company is doing to the share holder, is about on par with selling a hooker lipstick that prevents VD (you have to be blond to bite on that one). The TARP money is no good? It’s kind of hard to figure that out considering that the banks don’t have to account for it.
Put it another way, Bank of America needs 8 billion dollars to stay in business. So if you are already a stock holder, the added dilution is welcomed. Something added to nothing gives you a few cents in the “Bank.” Both Citi Bank and B of A have a good chance of collapsing sometime this year due to an inability to finance their credit operation.
Congress in their infinite wisdom is passing a law on credit card usury rates. Look for your rates to jump sky high before the law takes effect. The Credit card companies are not interested in future business, they want the money they loaned out, back, and that just isn’t going to happen.
Everyday now, we hear the phrase, “We have hit bottom.” Things are going to get better. California voters just turned down a bunch of bond measures to fund the budget. I guess hitting bottom, means that the Governator is taking bids on recycling the copper plumbing in state offices.
What gets cut first? --- Prisons, welfare, mental asylums, schools, teachers, fire, health services, and police. So if you have less than 5 years to serve in prison, you’ll be released. If you’re under mental treatment, you get to go “home” (find a shopping cart). Less school hours and no jobs, the neighborhood kids will be ransacking your house while you are at work. The police won’t arrest anyone, why bother, they won’t go to jail. So what are they going to do? Write you a traffic violation ticket and generate some revenue. Do you get the feeling that a lot of us are about to become victims in this fall from grace?
The California budget has had to face reality which is a good thing. The reality is that Disneyland is in California, but Congress thinks that Tinker Bell can throw this Fairy Dust (TARP money) everywhere. Governor Schwarzenegger is not asking Congress for fairy dust, he’s asking Congress for real help.
The Grand Old State of Kalifornia could go bankrupt while the banks gorge on Tarp money. Go figure, and they don’t even "want" it!
Wednesday, May 20, 2009
Thursday, May 14, 2009
US Government Faces Bankruptcy
Our government has spent all of the Social Security and Medicare surpluses. They weren’t spent on what they were allocated for, but they were spent. There is no problem spending money that is allocated further down the road; today you can always cover the amounts with the current budget. That is unless you run into a deep depression (and we know that that could never happen).
So what has happened, we are broke. The only way to fix it is to raise taxes. No one wants new taxes. Let’s propose new benefits for everyone like health care. The idea here, is that it is mostly money coming in with very little going out. The contributors are quite young. There is a 40 year lag time on having to pay out in real dollars.
The idea that Social Security, Medicare and Health benefits are undeniable benefits is absurd. These contributions are taxes. Your W-2 form shows what you paid where. It shows what your employer paid, but you paid that also (your employer figured it into your wage rate). The Supreme Court ruled Social Security taxes are taxes, the government can spend them as it sees fit.
Congress wants to offer us universal health care. Notice it is not free. They didn’t say that. They are going to charge you for it. Right now, you can get free medical care from any emergency room. What makes this different? Your paid wages will be subject to a health tax.
We can probably assume that 90 percent of those paying into the program are probably healthy and in very little need of health care. So from here the money is transferred to our over extended budget. At the same time you have to figure that all of those retired silver foxes on Medicare are relieved that their savings will not be wiped out by health costs. God Bless Congress in their infinite wisdom!
The shift of leadership to the Democratic Party didn’t change the seriousness of the problem, but now there is the chance that health care can be passed as a “benefit.” In actuality, Congress is raising our taxes without really figuring out how to pay these future benefits. The future will take care of itself, that’s what worries me with this Congress.
Obama needs the health care to pass. This benefit will take about $5,000 from each wage earner's yearly paycheck. We will have Universal health care and will probably have to wait 5 hours to see a physician.
We can’t borrow from other nations. Who will loan the government money at zero percent interest? My wife and I have gotten out of T-bills. We are putting our cash in a safety deposit box. We are not the least bit interested in interest rates of .17 percent. Give us a decent rate, and we might loan out our money.
So what has happened, we are broke. The only way to fix it is to raise taxes. No one wants new taxes. Let’s propose new benefits for everyone like health care. The idea here, is that it is mostly money coming in with very little going out. The contributors are quite young. There is a 40 year lag time on having to pay out in real dollars.
The idea that Social Security, Medicare and Health benefits are undeniable benefits is absurd. These contributions are taxes. Your W-2 form shows what you paid where. It shows what your employer paid, but you paid that also (your employer figured it into your wage rate). The Supreme Court ruled Social Security taxes are taxes, the government can spend them as it sees fit.
Congress wants to offer us universal health care. Notice it is not free. They didn’t say that. They are going to charge you for it. Right now, you can get free medical care from any emergency room. What makes this different? Your paid wages will be subject to a health tax.
We can probably assume that 90 percent of those paying into the program are probably healthy and in very little need of health care. So from here the money is transferred to our over extended budget. At the same time you have to figure that all of those retired silver foxes on Medicare are relieved that their savings will not be wiped out by health costs. God Bless Congress in their infinite wisdom!
The shift of leadership to the Democratic Party didn’t change the seriousness of the problem, but now there is the chance that health care can be passed as a “benefit.” In actuality, Congress is raising our taxes without really figuring out how to pay these future benefits. The future will take care of itself, that’s what worries me with this Congress.
Obama needs the health care to pass. This benefit will take about $5,000 from each wage earner's yearly paycheck. We will have Universal health care and will probably have to wait 5 hours to see a physician.
We can’t borrow from other nations. Who will loan the government money at zero percent interest? My wife and I have gotten out of T-bills. We are putting our cash in a safety deposit box. We are not the least bit interested in interest rates of .17 percent. Give us a decent rate, and we might loan out our money.
Monday, May 11, 2009
"Free" Healthcare or "Raise Taxes?"
Obama says that 45 million Americans are without health insurance. Just tragic! Right! Is he talking about the 60 million kids under the age of 15? Or the 80 million people between the age of 15 and 34? Then there is another 100 million are between 35 and 59.
This number of people “neglected by our health care system” is probably severely mis stated. I assume that they can’t pay for it themselves. In order to cover them, those of us that pay for health care insurance must pay more since they can’t.
Add it up; there are about 140 million people under the age of 34 that really don’t need health insurance. Why not? They are healthy. Health insurers give them a very good rate on insurance. This is called the gravy boat, money coming in and very little going out. Under Obama’s plan, their rates could triple.
Have you had two heart attacks, want health insurance and wonder what your rate will be? I don’t, we know you can’t pay it.
Just been in a shootout with the police and have critical wounds and no insurance, who pays the bills? By god these people need health insurance, 300K to 400k worth just this week alone.
From an insurance concept, you build up an actuary table and figure out what everyone has to pay to get health care over their lifetime and charge accordingly. Presently it looks as if we need about 200K to 600k just for an elderly person. We are not talking rest home here, that’s extra. So if you work 40 years, that amount to about $5,000 to $15,000 per year in health care taxes. Since we have to cover those already old, double the amount to say $10,000 to $30,000.
Right now, everyone over the age of 65 has a blank check for health care and they never paid a dime for it.
People that end up in the emergency room are also entitled to free health care (they don’t have to pay for it). This concept of free care is about to shut down emergency rooms nation wide.
Then we have people on Medicare. The government pays $2,000 per day in Chemo therapy for people dying of cancer. Price is no object.
Currently we have a budget that needs more tax revenues. The country will not stand for a tax increase. Well, let’s give the masses free health care. That means we can take the 180 million people between the ages of 20 to 59 and charge them for this added benefit. $5,000 per person per year for health insurance would raise about 1.8 trillion dollars per year. And the employer pays half—oh goodie. That way, we can pay for the 48 million people already eligible for Medicare.
The question arises, does government need money for health care or for operating expenses? It’s kind of like hiring a hooker to solicit customers at a blood bank. The bank takes a quart instead of a pint. And you’re now more worried about making it to your car without collapsing, rather than the good time you had in mind. There is a fine line between what a hooker does to you and what the government does to you. The results the same, but only one will leave a smile on your face.
This number of people “neglected by our health care system” is probably severely mis stated. I assume that they can’t pay for it themselves. In order to cover them, those of us that pay for health care insurance must pay more since they can’t.
Add it up; there are about 140 million people under the age of 34 that really don’t need health insurance. Why not? They are healthy. Health insurers give them a very good rate on insurance. This is called the gravy boat, money coming in and very little going out. Under Obama’s plan, their rates could triple.
Have you had two heart attacks, want health insurance and wonder what your rate will be? I don’t, we know you can’t pay it.
Just been in a shootout with the police and have critical wounds and no insurance, who pays the bills? By god these people need health insurance, 300K to 400k worth just this week alone.
From an insurance concept, you build up an actuary table and figure out what everyone has to pay to get health care over their lifetime and charge accordingly. Presently it looks as if we need about 200K to 600k just for an elderly person. We are not talking rest home here, that’s extra. So if you work 40 years, that amount to about $5,000 to $15,000 per year in health care taxes. Since we have to cover those already old, double the amount to say $10,000 to $30,000.
Right now, everyone over the age of 65 has a blank check for health care and they never paid a dime for it.
People that end up in the emergency room are also entitled to free health care (they don’t have to pay for it). This concept of free care is about to shut down emergency rooms nation wide.
Then we have people on Medicare. The government pays $2,000 per day in Chemo therapy for people dying of cancer. Price is no object.
Currently we have a budget that needs more tax revenues. The country will not stand for a tax increase. Well, let’s give the masses free health care. That means we can take the 180 million people between the ages of 20 to 59 and charge them for this added benefit. $5,000 per person per year for health insurance would raise about 1.8 trillion dollars per year. And the employer pays half—oh goodie. That way, we can pay for the 48 million people already eligible for Medicare.
The question arises, does government need money for health care or for operating expenses? It’s kind of like hiring a hooker to solicit customers at a blood bank. The bank takes a quart instead of a pint. And you’re now more worried about making it to your car without collapsing, rather than the good time you had in mind. There is a fine line between what a hooker does to you and what the government does to you. The results the same, but only one will leave a smile on your face.
Saturday, May 02, 2009
Going Broke Without a Clue
A notice from the water company arrived yesterday. They are raising their rates because of decreased consumption brought about by the drought. They are selling less water, but their fixed costs remain the same. So we get to pay more for using less.
It is the same story with GM and Chrysler. Selling fewer cars makes the companies financial future questionable. The fixed costs don’t drop. It used to be that the last two months of the year was the car company’s profit. When sales drop 50% those last two months never arrive. The contraction of sales can have the unexpected effect of forcing a company into bankruptcy; the fixed costs just don't go away.
If that is not bad enough, there are 50 state budgets, whose tax collections could fall 30 to 40 percent in the coming year. The state legislatures will select which bills get paid. Usually, Police, Fire and Education get cut. This really irritates the taxpayer to say the least. There are a lot of fixed retirement costs that will not disappear despite the labor cuts. Most states have already spent the money collected for this year. Now with the revenue collections dropping drastically, there is less and less money to fund various state programs into next year.
We have a very good chance of several states declaring bankruptcy before the end of the year. California, Florida, Michigan, Arizona and Nevada are high up on the list. Will the Federal Government step in and save the states in trouble?
What happens in this new era of too big to fail? Does the bankruptcy court take over the powers of the state legislature? Or does the Federal government take over and administrate the bankrupt state?
The government appears to be in a cover up mode. People in charge are losing their jobs for going along with the government’s strong arm persuasions. Government entities are being accused of overstepping their mandate (The Federal Reserve, comes to mind).
The economy in our area doesn't seem to be improving. We went garage sale-ing yesterday and I noticed 6 new commercial retail plazas under construction and two brand new ones that were almost completely vacant. Half of the present plaza malls in this area have many closed shops up for rent. Commercial real estate building is still in a boom stage here and there is really no explanation for it.
Of course the stock market has no clue as to what is going on—yet. Stocks are doing OK only because your IRA money manager refuses to sell. The losses are yours not theirs. This vast pool of money they manage is waiting for the market to rise up and return to the way things were.
What can we interpret from all of this? Conditions are not quite what our leaders are suggesting. The reaction to the possible Swine flu pandemic was blown way out of proportion; the bail out AIG probably accomplished little. The guys in charge rattled our cage and we panicked and accepted their proposed solution, just as we were suppose to. The real problem right now is where do we get the money to fix what we have just "paid" for?
Are we going to die of Swine Flu, or freeze to death while sleeping next to our shopping carts out on the street? Actions speak louder than words. Bawl out car executives for taking private jets to Washington and then take Air Force 1/2 (the short bus) on a low level fly-by of NYC???? It gives you an idea of where we are headed. Greenspan's quote, "Often wrong but never in doubt," seems to sum up the governments approach to solving this mess.
It is the same story with GM and Chrysler. Selling fewer cars makes the companies financial future questionable. The fixed costs don’t drop. It used to be that the last two months of the year was the car company’s profit. When sales drop 50% those last two months never arrive. The contraction of sales can have the unexpected effect of forcing a company into bankruptcy; the fixed costs just don't go away.
If that is not bad enough, there are 50 state budgets, whose tax collections could fall 30 to 40 percent in the coming year. The state legislatures will select which bills get paid. Usually, Police, Fire and Education get cut. This really irritates the taxpayer to say the least. There are a lot of fixed retirement costs that will not disappear despite the labor cuts. Most states have already spent the money collected for this year. Now with the revenue collections dropping drastically, there is less and less money to fund various state programs into next year.
We have a very good chance of several states declaring bankruptcy before the end of the year. California, Florida, Michigan, Arizona and Nevada are high up on the list. Will the Federal Government step in and save the states in trouble?
What happens in this new era of too big to fail? Does the bankruptcy court take over the powers of the state legislature? Or does the Federal government take over and administrate the bankrupt state?
The government appears to be in a cover up mode. People in charge are losing their jobs for going along with the government’s strong arm persuasions. Government entities are being accused of overstepping their mandate (The Federal Reserve, comes to mind).
The economy in our area doesn't seem to be improving. We went garage sale-ing yesterday and I noticed 6 new commercial retail plazas under construction and two brand new ones that were almost completely vacant. Half of the present plaza malls in this area have many closed shops up for rent. Commercial real estate building is still in a boom stage here and there is really no explanation for it.
Of course the stock market has no clue as to what is going on—yet. Stocks are doing OK only because your IRA money manager refuses to sell. The losses are yours not theirs. This vast pool of money they manage is waiting for the market to rise up and return to the way things were.
What can we interpret from all of this? Conditions are not quite what our leaders are suggesting. The reaction to the possible Swine flu pandemic was blown way out of proportion; the bail out AIG probably accomplished little. The guys in charge rattled our cage and we panicked and accepted their proposed solution, just as we were suppose to. The real problem right now is where do we get the money to fix what we have just "paid" for?
Are we going to die of Swine Flu, or freeze to death while sleeping next to our shopping carts out on the street? Actions speak louder than words. Bawl out car executives for taking private jets to Washington and then take Air Force 1/2 (the short bus) on a low level fly-by of NYC???? It gives you an idea of where we are headed. Greenspan's quote, "Often wrong but never in doubt," seems to sum up the governments approach to solving this mess.
Sunday, April 26, 2009
Sorting Out The Reality
I turned on the TV this morning and there is somebody from the Whitehouse discussing how things are under control. I’m wondering, "My god, what happened now." After a few minutes I figured out that they were talking about, Swine Flu. It seems like it is one crisis after another, those guys are running around with their rectal muscles in knots. Do you get the feeling that they are already in panic mode? A Presidential address day after day is getting incredulous let alone ridiculous. I wish someone would tell the guy to let up, he won the election. If you are busy talking to me, you can’t be working solving the nations problems, unless you’re trying to sell me something --- Hmmmm.
Bank of America CEO Ken Lewis is in hot water. Paulson told him to keep quiet about the Merrill Lynch deal if he knew what was good for him. Now the guy is being hung out to dry by the share holders for keeping his mouth shut. He can already claim that he doesn’t have a Porsche to piss in (he sold it to his CFO). This could be a real feeding frenzy for his lawyers; it could take years, before they spend his last nickel.
At first the banks needed a trillion dollars in TARP money and now they want to pay it back? It seems like no one wants to work for Uncle Sam. Maybe if the banks pay back the TARP, then they will get their bonuses and then they can send the Fed’s some jingle mail. There is nothing like telling people how much they can earn a year.
The bank stress test was a success. Everyone passed, what that means is anybody’s guess. They may have been checking for TARP money stashed at home.
The suicide of the CFO at Freddie Mac was kind of like touching off a nuclear bomb in the back yard, the neighbors, or what’s left of them are real quiet.
It appears that the focus of this administration is to fix everything at once, right now. They are going to stop Swine Flu, protect our borders, solve the banking mess, fix health care and lower taxes. This blather sounds more like an answer to a beauty pageant question. Where is the money, to do all of this, coming from? If we take a page from FDR, the fastest way to raise taxes like he did, was to promise Social Security benefits to the worker. This time, it will be free (socialized) health care.
Just for a joke, look at your tax forms that you just filled out and sent in. We paid $6,000 in Federal taxes, $1,500 in state taxes, $6,000 in Social Security taxes (your employer matches it) and $1,500 in Medicare (your employer matches it). Contrary to the way it is stated the employer doesn’t pay into Social Security and Medicare. It’s figured as part of the wage your employer offered to you, so you pay it all. My wife and I, paid $7,500 in Federal and State taxes and we also paid $15,000 in Social Security and Medicare.
So, when Obama says we’re not out of the woods yet, it means they need additional revenue (spending money). Figure they need a half trillion more in funds to run the government each year, the fastest way to get it on the books is as a health insurance benefit (AKA tax). The employee pays half and the employer pays half (yea right). Figure $2,500 for the employee and $2,500 from the employer. At the same time they can drop your income taxes $500 and fulfill an election promise.
So look for a new government benefit called health care. It will be run like our public rest rooms. Our government is desperate for cash. Remember this quote from long ago, “What’s good for General Motors is good for the country?” It kind of has a scary prophecy to it now. I'm reminded of a ditty from 1929, "Mellon pulled the whistle. Hoover rang the bell. Wall Street gave the signal. And the country went to hell." Looks like the ride has started, hold on!
Bank of America CEO Ken Lewis is in hot water. Paulson told him to keep quiet about the Merrill Lynch deal if he knew what was good for him. Now the guy is being hung out to dry by the share holders for keeping his mouth shut. He can already claim that he doesn’t have a Porsche to piss in (he sold it to his CFO). This could be a real feeding frenzy for his lawyers; it could take years, before they spend his last nickel.
At first the banks needed a trillion dollars in TARP money and now they want to pay it back? It seems like no one wants to work for Uncle Sam. Maybe if the banks pay back the TARP, then they will get their bonuses and then they can send the Fed’s some jingle mail. There is nothing like telling people how much they can earn a year.
The bank stress test was a success. Everyone passed, what that means is anybody’s guess. They may have been checking for TARP money stashed at home.
The suicide of the CFO at Freddie Mac was kind of like touching off a nuclear bomb in the back yard, the neighbors, or what’s left of them are real quiet.
It appears that the focus of this administration is to fix everything at once, right now. They are going to stop Swine Flu, protect our borders, solve the banking mess, fix health care and lower taxes. This blather sounds more like an answer to a beauty pageant question. Where is the money, to do all of this, coming from? If we take a page from FDR, the fastest way to raise taxes like he did, was to promise Social Security benefits to the worker. This time, it will be free (socialized) health care.
Just for a joke, look at your tax forms that you just filled out and sent in. We paid $6,000 in Federal taxes, $1,500 in state taxes, $6,000 in Social Security taxes (your employer matches it) and $1,500 in Medicare (your employer matches it). Contrary to the way it is stated the employer doesn’t pay into Social Security and Medicare. It’s figured as part of the wage your employer offered to you, so you pay it all. My wife and I, paid $7,500 in Federal and State taxes and we also paid $15,000 in Social Security and Medicare.
So, when Obama says we’re not out of the woods yet, it means they need additional revenue (spending money). Figure they need a half trillion more in funds to run the government each year, the fastest way to get it on the books is as a health insurance benefit (AKA tax). The employee pays half and the employer pays half (yea right). Figure $2,500 for the employee and $2,500 from the employer. At the same time they can drop your income taxes $500 and fulfill an election promise.
So look for a new government benefit called health care. It will be run like our public rest rooms. Our government is desperate for cash. Remember this quote from long ago, “What’s good for General Motors is good for the country?” It kind of has a scary prophecy to it now. I'm reminded of a ditty from 1929, "Mellon pulled the whistle. Hoover rang the bell. Wall Street gave the signal. And the country went to hell." Looks like the ride has started, hold on!
Thursday, April 23, 2009
Do You Know Where Your Money Is? (reprint)
Reprint from February 26, 2007
The question has to come up sooner or later. Why put money in the bank with these lousy interest rates?? Using the rule of 72, when you divide the savings rate into it (3%), you get the number of years for your money to double. In this case, it's 24 years. The inflation will eat you alive. A $100,000 in 1964 dollars is equivalent to $1,000,000 in purchasing power by today’s standards. So, to make it simple, over the last 44 years, we have had 90% inflation. The decimal point has been moved one space to the right. In 1964 gas was 30 cents a gallon and a house cost $20,000. Today gas is $2.65 a gallon and a house is around $200,000 (definitely not California!).
Examine a concept that is being glossed over and not taken at face value. Every house, stock, bond or mutual fund share has an owner at every instant in time. The certainty is, selling at the top is good and buying at the top is bad. Every dead horse has an owner (owning one is not a desirable thing unless you process dog food).
So let’s see, we have a zillion houses out there that are empty. We have 424,805 bankruptcies and 154,910 foreclosures nation wide according to foreclosure.com. The question comes to mind, who’s footing the bill? The money has been spent, just whose money was it?
It looks like the next thing to drop dead is going to be a credit card company. Wouldn't that be a real mess! Every layoff is a potential no pay. How many credit cards do you have in your wallet??
Any way you look at it, somebody OWNS all of this junk that is going bad. Its almost a forgone conclusion that whoever it is, has no idea of their vulnerability or their potential liability. Naturally this will all go away if we just close our eyes. My retirement fund or mutual fund couldn’t be that stupid or could it?
The question has to come up sooner or later. Why put money in the bank with these lousy interest rates?? Using the rule of 72, when you divide the savings rate into it (3%), you get the number of years for your money to double. In this case, it's 24 years. The inflation will eat you alive. A $100,000 in 1964 dollars is equivalent to $1,000,000 in purchasing power by today’s standards. So, to make it simple, over the last 44 years, we have had 90% inflation. The decimal point has been moved one space to the right. In 1964 gas was 30 cents a gallon and a house cost $20,000. Today gas is $2.65 a gallon and a house is around $200,000 (definitely not California!).
Examine a concept that is being glossed over and not taken at face value. Every house, stock, bond or mutual fund share has an owner at every instant in time. The certainty is, selling at the top is good and buying at the top is bad. Every dead horse has an owner (owning one is not a desirable thing unless you process dog food).
So let’s see, we have a zillion houses out there that are empty. We have 424,805 bankruptcies and 154,910 foreclosures nation wide according to foreclosure.com. The question comes to mind, who’s footing the bill? The money has been spent, just whose money was it?
It looks like the next thing to drop dead is going to be a credit card company. Wouldn't that be a real mess! Every layoff is a potential no pay. How many credit cards do you have in your wallet??
Any way you look at it, somebody OWNS all of this junk that is going bad. Its almost a forgone conclusion that whoever it is, has no idea of their vulnerability or their potential liability. Naturally this will all go away if we just close our eyes. My retirement fund or mutual fund couldn’t be that stupid or could it?
Friday, April 17, 2009
The One and One Half Trillion Dollar Loan?
The amazing thing about government is that they can solve all of our problems and give us all what we need. Step back one step and think about that. If it was true, all of our problems would have been solved hundreds of years ago.
The government is about to spend one and one half trillion dollars to stimulate the economy. Nobody has offered up the question of “Where is this money coming from?” The government is borrowing this money from somebody so we can consume what the savers denied themselves by saving it. The government is going to consume without producing new product for consumption.
Government taxation is a method whereby the government gets to spend a share of what the taxpayer produced. This spending is for defense, commerce, laws, education and other things that have become too numerous to mention let alone irritating to think about!
OK they want to spend 1.5 trillion dollars. Who’s going to be willing to loan to the government money at ½ percent interest (present 3 month T-Bill rate)? The Banks are getting free loans from the government and are declaring record profits. 25% interest on credit card loans from the bank’s ledger book are real “Money in the bank.”
Is something out of whack here? Banks get zero interest loans from the Fed, homeowner’s get 4.5% interest rates and the T-Bill rate is under ½% for 3 month T-Bills. If you figure the population of the US at 300 million and divide that into 1.5 trillion of proposed spending, we end up with $5,000 per person. So a family of 4 is about to spend 20 thousand dollars that they are never going to have to pay back? In other words, they are going to consume 20K that will never pass through their hands. Let’s add in free health care. Do you get the idea that we are dealing with someone with an addiction problem?
My question is this, where does the government get one and one half trillions dollars from, at these interest rates? If interest rates don’t rise dramatically, then it just might be time to buy gold. There is no reason to loan the government money at these low rates. It’s a little like pimping your sister, and you are her only customer. It kind of works, for all the wrong reasons.
The government is about to spend one and one half trillion dollars to stimulate the economy. Nobody has offered up the question of “Where is this money coming from?” The government is borrowing this money from somebody so we can consume what the savers denied themselves by saving it. The government is going to consume without producing new product for consumption.
Government taxation is a method whereby the government gets to spend a share of what the taxpayer produced. This spending is for defense, commerce, laws, education and other things that have become too numerous to mention let alone irritating to think about!
OK they want to spend 1.5 trillion dollars. Who’s going to be willing to loan to the government money at ½ percent interest (present 3 month T-Bill rate)? The Banks are getting free loans from the government and are declaring record profits. 25% interest on credit card loans from the bank’s ledger book are real “Money in the bank.”
Is something out of whack here? Banks get zero interest loans from the Fed, homeowner’s get 4.5% interest rates and the T-Bill rate is under ½% for 3 month T-Bills. If you figure the population of the US at 300 million and divide that into 1.5 trillion of proposed spending, we end up with $5,000 per person. So a family of 4 is about to spend 20 thousand dollars that they are never going to have to pay back? In other words, they are going to consume 20K that will never pass through their hands. Let’s add in free health care. Do you get the idea that we are dealing with someone with an addiction problem?
My question is this, where does the government get one and one half trillions dollars from, at these interest rates? If interest rates don’t rise dramatically, then it just might be time to buy gold. There is no reason to loan the government money at these low rates. It’s a little like pimping your sister, and you are her only customer. It kind of works, for all the wrong reasons.
Monday, April 13, 2009
Economic Terpitude (Reprinted)
Here's a reprint from October 21, 2007. It still has a pretty good punch. Maybe it's a bit more creditable today.
Banks, hedge funds and what ever are taking billions of dollars in loan loss provisions. I have been suggesting for over a year, that a lot of this money may be coming from our retirement funds. Think about it. If your wife buys a new fur coat with your paycheck, now you can’t pay the rent, that is obvious very fast. If the wife turned a trick with the old geezer down stairs and bought the coat, you are stuck wondering how she did it. The reason I suggest Retirement funds, is that the losses suffered so far appear to affect no one. But bear in mind, retirement income funds deal with the future. Most people are not ready to retire so these funds should have plenty of time to recover losses (keep quiet, keep your job). The write downs are massive. Nobody even blinks an eye. What’s a 10 billion dollar loss? The perspective is beyond comprehension. This money has to be coming from somewhere. Whoever’s money it is, they don’t seem to need it--yet.
The money supply worldwide seems to be contracting. Usually this would imply a rise in interest rates. That doesn’t seem to be happening. Commodities are increasing in value, which could be an inflation indicator. If reserves are being added to the banking system, then this could explain why rates are not rising (using a truck is cheaper than using Ben's helicopter).
A lot of the new earned money entering into the economy is not being used to create new jobs, its being “invested” in financial instruments. Workers are not creating new product, investors are placing side bets on the financial markets. The profit is gone from home building industry. Investment in rental property is a losing enterprise. Consumption seems to be tapering off. Home remodeling appears to have hit the skids. Starbucks seems to be doing OK, you have to draw the line somewhere.
Interest rates are dropping but you can't force people to borrow money unless there is some sort of return (like a house appreciating at 20% a year). That would explain why the stock market as well as the commodity’s markets are still in play. Cramer the other night was forecasting Google at $750. Everything is still going up. The stock market had a little hiccup on Friday. Nothing to worry about, Google kept on ticking just like a Timex watch. Of course it can’t be a bubble, bubbles don’t get that big!
You have a bunch of banks forming a consortium to bail out the CDO and SIV holders . They are creating a new financial instrument called a "USA," which is short for “Up in Smoke Assets.” It ought to be a hot item if they can figure out a way to package it. It’s kind of like selling invisible goldfish. Give the buyer one or two extra for free, so he thinks he’s getting a real bargain and then sell him some invisible fish food to boot.
The economy’s current condition reminds me of the embezzler and a millionaire taking a vacation at the same resort. The embezzler knows whose money he is spending. The millionaire has no idea that he is broke, but hey, everyone is having fun. Are we broke yet?
Banks, hedge funds and what ever are taking billions of dollars in loan loss provisions. I have been suggesting for over a year, that a lot of this money may be coming from our retirement funds. Think about it. If your wife buys a new fur coat with your paycheck, now you can’t pay the rent, that is obvious very fast. If the wife turned a trick with the old geezer down stairs and bought the coat, you are stuck wondering how she did it. The reason I suggest Retirement funds, is that the losses suffered so far appear to affect no one. But bear in mind, retirement income funds deal with the future. Most people are not ready to retire so these funds should have plenty of time to recover losses (keep quiet, keep your job). The write downs are massive. Nobody even blinks an eye. What’s a 10 billion dollar loss? The perspective is beyond comprehension. This money has to be coming from somewhere. Whoever’s money it is, they don’t seem to need it--yet.
The money supply worldwide seems to be contracting. Usually this would imply a rise in interest rates. That doesn’t seem to be happening. Commodities are increasing in value, which could be an inflation indicator. If reserves are being added to the banking system, then this could explain why rates are not rising (using a truck is cheaper than using Ben's helicopter).
A lot of the new earned money entering into the economy is not being used to create new jobs, its being “invested” in financial instruments. Workers are not creating new product, investors are placing side bets on the financial markets. The profit is gone from home building industry. Investment in rental property is a losing enterprise. Consumption seems to be tapering off. Home remodeling appears to have hit the skids. Starbucks seems to be doing OK, you have to draw the line somewhere.
Interest rates are dropping but you can't force people to borrow money unless there is some sort of return (like a house appreciating at 20% a year). That would explain why the stock market as well as the commodity’s markets are still in play. Cramer the other night was forecasting Google at $750. Everything is still going up. The stock market had a little hiccup on Friday. Nothing to worry about, Google kept on ticking just like a Timex watch. Of course it can’t be a bubble, bubbles don’t get that big!
You have a bunch of banks forming a consortium to bail out the CDO and SIV holders . They are creating a new financial instrument called a "USA," which is short for “Up in Smoke Assets.” It ought to be a hot item if they can figure out a way to package it. It’s kind of like selling invisible goldfish. Give the buyer one or two extra for free, so he thinks he’s getting a real bargain and then sell him some invisible fish food to boot.
The economy’s current condition reminds me of the embezzler and a millionaire taking a vacation at the same resort. The embezzler knows whose money he is spending. The millionaire has no idea that he is broke, but hey, everyone is having fun. Are we broke yet?
Monday, April 06, 2009
US to Sell Gold Reserves
World leaders agreed the other day, that the International Monetary Fund should sell gold to help stimulate world economies. Naturally the price of gold dropped below $900 per ounce when the markets learned that the IMF is going to sell 400 tons of gold.
Let’s just picture the IMF secretly located on some remote island with 3,400 tons of gold. Pretty implausible, isn’t it? This gold had to come from various world governments (i.e. members of the IMF). Most probably the IMF has pledges of gold in the form of paper certificates.
Here is where it gets technically twisted. Before when the world was on the gold standard; each country had a gold room with locations assigned to each and every country. If Germany sold one million dollars of goods to the US, one million in gold went from the U.S. part to the German location, and vice versa. If one country in the U.S. depositary got a pretty good size accumulation of gold, they might send over a boat to pick up the surplus. Then when you get about 10 of these world depositary storage vaults talking back to each other, the boat is not necessary, you owe to some other country your gain here.
If the IMF were to take a U.S. gold pledge certificate and submit it for cash currency, no gold is sold, but the IMF’s account now has less gold bars in it. It is here, that the true purpose of the gold backing can be realized. The gold guarantees the purchasing power of the sponsoring government's currency. If the US currency drops in value drastically, we have to cover the gold certificates at the present gold exchange rate.
Imagine that the IMF comes to one of these storage facilities to take physical possession of the gold, and then they sell it. Assume that the gold is sold in the US for dollars and the IMF gets a U.S. currency deposit of X amount of dollars. The extra effort to sell the gold on the spot market doesn’t make a whole lot of sense, does it?
Once you understand that the IMF holds no physical gold, the picture becomes clearer. World governments are realizing that there is a rush to convert currency into gold and as prices for the real thing escalates (it doesn’t seem like you can lose on this investment). So if we take the headline “IMF to sell gold,” and change the wording a bit to: “U.S. Government to sell down its Gold Reserves,” and I might add in parentheses, (in an attempt to tank the speculation in gold commodities), you see the real story. It didn’t work for Nixon and he had to eventually close the gold window.
I do caution the readers, I have not been able to really find any viable research information on what you have just read. Most references, from Google, were extremely vague in reference to the tangible assets of the IMF. You have to ask yourself, where do you get 400 tons of gold to sell, matter of fact like? Once you answer that question, this seems to fall into place. I could be accused of using a razor blade to make puzzle pieces fit, but I leave it to you the reader.
Let’s just picture the IMF secretly located on some remote island with 3,400 tons of gold. Pretty implausible, isn’t it? This gold had to come from various world governments (i.e. members of the IMF). Most probably the IMF has pledges of gold in the form of paper certificates.
Here is where it gets technically twisted. Before when the world was on the gold standard; each country had a gold room with locations assigned to each and every country. If Germany sold one million dollars of goods to the US, one million in gold went from the U.S. part to the German location, and vice versa. If one country in the U.S. depositary got a pretty good size accumulation of gold, they might send over a boat to pick up the surplus. Then when you get about 10 of these world depositary storage vaults talking back to each other, the boat is not necessary, you owe to some other country your gain here.
If the IMF were to take a U.S. gold pledge certificate and submit it for cash currency, no gold is sold, but the IMF’s account now has less gold bars in it. It is here, that the true purpose of the gold backing can be realized. The gold guarantees the purchasing power of the sponsoring government's currency. If the US currency drops in value drastically, we have to cover the gold certificates at the present gold exchange rate.
Imagine that the IMF comes to one of these storage facilities to take physical possession of the gold, and then they sell it. Assume that the gold is sold in the US for dollars and the IMF gets a U.S. currency deposit of X amount of dollars. The extra effort to sell the gold on the spot market doesn’t make a whole lot of sense, does it?
Once you understand that the IMF holds no physical gold, the picture becomes clearer. World governments are realizing that there is a rush to convert currency into gold and as prices for the real thing escalates (it doesn’t seem like you can lose on this investment). So if we take the headline “IMF to sell gold,” and change the wording a bit to: “U.S. Government to sell down its Gold Reserves,” and I might add in parentheses, (in an attempt to tank the speculation in gold commodities), you see the real story. It didn’t work for Nixon and he had to eventually close the gold window.
I do caution the readers, I have not been able to really find any viable research information on what you have just read. Most references, from Google, were extremely vague in reference to the tangible assets of the IMF. You have to ask yourself, where do you get 400 tons of gold to sell, matter of fact like? Once you answer that question, this seems to fall into place. I could be accused of using a razor blade to make puzzle pieces fit, but I leave it to you the reader.
Sunday, April 05, 2009
Fictionalized Accounting -- AKA BS
Forgetting politics, I am getting tired of turning on the TV and every day there is Obama telling us what the government is doing next. A lot of Presidents were accused of shunning the media, not this one. He even stood up the other day and told us that the government would honor GM car warranties. Just who is going to pay that bill? It’s nice to know that when the Defense Department buys a tank from GM, we the people cover the warranty repair.
It seems as if the taxpayer’s wallet is removed from this whole situation. Congress is going to lower our taxes, on top of that many people won’t even pay taxes, (they’re unemployed). Government revenues will drop by 50% and at the same time government spending will triple.
The housing collapse is getting “better,” it still doesn’t cost anything to buy a foreclosure. And if it doesn’t work out give it back to Fannie. At least you get to live rent free for a year.
This bail out money going to the “banks” is another strange item. Why loan to perspective home owners at 4.5% interest when the bank can put in into the latest and greatest bubble credit card debt? In that market, financial institutions can clean a plow with 28% interest return on cash loaned at zero percent interest (by way of the Bank of Uncle Bernanke Sam). I get 5 credit card applications a week still. It’s hard to figure out why these companies issues more; haven’t they done enough damage already to people that are broke?
The Federal Reserve lists credit card write offs at 8.82% for February. They suggest that it could approach 10% by year end. I suggest it could approach 14% by June. The aggravating thing about credit card debt is the fact that many families could conceivably have 20 to 30 cards.
Sane banks might suggest that all credit be cut off; our government will suggest otherwise, extend credit to stimulate the economy. Do you get the feeling that the people in charge haven’t got a clue, but by golly they’re going to fix this mess, even if it kills the taxpayer?
The irritating statements I see being made lately suggest that the worse is over and we are emerging out of this slump. It’s kind of like being hit by a car, laying on a rail road crossing and the train is right around the bend blowing its whistle.
It seems as if the taxpayer’s wallet is removed from this whole situation. Congress is going to lower our taxes, on top of that many people won’t even pay taxes, (they’re unemployed). Government revenues will drop by 50% and at the same time government spending will triple.
The housing collapse is getting “better,” it still doesn’t cost anything to buy a foreclosure. And if it doesn’t work out give it back to Fannie. At least you get to live rent free for a year.
This bail out money going to the “banks” is another strange item. Why loan to perspective home owners at 4.5% interest when the bank can put in into the latest and greatest bubble credit card debt? In that market, financial institutions can clean a plow with 28% interest return on cash loaned at zero percent interest (by way of the Bank of Uncle Bernanke Sam). I get 5 credit card applications a week still. It’s hard to figure out why these companies issues more; haven’t they done enough damage already to people that are broke?
The Federal Reserve lists credit card write offs at 8.82% for February. They suggest that it could approach 10% by year end. I suggest it could approach 14% by June. The aggravating thing about credit card debt is the fact that many families could conceivably have 20 to 30 cards.
Sane banks might suggest that all credit be cut off; our government will suggest otherwise, extend credit to stimulate the economy. Do you get the feeling that the people in charge haven’t got a clue, but by golly they’re going to fix this mess, even if it kills the taxpayer?
The irritating statements I see being made lately suggest that the worse is over and we are emerging out of this slump. It’s kind of like being hit by a car, laying on a rail road crossing and the train is right around the bend blowing its whistle.
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