The Big Pig

I just read the official press release for the big stimulus package. The federal government has obviously hired a really good marketing firm because I have never seen so much pork masquerading as “stimulus”. There is no underlying theme to the spending except to spread the money around. Let me offer some interesting tidbits:

The overall summary states that there will be unprecedented accountability in the spending because of the RAAT (Recovery Act Accountability and Transparency) Board. Maybe their first act should be to figure out where the $31B is missing from their Executive Summary. I added up all of the spending in the executive summary and got $518.7B, about $31B short of the $550B mentioned in the summary. I guess that $31B already went down the RAAT hole.

I also performed a simple classification analysis of spending. Turns out most spending will not go to new stuff (i.e. stimulus) but instead will go to just doing things the way we currently do them. All of the fighting in the California legislature, for example, will be moot because $328B (of which California will get maybe $30B) of the stimulus goes directly to states to keep their entitlement programs and government employees employed. California, problem solved! Of course I’m sure that they will raise a whole bunch of taxes before “discover” this aspect of the stimulus package.

I was interested in the $11B “Smart Grid Investment Program”, which is supposed to be used to modernize the electricity grid. I looked it up on Yahoo and got 54 hits, all of which were copies of the press release in one form or another. We are going spend $11B on something that nobody knows what it is? If this is an honest thing it will take 4 years just to define it. $11B on paperwork. That is the change I expected.

Another piece spends $2B on battery technology. $2B? I can’t imagine how to spend $2B on battery technology. How many battery researcher are out there? I can’t imagine spending this in a year or two years or even four years.

Overall, the stimulus package will spend $825B, of which 4% is unaccounted for, 40% is doing business as usual, 33% is for “tax cuts” (actually just giving money to some people for nothing), and finally 23% for new stuff. Among that new stuff, most is going to rebuilding things to make them more energy efficient. That is probably a good idea, but my guess is that if they were to spend that money on building nuclear power plants we would all be better off.

Obama and Biden, the Delusionists

When asked which of the four candidates running for President/Vice President scares me the most my answer is Joe Biden. After his debate with Gov. Palin, people interviewed on the street thought that Biden was very well informed, that he knew lots of things. What these people don’t know is that pretty much everything that Biden said was untrue. Biden claimed the U.S. and France kicked Hezbollah out of Lebanon. When did that happen? Biden complained about the economic policies of Bush that led to excessive deregulation. Bill Clinton signed the deregulation law and Biden himself voted for it. The list of Biden’s not so factual facts during the debate is way too long for this post.

A few weeks earlier Biden remarked on our memories of watching FDR on TV during the crash of 1929. Unfortunately TV was only commercialized after World War II and FDR wasn’t President until 3 years after the crash. I think he was referring to FDR’s “fireside chats” on the radio during the Great Depression. In 1987 he claimed he went to law school on a full academic scholarship and finished in the top of his class. Newsweek reported that he went to school on a half scholarship and finished in the bottom quarter of his class. You would think that Biden would at least know his own life history.

So is Joe Biden just a good liar? I don’t think so. I think Joe Biden is delusional. I watch “House” at home with my kids and sometimes when, for example, they show a woman with spiders crawling all over her body, my daughter turns to me and asks “Is that really happening Daddy?” I reply, “She thinks it is, but it isn’t.” That pretty much sums up Biden. If he becomes President we might be attacked by Martians, at least in Biden’s mind we might. His latest quip about there being an “international incident” shortly after Obama takes office is a Biden delusion. You might say he was just warning us, but I think it goes further than that because Biden went further than that. He said that the incident might be contrived. OK. Then he said that Obama would do what would look like the wrong thing… Interesting, he obvious has some specifics in mind, some visions up there that only he sees. Then he said that he would need the support of the people with whom he was discussing this delusion because the rest of the country or the world might be against them. Wow. I’m not a psychiatrist, but maybe this is the delusion of a paranoid schizophrenic. I wish someone in the audience had asked him to describe exactly what scenarios he was thinking of. Perhaps Obama would round up all the Jews and put them in camps to satisfy a request from a nuclear armed Iran?

At least Obama seems to have his feet firmly on Terra firma, right? Obama’s latest economic theory shows that he might be equally delusional or worse, he has the ability to project his delusions directly into the minds of his supporters. He has convinced at least one of them that our government will be paying her gas bills and her mortgage. I don’t think she is alone. Obama’s retort to his opponent’s charges that he is a socialist is not to deny it, but to compare socialism to sharing ones lunch or toys with another. If sharing is the issue then perhaps he should talk to Biden, that most patriotic and generous of citizens, who contributed a whopping $369/year over the last decade to charity. Perhaps Biden can explain his virtue and selfishness. Socialism is not about sharing, it is about force. A better example would be what if Obama’s teacher had taken half his sandwich, every day, and given it to her pet student. I wonder how long it would have taken a teenage Obama to beat the crap out of that guy.

While Obama claims his “tax” plan is more like the Clinton tax plan, in reality it is an amplification of the Bush tax plan. Say what? As I’ve pointed out before, Obama = Bush. Under Bush, low income earners pay no income taxes, zero. Then how could Obama give them a “tax cut”? He can’t. He just gives them a check. Of course with so many low income earners the checks aren’t going to be so much. Enough to buy a car as Obama now claims? No. Enough to pay their mortgage. I doubt even one month. Enough to pay their gas? Probably not because gas prices are going to go up again. The check might be enough to buy a Chinese built TV or computer. That might float all boats in China, but not here in the U.S.

Obama has sold his delusions to the public but Biden’s remain his little secret. If Joe Biden ends up President there will be three Americas. Those that pay income taxes, those that don’t, and those that live only in his head.

Is Obama a Decent Person?

I listen to a very informed radio commentator on weekends. He used to build nuclear bombs. He supports John McCain but always says that Obama is a decent person, he just prefers McCain’s energy policy to Obama’s. That got me thinking- what proof do we have that Obama is a decent person? I am asking this as a poll, if you can think of reasons, I’d like to know.

Here are some things that might indicate that he is a decent person: he smiles a lot, he laughs, he doesn’t have any felony convictions, his kids haven’t written any “my parents are horrible” books (of course they just learned to read a few years ago). He left his campaign to visit his ailing grandmother (of course he called McCain erratic when he suspending his campaign to deal with our sick economy).

There are a few reasons to think that he might not be a decent guy.

He is not a modest man, he is actually quite arrogant. As an example, he broadcast his V.P. announcement at 3:00am just to mock his already beaten opponent, Hillary Clinton. Today he is running ads in Arizona, again trying in his own way to humiliate John McCain. Nice guy.

He doesn’t like any sort of dissent. Just today he kicked three reporters off his airplane because their employers endorsed his opponent. He is constantly remarking that his poll numbers would be better if not for Fox News or Sean Hannity (who works for Fox News). Pew research found that the media is pro-Obama, but that doesn’t seem to be enough for him.

He smokes, but his vanity doesn’t let us see that.

But the biggest indicator that he might not be such a decent person is that he hangs around with a group of people that have spent their lives fighting to bring violent change to the U.S. and Israel. OK, if he is a professor or on a board of directors then he might have to go to meetings now and then with some unsavory peers. But that doesn’t mean that he has to go to dinner at their place, or that he has to praise their efforts in public. What would a decent person do if he went to a dinner and someone stood up and saluted “Heil Hilter” and meant it. Instead of outrage Obama just asks to pass the sweet and sour shrimp. And what is this excuse that Obama was 8 years old when Ayers bombed the Pentagon. The question I would ask Obama is what would he think if his daughter was playing on the White House lawn when a modern day “Weatherman”, disgruntled with a President Obama’s policies, threw a Molotov cocktail over the fence. Do you think his other daughter would forgive the man later in life because, after all, she was just 8 years old at the time? Maybe we should all excuse the Nazi’s for killing six million Jews because, hey, none of us were even born yet.

Obama has not shown that he has any moral compass, only a political compass. The news media has been unable to find anyone who really knows this guy, or at least nobody willing to talk about it. That is strange to me. McCain has lots of people that know him, have worked with him, have been in his personal life, and all of them seem to like him. So, after two years of running for office the question remains, is Obama a decent person?

“Redistributive Change” – Translation Please!

WARNING – IF YOU ARE OFFENDED BY THE WORDS BLACK OR WHITE PLEASE DO NOT READ THIS!

It seems to have taken 18 months of a campaign for someone to look into some of the actual communications of Sen. Obama. The Senator is a slick guy, and his friends and associates are keeping their mouths shut. The rest of us have to listen to the Obama of today, who is only saying what all politicians say, anything they can to get elected. Obama has made his entire economic plan about his so called tax plan, which has little or nothing to do with economics or taxes. Obama has a theory that he finally explained to “Joe the Plumber”: take wealth from those that have it, spread it around to those who don’t, and everyone will be able to hire “Joe” to fix their pipes. Joe’s answer was, “That doesn’t sound right to me.” Indeed.

The idea of redistributing wealth is as old as wealth itself. The Roman Emperors redistributed wealth the old-fashioned way, they killed the rich Patricians they didn’t like and gave their stuff to their soldiers and other supporters to secure power. Mao, Lenin and Stalin did the the same thing. Robert Mugabe is the latest addition to this method of redistribution.

Western societies are based on a much milder form of redistribution of wealth based on governments spending of lots of money on who and what they see fit, and taxing people according to their ability to pay. We all accept this form of redistribution of wealth because we all get some benefit from the government and we all pay taxes. That is, until George Bush took office. Today a large percentage of the public, people on the low end of the pay scale, pay NO income taxes. That is the unspoken truth the Bush tax plan.

Sen. Obama is now pushing for more redistribution. But until now it was unclear why Obama would favor giving people even more money from the wealthy. He has said he is doing this to be fair, not to stimulate the economy. I think “Joe” called him on that one. So what are Obama’s real motives? I think these came to light only this week with the release of a tape from a professorial exposition on local public radio. A short uncut quote:

If you look at the victories and failures of the civil rights movement and its litigation strategy in the court, I think where it succeeded was to invest formal rights in previously dispossessed peoples, so that now I would have the right to vote. I would now be able to sit at the lunch counter and order as long as I could pay for it I’d be okay. But, the Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in the society.

This passage, and the elaboration that followed, can be difficult to understand because it contains lots of euphemisms that liberals use to disguise what they mean. Let me translate:

As a result of the civil rights movement courts let black people vote, but that isn’t enough. They should have taken money and power from white people and given it to black people to even things out. Unfortunately, the Constitution got in their way. I think we should pass some laws to fix that.

I can’t wait for the Department of Social and Economic Justice. Just don’t rename the Justice Department: “The Man”.

A Three Point Plan to Get Us Back on Track

Before we embark on another round of stimulating our economy by reducing taxes or printing more money and giving it away, we should get our economic system back on track. The instability in our system that manifested so dramatically a few months ago with the collapse of Bear Sterns has caused our banking system, our money system, to freeze with indecision, fright, and paralysis. The issue now seems to be somewhat understood: there are too many worthless or bankrupting assets in the hands of the institutions that control our money. The problem must be fixed before we can hope to stimulate the general economy into prosperity. If the problem is not fixed, no amount of stimulation will help.

I would like to propose a simple three point plan to get us back on track:

1. In the short term, the government should pay the mortgages for foreclosed properties to get them our of arrears. This might seem like welfare but I’m looking at it from another perspective. If we invest $1 into a bank it can only get $9 from the Federal Reserve Bank. That is 10:1 leverage. If we pay $10,000 to get a house out of foreclosure, then the whole original value of the house is available for the bank to borrow against. That is perhaps a 100:1 leverage, at least in the short term. 100:1 leverage means that we would have to put up $70B instead of $700B to get the same effect. What happens to the money we put in? We get equity in the properly in proportion to the owner of that property. So, for example, if the owner of a foreclosed property had $100K equity in that home, and we put in $10K, we would get 9.1% equity in the home.
2. Go to court and establish that so-called “default swap” derivative contracts, and other derivatives are illegal gambling and therefore unenforceable. This might set off a bunch of lawsuits and accusations of fraud, etc. but that might be good in the long term. Eliminating the cloud that a default swap might come due and kill a bank or insurance company (the “fuckle finger of fate”) would bring confidence in lending, a crucial step in restoring faith to our money system. I had proposed a more complex system for the long term that would allow gambling for financial institutions, but in the short term, let’s just get off the juice.
3. Since paying the mortgages of foreclosed properties would be prohibitively expensive in the long term, the government must set up a system to sell these properties (we all have an interest in these properties). If the real-estate market recovers, then this will result in good yield, but if that growth is slow, which it will be, then we need to find investors to take on the challenge. The easiest way to encourage new investment into real-estate (or any business) is to offer a tax incentive. Perhaps if the capital gains tax is eliminated for any gains in any foreclosed property, whether one lives in it or just uses it for investment, that would be incentive enough.

Eliminating the current credit crunch by using the most leveraging methods, eliminating gambling masquerading as securities, and providing tax incentives for long term investors that step up to help solve our current problems is the best solution to our money crisis. Relying on the government to invest $700B or more of our dollars and simultaneous attempt to stimulate the economy will add even more instability to the system, something that none of us need.

A Solution to the Financial Crisis

Let me preface this post by saying that I have no idea what I am talking about. That said, I think I understand the root cause of our current financial crisis and I would like to propose a solution, or a class of solutions, to the problem.

First, let me explain my view of the problem: gambling masquerading as investment. The financial universe has become two separate worlds, one that is used to finance economic activity and the other used to gamble large amounts of money on a global scale. The second world has become much larger than the first and has leaked into the first. When you have a huge pot of crap that drips onto a much smaller cup of soup, everyone ends up eating shit. That is what we have now. The ultimate solution to this problem requires separating the gambling from the investment and putting different lending standards on these two activities. For example, a bank should be able to loan money for investment purposes but not for gambling purposes.

Even separating what is investment from what is gambling can be difficult for some. For example, is a mortgage on a house to someone who will never be able to pay it back an investment or a gamble? I would call this mainly a really bad investment. Why? because you always have the underlying house which is a real property with real value. Now, if I insure a mortgage on a house to someone who will never be able to pay it back, that is a gamble because either I get my money back or I get nothing depending on what someone else does. Sounds like gambling to me. Does that make the entire insurance industry gambling? Maybe, but perhaps one could say that something like life insurance or car insurance or fire insurance isn’t a gamble because of the history of probabilities involved. Still, covering one gamble with another gamble is really just gambling. How about options trading? I would call that 100% gambling. I am not against gambling, but I wouldn’t loan money to someone to do it. Gamblers all have the same underlying drive, when things are hot they can’t quit. Eventually they get cold and lose it all and then some.

One general rule for differentiating between an investment and a gamble is that an investment will have an influence on the outcome of that investment, while a gamble will not. For example, if I were to invest $1B in Cisco, the odds that I will get a good return (because they can use the money to grow the company) are much better than if were to invest $1. On the other hand if I were to gamble a $1B on a coin toss the odds of winning are no better than 50/50, same as if I were to gamble $1. This is not the sole distinction between gambling and investment, but I think it is a start.

So here is my solution: all public companies should be reviewed by an accounting firm that assigns a new class of shares for that company. We can call that class the “I” class for investment. Everyone owning shares in a company would be able to trade so many regular shares for so many “I” shares depending on the “gambling index” for the company. A company that has no gambling assets would have 100% “I” shares. An investment house or other company that has 50% regular assets and 50% gambling assets would split its shares 50 I and 50 regular. The “I” shares would then trade on a separate basis. The margin requirements for the “I” shares would be higher than for the regular shares just to make sure that banks don’t get too much into gambling.

I don’t think that evaluating the risk of an investment is anything new to the financial world. That is what rating agencies like Moody’s do for a living. In fact much of the current mortgage problems have been caused by rating agencies assigning AAA ratings to complete crap. Before my scheme could work these companies would have to abandon their current rating schemes and adopt a new one based on the gambling index.

I realize that any real solution is probably 1000 times more complex than what I have proposed, but the principle is there. Let people gamble if they like, but let’s not let gambling leak into our economic system.

700 Billion

This week the news is all about the $700 billion bailout/rescue proposed by Treasury department to fix a perceived “credit crisis.” We all look to the stock market to see the health of our economy and the stock market hasn’t looked good. But, the market hasn’t looked horrible either, certainly not anything that needs a $700B bailout bill. In fact, the market goes up, goes down, goes up, goes down. This isn’t tell us anything. If the Government wants to explain the crisis it has to find something simple, like the Dow Jones average, that shows the problem. I haven’t seen that yet. I don’t know if it exists.

$700 billion came up a few weeks ago, too, in ads from T. Boone Pickens. The $700 billion that we are massively pissed off at giving to Wall Street is the same $700 billion (according to Pickens) that we will pay, every year, to Saudi Arabia, Venezuela, Russia and lots of other corrupt, antagonistic, and socialistic countries for their oil. Apparently socialists don’t care so much about global warming or drilling. They like the money we give them.

T. Boone Pickens is a tricky guy. His plan is to use CNG, compressed natural gas (not a “green” solution by modern green standards), as a transportation fuel instead of (in addition too, actually) oil. We have lots of natural gas, but we use it for generating electricity, so he needed to find an alternative energy source for generating electricity. He picked wind. That was the tricky part. You see, by picking wind he is appealing to the “greenies,” our newest religious fanatics. I think T. knows that wind energy will not work, but he figures that showing commercials with windmills will get much more exposure, if not approval, for his plan than showing plumbs of burning natural gas.

Right now there are only two credible transportation fuels (oil and natural gas) and three credible electricity producing fuels (coal, natural gas, and nuclear). The other so-called alternative energy sources do not and cannot produce electricity reliably enough for a modern industrial nation.

The biggest irony of the $700B bailout bill that “taxpayers” are going to have to repay is that only a small number of “taxpayers” are going to pay it. Why? because only a small number of people actually pay the majority of income taxes. On the other hand, the $700B (or whatever the real number turns out to be) in extra gas prices will be paid by everyone, every year, until someone steps up to sell the U.S. public the truth – the only energy source that will bring cheap and clean energy back to the U.S. is nuclear power.

Reliving the 1970’s

I noticed at the beginning of this year how the times we are living today compare to the 1970’s. The “energy crisis,” the dependency on middle east oil, smaller cars, the war in Afghanistan (in the 1970’s Russia was in Afghanistan), the plan to get out of Vietnam (now Iraq), the Arab-Israeli wars, the total discrediting of a President, and finally the general economic funk. In the 1970’s the economy was in a state of “stagflation,” something that the economists of their day couldn’t explain. Today we have the “credit crisis,” again something that economists cannot explain.

The 1970’s ushered in Democratic President Jimmy Carter to save the day. There are a lot of similarities between Obama and Carter. Both have no experience and had to find a Washington old-timer as the V.P. to get credibility. Both were considered to be great intellects by their adoring fans. I remember a skit on SNL where Carter was taking questions on the phone from viewers and a guy who had O.D.’d on LSD called in and the SNL Carter talked him down. Carter’s knowledge was so vast! Carter ended his presidency a failure. He was clueless, and still is. He is good friends with the Saudi royal family. He told a story on Jay Leno about how the King of Saudi let him use his place in Aspen one winter and how Carter’s daughter was so impressed with the opulence of it. It was clear Carter was too.

The Carter campaign message was the same as the Obama campaign, a message of an honest guy coming to Washington to kick those horrible Republicans out of power. Carter offered a large number of programs to “fix” the economy, raise taxes on the evil rich, and bring fairness and competence to the federal government. Sound familiar? The story turned out to be that of a corrupt incompetent politician. Carter had only one success in his career, getting Anwar Sadat and Menachem Begin to negotiate peace between their two countries. Sadat got a bullet in his head for his efforts.

The Carter years were not a good time for this country, and we are still paying for it. The last year of the Carter administration made Iran what it is today, a menace to worldwide Democracies and perhaps a real threat to the existence of not only Israel, but all of us. Carter was clueless about how bad the Shah’s alternative would be. To contain fundamentalist Iran we propped up secular Iraq. Now we are in a war in Iraq to clean up the mess that Carter brought us, if we can.

But the biggest single burden that Carter put on us today is his killing of the nuclear power industry. Carter was so worried about a strong Soviet Union that he killed our domestic nuclear power. Does that make sense? It did to Carter. He felt is was better to negotiate with the Saudi’s for more foreign oil (and killing most domestic oil production at the same time) and negotiate with the Soviets to reduce nuclear proliferation. Negotiating with one’s enemies isn’t always the best approach.

For those who don’t know how Carter’s 1970’s ended, think 10% annual inflation and 9% unemployment. Listening to Obama today you would think that our 4% inflation and 6% unemployment are the world coming to an end. During the Carter years Obama was stoned (according to his own autobiography), he probably doesn’t remember any of it. Those who don’t remember history are doomed to relive it.

Obama’s Bridge To Nowhere

Bill Clinton used his “Bridge to the Future” to defeat Bob Dole 12 years ago. In this campaign we again hear about a bridge, this one to nowhere. The “Bridge to Nowhere” was originally a metaphor for Government waste. Why build a $400M bridge to connect 500 people to the mainland? Good question. That bridge was never built, but some of that money was used to build roads and other structures that were actually needed.

The “Bridge to Nowhere” has new meaning in this election. Candidates such as Obama are thinking of allowing some limited drilling for oil as a bridge to green energy. The idea here is that green energy will happen in 10 years because of some yet unknown and unknowable invention or discovery. We need the time and the oil, then, to get to this panacea. My view is that this is the real “Bridge to Nowhere.”

A serious analysis in Scientific American (i.e. the authors are seriously promoting their work) of how a solar-based power system for the U.S. might work shows that we would need to cover 165,000 square miles of the southwest with solar panels. I don’t know if this includes cloudy days. Just for reference, Arizona is 114,000 square miles. Implementing the system would require over 40 years and need technologies that currently do not exist. Obama is promoting this bridge to nowhere.

On the other hand, nuclear power plants that reprocess their fuel would yield more electrical power in a smaller space, and could be distributed over the whole country. By reprocessing fuel in place, there is no need to transport or store nuclear waste. Yucca mountain would be obsolete. McCain is promoting such power plants. They were banned in the Carter administration because of Carter’s 12 year old daughter’s fear of nuclear proliferation.

The Democratic party’s position on nuclear power is either uninformed or irrational. They are against all forms of nuclear power. Obama is talking out of both sides of his mouth regarding nuclear power, sometimes he seems to support it, other times he seems to be against it. Will Obama fight against his own party and lead us over the bridge to a nuclear powered future? I doubt. His bridge leads to nowhere.

Surprisingly, McCain Gets It.

I’ve been listening today to the political jousting over the financial problems our country is facing. Obama is claiming McCain “doesn’t get it.” Obama is trying to make “McCain doesn’t get it” his new slogan, hoping it will take off like “It’s the economy, stupid.” did for Clinton. It is plausible that McCain doesn’t understand the reasons for the financial problems we are seeing, and it is equally plausible that Obama doesn’t get it either.

Based on the news of today, McCain thinks that some financial charlatans have invented new and impossible to understand financial instruments (he said that even they don’t understand them) that amount to gambling and have rated them as reliable investments. BINGO. I have been saying this for years. McCain even mentioned specifically derivative investments, which are the exact source of the current financial instability. He gets it.

On the other hand, Obama blamed: 1. Bush, 2. lobbyists, 3. our economic system. Blaming Bush and lobbyists are stock complaints, nothing new or interesting there. But what does Obama mean by “our economic system?” I think our economic system is Capitalism. Does that mean Obama is against Capitalism? I can only assume so. I’m not sure if other people have picked up on this, but I expect them to soon.

Obama’s view of Capitalism comes from the people and institutions that educated him: Frank Marshall Davis (U.S. Communist Party), Columbia and Harvard. He sees Capitalism as the problem, not the solution. Obama has not told us his solution to “our economic system,” but I think it begins with an “S”.