A New Culture War

May 23, 2010

This Is What 'More Government' Looks Like - You Eventually Go BROKE!

You can find an OUTSTANDING article from Arthur Brooks in today’s Washington Post.  I implore you to read it:

 
  The premise of the article is summed up for what these two disparate groups are standing up for.  On one hand, you have the peaceful Tea Party who is for free enterprise, self-determination, liberty, and the freedom to succeed or fail by your own hand.  On the other side, you have the Greek rioters who violently oppose any government attempts to scale its scope back, retain some semblance of fiscal responsibility, and actually remove Greek society’s worst offenders from the government tit.
 
Please read, it is an excellent article that gives one pause for thought.
 
– G. S.

 


Your House Is On Fire – And Mine Is Catching…Thanks

May 20, 2010

   

Well At Least Its Not Worth As Much Nowadays...

 

The Dow dropped 376 points today because Europe’s socialist chickens are coming home to roost…and they’re on fire…and now they’re flocking into our house’s rafters.  Thanks!   Note to every liberal and sympathizer out there –  Socialism does not work!  It kills innovation.  It kills entrepreneurship.  It kills your tax base.  Regulations created to control every aspect of the market and society because you are your brother’s keeper and the government doesn’t trust you to take care of yourself is a proud European tradition.   Taxing the hell out of the productive parts of society and then subsidizing the rest of a country’s lazy work force with cradle to grave societal care is a failure and another European tradition.  Just look at Greece, Spain, and Portugal.  Their economies suck for a reason.  The people expect: 

 A) Luxurious bonuses, B) short work-weeks, C) guaranteed & cushy government sector employment (you think its bad here?), D) health-care as a right, and my personal favorite: 

E) Government checks when you’re a young and able-bodied, yet unemployed person.  Those clowns have no reason or motivation to find employment.  The government gives them a check to pay for rent, food, and smokes for doing nothing, so why work and be taxed to the hilt? 

F) Did I leave anything out?…oh yeah, and you resent America to this day despite us bailing your sorry ass out of not one, but two world wars and then enacting the Marshall Plan afterwards.  Don’t know what the Marshall Plan is?  Look it up here. 

http://en.wikipedia.org/wiki/Marshall_Plan 

  So, various parts of Europe subscribe to my broad swipe to greater (Greece) or lesser (Germany) degrees.  The problem is, they are all tied together with one currency that is not beholden to one government and its central banks to control.  The fiscal policy of the EuroZone is basically like the old adage of having too many chefs in the kitchen – it doesn’t work out well because there is a lot of squabbling and no consensus.  Germany’s ban on naked short selling without consulting its EuroZone neighbors is a perfect example and the impetus to this bad day on Wall Street. 

  So now that everyone knows that no matter what, you are only delaying the inevitable default of Greece’s debt.  European banks from the larger countries like France and Germany will lose money because they’ve invested it in Greece.  US banks in turn, have invested in Germany and France, and they as counterparties will lose money.  That fear is what is driving our stock markets down. 

    Don’t get me wrong…our economy is not nearly as strong or sound as people make you think.  We have 9.9% official unemployment; with real unemployment that includes discouraged workers to be something like 17.6% the last time I heard it.  You have a 13 year record low of mortgage applications after the $8,000 tax credit.  Its going to get worse because we stole future sales in the months ahead so people could get that free money!  You see and hear the pundits on the TV saying that the economy is improving, but look around you…do you really feel like it is?  Big surprise! it isn’t that great.  Our economy is still in the toilet.  It’s not on fire any more, but it easily could be if something like the collapse of the Euro happens. 

   What you are seeing is a market correction and it could be big and painful.  The stock market, whose increases fuels all of this false optimism is finally being smacked down by something painful like the potential collapse of the EuroZone.  That makes everyone go back to the overpriced nature of our stock market and look at the fundamentals.  They do not support where we are and the brokers know it…that is why they are selling.  They are making their money off of the irrational rise the stock market had been on.   It is psychology and now that the optimism isn’t there to prop up the false highs.  It now has the potential to go down and most likely well below the actual lows if it does.  Markets overreact.   It is the same phenomena that lets people think in 2007  that housing prices will go up forever or in 2001 tech stocks will go up forever.  

Good luck and good riddance.  If you think that being the smartest kid in a room full of dumb kids is good, then take a good, hard look in the mirror.  The administration’s sympathy towards market intervention and socialism is simply Europe-light.  All the debt we are accruing is exactly like what the Greeks have done.  If you think we won’t default on our debt because we can somehow control our spending, then you’re kidding yourself.   It may not happen today or next year, but it will happen.  The course we are on is unsustainable and no one, not even the mainstream Republicans have a real answer.  It takes the Ron Pauls of the world to come up with real solutions and he is considered on the fringe.  Well, that is what it’s going to take kids.  The problem has now become that bad. 

    The end game is simple.  The US will be the last one to go down if we don’t change course, but when it does go down for the count, the world economy will go with us.  China still needs us worse than we need them.  Look at the recent evidence from 2008 if you don’t believe me.  Now look at the ripples Greece has created.  What happens when you can’t run to the ‘safety and stability’ of the US because it’s finally and truly is on fire? 

Those aren’t chickens coming home to roost, they are ostriches. 

– G.S.


Spin Baby Spin

May 14, 2010

Yes, our energy future is on fire too

    Along with everyone else, I have watched the now infamous Deepwater Horizon oil well in the gulf spill thousands upon thousand of gallons a day into the Gulf of Mexico for the better part of a month.  Also like everyone else, I think it is a bloody mess.   Not only figuratively, but for the ecological damage, the economic damage, the wasted oil, the money spent trying to fix it, and the ensuing litigation that will certainly happen.

   I think the real shame in this though is the politicizing of this event.   It couldn’t have come at a worse time.  This is no doubt a disaster, but we do not need it to go beyond the unfortunate size and scope the slick has already made.  I am talking about the mostly pointless lampooning of the BP, Haliburton, and Transocean executives where the Congressional hearing devolves into finger pointing on both sides.  I am talking about discussions at all levels of the endangerment of the expansion of off shore drilling.  I AM TALKING ABOUT YET ANOTHER WAY THE BABY IS GETTING THROWN OUT WITH THE BATHWATER!!!

   It is absolutely preposterous and a knee-jerk reaction to say that we should not only curtail the proposed expansion of off-shore drilling, but ban off-shore drilling all-together.  I’ve seen the eco-friendlies out there holding up their signs AND THEY JUST DON’T GET IT.

– How much tax revenue does the oil industry provide?

– In this age of profligate government spending, how much tax revenue could the industry provide with an expansion to help offset some (not a lot, but some) of that spending?

– How many good-paying American jobs does the oil industry provide?

– How many more could it provide in this terrible economy with an expansion of drilling?

– What knowledge/development/technology does oil exploration contribute to geology, the oceans, mining sciences to name a few?

– How much more dependent do you want to be on nations like Saudi Arabia and Venezuela for our oil – places that really don’t like us.  They already have too much control…do you want to tighten the noose further?

– And most importantly, how much will your gas and energy prices in general go up?

  I’m imploring the greenies out there and the Democrats who listen to them to hear me out.  Please, get with the program.  Even if you ride a bike and have a minimal carbon footprint, most of Americans USE oil and its price affects them.  They farm your organic produce with tractors and deliver it with trucks.  They drive to the the factories that make the goods you buy.  At worst, they still work at the docks and drive the trucks that get your imported goods to the market.  Oil is in most of the plastic that you use.  You can’t escape it and putting your head in the sand by saying we shouldn’t expand off-shore drilling is only making a bad problem worse.

     We are already too far behind the power curve when it comes to the energy policy in this country.  Do you remember the summer of 2008?  Do you remember what oil at $145 a barrell looked like at the pump in your area?  I weep for Californians.  Remember all of the news coverage?  Remember average Americans saying how they couldn’t afford to drive themselves to work anymore?  If you think those days will never come again, you are fooling yourself.  They are only to get worse because the planet isn’t making  any more oil and it is increasingly harder to get.  You are not seeing the bigger picture when you extoll the ills of off-shore drilling because of one unfortunate accident.  Yes, BP needs to clean it up.  Yes, there needs to be new shutoff valves and safety standards, but why is it so hard to look at the practicality of the matter.  Even our President  has seen the light!  Giving support to the expansion of off-shore drilling is one of the few things that Obama has done that I can agree with.

   Energy is something that everyone uses, but is not on our radar.  Mark my words, it is going to be a problem along with everything else on this site that I rail about.  To do anything but pursue every option is foolish.  We need to drill more, in the gulf and in ANWAR.  Lets do it safely and ecologically, but we need to do it.  We need the government to incentivize the development of renewable energy sources – solar, wind, second generation ethanol, biomass, whatever.  We need to put serious money towards developing future technologies like clean coal (we have so much of it), hydrogen cells, and fusion-powered reactors.  We are going to need all of this as our energy needs rise and environmental concerns rise.  These are difficult, but long term solutions that need to get worked on now versus being put off for later.  That mentality never gets anything done.

   Lastly, there is nuclear power.  We haven’t built a new reactor in this country in over 25 years!  Three Mile Island was over 30 years ago and we still haven’t gotten over it!  C’mon!!!  It is pathetic that the French are better at this than we are.  80% of their power comes from nuclear reactors.  It is green, safe, abundant, and will provide thousands of construction jobs and thousands of high-paying jobs to run the plant.  This solution has been staring us in the face for  a very long time, but a small minority has allowed further development to cripple construction through regulation and red tape.  Hell, I haven’t even began to talk about our decaying and inefficient power infrastructure and how we could make it smarter as well…

   We are heading for a cliff.  Our oil dependency is only part of our problem, but to make us even more dependent by stopping further off-shore drilling is ridiculous.  Deepwater Horizon is rare failure of over 4000 rigs in the gulf; and it will be the last of this magnitude.  Valves need to get fixed and oil needs to get cleaned up, but not at the eventual expense of our way of life.  It is our fault that we didn’t learn from the energy crisis in the 70’s and ween ourselves off of oil like the Brazilians…but we haven’t.  So, its all we got until we fix the problem.  This article has been intended to point out that larger picture because our energy needs are growing faster than our ability to cheaply supply it.  Yes, we have to worry about being green, but that is a bonus that can be incentivized.  It should not be a tax that the industries are only going to pass on to consumers.  We use oil and energy in general to support our standard of living – which is the best in the world.  People are not going to stop driving cars or give up their wide-screen HDTVs, so we need to look at our energy problems pragmatically and solve them.  Otherwise, we are on a collision course and we only have ourselves to blame by not holding our representatives accountable.

– G.S.


Papered Over

May 11, 2010

The crack in the foundation is still there....

   I’ve been silent on here as of late, but it doesn’t mean I haven’t been watching the news.  

   Normally I write about US issues.  However, I want to point your attention to the Greek financial crisis and tell you to take a good look.  What is happening there is a foreshadowing for what is going to happen here in the US if we keep racking up our national debt.  Eventually, we will not be able to pay for it, just like the Greeks.   So please, read below and ask questions, comment, disagree, but don’t say I didn’t warn you.

   I don’t know if you have been watching the news on the European bailout of Greece, but the issue has ballooned in recent days with the bailout they proposed two days ago.  The call it containing ‘The Contagion’. Let me give you the history.

   Basically, Greece has some debt payments coming due in a week or so.  It is short term debt that comes up every couple of years.  Problem is, Greece LIED to everyone about how much debt it had.  Once elected, the new government came clean and the markets lost all confidence in the country to meet it debt obligations (because it has so much more than it should); so the interest rates they get charged to finance their debt went up.  Not good when its coming due.  So, they needed some kind of bailout from their European Union (EU) partners to make the debt payment.  To get the money, Greece agreed to cut back their government spending.  Among other things, that comes in the form of actually making Greek citizens pay their taxes, laying people off, not having government workers have juicy bonuses and labor contracts,  raisng retirement age from 61 to 65, and raising sales tax to 23% and heaping up more value added taxes as well.  Well, the Greeks are NOT happy at actually having to work, pay taxes, and have their benefits cut; so they riot.  It made for some great photos and some sheer stupdity when people actually died.  disgraceful.

    Well, from all of this, the other governments and banks in the EU have noconfidence that Greece can get its house in order and they begin to believe it will default.  So, they cut their losses and pull their money out – creating a run on the bank…but its not a bank its a country.  Not good, but this isn’t Germany or the US, this is Greece…Greece with its dinky little economy.  They’ve defaulted before, and they are going to again.      The difference this time is that their currency is the Eurodollar and their economy is tied to all the other countries in the eurozone.  Portugal, Ireland, Italy, Greece, and Spain (the PIIGS as they are called) all have similar debt woes.  If Greece defaults, then investors are afraid that the other 4 countries in similar economic shape could default as well, creating runs there.   That spreading is ‘the contagion’ and it would be bad.  So bad, that it would drag the European economy down, destroy the value of the Eurodollar and affect us here across the pond because Europe is a huge trading partner and our financial types have significant investments in major European economies.

    At first Greece needed the equivalent of something like a $25 billion bailout, then it was $60 billion, and then it was $144 billion to shore them up.  Well, it became such a crisis in confidence that the finance ministers across Europe decided that this wouldn’t be enough.  Everyone knew that the money would just vaporize, paying off all the debt holder – much like AIG was over here and it would be throwing away good money after bad.   These ministers had waited too long and too much panic had entered the markets.     So, to reassure everyone and to stop the contagion from spreading, these same finance ministers proposed a $1 trillion dollar bailout fund to essentially backstop all of this government debt from all of the PIIGS.  It is a direct correlation to letting Lehman Brothers fail over here in 2008 and the resulting tanking of the financial market that was bailed out by the TARP program.  It is the same basic principle.

Europe’s version of our TARP program sucks for the exact same reasons.

     It does not address the root causes of this problem – which is too much soverign debt.  Period.  That applies to Greece, Spain, the UK, and here in the US too.  If you think entitlement programs are out of control here, they have been out of control for years in Europe.  They ARE socialists in Europe.  Citizens there expect all sorts of government handouts whether they work or not.  Those that do work, pay high taxes to support such a structure.  Most are okay with this because so much is provided for them…but they grow to expect it.  You have serious problems when they are taken away.  Hence rioting.

     The problem with all of that is that it does not encourage personal productivity or work.  This is especially obvious in Greece, Spain, and Portugal which are not known as hard-working societies.  Why work when the government will pay for just about everything for you?  Those goodies aren’t free, so the government pays for them –  hence far too much government spending = government debt.  All the while the recipients aren’t paying nearly enough into the system, so the government borrows even more.  It is an unsustainable cycle and the chickens are coming home to roost – and in the developed world, it is first happening in Greece.

    So, instead of making the necessary austerity adjustments as outlined above, the Greeks get bailed out.  Their bad behavior is rewarded.  They keep on spending.  The Greek people are not prepared to make the necessary cuts and Europe’s financial leaders do not have the easy ability to control Greece and are as of yet unwilling and unable to boot them out of the Eurozone.  Remember, these are sovereign countries that do not control their money supply so it is much more complicated

    The solution is to cut the Greeks off, not go into more debt to bail them out.  There is no need to create a massive bailout fund that reassures the European banks that Greece will not default on the debt it owes them.  All you do is delay the inevitable.  That is why the pundits say they are just kicking the can down the road a couple of years.  There is still a spending problem.  More debt does not make it go away.  Rewarding feel-good bad behavior does not encourage painful good behavior.

   You cut the Greeks off by having the balls to kick them out of the Eurozone.   They go back to dracmas, its value plummets, and they default on their loans.  Shame on Greece for its spending and shame on the big banks for making the bad loans to a poorly run country in the first place.  That is a learning moment that does not reward bad behavior.  Neither side played by the rules and couldn’t keep their house in order and thus they have to pay for it.

   You then safeguard the other PIIGS nations with much smaller financial backstops, but let Greece fail.  It sends a message that tells the other countries that the same will happen to them if they don’t get straightened out.  That will send a message to those nations’ leaders and citizens and they need to do whatever it takes because they don’t want to end up like the Greeks.

    The problem with my proposal is that these politicians are humans.  Just like here, political leaders don’t want to have to pay the piper on their watch.  They think that they can borrow and spend their way out of the crisis and leave the problems for the next guy.  Why jeopardize their money, power, and influence?  Hence the ill-used bailout of Wall Street which didn’t help Main Street America and this bailout of Greece which isn’t going to help them or the EU.

    This papering over of the problem only lets it continue on for longer and makes the problem that much worse when things finally do fall apart. 

    Remember, the US Government is the lender of last resort.  There is no one to bail us out when our financial chickens come home to roost.  Just like this massive $1 trillion finacial backstop, our actions of the past 2 years have only bought ourselves some time.   Watch what happens in Greece and Europe in the next few years because they are in worse shape than us.  Greece is the canary in the economic coal mine, but management just pulled a switcheroo and replaced the dead canary with a new healthy one.  The mine is still poisonous and this new canary will eventually have the same fate as its predecessor.

– G. S.