Five Things You Need to Know: Last Chance to Stop the Bailouts
By
Kevin Depew
Nov 11, 2008 3:30 pm
This is it. The opportunity to do the right thing.
 |
|
Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:
When I lived in Kentucky every now and then I would go to a place called the Last Chance Saloon. The place could be a little tough on strangers, but after a couple of hours there were no such things as strangers.
I thought of the Last Chance Saloon today as American Express (AXP) became the latest company to "convert" to a TARP-eligible commercial bank, just so it can gain emergency access to government funds. And then, moments later, I read in the Wall Street Journal that of the first half of the $700 billion bailout allotment, only $60 billion remains.
Distressed companies from General Motors (GM) -- ostensibly an auto manufacturer -- to General Growth Properties (GGP) -- a shopping-mall REIT -- are desperately trying to elbow their way up to the trough. Even worse, the companies that received the initial bailout money, AIG (AIG) and Fannie Mae (FNM) and Freddie Mac (FRE), are finding they underestimated how much money they need. They're back for more.
The Journal says that this rush to belly up to the bar now makes it likely Treasury Secretary Hank Paulson will be forced to go back before Congress and ask for still more bailout money. And so here it is. This is it. Congress has a chance. The last chance to do the right thing and stop the bailouts.
What if Congress stops the bailout, even going so far as to patriotically refuse to authorize the second half of the original $350 billion? We will see a terrifying and dramatic drop in financial markets. Stocks will likely plunge 30% or so from present levels. There will be bankruptcies and layoffs. Times will be tough. Very tough.
What if Congress approves still more bailout money? That money will be quickly absorbed by a financial system staggering under the weight of unprecedented levels of debt. We will see a continued decline in the velocity of money and business activity. Stocks may slowly fall 30% or so from present levels. There will be bankruptcies and layoffs. Times will be tough. Very tough.
Then what's the difference?
The difference is that without more bailouts, within a decade - give or take a few years - we will emerge as a healthier, stronger economy with companies that operate as if they are deeply responsible for their own business decisions. With continued bailouts we will emerge from a lost decade with an economy and society crippled by the cost of bailng out businesses that operated with irresponsibility and a near total disregard for not just taxpayers but for their very own shareholders.
This is it. The last chance to do the right thing.
But you and I already know how this story ends. The right thing will not be done. There will be more bailouts. And then more bailouts. Meanwhile, even as we continue writing checks to failed businesses, once-healthy businesses are facing doom, victimized by zombie companies absorbing dollars that, if freely spent, would be rightly theirs.
USA Today this morning ran a piece on Crestor, an expensive drug that when given to those with normal cholesterol resulted in 54% fewer heart attacks and 48% fewer strokes. Unfortunately, using Crestor in healthy people to save lives would add $10 billion to the nation's healthcare bill.
But so what? See, that money is already earmarked for banks and for those who would pretend to be banks. The great irony in this nationlaization of the finance industry is that chief among those now feeeding from the public trough are the very same pigs that were first in line to denounce other "anti-free market" industrial nationalization platforms that have been proposed over the past two decades; industries such as health care.
Make no mistake, it is not that I think healthcare should be nationalized. I do not. But if I had to choose between paying taxes to subsidize Wall Street failures and paying taxes to subsidize healthcare policies, I would choose healthcare.
Many decades from now, when looking back, this generation of politicians and "financeers" will forever be remembered as those who, when faced with the choice, opted for nationalized finance over healthcare. Congratulations. We've got one; we can't afford both.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2010 Minyanville Media, Inc. All Rights Reserved.
(39)
Reply
2008-11-11 15:45:10
Can I pretend to be a Bank?
Probably not. Not only that, but I am not even a financial genius so I saw this all coming a few years ago. If I were a financial genius I would have lost a few billions of somebody else's money and walked away with a hundred million in cash after being fired.
Money will indeed be poured down more rat holes. In the rat race, the rats always do better than the rest of us.
Great work as always Prof!
Money will indeed be poured down more rat holes. In the rat race, the rats always do better than the rest of us.
Great work as always Prof!
2008-11-11 15:58:38
How true
But you miss the point, Kevin. The point is to keep the pain going as long as possible so businesses (and American society in general) continue to turn to the government for help. Long term pain intact, the current regime will be able to blame the Bush Tax Cuts for at least the next decade as the source of on-going difficulties that can be remedied only by massive tax increases and more government intervention to stave off the ill effects of capitalism run amok. In this sense, the cost of continued bailouts will exact a far higher toll on Americans than slow or stagnant growth. The real casualty will be liberty.
2008-11-11 16:25:54
Don't worry about no earmarks for Crestor. The only scam bigger than the U.S. banking system/ponzi scheme is the scam perpetuated by Big Pharma that high cholesterol causes heart disease and an increase in mortality. This is simply not true.
I know that Kevin is not calling for subsidies for Big Pharma, but I thought I needed to point at how big the scam is when someone as intelligent as Kevin would be OK with giving subsidies to healthcare for Crestor (OK being a relative term). Billions upon billions of dollars are wasted every year on cholesterol lowering medicine that does not decrease overall mortality in patients. It also comes with nasty side effects for the patient. It also helps to keep health insurance costs skyrocketing into what is sure to be the next bubble to burst.
I know that Kevin is not calling for subsidies for Big Pharma, but I thought I needed to point at how big the scam is when someone as intelligent as Kevin would be OK with giving subsidies to healthcare for Crestor (OK being a relative term). Billions upon billions of dollars are wasted every year on cholesterol lowering medicine that does not decrease overall mortality in patients. It also comes with nasty side effects for the patient. It also helps to keep health insurance costs skyrocketing into what is sure to be the next bubble to burst.
2008-11-11 16:31:57
What Really Happens...
Kevin,
I have a good friend in the oil business. Back in the mid-80's, after Penn Square failed, he had the funniest saying. When ever you asked my friend how he was doing, he would respond: "Terrible! But, I'm getting used to it."
Somehow, I think we will all need to learn this response if the bailouts continue. Heck, we'll need it no matter what.
Absolutely a great article!
I have a good friend in the oil business. Back in the mid-80's, after Penn Square failed, he had the funniest saying. When ever you asked my friend how he was doing, he would respond: "Terrible! But, I'm getting used to it."
Somehow, I think we will all need to learn this response if the bailouts continue. Heck, we'll need it no matter what.
Absolutely a great article!
2008-11-11 16:40:06
Government comedy
Part A: Our government lives by the unintended consequenses rule which is mistakes were made when we previously thought we knew what we were doing that need to be corrected now, but we continue to make mistakes now correcting things that happened in the past, that will need to be corrected in the future.
Part B: Our national defense spending has created the greatest military power on earth as long as we don't have to fight against anyone with rags wrapped around thier heads, who belong to tribes or sects.
Part c: Never give the government credit for a conspiracy theory as the government is too stupid to come up with one,
Part D: Watch out for Paulson, he has no stake in the outcome, and he looks like a rat, smells like a rat, behaves like a rat, he is a rat.
Part E: The best way to treat debt is with more debt
Part F: Now that's an interesting letter regarding what the government does best.
Part B: Our national defense spending has created the greatest military power on earth as long as we don't have to fight against anyone with rags wrapped around thier heads, who belong to tribes or sects.
Part c: Never give the government credit for a conspiracy theory as the government is too stupid to come up with one,
Part D: Watch out for Paulson, he has no stake in the outcome, and he looks like a rat, smells like a rat, behaves like a rat, he is a rat.
Part E: The best way to treat debt is with more debt
Part F: Now that's an interesting letter regarding what the government does best.
2008-11-11 16:50:58
Atlas Shrugged...The Lost Chapters
As soon as the first bailout package was passed the story had been written.
There is no way Congress will ever admit it was wrong. It will only use the 700 billion as an excuse to pay more. After all we can't allow that money to be 'wasted'!
What we are left with are a growing string of unsuccessful companies, vampires if you will, that require continual transfusions to stay alive. Does anyone have the audacity to ask why companies that have proven to be unprofitable or home buyers that have been imprudent are favored over the competent and the conservative?
Everything has been turned up side down. Failure is now rewarded while success is punished. If you are a successful business you don't need a tax cut like your spend thrift competition. If you live in a small house and make your mortgage payments you don't need a loan modification like your high flying neighbor.
Knowingly or not, the government has decided to promote failure and that is what they will get...in ever growing numbers.
As the recession takes hold and begins to grow who among us will not cry out...
Why not me?
2008-11-11 17:44:11
It is all very Sad
I agree. You should also read Paul B. Farrell at MarketWatch where he writes about Wall Street's Trojan Horse, Hank Paulson. The only good thing in all this is that we learn a lesson. I hope China can turn their Communism into a working Capitalistic system while we experience our Nationalization.
2008-11-11 17:57:17
How true
You wrote: "The point is to keep the pain going as long as possible so businesses (and American society in general) continue to turn to the government for help."
Surely you don't really believe this? When you get to be a little older, maybe you'll realize, as Mr Ron Price pointed out, they don't have their act together enough to have a conspiracy.
You then wrote: "Long term pain intact, the current regime will be able to blame the Bush Tax Cuts for at least the next decade as the source of on-going difficulties that can be remedied only by massive tax increases and more government intervention to stave off the ill effects of capitalism run amok."
So the whole point of this crisis was to enable the "current" (by which I presume mean "soon to be current") regime to raise taxes?
Dear, dear...
Surely you don't really believe this? When you get to be a little older, maybe you'll realize, as Mr Ron Price pointed out, they don't have their act together enough to have a conspiracy.
You then wrote: "Long term pain intact, the current regime will be able to blame the Bush Tax Cuts for at least the next decade as the source of on-going difficulties that can be remedied only by massive tax increases and more government intervention to stave off the ill effects of capitalism run amok."
So the whole point of this crisis was to enable the "current" (by which I presume mean "soon to be current") regime to raise taxes?
Dear, dear...
2008-11-11 18:18:10
Here's something you CAN do
So it's our last chance to stop the bailouts but Mr. Depew has lost hope and states "But you and I already know how this story ends. The right thing will not be done." Well then why even mention it? Well at least channel that frustration into action instead of resignation.
My point is, there are things to do, and others are doing it. Look at Bloomberg news' request for transparency on the assets being bought up by TARP under the Freedom of Information Act. The Treasury is stonewalling but Bloomberg is still pressing on. Read the article on bloomberb and write your congress person to force the Treasury to be transparent about the assets being bought. Why be against transparency unless there is something to hide?
My point is, there are things to do, and others are doing it. Look at Bloomberg news' request for transparency on the assets being bought up by TARP under the Freedom of Information Act. The Treasury is stonewalling but Bloomberg is still pressing on. Read the article on bloomberb and write your congress person to force the Treasury to be transparent about the assets being bought. Why be against transparency unless there is something to hide?
2008-11-11 18:20:19
The case for doing the right thing?
Excellent article.
My concern is that if these guys don't do the right thing, and in a trustworthy, transparent way, they could end up eroding confidence in the market in a big way. Why care? Well, no one is bigger than the market, and if people feel it is completely rigged (as I have already heard some cynics say), then we could have a mass exit from the market.
We could give a few undeserved bonuses, and secret deals, only to find the majority of people getting out of the market. Then those in line for the bonuses and secret deals will lose far more money, along with the rest of us.
Something to think about?
My concern is that if these guys don't do the right thing, and in a trustworthy, transparent way, they could end up eroding confidence in the market in a big way. Why care? Well, no one is bigger than the market, and if people feel it is completely rigged (as I have already heard some cynics say), then we could have a mass exit from the market.
We could give a few undeserved bonuses, and secret deals, only to find the majority of people getting out of the market. Then those in line for the bonuses and secret deals will lose far more money, along with the rest of us.
Something to think about?
2008-11-11 18:45:57
The case for doing the right thing?
If we are already socializing, why not give and transfer the money to the few financial institutions that have completely clean balance sheets (management can be trusted). Let them make new loans.
The rest already, or soon will have all of their dirty laundry revealed, and when that happens, trust in them will be gone, along with a lot of money.
Or, I hate to say this, form a new national bank with a 5 year charter.
No hidden assets, clean balance sheets, assets from the government. Gulf states, and anyone with real cash left, is welcome to invest.
Don't take on any old junk assets, but make new loans with old fashioned standards. But make it clear this is temporary, and solvent existing banks are expected to grow and take up the slack.
It's all about restoring trust, as soon as and in any way possible.
Any trickery or appearance that it is "welfare for the rich" will just cause more people to take money out of the system. Then your 30% predictions will seem optimistic.
I can't see how we can bail out everyone.
All just my opinion. Jenny says "Let it go"
The rest already, or soon will have all of their dirty laundry revealed, and when that happens, trust in them will be gone, along with a lot of money.
Or, I hate to say this, form a new national bank with a 5 year charter.
No hidden assets, clean balance sheets, assets from the government. Gulf states, and anyone with real cash left, is welcome to invest.
Don't take on any old junk assets, but make new loans with old fashioned standards. But make it clear this is temporary, and solvent existing banks are expected to grow and take up the slack.
It's all about restoring trust, as soon as and in any way possible.
Any trickery or appearance that it is "welfare for the rich" will just cause more people to take money out of the system. Then your 30% predictions will seem optimistic.
I can't see how we can bail out everyone.
All just my opinion. Jenny says "Let it go"
2008-11-11 21:16:03
sad but true
A fine article, Kevin. Unfortunately both people and governments invariably prefer to take the easy way out than taking nasty but necessary medecine.
2008-11-11 23:12:17
Failouts?
Just an idea:
To recreate the ideology of 1938 the fed could recreate FDR's Fannie Mea concept instead of giving capital to finance interests that are more into making a profit at the expense of the taxpayer.
Fund loans to any who have existing sup prime, prime, ARMs, etc later this may extend to the fixed markets.
Fund loans @ a simple fixed rate say 3 â€" 4 % to all who meet a more stringent qualification.These rates should be in the area of the original loans payments.
A side effect of this will force the banking industry to drop interest rates or get stuck with defaults. Also stimulate the market to those who have fixed rate notes.
The refinances will speed the velocity of capital in the market place creating a demand for goods and services much like the original explosion of goods and services created by the original sup-prime mess except that these loans will be based on responsibly qualified loans.
This system would solve a multitude of current errors:
1.Will put capital into the system fast.
2.Put pressure on the banking industry IE: either drop interest rates to compete or get stuck with more defaults.
3.Should restart the building industry with more appreciation loans as such stabilize the current housing markets.
4.Stop the bailout funding of banks hoarding money.
This is not a perfect solution but will limit the defaults to those who can't possible restructure their loans, stick the irresponsible lenders with their bad loans and reward those who have been responsible as well as speed the velocity of capital in the market place.
Well this from a small businessman, Gen Contractor for 26yrs. Seems simple may even work.
To recreate the ideology of 1938 the fed could recreate FDR's Fannie Mea concept instead of giving capital to finance interests that are more into making a profit at the expense of the taxpayer.
Fund loans to any who have existing sup prime, prime, ARMs, etc later this may extend to the fixed markets.
Fund loans @ a simple fixed rate say 3 â€" 4 % to all who meet a more stringent qualification.These rates should be in the area of the original loans payments.
A side effect of this will force the banking industry to drop interest rates or get stuck with defaults. Also stimulate the market to those who have fixed rate notes.
The refinances will speed the velocity of capital in the market place creating a demand for goods and services much like the original explosion of goods and services created by the original sup-prime mess except that these loans will be based on responsibly qualified loans.
This system would solve a multitude of current errors:
1.Will put capital into the system fast.
2.Put pressure on the banking industry IE: either drop interest rates to compete or get stuck with more defaults.
3.Should restart the building industry with more appreciation loans as such stabilize the current housing markets.
4.Stop the bailout funding of banks hoarding money.
This is not a perfect solution but will limit the defaults to those who can't possible restructure their loans, stick the irresponsible lenders with their bad loans and reward those who have been responsible as well as speed the velocity of capital in the market place.
Well this from a small businessman, Gen Contractor for 26yrs. Seems simple may even work.
2008-11-12 03:26:30
Borrowing is not a business
Borrowing is not a business.
I tried to explain the problems with the world economy to my wife, tried to explain why the financial bailouts waste our money. And I finally got through with this statementâ€"â€borrowing is not a businessâ€. â€What?†â€Well, let's say we have a guy, Max. He has a small company. Each year he does a little better. He drives a nice car, has a nice house, buys lots of sports equipment, and takes vacations. His business is borrowing. Each year he borrows a little more, does a little better, this is his business and it works fine. But one year, the bank tells him, â€sorry, we won't loan you any more moneyâ€. Max now has a problem. He has to sell his car, his house, accept anything to try to pay his loans. He is almost out of business, so he goes to the government and they loan him more money.†â€You mean like the banks?†â€Yes, and like almost everyone. Anyway, now he is back in business. But only for a while. Because, borrowing is not a business.†â€And this is what happened in our economy?†â€Yes, our business, as individuals, as companies, as governmentsâ€"our collective business for the last 10 or 20 years has been borrowing. But borrowing is not a business. And the people who promoted the business of borrowing, who helped create this illusion, they are the same people trying to â€fix†the problems by pouring money into black holes. By trying to create again the business of borrowing. Never before in history was borrowing a business and never again (other than the occasional Ponzi scheme) will it be a business.â€
Thank you. Bill
I tried to explain the problems with the world economy to my wife, tried to explain why the financial bailouts waste our money. And I finally got through with this statementâ€"â€borrowing is not a businessâ€. â€What?†â€Well, let's say we have a guy, Max. He has a small company. Each year he does a little better. He drives a nice car, has a nice house, buys lots of sports equipment, and takes vacations. His business is borrowing. Each year he borrows a little more, does a little better, this is his business and it works fine. But one year, the bank tells him, â€sorry, we won't loan you any more moneyâ€. Max now has a problem. He has to sell his car, his house, accept anything to try to pay his loans. He is almost out of business, so he goes to the government and they loan him more money.†â€You mean like the banks?†â€Yes, and like almost everyone. Anyway, now he is back in business. But only for a while. Because, borrowing is not a business.†â€And this is what happened in our economy?†â€Yes, our business, as individuals, as companies, as governmentsâ€"our collective business for the last 10 or 20 years has been borrowing. But borrowing is not a business. And the people who promoted the business of borrowing, who helped create this illusion, they are the same people trying to â€fix†the problems by pouring money into black holes. By trying to create again the business of borrowing. Never before in history was borrowing a business and never again (other than the occasional Ponzi scheme) will it be a business.â€
Thank you. Bill
2008-11-12 07:25:47
Wow, Crestor is the Flouride for old people...
It appears to me our gov. is lathering lipstick on the pig. I would like to see it save some resources for after the bottom hits so it can finance the rebuilding. By rewriting the rules and squandering resources our gov. is making how we get there more important than getting there.
It appears to me our gov. is lathering lipstick on the pig. I would like to see it save some resources for after the bottom hits so it can finance the rebuilding. By rewriting the rules and squandering resources our gov. is making how we get there more important than getting there.
2008-11-12 08:18:10
economics is just another way to call politics
And the amazing thing is how little political fight have these 700bn been worth. There has not been a single strong voice against this measure out of this website.
Compare it not only with health care, but all the education programs successively turned down by Congress, the controversy over the need and cost of measures against global warming, you name it!
Obviously one thing is economic theory and another, very predictable one, is politics. After all we had not become wiser than in 1929 nor the 1970's It was just that the right interest groups were not feeling the same needs as then.
Myrdal was perfectly right in considering economics a lesser art, subservient to politics.
Compare it not only with health care, but all the education programs successively turned down by Congress, the controversy over the need and cost of measures against global warming, you name it!
Obviously one thing is economic theory and another, very predictable one, is politics. After all we had not become wiser than in 1929 nor the 1970's It was just that the right interest groups were not feeling the same needs as then.
Myrdal was perfectly right in considering economics a lesser art, subservient to politics.
2008-11-12 09:05:38
How true
No need to be condescending, Oliver. It doesn't improve your argument.
My point is that the goal of government everywhere (city, state, federal, it doesn't matter) is more government. This is especially true of the liberal, Keynesian strain that we are about to host at the federal level. Government caused the current crisis, perhaps by design, perhaps not. Regardless and not surprisingly, the solution as proposed by government is more government, a solution that becomes easier for the country to swallow with every passing day. Higher taxes and less liberty are the inevitable consequence.
If you believe that government will not take this opportunity (whether it planned it this way or not) to expand its reach then you have a bit more reading to do.
My point is that the goal of government everywhere (city, state, federal, it doesn't matter) is more government. This is especially true of the liberal, Keynesian strain that we are about to host at the federal level. Government caused the current crisis, perhaps by design, perhaps not. Regardless and not surprisingly, the solution as proposed by government is more government, a solution that becomes easier for the country to swallow with every passing day. Higher taxes and less liberty are the inevitable consequence.
If you believe that government will not take this opportunity (whether it planned it this way or not) to expand its reach then you have a bit more reading to do.
2008-11-12 11:30:54
The US has gone to the dumps by moronic bureaucrats. Move to Dubai or Singapore
2008-11-12 12:46:29
Want to hasten settling the housing dilemma: dilute the debtors.
How?
Allow all U.S. corporations to repatriate foreign subsidiary earnings tax-free.
Grant tax prosecution immunity to all expatriated Americans if they shift their domicile permanently back to the U.S.
Auction off five million U.S. citizenships to the highest foreign bidders. The only requirement being that these bidders become domiciled in (and permanent residents of) the United States within one year.
How?
Allow all U.S. corporations to repatriate foreign subsidiary earnings tax-free.
Grant tax prosecution immunity to all expatriated Americans if they shift their domicile permanently back to the U.S.
Auction off five million U.S. citizenships to the highest foreign bidders. The only requirement being that these bidders become domiciled in (and permanent residents of) the United States within one year.
2008-11-12 12:53:15
Atlas Shrugged...The Lost Chapters
The Fountainhead had a happy ending but this malaise / morrass may indeed end with Atlas Shrugging.
2008-11-12 13:41:46
How true
Roger, I take your point, and I don't disagree with you about the tendency of politicians at all levels to try to expand their territories to the detriment of ordinary people. But surely you can see how ridiculous it sounds to be blaming "liberal Keynesians" before they even get in office for the disaster which has clearly been caused by the unbridled free markets of the past 25 years?
2008-11-12 13:43:57
Sorry Kevin, i'm disappointed in you.
While "morally" you are right about this "bail-out" stuff â€morals†don't matter. The horses are out of the barn already, they've been out of the barn for decades, there's no door to even close. The fence has fallen down. Hell, the barns not even there anymore; there's McMansions where the barn used to be â€" made possible with local socialism provided to the developers. Socialism is here, and is embraced by the majority of the population AND the politicians, so lets get with the program here.
What is needed is for people like yourself (especially, as you're a smart guy) to stop the hand wring and start talking about how to invest in a Socialist society. Forget about what's right; nobody cares what's â€rightâ€. Look, the government was building airports and freeways at the expense of "honest hardworkin'" privately financed railroads in the 50's. Anybody complain about that?! Just the few people that didn't "get it". BUT, the reason you've got no trains NOW is because we've got socialist airlines and freeways. And, SO WHAT? You and me are gonna die in the end. All I want to know is how I can invest in the socialist scam and retire comfortably. The equivalent of: â€Sell that New York Central stock and start buying trucking companies and airlinesâ€.
So, lets stop complaining about things you can't control (like: electing Ron Paul, getting rid of the Fed, returning to magical Gold-Standard, putting "those people" back in their places, WHAT EVER) and look forward to socialism and how SMART PEOPLE can â€capitalize†on the scams.
What is needed is for people like yourself (especially, as you're a smart guy) to stop the hand wring and start talking about how to invest in a Socialist society. Forget about what's right; nobody cares what's â€rightâ€. Look, the government was building airports and freeways at the expense of "honest hardworkin'" privately financed railroads in the 50's. Anybody complain about that?! Just the few people that didn't "get it". BUT, the reason you've got no trains NOW is because we've got socialist airlines and freeways. And, SO WHAT? You and me are gonna die in the end. All I want to know is how I can invest in the socialist scam and retire comfortably. The equivalent of: â€Sell that New York Central stock and start buying trucking companies and airlinesâ€.
So, lets stop complaining about things you can't control (like: electing Ron Paul, getting rid of the Fed, returning to magical Gold-Standard, putting "those people" back in their places, WHAT EVER) and look forward to socialism and how SMART PEOPLE can â€capitalize†on the scams.
2008-11-12 15:03:11
Excellent, excellent write-up Pepe...
How about a good ol' fashioned income tax revolt to get the message across that a continuation of the Bailout is simply not going to be tolerated?... To reiterate what we all know...that it will all be pissed away in the end? Remember the Boston Tea Party? How about a Washington D.C. TARP Party? What say you Americans? Power to the People.
2008-11-12 16:03:51
How true
In fact, I think a case can be made that closet â€liberal Keynesians†have been in charge for the last eight years at least, and well before that. The new regime will simply come out of the closet.
It's vogue to blame the current crisis on unbridled free markets. But the markets would not have come unhinged if the government's banker had not actually paid banks to make loans in real terms, disrupting markets in the process. Until very recently the only way a bank could generate revenue was to make a loan. That's what they do. The Fed's ridiculously low Fed Funds rate ensured that the usually self-regulating process turned into a feeding frenzy. Please excuse the rough analogy, but Greenspan ferried the country out to sea, spread chum on the water to attract sharks, and then told everyone to jump in, the water was fine. After the bloodbath everyone wants to blame the sharks.
I think that the liberal, Keynesian notion that an elite few can govern more efficiently that the market is flawed and we need to look no further than the Fed and the current administration's attempts to pick winners and losers to prove it. The next administration will only provide icing on that cake.
It's vogue to blame the current crisis on unbridled free markets. But the markets would not have come unhinged if the government's banker had not actually paid banks to make loans in real terms, disrupting markets in the process. Until very recently the only way a bank could generate revenue was to make a loan. That's what they do. The Fed's ridiculously low Fed Funds rate ensured that the usually self-regulating process turned into a feeding frenzy. Please excuse the rough analogy, but Greenspan ferried the country out to sea, spread chum on the water to attract sharks, and then told everyone to jump in, the water was fine. After the bloodbath everyone wants to blame the sharks.
I think that the liberal, Keynesian notion that an elite few can govern more efficiently that the market is flawed and we need to look no further than the Fed and the current administration's attempts to pick winners and losers to prove it. The next administration will only provide icing on that cake.
2008-11-12 18:05:46
How true
Roger, your faith in the free market is touching but I'm afraid misguided. Consider the panics of 1819, 1837, 1857, 1869, 1873, 1882, 1884, 1896, 1901, not to mention 1929, the Dutch Tulip bubble and the South Sea Bubble. Every one of them was caused by the same thing: idiots reveling in a free market. As your apparent bugbear, JM Keynes, noted in his 1936 General Theory of Employment, Interest and Money:
"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done."
As for Greenspan, I think he has made clear recently that he erred in trusting the banks, in a free market, to act in their own long-term interests. And I don't think you could find any reasonably knowledgeable person accusing him of being a Keynesian, in or out of the closet.
Mind you, at bottom I don't disagree with you: after all, it was probably the interventionists (I prefer this to Keynesian, because Keynes really wasn't a Keynesian) who cause the crash of 1974. As in most matters, moderation is usually the best policy.
"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done."
As for Greenspan, I think he has made clear recently that he erred in trusting the banks, in a free market, to act in their own long-term interests. And I don't think you could find any reasonably knowledgeable person accusing him of being a Keynesian, in or out of the closet.
Mind you, at bottom I don't disagree with you: after all, it was probably the interventionists (I prefer this to Keynesian, because Keynes really wasn't a Keynesian) who cause the crash of 1974. As in most matters, moderation is usually the best policy.
2008-11-12 20:42:17
How true
Oliver, Your use of the word "touching" implies that I am somehow romantically involved with the concept of a free market. I assure you that I am under no such illusion. A free market is not a cure all or end all. However, it excels over an elite autocracy that controls markets for us, don't you think? If not then I envy you as you enjoy the next 2-4 years. In contrast, I hope can retain enough of my wealth during that time to still be able to log onto this website to learn your thoughts. That issue, regretfully, is in doubt.
2008-11-12 21:08:21
How true
Thank you, Roger, for your good humored tolerance of my crankiness. I shouldn't worry about your wealth. This turbulence creates great opportunities. Stocks like Intel selling for four times cash flow. Stocks selling for less than cash minus debt. Perfectly good junk bonds with 20% yields. Markets bouncing around so fast you can hardly avoid making money just by being long and short at the same time. As for the coming recession, don't worry, I've been through this before, we'll come out the other side ok!
2008-11-13 09:54:39
How true
Oliver, Thanks for your thoughts laced with optimism -- a silver lining in a dark cloud. I look forward to reading more of them for as long as I'm able ;-))
2008-11-13 11:03:33
Sorry Kevin, i'm disappointed in you.
A good response.
I've been trying to think of how to approach that same idea, but there's a problem with the System of systems in that the current level of consumption of resources and the fake economy has to fail first in order to be out of the way. The pyramid is falling because the bottom (the barn, the fences, etc.) have been burned for heat and steam to run the System of building McMansions.
The people are burned out and stupid now. The foundations are rotten to the core, and have to be filled in, but where are we going to get the topsoil?
Almost everyone in these pages is worried about "retirement" and "comfort".
I can only say, "You really believe that, don't you?"
The idea of 'retiring' is gone. The value of the money you thought you put away is gone. It's value came from the perception of perpetual growth in paradise.
Paradise is burning, people, and Bernanke has been flying around dumping money on the flames.
It is so late that you might as well sit in the dark in your underwear watching the shopping channel until the Soylent Green truck comes to pick you up.
To quote our Heroes of Capitalism, the crews of the Mighty Spectre C-130 gunships, "You can run, but you'll only die tired."
If we shut down every petroleum-using machine and every methane-dumping cattle operation right now, it wouldn't make as much as a blip in the 'hockey-stick' chart. The greenies, the windpower utilities, the liberals, the "drill, baby, drill" hockey moms all have only one thing in mind: their immediate comfort.
We all forgot that life IS pain.
I've been trying to think of how to approach that same idea, but there's a problem with the System of systems in that the current level of consumption of resources and the fake economy has to fail first in order to be out of the way. The pyramid is falling because the bottom (the barn, the fences, etc.) have been burned for heat and steam to run the System of building McMansions.
The people are burned out and stupid now. The foundations are rotten to the core, and have to be filled in, but where are we going to get the topsoil?
Almost everyone in these pages is worried about "retirement" and "comfort".
I can only say, "You really believe that, don't you?"
The idea of 'retiring' is gone. The value of the money you thought you put away is gone. It's value came from the perception of perpetual growth in paradise.
Paradise is burning, people, and Bernanke has been flying around dumping money on the flames.
It is so late that you might as well sit in the dark in your underwear watching the shopping channel until the Soylent Green truck comes to pick you up.
To quote our Heroes of Capitalism, the crews of the Mighty Spectre C-130 gunships, "You can run, but you'll only die tired."
If we shut down every petroleum-using machine and every methane-dumping cattle operation right now, it wouldn't make as much as a blip in the 'hockey-stick' chart. The greenies, the windpower utilities, the liberals, the "drill, baby, drill" hockey moms all have only one thing in mind: their immediate comfort.
We all forgot that life IS pain.
2008-11-13 11:36:31
Excellent, excellent write-up Pepe...
How, exactly, do you have an "income tax revolt"?
Not do paperwork that you shouldn't have had to do to start with to justify the money they take without you seeing it?
Somehow convince employers not to send in the money?
It isn't the government that's the problem. It's the culture. If you want Change, keep it in your pocket.
Not do paperwork that you shouldn't have had to do to start with to justify the money they take without you seeing it?
Somehow convince employers not to send in the money?
It isn't the government that's the problem. It's the culture. If you want Change, keep it in your pocket.
2008-11-13 11:39:12
Excellent, excellent write-up Pepe...
The people who run things own the media.
The revolution will not be televised, just as the protests to the Iraq war went unseen, so shall your tax revolt.
The revolution will not be televised, just as the protests to the Iraq war went unseen, so shall your tax revolt.
2008-11-13 11:45:21
Atlas Shrugged...The Lost Chapters
What if John Galt doesn't WANT to tell everyone the secret of cheap energy? If he's so smart, why would he save the Idiocracy? Didn't everyone in Galt's Gulch pretty much end up dependent upon Galt? And why did they drill for oil shale when they had free energy already?
What if the energy giants assassinate him before his Engine is built?
Most importantly, what kind of weapons can we make from his Engine?
Sarah Palin as Dagne Taggert?
I don't think so. :-0
What if the energy giants assassinate him before his Engine is built?
Most importantly, what kind of weapons can we make from his Engine?
Sarah Palin as Dagne Taggert?
I don't think so. :-0
2008-11-13 11:57:59
Excellent, excellent write-up Pepe...
We start by taking 1040 tax booklets and publications to DC and burning them in a heap near the Washington monument, sort of like burning bras, or burning disco tapes & vinyls, or burning draft cards. Then we take it from there. I must be showing my age.
2008-11-13 14:13:25
Atlas Shrugged...The Lost Chapters
In truth, civilization probably depends on very few... certainly not the ones who won or lost the election.
Right vs wrong is more important than life or death to some - just fewer and fewer, it seems.
It would great to see everybody get what they truly deserve - cynic or optimist?
Right vs wrong is more important than life or death to some - just fewer and fewer, it seems.
It would great to see everybody get what they truly deserve - cynic or optimist?
2008-11-13 22:56:23
Excellent, excellent write-up Pepe...
You start with millions descending upon Washington peacefully. Ghandi style marches. Moving 401K money out of stocks or municipal bonds or treasuries.
Second, everyone files for late filing status, even if you have a refund coming. The inflow will be slowed, then the outflow will be maximized to occur all at once. Change your exemptions so you get to keep your money throughout the year rather than letting them bleed you paycheck by paycheck. Put the money in interest bearing savings so you have it to pay but only after step 3 if they don't listen.
Third, if no response, people withhold paying taxes. If enough people did it, we could cripple the ability to pay federal employees. Plus, they don't have enough IRS agents to process that many cases, it would create a backlog. Wait 6 months or as long as it takes, put the money you owe + 25% penalty in a 6 month CD. When they finally get around to garnering wages or the like, pay them in full.
Fourth, if none of this works, armed revolt would be a last resort. There are millions upon millions of Americans of every stripe who have the guns and ammo and the will if their Liberty is taken away; much more than popular press or society would ever believe. Civil war and bloodshed would be horrendous but it would be better than slavery (socialism).
2008-11-14 12:17:05
Atlas Shrugged...The Lost Chapters
What we are seeing is the failure of the consumption economy. In that sense, the companies that are successful ARE the failures. They have failed to return the value of moderation to their operations so that they would have operations in the future.
The government bailing them out is an example of failed government. Government isn't supposed to give out money. Government is supposed to take in money and give out rules while spending money to enforce them.
The government bailing them out is an example of failed government. Government isn't supposed to give out money. Government is supposed to take in money and give out rules while spending money to enforce them.
2008-11-14 12:19:04
Atlas Shrugged...The Lost Chapters
Minor point, but I think the failure chapter was written as Paulson got on his knees in front of Congress. "The End" floated on the back of his head.
It is one thing to see a bum on the street begging for money from the System, but when the head of the money system is begging for alms from the beggars, there's just no popcorn left.
It is one thing to see a bum on the street begging for money from the System, but when the head of the money system is begging for alms from the beggars, there's just no popcorn left.
2009-11-26 22:13:29
People all over the world know the abercrombie and fitch,but not everyone really knows how fashion the abercrombie is,hollister is the Legend maker. Everybody wears the hollister clothing would be the abercrombie mensand the abercrombie womens, if you want know you can search the Ruehl No.925 or abercrombie outlet in the www.google.com .
Get real-time options trading ideas from Steve Smith, veteran options trader and newsletter author, plus let him show you the way to cut risk and boost your returns through the strategic use of options. Click here for a free 14 day trial to OptionSmith by Steve Smith.
Copyright 2010 Minyanville Media, Inc. All Rights Reserved
