Babylon and The New Jerusalem

Previously I posted a quote from Revelation about leaving Babylon. The book of Revelation is really a tale of two cities - Babylon, the city on many waters, and the new Jerusalem, the city on a hill being prepared for the bride of Christ.

Note that from the time of Revelation until now, neither city has been seen. One city, Babylon, was destroyed by the Persians centuries before Christ. The other has yet to be seen on Earth. So both cities have special symbolic meaning.

Babylon represents the world system of power and wealth, the great harlot who sits on many waters, by which the merchants of the world were made rich by the wealth of her trade. It is a worldwide kingdom that spans across time and enslaves its citizens with the deceitfulness of riches. Its ruler is the prince of Babylon, the ruler of this age.

The New Jerusalem is the city of our God, in the mountain of His holiness. It is a city not built by human hands, whose center is the Throne of God, from which flow the streams of living water that make glad the city of God. It is built on a foundation of precious stones, the apostles and prophets, and whose cornerstone is Jesus Christ the Lord.

Ancient Babylon was used by God to separate and purify His people. The Jews who returned from Babylon to rebuild Jerusalem left established businesses and perhaps family to restore the temple of God. The ones who stayed in Babylon chose a more worldly Kingdom and lost their godly identity.

This is the choice we as Christians are now presented, to choose which master we will serve, God or Mammon (money). I had for most of my life focused my time and energy on the latter, but I sense God calling me back to focus on Him. The time is short for the kingdom of Babylon, and I feel the need to get oil for my lamp while there is still light. I have more to write on this subject, which I will do as time permits.

U-Turn Weekend

Imagine (if you will) you are riding a swift black horse down a winding mountain road.  It's been a wonderful ride, and the setting sun is still illumining the golden edges of the canyon beneath you.

At some point you realize that the horse is out of control.  You want to turn around, so you pull hard on the reins. The horse does not turn but only accelerates down the road.  You are now careening blindly down the road at full gallop when a barrier appears and you see that the end of the road is a steep cliff.  You try frantically to turn the horse but it refuses to waiver from its path of destruction.

Almost in slow-motion the horse leaps the barrier and sails into the black void ahead.  At this point any more attempts to influence the horse are worthless.  Your destiny is sealed.

This is the point we find ourselves.  Like the HMS Titanic slipping slowly, then suddenly into the cold dark abyss, this system that supported us is sinking.  Whether or not there is time to save it is a moot point for me; my time is too short to waste.

So this weekend I am taking a U-turn of sorts.  The Incredible Shrinking Wallet will continue shrinking, but I'm going to focus mostly on the even more incredible Kingdom of God.  I would rather focus on preparing for the now-certain future than vainly trying to fix what has already failed.

I don't really know what lies ahead for me, but I have decided to get out of Babylon and return to my Father's kingdom.  Thank God, it's a long way, but I think the door is still open!

I heard another voice from heaven, saying, “Come out of her, my people, so that you will not participate in her sins and receive of her plagues..." (Rev 18:4)

What the Bible Says About Employment

(I am an evangelical Christian and attend a Baptist church in the heart of the Bible belt.)
My pastor quoted this verse yesterday in reference to fasting.

Isaiah 58:3-6
'Why have we fasted,' they say, 'and you have not seen it? Why have we humbled ourselves, and you have not noticed?' Yet on the day of your fasting, you do as you please and exploit all your workers...
Is not this the kind of fasting I have chosen: to loose the chains of injustice and untie the cords of the yoke, to set the oppressed free and break every yoke?

I took this to heart, and also noted the reference to fair treatment of workers (which was not the subject of the sermon).  I think it is time for the Church to address the morality of certain business practices that do great harm to our neighbors and enrich others at their expense.

Leviticus 23:22
'When you reap the harvest of your land, do not reap to the very edges of your field or gather the gleanings of your harvest. Leave them for the poor and the alien. I am the LORD your God.'

Leviticus 19:13
Do not defraud your neighbor or rob him. Do not hold back the wages of a hired man overnight.

Deuteronomy 24:15
Pay him his wages each day before sunset, because he is poor and is counting on it. Otherwise he may cry to the LORD against you, and you will be guilty of sin.

Deuteronomy 25:4
Do not muzzle an ox while it is treading out the grain.

Jeremiah 22:13
Woe to him who builds his palace by unrighteousness, his upper rooms by injustice, making his countrymen work for nothing, not paying them for their labor.

Malachi 3:5
"Then I will draw near to you for judgment; and I will be a swift witness against the sorcerers and against the adulterers and against those who swear falsely, and against those who oppress the wage earner in his wages, the widow and the orphan, and those who turn aside the alien and do not fear Me," says the LORD of hosts.

James 5:4
Look! The wages you failed to pay the workmen who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty.

Jesus' disciples gathered grain from the fields when they were hungry, as did His ancestor Ruth. (Ruth 2:2, Mark 2:23-24).  The commandment to leave the edges of your grainfield for the poor is beautiful because it doesn't require handing out food; the poor can harvest and cook for themselves.  Charity is only required for the truly helpless.

A Christian Response
Why is the second greatest commandment from Jesus "Thou shalt love thy neighbor as thyself"?

Let me ask this another way.  What does the fellow need whom you pass begging on the highway, or whom you see at the thrift shop picking up food for his family?  Enough money to pay his electric bill, or his rent for a month?  This would certainly be an acceptable gift and much appreciated, but next month he will need help again.

What people really need are good jobs.  Since the Garden of Eden, mankind was made to work.  Work gives people not only money, but dignity and family values.  And it prevents crime.

What would the LORD think about those who drive their employees out of the workplace to be replaced by slaves in a foreign land?

I feel passionately about this because I have seen layoffs happen to so many of my colleagues and friends.  Of course most of them found other jobs eventually and this is certainly not limited to my business or industry.  But it is a national tragedy and symptomatic of a spiritual issue.  I believe that the spirit of hedonism is behind this, and the endless pursuit of money.  To the extent that we in the Church participate in this system, we are responsible to speak out against it and to protect people from it.

If you are an employer, my hat is off to you for putting up with a government that treats you like the enemy.  I don't know how you keep up with the time, taxes and regulations required to employ people in this country!  I encourage you to speak up, rather than giving up.  Speak out rather than selling out.

I have never been an employer, but a lot of people work for me.  People care for my lawn, serve me dinner at restaurants, repair my house, and manufacture the products I buy.  I will always treat them fairly and consider their needs when I deal with them.  I will do my best to influence decision makers at work.  I will use my vote to elect people who support family-friendly business practices.  And I will encourage my pastor and friends to discuss the morality of this critical issue in the context of the Bible and the teachings of Jesus.

Will you join me?

The Balooning Deficit - What's Up With That?

Why the budget deficits?  Find out for yourself here:

http://www.washingtonpost.com/wp-srv/special/politics/30-years-spending-priorities-federal-budget-2012/

The Washington Post provides a nice little interactive tool that helps you see where the money has been coming and going for the last 30 years.  For example:

You can see from the charts where the real problems lie.  First, revenues have declined $600 billion from $2.7 trillion in 2007 to $2.1 trillion the last few years.

Second, spending has gone from $3 trillion in 2007 to about $4 trillion each year since.

So breaking it down further, you will see the exponential growth of the entitlement programs, particularly health care-related expenditures.  You will also see the massive doubling of "income security" which is another word for unemployment benefits.  Oddly, that started in the 2010, most likely due to extending unemployment benefits from one year to two years.

On the revenue side, what happened in 2009?  Individual and corporate income taxes declined by $400 billion.  I believe that was due to an abrubt halt in routine investment gains that had been realized in prior years.  You can't really blame unemployment because payroll taxes hardly budged during that time.  Not only did capital gains evaporate and corporate incomes greatly decline, but you now have a carry-over effect with unrealized capital losses limiting tax revenues.

I guess the most disturbing thing to me is that the 2012 budget calls for a $500 billion increase in tax revenues.  If that doesn't happen we could be staring at a $1.6 trillion budget gap in 2012.  And it could get even worse, with a likelihood of much greater expenditures on interest on the national debt.

$1.6 trillion dollar deficit in a single year - whoa.  That is more than the entire federal budget when the first President Bush left office.  Yet I think the average taxpayer's income is probably not much higher than it was then.  (Mine certainly isn't.)

What can be done about this?  We could probably cut $200 billion from expenditures by getting employment back to pre-recession levels.  That might also add $100-200 billion in revenues.  But primarily the problem is the explosive growth of health care spending.  That absolutely must be stopped, and Obama Care is not going to do it.  Consumers absolutely must become aware of their health costs at the point where they make decisions that affect their health.

I recommend reading a book "The Coming Jobs War" by Jim Clifton.  That's a really good book that explains better than I can do in this blog.

No Place for Old Economists

I've been watching some old economists talking about "typically markets do this", or "when the economy returns to historical norms" or some such nonsense.  Maybe the law of supply and demand hasn't changed, but the historical norms of supply and demand in the West don't apply today and probably won't apply again until the world economy is fully globalized (yikes), or I expire (double yikes).

This really does matter to "main street" people because taxes, government spending and all manner of other decisions are based on these guys being right.

So you have one group of old economists called "supply-siders" who believe that if you throw money at the "rich" in the form of tax cuts, economic growth and jobs will just happen.

You have another group of old economists called "Keynesians" or "demand-siders" who believe that if you throw money at the "poor" that they will generate demand and the demand will result in economic growth and jobs will just happen.

Even the Federal Reserve is governed by these old economic views, as they wasted trillions of dollars "shooting in the dark" with easy money, assuming the economy would just magically recover.

Meanwhile we have tax policies designed to solve yesterday's problems of tight labor markets (capital gains tax breaks) and idiotic internet-bubble bad business models (dividend tax breaks).

Yes, it was a good idea back in the 1900s to incent businesses to invest in capital equipment to improve productivity.  It's not so good now - we are awash in productivity to such an extent that we no longer need about 25% of the available labor force in America.

Yes, it may have been a good idea back in the internet bubble to get companies to think about paying dividends instead of pursuing ridiculous, unsustainable revenue opportunities.  Now - not so much.

Now we have a situation where companies can make plenty of money with very little labor and the quality jobs that are available are easily filled with cheaper resources overseas.  But the supply-siders are continuing to push tax cuts and the demand-siders are continuing to push unsustainable government hand-outs.

At some point right-wingers have to say "tax cuts aren't the solution".  And left-wingers have to say "government hand-outs aren't working".  It's really that simple.  But the left continues to move left and the right continues to move right.  Here I am stuck in the middle again, in a vast un-represented waste land.

Van's List
My solutions involve eliminating laws and policies that make things worse.  That is free and simple.  Heres a partial list:

• Repeal Obama-care.  What a load of job-killing complexity and ill-timed policy.  Let's get people back to work so they can afford their own health care.
• Let the Bush tax cuts expire.  There are better ways to promote quality job creation.  If we're going to throw money at the problem, let's identify the problem first.  One thing for sure - those who live on high investment incomes don't need lower tax rates than those who work for a living.  The progressive income tax we have already provides tax breaks for lower income brackets, whether that is investment gains or earned income.
• Replace payroll taxes on both employer and employee with a revenue-neutral adjustment to the income tax, starting with the first dollar of income.  That will eliminate the concept of government-sponsored retirement and health care entitlements, and encourage people to plan their own futures without government subsidies.  It will also eliminate the perverse tax incentives to replace people with technology or offshore labor.
• Reduce unemployment benefits and re-direct that money to companies who will hire and train near-fit candidates from the unemployment rolls.  People need incentives to work, and companies need incentives to hire and train.  That's a policy that fits the economy today, and not one designed for an economy ten to one-hundred years ago.
• Eliminate all the new Obama EPA regulations and send half the EPA back to the college campuses from whence they came.  Thence they can pontificate about the causes of global warming and other idealistic causes du jour.
• One more radical idea - eliminate the exemption from overtime pay for salaried employees.  There is a problem today with companies eliminating jobs and piling more work on existing salaried employees.  This tactic works in a stressed labor market because people have limited alternatives to longer working hours.  And it is self-perpetuating by keeping the labor market stressed.  By eliminating the exemption from overtime, new employees would be cheaper than overtime, and the workload and wealth of jobs would be more evenly distributed.

If you are still with me, welcome to my world!  I'm sure I lost the left and right in that list of bullet items.  Please let me know if you agree (or not) by leaving comments.

Death of Jobs in America

Sad day in America - Steve Jobs is dead.
I looked around for how he handled Apple and one thing caught my eye.  Apple tried to set up operations in Bangalore about 5 years ago, and decided for various reasons that it wouldn't work.  They remained a high-quality employer in Cupertino, CA and made some of the best products in the world.

There is some irony in his name; I hope his death doesn't mean more than the loss of this one Jobs.  God rest his soul.

Update November 7
OK, so Apple is part of the problem too.  Apparently they run sweat shops in China. 

Busting Myths about US Taxes

We have some really bad tax policy here in the USA. I think one reason is that so many people believe myths told by both political parties to distort the truth toward their progressive or conservative agenda.

Here's my list of myths, half-truths and outright lies

1. Half the electorate pays no federal income tax at all
2. Contributions to Social Security and Medicare are held in an account for its beneficiaries
3. A flat tax will simplify the tax code
4. We need to broaden the tax base
5. Clinton's tax increases balanced the budget
6. Ending the Bush tax cuts will destroy the economy
7. Cutting or eliminating corporate taxes is the best way to stimulate growth

Half the electorate pays no federal income tax at all

True, but misleading. Everyone who works and reports their income is taxed around 6.5% (temporarily 4.5%) to pay for Social Security and another 1.5% to pay for Medicare (which is nowhere near enough to cover projected costs). Additionally employers pay another 6.5% on behalf of the employee, which either effectively comes out of their pay or in many cases costs them their job.

One big problem with this form of taxation is that people don't recognize it as taxation and feel entitled to the money they have contributed. The government doesn't treat your contributions this way; it decided long ago to account for this money as general revenues to fund the government.

Another huge problem with this form of taxation is that it only applies to wage income. People who make their money from investments don't contribute to these programs. People with huge salaries and bonuses stop contributing after a few paychecks (I had that experience one very good year.)  Just to be clear - payroll taxes are for the middle class and working poor. Is that right?

Contributions to Social Security and Medicare are held in an account for its beneficiaries

This is an outright lie.  The government makes it appear to be an account by tracking your contributions, but that money is actually spent to fund current beneficiaries.  Your only hope is that a future generation will still be willing and able to pay for you (if you live that long).

A flat tax will simplify the tax code

This is a less-than-half-truth. The number of tax brackets is not where complexity arises in the tax code. Complexity comes from deciding what taxable income is and what deductible expenses are. Don't believe for a minute that the lobbies in Washington will let their deductions and tax credits slip away. Any change to the tax code with the current crew of legislators and lobbyists will likely work in their favor and make the system more complex, not less. The flat tax is related to the next myth, which is broadening the tax base.

We need to broaden the tax base

Those who advocate this would like to raise more revenues from the middle class. Their argument is that most Americans do not participate in the income tax and therefore are not responsible for the basic services they consume. They also believe that you cannot raise significant revenues from the upper class because the diminishing numbers of very rich can't produce any meaningful increase in revenues without hurting the economy.

This is less than half-true because the very rich aren't really doing much for the economy now (in terms of hiring), and in many cases are doing things to hurt the US economy by offshoring manufacturing and information jobs.  Raising taxes on the middle class would likely hurt the economy as much or more than alternatives like letting the Bush tax cuts expire.

Clinton's tax increases balanced the budget

This is a half-truth.  The economy improved under Clinton because of two macro-economic factors largely outside his control, the end of the cold war, and the build-out of the internet.  Unless you believe Al Gore invented the Internet I have news for you, the Internet would have been developed and Y2K-related technology spending would have been about the same under a Republican president.  That had very little to do with politics.

The reduction of military spending allowed the entitlement state to grow without immediate budgetary consequences, and the Internet/technology bubble produced a wave of one-time stock market gains that created the illusion of a balanced budget.  The fact that tax rates were higher during that time amplified the income to the federal government and contributed to the surplus.

Actually that surplus contributed to the recession that started that year.  And it deceived our political leaders into believing that they had unlimited resources to increase entitlement spending and wage wars, while cutting taxes on investors.  So Clinton’s tax policy did increase tax revenues, but the net effect of the temporarily balanced budget was actually quite negative.

Ending the Bush tax cuts will destroy the economy
This is an outright lie.  Those tax cuts did little to help the economy and there are much better ways to use tax policy to produce economic growth today.  Capital gains tax breaks allow the investor class to pay much lower taxes while investing in companies like GE that use capital to create jobs in India and China.  Dividend tax cuts encourage companies to pay their shareholders, but this has the opposite effect on investment capital and doesn’t necessarily encourage companies or shareholders to create jobs or make other beneficial investments.

Who benefits from the Bush tax cuts?  The overwhelming majority of individual shareholders and mutual fund owners hold these investments in tax-deferred accounts.  Those who benefit from the tax breaks are wealthy investors who can’t participate or shelter their income in other ways.  Is it right that someone making their income from investments (like Warren Buffet) pays 15% while those making the same amount from working two or more jobs pay 28-35% of their income plus 15% to Social Security and Medicare?

Cutting or eliminating corporate taxes is the best way to stimulate growth

This is more than half true. Cutting corporate taxes would encourage offshore companies to locate headquarters here, and may encourage small business owners to incorporate and avoid double-taxation of their income.  But unless payroll taxes and regulatory burdens are lifted these companies may still employ offshore labor and manufacturing, thus missing the anticipated benefits and losing tax revenue.

If we’re serious about cutting corporate taxes the place to start is payroll taxes.  This is a tax that is levied on the thing we need most – employment.  And it is only levied on companies that employ Americans.  That is ridiculous and wrong.  Quite the opposite, the US government should be doing anything it can to reward companies that hire and retain American employees.  If there is a need to replace the lost revenues to fund those entitlement programs, it can be raised from tariffs and surcharges on cheap foreign labor.  And that may not even be necessary since the jobs gained from this policy would reduce unemployment costs and increase tax revenues from the new employees.

Finally, let’s talk about simplification of regulations on employers.  It is SO 19^th-century to look on employers as the enemy of labor.  Employers provide benefits and salaries to attract and retain good employees.  They provide record-keeping services and safe work environments and many other benefits, many as required by existing regulations.  Adding to this regulatory burden costs not only money but critical time and focus from businesses.  Now is the time to reach a balance that stops the tide of uncertainty and fear that is holding back our economy.

Businesses need a clear vision, not of short-term targeted incentives for particular types of business, but a long-term clear road ahead that is not barricaded by government regulators and bureaucrats.  And the road ahead should lead back to America.  This is an environment our elected government can help to foster and restore.

A Christmas Story for Labor Day

To commemorate Labor Day, let me bring an old story about greed into a modern American context.

It’s Christmas Eve, and old Ebenezer Scrooge is counting the gold coins he has accumulated as a result of replacing his accounting department with an accounting service based in India.  He’s visited by three ghosts that night.

The first ghost takes him back to his middle class family that always had food on the table, to his first job where his employer was so kind and generous to him, then to his early days as a private entrepreneur who employed a few of his fellow townspeople.

The second ghost appears.  Time has passed, and greed has gotten the better of him.  He takes the company public, brings in new management.  Soon they’re looking for ways to reduce labor costs.  The offshore accounting services are lined up at the door.  Bob Cratchit is feverishly working into the night, training his Indian colleagues on the back office work while he is “positioned” for a sales job.

The third ghost appears and shows him the future.  Bob Cratchit didn’t make quota and was laid off.  Tiny Tim got depressed and died of a drug overdose.  Scrooge is now too old to stay up all night talking with his offshore management company.  He has cashed out his shares to pay for a miracle drug to cure his cancer, but in the end there is nothing left and he expires.  What a pity, but nobody misses him.

Christmas morning arrives and Scrooge awakens determined to change course.  He hires Cratchit back and gives him a raise, but exorbitant taxes and regulations make it unprofitable, and his competition is still boosting productivity with technology and cheap labor.  He goes out of business and dies penniless but at peace with God.

What? I could have ended with something sappy, but sometimes reality bites! The moral message is the same, and it doesn't have to end this way...

Stimulus by Another Name

Aha - we just discovered Wednesday how the Obama Administration plans to stimulate the economy, by using the Department of Justice to block mergers and the resulting consolidation of assets and inevitable layoffs.

Not that there is anything wrong with that (trust busting).  The lawsuit against AT&T to block the T-Mobile acquisition would forestall or prevent the elimination of 34,000 to 60,000 jobs due to the restructuring that would have taken place.


This is stimulus in two ways, preventing layoffs and encouraging companies to build rather than buy assets.  It will effectively force some money out of the clutches of cash-rich companies into either much smaller acquisitions or internal hiring and "organic growth".

If I'm right about this being a "hidden stimulus" measure, you can expect more of these kinds of lawsuits.  It's the kind of big-government idea that Democrats love, pro-consumer and all that.  Of course it will slow productivity growth and ultimately result in more inflation, but the principle of the Federal government enforcing anti-trust policies is not inherently unconsitutional, like so many other things this administration is attempting to do.

In the meantime it will keep lots of lawyers employed (oh joy).  That's another thing Democrats love to do.  Anyway, you gotta hate these phone company monopolies; they're almost as arrogant as government bureaucrats.  Keep them competing, that's fine with me.

FASB and its Effect on the World Economy

The Financial Crisis of 2007-2009 started and ended largely as a result of the actions of a small group of men known as the FASB (Financial Accounting Standards Board).  This is WAY under-reported by the media, but I learned about it from Bill Isaac on Fox News Channel during the financial crisis.

To be brief, in 2007 the FASB introduced accounting rule FAS 157 aka the "Mark to Market" accounting rule.  That required financial institutions to raise more and more capital to meet reserve and margin requirements as their illiquid asset values plummeted. In other words, they had to sell more and more assets as the value of those assets declined. This created a self-perpetuating and accelerating financial vortex for some very large institutions from which they could only be saved by the Federal Government.

Under great political pressure, Congress passed the "Emergency Economic Stabilization Act of 2008", which authorized the SEC to review the FASB rules.  By March 16, 2009 FASB finally relented on the worst provisions of the rule and the market instantly turned positive.  This rule has also been attributed with increasing bank profits in the recovery (and thus executive bonuses) by exaggerating the increase in asset values after they were artificially depressed by the collapse.

I'm not really complaining about FAS 157 (as modified) since it brought the financial world back to reality from its euphoric bubble.  But as with any good regulatory body, they abused their power.  Thank God they finally came down off their pedestals before financial Armageddon, which was within days of becoming reality in 2009.  "Vogons" exist in the FASB...

I suppose the point of bringing this up now is this: the financial meltdown and its meteoric resurrection was a bunch of bureaucratic nonsense.  But the political reaction to it, and the resulting massive public debt are very real.  Unwinding that will be painful if even possible.

Economic Warfare on the High-Speed Battleground

Most US politicians and economists don't get it.  The economic problems faced by the USA today are not just related to economic boom-bust cycles and poor management of economies (though these are real problems).  This is Economic Warfare being fought on a new battleground called the High-Speed Internet.

In this war, the USA employs a strategy it calls "free trade", which equates to unilateral economic disarmament.  We fear threats from our economic foes so we constantly surrender favorable trade deals, off-shoring jobs, capital flight, etc.

The guerilla tactics of our economic foes are unrecognized and their targets are rarely defended by the US.  They appear at our electronic gates and negotiate deals with the captains of business, while the generals lay additional regulations and taxes on us, like useless equipment and rules of engagement that leave us powerless to fight.

Old ideas are hard to change.  Liberal colleges still teach economic theories developed centuries ago.  Politicians still use policies based on teachings of Karl Marx, John Maynard Keynes, Milton Friedman, etc.  The fact is, the battleground has changed, the tactics have changed, and the US needs to wake up and fight with 21st century tactics before the battle is lost and our sovereignty is lost with it.

Throwing more money at the problem (whether tax cuts for the rich or stimulus checks for the poor) won’t work anymore.  The money will be tucked under a mattress or put to work overseas.  Fixing the economy will require policies that change the direction, not the speed of business.

The first order of business is to find anything the government is doing now to make things worse, and stop doing it.  All the health care policies developed in this century need to be reversed, to start with.  We need to stop using taxes and regulations to make employers act like social services.  It is way too easy to get unregulated, cheap foreign labor on the Internet.

The only reason the jobs situation hasn’t gotten even worse is that many small business people still care for their employees.  Community organizers and career politicians don’t have a clue about how businesses work and won’t find the answer from people who run mega-cap corporations that routinely send US jobs overseas.

Small businesses won’t last in a weak economy, when they are competing against multi-nationals and cheap foreign labor.  They will be acquired or put out of business.  This trend will not only continue but accelerate if it is not addressed.

Changing the direction will require time and pain, but it’s better to start now before we go deeper in debt and further into the mud.  Probably the first step will be early 2012 when we can start to get fresh blood in the primary process.  The primary elections are our best chance to make a change in leadership; both parties need people who at least recognize the new economic battle we face.

World's Worst Investment

The US Dollar may be the worst investment in the World.  Think of a Dollar as a stock certificate (for those old enough to remember what they look like).  It signifies that you own a very small piece of the USA.

The problem is that the CFO (Ben Bernanke) can issue new shares any time he thinks the corporation needs extra cash.  For shareholders (you people with cash) that is DILUTION.  That means your shares are constantly declining.

The worst of the worst investments are those "Convertibles" (Treasuries) that pay a puny 2% taxable income and convert back to "USA Common Stock" in 10-30 years, when the stock is guaranteed to be worth 50-80% less than it is today.

Shareholders of the USA don't really appreciate their ownership, and they can't seem to make up their mind about management.  Management continues to add more and more people to the payroll, in spite of declining sales per employee.  And all the different divisions can do is talk about whether to lay off people (the Republican approach) or borrow more and give everybody a raise (the Democrat approach).  Thus the corporation and the value of its shares continues to decline.

The company needs new management, some visionaries that understand we need a better strategy to motivate employees and stimulate sales.  Until this happens, the shares are a SELL.

Did You Get Scared Into US Treasuries?

I hope you didn't buy US Treasuries in the last few weeks.  If you did, good luck getting out when you have Uncle Sam's protuberant posterior and Ben Bernanke's bulging bum jammed in the door in front of you.

Now there will be a host of bond index funds stuck with these guaranteed money-losers for the next 10-30 years.  The day the Fed-engineered bond bubble bursts will be the biggest "giant sucking sound" since Ross Perot invented the term to describe "free trade".

Oh, I forgot one other big player stuck in the room holding Treasuries - the Social Security trust fund.  That thing is going to have to start selling Treasuries too, just to keep the money flowing to all the baby boom geezers.  We're going to need a massive tube of Preparation-H to get all those Treasuries on the market at the same time; watch out!

Some Really Good Stuff

I've been seeing some pretty good stuff on the financial news lately.  I love David Stockman - see these news posts today:

David Stockman: GOP Candidates "Checked Out of Reality"
http://finance.yahoo.com/blogs/daily-ticker/david-stockman-gop-candidates-checked-reality-125336801.html

“Obama Doesn’t Get It”: More Stimulus Won’t Help, Stockman Says – And We Can’t Afford It
http://finance.yahoo.com/blogs/daily-ticker/obama-doesn-t-more-stimulus-won-t-help-181952721.html

Congress, not Fed, must do more for economy: Fisher
http://finance.yahoo.com/news/Congress-not-Fed-must-do-more-rb-1795827576.html

This last article has been echoed a lot this week - the Federal Government got us into this mess and we can't expect the Federal Reserve to get us out.

I find it a bit ironic that David Stockman says this has been going on for 30 years, since that dates back to the Reagan administration when he was Chief Economic Council to the President. Basically the elected government under Reagan and the Democrat Congress abdicated its control of the economy so the Federal Reserve could take the heat for killing inflation (and the economy). They never got the guts to balance the budget again. Of course, who can blame them, we keep electing them.   Finally...


Congress Needs to 'Cowboy Up' to Fix the Economy
http://finance.yahoo.com/news/Congress-Needs-to-Cowboy-Up-cnbc-2912894222.html

Somebody needs to advocate for tough, strong policies for America and stop all the namby-pamby coddling of the electorate.  I think the right person could pull this off, but I don't know about the two parties we have today.  I think there is more hope on the Republican side if they could wean themselves off big-money and possibly foreign interests that are corrupting their trade and tax policies.

I'll end with a quote from a famous (oops) Democrat:

"Ask not what your country can do for you, ask what you can do for your country!"

That means all of us, not just the rich or the entitlement class...

Reforming Republicans

Part of what I hope to accomplish with this little blog is to convince a few Republicans to act and vote more responsibly.  I tried reforming Democrats and found them hopelessly lost in another world-view.

I believe the Federal government has a limited purpose as defined by the US Constitution.  That means the Feds have no business providing things like retirement income and medical care for people (among many other items on the Progressive agenda.)  Retirement is a personal and family responsibility, as is health care except in cases where charitable organizations may fill the gaps.  The sooner we can get the Federal government out of our personal health and finances the better.

So if what I just said outrages you, you are welcome to stop reading because we obviously disagree about the fundamental purpose of government.

There are two things wrong with the Republican agenda that I want to change - the "party line" on tax policy, and "free trade".  I could write a book about either subject and get exactly ZERO readers.  Books need to be written by people with credentials.  Blogs are for people like me.

Taxes
I've been outraged about deficits since the early days of the Reagan administration.  I thought maybe the Tea Party movement would finally do something about this.  But instead of bargaining with Democrats about spending cuts in exchange for "revenue increases", they drove us to the brink and got exactly NOTHING.  I can't think of anything good to say about that.  Neither party wants to talk about sacrifice unless the other party does the same - I know how that works and they should too.  If you want to bargain by not compromising, you will obtain this result every time, guaranteed.

Free Trade
I think that both parties share the blame, but I expect Republicans to stand up for US interests.  Thus I am constantly disappointed and frustrated with our trade policies.  I can only explain it by either stupidity or corruption, plain and simple.  We simply cannot let the world roll over us any more.  Peter Morici says it better than I; search for this article if you can't find it here:

http://www.cnbc.com/id/43493708/Morici_Federal_Reserve_Ending_QE2_Much_Ado_about_Nothing

I sent him an email asking which presidential candidate would stand up for the US against Chinese currency manipulation.  His reply: Only Trump.  The Donald that is.  Sad for me, he isn't running right now.

Is the Stock Market About to Bottom Out?

I posted this today in response to this article:

http://finance.yahoo.com/banking-budgeting/article/113250/stocks-pricing-new-recession-marketwatch

The article claims the stock market could start to rise again later this year, as it did in March 2009...

The bottom in March 2009 was directly related to FASB relenting on Mark-to-Market accounting rules, which allowed the banks to stop writing down assets and approaching artificial insolvency.

What is happening now is anything but artificial. The only way to stop it is to remove the current policy makers (read - executive branch) because it is regulatory policy that is scaring businesses and discouraging investment and job creation. Based on the recent "women's health care" mandates they are clearly completely out of touch with reality.

Maybe the markets will discount a new administration early next year when it is clear there is a CHANGE coming in the right direction (I hope). Then confidence would be restored and the market could rise from the ash heap again. 

I Want To Scream

I guess bloggers scream by blogging in UPPER CASE.

I'm posting this because it might be more effective than just writing or calling my Congress people.

I'm a former Republican activist who is burned out on politics.  I would LIKE to have a stable country for the rest of my life, and the same for my descendants.  That does NOT appear to be possible now.

You people in Washington DC who are running this country (into the ground), PLEASE do something in the interest of the country for a change!

If we need higher tax rates to balance the budget, I don't mind paying.  But I don't want connected people exploiting our system and passing the tax burden over to me.  I hear Republicans saying we shouldn't raise taxes on the people creating jobs.  REALLY - who is creating jobs these days?  If there ARE any, they should be getting tax BREAKS.  But come on - the Bush tax cuts didn't create jobs OR incentives to create jobs.

As it is, if anyone wants to create a job for an American, they have to PAY EXTRA taxes and hire accountants and legal experts to navigate all the government red tape.  Don't talk about payroll tax holidays - you should get rid of all these job-killing taxes and regulations PERMANENTLY.

I didn't vote Republican to lower taxes, I voted Republican because I want ADULTS running the government.  That means a responsible budget and limited government.  I realize we have a lot of debt and government services that are non-sustainable.  I want those services cut, and I want taxes raised, and I want companies to have incentives to expand and hire AMERICANS.  If that means sacrifice for all then that's the way it has to be.

I realize this doesn't fit in either party's nice little policy box, but I believe I'm not alone.  In the future I will only vote for responsible ADULTS.  I hope you will all grow up before I have to vote again.

What's going on with interest rates?

I'm an amateur economist and investor with a lot of questions.  Here's one: What on Earth is happening with interest rates?  Why is the bond market driving US Treasury rates lower when the Federal Reserve is about to stop buying Treasury notes at the end of this month?  Wouldn't that dry up the money supply and force rates UP?

This is challenging my long-held view that US economic policy has been reckless and hyper-inflationary.  Is it possible that Ben Bernanke is right and without Quantitative Easing we would be in a deflationary spiral?  I know (and you know) that Bernanke knows a lot more about economics than most people, but come on - isn't there something nefarious going on inside that Federal building?

I am reminded that inflation is an oversimplification of a lot of different monetary forces at work.  There's a lot of difference between food inflation and rising home prices.  Rising prices of energy can suppress economic activity and reduce demand for all sorts of other things, and the net effect could be "no inflation".  And how it affects you may be totally different than how it affects me.

So let's focus on what those Federal Reserve bankers care about.  Remember this - when you can't understand something, look for a profit motive.  Most of the big banks are in trouble with the real estate market and stand to lose a lot of money and maybe collapse if their real estate loans aren't collateralized.  So one thing they will never do while they can stop it, is allow real estate prices nationwide to continue to spiral downward.

All that QE managed to do was to slow down the house price declines and drive up prices for a lot of other stuff (including stock prices).  Now that QE looks like it's completely out of favor and the new Tea Party mandate will probably suppress another round of easing, we SHOULD be seeing long-term rates (eg. mortgage rates) climbing and asset price declines accelerating.  Right?

Well, all that could happen tomorrow, or not.  But I have to consider that Mr. Market (who consistently proves to be smarter than even the likes of Mr. Bernanke) may be telling us that economic weakness and deflation is a real possibility.  I also have to think that there are more and more of you who would like to pay less for pizza and rent, and less of you that care about your shrinking or non-existent home equity and 401Ks.  Well you probably won't like the next few years anyway - house prices will continue to decline and food prices will continue to rise because of all that foolish economic policy in the past.  Until the home/hamburger ratio returns to what it was before the Keynesian Economists went wild, and until average people can afford average homes without fraudulent loans at artificially low rates.  That could be a long time from now.