Monday, September 29, 2008
Partisan politics are stronger and louder than ever. Voter opinions mean less than ever.
Man, this is an era that our grandchildren will learn about in school as one of the most tumultuous eras in America.
The 1960s had far more activist movements. The 1930s had more depression horror stories (so far). The 1980s saw more world change. The 2000s though, have seen the most horrific transformation of our nation, from democracy into police state. Voter apathy and governmental complacency have run rampant over the past decade. Small groups call for change - they call for radical shifts in power, and they call for forcing the government to listen to our concerns. The population at large has stopped caring and made the government into the one thing our founding fathers never wanted it to be: an autonomous entity, above the law, and outside of the needs of the people.
Our grandchildren will know this era of the USA as the era in which the government took total control from the people, and served its own needs over those of the people. It is from this era that they will hopefully learn the power of voting, the power of being politically active, and the power of being a single loud voice among all the rest.
While this era may well provide a suffering nation of derelicts suffering under a totalitarian control to our grandchildren, hopefully they will be able to learn the lessons that current Americans have not. These are the same lessons that our parents and grandparents learned. These are the lessons that we have not learned.
Regardless of whether you're politically active or not, regardless of whether you're successful or not, regardless of whether you're a politician or not, your grandchildren will learn much from us. Let's just hope that they don't have to learn it from another country.
Bailout plan rejected - supporters scramble
NEW YORK (CNNMoney.com) -- The fate of the government's $700 billion financial bailout plan was thrown into doubt Monday as the House rejected the controversial measure.
The next steps were unclear. The abrupt defeat left the Bush administration and congressional leaders scrambling to figure out whether to renegotiate the bill and introduce it again as soon as Thursday or to try other options.
Stock markets reacted violently. Investors who had been counting on the rescue plan's passage sent the Dow Jones industrial average down well over 700 points. The stock gauge closed 778 points lower - nearly 7%. (Full coverage)
The measure, which is designed to get battered lending markets working normally again, needed 218 votes for passage. But it came up 13 votes short of that target, with a final vote of 228 to 205 against. Two-thirds of Democrats and one-third of Republicans voted for the measure.
This is actually very good news for the average American. Yes, times are tough for us all, and they will be for quite some time, but the failure of this bill means that we'll all be getting back on our feet sooner than would have otherwise been the case.
What really started all of this was the Clinton era (following into the early Bush-era) deregulations on mortgage lenders to make it easier for lower income families to buy homes. This ultimately made for a spike in housing demand, which resulted in higher home prices. Higher home prices resulted in higher property taxes. Add into this higher fuel costs (and that whole snowball effect) after Katrina in particular, and all of a sudden, you have thousands of families in homes that they can no longer afford. Foreclosures skyrocket, and the entire (ultra-high risk) sub-prime market goes bust. This spells financial disaster for the lenders. All the while, homebuilders continue building, and end up with entire neighborhoods full homes that won't sell. Additionally, you have the sub-prime lenders that are trying to escape foreclosure by selling their homes, not to mention thousands of homeowners that are trying to sell their houses so they can live more within their means by renting or buying a smaller house. Right now in the US, there are enough homes sitting vacant to take every single homeless man, woman, and child in the US, put each one into their OWN house (yes - one per house), and still have thousands of houses left over. The supply outweighs the demand so much that it's caused the debt to be essentially worthless.
This doesn't apply only to the sub-prime loans anymore, but to all loans. How many of you are homeowners that bought your house through a standard mortgage? How many of you are now noticing that the value of your home has declined since you bought it (unless you bought it after the housing crash)? How many are refinancing to get a lower rate on a lower value?
When all of this gets rolled together, it makes for trillions of dollars in worthless loans to investment companies. I'm no financial genius, and I understand all of this. Surely a banker or loan officer should understand this too. I think it's mostly a case of they understood the risk, but didn't care until it was too late.
What benefit would the bailout bill have provided? Another false sense of security - just like all of the security bills passed after 9/11. Ultimately, the bailout bill would have been more damaging to the American public than any recession would be. Had the bailout bill passed, it simply would have put off the collapse of various financial giants for six months to a year, and when the money ran out, these banking firms would have collapsed anyway, but with Uncle Sam having absolutely no money left to do anything. The United States has always had a capitalist economy - one based on supply and demand, market risks, successes, and failures. This economic collapse is a basic part of capitalism, as taught to me in elementary school civics classes.
It can be looked at, on a much smaller scale, in this example: Joe's Hardware opens up shop, providing fair prices on hardware to the community. His bestselling item is a hammer. He sells the hammer for $10. Meanwhile, John's Hardware opens up just across town and starts selling the same hammer for $9. Joe knows that his cost on hammers is $9, so he can't sell them any lower without suffering a loss. Joe's business is suffering though, and in order to bring customers back, he starts selling his hammer for $8, hoping that sales on other items will make up for the loss. Meanwhile, labor costs start to skyrocket because there's not enough labor to meet the demand. Customers start cutting back on buying anything because it costs more for labor. John manages to stay afloat for a while, because he's still charging $9 for a hammer. Joe, even knowing the risk, continues selling his hammers at $8, hoping he can make more money off of customers that don't want to spend the money. John, in an act of desperation, drops his hammer prices to $8 as well. Both companies eventually fold due to complete market saturation of hammers, and ask the government for $700 billion because they ran their companies into the ground.
The fact is, the economy needs to return to an equilibrium, where market demand meets market supply. While this happens, financial times are going to be really rough for Americans, most of whom live beyond their means through their credit, much of which is now worthless. The only ones that are really going to have a relatively easy transition are the ones that never relied on credit in the first place - and even they are going to have a rough time.
Without this bailout, the economy will likely find an equilibrium in about five years, compared to a decade or more if it passed. Tighten your belts and stock up on ramen. We're in for a wild ride. Filet Mingon all around once we find stability again!
Friday, September 26, 2008
The economy/bailout: McCain failed to mention anything beyond a talking point. Obama, while having a couple of reasonable ideas (though ideas that aren't really financially possible) never mentioned McCain's involvement with the Keating Five. Both fail.
Taxes: Neither tax plan is viable to help solve the problems in the US. Obama's is more reasonable. Obama, slightly ahead, but ultimately, both fail.
The War and foreign policy: McCain wants all-out war. He says he wants troop withdrawals from Iraq, but wants a surge in Afghanistan and Iran. McCain also makes a little reference that he has full confidence in his "maverick" running mate. Obama wants complete withdrawals from Iraq, but a surge in Afghanistan, and little to no troops in Iran before diplomatic negotiations. Obama slightly ahead. Neither candidate can promise withdrawal. Both fail. McCain fails more, because of lousy policy and his support of Palin, who will likely become president before McCain's term is up.
Alternative Energy: McCain stuck to talking points that suggested he was "only saying what the public wanted to hear". He denounced dependence on foreign oil. He stated support for both off-shore drilling and alternative energies, yet outright opposes the Ethanol industry - which is the alternative energy technology that will help us get to a true energy independence. McCain - fail. Obama - show me. I like your plans, but I have a hard time believing you.
Russia/Georgia situation: McCain - in favor of military action. Obama - I missed his reply, but from the post-reply debate, I'm guessing that he's still pro-military action, but on a reduced level. Combined fail initially, but unable to really tell, as I missed Obama's reply. Ultimately, I'm just going to call it a draw.
The nuclear option: Both against. Both win.
Closing statements: Everything each of them have stated above was reiterated again.
My Judgment: Obama won, hands down, even though I dislike his politics. John McCain was never able to address the camera directly. Obama addressed the camera repeatedly in fact, he addressed the camera, nearly every time he spoke to the American people. McCain seemed to fall back on talking points as much as he could. He never looked at the camera, and instead always addressed Jim Leher, the moderator, with every response. That doesn't seem like a big deal, but with only maybe 20,000 people at the debate, yet tens of millions watching nationwide, addressing the camera and "looking into the eyes of America" is important.
Final thoughts: Obama never mentioned the one thing that would make me vote for him: McCain's involvement with the Keating Five - a group that illegally protected the Savings and Loan institutions back in the 1980's. He refused to make McCain answer for this illegal and nearly traitorous act. Neither candidate even glossed over the unconstitutional Patriot Act and subsequent creation of the Patriot Act, even when both topics are heavilly involved with both the economy and the military.
After seeing this debate, who am I voting for? I'm still torn among third party candidates, and leaning towards a write-in vote for Ron Paul. Neither McCain nor Obama won my vote in this debate.
As I'm sure is the case for many of you, discussion about economic hardships has been a major topic of conversation with most of the people I know. Given my base of friends, I'm fortunate in that I have friends from all ages and walks of life. My friends range in age from 16 to 74. Their careers range from student to burger flipper to IT professional to lawyers and doctors to CEO. Income levels among my friends range from less than $15,000/year up to well over $200,000/year. Times seem to be tough for all of them. I have a few stories that have stuck in my mind.
From a co-worker: Cash is tough right now. You know that I have my own business in addition to working here. Even with both incomes, I'm having trouble. The cost of gas, food... (opening his paycheck) Damn! $640 in federal taxes! That's more than most people's paychecks! They're raping me. You know, last week, I was just trying to get caught up on my bills, one check bounced. My bank charged me multiple times for overdrafts. When all was said and done, between covering overdrafts and fees, I paid them $400! I'm completely broke - even with this check. It's barely enough to cover food and bills.
From a friend: I think I'm going to have to quit my job. I can't afford the gas to get there. I need to find something I can walk to. I can't feed my kid after I buy gas to get to work. I've already canceled my cable and internet. I still can't make ends meet.
From my father: I own my own company. (he's a small business owner, with a good income) Do you know how much I pay for health insurance for myself and your step-mother? Over $20,000 a year! Between that, two investment properties I can't sell, and my own double mortgage, It's getting tough to afford anything extra. Do you realize I've had to remortgage my house twice in the past year? I just got it paid off! I need a new car, but I can't afford it with as expensive as everything else has become.
From another friend of mine - he's a lawyer in NYC: We had to move to the Bronx because we simply can't afford Manhattan anymore. At least I don't have to own a car. You think you have it bad here, try living in New York in this economy.
It's tough across the board for everyone. I'm sure everyone reading this has heard a story like one of these, and many probably have their own story like this.
My one political comment on this post: Whoever you vote for, make damn sure that it's a candidate that will care about the average person - and every average person.
Thursday, September 25, 2008
If you were to find (or start) your ideal political party, what would be the core values of that party? What platforms would they strive for? What would be most important to them?
There are no wrong answers in this exercise, as people having the freedom to have differing politics is part of what makes this nation great.
Personally, while I may be a registered Libertarian, I don't agree with all of the views of the Libertarian party. While the Libertarians are the best suited for my politics, they are not ideal for me. If I was to create the ideal political party for me, this is what the core values would be:
Economy: Above all else, individuals and businesses alike should be 100% accountable for their own successes and failures. If a financial institution made poor financial choices, and found themselves failing, it'd be up to them to either correct the problems or go out of business. By the same right, if an individual finds themselves making poor financial choices, it is their own responsibility to do something about it. The individual responsibility leads me into the next core value.
Education: Educational standards are the one thing that I feel should be regulated on a Federal level, and to standards at least as high as countries like Japan. An educated public is a public that is able to take care of themselves. I do believe firmly in public subsidies for education, making it cheap, if not completely free for any citizen or legal alien that should desire to take advantage of it. If a person is finding themselves unable to find a decent job because of their educational level, they should not be made to feel that education isn't an option because they can't afford it. Education, through at least a four year degree level, should be available to everyone, regardless of financial means. A high standard of education is the single most important step to a booming economy and a successful nation.
Military: The military should only be used for one purpose, and one purpose alone: to protect our great nation. We should not perform preemptive military strikes on the grounds that a foreign nation might do something. The last just war fought by the United States of America was World War II - and if you've read your history, we tried to stay out of it - we were no longer able to stay out of it after the bombing of Pearl Harbor. Using the military in exclusively a defense role would greatly reduce our military budget and keep our soldiers at home - where they're happiest and most needed (by their families). The reduced funding for military could translate into greater funding for education, lower taxes for the American public, or capital to start helping to pay down the national debt.
Federal Drug Enforcement: Legalize it all. With the removal of the DEA from the list of government agencies, billions of dollars a year would be freed up for better use. Instead of prosecuting people for drug sales or use, educate them about the dangers of drug use and offer free rehabilitative services. The benefits of doing this are many. First, as previously mentioned, billions of dollars a year would be freed up for other uses or reduced taxes - even after figuring in the costs of drug education and rehabilitation. If drugs were legal, they'd likely be far cheaper, and would alleviate much of the drug-related crime. Very rarely do you hear about someone getting mugged for money for alcohol. Someone getting mugged for money for heroin or crack is something that happens hundreds or thousands of times a day.
Abortion: Not the government's decision. Abortion is a decision made by an individual (and sometimes two individuals) about a woman's own body. No man is qualified to tell a woman what is right for her own body. Abortion should remain legal, and a woman should have the right to choose, based on her own feelings on the situation. The right to choose is not a pro-abortion standpoint. It is a pro-woman standpoint. Many individuals will likely remain completely pro-life, and that is their right to do so. Many others will contemplate abortions if the need arises, and that is their right to do so. No person on this planet has the right to force a person to do what they do not want to do.
Religion: Let's take it back to the Constitution. The First Amendment - the single most important law in the land - so important that our founding fathers chose to make it the FIRST law of the land - guarantees the right to freedom of religion. This means that my religion is not your religion, which is not someone else's religion. Every single person in this country is free to practice any religion they want to, or even no religion at all, without being persecuted for their beliefs. Making laws based on faith is something that will never work in the long run, simply because everyone's faith is different.
Immigration: Let's not lose sight of the melting pot idea that America was founded on. People from all nations should be welcome here. That said, the number of illegal immigrants rises daily. Illegal immigrants put a lot of strain on taxpayers through all sorts of various means, including social programs, crime, and public education. The reason that there are so many illegal aliens in this country is because of the absolutely insane maze that they must traverse to try and become legal citizens (or at least legal aliens). Let's simplify the process, and make it easier for those that would be valued citizens of the US to become legal citizens, and make it easier for those that want to work in the US to get a green card or work visa. While screening of applicants would still be a necessity - to screen out those that may be a drain on the system, such as potential welfare recipients or criminals - the process could be greatly simplified for those that truly wish to be a productive member of society - making the naturalization process take only a year or two and making the process to get a work visa or green card take only a matter of weeks. Immigrants aren't the problem - most Americans are only 3-4 generations from immigrants themselves. Illegal immigrants are the problem. The complexity of becoming legal is what makes for so many illegal immigrants.
So, after my description of the perfect political party...
Wednesday, September 24, 2008
- the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.
- a particular instance or mode of investing.
- a thing invested in, as a business, a quantity of shares of stock, etc.
Investment Bank: A financial firm that underwrites, or arranges the sale, of stock and bonds for companies. Investment banks also implement a variety of corporate restructuring activities such as mergers and acquisitions. Investment banks do not accept deposits from the general public; traditionally, they have not made the same kind of loans that commercial banks do.
Within both of these definitions is an inherent implied risk. More on investment risks can be found here
With basic definition out of the way, I am under the impression that all of these investment companies (and AIG is an investment company - they invest in property value versus likelihood of property loss) were (or should have been) well aware of the potential risk of their business. After all, with investments, risk is the name of the game. That's the reason the investment industry is so lucrative - risk of loss, and minimizing that risk, can beget great profits.
I am not a financial expert, but I understand the basics behind investment and the inherent risks.
Let's put this whole issue into the perspective of an investment that is part of the American dream (and also a large part of the reason for this bailout): home ownership.
Buying a house is an investment, plain and simple. Most homeowners bought their homes in hopes that they could one day sell it at a profit, and increase the size of the home they live in. There is an inherent risk in this, financial institutions aside.
Houses typically do increase in value over time, given demand for housing in an area, the economy, the local schools, the local crime rate, improvements made to the house, etc. All of these factors for increase in the house value are also potential risk factors.
Suppose the major employer in an area shuts down, eliminating thousands of jobs in an area. The value of houses in that area could plummet, virtually overnight. This has been the effect, most recently, in areas where the US Military has shut down bases in given areas, thus eliminating the need for all the housing for military personnel and supporting contractors.
Suppose a bad element moves into the local area, and over time, the bad element expands, putting the crime rate through the roof. The values of houses in that area decline quickly, as nobody, save parts of the bad element, want to buy a house in that area.
Suppose the local school system falters for whatever reason, and performs less than adequately. Families are not going to want to buy homes in that school district, due to not being able to ensure adequate education for their children.
If the general economy tanks (as is happening nationwide at the moment), people are going to be less inclined to want to buy houses, preferring to either rent or stay where they are until money is less tight.
Home improvements are a sub-investment unto themselves - suppose the improvement made is suddenly undesirable at the time of sale? Yup, you guessed it - decreased sale value.
While the above is far from a complete list of reasons a house's value could plummet, it's at least a good example of the risk involved in investment.
When the house becomes millions of houses, and also suddenly includes investments on all sorts of other items such as cars, boats, electronics, businesses, and such, and the economy is faltering due to financial crisis in other sectors, the ones that lose big are the financial institutions funding all of this. It's still nothing more than the inherent risk in doing business. Mom's Craft Shop will go out of business when people can't afford to buy her goods. Lehman Brothers will get liquidated when people can no longer afford to pay their loans. Same thing, different scale.
Now, the Federal Government has proposed a $700 billion fund to bail out the remainder of financial institutions in the US in an attempt to prevent a total economic collapse.
First question: Where is this money coming from? It certainly can't be from the US Economy. Hell, when Bush offered his Economic Stimulus Package earlier this year (total cost: about $156 billion), we had to get a loan from China. That was only 22% of the cost of the proposed bailout. To take it a step further, the named figure of $700 billion isn't a cap - it's the limit to what can be loaned out at any one time. That means that if someone was to pay back $100 billion of this, that same $100 billion could be loaned out again. This thing has no cap. The real kicker is that the Secretary of the Treasury, who would be in charge of sending the bailout funds to their recipients, would be protected under this little tidbit from Section 8 of the act: Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Wait a second, the Secretary of the Treasury, who only holds his job until January 20, when the new president is sworn in, suddenly becomes above the law in his management of $700 billion? You mean he could hand this money to Al Qaida, stating that they held the key to financial stability, and not be held accountable?
Oh HELL no!
Additionally, what does this massive amount of money translate out in cost to each American taxpayer? Roughly $2500 each, assuming an equal share for most. I don't know about the rest of you, but $2500 would put a hell of a dent in my car payment (as an American taxpayer with less than perfect credit, that loan, even without a single late payment, would qualify as part of the worthless credit we're bailing out), and allow me to pay it off in three years instead of six. If the Feds are going to railroad this through, I say we give the money to taxpayers rather than the banks. If this money is going to materialize out of nowhere, us individuals might as well help pay our loans, and make that "worthless credit" into "paid credit" with these mythical dollars.
I'd far rather see this bailout help Americans keep their homes than I would want to see it go to fat-cat bankers, who even while holding all of this bad debt, still make enough to enjoy their cruises around the world and cash to take a vacation to Dubai and stay in the penthouse suite of the world's only seven star hotel.
Ultimately, I'm against spending this money altogether. It will, in the long run, only serve to prolong the inevitable crash of Wall Street, while helping to put the American economy into even deeper trouble. I say let the risk-takers eat the risk. Only then will the economy find equilibrium.
Far too long have we been bailing out corporate financial woes. Let's let the fat-cats see what the average person has to go through.
Thursday, September 18, 2008
For purposes of this post, I'm going to change this question to "Which candidate would you most like to have a drink with?" as I'd like to work hard liquor into the equation.
I'd love to have a drink with both candidates.
My drink with John McCain: I'd challenge Johnny-boy to a shot-for-shot liquor consumption contest. Knowing my prowess with the drink, I'd be a shoe-in to win it. Additionally, knowing McCain's health problems, I think that he'd likely keel over dead halfway through the contest. That would solve the McCain problem. How beautiful it'd be... John McCain and I, trading friendly shots of Jameson (gotta drink real man shots with a Republican). Near the end of the first bottle, his heart gives out, and I'm still sober enough to attempt CPR. However, because of his age and medical conditions, he doesn't even make it to the hospital before he dies of "complications due to alcohol poisoning," even with the best attempts of the paramedics.
My drink with Barack Obama: Oh, that would be a hell of a night. We'd start off in one pub. He'd buy the first couple of rounds, and I'd buy the first round of shots. We'd be the life of the bar. We'd move on after a few rounds to another pub, one with a great band playing. We'd live it up over pint after pint. We'd talk about life, the music, everything except for politics because we'll never agree on them. We'd be almost as much fun as the band. It'd certainly be a night to remember. Even after such a great night, I wouldn't vote for him. I like Obama's charisma and personality. I just don't want him as a leader. Obama would be a friend, not a president to me.
Wait, I just killed one candidate, and refused to vote for another. Isn't the purpose of this exercise to show who I'd want as a president? Why yes it is. We haven't gotten to my choice for president yet. In the eyes of many Americans, there's more than two choices for president.
My third night out drinking with candidates, I'd like to go have a drink with Ron Paul.
My drink with Ron Paul: The evening would start off in a back corner of a local pub, likely with a great band playing. We would have chosen the back corner so we could still enjoy the music, but also be able to hear each other in conversation. I'd buy the first round - two perfect pints of Guinness. Ron and I would talk for hours on end about how to really fix this country. By the end of the evening, we would have solved the problems with the economy, oil prices, the war(s), education, and just about everything else - all with him never presenting a new idea. Ron Paul already has the solutions for this country. I'd just be a better man for having talked to him about them. Come November, I'd do just as I plan - write in a vote for Ron Paul. He is one man that is truly a leader.