Category Archives: Economics

Economics, Politics

WTF!

Banks to Continue Paying Dividends

Here we are, bailing out all these banks who are so badly in need of capital in order to operate and do their banking thing, and they want to pay out over half of the money we are rescuing them with to the investors who goaded them into their malfeasant ways in the first place.

And then there’s this:

Ed Yingling, chief executive of the American Bankers Association, said he was increasingly hearing from banking executives who feel they should not be forced to accept money with so many strings attached. He said these banks don’t need the money, but they are willing to use it to increase lending, so long as they are not punished for doing so.

Are we forcing banks to accept federal money?

The more I hear about this entire venture, the more it stinks. I think the best idea is to take the $700 Billion and create a separate banking system. Let the new banks put liquidity into the system and let the old banks die. (I heard this proposed earlier this month (Oct 10?) on CNN or MSNBC but my google-fu is not not working and I can’t find a link to it. It sounded like a very workable idea. There was even a way for the government to gracefully bow out of the banking business once the foundation was set.)

Economics, General, Politics

re: Executive Compensation

I have been hearing a bit that, as a result of the current financial meltdown, the salaries, the golden parachutes and the exorbitant compensation many (if not all) financial executives receive should be reduced due to their incompetence and malfeasance, especially if they expect the fed to bail them out.  On the other hand, the company/corporation and its shareholders are the ones that set the compensation and they are the ones that pay it out.

I would suggest that any annual compensation in excess of the US President’s salary be treated as taxable profit for the corporation.  So the corporation can still pay an executive $1M, $10M, $100M, but everything over $400,000 is taxed as pure profit. ( I also suggest that the President’s salary be no more than 10x the average household income in the US. )

I’m sure that these executives will try to  find a way around this limit – like ‘personal service contracts’ a la sport compensation packages – and I will leave it to the legislators to figure out how to deal with this violation of the spirit of the rule. Maybe something as simple as “executives can’t be contractors”. From my limited understanding of the corporate structure, executives are the ones that can commit a corporation to liabilities by signing a contract or agreement.

The other area of compensation that gets really outrageous is bonuses. I don’t know if bonuses can or should be tied directly back to the salary tax, but I would suggest that bonuses be deferred. An executive’s bonus should be based on how the company is doing 5, 7 or 10 years down the road, and not on what has happened in the past quarter or the past year. If a bonus is premised on an increase stock price, then let it be the stock price 5 years from now.  If the executive is no longer with the company, big deal, they, or their estate, still get the bonus.  Give the executives an incentive to lay a solid foundation for future growth rather than trying to game the system for a short-term spike in the market. That is a call for the board of directors and the shareholders, but maybe we can motivate them to go in that direction.

Economics, Liberating Thoughts, Politics, Preparing for the worst

Whose Economic Policies Work Best?!?

Personally, I consider the National Debt to be the greatest threat to the future well-being of the United States. Followed closely by deficit spending. Given the economic news of the past week, with the Federal Government doing its best to socialize losses, I expect the debt will continue to grow. (Did you know the National Debt is about to hit $10 Trillion? That’s Trillion, with a Tr.)

Avedon compiled a review of past administration economic results that Dwight Meredith studied “Just For the Record” – covering 1962-2001.

The link has some specific numbers and links to other interesting pages.

A bit of Summary:
Continue reading Whose Economic Policies Work Best?!? →

Economics, Preparing for the worst

Why Keep Your Landline

I saw this commentary in Telephony Online.

I still have a landline to my house. I sometimes ask myself why am I spending the $25 a month to keep it.

One of the main reasons I keep it is that the phone company provides a separate power source for the telephone from the commercial grid power. If the snow and ice take down all the cables on the poles where power and phone overlap (about 1/4 mile to my place) then I am out of luck. But  if the power line goes down elsewhere, I should still be able to get dial-tone on the phone.  And if the commercial power goes out, the odds are the cell phone tower has also lost power and unless the wireless companies have gone to the much added expense of providing a long-term battery backup to the cell tower, your cell phone is dead.

It seems like once every year or two we get a major power outage in our area and I can look across the valley and see the darkness. Something breaks far away and everything in the area will take a power hit until the electric company can reroute the power. Last year I think we were out for over 24 hours because ice took down some power lines 10 miles away. It took the utility that long to reach the break because of the storm.

And I have several different type telephones including ones that don’t need to be plugged into a wall socket to work.

The redundancy of having cell phone and landline is a bit of added comfort when you are going to be stranded in a blizzard.  (As I write this it is 80′ and sunny)

Economics, Politics

Entering the economic quagmire…

I read an article over on Making Light and it got me to pondering.

What libertarians (and the softheaded quasi-libertarian burghers of science fiction fandom, most of whom think the Economist is a voice of reason) need to learn is that capitalism is never about free markets, or in fact “freedom” of any sort; it’s about using the power of the state in order to make it easy for large amounts of capital to get together and rearrange the rules for its own convenience. “Privatize the profits, socialize the losses” is the logical consequence of capitalism’s prime directive. What we wind up with is socialism for the powerful, and tough shit for everybody else.

“Privatize the profits, socialize losses” seems to be a very apt description of Wall Street Capitalism.  Every decade or two we seem to need to learn the lesson all over again. If rules and regulations get set up, the players learn to game the system while continually trying to undermine the regulators – Oh! they’re not needed anymore since we learned that lesson!

But I did start to ponder about the full matrix that the statement creates.

  1. Privatize profits ——socialize losses
  2. Socialize profits——socialize  losses
  3. Socialize profits——privatize losses
  4. Privatize profits——privatize losses
  1. is straight Wall Street Capitalism
  2. is probably straight Socialism
  3. is never going to happen, or is it philanthropy?
  4. is complete anarchy/ true capitalism

I must continue my pondering.

Economics, General, Politics

The New Colonialism

China | The new colonialists | Economist.com

Not all observers, however, think that China’s unstinting appetite for commodities is super. The most common complaint centres on foreign policy. In its drive to secure reliable supplies of raw materials, it is said, China is coddling dictators, despoiling poor countries and undermining Western efforts to spread democracy and prosperity. America and Europe, the shrillest voices say, are “losing” Africa and Latin America.

I read this paragraph and immediately thought “How is this different from what the US has been doing for the past 100+ years? ” I might include the Europeans as well, after they had to relinquish their empires – coddling dictators indeed, setting them up in the first place, that’s what they were doing.