Monthly Archives: October 2008

Economics, Politics

This is not looking any better

The Nation is tracking how the bailout is proceeding.  It continues to ring so wrong.

This bit

But, if you look more closely at Paulson’s transaction, the
taxpayers were taken for a ride–a very expensive ride. They paid $125
billion for bank stock that a private investor could purchase for $62.5
billion. That means half of the public’s money was a straight-out gift
to Wall Street, for which taxpayers got nothing in return.

is very irksome, but the private investor they are invoking is Warren Buffett, who was only putting up a few billion into Goldman-Sachs. And then they extend the analogy of the deal Buffett made with GS to cover all nine institutions, something I don’t think is quite fair.

But the upshot is that we appear to have the wolves in charge of the foxes in charge of the chicken coop. And the wolves are preparing for one last plunder before they retire. I don’t trust the administration to monitor and manage the bailout, I don’t trust the Congress to provide oversight on the wolves. I don’t expect the Justice Department to initiate criminal prosecutions in a timely fashion. I don’t trust the Republicans to do anything other than plunder the US treasury as best they can. And I don’t trust the Democrats to provide any ‘check and balance’ to stop the Republicans. (Hell, they may even join the bandwagon.) It would be nice to be pleasantly surprised.

Economics

How do you prevent someone from sharing what you want to sell to others

I don’t know if this would work, but what if you sold something digital to someone and hashed it with their credit card information such that it would be perfectly usable on any system?  Anyone could use it anywhere at anytime. They could pass it around and share it with everyone in the world. But, if they shared it with others, they would be passing along their credit card information at the same time.  So maybe they wouldn’t want to share with others so readily.

Economics, Politics, Preparing for the worst

A Privatized Social Security

Recently, I have been seeing or hearing a few references about privatizing Social Security, and how it doesn’t seem to be an issue this election. I wonder why?

If people really wanted to go about privatizing Social Security, I would suggest that we build on the existing scheme. Leave the current SSA accounts in place and then allow the individual to set aside some completely voluntary amount into an account that they, personally, can manage. They can select the funds to be invested in, or the stocks or bonds to be purchased. I imagine a lot of brokerage firms like Fidelity and T Rowe Price and Merrill Lynch and Charles Schwabb and others will be glad to set up structured plans to aid the novice investor in directing the growth of these future retirement accounts (all in exchange for a very small percentage, annually, of the account’s net worth).

We can call them Individual Retirement Accounts, since they are for an individual to build up a retirement nest egg. And we can motivate the reluctant citizen to invest in their future with all sorts of tax reliefs and incentives. It’s hard to see any down-side to this plan. If everyone invested 10% of their income every year, in not too long a time everyone would be millionaires. Just think of it, a nation with 300-Million+ millionaires. And they would still be getting Social Security checks! This is such a no-brainer, I’m surprised no one has thought of it before.

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.)

Politics, Preparing for the worst

Please explain how participatory democracy is bad, again

The Washington Post has an article on some folks complaining about millions of Americans donating little sums of money to their preferred political candidate.

Sen. Barack Obama‘s record-breaking $150 million fundraising performance in September has for the first time prompted questions about whether presidential candidates should be permitted to collect huge sums of money through faceless credit card transactions over the Internet.

I don’t know how the credit card transactions can be so faceless. When I try to use a credit card online, the name and mailing address I provide is supposed to be the same as the one on the credit card company’s record, or they won’t process the transaction. Makes it very difficult for a “Mickey Mouse” to anonymously donate to anyone.  Of course, I suppose that a donor can request to be listed as “Mickey Mouse”, for whatever reason, maybe to avoid donation caps, but the campaign has the legal name of the donor in its records and should be able to refund anyone who has exceeded the cap. More than likely, someone doesn’t want to known publicly as supporting a candidate. If the campaign publishes its list of donors with the name on the credit card and not some pseudonym then there is some immediate transparency.Or maybe list the real names of donors that exceed a certain limit in order to protect the donor that doesn’t want to be publicly associated with a candidate.

This is democracy in action – 3 million citizens donating $50 each to the candidate of their choice. It is poetry in democracy.

I would think a bigger issue would be the folks that are donating large chunks of cash in person to campaign reps, but that sounds like the way it has been done in the past and will continue in the future. We keep track of those donations, don’t we guys?

Me thinks that the party that couldn’t raise a pittance online is going to be a whining pain, until they figure out how to game the system, or what online means.

Politics

Only in America, land of opportunity

Yes- only in America do you have the opportunity to be branded a terrorist for committing acts of non-violence. And with that opportunity comes the lifetime of harassment and restrictions imposed by said label.  Oh well, at least they won’t disappear you the way they do in other countries, mostly.

Protesting nuns branded terrorists

http://www.denverpost.com/ci_10694060

This does open the an interesting option. Can we get the Wall Streeters and mortgage brokers labeled terrorists? No trial necessary and they are going to be hosed for the rest of their lives.

Politics, Preparing for the worst

Building a House on Shifting Ground

When I build a house, or have one built for me – I don’t have the time, energy or money to learn and master all the skills necessary to build a house and still keep the job that will pay for building the house – I don’t expect to have to be constantly monitoring the foundations for cracks, the walls for squareness, the rafters for support, the duct work for leaks, the basic integrity of the house. There are some basic expectations that someone has about the initial state of a house. A lot of these expectations are defined in building codes. The foundations are deep enough that the house doesn’t immediately start shifting. Rafters are strong enough to support the weight loads. Septic lines are sealed to prevent gasses from escaping within the house. Electrical outlets are properly wired to prevent fires and electrocutions. There are basic expectations that society has learned over time and codified, so that I don’t have to learn the same lessons all over again.

Expectations are lessons learned from the past. Why don’t I grab an iron frying pan handle that’s on the stove before checking to see if it is hot? because past lessons learned have taught me that iron retains heat for a while and it is worthwhile to see if it is still hot before grabbing. But a frying pan on a fire is rather simple compared to the overall complexity of a house. Even individual systems in a house can be relatively simple – the water system is just a bunch of pipes and faucets tied together. The electrical system is just a bunch of wires running from a fuse box the outlets (actually let’s simplify it further and get rid of the fuse box and just run the wires straight the to pole in the street.) The structural walls, floors and ceilings are just wood boards nailed together. But putting those three systems: water, electrical and structural, creates a very complex system. You probably don’t want an electrical outlet in a bathtub – my expectation is that it wouldn’t be healthy – and where one system can or can’t go dictates where other systems can or can’t go. You probably want the walls to be where the electrical outlets are but not where the toilet is (by the wall, on the floor – yes. wall running through it – no.) Putting a bathtub in the middle of a bedroom floor might look really neat (especially if it is one of those clawfoot Victorian tubs, colored with a dark red enamel and with gold trim and fixtures) but there are some practical problems with having a tub in a bedroom. The problems are left to the reader’s expectations.

I do expect to monitor the condition of my house periodically, maybe every few years. Foundations will shift over time and corrections can be made before the damage becomes too great, if caught in time. Pipes and seals will degrade over time and will need to be replaced. The one that I have to stay on top of at my place is to stain the exterior siding every two years because we have strong UV year round that will break down the cedar siding rather quickly if it is unprotected. Materials degrade in time, gravity is unrelenting, the laws of physics are unrelenting. I need to monitor the changes and effects on my abode periodically – not constantly, because I have some basic expectations of how things work.

We learn through life what our expectations should be. It seems that some expectations we learn are not realistic. I mean,if you run off a cliff you will start falling right away, you won’t stay up in the air and not fall until you realize there is no ground under your feet. (I think that image has warped some folks expectations of how gravity works, but it is a learned expectation.) A lot of expectations I have are not personally learned but have been transmitted from the society around me, via osmosis, to me.

What brought on this rant of houses and expectations? I was thinking about the current financial mess on Wall Street, our euphemism for the financial industry, and what my expectations are. I don’t have the knowledge or expertise to comprehend and manage my assets across the width and breadth of the financial system. So, I have to entrust the care a feeding of my assets to strangers and to trust in the kindness of strangers – because I have some expectations.

I expect the financial system to be built on a solid foundation with interlocking fail-safes to prevent a collapse of the overall structure. Why did I have this expectation? Because the American economy has ridden through several financial storms before and has almost sunk before and we learned some lessons along the way and codified them. And then 50-60 years later, after things have been relatively stable, we removed those codes based on lessons learned and the almost immediately the system collapsed.

Going back to my house analogy, you are supposed to go around periodically and review the state of infrastructure, fix and patch what may be leaking, maybe shell out some big bucks to replace the roof that has been pounded by 10-20 years of hailstorms, in general do what is needed to maintain the function of the house. You don’t go around saying ‘this wall is in our way, let’s take it down’ without considering it is a load-bearing wall.

My expectations on the financial markets are that I should be able to:
invest in the growth of the economy,
have a long-term retirement fund,
plan to have growth in the long-term fund.
have knowledgeable functionaries to run the fund,
know that properly managed securities are a known entity,
assume that the functionaries know what they are doing,
assume that assets invested in will still exist after a period of years,
assume that I am not being invested in securities that will disappear into a bankrupt pit,
expect that funds will fluctuate over the short term but will grow over the long term,
expect the Republicans will do everything in their power to undermine my long-term security.

Overall, I know that investing in securities is fraught with peril and risk. But, I expect that the fund managers I am using will be doing their fiduciary duty to minimize the risk. And that fiduciary duty includes wandering around the house and looking for cracks in the foundation and leaks in the pipes and the roof. And moving my stuff away from the leaks and the cracks until the repairs are made. The SEC is the repair group to fix the leaks and cracks. If the cracks are being caused by a shifting foundation then they will need to jack up the rafters and shore up the foundation to keep the stability. Expensive project. Or they can let the foundation collapse, clear it and everything that fell with it away, and rebuild the damaged section on a new foundation. Probably an even more expensive project.

Am I being naive in my expectations? Are they realistic? or are they the cartoony “I am still safe until I look down and see that I am standing on thin air.”?

Building on Shifting Ground