No, this wasn't what Barry O promised last night in his self congratulatory bs fest. That's what the new debt ceiling passed by the Senate today amounts to. The debt ceiling was raised another $1.9 trillion today. With the new debt ceiling at $14.3 trillion that amounts to each man, woman, and child living in America owing $47,650.
For perspective to those who want to believe that the current situation is akin to past hiccups in American history, the debt ceiling 10 years ago was $5.9 trillion.
Thursday, January 28, 2010
Andrew Jackson
For those who might not be familiar, Andrew Jackson abolished the Second Bank of the United States, which was the second incarnation of a central bank in the U.S. Note his statement when addressing the parasites and it's application to the destruction of the middle class going on today.
"Gentleman, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out."
An additional piece of information for your consideration. There was an assassination attempt on the life of President Jackson. You might be surprised to read a little bit about the U.S. Presidents who have been assassinated who opposed the idea of central banking. Surely just a coincidence.
Surely it's also a coincidence that Ben Bernanke is a republican appointed by a republican president who now is being supported by more democrats than republicans in his renonomination attempt.
"Gentleman, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out."
An additional piece of information for your consideration. There was an assassination attempt on the life of President Jackson. You might be surprised to read a little bit about the U.S. Presidents who have been assassinated who opposed the idea of central banking. Surely just a coincidence.
Surely it's also a coincidence that Ben Bernanke is a republican appointed by a republican president who now is being supported by more democrats than republicans in his renonomination attempt.
Wednesday, January 27, 2010
Money Market Update
For anyone who is holding cash in a Money Market Fund, take note that when the next financial panic ensues you will have no access to your money. Check www.zerohedge.com for details.
Don't be surprised when your 401k is forced to hold a fixed percentage of U.S. bonds in the near future either.
Don't be surprised when your 401k is forced to hold a fixed percentage of U.S. bonds in the near future either.
Real Estate Anecdotes
Yesterday I had the good pleasure of interacting with several different Realtors in the Phoenix area. The experiences once again confirmed my steadfast belief that we are perhaps into the 2nd or 3rd inning of what will prove to be a devastating depression.
The first interaction involved me inspecting a REO property that I was considering purchasing, improving, and reselling. Phoenix just experienced nearly a week of steady rain and this property clearly had a roof leak. The ceiling was wet and drooping and the carpet was still wet. I instructed my realtor to lower the offer and let the other agent know of the problem. The other agent insisted that I was lying, and claimed to have a contractor go look at it and saw no signs of a leak. Why does this confirm that we are just beginning the depression? Simply because idiots like the agent and her contractor will ultimately be washed out when the bottom is found. The house a real problem along with a real buyer. The contractor couldn't identify the easiest of problems, and the agent chose to stop trying to make a sale and instead argue about something she had no capacity to understand. So far there has been very, very little cleansing accomplished in this depression. Our national policy has been to extend and pretend, providing more liquidity to markets that have suffered from excess liquidity for no less than 10 years. Idiots masquerade as proffesionals...this is not a market that has been chastened, corrected, or found a bottom. When it does these types will have been wiped out.
The second experience was with a worthless agent who called to schedule to show my personal residence. We spoke at 2:00pm and scheduled for him to bring his clients by between 4:00-5:00pm. When he hadn't shown by 5:30 I called and left him a message. Of course you can guess that he never bothered to call back. The Arizona real estate market has been the home of those who were completely unemployable for the past 10 years. No bottom will be found until these worthless, unprofessional, parasites are washed out of the industry.
The last experience was a meeting with two agents who recognize the need to reinvent themselves to stay relevant as the industry washes out the losers. Smart enough to know that they've got to get creative and smart enough to know that if that doesn't work they need to get out of the industry. All the hacks are out there telling everyone, "there's never been a better time to buy" and all the other bs. The smart ones are getting creative and acknowledging that if their new approach doesn't work, get out of dodge.
That's not the end of a depression or even a mild recession. It is the second stage of consciousness among those that intellectual capable of understanding just how bad the situation truly is.
The first interaction involved me inspecting a REO property that I was considering purchasing, improving, and reselling. Phoenix just experienced nearly a week of steady rain and this property clearly had a roof leak. The ceiling was wet and drooping and the carpet was still wet. I instructed my realtor to lower the offer and let the other agent know of the problem. The other agent insisted that I was lying, and claimed to have a contractor go look at it and saw no signs of a leak. Why does this confirm that we are just beginning the depression? Simply because idiots like the agent and her contractor will ultimately be washed out when the bottom is found. The house a real problem along with a real buyer. The contractor couldn't identify the easiest of problems, and the agent chose to stop trying to make a sale and instead argue about something she had no capacity to understand. So far there has been very, very little cleansing accomplished in this depression. Our national policy has been to extend and pretend, providing more liquidity to markets that have suffered from excess liquidity for no less than 10 years. Idiots masquerade as proffesionals...this is not a market that has been chastened, corrected, or found a bottom. When it does these types will have been wiped out.
The second experience was with a worthless agent who called to schedule to show my personal residence. We spoke at 2:00pm and scheduled for him to bring his clients by between 4:00-5:00pm. When he hadn't shown by 5:30 I called and left him a message. Of course you can guess that he never bothered to call back. The Arizona real estate market has been the home of those who were completely unemployable for the past 10 years. No bottom will be found until these worthless, unprofessional, parasites are washed out of the industry.
The last experience was a meeting with two agents who recognize the need to reinvent themselves to stay relevant as the industry washes out the losers. Smart enough to know that they've got to get creative and smart enough to know that if that doesn't work they need to get out of the industry. All the hacks are out there telling everyone, "there's never been a better time to buy" and all the other bs. The smart ones are getting creative and acknowledging that if their new approach doesn't work, get out of dodge.
That's not the end of a depression or even a mild recession. It is the second stage of consciousness among those that intellectual capable of understanding just how bad the situation truly is.
Saturday, January 23, 2010
Grandpa's advice
Grandpa Warren stated this week that if Ben Bernanke is not reconfirmed as President of the Federal Reserve he will sell U.S. stocks. Just when I think I couldn't possible hold America's Grandpa in any more contempt he goes and does this. It prompted me to do a little research as to just how well letting grandpa manage your money would have been over the past ten years.
As previously noted Grandpa would be worth jack without the government bailouts of his largest financial investments, however besides that here is what Grandpa has accomplished over the past 10 years. From 12.31.99-12.31.09 Berkshire Hathaway's A shares annaualized return was 5.86%.
Had you simply bought a 10 year U.S. Treasury Bond on 12.31.99 the U.S. government would have paid you 6.45% annualized. That's risk free 6.45% verses Grandpa, supposedly the world's smartest investor, delivering 5.86%.
I wonder why Becky Quick doesn't point out that listening to Grandpa over the past 10 years would have been worse than taking no risk and investing in a 10 year?
As previously noted Grandpa would be worth jack without the government bailouts of his largest financial investments, however besides that here is what Grandpa has accomplished over the past 10 years. From 12.31.99-12.31.09 Berkshire Hathaway's A shares annaualized return was 5.86%.
Had you simply bought a 10 year U.S. Treasury Bond on 12.31.99 the U.S. government would have paid you 6.45% annualized. That's risk free 6.45% verses Grandpa, supposedly the world's smartest investor, delivering 5.86%.
I wonder why Becky Quick doesn't point out that listening to Grandpa over the past 10 years would have been worse than taking no risk and investing in a 10 year?
Friday, January 22, 2010
Barry O's New Banking Rules
With Barry O finally listening to what Paul Volcker has been advising him to do for the past year and limiting the nature of risk taking that banks can participate in things are getting interesting.
You can certainly tell who is shorting the banks and who is long the banks by their arguments regarding the proposed regulation changes. I just watched a complete d bag argue that these regulations are ridiculous and are a clearly anticapitilist move. Of course the idiot conducting the interview, not knowing what true capitalism consists of, didn't ask the moron to define exactly how banks are capitalist enterprises.
For those that lean to the right, don't fall for this bs argument that asking banks to function as banks rather than private equity shops, hedge funds, or frontrunners of their own clients, is somehow anti capitalist. Political theater, likely, but anti capitalism not a chance.
I'm no fan of Barry O and doubt that any piece of legislation will be crafted with sufficient teeth to curtail systemic risk in the U.S. banking industry. However, it is great to see that the political class is beginning to fear the outrage brewing in America. It is equally fun to watch some arrogant investment manager rage on about how unfair itis that his long position in Bank of America just took a big hit.
Another two liberal senators just announced they won't be voting for Ben Bernanke's reappointment as President as the Federal Reserve. Again, another interesting sign that the ruling elite are getting scared and starting to turn on each other. Expect Turbo Tax Timmy to be canned soon as well.
You can certainly tell who is shorting the banks and who is long the banks by their arguments regarding the proposed regulation changes. I just watched a complete d bag argue that these regulations are ridiculous and are a clearly anticapitilist move. Of course the idiot conducting the interview, not knowing what true capitalism consists of, didn't ask the moron to define exactly how banks are capitalist enterprises.
For those that lean to the right, don't fall for this bs argument that asking banks to function as banks rather than private equity shops, hedge funds, or frontrunners of their own clients, is somehow anti capitalist. Political theater, likely, but anti capitalism not a chance.
I'm no fan of Barry O and doubt that any piece of legislation will be crafted with sufficient teeth to curtail systemic risk in the U.S. banking industry. However, it is great to see that the political class is beginning to fear the outrage brewing in America. It is equally fun to watch some arrogant investment manager rage on about how unfair itis that his long position in Bank of America just took a big hit.
Another two liberal senators just announced they won't be voting for Ben Bernanke's reappointment as President as the Federal Reserve. Again, another interesting sign that the ruling elite are getting scared and starting to turn on each other. Expect Turbo Tax Timmy to be canned soon as well.
Thursday, January 21, 2010
WSJ Headlines
In the event that there is anyone out there who doesn't realize that the main stream U.S. media is is nothing but propaganda, here are the headlines for earnings reports today. Keep in mind U.S. equity markets lost more in the past two days than they have in several months.
Google Earnings Soar
AmEx Profit Surges
Xerox Earnings Surge
Goldman Profit Leaps
BONY, State Street Net Surge
Ebay's Profit Soars
Kotak Bank Profit More than Doubles
And for those companies that didn't soar, surge, and leap
American Airlines Narrows Loss (once again bad news is great news...sure they still can't make money but the loss is narrower!)
Union Pacific Profit Falls 17%
ICICI Bank Profit Dips 13.4%
Competition Hits LSE Revenue
Google Earnings Soar
AmEx Profit Surges
Xerox Earnings Surge
Goldman Profit Leaps
BONY, State Street Net Surge
Ebay's Profit Soars
Kotak Bank Profit More than Doubles
And for those companies that didn't soar, surge, and leap
American Airlines Narrows Loss (once again bad news is great news...sure they still can't make money but the loss is narrower!)
Union Pacific Profit Falls 17%
ICICI Bank Profit Dips 13.4%
Competition Hits LSE Revenue
Elmer Fudd is gay
For some odd reason I usually turn on CNBC and move between it, Fox Business, and Bloomberg while I eat my lunch. Today I was unlucky enough to get to see Grandpa Warren and Barney Frank. While it's a closer call than you might think I'll go on record as being more repulsed by Barney Frank than America's Grandpa.
Listening to Barney Frank talk his nonsense puts the fact that Scott Brown won the Massachusetts senate seat in it's proper perspective. The same state that has sent Bawny Fwank to congress for the last 28 years just gave one of their 2 Senate seats to a Republican. While I'll remain skeptical that this will lead to the kind of revolution necessary to save the U.S. from bankruptcy it is certainly an encouraging sign nevertheless. If somehow you've been able to avoid ever hearing Bawny speak you might want to google him. He's gay and sounds like Elmer Fudd. The content of his bs is equally absurd, but it is simply amazing to me that this guy has been elected to congress over and over again. Not to mention that Bawny was reprimanded for taking care of the parking tickets of a male prostitute that he paid for sex. The same people that vote for this worthless piece of garbage just voted in a Republican to replace Ted Kennedy? Wow...
Anyway he first showed up on CNBC being interviewed by the charlatan Jim Cramer about Barry O's new plan to eliminate prop trading from banks. He and Cramer came to the conclusion that this wouldn't be fair unless it wasn't enacted for 3-5 years. I watched the ticker on the NYSE go from down 220 points to down 170 points while these two pricks determined what would be fair. He then moved on to Bloomberg where he continued to try and prop the market up while hinting that he would resist any efforts to actually reduce systemic risk in the U.S. banking system.
Then there was Grandpa Buffet. Yesterday he announced that he was splitting the Berkshire B shares 50-1 and gave an hour interview to his favorite little propaganda spewer Becky Quick. Today he showed up on Fox. You know the administration is afraid the equity markets are going to tank when Grandpa has to do both CNBC and Fox. Once again he gave the sage advice that all of us peons should be buying U.S. equity markets.
It is good to know that Bawny and Grandpa are making the rounds to try and keep the wheels on the cart today.
Listening to Barney Frank talk his nonsense puts the fact that Scott Brown won the Massachusetts senate seat in it's proper perspective. The same state that has sent Bawny Fwank to congress for the last 28 years just gave one of their 2 Senate seats to a Republican. While I'll remain skeptical that this will lead to the kind of revolution necessary to save the U.S. from bankruptcy it is certainly an encouraging sign nevertheless. If somehow you've been able to avoid ever hearing Bawny speak you might want to google him. He's gay and sounds like Elmer Fudd. The content of his bs is equally absurd, but it is simply amazing to me that this guy has been elected to congress over and over again. Not to mention that Bawny was reprimanded for taking care of the parking tickets of a male prostitute that he paid for sex. The same people that vote for this worthless piece of garbage just voted in a Republican to replace Ted Kennedy? Wow...
Anyway he first showed up on CNBC being interviewed by the charlatan Jim Cramer about Barry O's new plan to eliminate prop trading from banks. He and Cramer came to the conclusion that this wouldn't be fair unless it wasn't enacted for 3-5 years. I watched the ticker on the NYSE go from down 220 points to down 170 points while these two pricks determined what would be fair. He then moved on to Bloomberg where he continued to try and prop the market up while hinting that he would resist any efforts to actually reduce systemic risk in the U.S. banking system.
Then there was Grandpa Buffet. Yesterday he announced that he was splitting the Berkshire B shares 50-1 and gave an hour interview to his favorite little propaganda spewer Becky Quick. Today he showed up on Fox. You know the administration is afraid the equity markets are going to tank when Grandpa has to do both CNBC and Fox. Once again he gave the sage advice that all of us peons should be buying U.S. equity markets.
It is good to know that Bawny and Grandpa are making the rounds to try and keep the wheels on the cart today.
Thursday, January 14, 2010
Political Theater
Today's headlines include, "Obama to Announce Tax Plans for Banks". The gist of Barry O's plan is that banks with assets of $50 billion or more will pay a special tax for the next 10 years as a punishment for presenting systemic risk to the economy and in an attempt to discourage large bonuses being given to management.
Only an Ivy League ahole surrounded by other "intellectuals" who are too smart to have ever participated in the real economy could dream up such a ridiculous idea. Clearly the true intention of this tax is to try and hoodwink the citizens of America into thinking that Obama is somehow outraged at the banks and is going to stick it to them. Anyone who thinks through this farce realizes that the bankers will have nothing stuck to them by this absurdity.
For starters, these publicly traded financial institutions will simply deliver less to their owners/shareholders because of the penalty tax. The joke is on the little guy whose pension fund is an owner of Citi, Goldman Sachs, JP Morgan and the like. All this nonsensical talk of limiting bonuses, discouraging bonuses, taxing bonuses is a red herring. There is only one reasonable, ethical, moral, and effective way to limit bonuses given to bank employees and that's to actually provide for the shareholders/owners of these companies to have the appropriate voice in the discussion. Part of the great myth of our modern day stock market is that it is an efficient allocator of capital that provides for those with capital to purchase a portion of businesses and reap the profit of such ownership. Yet in reality the shareholders/owners reap little or no reward from their ownership. Unless a firm pays a dividend the owners get absolutely nothing for risking their capital to be an owner. They are at the mercy of the market (the increasingly manipulated market) to determine if their interest will ever be worth anymore than they paid for it. Who in their right mind would ever purchase a company or a portion of a company, knowing that the cash it generated would not be shared with them, that they would have no say whatsoever as to where that cash was allocated, that the managers of the company could chose to simply give all of that cash to themselves...only in the stock market is anyone willing to do this. You wouldn't buy a sandwich shop under those rules. So to my point, the way to control bonuses is to completely overhaul how publicly traded companies are governed. The board of directors would have to be made up of representatives of the largest shareholders. More specifically to my point, the new tax will simply hurt the owners of the company--anyone owning stock mutual funds, receiving a pension, 401k...most likely you. It will not curtail bonuses, it will not hurt the management of these institutions.
All of that is really a side note. The big issue is that we now have acknowledged that there are financial institutions that are large enough and complex enough to present systemic problems to our economy, or at least this is the message we've been told with the "too big to fail" mantra. If this is the case it only takes an elementary education to understand that the solution is not to levy a special tax on such institutions but rather to require them to be dismantled until they are no longer large enough to present said risk. This is not rocket science and Bary O and his team of geniuses know this perfectly well. Too big to fail means that it is too big to exist without creating unnecessary risks, simply put. Instead Bary O is going to produce this piece of garbage penalty tax and try and convince the masses that he's on their side and really sticking it to the "fat cat bankers" as he so eloquently called them on 60 Minutes.
Expect to see the "fat cat bankers" do their best Br'er Rabbit imitation concerning this farce, pretending to be outraged by all of this. Just as disturbing expect the libs to say how great it is that Barry O is taking a stand that is representative of the growing populist anger towards the bankers, while the conservative talking heads will express outrage about raising taxes and how it will cause the banks to lend even less. Neither side understanding or caring about the real issues at hand. Just another red/state blue state fighting point while both the red and blue continue to be raped and blame each other for it while the real perpetrators continue to put our entire economic system at risk.
Only an Ivy League ahole surrounded by other "intellectuals" who are too smart to have ever participated in the real economy could dream up such a ridiculous idea. Clearly the true intention of this tax is to try and hoodwink the citizens of America into thinking that Obama is somehow outraged at the banks and is going to stick it to them. Anyone who thinks through this farce realizes that the bankers will have nothing stuck to them by this absurdity.
For starters, these publicly traded financial institutions will simply deliver less to their owners/shareholders because of the penalty tax. The joke is on the little guy whose pension fund is an owner of Citi, Goldman Sachs, JP Morgan and the like. All this nonsensical talk of limiting bonuses, discouraging bonuses, taxing bonuses is a red herring. There is only one reasonable, ethical, moral, and effective way to limit bonuses given to bank employees and that's to actually provide for the shareholders/owners of these companies to have the appropriate voice in the discussion. Part of the great myth of our modern day stock market is that it is an efficient allocator of capital that provides for those with capital to purchase a portion of businesses and reap the profit of such ownership. Yet in reality the shareholders/owners reap little or no reward from their ownership. Unless a firm pays a dividend the owners get absolutely nothing for risking their capital to be an owner. They are at the mercy of the market (the increasingly manipulated market) to determine if their interest will ever be worth anymore than they paid for it. Who in their right mind would ever purchase a company or a portion of a company, knowing that the cash it generated would not be shared with them, that they would have no say whatsoever as to where that cash was allocated, that the managers of the company could chose to simply give all of that cash to themselves...only in the stock market is anyone willing to do this. You wouldn't buy a sandwich shop under those rules. So to my point, the way to control bonuses is to completely overhaul how publicly traded companies are governed. The board of directors would have to be made up of representatives of the largest shareholders. More specifically to my point, the new tax will simply hurt the owners of the company--anyone owning stock mutual funds, receiving a pension, 401k...most likely you. It will not curtail bonuses, it will not hurt the management of these institutions.
All of that is really a side note. The big issue is that we now have acknowledged that there are financial institutions that are large enough and complex enough to present systemic problems to our economy, or at least this is the message we've been told with the "too big to fail" mantra. If this is the case it only takes an elementary education to understand that the solution is not to levy a special tax on such institutions but rather to require them to be dismantled until they are no longer large enough to present said risk. This is not rocket science and Bary O and his team of geniuses know this perfectly well. Too big to fail means that it is too big to exist without creating unnecessary risks, simply put. Instead Bary O is going to produce this piece of garbage penalty tax and try and convince the masses that he's on their side and really sticking it to the "fat cat bankers" as he so eloquently called them on 60 Minutes.
Expect to see the "fat cat bankers" do their best Br'er Rabbit imitation concerning this farce, pretending to be outraged by all of this. Just as disturbing expect the libs to say how great it is that Barry O is taking a stand that is representative of the growing populist anger towards the bankers, while the conservative talking heads will express outrage about raising taxes and how it will cause the banks to lend even less. Neither side understanding or caring about the real issues at hand. Just another red/state blue state fighting point while both the red and blue continue to be raped and blame each other for it while the real perpetrators continue to put our entire economic system at risk.
Tuesday, January 12, 2010
Parasites with MBAs
There was a time not long ago when creating wealth in the United States primarily involved starting a business. The idea of getting rich without being your own boss made little sense. So if you were smart, hard working, comfortable taking risks, and wanted to accumulate wealth the natural thing to do was to identify an opportunity to create a new business and serve a market that was undeserved, unrecognized, or perhaps didn't even exist yet. You'd save money while you worked for someone else until you had enough capital and a clear enough vision to try and achieve your dream. I can speak from experience and say this was at least how my career looked and I'm grateful that I had the drive, took the risks, and achieved some measure of success. It honestly never occurred to me that there was any other way for an individual who wasn't born into wealth to achieve financial success. As a young man I certainly never met anyone who had achieved any real measure of financial success who pursued an alternative path.
Fast forward to 2010 and consider the path to financial success and it becomes exceedingly clear why our country is in the mess that it is in. The best and the brightest no longer strive to create a company that provides a real good or a beneficial service as it is far easier simply to be a parasite and suck wealth off a "host" who has already achieved financial success. This new attitude towards wealth creation was given the federal government's seal of approval when it determined that it would save the banking industry and the investment banking industry in the past 20 months. While commercial banks do provide value to society, they are nevertheless parasitic in nature as they produce nothing and only exist because other individuals do produce goods and do provide services that are in demand. Investment banking is entirely parasitic with no redeeming benefit whatsoever. However, if you were smart, hard working, and wanted to achieve financial success there are few better ways to do it than to work for an investment bank. You assume zero personal financial risk and can "earn" more money than most business owners, so why would you choose to build a business in light of that?
Of course if you are an investment banker you'd say there is definitely a better way to make more money and that is to manage a hedge fund. These are the kings of the parasites and literally can make billions rather than just the millions that investment bankers make. This group "manages" money that belongs primarily to producers and keeps more than 20% of any gains they achieve. The good news for the hedge fund manager is if they loose money they don't owe the producers 20% so it is the king parasite gig for sure.
The problem, which we are beginning to see in America now, is that at some point there aren't enough hosts left for all the parasites to be fed from. An economy does need some producers to make it work, everybody can't be a parasite. The paradox of course is that the rewards without risk lie in being the parasite not in being the host so more smart people want to be the parasite than the host.
As a thought exercise consider all the people in your sphere of influence, particularly those that you believe have achieved a measure of financial success. How many are producers and how many are parasites? It gets kind of interesting when you really ponder it. Worse yet, if you are a producer, or more accurately in this economy, were a producer consider all the parasites that you feed or fed while running your business....lawyers, accountants, bankers, financial/investment advisers, consultants...
This transition from being producers to being parasites isn't new or peculiar to the United States in 2010. Perhaps this time it will be different (famous last words) but the Dutch, Spanish, and British all tried to move from producers to parasites at different points in the last 400 years and all failed. There comes a point where there just aren't enough hosts left to support all of the parasites.
Fast forward to 2010 and consider the path to financial success and it becomes exceedingly clear why our country is in the mess that it is in. The best and the brightest no longer strive to create a company that provides a real good or a beneficial service as it is far easier simply to be a parasite and suck wealth off a "host" who has already achieved financial success. This new attitude towards wealth creation was given the federal government's seal of approval when it determined that it would save the banking industry and the investment banking industry in the past 20 months. While commercial banks do provide value to society, they are nevertheless parasitic in nature as they produce nothing and only exist because other individuals do produce goods and do provide services that are in demand. Investment banking is entirely parasitic with no redeeming benefit whatsoever. However, if you were smart, hard working, and wanted to achieve financial success there are few better ways to do it than to work for an investment bank. You assume zero personal financial risk and can "earn" more money than most business owners, so why would you choose to build a business in light of that?
Of course if you are an investment banker you'd say there is definitely a better way to make more money and that is to manage a hedge fund. These are the kings of the parasites and literally can make billions rather than just the millions that investment bankers make. This group "manages" money that belongs primarily to producers and keeps more than 20% of any gains they achieve. The good news for the hedge fund manager is if they loose money they don't owe the producers 20% so it is the king parasite gig for sure.
The problem, which we are beginning to see in America now, is that at some point there aren't enough hosts left for all the parasites to be fed from. An economy does need some producers to make it work, everybody can't be a parasite. The paradox of course is that the rewards without risk lie in being the parasite not in being the host so more smart people want to be the parasite than the host.
As a thought exercise consider all the people in your sphere of influence, particularly those that you believe have achieved a measure of financial success. How many are producers and how many are parasites? It gets kind of interesting when you really ponder it. Worse yet, if you are a producer, or more accurately in this economy, were a producer consider all the parasites that you feed or fed while running your business....lawyers, accountants, bankers, financial/investment advisers, consultants...
This transition from being producers to being parasites isn't new or peculiar to the United States in 2010. Perhaps this time it will be different (famous last words) but the Dutch, Spanish, and British all tried to move from producers to parasites at different points in the last 400 years and all failed. There comes a point where there just aren't enough hosts left to support all of the parasites.
Thursday, January 7, 2010
Jefferson
A few quotes from Thomas Jefferson.
"If the American people ever allow private banks to control the issue of their money, first by inflation then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
"The system of banking is a blot left in all our Constitutions, which, if not covered, will end in their destruction...I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid back by posterity...is but swindling futurity on a large scale."
"We have the greatest opportunity the world has ever seen, as long as we remain honest, which will be as long as we can keep the attention of our people alive. If they once become inattentive to public affairs, you and I, and Congress and Assemblies, judges and governors would all become wolves."
"If the American people ever allow private banks to control the issue of their money, first by inflation then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
"The system of banking is a blot left in all our Constitutions, which, if not covered, will end in their destruction...I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid back by posterity...is but swindling futurity on a large scale."
"We have the greatest opportunity the world has ever seen, as long as we remain honest, which will be as long as we can keep the attention of our people alive. If they once become inattentive to public affairs, you and I, and Congress and Assemblies, judges and governors would all become wolves."
Tuesday, January 5, 2010
Where are the bread lines?
In the past several months I've been asked more than once, "If what we are going through really is the worst economic environment since the Great Depression, where are the bread lines?"
The answer to this question that you'll get by listening to any of the empty suits on CNBC, Fox Business, The Wall Street Journal, or any of the other propaganda engines masquerading as the media would be, due to swift action on the part of the Federal Reserve and the Federal Government the economy was rescued from a depression hence you don't seen bread lines and widespread misery. The first reality is that we don't see bread lines because the propaganda engines don't show you bread lines when you watch them or read them.
However, the reasons why we haven't yet seen the massive bread lines that are associated with the Great Depression go beyond what the propaganda engines are willing to show us. Consider the fact that Social Security didn't come into existence until 1935. Food stamps didn't come into existence until 1939. Unemployment insurance began in 1936. Credit cards didn't come into use until 1951.
Now consider that 20.7 million Americans received unemployment benefits at some point in 2009, 37 million Americans are on Food Stamps, credit cards are ubiquitous, millions are living rent free in homes while they wait for the mortgage holder to foreclose and it becomes rather obvious why this depression doesn't at this point include massive bread lines. There are in fact bread lines, however the modern day version of it is food stamps. What would the national sentiment be if you turned on the television to see 37 million Americans in bread lines? I'll take a bet that it would be outrage, panic, depression, and perhaps violence in Washington and Wall Street.
Draw your own conclusions as to what all of this means, but don't for a minute believe that because you don't see widespread reporting of events that look like what you've been taught the Great Depression looked like that we have somehow come to the edge of the abyss and been rescued.
Also consider this, President Herbert Hoover did not begin describing the economic situation America was in as a "depression" until 1931, nearly 2 years after the stock market crash of October 1929 began the Great Depression.
The answer to this question that you'll get by listening to any of the empty suits on CNBC, Fox Business, The Wall Street Journal, or any of the other propaganda engines masquerading as the media would be, due to swift action on the part of the Federal Reserve and the Federal Government the economy was rescued from a depression hence you don't seen bread lines and widespread misery. The first reality is that we don't see bread lines because the propaganda engines don't show you bread lines when you watch them or read them.
However, the reasons why we haven't yet seen the massive bread lines that are associated with the Great Depression go beyond what the propaganda engines are willing to show us. Consider the fact that Social Security didn't come into existence until 1935. Food stamps didn't come into existence until 1939. Unemployment insurance began in 1936. Credit cards didn't come into use until 1951.
Now consider that 20.7 million Americans received unemployment benefits at some point in 2009, 37 million Americans are on Food Stamps, credit cards are ubiquitous, millions are living rent free in homes while they wait for the mortgage holder to foreclose and it becomes rather obvious why this depression doesn't at this point include massive bread lines. There are in fact bread lines, however the modern day version of it is food stamps. What would the national sentiment be if you turned on the television to see 37 million Americans in bread lines? I'll take a bet that it would be outrage, panic, depression, and perhaps violence in Washington and Wall Street.
Draw your own conclusions as to what all of this means, but don't for a minute believe that because you don't see widespread reporting of events that look like what you've been taught the Great Depression looked like that we have somehow come to the edge of the abyss and been rescued.
Also consider this, President Herbert Hoover did not begin describing the economic situation America was in as a "depression" until 1931, nearly 2 years after the stock market crash of October 1929 began the Great Depression.
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