Archive for September, 2008

Just Focus on the Bailout…

September 29, 2008

While, the Federal Reserve pumps another $600 billion into the financial system!  See the link below:

We’re all up in arms about the bailout and the taxpayer money that will be used and rightly so.  However, we need to have the same outrage about the Federal Reserve printing countless billions of dollars!

While the bailout plan will use about $5000 per taxpayer (at the full $700 billion), the money the Fed prints is out of thin air.  Sure, they say it’s anchored to debt or it’s just a loan, but are they ever going to recoup that money?

For every dollar that is printed, the value of all of our dollars goes down.  The dollar is also the benchmark for many commodities, such as oil.  So as the value of every dollar drops, the price of all thos commodities goes up.  So not only is our dollar worth less, but the price of what it can buy goes up.  This is inflation at it’s core.

Only Congress, in the Constitution, has the power to print money.  They passed this power on to the Federal Reserve.  Well, it is now time for them to take this power back!  Put someone with their jobs on the line in charge of money.  I bet a lot less would get printed then.

The Federal Reserve is led by appointed officials who have limitless power when it comes to our money supply.  They can not be audited and never face the fear of re-election.  

Here is a way you can help get rid of the Federal Reserve.  It’s a link to Ron Paul’s website and actual legislation that will abolish the Federal Reserve:–

Thanks for reading!

Tried to Watch the Debate

September 29, 2008

I DVR’d the Presdential Debate and started to watch it last night.  I had heard and read some reviews about the candidates performances, but of course, none of the reviews actually discussed issues.  

Personally, I thought Obama presented himself better and was more forceful in his presentation.  McCain might have more knowledge and more experience, but he failed to match the performance of Obama.

But seriously, these debates are just a chance for the candidates to spew rhetoric and show their “fundamental differences.”  There is no true debate on issues, just some back and forth over talking points or minute details of broader issues.

I got so frustrated that I had to turn it off about halfway through.  There really isn’t a big difference between these two.  They agree on almost every macro issue.  It’s just the little details they actually differ on.  You can see why the average American thinks “wasteful spending” is limited to earmarks or that our foreign policy is limited to Iraq and Afghanistan.

If this was truly a debate between two distinct parties, larger questions would have been asked.  Instead of debating a timeline to withdraw from Iraq, bigger questions needed to be asked.  Among them:

Do you believe in nation building and our military having a presence in over 150 countries?

Do you believe in supplying billions of dollars in foreign aid each year?

Do you think our military presence on the Arabian penisula is good or bad for our national security?

Why does the US call for democracy and liberty and freedom but support unpopular dictatorships and not recognize some democratic governments?

Should the Federal Government have the right to take however much of our hard earned income they want and distribute to others?

Should Congress take back some of the power it has passed on to the Federal Reserve in regards to the money supply?

It is amazing to me that people eat this stuff up without questioning it.  The debates and the entire election process is to create an illusion of a choice, when it is really more of the same.  The electorate should be outraged that a real debate about real issues can not happen.  The Republicans and Democrats have shut out third party candidates and broder issues.  It is about keeping those in power today, in power tomorrow.

Figuring Out the Financial Crisis

September 27, 2008

What really is the crisis right now?  I can’t seem to really figure it out.  Here’s what I’ve heard or read in the last few days on CSPAN, the internet and on TV.

Lost Confidence

Banks have lost confidence in each other to the point where they will not loan each other short term funds.  Normally, at the end of every business day, if the bank has a surplus of cash, they will lend it to other banks.  If they have a deficit, they will borrow from another bank.

Now, banks have so little faith in each other, that they will not make these loans.  There isn’t one specific reason for this.  It could be that the other banks have too much subprime holdings or don’t have enough of a capital cushion.

These banks are still getting the loans they need, but the Treasury is serving as an intermediary.  Banks with a surplus buy Treasury debt, and the Treasury loans that money to banks with deficits.

So, one step to solving this is to restore confidence and faith back to the short term, bank to bank funding system.

Illiquid Assets

According to what you are hearing every day on the news, there are billions of “toxic” debt and “illiquid assets.”  These are all holdings that were tied to subprime lending that are now filled with loans that will never be paid off.

Illiquid means that there is no market for them.  Trust me, there is a market out there for these securities, it’s just that the banks don’t want to drop the price low enough for someone to buy them.

In accounting, these subprime loans were valued with “mark to market.”  This means their values were based on what the market price is for them.  Basically, when the were put on the books, they were valued very highly, probably on a dollar for dollar value.  All the write downs you heard about were banks “marking” them down to market value.  However, if they never sold them, how did they know the value?

If the banks right now cut the price to 1 cent for every dollar, there would be a market for them.  Investment banks and foreign countries would scoop them up.

In order to restore faith between banks, they need to know that the other banks aren’t going to be burdened by this subprime debt and not be able to meet their obligations.

The Bailout

This is where the bailout comes into play.  The Federal Government is going to buy these illiquid assets to take them off of the banks books.

The risk for the taxpayer, who is funding the deal, is that the Federal Government is going to overpay.

You’ve heard a lot about “reverse auctions” too with all the bailout talk.  This means, the Government is going to say, “here’s $1 billion, what will you sell us for $1 billion.”  The banks would offer up different packages of their illiquid assets.

This does not set the market price for these.  This sets an artificially higher price because the Government only has a certain number of packages to choose from.

It should work in a pure auction format.  The banks should present a package they want to sell.  Then they can start the bidding between other banks, private investors, and the Fed.  The package then goes to the high bidder.  Using this method, the true market price is found.

Does This Fix the Problem?

There are many roots to this problem, but a main one was people defaulting on their subprime mortgages.

A lot of people right now are upside down.  This means they owe more than their house is worth.  If they bought at the peak, their mortgage could be for $300,000 but their house is only worth $250,000.

Many people defaulted on their loans when they could no longer make the payments.  Their adjustable rate period is up and they can not make the higher payments.  However, there are some people who are just walking away from their homes.  They can get foreclosed on and walk away with only a hit to their credit score.  There is no incentive right now for them to try and pay the bills.

A New Approach?

The focus should be on the subprime loans and how to get them to be current, rather than having people lose their homes.  There are still waves of adjustable rates jumping up, so there are still a lot of homeowners in trouble.

If the subprime loans would get paid, then the illiquid assets would have value because investors would know they would pay off.

Since the Fed has taken control of Fannie and Freddie, they are basically the ones who decide who gets a loan and who doesn’t. They also generate mortgages and re-sell them to investors.

The Fed should offer attractive, 40 year refinancing to any homeowner that wants it.  They should write off the losses of the home compared to the mortgage as well.  So homeowner’s would no longer be upside down, and they would have more affordable payments.

I am not a fan of government intervention at all. If they are going to intervene though, they should do it to help the root of the problem, not a symptom.  The banks failing are a symptom of the subprime meltdown.

Already the Fed has pumped billions and billions into the market and that money hasn’t done anything.  What is another $700 billion going to do?  It’s too big of a risk to throw that much money at a system that is not functioning.

They need to address the root of the problem and stop homeowners from defaulting.  If they fix that, they can fix the system.  Bailing out big Wall Street banks will help their fat cat friends, but will only patch holes in a dam that is about to burst.

Debate Tomorrow Night

September 26, 2008

Tomorrow night, in Oxford, Mississippi, the first of three presidential debates is scheduled.  At first, it looked like McCain was going to try and postpone the event, but now it looks like it will go on as scheduled.

Even though I will be watching, I have a big problem with the debate process.

Other parties might be small, but their candidates have ideas the nation should be able to hear.  It is not fair to these candidates or the public that they get shut out.  They still represent a portion of the voting population.

Especially now, where the candidates have very similar views on almost every issue, the need for outside ideas is larger than ever.

There needs to be a more open forum, so everyone feels represented.  Instead of informing voters, the closed debates turn a lot of independents and undecideds off.

Last election, Ralph Nader called for open debates.  It’s not that crazy of an idea.  I just can’t believe that I’m in such a minority.  Is the rest of the country that satisfied with the two parties?  Do they even know there are other parties with new and fresh ideas?

What a Joke!

September 25, 2008

From the AP:

“Under the tentative plan, the government would buy the toxic, mortgage-based assets of shaky financial institutions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retirement savings, rising home foreclosures, closed businesses, and lost jobs. Bush warned darkly in a prime-time address Wednesday night, “Our entire economy is in danger.””

Hasn’t this “cascade of ruinous events” already happened?  So all this talk of people losing jobs and being foreclosed on hasn’t happened yet?  You mean the economy is fine right now, but if we don’t give all our money to the Feds to bail out Wall Street we’re going to be in a recession?

Wake up people!  This whole bailout is just another way for the Exectutive branch to take our tax money and spend it without any checks and balances!

Congress needs to stop bending over and needs to take a stand!

The answer is not to keep throwing money at this mess.  It’s like telling an alcoholic that more whiskey will make him better.

If these assets are so toxic, why are they going to cost hundreds of billions of dollars to buy them?  The government is overpaying on purpose so their buddies at the banks can keep living the high life.  Illiquid means they can’t be sold.  So they’re basically worthless.  Since when does “worthless” equal $700,000,000,000?

Also, the banks and institutions that are going to benefit the most are the ones that are in the worst shape. The ones that made the most bad investments and need to be weeded out are being propped up the most.  What a joke!  

All those people that say that it’s capitalism and greed gone crazy and that we need more oversight are missing the point.  In the back of everyone’s mind, they knew that if times got really bad, Uncle Sam would be there to bail them out.  It’s happened before and it will happen again.  This whole bailout will just increase recklessness in the future.  This is a horrible precedent that we are just reaffirming.

It’s not capitalism any more.  It’s a casino.  A free market would let banks fail and let the market set interest rates and values for the toxic assets.  Instead, the house is creating the odds and the prices.  They’re letting the gamblers run up huge tabs and the walk away not having to pay!

The government does not own us.  They take your money and my money and give it to a select few politically well-connected people.  It is Unconstitutional and un-American to take money from one person to give it to another.  Especially when the person you’re taking it from has been prudent and saved, while the person you’re giving it to has been reckless and irresponsible.

Write your Representative and tell them to stop taking our money and giving it to special interests.  If your Congressman or woman says they are opposed to it and then pass it anyway, hold them accountable and vote them out.  More than 55% of Americans oppose the bailout.  It’s time for our voices to be heard!

It’s Health Insurance Time Again

September 25, 2008

My employer offers coverage for me, and I can add my wife and child onto the plan through my work.  I knew already that I was paying a lot, but I was taken by surprise when the policy jumped almost 10% last year.  I went from paying about $550 a month to $610 a month.

I was caught off guard last year, so this year I’ve already started shopping around to see if I can get a better price for my wife and kid to get insured through another small group plan.  Anything off of that $7,200 a year I can save would be awesome.

Every year, our health care representative comes in and shows us how much it has gone up and explains that it’s because we want the best technology and the best drugs and that is what drives the cost.  Doesn’t it seem strange that technology makes the costs go up?  Most of the time, better technology lowers costs and raises efficiency.

Why then, in health care, is the opposite true?

First, we have to look at the difference between health insurance and health coverage.  While most people think they’re synonymous, they aren’t.  Insurance should only be for catastrophes, not fore every day doctor visits.  Today, we all have “coverage” through our HMOs where we can’t even go see a doctor unless we are covered.

Since HMOs and other health care companies are for-profit, they are in the business of controlling costs.  So as they try to pressure doctors to keep costs down, the doctors push back by charging the maximum they can to the insurance company.

We need to take back control of our health care system.  We need to stop the drug, medical companies, and insurance companies from dictating prices.  There is no competition for pricing, and there is no incentive to bring costs down.  Also, there are no real alternatives offered.

If individuals and not big companies or government entities were responsible for footing the bill, the costs would come down.  Instead of paying huge premiums to health care companies, we should be able to put our money into medical savings account using pre tax dollars.  That can cover our routine medical care, and we could pay for catastrophe insurance with that money as well.

Think about if we paid cash for every day doctor visits and paid a small amount for our insurance.  If every doctor visit was $100 and my family went 12 times, that would be $1200.  If I paid $200 a month for insurance (not coverage), that’s $2400.  That total is half of what I pay now, and probably another $3,000 or so that my company pays for me.  The savings could be close to $6,000 a year.  That is an extra $500 a month in my pocket.

Also, for malpractice, I agree with Congressman Dr. Ron Paul.  He says that patients should have the option to pay for malpractice insurance before every major procedure.  It would be very affordable and would cover a certain dollar amount in case something goes wrong.  It doesn’t make sense that malpractice insurance is added into the costs of everyone.  It should be offered when you need it.

Government mandated that all companies had to offer HMOs in the HMO Act of 1973, and government runs medicare.  So government intervention in the health care industry has created a system where it pays for everyone to charge the most they can get.  In a free society, it would make sense to compete for your business and keep costs down.

I am not a proponent of “health care for all.”  I do not think that the Federal Government should be involved in the health care of a nation.  Costs would spiral out of control and the quality of the care would decline.  Imagine your doctor being like going to the DMV.  Yikes!

Government had good intentions with Medicare and I’m sure there are ways to solve the problems it is facing.  I just think that government running a huge insurance company creates so much bureaucracy, leads to fraud, and encourages doctors and drug and device companies to charge more.

Maybe these ideas are naive and too radical for most people.  It is just that the only alternatives we are presented are along the lines of cheaper drugs or lower co-pays.  There is never discussion about the entire health care system.

We need to wake up and realize that the system we have creates inefficiencies, stifles competition, and encourages charging the highest amount possible.  There has to be something better, right?

Sending the Wrong Message

September 25, 2008

So, I read about President Bush’s address to the nation tonight.  He was urging the American public to accept the bailout.  One of his quotes was:  “It will help american businesses and consumers get credit to meet their daily needs and create jobs.”

Can you believe that?  Credit for their “daily needs.”  What happened to paying cash?  What happened to living within your means?

If this is the message the President is sending, we are nowhere near the end of this credit crunch.  Once credit becomes available, we’ll max it all out again.

Of course, this is coming from the administration that has run up the largest national debt in our history, so maybe this is business as usual…

Once Again, They’re Missing the Point

September 24, 2008

How many more times in the next few days am I going to hear one of the following statements:

“We’re in this crisis because of investment banks and Wall Street greed.”

“it’s because of homeowners buying too much home that they knew they couldn’t afford.”

“it’s because of mortgage companies and lax lending standards.”

These are all after-effects of the real cause of the financial “crisis” we’re in now.  I put “crisis” in quotes because no one really knows how much of a crisis it really is.  We keep hearing about “grave consequences” and that we need to “act now,” but why?  This can’t wait til tomorrow?  I didn’t see this urgency to strap regulations on financial institutions during the boom.

Now lawmakers are bickering over golden parachutes.  Once again, it is petty issues and band aids and not tackling the real problem.

What is the real problem?

The Federal Reserve.  A organization run by unelected officials that was created by pressure from the major investment banks.  

The Federal Reserve can not keep playing God with our economy.  How do they know what interest rate banks should charge each other?  They should let the market work and determine those rates.  If times are risky, the rate should rise.  If little risk is seen, the rates will be lower.  Why should the Fed set the rate to what they see fit?  Greenspan cutting the interest rates to 1% is what started all this.  He created an era of cheap and easy money that spiraled out of control.  These are unaccountable unelected officials making these decisions.  Congress needs to take some of the power back from the Fed until we regain some confidence in their economic abilities.

Also, the Federal Reserve needs to stop printing money.  Congress needs to take back control of the money supply.  If you keep printing billions of dollars out of thin air, of course you’re going to have a crisis sooner or later.  Prices will inflate and the rest of the world will lose faith in the dollar and dollar backed securities.  Part of the big run up in oil is because of the weak dollar.

The Fed also needs to have more transparency.  They can not be audited and recently, they have stopped reporting how much money is in the money supply.  This way they can print billions of dollars for their Wall Street friends and not have to show the impact it is having on the supply of money.

Once we know how much money is out there, we can cap how much can be created every year.  This would restore faith in the dollar worldwide.  The dollar would rise instantly because they would know the Fed could not print billions more and make the currency worth less.

This is a very simple solution that is not that complicated.  It almost makes too much sense.  Once this system is fixed, then we can worry about restoring the financial markets.  If we just keep patching the holes and cracks in the dam, eventually, it’s going to give.

We Need to Act Now!

September 24, 2008

Why do you think Henry Paulson, Ben Bernake, and the Bush Administration keep saying, “We must act now!” and “We must act quickly!”?

It is because in times of crisis, the administration sees a chance to strip more freedoms and liberties from the American people.  

They use a “trust us, we know what we’re doing, now get out of our way” mentality and it has worked so far.

Finally, Congress is putting pressure on them and fighting back.

We’ll see though, when it comes to a vote, how many of our leaders will actually back up their talk and how many will cave and vote the bailout through.

What the Heck is Going on?

September 23, 2008

So I read today that John McCain is criticizing Obama for not coming up with a plan on how to fix the Wall Street crisis.  Fair enough.

But McCain’s plan wants to put all sorts of new restrictions and oversight on Wall Street banks.  This coming from the party of “small government.”

Then, in Congress, the Democrats are trying to limit the role of the Treasury and the Federal Governement in the bailout plan.  

So we have the Republicans trying to add more restrictions and the Democrats trying to reduce the role of the Federal Government.

If this isn’t proof that the two parties have merged into one, I don’t know what is.