Archive for the ‘Economy’ Category

Making Work for ATT

December 29, 2010

At work, we had a phone line through ATT that we didn’t use anymore. We also had a DSL line that we use for our phone system tied to that account. We wanted to cancel the phone line, but keep the DSL line. Sounds pretty simple, right?

Let’s just say it ended up being a lesson in the power of the International Communications Workers Union. When we canceled the phone line, they told us we would have a new account number. Nobody thought anything of it.

Then, the next morning, our phones were dead. I checked the DSL modem, to see if it was that or the phone system itself. The lights on the modem were all dead. Definitely a DSL problem. After calling ATT, we figured out that our new account number meant we had a completely new account. They couldn’t just cancel the phone line and keep the DSL line active. Perhaps this was a quirk in ATT’s system.

They told us that they would be able to turn it on for us in a few hours.   Then we got a call back from another rep saying that since we were in California, they couldn’t just turn it back on.  They had to send someone out to install the line.

We told them that we already had the modem, everything was hooked up, and we just needed the line switched. The answer was no. We had to have someone come out. So we scheduled it between 8 am and noon in a few days.

This was during a time when our office was closed for the Holidays, but I had some work to do so I came in with our IT guy. That morning at 9:30, we got an automated call from ATT saying that our line was now ready to use and we needed to register our account.   So now I came in to wait for an install that wasn’t even going to happen? They also were kind enough to tell us if we were having trouble, they could send someone out for $150.

I was mad, so I got on chat support with ATT. We got the modem activated and were up and running. I asked them why they told us someone had to come out. They said that on their records, no one was ever scheduled. I was dumbfounded.

After all this, an ATT truck pulls up in front of our office. The guy sits there for a minute, then comes in and asks “So you’re all up and running?”

We said that we set it up ourselves. We suspected that there had to be some sort of subcontractor or union agreement behind his visit, so we asked him if he was part of a union. That’s when he told us he was part of the ICW. We asked what he was going to do, and he said “say hi and leave.”

This was one of my first direct experiences with a union “make work” program. There was no need for him to come to our office at all, but the State of California requires him to do so. The union lobbied for these regulations not to ensure that our connection was up and running, but to make sure this person had a job.

Makes you realize why we’re so uncompetitive here in CA and in the US in general…

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TARP Success?

October 5, 2010

Today, the Treasury Department declared that the government will only lose $29 billion from the TARP program.  This is being hailed as a huge success and that we saved the financial system and the economy, preventing a second Great Depression and barely losing any money.

I have some big problems with these statements.  First of all, most of the big banks that were infused with cash paid back that money within a year of the program starting.  How can a bank go from about to collapse to financially stable so quickly?

Think about Goldman, it received $10 billion from the government.  If they just took that money and invested it for a year in 3% government bonds, that’s $300 million!  Citi and Bank of America got $20 billion each.  That could turn to $600 million of pure profit.

Did the big financial institutions create a sense of panic, in order to get the government to step in and “save” them by taking over all their bad debts?  Did they know that this panic would lead the government create a web of regulations that stifles future competition?  Anytime banks and government come together, I have a feeling the banks are going to win.

Also, where did this money come from anyway?  We created $700 billion out of thin air, gave it to banks to earn interest on, took on their bad loans, and then they gave it back to the Treasury.   Will the government now put that money to rest?  Or will it eventually make it back into the economy.

And finally, $33 billion is still a lot of money.  We have just become desensitized to the number because we saw the $750 billion stimulus package and the $700 billion bailout.  $33 billion just seems like a drop in the bucket.

While the government claims the success of TARP, I find it hard to believe that it saved our economy and that the true cost was really that low.  We’re still mired in a stalled economy and the bad debt is still out there and has not been liquidated.  And with all the success of this bailout, business now knows that future bailouts will be sure to follow, allowing them to take more foolish risks and setting us up for even bigger failure.

Bondholders Are Not Villians

May 27, 2009

I’m tired of hearing about the evil bondholders that are preventing GM from avoiding bankruptcy.  Why not call them what they really are?  They are the creditors to GM.  They lent GM money, and now are being villified for wanting to collect as much of that money as possible.

The Obama administration’s “offer” is for the bondholders to trade their $27 billion in debt for 10% of the failing company.  If they go to bankruptcy, the bondholders might get wiped out completely, but in a real bankruptcy, the bondholders usually get paid back first.  The problem is that this is not an ordinary bankruptcy.  It is rigged to give the government and the unions all the power.  The creditors and stockholders are the ones getting screwed.

Also, the “offer” gives the US and Canadian governments a 69% stake in the company.  So the primary debt holders get 10%, but the government gets 69%?  Who in their right mind would accept this rotten deal?

We all know the problem with GM is that their labor costs are too high.  Rather than actually trying to fix the problem, the government is handing the keys to the car over to the unions.  Since they are in a partnership with Uncle Sam, we now will be bailing them out forever.  The current model is unsustainable, but rather than actually fixing the problem we are setting up for permanent transfer of wealth from our pockets to the unions.

So, instead of just saying “it’s the evil bondholders’ fault,” we need to look at the actual offer and realize the only winners are Obama and the UAW, and the losers are every tax paying citizen of the country.

The Taxpayer Revolt

January 27, 2009

This year is going to be tough on everyone.  To make matters worse, this year, the state of California is going to be issuing IOUs instead of refund checks because they are broke. I rely on the money back from the state to offset the money I owe to the IRS.  You think the IRS will take my California IOU?

I know I shouldn’t be loaning the government money all year and expect a refund.  However, my wife works as a 1099 consultant, and normally, I end up owing about $1,000 to the IRS, so it all evens out.  A friend of mine has an accountant and does the same thing, so I don’t think I’m too far off.

So now, instead of a net zero situation or owing $1,000, I’m going to have to put almost $3,000 out of my pocket to the Federal Government, and hope that my IOU from the state gets fulfilled.  That’s exactly the kind of extra burden I need this year.  Thanks a lot, Arnold.

How many people across the country are in the same situation?  How many other people are strapped for cash and now will have to go further into debt to pay off these unexpected taxes?

An even bigger problem with the whole system is that my taxes are going to fund all these bailouts.  Why should I have to be burdened with thousands of dollars of taxes, when it is going to something I do not believe in?  It’s not just me either.  The majority of the population is against the bailouts, yet we all keep having to pay into the system.

At what point are we going to have enough?  It’s one thing to pay taxes that go to your local school or to a state project where you will see the direct benefit of the taxes.  It’s another when your tax dollars were donated to big banks and no one has any idea of where it went.

A main reason of the American Revolution was “no taxation without representation.”  Could this be any more true in the current environment?  The American Public is saying one thing, but the government is acting on its own.  At what point do we say that enough is enough?

It won’t take a whole lot more government intervention to make the current situation a lot worse.  At what point will the American Taxpayer start to revolt?  When will be our Boston Tea Party?  At this point in time, the last thing we need is the government wasting our tax dollars.  They would be much better served staying in our pockets so we can pay off debts or buy more things to support our economy.

More Reasons the Bailout was a Bad Idea

January 27, 2009

As if we didn’t have enough reasons to show us the TARP bailout has been an utter distaster, a few more popped up this morning that aren’t as obvious.

The first is that the headlines all read this morning that Citigroup was buying a $50 million plane with taxpayer money.  It turns out that it really ordered the plane in 2005 and that using it would cut costs for the company.  They also were financing it by selling other planes.  Now, they’ll still have to spend millions of taxpayer dollars cancelling the order.

This is exactly the kind of double standard that is set up by the bailouts.  You can’t spend any money to improve your business because if you do, you are wasting money.  I’m not sure how much efficiency this plane would gain Citi, but $50 million is only .014% of the $350 billion they can’t find.

So now, in the eyes of the public, the reason we can’t find the bailout money is because of wasteful companies buying private jets.  This is the scapegoat the new administration needs so they can place the blame on the companies,  not the failed policies the new Treasury Secretary promoted.

This leads us to another example of the failure of the bailout.  This morning, Tim Geithner, the new Treasury Secretary mentioned above, placed new rules against lobbying for TARP funds.

Wasn’t it just a few months ago that the Treasury basically forced the largest banks in the nation to take the TARP funds?  If they did not want them, why would they lobby for them?  Maybe Geithner’s new rules prevent the banks from lobbying against getting government money.  You will have to take it, no questions asked.

Again, a great example of the new administration showing how they’re cracking down on lobbying and adding transparency (that was said with sarcasm, by the way).  This is just political grandstanding and fooling the public into thinking real “change” is happening.

These lobbying rules will also have no effect on the lobbying efforts that are going on for the new stimulus package though.  That one has politicians and lobbyists lined up, trying to get money for any projects within their districts.

Also, these rules have the unintended consequence of encouraging closed door, secret meetings like the one Bank of America had with the Treasury.  By outlawing lobbying, the banks will go to more secretive and shadier tactics.  

The whole idea of bailouts and the TARP were horrible from the start.  The House had it right the first time, when they voted against it.  Now we are living in a world where we, the people, have to just live with this garbage day after day.  

A President who really promotes change would have assessed the situation with unbiased eyes, realized how the TARP is not working, and had an action plan ready to go day one.  Instead, Obama’s team is saying it will take months to get up and running and just adding more crap on top of the stinking TARP.  We need real fixes, not patch jobs on what was a horrible idea from the start.

A Great Example of the Free Market

January 11, 2009

This weekend, during the NFL Playoff games, I was bombarded with truck commercials from Toyota, Ford, Dodge and Chevy.  Each was touting their own features and downplaying those of their competitors, and all four talked about their great fuel economy.

This is a perfect example of the free market at work.  First, when Toyota came out with their new Tundra, and their new commercials (the see saw and braking ones, etc) the American automakers didn’t have an answer.  Now, they have all innovated to create new features to compete with the Tundra.

Secondly, when consumers demanded better fuel efficiency, the truck makers had to listen, and now all of these full size trucks are getting over 20 miles per gallon, highway, even with a V8.  The fact that they made these trucks so much more efficient so quickly shows how innovative the automakers can be.

The best part?  All of this was done without any sort of government intervention or mandates.  In order to sell their trucks, Toyota upped the ante with the Tundra and their marketing campaign, and the American companies countered with their own new features.  Then when oil and gas shot through the roof, they innovated again to make their trucks more efficient.  It was purely a function of the free market and competition.  Capitalism at it’s best.

I know this is only a small anectdote for economics, but it shows that we don’t need government to tell us what to do in order to make things better.  Lately we have been conditioned to think we need government intervention, and we just lack the vision to see when the free markets really work.  It also shows what happens when consumers demand a better product.  When more people bought Tundras, Ford, Chevy and Dodge all upped their efforts.

Imagine if we can get this kind of action in our healthcare industry.  Our costs would plummet and our care would improve.  Instead, with government’s heavy involvement, healthcare is one of the only industries where technology makes things more expensive.  You’d also be hard pressed to find people that are totally satisfied with their healthcare as well.  However, we are so tied to the current system that a consumer revolt is almost impossible.  If government would get out of the way, maybe there would be a chance of true reform, not little tweaks to a horribly broken system.

The lesson is that the government doesn’t always know best, and that we need to let the markets work.  Have you ever read the CAFE fuel standards?  It is the most idiotic way to measure fuel efficiency ever.  So, rather than make each model more efficient, they could just sell crappy, compact cars.  Now, that consumers have demanded better fuel efficiency in trucks, the companies have listened.

We need to carry this model over to every aspect of our economy.  Only then will we be able to weed out the failures and move forward in the new industries that are arising today.  We need government to stop propping up businesses and getting involved in industries they don’t understand.  Let the companies work and the consumers dictate what they want and we’ll all be better off!

Obama is a Quick Learner

January 8, 2009

Taking a cue from the outgoing Bush Administration, Barack Obama today decided that scare tactics and fear mongering were needed to get his stimulus package to pass through Congress.

Here’s what he said today at a press conference (the whole article is here):

“I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible,” Mr. Obama said. “If nothing is done, this recession could linger for years. The unemployment rate could reach double digits.”

This ranks right up there with Hank Paulson’s “abyss” speech.

Looks like Obama’s “change” is just more of the same.  He can give a great speech, but when it comes down to it, he’s just your normal politician.

Obama to the World: Our Dollars are Worthless

January 6, 2009

Someone needs to tell Barack not to tell the world that we are going to be running “trillion dollar deficits for years to come” like he did today.

What kind of message is that sending to the rest of the world?  What kind of message is that sending to American businesses and the rest of the population?

First, how are we going to finance all this spending?  Are we going to keep borrowing money from China and Japan?  What happens when China finally wakes up and realizes that they are getting paid back in dollars that are worth less and less?  The fact that Obama is announcing to the world that we are going to be fiscally irresponsible and are going to keep printing money is going to accelerate the East’s rejection of our dollars.

Second, why would any business spend to hire new employees, give raises and bonuses, or buy new equipment when their leader is telling them that recovery is years away?  Everyone is waiting for government’s next move, hoping it’s the cure all.  News Flash – the government actions are making things worse!  The sooner Obama and the Feds get out of the way and let the markets correct themselves the better.  If we do get out of this by printing money, we will only be setting ourselves up for complete and total collapse a few years down the line.

My industry is tied to real estate development, whether it’s apartments or commercial centers.  Right now, no one wants to lend money because there is too much uncertainty, and because the commercial real estate developers want their own bailout.  There are projects ready to go, that need to start so they are built when the economy recovers, but no one wants to lend money to get them going.  The shoot from the hip fiscal policy of the Federal government is only making the lenders more fearful and more reluctant to lend.

And finally, why is so much of the blame being placed on the reluctant American Consumer?  Do you think something is wrong when two-thirds of our economy is based on consumer spending?  We don’t make anything, we import everything, and buy things we don’t need on credit.  Sounds like an awesome system.  The American consumer is tapped out and is unwilling to go deeper into debt when they are fearful they are going to lose their job.  Obama blabbing about running trillion dollar debts for years is not helping restore confidence.

We need real leadership right now and a government that is willing to make a stand and stick to it.  If they are going to bailout companies, then they need a real plan.  They can’t have one plan then another and then change that one half way through.  That approach has just made things more messed up.  Unfortunately, Obama and his team seem more than willing to throw money around without a clear plan as well.  We can’t keep running these deficits forever and we shouldn’t announce it to the world.  We need to restore faith in our currency and our economic system, and Obama’s comments are leading more fear and an even longer recession.

A New Economy

December 19, 2008

With the downward spiral our economy is in right now, a simple question must be answered:  What will the new economy look like?

Certainly, we can not continue our current consumer based model.  People have run up enough debt and made enough bad decisions where they are cautious to spend money.  Savings is becoming back into vogue, and the American philosophy of thrift has returned to the mainstream.

What made our economy so successful in the past is that goods bought and sold in America were made here at home.  Also, many of these products were exported as well.  In our current economy, we rely on emerging nations like China, Vietnam, the Philipines, etc as the producer of our goods.  In order to regain our standing as the world’s leading economy, we are going to have to shift some of that production back to the U.S.

The only problem I see is a really big one.  What will we produce?  Can we make electronics cheaper and better than those made in Asia?  I doubt it.  The Big Three has trouble selling cars here at home, how are they going to compete in other markets?  A lot of the alternative energy solutions will reduce our dependence on foreign sources, but how will it lead to exports?

One area I know we already export is our services.  I work in the architecture industry, and we export our designs to China, the rest of Asia and the Middle East.  Our expertise and creativeness is needed to help design projects that will succeed.  The engineering is more mathematical and logical, so that can be done locally.  But the American sense of design and place is exported to any emerging real estate market.  However, this industry is relatively small, and does not have a major effect on our economy.

What else can we export?  Where is our expertise located?  Where can we be competitive with other countries?  These are all questions that I really don’t have an answer for.

Please leave comments and ideas on areas where we can focus our economy and shift from an importing, consumer based economy to an exporting, production based one.

Like Recessions? Better Get Comfy!

December 16, 2008

This is awesome!  Today, the genius Ben Bernanke announced that we will officially be in the longest recession in American history!  As much as I love worrying about my job and scrimping and saving to pay the bills, I can’t wait for it to get worse!  I hope I get to eat Hamburger Helper and Ramen every night!  Better get used to those PB and J’s!

I really can’t believe how bad of job Bernanke is doing.  He is driving this county off a cliff, and instead of applying the brakes, he’s stepping on the gas.  Remember the “financial abyss” Paulson warned us about when Congress didn’t approve the TARP bailout the first time?  We’re there, and Helicopter Ben is taking us all down with him.

I guess I have to cut him a little slack because he was only a professor at Harvard.  He never got any real world experience, so I guess he never really actually got to apply any of his theories until now.  The old saying is “those that can’t, teach.”  I respect elementary, junior, middle and high school teachers.  They believe in what they do and are trying to help make the world better.  However, everyone wants to have a cush job like a college professor.  You get tenured, you can’t get fired, you get fat pay, great benefits, 3 months a year off, paid sabaticals and a great pension.  I’m sure glad we picked such an idiot to run our financial system.

Ben was supposedly an expert on the Great Depression in his research as a professor.  I guess he didn’t study an recent history like the Lost Decade in Japan.  Can the problem be any similar?  Cheap credit, a real estate bubble, a credit crisis, a central bank that cut it’s rate to zero, and then a 15 year recession.  Wow.  Sounds like a blast.  Maybe Ben wanted to relive the Depression first hand!

Here’s a quote from Yahoo! Finance:  “Given how low interest rates are, the central bank said it planned to use a variety of unconventional methods to flood the banking system with credit and drive interest rates lower.”

Sounds like that’s exactly what we need right now.  More and more credit.  Floods of it to be exact.  Isn’t that how we got here in the first place?  How is it going to get us out of it?  It’s like telling someone who’s drunk that what they need is more tequila, not trying to sober up.

The American consumer is being criticized right now for cutting back, being frugal, and not buying big ticket items (with debt) like cars and appliances.  They should be lauded for setting a great example.  Helicopter Ben should realize what everyone, from banks to lenders to consumers, wants is a stable economic policy.  We don’t need more reckless spending and more and more debt.

I wonder what Ben’s personal finances look like.  If he practices what he preaches, he must have 10 maxed out credit cards and no savings.  He probably has all new appliances on the store’s credit card and he has huge car payments each month.  That’s supposedly what is good for the economy because he’s spending.

What we need right now is for Ben to make an early exit, and for Obama to name a new person to run the Fed, not this Geithner clown who shares Ben’s affinity for the printing press.  We need someone who will run our economy like we all have to run our houses.  We need to live within our means and manage our debt.  We can’t rely on printing new money whenever we get in a bind.  Why should the Fed be any different?

All I know is that right now, all the actions of the Fed and Washington have failed miserably.  Ben the Genius keeps thinking that more debt and credit will right the ship.  We have a credit crisis, but the underlying problem is a complete and total lack of confidence in our economic system.  The government also has a huge credibility problem because it has no plan, is running around like a chicken with it’s head cut off, and pumping trillions of dollars into the system.

Until we get a policy that restores confidence in the system and faith in our government, we won’t get out of this.  So grab a chair and a blanket, sit back, and enjoy your Hamburger Helper.