Friday, April 30, 2010

The Grecian Formula?

As I write this, the Central Bank of the European Union (the ECB) is putting together a $60 billion (in U.S. dollars) rescue package (a loan) to save Greece's bacon and keep it from completely collapsing into utter financial chaos. But, all this loan will do is delay the inevitable if Greece doesn't comes to grips with the bad financial housekeeping that got it into this problem.

Greece is like so many countries who are heavily burdened by too many expensive social programs and labor union related issues. Raising taxes just won't do it because taxes are already high and any new ones will just kill what's left of a fast declining economic environment. The problem of trying to cut back on social programs, excessive union labor rates, and spiraling expenses for fat retirement packages is that no one wants to give up their particular "program" or a "percentage of their wages" or "retirement pay and benefits". But, if Greece doesn't cut into all these costly programs, it will just burn through that $60 billion dollar loan like a brush fire in a drought-ravaged forest and, once again, find itself facing collapse. Greece, itself, has claimed that it really needs $160 billion to remain solvent over the next three years.

What is happening in Greece is bound spread to other Euro-Socialist countries. Licking the heals of their financial morass is Portugal, Spain, Ireland, and Iceland. Not far from that pack is Italy. So, if it spreads, you've got to wonder if the European banking system will be able to float another $100 billion more for Greece and, then, bailout Portugal. Or, another $100 billion for Spain; and, so on. I don't think so. If that should happen, and in a worst case scenario, the world could literally see a complete collapse of Europe's banking system.

If so, would the U.S. and other nations come to Europe's aid with the equivalent of an international TARP rescue program? Just maybe! And, that could actually put us at risk for collapse, also. That's because some of our own "states" are quickly closing in on their own financial crises. Right now, California is close. Like Greece, it has all the earmarks of a government gone wild with social programs, union wages, and generous pensions. Other states like New Jersey, New York, Arizona, and Illinois aren't that far behind. All together, our 50 states had a near-$50 billion combined shortfall for last year, alone; and, all see those numbers growing into this year and beyond.

These are very troubled times. Perhaps, just a calm before the ultimate storm.

Thursday, April 29, 2010

The Senate's Kangaroo Court Against Goldman-Sachs

From Wikipedia, the definition of a Kangaroo Court is as follows:
"A kangaroo court or kangaroo trial, sometimes likened to a drumhead court-martial, refers to a sham legal proceeding or court. The colloquial phrase "kangaroo court" is used to describe judicial proceedings that deny due process rights in the name of expediency. Such rights include the right to summon witnesses, the right of cross-examination, the right not to incriminate oneself, the right not to be tried on secret evidence, the right to control one's own defense, the right to exclude evidence that is improperly obtained, irrelevant or inherently inadmissible, e.g., hearsay, the right to exclude judges or jurors on the grounds of partiality or conflict of interest, and the right of appeal. The outcome of a trial by "kangaroo court" is essentially determined in advance, usually for the purpose of providing a conviction, either by going through the motions of manipulated procedure or by allowing no defense at all."

What I saw with Senator Levin's hearings on Tuesday and the grilling of Goldman-Sachs over the mortgage and housing collapse was a form of court that completely goes against the grain of our system of justice and, in essence, more aptly fits the above definition of a Kangaroo Court. That was evident in Senator Levin's opening statement where he made a statement that made it appear as if it was a foregone conclusion that Goldman-Sachs was guilty. In the process of being grilled, the Goldman-Sachs team was forced into answering questions that were intentionally formulated to make "Sachs" look bad. What's worse, everyone on that Senate panel knew that Goldman-Sachs was being litigated against by the SEC and, therefore, the "Sachs" members at that hearing couldn't answer all the questions that Levin and the rest of the Senate panel were throwing at them; because, to do so, could undermine their pending legal case with the Securities and Exchange Commission.

The problem with any Congressional Hearing is that you are placed under oath. But, all the precepts of due process are completely thrown out the window. You can't present a case in your own defense. You must simply answer questions from the Senate panel. A failure to answer any question -- either by pleading the 5th or by being evasive -- just makes you look bad and in fact could get you a "contempt" citation. And, for sure, the camera's are rolling; forcing people like Senator Levin to be even more theatrical. This was evidenced by his constant use of the word "shitty" in an attempt to keep hammering "Sachs" with their own words. If an attorney is present at a hearing, that attorney can not speak in defense of his client(s) in any way. He can only advise on an "aside" basis before his client answers any specific Congressman's or Senator's question. So, for that reason alone, a Senate hearing is truly a Kangaroo Court.

The whole objective of this hearing was political. It was fully intended to be a vehicle by which the Democrats could crucify Wall Street -- vis a vis Goldman-Sachs -- and, therefore, strengthen the Democrat's reelection bids in the fall by energizing their base and, hopefully, impressing some independents who might think very little of Wall Street. It was truly politics at it's worst. I personally believe that the Senate should stand aside and let the courts decide if Goldman-Sachs has done anything wrong. That hearing only tainted the judicial process. But, the Democrats could care less about Goldman-Sachs getting a fair trial. What they want is a spectacle so they can win in the court of public opinion and win in the fall elections; and, that's truly sad and, quite frankly, un-American.

Wednesday, April 28, 2010

A Debt Reduction Commission - Or - Just A Sneaky Way To Break A Tax Promise

Yesterday, Obama's Debt Reduction Commission held their first meeting to decide what measures should be taken to reduce this nation's spiraling deficit. According to the Republican Co-Chair, former Senator Alan Simpson, "everything is on the table". Of course, for me, the best debt reduction action that could be taken right now would be to fire this President and send all Congressional Democrats home. But, maybe in the Fall?

The problem with the Debt Commission is that it will be used to raise taxes; and, nothing else. Everyone on Capitol Hill, Republicans included, knows damn well that any "program eliminations or reductions" would take an act of god to happen. For a politician, cutting any program and possibly losing even a single vote is anathema. So, my prediction is that only tax increases will be implemented out of this commission's December recommendation.

For Obama, the tax recommendations from this "bi-partisan" commission will be particularly beneficial. That's because (and I predict) that commission will recommend some form of tax that will hit the middle or lower classes of this country; thus giving Obama cover to break his promise of not taxing anyone below $200,000. Afterall, that's why he really created the commission. Duh!

Everyone on Capitol Hill knows what has to be done to save this country from collapsing under its own debt. But no one wants to make the hard choice because, in doing so, some voters are going to be offended. But, having a bi-partisan commission, not made up of current office holders, is just the ticket. Now, if the voters get angry, they'll have to get angry at the commission and "not" any particular elected official. How gutsy!

Tuesday, April 27, 2010

Toxic CO2?

If you listen to the Gore-ites of the world, the 3/100's of a percent of our total atmosphere that is comprised of carbon dioxide (CO2) is literally choking the planet. The EPA, under Obama, now considers it a "toxic gas" subject to stringent controls. However, increasingly, the world's peoples are not buying into all this horse-cart litter regarding the supposed toxicity of CO2; simply, because the earth isn't really getting any hotter. Yet, the world's liberal governments are still pressing on to control it.

I, for one, believe that higher levels of CO2 will result in increased plant activity; thus, reducing those high levels of atmospheric CO2 down to normal levels. This is the basis of the Gaia theory (or hypothesis) that was first suggested by James Lovelock of NASA in 1960.

Now, we have this very interesting YouTube video that seems to support the Gaia theory with a real-life, side-by-side example of two plants; one getting nearly three times the level of CO2 over the other. The results are amazing:

Monday, April 26, 2010

Another Outrageous Claim By Obama

By now, you should be used to some of the most ridiculous and outrageous claims ever given by a President. Last year, Obama claimed that if your kid was sick with a sore throat, the doctor would yank the kid's tonsils so he/she could make more money. Then, there was the physician who would arbitrarily cut a diabetic's foot off to make more bucks.

Now, last Thursday, when he gave his address to Wall Street on reform, he made the statement that for every dollar that is traded on Wall Street there is a family who needs to buy a new home or family who wants to send their kid to college. This, like the outrageous doctors acting badly examples of last year, is just as absurd and the mainstream media again ignored it. The intent of that statement, in typical Obama thuggery style, was to demonize Wall Street by making it seem like "all" their activities are taking money from families so they can't buy a new house or send their kid to college. That is just B.S.

My father was able to pay for my college tuition because of the profits he was able to make in the stock market. That is true for many families today who used their investments to grow their kid's college funds. Believe me, a bank that gives you 1% interest on your savings against a dollar that loses value at a faster rate than 1% isn't going to send anybody to college. Additionally, Wall Street investments have helped millions of Americans grow their savings to buy a newer, bigger home. Further, it is stock market investments (over the long haul) that have made retirement possible for millions.

Lastly, it wasn't Wall Street that was the genesis of the collapse of the housing and mortgage market and the subsequent recession. It was the mortgage industry who gave out shaky, no money down and sub-prime loans that was at fault. More than anyone, it was those federal affiliated mortgage loan agencies like Freddie Mac and Fannie Mae and FHA who gave out more than 55% of the faulty loans who were most at fault, and this Congress, and this President has ignored that completely and decided, instead, to go after Wall Street. Because of that, we are not solving the problem and another housing collapse is probably well on its way to happening.

Friday, April 23, 2010

Three Strikes And You Should Be Out!

George Bush, Sr. lost his reelection bid because of his "read my lips, no new taxes" and, of course, the votes taken away from him by Ross Perot. Now, we have another President who has made a "no new taxes" promise that may ultimately bite him in the rear.

During the campaign and following his win, Obama has repeated this well-worn promise:

However, he has already broken that pledge once and he appears to be on the way to breaking it again; at least two more times.

First, as part of the health care bill, as promoted and signed into law by Obama, the Congressional Budget Office (CBO) now estimates that 4 million Americans will be taxed (actually fined) by the IRS for not having health insurance. And, it is estimated, in the same CBO report, that most of those 4 million will be middle class Americans that Obama promised not to tax (Click to See Full Story: Nearly 4 million to pay health insurance penalty by 2016, CBO says).

Then, Obama and the Democrats will let the Bush Tax cuts expire. As part of that, the capital gains tax will again rise to 20% from the current 15%. This means that any middle-class families that have put their savings away in Mutual funds, stock, or other investment securities will be taxed at a higher rate. A direct contradiction to the above video.

Lastly, as a result of an interview that Obama gave Wednesday on CNBC, we now know he is "not" opposed to the Value Added Tax and that, presumably, Volker's broaching of that concept two weeks ago was done to intentionally pave the way for it. Of course, the VAT will not only hit the middle class hard but it will hit the poor and working poor the hardest.

If you can't believe this guy when he promises no taxes, how, then, can you believe him when he promises his policies are going to make our lives better?

Thursday, April 22, 2010

"Trust" At A New Low For Our U.S. Government

On April 19, Pew Research released the results of a poll that reported that only 22% of Americans trusted the government (Click to See Full NPR Story: Pew Poll: Trust In Government Hits Near-Historic Low). Pew actually repeated the same poll three times because they couldn't believe the results. But, is it any wonder?

The government, now primarily run by Democrats, has done nothing in the last year and a quarter to warrant any trust at all. There's been back room dealing behind closed doors to Democratic special interest groups like the labor unions. There have been billion dollar bribes for Senatorial and Congressional votes on health care. We had a takeover of General Motors by this government and the United Auto Workers walked away with control of the company; rather than the creditors. There was a near trillion dollars spent to create jobs with nothing to show for it except that union groups like the teachers, cops, and firefighters got to keep their jobs. Then, $75 billion dollars to thwart the rate of foreclosures; yet, foreclosures are running higher than ever. We had a 30% increase in the national debt in one year and, now, there's talk of a new and more onerous Value Added Tax that will kill even more jobs. Then, there was passage of a health care bill that 60% of this country didn't want. And, finally, a possible coordinated effort between the White House, the New York Times, and the Securities and Exchange Commission to disgrace Goldman-Sachs as a means of pushing through the control of the financial system of this country.

Personally, I can't believe that ANYONE trusts this government!

When someone like Bill Clinton talks about the danger of the Tea Party creating the conditions that spawned the Oklahoma City bombing, he should be very careful. When as many people, as the PEW poll suggests, seem to be anti-government, we are looking at one that is Democratically controlled and who, by itself, could spawn possible violence because it is not listening to the people. I think Bill Clinton should worry more about his own Democratic party; rather than the Tea Party who seems to be more in step with main-stream America.

Tuesday, April 20, 2010

A "VAT" Chance That The Deficit Will Ever Be Reduced

Over the years, numerous countries have implemented the Value Added Tax (VAT) as a means of lowering their high deficits. Initially, the VAT did manage to lower the debt level in each of those countries. But, eventually the debt returned to even higher levels than before and the rate at which the VAT was set just kept being increased. Almost every country started their VAT at 10 percent. Today, most are now at a 20% plus level and expected to go even higher as governments try to fight the worldwide recession.

Initially VATs sounded like the ultimate solution for solving a country's debt problems. However, there is a human component that almost always causes it to fall short of its intended goal. Almost genetically, a politician can't view any new tax as a means of reducing debt. Instead, they only see any new revenue stream as a means of spending more taxpayer money. Politicians see a new tax as the cachet they need to spend more and more money in order to buy votes. The best example of this, today, is Greece who at a 19% VAT is literally at the doorstep of complete financial collapse.

If the U.S. goes with the Value Added Tax, you can expect spending to never stop. Over time, the VAT will continue to be increased with more spending to follow. And, it isn't just me saying this. History has proven it so.

What we need in this country is a mandate that forces politicians into controlling spending. We don't need another tax. We need a Balanced Budget Amendment to our Constitution with financial penalties or even jail time for any politician or politicians who violate that law. Only then will spending and deficits get under control.

Monday, April 19, 2010

A Post Script On Goldman-Sachs From Jim Cramer

After writing my piece on Goldman-Sachs this weekend (published this morning), I ran into this video commentary by Jim Cramer of CNBC. I think, in ways, he is confirming my suspicions about the lawsuit being brought by the government against Goldman-Sachs:

The Smoke And Mirrors Of The Goldman-Sachs Suit

On Friday, the Securities and Exchange Commission (SEC) unloaded on Goldman-Sachs by filing a Federal lawsuit against them for playing both sides of the mortgage-backed securities market.

The suit alleges that Goldman-Sachs, on one hand, was securitizing (bundling) mortgages into certain investment vehicles called mortgage-backed securities and selling them to their large commercial customers (aka Institutional Investors and Mutual Funds). Those commercial customers were happy to buy these instruments because they could see constantly increasing profits from their investments as the underlying mortgages started to adjust their rates upwards; since most of those mortgages were Adjustable Rate Mortgages or, simply, ARMs. Apparently, they felt the housing market was sound.

At the same time that Goldman-Sachs was directly selling these securities as "long" investments, it was also allowing a major hedge fund, run by John Paulson, to engage in the very common brokerage practice of borrowing these securities and selling them "short". Paulson was engaging in this shorting activity because he was betting on a collapse of the housing bubble and, subsequently, a loss in value of all these mortgage-backed securities. As it turned out, he was right. Because of this, his hedge fund made a billion dollars when, in 2007, the housing market started to collapse; foreclosures exploded; and, the value of these mortgage-backed securities started to unravel.

Of course, from now until the elections, expect Obama and the Democrats to demonize Goldman-Sachs and all of Wall Street for profiting off the pain that America and the world suffered in the housing collapse and as a result of the subsequent recession. But, please understand that the hedge fund could have very well lost a lot of money if the housing market remained healthy to this very day. However, once again, Obama is trying to convince you to shoot the messengers (John Paulson, Goldman-Sachs, and Wall Street) while ignoring the message. Very simply, if all those mortgage-backed securities where made up of solid-gold mortgages, we wouldn't be talking about any of this, today. Instead, we're living through a deep recession because it was Federal policy to push people into mortgages and housing that they weren't qualified to be in.

The true culprit here is the mortgage industry. But, more so, because of the two Federally-backed (and controlled) mortgage entities: Freddie Mac and Fannie Mae. And, it was people like Senator Dodd and Barney Frank who protected and defended the risky loan practices of these two major lenders of the country.

What's really happening here is very much like you or I blaming a racetrack for selling us a $2 bet on a horse that ultimately comes in last. In this case, the racetrack is Goldman-Sachs who had sold bets with some customers who were betting that the housing market would stay healthy; and, in another case, selling bets to a hedge fund that thought the housing market would collapse. In a similar fashion, no one complained or wanted to sue Obama's buddy, George Soros, when he made a billion dollars by betting against the British pound just prior to it's collapse in 1992.

But, now, Obama's SEC is being being used as a political tool to try and take our eyes off the real problems that face this country and, instead, chase Goldman-Sachs as a bogey man in another attempt to rescue the Fall election for the Democrats by making it look like Obama is looking out for us. If there is one thing that Goldman-Sachs is guilty of is the fact that they didn't disclose that a hedge fund was shorting the investments. But, anyone who buys stock and other securities at the levels that these commercial customers were buying them knows full well that there had to be shorting activity going on. As a small investor myself, even I, know that there are "shorts" against the stocks that I'm buying. It so prevalent on Wall Street that it's just as common as having butter on toast. That's why I think that this is just more smoke and mirrors. I'll even bet this lawsuit may be dropped once its usefulness to the Fall elections is over. Ya think!

Saturday, April 17, 2010

Shades of the Carter Years

Yesterday morning, the financial headlines read: "Housing Construction Surges in March". But, that headline is deceiving. Actually, single family housing construction fell. That drop was more than offset by the construction of multi-family homes; condos and apartment buildings.

This kind of home building activity is very similar to the recessionary years under Carter. But, in the Carter years, it was primarily due to runaway inflation and double-digit mortgage rates. In this recession, credit is tight and we have the constant overhang of high unemployment; thus forcing people into cheaper, multi-family options.

But, have no fear, the direct parallels to Jimmy Carter's disastrous Presidency are still yet to come. That's because inflation will ultimately hit us like a rock when the economy tries to recover. We've already seen the potential of it when the 10-Treasury notes jumped up to near 4% rates. While that may not seem high, it is when you consider that the Federal Reserve is lending at near zero interest rates.

Long-term, any new housing activity will have a downside effect. If and when we ever recover from this recession and people start working again, families are going to want to dump those multi-family homes and move back into single family nests. That means that today's multi-home building will result in a glut of those kinds of homes. This will depress the condo and the apartment markets for years to come; driving rental rates and condo prices down. That, in turn, will stall out the single family home recovery because condos and apartments, at their new lower prices, will look a lot more attractive. Then, add to this, the potential for high interest rates and I don't think home prices will recover to 2007 levels for a decade or more to come.

Friday, April 16, 2010

Who's The Real Racist

Yesterday, an NBC reporter, Ms. Kelley O'Donnell, singled out a Black person at one of the many Tea Party rallies and asked, on camera, if he was "uncomfortable" in attending that rally - implying that, somehow, a black wouldn't be accepted by a bunch of white, racist Tea Partiers (Click to See Video).

But, who's the real racist here? A bunch of Tea Party members who will readily accept any like-minded person and who could care less what color they are? Or, the white liberal journalist, Kelley O'Donnell, who lives in a world, like so many other Democrats, where Blacks have been stereotyped and pigeon-holed as having only one place in life as a Progressive Liberal? And, apparently, find it unbelievable and, I assume, unacceptable for any Black to step outside this box that the Democrats have so self-servingly put them in. Thus casting Blacks as abunch of mindless automatons of the Democratic Party.

Thursday, April 15, 2010

The Economy: A True Recovery Or Just A Pause?

On more than one occasion, Glenn Beck has described our economy as being in the eye of the hurricane; giving a false indication of recovery prior to getting slammed again after passing through the back end of the eye wall., I agree.

Yesterday, the stock market was ecstatic over the fact that retail sales jumped by 1.8% in March. The Dow Jones industrial average was up by more than 100 points. But, the reality is that you can't declare the economy to be recovered on just that simple number. More often than not, retail sales is forced to go up on the simple fact that the consumer needs to buy because things break and their kids grow out of their clothes. But, we need to remember that this economy has come way down from where it was in 2007 before the housing bust. The fact that retail sales went up is like saying we've fallen 50 floors in a 100 story building and we've moved back up to 51st floor. We still have 49 floors to get back to where we were in 2007.

However, today's stories paint a more troubled economic picture that is ahead of us.

First, we had RealyTrac release it's quarterly foreclosure numbers and they were horrible. In the first quarter of this year, foreclosures jumped by 35%; the biggest jump since this recession started. Worse than that, March posted a one-month jump of 19%. Certainly, the continuation of high unemployment and underemployment is at the heart of this number; and, Obama wasted a whole year on health care when he should have been focused, instead, on jobs. I predicted this in July of last year with my blog entry: The Worst Is Yet To Come for Foreclosures.

The other bad news that we got today was that the unemployment insurance claims jumped again for the second week in a row. The latest number was 484,000 new claims; meaning that we are again closing in on the 500,000 newly unemployed per week number. The lame excuse that this Administration's economists gave for this number is that jobless insurance claims are always volatile around Easter. Of course that's true; but, not in the way these numbers played out. Traditionally, the number of claims falls during Easter week because of the unemployment offices being closed that Friday and because potential claimants have family, out-of-town, commitments that preclude them from filing claims prior to Easter. But, instead of the normal fall in claims before Easter, the numbers actually jumped during Easter week. So, in reality, Obama's minions are taking today's number out of context.

There is nothing that the Obama Administration has done to improve the employment situation in this country. In fact, he and the Democrats have done just the opposite. The per-employee mandates of ObamaCare only make companies recoil from hiring any new people; and, in fact, probably causes them to consider laying off more employees.

As part of the health care bill, Obama took over student loans in America. Immediately, Student Loan Marketing (aka Sallie-Mae) -- the largest student loan agency in America -- announced that they would eliminate 2200 jobs because they won't be handling student loans anymore. I'm quite sure that banks and other lending agencies that were also involved in student loan activity will follow Sallie-Mae's lead.

Additionally, the elimination of the Bush tax cuts, is going to force many small business that make more than $200,000 to rethink their employment levels; resulting in more layoffs. If Cap and Trade is passed or if the EPA imposes punitive penalties on any businesses for producing high levels of carbon dioxide, you can expect more jobs being cut from the economy. If some kind of Value Added Tax or national sales taxes are imposed, more people will lose jobs as a result of the expected slow-down in retail sales. Today, for example, his decision to kill the manned space program will probably result in numerous lay offs from NASA. And, God only know what this Congress and this President will cook up next to kill jobs in America. I think we are seriously looking at foreclosures and consistently higher unemployment rates to continue for many years as a result of the policies of Obama.

Waxman On, Waxman Off

Apparently, those dastardly corporations that had declared that ObamaCare will cost them billions in lost tax benefits won't have to go to Congress to be dragged through the mud by California Democrat, Henry Waxman. That's because, as of yesterday, Waxman canceled his intended Congressional kangaroo court.

No matter what the explanation is that O'Henry gives for the cancellation, I am quite sure that the Democrats finally realized that, by having hearings about the shortcomings of ObamaCare, they would be only adding fuel to the public's anger. Only a fool would have hearings to accentuate the negatives of their own policy.

Wednesday, April 14, 2010

More ObamaCare Stupidity

First, we find out that any children with pre-existing conditions had been completely excluded from ObamaCare; embarrasing Obama who had been touting, both before and after the bill's passage, that these children would be taken care of. Then, Corporations started declaring that ObamaCare will cause them to lose billions of dollars in tax benefits. Benefits they had been receiving to continue private health insurance for their retirees; rather than discontinue that benefit at age 65 and force those people onto Medicare. Now, it is apparent that the affected companies will now pay less taxes because of higher expenses and, more importantly, they no longer have any incentive to keep from throwing their retirees onto Medicare at age 65. Subsequently, Medicare costs will go up higher than expected.

Now, we find out the most laughable impact of all under ObamaCare: That Members of Congress will lose their own "rich" health care plans. Apparently § 1312(d)(3)(D)(i) states that members of Congress must either subscribe to health plans that are formulated under the new dictates of ObamaCare or buy their insurance from any one of the newly created health care Exchanges (Click to See Full Story: Ooops! Congress loses health care plan under Obamacare?).

And, added to both the laughability and stupidity factor, you now have Democratic members of Congress questioning how this could happen. Maybe if these idiots spent more time reading the bill, rather than scheming on how to pass it against the will of the people and the rules of Congress, they would have realized what they had done. But, when you "intentionally" draft legislation that is so large and so cross-referenced it takes a doctorate to decipher, this is what happens. It just proves that Congress could have cared less about what was in the law. They could care less if it helped or hurt Americans. Their only interest in passing it was that it would give the Federal Government complete control of health care in America.

Tuesday, April 13, 2010

A Jobless and Income-Less Recovery?

If you listen to Obama and his economic team, we've turned the corner on this recession. But, for most Americans that same feeling is probably far from a reality. Despite what the Administration keeps saying, the number of Americans who have completely given up looking for jobs has continued to rise. Unemployment did have a small drop after poking above 10 percent last fall but, the rate has remained steady for the last 3 months. Last Thursday, the number of workers filing for new unemployment benefits claims jumped unexpectedly by 18,000 new claims after having fallen for 3 weeks in a row. And, the number of temporary workers just keeps rising.

But, putting all those numbers aside, the best indicator as to whether Americans are really hurting or not, all comes down to what's in their paychecks. Sadly, the American worker lost 3.2% of their income last year from the year prior (Click to See Full Story: Income falls 3.2% during Obama's term) and there is every indication that they will continue to lose wages again this year. In dollar terms, that's about $1,028 that has been taken out of every man, woman or child's pocket. For an average of family of 4, that's a whopping $4,100 in lost wages last year. In Arizona, alone, the per capita income drop was actually 4.1% (Click to See Full Story: Income in Arizona falls faster than rest of nation) or by about $1,350.

The bottom line is that the loss of wages is an economy killer. It means that people have less money to buy stuff and if the losses continue this year, it's hard to believe this economy is actually on the mend.

Monday, April 12, 2010

The Destruction And Resurection Of The Tax Base

Under Clinton, the number of Americans who paid absolutely no taxes was raised to 30%. Under G.W. Bush, that percentage was increased to about 40% through his tax cuts (Contrary to popular belief, the Bush tax cuts weren't just for the rich!) Now, with Obama having only been in office a little over a year, the number of Americans who won't pay any taxes has been raised to 47%.

In effect, each of these Presidents has destroyed the tax base to the extent that, now, almost half of all Americans are dependent on the other half to fund our government activities. At the same time, spending has been going through the roof. In fact, this current President and Congress have actually created more debt in one year than was created by almost all the other Presidents, combined. In a little over a year, the national debt has jumped from $10.4 trillion to nearly $14 trillion; a more than 30% rise in debt.

Realistically, you can't keep growing a class of people who live off the government and who don't contribute anything to it. At some point, there just won't be enough income from the other class who pay the taxes to keep our ship of state afloat. In effect, we are sinking that ship even more quickly under Obama and this Congress.

Right now, there is all this talk of adding a new, additional tax to our current plethora of taxation: The Value Added Tax (VAT). If implemented, it will be a tax that will force the price of almost everything we buy to go up by 20 to 30%. And, it is a tax will be totally blind to a person's economic stature; with the lower and lower middle classes being hurt the most.

Of course the true stupidity of this is that a VAT, if adopted, will completely reverse the destruction of the income tax base that had been taking place over the 17 years with the current and two previous Presidents and their Congresses. The sham promise of giving more and more Americans a better lifestyle by lowering and/or completely removing their income taxes will, in one fell swoop, evaporate when they have to pay 20 or 30% more at the cash register. Worse yet, many of those who had paid no taxes before may actually lose their jobs as a consequence of higher prices and the inevitable slowdown in retail sales. Further, expect more manufacturing jobs to leave the U.S. as American business are forced to go off-shore to a country without the tax; like China and India. Lastly, we will see another broken promise from this President. You know, that promise of not raising taxes on anyone making $250,000 or more. Of course the VAT is against our wallets and not our paychecks and that will be Obama's out. Sort of like that famous line: "It depends what the definition of is is."

Friday, April 9, 2010

Hit and Run

Just like a driver who flees the scene after inflicting both physical and immeasurable psychological damage, Bart Stupak has now decided to flee the scene of his crime and retire from the U.S. Senate. Like so many other Democrats who have already read the handwriting on the wall, Stupak is getting out while the getting is good. The worst thing for any politician is to lose in an election and this guy had a big "L" all over his forehead. This phony Pro-Lifer and his contingent of 8 or 11 others who are supposedly Pr0-Life almost single-handedly allowed for the final passage of the health care reform bill. He and that stupid contingency of other Pro-Life Democrats bought into Obama's lie that the abortion expansion that had been written into the health care law could be easily overridden by a Presidential executive order. If that were true, then a line-item-veto would never been needed to exclude individual spending items from any Congressional Budget Bill. But, we all know that no President has the power to do that.

So, as it stands right now, "Stupak the Stupid", becomes another in a long list of sacrificial lambs that were slaughtered at the unholy altar of Obama, Pelosi and Reid so Obama could have a legacy other than possibly being the worst President this country has ever seen.

I say... Good riddance!


Thursday, April 8, 2010

What A Value Added Tax Will Do To America

Yesterday, Obama's lead man on financial issues, former Federal Reserve Chief, Paul Volker, said that America must consider a Value Added Tax (VAT) in order to reverse deficit spending and clear our high national debt.

Most American's are under the false belief that a VAT is just some kind of national sales tax. But, they're wrong. The VAT is actually a compounded tax that is applied every time any product gains or "adds value" over its entire production process. Take, for example, a piece of steel that will be ultimately sold as part of a new automobile. When the original iron ore was mined and, then, turned into steel ingots , there was a change in the ore's value and, as a consequence, the value differential that was created would be subject to a VAT. Once those ingots are turned into rolled steel, that, too, is a change in value, and the VAT would be applied. Then, that same steel, after being stamped into a more valuable automobile frame would be VAT'ed again. Finally, as part of a finished car, the value increase of that auto frame would be included in the final VAT that is applied to the finished car. Because the VAT is a compounding tax, it is highly possible that a nominal 10% VAT could result in a 30% increase in the price of any product; depending on how complex the manufacturing chain is. As a result, the VAT favors building products out-of-country so the step-by-step VAT charges can be avoided. That, then, favors importation and not domestic production. (So, much for Obama's promise to double our exports in 5 years!)

Throughout the health care debate, liberals would always point to Europe as the shinning star that we should strive to match. But, as part of my former job, I spent a lot of time in Europe and things are hardly rosier there than in the good ole U.S. of A. My experience is that people in Europe lived smaller; had less to spend; and, almost always paid higher prices for everything they bought. Clearly, this is the trade-off they've had to accept as part of all of their social programs.

To prove this point, let me give you some very interesting comparisons between Europe and the U.S. In this country, the median after-tax yearly income (disposable income) is about $31,400. Throughout Europe, that number is almost 25% less because of their high taxes. For example, the median disposable annual income in France is $26,416. In Germany, that supposed economic powerhouse of Western Europe, its even less at $25,146. So, right off the bat, people have less to spend.

Then, because of the VAT's throughout Europe, things cost more. We can indirectly see that from the average age of cars on the road in Europe versus the average in this country. In Europe, the median age of an automobile is 14 years. In the U.S., it just above 9 years. People just can't afford to buy a new car as frequently as they do here. On top of that, gasoline taxes are so high that the per-gallon price of gasoline is 2 to 3 times what it is here; all throughout Europe. In terms of housing, there is an even larger disparity in the standard of living. In this country, the average new home being built is about 2,220 square feet. In Europe, that number is closer to 1,000 square feet. In Britain, it is actually only 815 square feet.

I get a little tired of all the talk that we should be more like Europe. The direction that Obama and the Democrats are taking us would literally cut our standard of living in half. That's what being more like Europe is all about. And, that's what the VAT will do to us.

Just a few more comments. Despite all their taxation, most of Europe is still neck-deep in deficit spending. That because, as taxes are increased, the economic expansion is reduced and the effect of any new taxes is completely negated. It's like the Post Office raising rates in this country. With every rate increase, the U.S. Post Office actually get's even deeper in debt because they continue to lose business. As a result, any rate increase is never enough.

The European Union -- only just a few years old -- is close to collapsing in favor of returning to country-by-country individualism. That's because Greece, Spain, and Portugal are near bankruptcy and they are dragging down the "Union". In the U.K., they have just raised their taxes even higher and my guess is that will only hurt their economy even more than it is being hurt tight now. Throughout the last two decades, most of Europe has had unemployment rates that were 30-50% higher than this country. This is the great economic model that Obama and his socialist friends seem to think we should follow.

One last comment about Volker. All of a sudden he's worried about all of our debt and is proposing an expansive tax structure to fight it. Where was this supposed genius when Obama and the Democrats decided to raise the national debt by nearly 30% or by $3.2 trillion dollars in "just one year" from the previous $10.8 trillion. All these people have done is put this country on a typical liberal economic treadmill. First, they create the debt. Then, they plan to fix it with taxes. But, with new taxes, they again start spending. And, again, the fix is another new round of higher taxes.

Wednesday, April 7, 2010

Rush Predicted It

Right after ObamaCare was signed into law, Rush Limbaugh was having another one of his kidding around moments at the microphone as he related a story (I don't know if its actually true or not) of a person who went to a local hospital and demanded that they get a free operation now that ObamaCare had passed. As Rush went on to explain, that person got a real shock when he/she found out that most of the benefits of ObamaCare won't even kick in until 2014.

In reality, Rush was right on the money. We now know that many Americans are confused as to what ObamaCare will really do for them and when. Since the law was passed, health care providers and health insurers are getting inundated with calls from people who are under the complete misconception that all the benefits of ObamaCare are available to them right now. In fact, this news/opinion piece that appeared in this morning's McClatchy papers and on the Drudge Report, "Health care overhaul spawns mass confusion for public", says it all.

This confusion is a direct result of the Democrats telling us about all the great things they've done for us by passing their health care reform. However, like some schiester selling swamp land in Florida, they neglected to reveal that the real meat of their program wouldn't be available until 2014. That's because, to implement those things, now, would completely blow out the deficit. So, Americans are finding out that the new health care reform is actually a lay-away plan; with payments starting now. Nancy Pelosi was dead-on when she proclaimed: "People will have to wait until the bill is passed before they will know what's in it".

I just can't believe that the Democrats thought they could pull the wool over America's eyes -- as if none of this stuff would ever come out. In fact, if you listened to them, they really thought that the people would come to love what they've done once all the facts were out. But, in reality, ObamaCare is actually losing ground in the polls since being passed. Once again, the Democrats are totally out of step with the principals and values of mainstream Americans.

Tuesday, April 6, 2010

Nukes Weren't Developed Because of Peace

The main headline on the Drudge Report this morning -- based on a New York Times story -- says that Barack Obama will announce that America will not use nukes; even in self-defense. If that's true, you might ask: Why even have them?

I am sorry. For years, the concept of MAD (Mutually Assured Destruction) has actually kept the world safe from the use of "any" nuclear weapons. Now, by saying we aren't going to use them, even in retaliation, is to give a green light to someone --- maybe Russia or China or some rogue state --- that we won't punish them for attacking our citizens or any of our weaker allies. But, this President seems to think he can single-handedly create a nuke-free world because he is willing to lay down his (our) weapons as some kind of lofty example to the rest of the world.

This is the liberal mentality at its absurd height. It is based on a simplistic and an almost child-like view of the world. This "lead by example" works with children and persons who can easily be moved by such a tactic. However, in the real world, the bad guys could care less. Whether you're dealing with a hardened criminal or a power-hungry world leader who is, too, a criminal, the concept of trying to lead by example is a nonsense concept. If that were such a viable solution to any criminal or aggressive behavior, we could theoretically empty our prisons. But, instead and all too often, we see that it is this simple liberal mentality that tends to send criminals back out into society so they can kill, rape, or molest again.

After all, this is the same President who, when he took office, decided to extend a hand and not a clenched fist to Iran. He thought he could prove all his predecessors wrong by being more lenient towards that country. Instead, all that stupidity got us was another year plus 3 months in Iran's continued pursuit of nuclear weaponry. Now, Obama is being forced to return to the hard line tactics of his predecessors by calling for a new round of stricter sanctions.

At what point will this guy decide he was wrong, too, on his no nuke strategy. After we are attacked and millions of Americans are dead?

To me, fools are fools because they will always keep acting foolishly. And, Obama -- first with the glad-handing of Iran and now with his no nukes plan -- is just proving that concept to be true!

Monday, April 5, 2010

Why Arlen Specter Is Clueless

Yesterday, on Fox News Sunday, Arlen Specter made another one of his ridiculous statements. This time about China: "They're very shrewd. They take our jobs, they take our money, and then they lend it back to us."

The stupidity of that statement is that China isn't being shrewd. Instead,
America, as a country, is just being dumb. China didn't create our debt. We did. If it weren't for China's aid, we'd be wallowing in it to our possible financial collapse.

China didn't tax our manufacturing jobs out of existence. We did it ourselves with lawmakers like Arlen who can't control their tax and spend attitudes. In fact, the health care bill that was just passed is only going to make it easier for China to "steal" even more jobs away from us.

Among the world's economies, we're the easy mark because of people like Arlen Specter. People who don't seem to understand what drives the business world and what are the causes of our constant decline in manufacturing jobs. In the 1950's we only imported about 5% of what we consumed. Today, we import more than we export and that imbalance continues to grow with every new tax increase and federal regulation. China is just the latest country to take advantage of our own ignorance. People seem to forget that it was once Japan that stole most of our electronics and auto manufacturing. China is just the latest in a long line of countries who see America as an easy target. They all can't be that shrewd, now, can they, Mr. Specter?

Oil Is Laughing At Obama

Last week, when Obama announced his offshore drilling plan, the price of a barrel of oil was just below $82. Today, oil is at about $85.50 a barrel and looking to go higher; probably much higher. If the oil traders thought that what Obama had proposed in his offshore drilling plan would actually increase oil production and wean America off foreign oil, the price would have traded downward; or, at least sideways. But, the traders know that Obama's plan is nothing but political fluff with no real substance.

Obama and his Eco buddies don't really care if oil ends up being in extremely short supply and that the price per gallon of gasoline goes above $4 again. Even though that would hit us hard in our wallets and might even cripple our economy, high oil prices give them the opportunity to push those "green" alternatives that would hardly be cost effective alternatives to oil unless, of course, you limit oil production and, as a result, artificially force the price of oil to rise rapidly.

Last year, at the height of the recession and when oil usage was actually falling, I, as a contrarian, said oil would rise to $80; and, it did. I also predicted that oil would go to $120 a barrel this year and I still believe it will. My guess is that we will easily see $100 a barrel and $3/gallon for gasoline by the summer driving season. I would expect that by year's end, $3.50 a gallon will become the new normal for gasoline prices in this country. As a result, you can expect the prices for everything to rise because oil is essential to the production and delivery of almost every product we consume. Therefore, you can add high oil prices to all the other things that this President has done to make it more expensive to live in America.

Sunday, April 4, 2010

A Word About U.S. Population Growth

In my last blog entry, I mentioned that the monthly population growth was 250,000. That's 3 million persons per year. That number was a little high. I based it on a one percent annual population growth as had been seen in the 1990's and early 2000's. The current rate is actually slower than that at .883% which means that the annual population is about 2.6 million or approximately 220,000 persons per month. As a point of historical reference, the population growth in the 1950's was closer to 2% against the base population -- the baby boom years.

Friday, April 2, 2010

Looking Between The Sheets On Today's Job's Number

While most of the headlines will read that it is the first time in 3 years that jobs have been added to the economy and that the economy may have turned the corner, don't be two quick to fall into that trap.

First of all, of the 162,000 jobs that were created last month, 48,000 were temporary Census worker jobs and another 40,000 were temporary positions in the private sector. So, in reality, only 74,000 full time jobs were created in March. As a country, our population grows at a rate of 250,000 persons (net of births versus deaths) per month. So, in effect, the addition of 75,000 full time jobs in March fell well short of the rate of population growth. We really need to have job additions in excess of 250,000 jobs in order to truly tick away at the 8.5 million people who became unemployed during this recession.

Secondly, the number of people who have been out of work for more than 6 months rose, again, by another 441,000 job seekers. That says more about the job situation that the mere addition of 162,000 jobs. That number has to stop growing before anyone can really say that this economy has turned the corner on jobs.

Lastly, with the unemployment rate remaining static at 9.7%, the true unemployment rate, the one which includes discouraged workers, rose again from 16.8% to 16.9%. This is a disturbing number. Every month, the Bureau of Labor and Statistics just ignores these people in the discouraged worker category as if they are no longer part of the workforce. This, then, artificially makes the unemployment rate look better. So that you understand what a discouraged worker actually is, it is a person who, in the last four weeks or more, has given up looking for work because they have tried so long without any success. While some discouraged workers might be those who took early retirement and may never return to the workforce, there are still millions more who need to work but have an economic or social setting which allows them not to have to look for work in the short term. These could be college graduates who continue to live at home with there parents. It could be a spouse who needs to work but has decided to become a stay at home mom or dad until the job situation gets better. It could be a complete family who has been forced to move in with relatives in order to weather the recession. Lastly, it could be the homeless and jobless persons who have been forced to live in tent cities or on the streets. In any event, these people fully intend to work again but have statistically been shoved off the workforce map.

One last comment about the Census workers. In past Censuses, about 10 to 15% of the overall jobs were filled by this time. That means, that about 100,000 to 150,000 should have been hired in March. Yet, only 48,000 workers were added. Does this indicate a brewing problem in properly completing this decade's Census data?

For a complete summary of this month's jobs data please Click Here.


Thursday, April 1, 2010

A Little Sugar With Your Poison?

Yesterday, Obama announced that he will allow oil exploration in some previously barred offshore locations. But, this is just a political ruse. He's only allowing exploration, now, and the question of whether or not any actual drilling will ever really take place is highly questionable. In any event, the time of his announcement is intended to give America a little sugar to go along with the big dose of poison that he will serve us up; later this or the next week. And, of course, with Obama, timing is everything.

The poison that I am talking about is the fact that Obama's Environmental Protection Agency (EPA) will finally declare carbon dioxide a dangerous gas that will be subject to regulations beginning at the start of 2011. That means, from that point forward, the EPA will be able to regulate and fine anyone and any business who, in their estimation, is emitting too much carbon dioxide. This is Obama's attempt to force America into compliance with the stupidity of Global Warming mandates. It's also an override of Congress' inability to pass Cap and Trade legislation. It also means that, coupled with health care reform, businesses will again be forced to shed jobs in the face of higher operational costs.

As far as offshore drilling is concerned, Obama has no intention of actually allowing any new drilling for oil in those areas. If he was truly concerned about finding new oil sources in order to wean America off of its dependence on foreign oil, there are plenty of existing, inland locations that are ripe for drilling right now but have been put off bounds by Obama and the Democrats. Instead, he only specified these new offshore locations because they are 50 to 150 miles off our coasts and, as a consequence, would force drilling to be attempted at extreme and very costly depths. Additionally, Obama also knows that he can keep any actual drilling at bay because they can force years of environmental studies to be conducted before it would ever start. By then, most potential oil exploration companies would have just given up and gone elsewhere where overcoming environmental regulations would be less difficult.

As with everything that Obama does, nothing is done for the true benefit of America. Here's a guy that had campaigned for over a year on no drilling for oil; either onshore or offshore. Now, we are supposed to believe he's suddenly pro-oil? Or, pro-atomic energy? Instead, it's easier to believe that he's a con-man who constantly plays political games in order to ultimately put forth another piece of his intentionally far-left agenda. Even the environmental groups know this to be true; otherwise you'd be seeing rallies and picketing all over this country in opposition to this latest announcement.