Tuesday, December 30, 2008

• Israel, Hamas, Lebanon – Here We Go Again. And Again.

Israel’s systematic and carefully targeted attack on Hamas militants has invited the usual response from the Arab world, and from Muslims generally. The following words from Iran’s Supreme Leader Ayatollah Khamenei, released through Iran’s news agency, embodies the essentials of a very old refrain.

"All true believers in the world of Islam and Palestinian fighters are duty-bound to defend the defenseless women and children in Gaza Strip and those giving their lives in carrying out such a divine duty are 'martyrs.' "

This official statement is burdened with detrimental intent from the Iranian leadership enthusiastically promoting discord in the Arab world. It sadly reflects a generally felt and ancient sentiment. This cynical stance accentuates the dearth of reprimand emanating from Arab leadership toward a callous treatment of its own, by its own.

Using the well-tried and successful Hezbollah strategy for waging war, Hamas inserts itself into communities populated with children, women and men. It then launches missiles into Israel, knowing that its launch sites will be easily detected by Israel’s technology. Hamas also knows that the deeper it has insinuated itself into Arab family communities, the higher the odds of civilian casualties during a retaliation. The higher the casualties, the higher the sympathy quotient for militant Islam, and unfortunately, the higher the support for Islamic radicalism.

On the Israeli side of the wall, leaders cannot retain power unless they are seen to decisively defend their people. The international PR machinery emanating out of this crisis, however, including expressions of disgust from the UN, will continue to work against Israel. U.N. Secretary-General Ban Ki-moon, “condemned the excessive use of force.” The current air assault from Israel tactical forces inevitably killed civilians. Even missiles with an accuracy of three meters to target, will unavoidably deliver death to bystanders and innocents when the intended targets are hiding in apartment buildings, mosques or schools. The media then becomes very preoccupied with reporting of rallies orchestrated around the world demonstrating opposition to the Israeli offensive.

This has been a sustained and caustic dance of death long contaminating the Middle East. Much of the world observes, but does not understand. It can’t. How can it make sense of a conflict that plays and replays, generation after generation, with the same players, same faces, different weapons? How can the world make sense of self-hating organizations being allowed to “lead” a society? Did anyone really expect that withdrawing thousands of Israeli settlers from Gaza would silence the rockets screaming into Israel?

From Denmark to Venezuela, the sanctimonious debate as to which side holds greater responsibility for the current cycle of death avoids the well-entrenched commitment in radical Islam to exterminate the state of Israel. The few Muslim voices declaring disapproval with Hamas’ ongoing break of the ceasefire accord find little harmony in the Islamic Arab community. Whether Israel is doing enough to allow Gaza’s economy to flourish, or whether it is shipping enough goods into the territory, giving Hamas justification for sporadic but endless rocket launches are simply minor subsets of the larger problem.

Most critical to any long term silencing of the rockets, would be reading and hearing loud pronouncements from the long silent voices of the vast majority of Arabs and their leaders. Their chorus should emphatically vocalize support for the existence of Israel. With such pressure on the extremists, the rest of the world would take the possibility of a Middle East peace seriously, and economic development would be on the horizon for Gaza and the Palestinians. Arabs in Gaza deserve some peace, and so do the people of Israel.

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Wednesday, December 24, 2008


Best wishes for feelings of Joy and Gratitude to all readers from around the world who have joined me here this past year, and to billions more who haven’t yet. I have enjoyed the exploration and the education in this journey. And no matter what time of year, internally or externally, a smile is always infectious. … ☺

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Tuesday, December 23, 2008

• A New And Different Shattering Of Assumptions

You have done your share. You work exhausting hours, sometimes at two jobs, and you have succeeded by any definition in fashioning a good life for yourself and your family. You accepted that while you were taking care of your part, others, some perhaps with more knowledge, power, influence and wealth, were taking care of theirs. Good for you, and well, … not so much.

Assumptions are a foundation of society’s functioning processes. As you travel at 55 miles an hour down a busy highway, you assume. You assume your automobile’s wheels will not suddenly part ways and decide to retire in a roadside ditch. You assume others driving in the opposite direction will continue enjoyment of life long enough to pass by your left window at a relative 110 miles an hour, with no sudden change of heart that might cause your abrupt transition into a hood ornament.

You assume that those you have elected to office will ardently carry their impassioned campaign trail promises to Washington or The White House. You assume that all knowing sages who have been given the keys to the National Safe will be diligent in the management of its contents. You assume that the Harvard educated captains of industry will manage the corporate world in testament to their prodigious capacities. You assume that others must have special insights far exceeding your own on the big picture.

We all assume. We have to. The faculties of human endeavor expect it. Without assumptions, the evolving ritual dances of the social, political and other conventions would disjunct into paralysis. Our behavior holds certain expectations of its ambience. In the event that those expectations are violated, we have enacted laws that will impose a collective retribution.

Current economic, political, corporate and social events are shattering our assumptions with impudent and invasive intrusion into the core of our lives. Our centers of gravity are undergoing some dislocation somewhat similar to that experienced three generations back during the Great Depression. The global interconnection and interdependence allows for a more pervasive impact on the earth’s population by the current version of high anxiety.

Do you remember the day when that parent you thought archaic told you, “Things are rarely as they seem?” This assertion pertained to perceptions. You were convinced that government bailouts were foreign concepts too far down the politically impossible spectrum to warrant serious thought. Now you listen to unwavering shouts from experts telling you that bailing out banks and financial institutions is not only good for you, it is mandatory for your future well-being and peace of mind.

Will the best-connected voices, the CEOs cap-in-hand, be the most rewarded in the bailout line-up? The taxpayer will continue to borrow trillions of dollars to enable these bailouts of Wall Street, and it will be left to our children and grandchildren to figure out how these debts will be repaid. Can’t we just assume that they will? That would be easier. The dogmatic nudging of our perceptions is disquieting. We are perhaps observing, and financing, the dawning of a new capitalistic system and a metamorphosis of the corporate entity.

Surely somebody knows what he or she is doing. The assumptions return. This new Obama administration with its dozens of experts must know something we don’t. It will make things better with a stimulus package on top of the bailout packages. This stimulus package will be the biggest in history, setting new incomprehensible levels of national debt. Shall we assume once again that for that singular reason, this package will work?

The cycles of our presence on this Earth are not all within our control, and these times are an experience along our journey for which our spirits will draw a learning. New assumptions will advance on our percepts, reframing our outlooks and expectations, and your parent was right, things will rarely ever be quite as they seem.

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Saturday, December 20, 2008

• Bernanke And The Perpetuating Credit Card Swindle

Banks, and whomever else we blissfully accepted a credit card from, have been charging us, all of us, grossly usurious fees. Even those diligent observers faithfully sending off payments before they were due, have long been abused by capricious credit card issuers.

When the Head of The Fed, Ben Bernanke, gets involved because Congress has been asleep, you know the pressure of discontent from tens of millions of Americans is building beyond a sustainable level of annoyance. Ben Bernanke's comment that the rules, “will establish a new baseline for fairness,” is so fraught with meaning one doesn’t know where to begin its appreciation, … well almost.

This is what he might be saying, “We have been exhorting so much out of your pockets for so long through slight of hand, guilt, ... no, make that fear, that we are led to enact a few rules that will do nothing for you. If we present these new rules with enough jaw-dropping appearance of boldness and empathy for your well-being, you will remain oblivious to the vulgarity with which you have been and will continue to be fouled.

“Don’t get yourselves in a knot over this one-half-of-one-percent-rate thing on the sub-slime, I mean sub-prime interest rate the Fed charges its friends, and quit wondering why you can’t get in on that good stuff. It doesn’t concern you, and has nothing to do with you. Never has, never will. That rate has no correlation to the 14% to 36% interest you pay on your credit cards. Such rates are because you are all really terrible at keeping your books in order, and making all your debt payments on time. If you knew what you were doing, you’d never agree to pay such insane rates. You are so oblivious, you could be getting better rates on your street corner. Idiots. Oh, sorry. I didn’t mean that, although, why are there almost three quarters of a trillion credits cards holding a trillion dollars in debt when there are only 300 million men, women and children in this wonderful country of ours? And, NO, I will not go into an explanation of why our friends, the banks, get almost no interest charged on money we lend them, while their credit stinks, and you have to bail them out. It is much too Byzantine a system to be explained. Even my bosses have no clue.

“Ladies and gentlemen the rules regulating credit are complex, though a little feudal. You’ve understood all along that we, umm, I mean the banks and credit card issuers, could set interest rates and fees at whatever levels they wished. Why so much surprise? We are nevertheless pleased to announce that we will reduce re-pricing, a little, well, we won’t reduce it but we want you to be notified when it will happen. Will we check if lenders tell you ahead of time? No. Will you? Not much, no. We are absolutely certain most of you never pay attention to notices or fine print. How many of you can tell me, right now, how much interest you pay on those ubiquitous and so colorful pieces of plastic? … Clueless.

"Let me make something perfectly clear. We do not owe you debt. Debt is not your right. It is a privilege. You should be grateful we even allow you to borrow from us to lever your lavish lifestyles against your future incomes. Right now we’re not so comfortable with your prospects for continuing those incomes, so we are simply making some adjustments. Tweaking the system a little. We also don’t need to see any demonstration parades coming down Avenue of The Americas whining about how you’re hard-done-by, or chanting ‘ban the fed’ or shaking signs with ‘help we’re broke.’

"We are gleefully aware of your lack of familiarity with the term, Saving. It is a term in the English language that refers to economizing or conserving money for the future. Who do you think keeps count? I do. Why? Because tracking details of your habits with microscopic attention enables us to accurately time adjustments in the system. I don’t mean adjustment in prime rates, I mean the establishment of regulations that will instill in your minds an impression of our all-knowing prescriptions for everything financial that ails you.

"This is why we will allow companies to raise interest rates only on new cards and purchases, not on existing balances. I know that you think the interest on the old stuff’s already been jacked through the roof, so what difference can this possibly make? True, but when you add to this the restriction on allocation of payments to account balances with lower interest rates, and reducing cross-card-credit-contamination, now we’re talking vast implications on the credit system. Huge. This is big for you guys. Really. Well, maybe. Hey, we’re doing the best we can here at the Fed, and things are tough everywhere. No one wants to give an inch. That is why we won’t be putting caps on interest rate levels charged by card issuers. Sorry. Oh, and by the way, because we just cannot upset our friends, these new rules will not go into effect for at least a year and half. You know how things are. Congress is so laborious. Each one of those crapulous crackpots wants a piece of the pie before agreeing to anything. They think pork-barreling is their right, … things like that.

“In conclusion, I know deep down in my heart that all of you feel a very strong and emotional commitment to repaying your obligations. We are thrilled to know that you will be making your payments on time and that you will atone for your sins, … umm, that you will extinguish your debt, the principal and the interest. Every penny. Particularly the interest. Yes, make sure you repay the interest. Perhaps I shouldn’t harp on the principal so much.

“We will lend you more as you need it, and the presses, the paper, the ink are churning 24/7 to keep up. Now I must go have lunch with your new leader and explain what I’m doing, again. I wish these guys would just leave me alone, their eyes just glaze over when I talk to them. Merry Christmas, and happy spending. It’s good for the economy.”

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Tuesday, December 16, 2008

• Is Madoff Really A Wall Street Anomaly?

As if the negative news of the past month was not enough to rattle the constitutions of the hardiest bank accounts, a new face has appeared to erase Paulson’s from principal and front-page news coverage. The new face of Wall Street’s meltdown is Bernard Madoff, a well-respected, elusive, disarming, egocentric, and now arrested, financial service executive. Is he really such an anomaly?

Individuals, banks and fund managers of brokerage, hedge, trust, private, non-profit or other capital pools, who made sumptuous donations to Madoff’s coffers are making the headlines for having invested in the genius of 1% to 1.5% monthly returns. Over the coming days and months names will continue to emerge, and so will the dearth of ethics. It is inevitable that some of the nastiness permeating the penumbral netherworlds of investment banking will force the hands of authorities that have ignored many of the egregious abuses of fiduciary responsibilities entrusted in positions of influence and power over money. Wealth destruction of such magnitude required servility and assent from a synchronous multitude.

In the Madoff fiasco, the range of investors already finding light of day includes for example Banco Santander based in Spain with a reported $3.1 billion exposure, and Britain’s Man Group with only $360 million in potential losses. Individual fund managers and financial advisors to the wealthy will also be exposed. For some individuals the nature of the exposure may be more than simply having lost staggering amounts due to their inappropriate allocation of capital to an alleged ponzi scheme.

We may be bestowed the first significant opening to a flood of exposure into the imposture and pilferage that has been too pervasive in the investment and banking industries for a century. It is an industry that has been protected with almost ecumenical solemnity by regulatory agencies and media. Regulators might not be up for it and MSM may be too distant from privacies of collusion. Nevertheless, the doors of the cloisters shrouding indefensible vulnerabilities may open a crack. Perhaps we will be granted insight to a whole range of shamelessly aberrant possibilities that the financial world and its regulators would rather leave undisturbed like a stagnant toxic reservoir.

At the less pernicious end of the seductive a cappella temptations of ripened greed are those who suspected that Madoff was doing something off the main line to deliver such absurdly consistent returns. As is often the case on schemes too good to be true, these investors didn’t really want to know. They invested anyway. Smaller fish begged Madoff to accept their capital for investment, but many were likely directed there by their own financial consultants who received some form of compensation from the virulent fund. This is not to suggest that the whole system is corrupt, however, a considerable portion in the financial consulting and capital management business, have forever acceded to beguilement and dipped their buckets into both sides of an investment transaction.

Nearer the apex of the pecking order are market savvy managers of large capital pools who accost both sides of financial transactions in monastic secrecy and with ascetic prudence. The nature of their game can get complex, and presents a kaleidoscope of diversity. While overseeing funds or pools owned by others worth tens, even hundreds of billions, they manage their own private smaller but nevertheless sizable funds. One can scale down numbers applied to the graft, however the same ceremonial congruity applies. Regardless what long, short or other more eclectic bet is made from the large fund under management, the smaller private fund can be insinuated into the safe side of the transaction between the bid and ask, for example. The smaller private million-dollar insertion will be guaranteed warmth by the bigger trades on behalf of the larger managed funds. Execution can avert prying eyes with or without broker or market maker accommodation, utilizing Byzantine devices such as well nested off shore accounts, although many operate subtly but in full view.

The investment game is prodigally encumbered with inducement for manipulation or corruption, imploring those weak of fortitude, morals and principals to abide to discrepant customs. When managing “someone else’s money” it is too easy to take a piece over and above the agreed-to fees. Rationalizations abound sanitizing the egos of corrupt investment bankers convinced they are the requisite Eustachian tubes of the investment world. Attempt to calculate odds of graft in this industry would accelerate the most complex algorithms into catharsis. We are treated to many great lies, such as “the market never lies,” or “insider trading is illegal,” meant to administer salve to the flock, or anaesthetize the unsuspecting.

What self-respecting investor, broker, market maker, fund manager or general purveyor of financial clout would make an investment without “inside” information? Martha Stewart was jailed for a minor incarnation of that infraction. Occasional immolations are inevitably imposed for the industry’s aesthetics to maintain consecration. Madoff is no recent proselyte to the game, having founded his firm in 1960 and having served as Chairman of NASDAQ, his breadth of experience should deliver unusual enlightenment into the darker corners of his industry during these times of bailouts and deficits. It will then be up to Congress to act on reducing the odds of seduction.

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Thursday, December 11, 2008

• Cerberus Leveraging Billion Dollar Connections In Congress

It is agonizing to watch Congress publicly stumbling through its analysis and qualification of the auto industry, providing appearance that it is doing its homework on a bailout. Over 40% of Congress is made up of lawyers, with little grasp of finance, economics or business. Congress should not be negotiating the bailout.

Chrysler and Cerberus Capital Management are seeking an unholy bailout and Congress understandably struggles when Cerberus owned Chrysler CEO, Bob Nardelli, cannot explain why his bosses will not put up cash to bailout one of its many subsidiaries. Cerberus does not work that way, and it does not have to. Its political clout will do the heavy lifting on salvaging a failing investment.

Taxpayers won’t know any better since neither the current nor the incoming administrations will take oversight seriously and neither seems to understand Deal Structure. Unfortunately, neither will Congress which is simply lacking understanding of some critical components of business, wealth creation and negotiations. Certainly its actions suggest absence of such comprehension. American taxpayers have a particular interest in the outcome, and should be paying particular attention to the bailout, and to the Chrysler deal in particular.

In the shadows of enormous private equity investment firms lurk shareholders who remain anonymous, and who hire directors, senior staff and advisors who have political connections deep inside the private rooms of Washington decision makers (Congress & Administration), enriching the deals and enhancing ultimate financial returns. John Snow, the current Chairman of Cerberus and Bush’s former Secretary of the Treasury before Paulson, has apparently been earning his employer’s favor by lobbying directly, and through influential lobbyists at Treasury and elsewhere, for a Chrysler bailout.

The Cerberus investment of $7.4 billion in Chrysler is underwater. Their elimination of 30,000 jobs has not helped them or their former employees, so now Nardelli uses fear to energize congress into action. Most firms like Cerberus don’t acquire control of companies to turn them around, rebuild them and create wealth. They either acquire for position in an industry, then apply and leverage influence for strong ROI, or they pluck low lying fruit in the hope that political polishing and some finely tuned connections will enable a flip of the asset for a significant profit. Cerberus has for years had a nasty reputation on Wall Street as a fierce player and hard nosed negotiator, which is its right. Everything Congress is not. In this game of risk, connections and being ruthless make all the difference. In the Chrysler deal, these warm associations and substantial sphere of influence will bring access to taxpayer funds. Snow called his friend Paulson for the cash.

There may be media clamoring for transparency on the wealthy and secretive Cerberus, yet I feel this is an unwarranted forensic hunt for indeterminate ghosts. If Congress structured the deal properly, Cerberus and who owns it, how much it has, what companies it controls, all become irrelevant. Implementing a bailout program as delineated in this recent article on this post, would remove any Congressional concerns of the Cerberus share position, which would be drastically diluted to a minority in the event of any bailout cash injection. Unfettered, Cerberus could then slide back into the shadows, to await some future Congressional discomfort with its unnatural influence.

Should Chrysler take any money from the taxpayers, as it now appears it will, structure can be simple and effective as noted in the above referred-to article and “…take preferred share positions at the current market value for funds provided as and when the investments are made.” This, and other suggestions therein, such as clearing all Directors for the Boards, renders Cerberus shares inconsequential and provides taxpayer complete control over a company they will have funded, until all funds are repaid.

Congress, please pay attention. American taxpayers don’t need another blunder committed on their behalf.

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Wednesday, December 10, 2008

• Obama - The Second Tell

As follow-up to a November 21, ’08 article on this post regarding signs that may reveal the direction that an Obama Presidency might take, the following presents another “tell.” This one is less innocuous, but may prove to be more expensive to America.

Perceptions inside the current White House, when Bush and Cheney took office, were that incurring debt was its right and was its political capital to spend with Cheney supposedly claiming “deficits don’t matter.” Hindsight was temporarily kind to them with support from William Niskanen, a member of Reagan’s Council of Economic Advisors also claiming, “The lesson we should have learned is that deficits have little or no short-term economic impacts.”

Through the early years of this decade, everyone accepted the premise that debt was a normal, perhaps integral conveyance of a modern society, possibly even an applauded one. From economists to taxpayers on assembly lines, everyone dwelled in the comfort that deficits and borrowing could bring unfathomable respect from acquisition of material possessions. Second mortgages were objects of desire and their procurements were cause for boasting. And didn’t second cars and gigantic cinema sized TV screens provide jobs for people in foreign lands anyway? Who could possibly argue with success?

Debt administered through spinal shunts delivered energy into the U.S. economy. The amphetamine rush sent economic experts into undiluted delusions of grandeur, and the exploiters into creative overdrive on derivative concoctions too complex for their corruption and decomposition to be diagnosed. Somewhere along the delivery track, the drug magically transformed into analgesic and the rest of society, including government, slid into either acceptance or compliance. Some sectors of government abdicated responsibility, when their persuasion to appear oblivious was finessed with financial seduction.

Debt is seductive. Its power is evidently overpowering. America is anxious to move on beyond the current administration and is anticipating a new President with promises of change. We listen for signs of that impending change, and so here is the Second Tell. During this past weekend President Elect Obama, while making promises of unprecedented public works projects, stated, “We've got to provide a blood infusion. And that means we can't worry short-term about the deficit." At least Obama’s delivery of attitude toward economic probity was less arrogant than Bush and Cheney’s, but identical in its bearing. He seems more genuine, even if misguided. The legal debt ceiling has already been increased to $11.3 trillion and more increases will be requested.

Evidently not so much has changed or will change, and deficits be damned, full steam ahead with borrowing and government intervention. An additionally disconcerting sense is felt when accepting the reality of the notion that even bigger government may not be just an enigmatic abstraction over the coming four years.

A preceding article on this post discussed the need of the 44th President to urgently obtain an intensive and thorough education on inflation. With the coming boom in currency creation, not doing so would be tantamount to an abdication of responsibility.

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Friday, December 5, 2008

• Revising Government Relationship To Money

In the search for solutions to the global economic turmoil, there is a disconnect between the objective of bankers and financial institutions, and the objective of government (read: people). The global crisis presents an evolving pathology beyond the reach of Paulson, Bernanke or any other imposition. That is the great mystery and abstruse nature of money.

If current examples of frenetic activity on the levers of the financial system are any indication, no one really understands money. The actions have been more akin to transgressions against taxpayers, although where would any forensic audits hope to begin on a course to discover root causes for the overwhelming market, currency or resource price gyrations. Some well enough appreciate how to use or manipulate money, but who really understands its complexities and flux? We all make some use of it, need it, work for it, fight for it, even beg for it, but understanding it is an altogether different exercise. We leave that to the wisdom of economists and Wall Street addressed expertise.

In the past year, banks all over the world have lost billions, and many have slid into bankruptcy. Paulson’s decision to hand billions to bankers, in the hope they would loosen their grip was just that, hope. J.P. Morgan for example acquired depressed financial entities for pennies on the dollar, expanding its presence and reach over the economy. But lend? Not so much. Why should it take risks, when it is still standing after having been more diligent, or gifted with higher levels of awareness than others?

Banks will not lend in this climate of uncertainty when the term rescue has morphed from verb, or name, into an adjective of economy. Paulson did not structure his deals with effective strings attached to ensure the function of providing liquidity to businesses. If the Secretary of the Treasury’s purpose was to stimulate the wheels of commerce on behalf of taxpayers, he is failing. Europe has also taken the bank bailout route in earnest, with each country dispersing enormous percentages of its GDP hoping to diffuse uncertainty and minimize the collapse of banks.

Did anyone listening to the concept of the government acquiring toxic assets from banks not have an intuitive flutter? And with all the talk of mortgages, are we forgetting the careless lending practices that were also applied to car loans and credit cards? Without disputing the overall concept, who could possibly be chosen as the arbiter of moral behavior on such elemental questions as the application of “valuation” on these noxious and nebulous inhabitants at the far reaches of the derivative universe? Walking on water would prove a more plausible expectation. This is not a smear on Paulson. He is human. He will no doubt do what he believes to be right. Paulson’s view is that of a banker. We will not change human nature, nor eliminate greed through regulation. Although perspective can be limiting, and in the existing financial situation may act to further exacerbate the damage, perspective can be modified. This can in turn alter behavior. The banking system may be in crisis, but much of the rest of the economy is not. At least not yet. Is a very different approach worth consideration?

There are endless suggestions floating through the political maelstrom girding an out of control financial implosion that will not be corralled. We are now heading to the $2 Trillion dollar bailout mark with no end in sight, and little substantive ignition of financing activity. On the personal front, taxpayers and workers are on average currently paying interest of 6.95% on car loans, 11.43% on credit cards, with $2.6 Trillion of consumer credit outstanding.

Taking counsel from Abraham Lincoln and Theodore Roosevelt, in the hope that we might prevent reprimand from Thomas Jefferson, may we be so bold as to proffer on the Secretary a few additional suggestions on dealing with the vicious cycle of credit contraction?

Mr. Paulson,

- Send out the whole army of economists and accountants at your disposal, add more as needed, to meet with the critical cogs in the economy, businesses, not the banks.
- Disperse these troops across the country, adding administrative support from state level when needed or appropriate, to meet with companies large and small.
- Don’t ask what they need, that would be insulting since you already know, just ask, “How much and for how long.”
- Assess the reasonableness of the demands based on current audited financial statements of each corporate entity and make a decision on the urgency of the need.
- Cut the check within two weeks, and here’s the key, No Interest. None. Why should banks be the only ones with access to borderline negative interest rates?
- Prorate repayment schedules over a five year window, preferably, but remain flexible and susceptible to the capacity to repay.
- The taxpayers (read: government) aren’t in need of interest on their money. Whether entrepreneurs or employees, they require an economy that continues to thrive, provides them jobs, a roof over their heads and nourishment for their kids. They’ve already been slapped into awareness on the traps of endless credit, they will be more astute from now on. Furthermore, the national currency is not backed by anything other that the strength of the economy, ergo, until there is a change to something like gold, silver or microchips backing the currency, the economy is it. It needs bolstering and we will trust that its resurgence will provide enough gain for us to deal with the cost of escalating debt.
- Take care to ensure that proper documents are signed with equitable collateral.
- Establish very tough regulations and repercussions in order to limit abuse, kick-backs or graft.
- Nationalize the Federal Reserve if you have time, before deploying the distributors. The Fed will be less cantankerous in good time, but you must give it the good news. It will be really good news, since there will be no leveraging with 30+ multipliers on capital to asset ratios, as we have seen over the past two decades in the financial derivative escalations.
- Government will actually have accurate measurements on the money supply, and there will be no concern for where the interest owed will come from, since none will be required. 
In other words, no one needs to fry at the bottom of the financial pyramid. This will also reduce the need to infinitely create new debt.

That’s it, Mr. Paulson. Good luck.
Your Taxpayers.

While issuing legal tender is in the government’s purview, it does so through creation of bank debt. Banks distribute currency as they see fit. Even The Fed operates under the aegis of the government though it operates privately. Increasing the efficiency of the money creation system, allowing capital to flow and infusing it directly where it will most straightforwardly impact the nation’s engines will ignite recovery. Efficiency is not the primary objective, though under current circumstances, it would appear a necessary one in the mix of considerations. The current monetary and banking infrastructures claim efficiency, while the outcome is evidence otherwise.

The American economy rests on the back of the American worker and consumer. Taxpayers own the government and currency is only a tool enabling commerce. Get it working for you, not against you. With the computing power available and the internet’s ubiquity, the possibilities to become creative on the currency front within economic, political, or other boundaries are endless even to include a large role for banks.

The government just wants its tax. On the next trillion dollars, don’t waste it on the black hole of bad debt. Get this economy thriving again and get it paying its taxes. There will then be hope on the horizon that the principal on trillions of dollars of debt will gradually get paid down.

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Tuesday, December 2, 2008

• Recession? Depression? Deflation? Inflation?

The world of internet search has become a reasonable gauge of a population’s concerns. Obama has almost disappeared from the top of the list and has been replaced by the economy. The shift suggests more than an elemental change in unfolding interests. The first has been a result of serious preoccupation with the new face of America as he becomes the 44th President, the latter and current driver of search engines, is a deepening concern for personal economic well being.

Our stress propels the investigation. We are anxious. The uncertainty of tomorrow, clouds our present. Until we find answers that might lead to a plan, the apprehension will persist. On our individual paths, along the trail of our human endeavors, we encounter various challenges to our physical, intellectual, emotional, or spiritual vitalities. Relief usually arrives in the form of clarity and a plan. Knowing what we are going to do provides a relief valve for the anxiety, even before we step into action mode. Our disposition improves and we then walk with purpose.

This week brought news that the U.S. has been in a recession since December 2007. That is what economists have decreed, after thorough analysis of past economic activity across numerous indicators, including incomes, production and employment. That is not helpful to our cause. The ability to look backwards is great, but what will tomorrow bring, and how do we deal with it? Expertise tells us that we are in a deflationary period. No one is raising the likelihood that inflation may be around the corner as the printing presses accelerate to satisfy the currency demands of the national debt and payments on maturing obligations. (more on this in future articles)

Our media is particularly adept at elevating confusion and adding drama to the unraveling economic events whirling conscious thought into a frenzy. This also is not helpful. One pundit provides an explanation and prognostication that appears valid, only to be immediately followed by another expert with a completely different and opposite view, which also seems valid, and based on its delivery, appears even more so. And both read the same tea leaves.

No matter what comes tomorrow, or next year, whether recession, depression, deflation, or inflation, you will get through it because what matters is not so much what might be, but what is. Your common sense will guide your steps as it did yesterday. You already know that it is time to do all that is in your power to get rid of your personal debts starting with your credit cards. You already know that it means making extra payments, however small, until debts have all disappeared. You also already know that it means doing without a long distance holiday, or taking the time to look for discounts on daily purchases. Your natural spending to meet your needs will over time sustain the economy. Discount any implorations from certain leaders who would want you to return to profligate spending.

This economy will lead us to become more reliant on communal groups, including family, where support and encouragement is available, and where shared perceptions can yield gratitude for the smallest gifts of life. Attitude can lighten the path and crystallize solutions, easing anxiety. We will all become just a little more productive in small ways that impact the whole.

Perhaps the internet will soon gauge that the level of voices clamoring to be heard by their elected officials represents a majority of traffic until common sense is evidenced in Congress, reversing the abusive past indiscretions and their listening skills have been sharpened. Then we can expect some abatement in national anxiety levels and the next July 4th celebration will be an observance of national renewal.

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Friday, November 28, 2008


Our mainstream media has been in panic mode for a couple of months, and in its continuing consternation, has clamored for the President Elect to rush, first and foremost, into naming his economic team. “Hurry up, and you better be picking some guys who understand numbers and the economy. We want experts. The best money can buy.” So you turn off the news, and head off to bed confident that although a gloomy, almost mystic storm is brewing outside your window, all will be well. An Economist will figure it out. Some hours later your wake up call is the dawn sending rolling thunder that jolts your home to its foundation. You jump, wide awake, and in a cold sweat. “What the hell is an economist?” The sun is actually attempting to cast light around your drapes.

Once upon a time, "economist" was a term applied to an individual who enjoyed a certain conservative frugality to all human endeavors. Vestiges of that connotation remain with today’s definition, although these cannot be assigned to the modern economist in whose hands we appear to entrust our economic lives, those of our children and those of our grandchildren. Not that some of our more illustrious ancestors might not be addressed today as economists. Certainly Xenophon, Aristotle or Adam Smith wore the mantle well, in addition to being philosophers. Doubtless, each would probably be perplexed by the current definition, and even embarrassed by its most modern incarnation.

Our best known are too often staggering egos, rooted in analytical methods far from the disturbing notion of public discourse and sensibilities, but readily capable of pontification on the state of everything economic. Aided by the most powerful computational powers the world has even known, they interminably scrutinize the minutiae of fractions, macroeconomically dissecting our lives, creating hypotheses felicitous of one theory, or another that each might have subscribed to. The new breed of economist hopes that the consequence of his or her efforts might eventually dissolve into public policy. All struggle to be heard in one way or another, and a few get lucky.

Alan Greenspan for example, was much more than lucky. He was feared. He was clearly not as competent as he believed himself to be, but he was feared, as well as venerated. So discombobulated were four American Presidents on the state of their economies that Reagan, Bush Sr., Clinton and Bush Jr. each capitulated, leaving him insulated, permanently ensconced in office as 13th Chairman of the Federal Reserve. For 19 years Greenspan was arguably the most powerful man in the world, if you place money at the top of the human existence food chain.

Who preceded Greenspan? Paul Volcker, who will now be Obama’s eminence grise.

Aristotles, they are not, but let's cast a slightly more discerning inspection their way, and toward the state of their art. Economists are human with any of the frailties the rest of us might also endure. They are products of their educational systems, and environments limited by the very nature of economics. It is a vast endless field of study. Some concern themselves with wide global movements of goods, people and money. Others might specialize in capital ratios, dealing with banking regulations and interpretations on depository requirements, or the standards of capital and asset risk measurements, with specializations within each area. Others are preoccupied with inflation, and just to complicate matters all countries have individual methods of calculating capital within their boundaries, though they are confined to internationally accepted guidelines. Unfortunately, they either specialize, or they really don’t know anything, and become really, really dangerous.

It was anomalous that a few economists, during the bubble’s inflation, indulged quietly on the more dire economic possibilities, but their squeaks were obscured in the noise of the herd.

We assume that society’s Greenspans can not only be visionaries with insights into mathematical models, but can hover above the fray issuing profound prognostications on the state of our malaise. We assume a dream team of economists crowded around a new Commander In Chief of Change will blend their discordant mix of views into a powerful amalgam. One capable of charting a methodical path out of a labyrinth no one really understands, and no one is taking credit for.

Repeating platitudes on the perils of assumptions would be pointless. Through the kaleidoscope of our bank accounts we are witnessing the evolution of our own wreckage in slow motion.

The first clue as to why our modern day Aristotles of economics are not the oracles we sanction them to be, is that they deal with yesterday. They present the past beautifully, and with more clarity than the Hubble’s brilliant and awe inspiring images of distant galaxies as they existed billions of light years ago. As to what will occur tomorrow, or even later today, our seers are particularly inept. Specialization and compartmentalization are dangerous competences, particularly when compromised by insecure egos.

The second clue resides in the box that hides these enigmatic specialists of the statistical tables. They have perceptibly limited understanding of the nature that is human. The culminating pinnacle of their output is theory. Not practical, but obscure and probably intangible methodologies for hopefully enhancing efficiencies, or exploiting short, mid or long term trends, and biases. Nowhere in the mix that is the economist’s alchemy, can we find a scintilla of any universal principals that might inject percepts of morality into their mental and computational gyrations. Their inclinations fall short on the E.Q. meter, and human nature is not in their catalogue of, “Things I’m An Expert In.”

Now for the third clue. It is not in the nature of the economist to be an entrepreneur. Time spent in research, and analysis also do not allow for long term commercial endeavors. Unfortunately, this limit understanding of where the proverbial rubber meets the road.

The most effective presence at the round table carving a new path out of the maze America is trapped in, would be that of an entrepreneur. One who has had extensive success in the commercialization of goods or services to the broad market over a sustained period of time. One who has demonstrated vision and creativity, as well as capacities to motivate individuals other than himself to reach unexpected productivity. One who in practice and not through vicarious imaginings, has been drenched in all elements that fuel the economic engine driving an economy.

Drawing the curtains to let the sun’s warmth fill the room, you remain hopeful, but know that as the morning news will announce yet another bailout package, you will look elsewhere for telltales of contemporary Voltaires in our midst.

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Tuesday, November 25, 2008


We read the headline on a story buried deep on a back page related to Texas indictments on Vice President Dick Cheney, and former Attorney General Alberto Gonzales, but we don’t bother reading further. What’s the point? Surely it’s related to Guantanamo Bay, or some other absurdity these guys were involved in. It did not make the front cover, so how momentous can it be? The story appears to be about prisons, or prisoners, or something else that won’t affect us much, so who cares? Things are rarely as they appear.

On closer analysis, we are offered a view of the bizarre circus that is often performed by the Texas judicial system. That is not bewildering, since the performance of many magisterial infrastructures on this continent are desperately wanting, and the Texas judiciary rarely provides a surprise. The indictment of a sitting Vice President of the United States, however, should be international front-page news, and deserves dissection with all the skepticism that CSI Miami’s labs might percolate into truth. Alas, no such disposition is demonstrated on this case, yet even for modest entertainment, the incident deserves attention.

It may be impossible to discern if this collision of hapless dominos being played in a judicial game of Texas law, is simply a Universal coincidence when all astrological forces have merged to favor the Bush Administration, or if it is an outcome of the current White House hard at work on its end game.

The endless rambling road of predictions and conjecture is littered with decimated egos, yet on this one, can we help ourselves? The opportunity is too appetizing to pass up. This spectacle in Texas, fields a cast of characters too reminiscent of the Keystone Cops, to be either funny, or an aberration. And no, this isn’t a conspiracy theory revelation, but how good can a story get?

Cheney is accused of conflict of interest because he owns substantial holdings in the Vanguard Group, which invests in private prisons, while he holds influence over the Willacy County’s federal immigrant detention center. He is also accused of misdemeanor assaults on detainees because of that ownership link. In the litany of errant decisions suspected of Cheney, nailing him with a misdemeanor does not ignite much interest, and would not even make any list of top ten transgressions. This misdemeanor would also not find much traction in most courts, yet there it stands.

Gonzales on the other hand is accused of terminating an investigation into abuses at a federal detention center in the county. Gonzales demonstrated little propensity for recollection of anything when Congress questioned him on events within his own office. How can anyone possibly believe that he might successfully be linked to events inside a Texas detention center, while he fumbled around Washington? Perhaps someone is finally crediting Gonzales of having talent.

We suspect that Cheney and Gonzales are not losing much sleep from anxiety over this affair. Neither the accused, nor the District Attorney showed up for arraignments. The D. A. was found camping outside the courthouse with a horse, 3 goats and a rooster, and clerks, judges and prosecutors related to the case are separately being indicted on charges of abuse. They are furthermore embroiled in other debilitating peculiarities, laying a cloak of dubious lineage on an already questionable judicial exercise.

So how bizarre is this game? Perhaps not bizarre at all. The timing is impeccable and the players appear perfectly suited for the performances of their lives. Burlesque or not, they may be celebrated for years to come at a now famous ranch in Crawford, Texas, and might be deserving of a badge of excellence.

For all those who have reported, with a certain glee, on the charges against the intensely disliked Vice President’s potential humiliation, don’t dive into your bath of triumph with too fervent exhilaration. You may be gawking at a perfect scenario for George W. Bush to erect a Chinese Wall around himself.

As Bush exits the most powerful office in the world, but before welcoming the 44th. President, he will dispense Presidential pardons with sanguine indifference to perceptions. He can do so even before any trial is concluded. What a perfect, non-descript, development, and excuse for a blanket absolution of his Vice President from exposure to flack flying from any and all activities, or decisions. Gonzales is just an additional moat of protection for fortress Bush. Rather than wait for events to unravel after he has left office, or for other charges to be leveled at Cheney, Bush is presented a perfectly rational circumstance for exercising the power to pardon, before it evaporates completely from his grasp on January 20, 2009.

Deployment of the protective mantle to shelter the first guard of this markedly reviled President may propel Congress to revisit the practice that has been an embarrassment to the electorate in almost every instance that a Commander in Chief has left office. Presidential pardons have no place in a Democracy that honors itself with Laws.

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Friday, November 21, 2008


Throughout the election process, image is everything. Now, post-election, the Electorate looks for signals of capacities beyond the ability to get elected. We peer in, looking for tells of what an Obama Presidency will mean. Has there been a tell? … Did we miss it?

There was little satisfaction in The Pacific Gate Post having predicted back in early July that Obama would become the next President. The conditions and road signs were easy to read. The population’s unrest was conspicuous. The discontent gaining momentum rendered Hillary’s bid for the White House, and then John McCain’s charge, little more than valiant but submerged free-style strokes against a powerful current. Obama was a refreshing embodiment of eloquence which the self proclaimed intelligentsia believed accurately reflected America’s image. In contrast to George Bush’s endless public verbal faux-pas echoed with flourish by CNN, and late-night talk show hosts, Democrats agreed, and many across the political middle acquiesced, with fingers crossed.

Since the election, the mainstream media has presented us what it believes are satisfactory analyses on the transitioning process. We have been provided examinations of moment-by-moment cameos in the life of a history making President Elect, from his visit to the White House, to the pasting of fresh faces on titles fashioning the top of the new administration’s food chain. Endless Op Eds have given us “much ado about nothing” over the Rahm Emanuel pick for Chief of Staff. Will it annoy the Israel’s neighbors? Will it make this a too pro-Israel administration? Will Emanuel’s tantrums impede or frustrate relations with some Democrats in Congress? We are not getting much reporting of the fact that he failed dismally in his fiduciary duties as a Director of Freddie Mac through a time when the books were getting massaged in that institution. But then, no one seems to be held accountable for any of that corrupted abuse of the taxpayer’s cash by Fannie Mae and Freddie Mac.

No, the Emanuel decision, although momentous, is not a tell. Neither are any of Obama’s other likely announcements on his Cabinet. How could they be? Just as George W. Bush was a product of his father’s political machine, it cannot be a surprise to anyone that Obama is a product of the Chicago political machine that produces Senators, Congressmen, or Mayors. It cannot bewilder anyone that a lawyer by training, and Senator by oratory, would surround himself with powerful members of the Democratic system that funded him into the Oval Office, or with former members of the Clinton inner circle. We expect that a couple of Republican faces will take a chair around his table in deference to campaign promises of bipartisan politics from his administration. None of this will bring change. And so, we look for signs that some may come, and we await a sign that Obama will establish a sense of history for his Presidency beyond the obvious.

We will strive to decipher the reveals on the Obama economic front, and gage his engagements to resolve the Nation’s greatest crisis. In the meantime, here is the first sign of a tell on the international relations, and foreign affairs negotiating front…

He “supports deploying a missile defense system when the technology is proved to be workable."

Such sentiment, on the surface, appears an innocuous and even benign proclamation. Not so. Not in a time of so much international tension, or fear of nuclear proliferation. Let’s take a page from the most central and dominant figure in the end game of the Cold War. Let’s glean from a master negotiator, Ronald Reagan.

Reagan’s most sobering moment may have been his realization of the devastation that would define a nuclear war. His awakening to the outcome of a nuclear attack on America by the Soviet regime sharpened his mind to the protection of his country. To buttress against the potential of such a holocaust, Reagan threw himself behind the Strategic Defense Initiative (SDI). As many of you will recall, on March 23, 1983, he committed to the creation of an elaborate umbrella of space-based missile destroying long-range strategic nuclear ballistic missiles in flight, deployed from satellites, and X-ray lasers also shot from satellites. The brain center of this program may have been the Lawrence Livermore National Laboratory, East of San Francisco, California, but its heart was Ronald Reagan. His strategy was a dramatic shift from the long assumed doctrine of Mutual Assured Destruction (MAD), and it sought a leap in weapons systems unlike any ever conceived in military history.

Far from being an “intellectual”, or ever pretending to be one, Reagan’s genius was his knowing what he didn’t know, and embracing a deep seeded conviction that American ingenuity could achieve the near impossible. His Lawrence Livermore Labs would deliver. He did not question whether SDI would be "workable". The very fact that he set Lawrence Livermore Labs on track to realize his dream, would make it so. He convinced America of it, but more importantly, he convinced the world of it, particularly the Soviets and Gorbachev.

At summits held in Geneva and Reykjavik, Mikhail Gorbachev offered concessions, including nuclear armament concessions, in exchange for abandonment of the SDI program. With power of rhetorical persuasion and confidence, coupled with his fervent distrust of communism, or communists, Reagan prevailed, undaunted, in the shaping of his audacious foreign policy. He backed the Soviet bear into a corner. The already cracking Soviet economy could not support the escalating costs of competing with such exotic technological deployments as SDI. The advantage would provide America with overwhelming dominance. An initial result of the Reagan strategy was the Intermediate Nuclear Force treaty of 1987, followed a few years later with the disintegration of the Soviet empire, and the destruction of the Berlin wall.

Some of us close to the technological capacities resting in the state of the art during this period knew that the Reagan “Star Wars” system would not be achievable for at least the coming decade, and possibly far beyond. And yet, we marveled at the brilliance, the audacity, and the execution of the Reagan strategy. Even his closest aids believed that he believed. His enthusiasm was infectious. He was never in doubt.

So, back to Obama. Where was the tell? Where was the reveal? It was too painfully, and obviously obvious.

We await the next tell.

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Monday, November 17, 2008


A new world order? Not likely. What? You’re confused as to what and who makes up this new “Group” of countries now supposedly in charge of straightening out the world's economic recession? The politically loaded international photo-op was principally aimed at instilling confidence in the folks back home with two blunt instruments. One, “Watch me as I fly off to the U.S. because I’m really concerned about your plight, and I’m going to do something about it with these 19 other leaders.” Two, “… are you still watching? I’m shaking my finger at America. It is responsible for this mess, and we’re not going to take it anymore. How do I look?” Then home they all went, back to Paris, London, Canberra, Berlin, Tokyo, etc., back to their constituencies, having achieved nothing, but having left behind them in the American capital an odorous agglomeration of blame.

Countries around the world are relishing the misfortunes befalling America a little too enthusiastically. Their own balance sheets seem not to have cowed them into embarrassment. Sarkozi started the finger pointing process, quickly followed by Brown from Britain. The more powerful presences, China and Japan, were somewhat more polite, but the gloating from all members was evident, and its obnoxious cacophony has stained the cover pages of the world’s media.

It is also evident that most member countries believe it is now time to pounce, while the U.S. version of capitalism , and the country itself, appears vulnerable in their eyes. They feel that now is the time to create new international bodies intended to redistribute the economic clout from Wall Street to somewhere else. To where? Who knows? Perhaps to somewhere between Paris and Beijing, like the North Pole, or Geneva, or Moscow perhaps, … just anywhere but Wall Street. Anywhere but in the U.S. Dmitry Medvedev completely overlooked the fact that America held an election only days ago, and the largest economy’s electorate articulated its renewal by deciding to send Obama to the White House. He and his boss Putin felt it gratifying to assert that the United States had poor market oversight. Evidently Russia has not quite been brought up to date on the full translation or meaning of such terms as oversight, transparency, or even democracy, but accuse, they did. It read well back in Moscow.

Some humorous non-decisions by the 20 leaders were worth noting. The leaders indicated they would look into executive pay scales. That should be supremely comforting to most Russians and Chinese, whose leaders and friends are pilfering the treasuries of every business they can possibly find that produces any cash. How can an international body possibly dream of overseeing or regulating corporate entities? More likely, this is an arrow, that while directed at the U.S. banking institutions involved in much of the mortgage crisis, it will land in the middle of the Atlantic somewhere just North of Bermuda.

Another by-product of this historic conference was a call for the creation of new financial market watchdogs wonderfully identified as a “college of supervisors.” This group of experts would monitor major financial institutions dealing with transactions that crisscross member country borders. Actually, this was more than a call, it was a “pledge.” Pledges have more conviction. Such earnest commitment to oversight over financial markets would bring warmth to taxpayers from New York to Vancouver, as they settle in for the winter. The most heartening element in the pledge was its inclusion of hedge funds and derivatives under the oversight umbrella. This must read well in Caracas, but surely no one in North America is taking this seriously.

Granted, the $60 trillion in credit default swaps market is an aggregate of transactions floating in the ether of the electronic digital age, but we have not reached an age where civilization has advanced enough for international bodies to take oversight positions on the financial corporate firmament. National sovereignty will not allow it. Weak countries succumb to demands of organizations like the IMF. It is foolish to expect that any one of the 20 countries representing 90% of the world’s GDP would deign capitulating to such supervision or surveillance, particularly the United States.

It is understandable that a “plan” might be difficult to fashion in so short a time, however this financial calamity did not develop yesterday, and with the thousands of insiders and experts floating through the hallways and byways of 20 governments, it might not have been too much to expect the emergence of some creative ideas or concepts.

Calls for “financial stimulus” efforts are not a “plan,” and are definitely not creative. Oversight on the existing structures, even at a national parochial level, simply acknowledge that there is a problem, but will prevent nothing, and safeguard nothing of value since the organizations under scrutiny will be in no position to execute any abusive or dangerous transactions.

The world of tomorrow, which is no more than a year away, will have new structures, new frameworks of varying complexities, new inventive manners of exploitation that will create new financial bubbles around products not yet conceived. During the Dutch Golden Age, the spectacular, and scarce Semper Augustus tulip, with its blood-red flares and flakes streaking a white background, became a symbol of the 1637 tulip bubble. A single bulb of the rarity supposedly reached a value equal to a mansion in Holland. Delusions, illusions and herds create momentum. There always exists a human being or two, being human, taking advantage of that momentum. International bodies will never have the foresight to effectively provide oversight on behalf of their constituents. We now look forward to the musings of the next G20 meeting.

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Monday, November 10, 2008


General Motors tells us it has plans for the long term. Long term plans are dreams. Unfortunately, GM’s horizon reality isn’t long enough for those plans and dreams to be realized. Pelosi and the Democratic leaders are urging Bush to provide more aid to the beleaguered auto industry. Congress bungled the specifics on the $700 billion bailout, and now it wants to extend the bungling to other areas of the economy, beyond the financial institutions. Panic is a dangerous condition, however, while it appears everyone is being conciliatory, or afraid to lose his or her job, there is an opportunity to take radical action. There exists a brief window of time when reconstruction can be enforced on a broken U.S. auto industry.

Here’s the fix:

Dear General Motors, Chrysler, Ford (yes, you too Ford, you’re in trouble, but just won’t admit it), and all suppliers and sub-contractors.

c.c.: UAW (pay attention because this is really going to affect you)

We, the ever hopeful Taxpayers, agree to come to your rescue, but feel it is time for some overhaul. We’ve been embarrassed for long enough. Over the past couple of decades most of your vehicles have looked like they were designed by committees ensconced in the shoebox concept of beauty. We don’t need to address all the other awkwardness, such as your failure to deliver reliability, while Toyota and Honda humbled even the German manufacturers. We are familiar with the rationalizations, and to some degree empathize with your being trapped in untenable labor relationships that have over the years stalled efficiencies. It is time to clear some decks in the management ranks as well as in the labor contract details. The now presents a perfect opportunity.

Please note that neither Congress nor Mr. Paulson will be negotiating the details on deals with each of your companies. Congress has demonstrated it cannot be trusted, and as for Mr. Paulson, we have been less than impressed with his ability to step back and act with objectivity, diligence or any sign of creativity and wisdom. How he became a billionaire is truly the extreme of the American dream waylaid on the road to fulfillment. Reaching dizzying heights of power and wealth with so little …, but enough of that for now. Here is the plan:

Each company will receive the same deal. All you have to do is throw up the white flag indicating that you can’t go it alone, and it becomes activated. There is no negotiation on the broad strokes. A bill will be passed, ensuring that all parties, including all employees, all executives, all Directors, and all related Unions, particularly the UAW, as well as all related contractors, sub-contractors and suppliers, abide by the terms since this will affect all of them very directly. We plan to end the excesses in the executive offices, and in the labor unions that have withered your companies.

We will take preferred share positions at the current market value for funds provided as and when the investments are made. Given the severity of the situation, the preferred shares will carry a dividend premium, we will settle for a total of 10%, and their buyback will also carry a 10% premium.

Considering the current share values, we will end up holding majority positions, which will sit in abeyance awaiting their return to your treasuries. We do not demand board representation, nor do we wish to dictate the agenda.

Since we are primarily interested in a long term success of your companies, we will not demand attached warrants on the preferreds, as other investors might be wont to do. We also recognize that adding to the overhang on the market would not be fruitful. We are not interested in promulgating evidence of greed here, just positive intentions for a significant industry we care to stimulate. Forget about going the loan guarantee route. We already have to borrow these funds, so enough borrowing already. We are anxious to get on with taking drastic action for the revival of your companies. We look forward to launching them into the twenty first century without too much surprise.

All employees, including management and officers, will take a full 25% cut in salary other than those recently hired for “non-core” jobs at $14 per hour or less. The salary cap will be $250,000 per annum, with no bonuses whatsoever. We are dealing with survival here, so whining that your personal overhead is higher than $250,000 will fall on deaf ears, and how can we say this with sensitivity, …you screwed up. Blame your egos for the extravagant lifestyles, and then move to a more moderate neighborhood. You’ll enjoy some peace of mind.

All employee agreements, unionized or executive, will be revisited. We realize that you compete in an international economy, and face competition that does not have the encumbrance of your labor history or your retired labor force. We will be reconsidering and renegotiating health care coverage as well as all 401(k) contribution programs, to bring them into line with the rest of work forces in America. While on the topic, we’re not getting with the program to shift the worker and retiree health care program responsibility from GM to the union, for example. That one smells, and workers will not get the better end of any such deal.

We will revisit the legislation that has governed labor relations, and become intrusive in the function of a prosperous enterprise. Unions abused their privileges, and executives abused their power, taking over-reaching compensation beyond common sense. Both exploited the system to selfish gain, almost killing the businesses. Executives went along with UAW coercion as long as their own incomes were skyrocketing. We are still shaking our heads at the 64% pay raise, Mr. Wagoner gave himself ’06-’07, while GM was hemorrhaging cash and it’s stock was crashing. While he was busy with his own bank account, GM was preoccupied with unproductive plant cutbacks to 80% instead of closing them altogether. The onerous position that carmakers have been subjected to by unions are no longer defendable or rational. Unions have also been taking care of their own senior executives, but their members are staring into the abyss. This will be changed. Oh, yes, and so will the “Jobs Bank” program or other arrangements such as paying “idled” workers almost all their take home pay plus benefits. You can expect us to rescind guarantees such as GM provided to keep all U.AW., U.S. factories operating.

The Board of Directors will experience an immediate restructuring so that we may implement much needed overhaul, and independence to the oversight process.

Accept this in a positive light which will stand you in good stead with the North American car buying public. Seeing some tightening of belts and constraint by unions and executives alike might endear your mobile armada to your primary market. We will not tell you how to run your business but folks, really, could you shrink the number of models? Too many of them look identical. GM, could we talk about your stake in GMAC? You’re supposed to be making cars, not financing homes. We’ll talk.

We would really like all three companies to demonstrate at least some of the vision their competitors have been actuating. We’re not talking about the kind of vision you used when you predicted a strong second half in 2008, but how about some vision on the future of the industry. This is just a “wishful” kind of thing on our parts, but we would be grateful if you could give room to the “vision” thing.

Few familiar with the auto industry would disagree that over-zealous unions have had obvious smothering impact on U.S. companies constraining their dexterity in fast changing markets. Without denigrating their significance to a labor force, we will do our utmost to ensure that common sense prevails in the relationship between unions and the auto industry. We are aware that labor isn’t the overwhelming cost factor, rendering you unprofitable, however, we are very familiar with what almost a century of accumulated bureaucratic strangulation from unions and government have done to your companies. We wish to remove all possible rationalizations and excuses on your road to recovery, and yearn to see it paved with ethical behavior.

Once your companies return to profitability, and our share positions are repurchased, your salaries will be revisited by new, and hopefully independent boards of directors.

We wish you much wisdom, foresight and plenty of good fortune. We also want our money back.

The Taxpayers.

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Wednesday, November 5, 2008


The American electorate has placed a bet. It is betting: That Obama will burnish the image of America in the eyes of the world, that he will pull America out of its economic crisis, and that the President Elect will lead the nation into a new era of change. Peering through the Obama enigma, there is a very real ray of light that may bring energy to the turn-around, however temporarily. A majority of taxpayers await with hope the revelation of the “change” definition in the Obama encyclopedia, although fear continues to permeate the country, and bad news persists in dominating the news.

The world witnessed an international reaction to the U.S. election of its first African American President. Most Americans, including many who voted for McCain, could not help but be touched by the event, and most were inevitably moved by the possibility that “hope” might find traction, though much of that hope rose from weariness and disappointment rooted in a failed 43rd Presidency.

Populations in Asia, Europe, Africa and even in the Middle East, genuinely applauded the event, and demonstrated a new support for possibilities available in the American society, polity and economy. Most countries around the world envy such freedoms, and many were stirred with a refreshed affirmation of America’s glassless ceiling. Obviously many of those countries also look to America as a source of capital coming from purchase of their products and resources. A few also procure loans for America’s expenditures.

The “goodwill” generated from the Obama election presents America with a window of time during which it will be able to further extend its borrowing practice from countries holding significant dollar reserves. America remains the only safe haven for cash. The Obama Presidency will find that extending the portent of “hope” beyond the borders of the United States could provide the Treasury an additional trillion dollars in borrowed funds with which to structure a turn-around for the world’s largest economy. The care, diligence, boldness and intelligence with which Obama allocates the country’s newfound capital will dictate the length and depth of the current recession. The window provided by this goodwill may be opened only temporarily. We will watch as he attempts to deliver on his promises, but the real “hope” is that he will use this window to dramatically energize the economic engine much of the world depends on.

.... Read more!


As millions of American voters stood in line for a chance to cast their votes today, their Federal government crossed a historic threshold on their collective behalf. The Federal debt quietly stepped over the 10 trillion dollar mark. The number is staggering, and one that neither candidate receiving votes today, had the courage to face or address amidst the flow of promises. During the campaign, neither candidate could confront the unfunded obligations forming the entitlement crisis.

Voters will cast votes today, in part reacting to what they believe is a disastrous administration, and in part hopeful that a new face in the White House will present them with a renewed confidence for tomorrow and the future.

Through the closing weeks of the Presidential campaign, loss of consumer confidence continued apace further suppressing home prices, and sinking car sales 31 percent in October compared to last year. These are significant events, and significant trends.

The next President will need to spend less time redistributing wealth, than steering the Nation away from self-indulgent borrowing policies, either personal or national. While the new President will have no choice but to lift spirits and morale of a stressed nation, his most daunting task will be to finally confront both the rapidly growing deficit, and the out of control debt. Even in the short time between his becoming President Elect, and his swearing-in, both the deficit and the debt will increase by a couple of hundred million dollars as the Treasury further taps foreign lenders to keep the nation afloat.

The degree to which the new President Elect takes the high road and makes hard decisions, will be inversely proportional to any blame he places on the previous administration for the depth of the nation’s economic disarray. One hopes the next President moves forward positively and without fear, doing the right thing right. The wall of massive debt requires it.

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Tuesday, October 28, 2008


We are about to witness more plundering of the American taxpayer. The 700 billion dollar bailout so quickly rushed through Congress under the threat of complete collapse of the U.S. economy, was slipped by American taxpayers who in majority were against the bailout. Democrats jumped in first, Republicans were slower to rush in. Both parties acted while drenched in fear and anxiety. The taxpayers were right. Obama and McCain were not, nor did they do the right thing right.

Taxpayers were threatened that with credit market paralysis, their jobs would be at risk, they would not be able to keep their businesses afloat, and they would not get loans to finance their lives. Without the passing of the Emergency Economic Stabilization Act, taxpayers would find their whole way of life turned upside down, and the specter of finding solace on a park bench would be just around the corner.

Neither Paulson, nor Congress, provided any real details on some of the critical concerns surrounding the bailout. Even expert analysts didn’t raise objection as to how some of the potentially explosive finer points might in practical terms find implementation. Taxpayers assumed that in such a world shattering moment, on such a historically critical decision, Congress would finally be diligent. Congress, filled with resident and elected lawyers, would understand the fine-print on the legislation. Taxpayers accepted or assumed that someone, somewhere, hopefully someone with talent, would do the right thing, and make sure that the legislation would in turn be subject to industrious and careful execution. Wrong on all counts.

The coming weeks will deliver further anxiety from wildly fluctuating markets, and distressing news that the bailout will finance hundreds of millions of dollars worth of salaries and bonuses. These millions will be paid to incompetent individuals who mismanaged their institutions into becoming beggars standing at the bailout wicket crying for taxpayer handouts. We can expect agreements between executives and their employers to surface, that Congress did not consider during the passing of the legislation. Don't think for a moment that those agreements won't stand. Paulson and his friends at the Treasury and the Fed will not be able to withhold money from those institutions. And that’s just the beginning of the abuse. Lawyers will rush to the trough, and taxpayers will stand-by, helpless, as large amounts of their added debt burden continues to be abused by many responsible for creating this disaster in the first place.

It will also surprise taxpayers that the lending institutions that will receive handouts, will be under no obligation to “lend.” Oops, sorry. Congress also failed on that one. Senators and House Members who rushed this rescue package through, will escape unscathed and untarnished, and one of them will even be rewarded with the Presidency next week. While government cannot be expected to solve all problems that face a nation, it is expected to act with prescience and prudence. Why Congress isn’t, is the real question. Is the mainstream media watching?

Oh, and hiding behind the skirts of PricewaterhouseCoopers and Ernst & Young to “help” in the administration of the bailout should not be accepted as a veil shrouding incompetence, and sanctioning abuse of power.

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Monday, October 27, 2008


Like it or not, taxation redistributes wealth. Somewhat. The term socialism has a malodorous aroma, but so too does over-concentration of wealth. The current wealth imbalance between the top 1% of the population and the rest of society creates tangible resentment. It is therefore not surprising that statements from Obama that he will “spread the wealth,” appear to get favorable approval from a majority, if his support polls are to be believed. What is surprising is the lack of analysis in the fourth estate, as to what that really means, and what methodology might deliver on such a promise. Greater taxation on the wealthy few buys votes, but will not make any difference to the vast majority of the population. On the other hand, additional taxes on businesses will.

Those who have depended on others for income, particularly those working for organizations dependent on governments or foundations for income, have difficulty empathizing with entrepreneurs whose lives are engrossed in building successful businesses. There is also absolutely no chance that they will feel any affinity or sympathy for those at the top of financial food chain. Being responsible for covering and issuing a payroll presents its own unique lessons.

When abuse of benefits and power in the corporate executive office seems rampant, the public perceptions become further skewed toward supporting higher taxes for the rich trough progressive taxation. It can be argued that the rich can and should bear a greater percentage of the burden, although the impact on the nation’s majority would be minimal. The picture changes when the increase in taxes spreads to businesses, and impacts the day-to-day reality for business owners and employees.

Most businesses in America are small and medium companies, employing one to a hundred or so employees. They are the economic engines that keep the economy thriving. Imposing further burden on businesses, and penalizing them for government excesses, mismanagement and debt, would deepen the current recession. It would also stretch the process of recovery into a multi-year reminder that accumulating debt and possessions is no way to manage personal affairs or run a government. Deal with abuse at the top of the corporate ladder through other means, not taxes.

“Redistribution of wealth” should be re-defined to intend and encompass the distribution of knowledge through education. Allowing the educational system to disintegrate and inadvertently limiting its access, as we have witnessed through the past generation, restrains the majority from achieving educational objectives, and smothers most personal and financial aspirations. Ensuring that all who want to be educated actually receive the education to the full extent of their capabilities will enrich the country. Education should take precedence over other government programs currently siphoning hundreds of billions but not serving to ensure a healthy future for the country.

As for the next administration cutting anyone’s taxes, the staggering debt says that one won’t fly. It won’t fly for McCain or for Obama. Taxpayers can expect more taxation, and they can expect little, if any, reduction in government spending from the next President.

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Tuesday, October 21, 2008


Capitalism is the heart of the American economic engine, and really the core the whole of American society, but capitalism regularly gets pummeled as a provenance of the nation’s moral disintegration. There are, of course, ample specimens selfishly pursuing purposes to the exclusion of other more lofty ideals, however, such are not the majority of individuals and businesses, which provide the sweat that builds a country. The elements in a society that blame the profit motive are those who leach from its successes directly or indirectly, either out of incapacity, laziness or from jealousy. Going after abusers of responsibility, including CEOs whose incomes vastly overreach their real value, or elected politicians who take bribes such as those who took cash from Fannie Mae, is necessary, just like jail terms are necessary for any criminal behavior in a society that seeks some level of security.

Capitalism and the business culture of all societies, it seems, are easy targets for the venting of frustrations that surface during financial crises, such as the current unstable state of affairs. It is abundantly obvious the general media has done its best to fuel these fires, while leaving the legislators to continue along their paths, unscathed, unrepentant, and unpunished. Defaming the business environment and disparaging corporate America may serve the campaign trail to the White House with moral bait for votes. It won’t serve the future well-being of American society, and its systems if such sentiments find their way through the legislative process stifling trade and asphyxiating the entrepreneurial spirit.

At stake is the freedom that was promised upon the founding of America. With all of its strength, America remains a fragile social experiment that requires, and will always require, care, attention and nurturing. While the current administration curtailed some of the assumed freedoms, the nation should not allow the political pendulum to swing so far in the other direction that a greater degradation of freedoms is instituted in plain sight while attention is being diverted to the “straw man” of corruption, the businessman or businesswoman, being pilloried.

Laws provide a country with ample guidelines that pertain to accepted behavior. Today we find ourselves with countries around the world rushing to seek new convoluted systems of “oversight and regulation” in efforts to reign-in capitalism. Some are even proposing the creation of international regulations and ruling bodies. Such efforts should instead focus on setting legal parameters establishing acceptable rules of conduct within America. Doing so, and setting severe punitive retribution for breaking the laws, as well as providing the courts with real teeth will minimize future abuse and corruption. Specific laws emanating from this economic debacle will retain the freedom required for a flourishing capitalistic system while protecting individual rights to pursue personal and corporate financial objectives. Global problem solving is impossible if your own house is not in order.

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Wednesday, October 15, 2008


American taxpayers are watching their leadership take a stake in the financial engines of their economy, supposedly on their behalf and for their own good. The State is taking equity stakes in banks, healthy banks, solvent banks in need of cash, as well as not so solvent ones. And, as if it matters, Paulson and company are earnestly pointing out that participating companies will have to accept executive compensation limits. Taxpayers have no choice and the compensation limits won’t make the pill go down any more easily. Taxpayers, nevertheless, have front row seats to the biggest show on Earth, and to the historic changes that are shaking the American style of capitalism to its roots.

For taxpayers to be provided the kind of government that will be effective in its supervision and oversight of corporate investments, or general corporate behavior, as well as continued tendencies toward free trade that have built the country and its economy, they will need to demand change in the electoral process. Honest dissection of root problems that enabled the economic turmoil currently being endured by most taxpayers, should lead to an elimination of the organizational, corporate, and special interest funding of elected officials.

How, for example, could Congress, the house Financial Services Committee and the Senate Banking Committee, conduct themselves in a manner befitting the public’s interest when all of them received millions from the financial services industry, including Fannie Mae and Freddie Mac? Independence of thought and deed becomes difficult if not impossible when powerful, almost unlimited forces oil the machine that keeps you elected.

Labor unions, political action committees, corporations, associations and other such bodies, should be prevented from providing dollar contributions, or gifts, to political parties, their representatives running for office or those already in office. Along with changes in corporate governance, there is a need for change in electoral governance.

If this is a government By The People and FOR The People, then the people should demand that the financial clout of special interests be taken out of the equation. It is NOT time to look to Europe for a better form of governance of very much, particularly the economy, as some would suggest. Europe was only remained an envious bystander to America’s technological and entrepreneurial advances achieved over the past thirty years. Don’t turn the clock back a century. Allow as much freedom for innovation as possible, but give teeth to oversight. Get meddling interests out of the electoral process, and allow creativity of get the country out of its current difficulties. Legislators will resist such changes. Don’t let them.

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