The Bush administration is looking at another $800 billion dollar income transfer scheme to give rich investors via government purchases of Citigroup Stock, as well the buying of bad mortgage debt from this and other banks. This is called extreme socialism for the affluent, the base of the Republican Party, as well as of many Democrats.
Two days ago, I received an unsolicited preapproved loan from Wells Fargo, which I have chosen not to accept. It makes me wonder if the credit crisis is real, and the answer is that it is not. Paulson, Bush and Obama are fighting an illusion with borrowed money that may send this country into bankruptcy.
Buying stock in Citigroup is intended to push up its stock price, which helps only rich investors. The same holds true when the government takes on the bad mortgage debt of banks.
However, the obvious thing to do is to purchase the bad mortgages, and then provide favorable terms to home buyers, but that's not what's going on here, unless Paulson and Bush are incredibly stupid. They are robbing everybody's future social security, medicare and medicade payments. When those debts come due, Republicans and Democrats will turn around and tell us the government doesn't have the money, although they can borrow trillions of dollars and bail out the rich. They'll never have a few extra billion for hard working citizens, unless it will avert violent revolution.
What Paulson and Bush are doing should demonstrate how much the Republican Party and its base of "the have and the have mores" are freeloading parasites on the rest of us.
As for the real problem plaguing us, so much money and wealth have been transfered from working people to the rich over the last thirty years, we can't afford to buy things even if the money is available. Espeically now that the equity in our homes is being destroyed. We can't stupidly borrow against our homes anymore, or if we're barely making payments on our bills now.
I didn't borrow against my house, and maybe that's why Wells Fargo is so desperate to give me a loan at zero percent interst for the next year, and less than five percent afterwards for the life of the loan.
The real problem is that wages and salaries have dropped during the Republican reign of lies, fraud and deceit (aided by the Democrats and their leaders Pelosi and Reid), and we can't afford to borrow more money in the aggregate to keep the economy afloat.
So it doesn't matter if there's money to borrow or not, because we are unable to do so in sufficient amounts to keep the economy growing. The only way to do that is to establish an economic climate, much like the New Deal, in which wages and salaries grow in real terms.
Otherwise, Paulson and Bush are just throwing good money after bad; and perhaps that's their intent; rob from the working folks and give to the rich.
Tuesday, November 25, 2008
Sunday, November 23, 2008
Obama Economically Foolish
President elect Barack Obama is not going to increase taxes on the rich, and he is being pressured by republicans to reduce capital gains and corporate taxes. He has no option: He must increase all of those taxes because doing so will increase jobs. And right now in the middle of a recession is the time to do it.
Obama seems to be heading economically center-right, with a dash of green economics thrown in as a concession to the progressives of the Democratic Party, such as Henry Waxman. But this economy needs to head hard left before it can move back to the right.
Decreasing taxes on the rich will only curtail job growth. Bush tried to do this; and from June 2001 to now less than 3 million private sector jobs were created, an all time low. If Obama wants to continue a policy of low job growth and declining family income, reducing the taxes on the rich is the way to go.
See the article below on why I voted for Obama and you will discover why tax cuts for the rich destroy jobs.
Obama seems to be heading economically center-right, with a dash of green economics thrown in as a concession to the progressives of the Democratic Party, such as Henry Waxman. But this economy needs to head hard left before it can move back to the right.
Decreasing taxes on the rich will only curtail job growth. Bush tried to do this; and from June 2001 to now less than 3 million private sector jobs were created, an all time low. If Obama wants to continue a policy of low job growth and declining family income, reducing the taxes on the rich is the way to go.
See the article below on why I voted for Obama and you will discover why tax cuts for the rich destroy jobs.
Wednesday, November 19, 2008
The New Economic Forecaster
I am forming an economic forecasting company. I haven't decided on a name yet. I seem to be a lot more accurate making economic predictions than the people who are earning lots of money doing it already, so I am taking the plunge.
Interest Rates and the Federal Reserve
The Federal Reserve is expected to reduce interest rates to historic levels in December, matching a prediction I made twenty-six months.
Two months ago, Fed Chairman Ben Bernanke announced the Fed would not reduce rates anymore. I said hogwash and wrote on these pages that he would slice rates even more, and to no avail. But he has no choice.
Currently, the federal funds rate sits at one percent. The Fed is running out of bullets to combat this recession, which some whackos think the U.S. has not yet gone into. There is a good chance the Fed may reduce the Federal Fund Rate to zero before the spring.
Two months ago, Fed Chairman Ben Bernanke announced the Fed would not reduce rates anymore. I said hogwash and wrote on these pages that he would slice rates even more, and to no avail. But he has no choice.
Currently, the federal funds rate sits at one percent. The Fed is running out of bullets to combat this recession, which some whackos think the U.S. has not yet gone into. There is a good chance the Fed may reduce the Federal Fund Rate to zero before the spring.
Tuesday, November 18, 2008
The Tax Issue: Why I Voted for Obama Over McCain--a draft
I based my vote in the recent presidential election on only one issue: taxes. That's why I voted for Barack Obama and against John McCain.
McCain wanted to continue Bush's tax cuts for the rich and then add another 80+ billion dollars in cuts to it. Obama campaigned saying he wanted to eliminate those tax reductions, and this is exactly what he needs to do if he wants to get us out of this recession.
Unfortunately, a few weeks back Obama said he may not seek to immediately eliminate those tax cuts even though they are proven job killers.
Republicans still cling to the notion that tax cuts for the rich will stimulate job growth, but reality has proven them wrong time and again. Only 2.7 million private sector jobs were created from June 2001 until now, the worst job creation on record for anywhere near that length of time.
Tax reductions for the rich result in the suppression of job growth. And this is particularly clear in the Bush case.
When publicly traded, limited liability corporations experience declining revenues, dividends and share prices, CEO's look for ways to attract investors to purchase their shares and bid up their stock prices. A tax cut for the rich presents an opportunity for CEO's to lure that newly available money to their stocks and away from their rivals since the affluent tend to invest this extra cash rather than buy stuff.
During the financially dreary Bush years, and with the economy still weak from 2001-05, CEO's needed to make their companies more attractive to investors. They did this by pushing up the bottom line: profits. They achieved this by shipping jobs overseas, by laying people off and by cutting wages, salaries and benefits.
That's why the result of the Bush tax cuts was historically anemic job growth and a $2,000+ plus drop in real family income. It's also why the rich got richer. In other words, the Bush tax cuts for the rich redistributed income upward from the middle class.
The Bush tax cuts weakened the demand sector terribly, with the result possibly the worst economic expansion since statistics have been kept (2001-2007) and the worst financial crisis since the Great Depression.
A vote for McCain was a vote for continuing this insanity by redistributing more income toward the upper classes and away from people who actually produce and purchase goods and services: otherwise known as the wealth of nations. Things would have gotten worse under McCain.
On the other hand, Obama was astute enough to declare that he wanted to allow the Bush tax cuts to expire. Whether he recognized those cuts were job destroyers or not is unimportant.
It doesn't take half a brain to figure out that the problem with the U.S. economy isn't the sub-prime mess because that's only a symptom of the real cause: the mal-distribution of income and wealth during the past thirty years.
McCain wanted to continue Bush's tax cuts for the rich and then add another 80+ billion dollars in cuts to it. Obama campaigned saying he wanted to eliminate those tax reductions, and this is exactly what he needs to do if he wants to get us out of this recession.
Unfortunately, a few weeks back Obama said he may not seek to immediately eliminate those tax cuts even though they are proven job killers.
Republicans still cling to the notion that tax cuts for the rich will stimulate job growth, but reality has proven them wrong time and again. Only 2.7 million private sector jobs were created from June 2001 until now, the worst job creation on record for anywhere near that length of time.
Tax reductions for the rich result in the suppression of job growth. And this is particularly clear in the Bush case.
When publicly traded, limited liability corporations experience declining revenues, dividends and share prices, CEO's look for ways to attract investors to purchase their shares and bid up their stock prices. A tax cut for the rich presents an opportunity for CEO's to lure that newly available money to their stocks and away from their rivals since the affluent tend to invest this extra cash rather than buy stuff.
During the financially dreary Bush years, and with the economy still weak from 2001-05, CEO's needed to make their companies more attractive to investors. They did this by pushing up the bottom line: profits. They achieved this by shipping jobs overseas, by laying people off and by cutting wages, salaries and benefits.
That's why the result of the Bush tax cuts was historically anemic job growth and a $2,000+ plus drop in real family income. It's also why the rich got richer. In other words, the Bush tax cuts for the rich redistributed income upward from the middle class.
The Bush tax cuts weakened the demand sector terribly, with the result possibly the worst economic expansion since statistics have been kept (2001-2007) and the worst financial crisis since the Great Depression.
A vote for McCain was a vote for continuing this insanity by redistributing more income toward the upper classes and away from people who actually produce and purchase goods and services: otherwise known as the wealth of nations. Things would have gotten worse under McCain.
On the other hand, Obama was astute enough to declare that he wanted to allow the Bush tax cuts to expire. Whether he recognized those cuts were job destroyers or not is unimportant.
It doesn't take half a brain to figure out that the problem with the U.S. economy isn't the sub-prime mess because that's only a symptom of the real cause: the mal-distribution of income and wealth during the past thirty years.
Tuesday, November 11, 2008
The Economy Will Flirt or Go into Deflation
The U.S. economy should begin flirting with deflation soon, something predictable as far back as 2001 when the economy last brushed up against it. I also predicted its coming over two years ago, based on my studies that became my book, The Rigged Game.
Deflation is an overall decline in prices; a widespread drop in prices reduces profit margins. This condition triggers additional layoffs and other cutbacks than would otherwise be the case in an economy dominated by publicly traded limited liability corporations, jsut like the U.S. economy.
Most CEO’s know little as to how their companies produce goods and services. Let’s face it. It’s difficult for a person to know what’s going on if they’re the CEO of a multi-national corporation manufacturing airplane parts when they just transferred over from Walmart or some other unrelated corporation; and even if they've been with the same company for years and years, they most likely know little of what is going on in their factories and stores; or how their products are produced; and that is precisely why rising profits, dividends and share prices are primarily the sole determinate of the effectiveness of corporate leaders.
When business plummets due to a recession, CEO’s have no option but to reduce costs, because that's all they know how to do; and those cutbacks include employment, wages, salaries, benefits and business-to-business transactions. But then when prices drop on top of that, companies are more likely to experience losses as profit margins on their products narrow or are eliminated. At that point there is no choice; it's cut, cut, cut.
While deflation is good for citizens who have jobs, since it enhances their spending power, it increases the numbers of the unemployed, making the recession worse as more and more citizens are thrown out of work. Deflation can turn a recession into a Great Depression.
One final note: Deflation or even flirting with it signals that the re-distribution of income and wealth from working people to the affluent since Ronald Reagan was president has gone too far, inasmuch as it has choked off the demand for goods and services. That's why the mass of prices are likely to be going down in a deflationary spiral. That condition is precisely what the New Dealers figured out when they took office in 1933. And that's what they sought to reverse. They did it quickly and successfully by re-distributing income back to working people.
Deflation is an overall decline in prices; a widespread drop in prices reduces profit margins. This condition triggers additional layoffs and other cutbacks than would otherwise be the case in an economy dominated by publicly traded limited liability corporations, jsut like the U.S. economy.
Most CEO’s know little as to how their companies produce goods and services. Let’s face it. It’s difficult for a person to know what’s going on if they’re the CEO of a multi-national corporation manufacturing airplane parts when they just transferred over from Walmart or some other unrelated corporation; and even if they've been with the same company for years and years, they most likely know little of what is going on in their factories and stores; or how their products are produced; and that is precisely why rising profits, dividends and share prices are primarily the sole determinate of the effectiveness of corporate leaders.
When business plummets due to a recession, CEO’s have no option but to reduce costs, because that's all they know how to do; and those cutbacks include employment, wages, salaries, benefits and business-to-business transactions. But then when prices drop on top of that, companies are more likely to experience losses as profit margins on their products narrow or are eliminated. At that point there is no choice; it's cut, cut, cut.
While deflation is good for citizens who have jobs, since it enhances their spending power, it increases the numbers of the unemployed, making the recession worse as more and more citizens are thrown out of work. Deflation can turn a recession into a Great Depression.
One final note: Deflation or even flirting with it signals that the re-distribution of income and wealth from working people to the affluent since Ronald Reagan was president has gone too far, inasmuch as it has choked off the demand for goods and services. That's why the mass of prices are likely to be going down in a deflationary spiral. That condition is precisely what the New Dealers figured out when they took office in 1933. And that's what they sought to reverse. They did it quickly and successfully by re-distributing income back to working people.
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