Brains Not Included

Cracked Up, Whacked Out and Completely Out of Control

Keynesian Kooks – Why Keynesian Theory Doesn’t Work

KeynesianWhose Theory is This?

Keynesian Theory was developed by John Maynard Keynes, a man who would eventually have the royal title of Duke bestowed upon him in England.  Born in 1883, he came to prominence as an economist and philosopher around the time of The Great Depression. 

 His theories were adopted by the government in England in the late 1930’s and were eventually adopted by the Americans towards the end of World War II.  Essentially he believed that government could and should control capital in order to abate the swings in unemployment that can be typical in capitalist economic systems.

His theory basically states that high rates of savings by the population should be discouraged because those rates of savings hamper growth.  He also believed that supply drove demand not the other way around.

One of his largest critics was Milton Friedman who believed there were some basic flaws in Keynes theory.  One of the things that bothered Friedman the most was that much of Keynes economic themes were based on his feelings or his philosophy and had very little to do with actual mathimatical formulaic proof.

Friedman actually disproved Keynes theory that supply created demand and proved mathematically the opposite was in fact true.

What is the Keynesian Theory of Economics?

Simply put, Keynesian theory states that government can place capital more efficiently than the private sector.  When government controls capital and directs its placement through taxation and heavy regulation or through deficit spending, then swings in economic cycles are flattened and full employment is brought into equilibrium for long periods of time.

It further hypothesizes that high savings rates are unsafe and destabilize the economy and that only low savings rates and high rates of spending by the population can sustain growth and fuel stable economic cycles. 

Therefore, when the public is saving in large numbers, the government must encourage spending through regulation and if government cannot encourage spending then it should tax heavily in order to put the saved money to work in the economy.

Why Keynesian Theory is Still a Theory

Keynesian Theory is still a theory because it’s never been proven to work.  While America embraced Keynesian Theory in the lat 70’s under Nixon and Carter, the British were quickly squeezing the vestiges of this failed theory out of their government.

Theories remain theories until they are proven at which time they receive the title of Rule or Law.  We don’t call it a law because the theory’s concepts have failed time and again.  If it worked we would call it a Keynesian’s Law or the Keynesian Rule.

Milton FriedmanCommon Sense Shows Us the Way

Think about the two basic tenants of Keynesian Theory.  1.)  That saving is bad and; 2. )  That capital in the hands of a few (the government) is better than the profit motive of capital in the hands of many.

Instinctively we know that having savings is good.  ‘Save for a rainy day’… ‘Neither a beggar or a borrower be’…  ‘Waste not, want not’…  All of these wise old sayings are telling us something.  SAVE FOR A RAINY DAY!  Saving is a good thing.

Next lets take a look at human nature.  How good would a person have to be if you put millions, billions or even trillions of dollars in their hands and said, this doesn’t belong to you but you have complete control over it? 

Now the rules say this person can’t use their emotions in deciding what to do with the money and they can’t let their personal opinions play on their decisions, but…  How does this person or these few people in control that kind of money keep their own human nature in check? 

They don’t, just look at the Marxist utopia that should have bloomed from the Bolshevik revolution.  Instead of Utopia we got the USSR.  Socialism and Communism are the end result of basic Keynesian Theory.

Friedman Got It Right

Milton Friedman used mathematics to prove his economic theories and to disprove Keynesian Theory.  While Keynesian approached economics from the viewpoint of philosophy first and mathematics second, Friedman comes at from the other side.

While the Keynesian experiment was all the rage in Europe and was being put into practice in the U.S.A., Friedman was being decried by his piers for his opposition to this ‘enlightened’ economic theory. 

But, armed with the mathematical facts and penchant for philosophy himself, Friedman was able to write one of the greatest books of all times.  Capitalism and Freedom is a must read for anyone that wants to understand why Capitalism works and how it creates freedom.

We can try Keynes ideas one more time, but doesn’t make more since to turn to the logical rules that are proven and documented for us by Friedman?  Capitalism may give us some ups and downs in our economy, but it is still the worlds last best chance for strong free societies where people have an opportunity to live free from tyranny and where people are free to live their lives as they see fit!

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Cheney Report to Clear Bush

biden-reportImagine the headline: Cheney: Report to Clear Bush.  ABC, NBC and CBS reporters would blow their stacks.  AP and Reuters would pontificate about the how the report was biased and couldn’t be trusted.  Members of congress would demand a special investigator!

Now enter this headline:  Biden: Report to Clear Obama.  ABC, NBC and CBS reporters are reporting that the report is factual and a ‘relief’ to the Obama campaign.  AP reporters are writing articles that Obama won’t have to cut his Hawaiian vacation short because there was no wrong doing by he or his staff.  Why the difference?

The difference is because the supposedly unbiased press is not so unbiased.  Unbiased reporting would mean simply reporting the fact that Biden had conducted the internal report.  Then they would go on to explain that the report is biased being as it was produced by Obama’s team and then they would point out that a biased report of this nature means nothing.

My point here is not to accuse or besmearch Obama or his team in any way.  I don’t know whether he was part of the pay to play scheme of Blago up in the mean streets of politics in Chicago or not.  Wrong doing or not is not the point here.

The point I’m making is about the supposed unbiased media.  They are NOT unbiased at all.  While I think that Rush is way, way to far rigth of center and at times Sean Hannity makes Rush look like a Lib, at least with these commentators, you know what you are getting …COMMENTARY!

With the talking heads at the major media outlets we are getting commentary disguised as unbiased news.  No wonder political corruption has proliferated for so long in Chicago.  If you are of the proper political persuasion, you get a pass from the ‘unbiased’ media….

By The Way:  The facts are that the report to clear Obama and his staff …you know the report that is being reported on… Obama’s staff hasn’t even released the report yet because they’ve been asked not to by the FBI.  So all the reporters writing articles about how the investigation conducted by Obama’s staff clears Obama and his staff haven’t even seen the reporters yet!  Madness!

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Me and Dennis Miller!

dennis-millerSo when I’m wrong I admit it.  My buddies were right.  You know the ones, the ‘angry’ guys that I just couldn’t understand!  Yes, those guys, the ones with no brains and I can’t beat them up verbally.  Now I think those guys could beat me up with half their brains tied behind their backs.

I was the one on the band wagon first!  I can make that claim and back it up!  I bought the book!  🙂  I saw our President Elect back when he was a Senator speaking from the same steps Lincoln spoke from in Gettysburg. 

It was a moving and eloquent speech that got me thinking  …hmmm….. could I vote Democrat?

Then I read the book Audacity of Hope, and the answer was an emphatic YES!  I could vote for a Dem.  But then the election started.  Barak moved way left, even left of Hillary, then he swung right again.  He was a swinging sea-saw of words and ideas.  I lost who the man was.

Then the right started screaming and the campaign was in full out, tear down the walls, scorched earth, America be Damned mode!  I have to admit, I rail against the cacophony from the political extremes on both sides but I got caught up in them anyway.

Now it looks like Barak is the Barak of Audacity of Hope.  He may be the man that I originally said I would vote for and I’m now sorry I didn’t.  I apologize.

I am in the Dennis Miller camp now.  I support the President Elect fully and I need him to be the kind of President that makes me want to vote for him and nobody else for a second term!  I pray for him and our nation.

As for his recent picks for his cabinet, I am becoming increasingly happy.  His choice of Hillary was a very astute political move.  She is no dove that is for sure.  And, with this pick he has removed one of his most powerful left leaning rivals from the Senate.  Pretty smart move if you ask me.

His softening stance on when and how to pull out of Iraq and on when to or when NOT to raise taxes is also encouraging.  Next election I’ll go with my initial gut reaction on who to vote for and then maybe I won’t have to eat so much crow!  LOL

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No More Blank Checks!

bush-obamaIn about 60 days from now our new president will be sworn in.  He will have a challenge like none seen since Reagan entered the Whitehouse after defeating Jimmy Carter.

Don’t believe the pundits, this is NOT the worst condition our economy has been in since the great depression.  However, it is the worst economic environment we’ve seen since those awful Carter years.

The challenges facing our new president are daunting and they are not being made any better by the bungling mismanagement of the crisis by the current Secretary of the Treasury.  His most recent comment that the rest of the bail out money would not be used to purchase failing loans and the TARP should be expanded to cover ‘other’ industry is more evidence that the idiots that got us into this mess have no clue about how to get us out!

Now we’re talking about bailing out the Auto industry, and bailing out certain cities around the US and maybe even California.  Here’s an idea, let’s let the tired old industries of the past fail and let mismanaged cities layoff some employees that they’ve hired in their socialist style ‘make work’ programs.  Let’s set conditions for the way tax payer money is used in these bailouts.

No more blank checks!  I was appalled to learn that the initial funding to banks of the bailout money is being used to fund the acquisition of other smaller institutions, thereby creating greater market share for some of these institutions.  It’s NOT being used to lend and get the credit markets moving again.

Other banks are hording the cash!  As it turns out, there were no specific guidelines for ‘use’ of the funds.  The only guidelines that were set were rulels limiting executive pay.  That’s right, punish the evil rich!  Those dirty bastards!  Right? 

Wrong!  Political bias and hatred is now in the way of doing what’s right for the people.  McCain’s mantra, Country First, should not have had to be a campaign slogan.  It should be the way ALL of our politicians pursue public service.

The problem is that it’s not the way they pursue public service.  For instance, Unions have tons of cash to contribute to campaigns.  So, in an effort to garner their support and money some are proposing that an Auto Czar be appointed.  What?  That’s right, an Auto Czar to oversee the ‘direction’ of the auto industry in our country.

Now do you think that the tax dollars, mine and your hard earned money, taken from us by the governement and given to auto companies will be used to force these companies to come out with more advanced and efficient cars? 

The answer is probably not.  More advanced technology like Hydrogen Fuel Cells and electric cars would mean a need for more advanced factories.  More advanced factories means a need for highly skilled labor and greater automation that would leave unskilled workers on the sideline.  Do you think the Unions would stand by and let that happen?  Probably not.

So what is the answer?  I’m not sure, but I know this one thing …. A blank check is not the way to go!

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Why Are Obama Supporters So Angry

It’s 4AM and it happened again.  I just can’t sleep because of something that happened with a long-time, good friend. 

In responding to an email my wife sent out, this friend of mine who is an Obama supporter seems to have taken offence to something on the about page of this web site.  In one portion of this site I talk about an advantage I have over my buddies because their illiteracy.

Now here’s the thing, I’m probably the most illiterate of the bunch, but as I explained it I like to poke fun.  Besides, this is Brains Not Included and that includes mine!  LOL

Now I was about to brush it off when another buddy of mine made a comment about the site.  He toasted the holiday with me and said he had read the site.  He asked if the comment about illiteracy was about him, he chuckled and said it was appropriate and then complemented me on the site.

I think there is a deeper problem here than just who supports whom.  Here we have two people, both friends of a very long time.  One takes offence while the other laughs and ‘get’s it’ and moves on with a chuckle.

It seems to me that a large majority of the people who support Obama do so with a lot of emotion.  Notice, I did not say ‘out’ of emotion but with a lot of emotion.  There is a problem though, a lot of this emotion seems to be anger.

For sure their is excitement and there is hope, but there is also a great outpouring of anger.  The Obama campaign has been very good at tapping into the anger in America and using that to maintain momentum.  But it’s not the candidates fault.

I see a greater force causeing and fomenting the anger in the electorate.  I am calling this force a war.  It is a War of Ideas and it is being fought by two powerful media outlets.  On one side you have the traditional news media and on the other you have the ‘new’ media.

The new media has grown in size and influence while the traditional media has stagnated.  The traditional media is fighting back and they are using the same tool that the new media uses ….. politics! 

Recent surveys taken by the news organizations themselves show that from 68-73% of all reporting in traditional media outlets about Obama were positive.  These same surveys show round 78% of all reports about McCain were negative. 

These surveys were conducted by the Traditional Media about themselves.  Essentially proving to themselves their own bias.  In a recent interview, when asked about Senator Barak Obama, Tom Brokaw lamented that even he ‘didn’t know much about the man’.  He said he didn’t know his core values or the books he read that influenced his political thinking and these comments were made while acknowledging that his own media outlet had not done enough to vet the candidate.

It is understandable why the electorate is so upset, however what is not understandable is how we have allowed ourselves to be swayed by the negativity and bias being spewed by both sides of the media outlets.  As Americans it is time for us to take our country back, not with the force of government but with the force of our wallets.

The manipulation is to much.  When friends can be so easily offended and when a civil discussion turns into complete and total disrespect of others views just because they chose the opposing candidate we are all in trouble.  And if we continue down this ‘angry’ path, history has shown that there is nothing good at the end.

These are just my observations.  If I’m wrong, and I hope I am, then please reach out to me and show me the brighter side.

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It’s Not Worth It!

I sit here and reflect on my weekend and I wonder how a fun filled evening could end so explosively.  Our political system has pushed good people to the edge.  As I’ve said in a previous post, when our politicians can get a grandson to besmirch his grandfather in order to make his political point relevant, we’ve lost something in what used to be a uniquely civil American discourse.

I’ll not go into the details of my situation, but suffice to say that it rattled me so much that it still weighs heavily on my mind two full days after the event.  The differences in the political beliefs of most Americans I believe to be very small.  However, the harangue from the extremes on our left and our right keep even the most sensible among us gripped in a life or death struggle to have our ideas accepted.

Reading Audacity of Hope by Barak Obama gives one a sense of a man that is reasonable and somewhere in the middle.  However watching his campaign and how he is drawn to the far left by Nancy Pelosi and Harry Reed is scary.  His politics are not those espoused in the book.

However, looking at the “Maverick” (quoted with some sarcasm) of the Senate, John McCain, we see the same thing.  The far right of the party would not support him therefore he had to move farther away from the center in order to garner the support of his party if he is to have any chance of being elected.

So we are governed by the extremes.  We receive our news and media from the extremes and those of us who work hard and agree somewhat are painted with a broad brush by our detractors as being part of the extreme.  It doesn’t matter whether you are just slightly to the left or slightly to the right.  Lean one way and you are a Socialist/Communist or lean the other and you are an Intolerant Conservative/Fascist.

In this political season we have two men that I feel are truly like a lot of America.  They are slightly to the left or right of center.  There truly is not much difference between the two.  The left and the right have painted their differences in extreme ways. 

The bottom line is this, my vote goes to the person that will stay out of my wallet first and then stay out of my bedroom second.  That vote then would be for McCain.  I will go to the voting booth and I will cast my vote.  Like many proud Americans before me, I will cast my vote for the American I feel is most deserving and who would serve the best.

For those who say that this choice makes me a fascist or intolerant, I say to you that you then are the one that is intolerant.  Does your vote for Obama make you a socialist or communist.  I say no!  It makes you an American and like most Americans you have made your choice as well.

Let’s all remember that many men and women have served and died for us to make our own choice.  They’ve served so that you and I could vote and so that we can express ourselves in a free and civil way.  Let’s not belittle their service by continuing a discourse that pits Friends against one another. 

While this election is important it is not the end all and be all to life.  When we begin to allow the media and the politicians to gain control over our relationships and how we treat each other, we give up a little of what makes our nation great.  I for one say go and vote!  Vote for whoever you want, write in Mickey Mouse if you have to.  Then stand up and be proud.

Be proud of yourself, your choice and the freedom of others to choose.  Be proud that you haven’t allowed the best efforts of the politicians and the talking heads to ruin your relationships.  Be proud of your friends and respect their choice, in the end we will all need each other and if we allow politics to tear us apart then we are truly weak and deserve what we get in our elected officials.

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Say it Ain’t So Joe!

I’d like to talk about two Joes today.  Good ole Joe, we all know one.  Joe six pack, Joe the Plumber, GI Joe, Everyday Joe and even Joe Mama ….or is that Yo’ Mama?  I always get those two confused….

Look, all Joe did was ask a question of Senator Obama and it was the question heard around the world.  Joe didn’t ‘ambush’ the man, Joe didn’t seek out some far flung rally to ‘trap’ Senator Obama with a trick question.  Joe just stood in a rope line in is own community and when the Senator came by he asked a basic and simple question. 

The Senators answer was very revealing.  He wants ‘fairness’ he wants to ‘spread the wealth around’.  I say that is socialism and as a matter of fact so do most socialist.  However, socialist are learning a thing or two about spreading the wealth around.  They are learning it doesn’t work and no government can sustain the cost of doing it.

For example, take the words of Raul Castro, brother of Fidel Castro and future ruler of Cuba.  He said; “Socialism means social justice and equality, but equality of rights, of opportunities, not of income.” He went on to say that “egalitarianism is in itself a form of exploitation; exploitation of the good workers by those who are less productive and lazy.”  Hmmm…….so spreading the wealth around ain’t such a good idea anymore? Huh?

Hurry!  Someone get on the horn to Senator Obama and let him know his Socialist buddies are singing a new tune. 

Spreading the wealth around is not what America is about, spreading the opportunity around is!

Now on to what’s happening with Joe!  The Obama campaign and the smear merchants in the media have relentlessly attacked this everyday American for daring to ask the question.  He did nothing wrong, he’s just an everyday Joe.  He goes to work and works hard for his family.

To say that he’s ‘not really’ a plumber because he doesn’t have a license is disingenuous.  I own a Mortgage Brokerage and I have a license.  My loan officers are Mortgage Brokers as well, but they don’t have a license.  They all work under mine!  This happens in many industries.  The media has painted the man a liar, I say the media is lying to the public. 

There are reports that he owes back taxes, he says he didn’t know and I believe that.  But lets suppose for a second that he did know …..  does owing taxes make him un-American or invalidate his question?  I say NO, it just means that he is like the rest of us.  He’s taxed so darn much that he can’t afford to pay the tax and support his family.  Seems like his family came first!  Way to go Joe!

Now let’s move on to a Joe of another sort.  Joe the Senator!  He has a buddy, Senator Government (a name that Senator McCain let slip in the last debate, most say it was a gaff.  I say it was very appropriate.)  Senator Joe thinks that Senator Government will face a major international crisis in the first six months of his presidency.  He well be tested Senator Joe says; “Mark my words!”  He also says that they will need the support of their followers because their response to this test will not be popular with the people.  Hmmm, curious….

Now I don’t know about any of you, but I for one am not ready to adhere to the very un-American idea of spreading the wealth around and I’m sure not ready for our new Commander In Chief to be ‘tested’ in his first 180 days of office.  I think the choices are clear and think we all need to be careful about the ones that we make when we step in that voting booth.

I’m not happy with our choice of candidates this year but there is clearly only one candidate that has put Country First.  You make the call.  I look forward to your comments and thoughts.

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Creating The Socialist National Bank of Amerika

How much is enough?  Well, how about another $250 Billion!  That’s BILLION with a ‘B’!  So we’ve poured billions and billions into this bailout with no end in site. 

Obama seems to see the bailout and the economy as a way to make political hay.  His answer is to tax more and spend more.  My questions to Senator Obama are:  How does taking more money out of my pocket and giving it to others help the situation? ……and…..  How does spending MORE money and creating larger government bureaucracy help? 

Isn’t our problem that a liberal government has been to involved in making policy like the Community Reinvestment Act that forced banks to make bad loans?  Isn’t the problem also that through our ‘social engineering’ strategies, government spends way to much money?  I say yes, that is the problem. 

For those that would point to the war and say we spent to much there, I say you are correct.  But, be honest about why you say that, you wouldn’t save that money.  You just want it to poor into other government programs.

McCain is a different story.  He doesn’t have a clue about how the economy works.  He seems to be walking lock step with what Paulson and Bernanke are recommending and he has no original ideas of his own.  To his credit he wants to freeze spending, but to his discredit he has suggested drastic cuts in spending.

Conservatives and Republicans in general are way to far to the other side of this issue.  There needs to be some SERIOUS regulation of banks and investment banking operations.  There needs to be oversight to make sure that these organizations are taking advantage of the public.

Both sides have it wrong.  Seems like we are ruled by the extreme left and the extreme right and the only candidates we get that are in the middle don’t have the backbone to make a stand against the extremes on both sides!  We need someone in the middle to say enough!  and stand up to both the left and the right.

Sorry, back to the subject at hand…..

So Paulson decides he’s going to take $250,000,000 and ‘invest’ in America’s banks.  Now we have the ‘socialization’ of the American Banking System and neither candidate ….let me say that again…. NEITHER CANDIDATE! has said anything about it!

And who gets the largest portion of that money, 9 of the nations largest banking institutions!  I would love to see the ‘formula’ where they figured that one out.

One last thing and I’ll close; I just read the U.S. Constitution.  Funny thing is I didn’t see anywhere in there where the Federal Government was given the power to own bank stocks.  Can someone help me out with this?  Please, I’m just sure my head is going to pop right off of my shoulders!

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Bingo! There is a Plan

McCain is getting hammered by the press, by the Dems and by the conservatives.  His egregious mistake?  He mentioned that he would take $300 Billion and buy up all the bad loans and then reset those loans to make them affordable for the homeowners.

Now everybody is hammering him for his plan.  Let me just say this, AT LEAST HE HAS A PLAN!.  He’s not playing the Paulson/Bernanke game and just shooting in the dark.  He’s looked at the problem and said; ‘hey, if the real problem is bad mortgages clogging the system, then let’s get them out of the system.’

BINGO!  If that is the problem, then remove the problem.  What Paulson and Bernanke have done is said they’ve identified the cancer, they see the tumor and it’s in the gut.  BUT, we have to go through the foot, up the leg, through the groin and then maybe we can get to the problem area. 

McCain says, hey I see the tumor, let’s go in there and pluck it out!

I for one do not relish the thought of sitting around over the next three years while the current plan slowly weeds these bad mortgages out of the system.  Furthermore, can someone telll me where the authority was given to Paulson to invest our $700 Billion into bank stocks? ….both good and bad companies…..

So now the Fed is in the business of being a stock holder in America’s banks?  What, are we turning into United Socialist State of AmeriKa?

Look, I’m in the mortgage business so I see this stuff every day.  I’ve seen the bad players and I’ve fought against the predatory lenders.  I’ve watched our stock market and bond markets slowly detach themselves from one another and now they are completely working as opposing forces instead of working in unison.

There is a huge problem out there and at lease McCain has a fix.  It may be unpalatable to those of us who play by the rules and pay our bills on time, but what is the alternative?  The alternative is what we are dealing with right now ….or worse!  Let’s just swallow this one last BAD bite and be done with it.

The more I think about it, the more I’m beginning to think McCain is on to something.

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