Brains Not Included

Cracked Up, Whacked Out and Completely Out of Control

It Just Might Be on Purpose

I hate conspiracy theories and I hate it when commentators try to point to disparate events as proof that some politician is a bad egg.  But I have to say this and I know it’s going to make some of you mad.

It appears to some that the Democrat strategy is to keep the economy down and in the doldrums in order to continue to ‘blame’ the previous administration and keep the country in a state of economic crisis.  I know, it sounds crazy and I can’t even believe I’m writing this but here it goes.

 I believe the President and many on the far left in his party are purposely doing and saying things that keep the American economy in a state of constant flux and instability.  Take the press conferences over the past couple of day.  (01/21/2010)

 In an attempt to strike a populist tone and garner support to the Democrat candidate in Massachusetts, President Obama came out with a speech denouncing corporate bonuses and pay for CEOs.  After the Democrat loss and the exuberance of the electorate he made another speech about limiting the size of banks which practically collapsed the stock market.

If we take Rohm Emmanuel at his word; ‘never let a crisis go to waste.’  Then we have to assume that the left in this country needs us to remain in crisis to pass their agenda.  So I ask; is the President and his party purposely trying to keep our economy down?  Could this be true?  I’m beginning to believe it just might be on purpose.


Filed under: Economics 101, Smoke Screens, , , , , ,

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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Chicago Dogs

chicago-dogI ran the Chicago Marathon about 6 years ago and there were several things I really loved about the city.  The people in all of the neighborhoods I ran through had a huge since of pride.  For the most part, the entire city was welcoming and friendly.

For dinner my wife and I ventured out to a little pub style restaurant and I just couldn’t wait to try a Chicago style hot dog, up until that point I had always been a Coney Island man ….come to think of it, I still am.

The problem for me is that the Chicago Dog was kind of greasy and definitely messy.  It had things on it that didn’t belong; like sliced tomato, a whole pepper and celery salt!  What a concoction.

It’s like someone broke all the rules of Hot Dog decency and they didn’t even care.  They just threw a bunch of crap on a bun, shoved a hot dog in it and called it a day.  Half assed, half witted, bold and blatant and dared anyone to say anything bad about it.

So the Chicago Dog isn’t all it’s cracked up to be.  There are other Chicago Dogs whose time has come as well.  It’s time to call them out and point out that they don’t belong either.

These Top Dogs of Chicago politics have run their course.  Their time has come it’s time for them to be taken down.  From Mayor Daley to Jessey Jr.  to Gov. Blogojavich and all the cronies down the line.  Time for Chicago to finally, once and for all, clean up it’s political act.

Then maybe the wonderful people of Chicago can have respectable representation in their political system and who knows, maybe somebody will eventually fix that damned horrible hot dog!

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The Non Debate – Can We Have Some Fireworks Please?

So I watched McCain and Obama last night in their second ‘debate’.  I was intrigued that it was going to be a town hall setting.

While I had resigned myself to the fact that it would be difficult for them to through jabs at each other in such an intimate setting, I had hoped for more fireworks.  What we got was more of the same.

I don’t completely blame the candidates.  Tommy Brokaw was so concerned with getting all his questions answered that he would not allow the candidates to go after each other.  And what about the questions he chose?  Mundane and boring if you ask me!

In the next debate we need a little spark.  Let’s get away from strict policy questions and get inside the candidates.  Let’s see who they are rally are and let’s hear from their own mouths about the life experiences that shaped them.

I’m tired of the boring media mouth pieces getting in the way of allowing us to see who the real candidates are.  Between the media and the candidates own handlers it seems we don’t who we are really dealing with.  Maybe the next debate will offer some fireworks …. or ….. maybe not.

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Bar Stool Economics – The Analysis

We’ve all seen the bar stool economics email, right?  The one where the 10 buddies go to the bar and they all pay according to their ability rather than dividing the bill up equally.  (by the way – this is a communist principal ….each according to their ability to each according to their need…. but that’s for another post, let’s move on.)

Well my lovely bride sent this email out to a friend of hers and he responded with a well thought out recalculation.  I won’t go into his response in detail because this post is not about the numbers.  This post is all about the fact that he needed to respond in a way that would prove his point.

His analogy was to point out that his grand father, a very wealthy man in his own right, paid less tax than a lot of people that mad eless than he did.  His analogy showed the wealthy guy paying less than the others as a percentage, thereby creating a deficit to the bar owner, he also disparages his grand father for only paying Social Security Tax to a certain limit.

While he had a decent analogy, he forgot one thing.  The people that put the SS tax in place were the democrats and the people that started the ‘tiered’ system  of taxation were democrats. Regardless of the reasoning behind these ‘systems’ the truth of our day and of this political environment is that the current system is used to pit one American against the other.

So here we sit. Al off us Americans…..many of us in the same tax bracket……taking a simple analogy of how our tax system works and turning it into some complex manipulation of numbers to show how it all ‘really’ works! LOL

and I say, isn’t that the real problem anyway?!!?

Don’t we need to quit worrying about what other people make and/or pay and go to a system that doesn’t promote class warfare? I look at the parties and I see one side always trying to tax the heck out of me and I see the other always trying to remove taxes from me. But then I see one party trying to legislate morality while the other isn’t.

I say the government should stay out of our wallets AND out of our bedrooms. It’s a shame we don’t have a singular choice that meets both tenants. In the end I vote for the party that stays ‘mostly’ out of my wallet. That would be the Republicans ….this year anyway….

Oh and BTW – This current economic crisis was not caused completely by the Republicans. It was caused mostly by the Dems. I know because I have followed the issue for years and have railed against the abuses in lending for years. I’m in the mortgage/real estate industry and I watched this crash coming.

There is no debating that the democrats staved off heavier regulation of the GSE’s and that the Republicans the Bush Admin. wanted more regulation on those companies.

Visit this link and watch the politicians say in their own words:

It’s also no secret that J. Carter created the Community Reinvestment Act and it was Clinton who expanded it and forced banks under the threat of a law suit to prove that they were making loans in ‘under developed’ communities. This act essentially created the Sub Prime mortgage market and forced banks to make loans to people that couldn’t afford them.

We can go into all the predatory lender comments and bad players and play the blame game, but everyone needs to realize that these players would never have existed if a playing field had not been created for them to play on. This field was created by the expansion of the Community Reinvestment Act and through the lack of the political will of Democrats on the hill to allow tighter regulation of the GSE’s

These facts are undeniable. So here we sit, good people, reasonable people and knowledgeable people, arguing (in a playful way of course) over who to vote for. We are probably very close in our belief systems but the pimps from both parties have achieved their goal…..they’ve gotten fairly like minded individuals to play the ‘class warfare’ game and even have some people disparaging their own grandfather to make thier point.

We all need to band together and find a way to remove these pimps from office. The socialist and the facist need to go and we need to elect some people that truly understand that our nation was founded as a Democratic Republic and not a democracy. We need the Fair Tax so pimp politicians can’t pit good people against each other even if we are against each other in jest.

Much love for everybody’s passion in taking the time to recalculate but I think they may have been blinded by a little ‘class warfareism’ with the response.

Take care and hope everyone is making it through this down economy.

Read this and other comments on my blog I would love to get your feedback. Remember when you read it, I said brains NOT included, that would mean the politicians and MINE! LOL

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When the Roof Leaks Put a TARP On It

The night was stormy.  The wind was trashing and thunder was crashing and trees were falling all around us.  It was a horrible storm.  The rain was coming down in sheets and water flowed through a gash in the roof filling bucket after bucket with water.

The next day we surveyed the damage.  After pulling a huge tree limb out of the roof it revealed a gaping hole.  Something had to be done so a huge blue tarp was strung across the house.  It was a temporary fix but it worked until the roof could be repaired and all could be made right again.

In a way, this is what has happened to our economic system and isn’t it appropriate that the government would name the portion of HR 1424 Emergency Economic Stabilization Act that is designed to stabilize home ownership T.A.R.P. (Troubled Asset Relief Program)

Many people ask me what this bill is all about and the answer is complex.  You see the bill is about a lot of things.  Some of what is in the bill is important, however I am sad to say that there is a lot in the bill that is not.  So let’s focus on what is important in the bill and for the time being, leave the pontification of what should not be there to the pundits.

One of the most important parts of this bill is the TARP (Troubled Asset Relief Program).  The TARP is the portion of the bill that gives the Secretary of the Treasury the authority to purchase non-performing and under-performing loan assets from banks.  This huge fund should start to get all of the bad loans out of the credit system so that the real value of the loan pools that are performing can be determined.

The American economy, our financial house, has just been through a really bad storm.  The TARP is there to temporarily cover the hole in the rough until it can be fixed properly.  It is truly and temporary fix.

However, don’t fret, there is a portion of this bill that is designed to permanently fix the hole and put our economic house in order.  After the Sec. Tres. buys these troubled assets he has several tools he can use to transform the troubled assets from worthless pieces of paper into valuable streams of income.

  • First, the bill gives the Secretary the ability to adjust non-performing loans.  The secretary can lower the interest rate, lower the loan balance or reset the loan to a 30 year fixed.  He can do one or all of these things to help the borrower stay in their home and to make the home affordable based on the current income of the homeowner.  This should allow the homeowner to start making their payments on time and should turn a non-performing asset with no value into a performing asset that can be sold for a profit.
  • Second, the Secretary has the authority to insure the payments on the new loan.  If the secretary feels that the new loan would sell faster and for more money in the tertiary market if it were insured, the secretary can add a premium to the payment.  This premium would insure the loan for up to 100% of it’s payment if it went into default.  Essentially this means that anyone purchasing the loan as an investment would have no downside risk.

As I said, there is much more in this bill that can be discussed.  Much of it has to do with technical issues relating to how banks lend to each other and how they borrower from the Fed.  The bottom line is that the TARP is the major portion of the bill that will help homeowners and that will stabilize the real estate markets.

So we’ve decided to do something about the hole in the roof caused by the storm.  We’ve put a TARP over it to stop the damage.  Now let’s hope our politicians have the knowledge and foresight to take the next steps to do the hard work to remove the TARP as quickly as possible and truly fix the gaping hole in our economic house.

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Bean Counters and Boneheads

Let’s talk.  The bean counters tell us the $700 billion financial rescue plan is necessary and that it will solve all our problems.  Isn’t that the same thing they said about the take over of Fannie & Freddie?  How about the injection of $85 billion into AIG or the money to prop up WaMu and the list goes on and on?

Now we have experts telling us that $700 billion is a drop in the bucket.  In the overall scheme of things it’s like thowing a dollar at a $1,000,000 debt and hoping that the principal reduction will significantly change the payment structure of the debt.  It’s to little to late ….. in the end it might not be the right solution anyway.

So ‘We the People’ are supposed to bail out Wall Street?  Or is it that we’re supposed to bail out the Politicians.  The political posturing is amazing!  The dweebs and ditsy, stuck up cheerleader types on the left are treating the House and the Senate like their own private Idaho and the crotchety good-ol’-boys on the right are wringing their hands that they may have to cut back on the fillet mignon.  It’s sickening and I could go on and on about the way the House and Senate have been run, but that’s a topic for another post.

The Bean Counters sit in front of Congress and say something has to be done.  The Boneheads in the governement say we risk financial collapse if we don’t bail out Wall Street!  The funny thing is I haven’t heard a word from any of them about bailing out every day Americans.  Curious?

Here’s an idea.  Give every American household that pays federal income tax a check for $50,000. (That would be about 30,000,000 households)  Then let us solve the problem.  If the problem is bad debt clogging the lending markets and restricting the flow of capital, what happens when all that debt is paid off or paid down?

Hell, send me a check !  Put a requirement on it that I MUST use the money to pay off debt before using it for any other purpose or I would be subject to additional tax penalties.  Do you think that would unclog the markets? 

If it’s true that ‘bad’ mortgages are causing the restriction of capital and that this has caused the decline in the housing market, then give the power to the people.  Let the people pay off all their debt and watch what happens.  The citizens of America work hard every day and they deserve a little reciprocity from the government.

One last thing, don’t use class warfare here!  Give it to everyone that actually pays real money to the IRS in the form of income tax and watch the problem just melt away.  Of course this will never happen because for some reason the bean counters will see sending $1.5 trillion to the American people as less of a solution than sending $700 billion to fat cats on Wall Street and the boneheads in Washington would be abdicating their power and their ability to take credit for solving the problem.

Another situation where we look at all of government and it reminds us ….. when we open up the package that is our government and we read the fine print on the box it says Warning:  Brains not included!

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