The Times, They Are A’ Changing
On my way into to work this morning I saw an advertisement billboard that struck me.
[Name of Bank] We have money to lend (and the will to lend it)
When a bank can say that it's ability to lend and will to lend separates it from other banks you have to know that things aren't going well.
Even in light of this, though, I have to say that it's probably fool hearty for banks to be lending right now, especially if they are writing mortgages. The housing market has taken quite a hit, to be certain. But one economist that predicted the housing crash in the first place says there is a very good chance that housing will crash again.
By transferring more underwater mortgage balances onto the public books, the plan puts taxpayers on the hook for further losses if housing prices continue to fall. Given the massive support for real estate already afforded by record-low interest rates and massive federal tax and policy incentives, there are very good reasons to believe that home prices will indeed collapse when these crutches are removed. Recent spikes in long-term interest rates warn of this prospect.
If these items aren't enough to make you wonder, perhaps this last item will. Remember all that talk in grade school about this being a free country? Well, it just got a little less free again. Due to a recent law, if you decide you want to put your money in a foreign bank to keep it safe from a falling economy, the IRS wants to know. And if the country you do your banking through has laws that prohibit such disclosures (like Switzerland) they are being ordered to close the accounts.
Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS.
Come, gather 'round people, wherever you roam, and admit that the waters around you have grown...
by Carlton Smith
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Old Dogs and New Tricks
I am 36 years old, and until two months ago I had never put on a pair of ice skates. However, tonight, I had the pleasure of playing ice-hockey on a coed league for all levels. My fiancee, Tiffany, you see, is much younger than I am, and has been playing hockey ever since she was a kid. She loves playing. And she thought it would be fun to teach me to skate and see if we couldn't play together. I thought the idea, though not without its hurdles, sounded like quite a lot of fun.
So, two months ago we went out and bought me a bunch of hockey gear, including ice skates, and I commenced learning how to skate. My first time on the ice I didn't think I would be able to move. I was very unbalanced and was very uncomfortable leaning all of my weight on one leg and pushing off with the other. I spent the entire time staying as close to the wall as I could and moved along slowly, with much trepidation.
Since then, we've managed to get up to the rink about 10 times, and my skating was progressing nicely. I certainly don't look like I'm competent on ice skates, but I've at least gotten to the point that I can push of with both feet a few times and glide and turn a bit. I am completely unable to stop myself without running into something.
So, tonight was the big night. Our first night playing with the league. My little brother, Tony, and his friend, Matt, also joined the league with us. My brother had never played hockey before, but is quite a bit more competent on skates than I am. His friend has been playing hockey since he was a kid.
We got creamed. The final score was 5 - 1. But, it was worth every minute of it. I had a blast getting out there on the ice, lunging at the puck with a lack of grace comparable to a small child first learning to ride a bike. I fell several times. But I was managing to get from one end of the ice to the other, albeit a degree of magnitude more slowly than my teammates and opponents. But still, I got out there and gave it a go. I even managed to get a shot on net. Technically. The puck was travelling along the ice slowly enough that I could have been walking it, but it got to the goalie, and had he not been there it would have gone in.
Tiffany was very happy to get back on the ice again and played very well - she even had an awesome cross-ice pass to one of the other women on the team - though she didn't quite come down with it. The pass was right there and behind the defense, though.
Even cooler was the fact that Tony, in his first time playing was the one that scored our only goal.
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I’ve Been Tired
What a treat to meet you all and participate here. My name is Jason, and I am not an alcoholic. Hazim is the name bestowed upon me by Saiyid Szohail AL"Aridi on my first day of school at the Defense Language Institute at the ripe 'ol age of 19. They are Arabs and their names DO mean shiite. Hazim means: resolute, energetic, judicious, discreet & prudent. Mr. AL"Aridi was certainly no prophet.
Or was he? Time will tell. But he never got to see much of that out of me.
Now, I just trudge along the tip of the corporate spear and enjoy the love of my family and friends. Not a bad gig if you can get it, but work sure doesn't fulfill me.
Corporate structures and political entities are repulsive to my humours. I thrive on merriment and conversation, and I've never met a sinner that wasn't a mirror.
But I believe in an almighty creator named Yaweh (or sounds to that effect) and I believe in a king of corruption, deception and death named many things. And I believe that Yaweh personified the human part of his infinite existence in a man named Yeshua who settled some old blood feuds with the deceiver and advocated for us to Yaweh. We can learn his simple truth in order to inherit his eternal kingdom with him through love in all its many splendors, as it was shown to us through his life here. The King of Righteousness is my Sovereign. And that's all I got to say about that. Unless you want to discuss it, of course.
I think that those who assert cooercive authority over me are usurpers, except on the most tactical level. Cops are just the cannon fodder for the ruthless rulers of this wicked world, and I wish them no harm. But, I haven't perfected my forgiveness powers to the point that I can wish no harm to the "Great Architects" of this coming holocaust, if you know what I mean 
Favorite Movie: Revenge of the Sith
Favorite Book: Rulers of Evil
Favorite Color: Blue
Favorite Song: Six Sixty Six by Frank Black and the Catholics
Favorite Band: Pixies
Favorite Singer: Don Francisco
Favorite President: whichever one had the shortest reign
Favorite Country: Beyond the frontier
Favorite Memory: 05181999, the day I separated from the US Air Force
2nd Favorite Memory: 6/1/1993, my last day of high school
Favorite Beer: Never met a beer I didn't like
Favorite TV Show: Breaking Bad or The Venture Brothers, toss-up
Favorite Female Body Part: Breast
Favorite Game: Civilization IV
Favorite Food: I am a glutton
What are some of your favorite things?
Well, now that I've gotten all the crazy out there; It's a pleasure to know you all and I look forward to sharing, fellow travellers.
Hazim
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Welcome Hazim
A long time friend of mine, going by the handle "Hazim" has recently agreed to become a contributor to this blog. You'll find his posts, I'm sure, to be entertaining and often controversial. His view is certainly unique, and we don't always agree (though, we often do), but his voice is certainly worth hearing. I hope you enjoy his perspective as much as I do. Welcome, Hazim.
by Carlton Smith Print This Post
Health Care Fallout
Karl Denninger at the Market Ticker thinks that there will be some very serious unintended consequences to the health care package congress is currently passing. Well, if you read the piece, you'll see he doesn't think the consequences are unintended at all. Personally, I believe that politicians are idiots and are incapable of seeing what incentives they create with their legislation. Regardless, it's quite a mess. Click here for the full story.
by Carlton SmithHere's the bottom line:
- If you refuse to buy health insurance, you will be fined on a sliding scale that amounts to 2% of your AGI. So if you make $100,000 a year, you could be fined $2,000 for "refusing" to buy insurance.
- You cannot buy a catastrophic policy any more. The "cheapest" acceptable policy will cost somewhere around $15,000 for a single person, and over $20,000 for a family. This is, for most people, more than five times the maximum possible fine - each and every year. The law makes it effectively impossible to maintain an existing catastrophic policy as they "renew" every year, and should any change be made you are then forced to buy something "acceptable" in the law (or pay the fine.)
- When the "pre-existing condition" bar comes down you cannot be charged more or denied coverage due to pre-existing conditions.
- I fully expect 20-50% premium increases immediately, and for the next three years sequentially, in all existing policies. This is precisely what the banks did in front of the CARD act becoming effective, and it will happen here as well. That is the cause of the short-term rocket shot in the health-related stocks this morning
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Health Care Reform per Dr. Paul
Looks like the distinguished gentleman from Texas agrees with me.
by Carlton SmithFrustratingly, this legislation does not deal at all with the real reasons access to healthcare is a struggle for so many – the astronomical costs. If tort reform was seriously discussed, if the massive regulatory burden on healthcare was reduced and reformed, if the free market was allowed to function and apply downward pressure on healthcare costs as it does with everything else, perhaps people wouldn’t be so beholden to insurance companies in the first place. If costs were lowered, more people could simply pay for what they need out of pocket, as they were able to do before government got so involved. Instead, in the name of going after greedy insurance companies, the federal government is going to make people even more beholden to them by mandating that everyone buy their product! Hefty fines are due from anyone found to have committed the heinous crime of not being a customer of a health insurance company. We will need to hire some 16,500 new IRS agents to police compliance with all these new mandates and administer various fines. So in government terms, this is also a jobs bill. Never mind that this program is also likely to cost the private sector some 5 million jobs.
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Health Care, Obama Style
I tend to think the new health care system will have less impact on the quality and availability of health care than is supposed by free market proponents. I think that the current state of our health care system is already so far removed from the free market, that the problems of decreased quality and availability, as occur with any socialized system have already been present in our system for quite some time. The only difference is that the "socialization" we experience at present is controlled by a consortium of insurance companies and the AMA as opposed to the federal government.
That said, it will still be disastrous as it simply can't be afforded. It will undoubtedly cost much more than is projected and we undoubtedly cannot afford yet another huge entitlement program. I've yet to see exactly how it will be funded but I've heard hints at raised taxes, at least to corporations. In a time of economic contraction this cannot bode well for the economy at large. And the added debt will have its own consequences as well.
All in all, we Americans are getting what we deserve for continuing to elect Democrats and Republicans. It will be interesting, and probably painful, to see how it all plays out.
by Carlton Smith Print This Post
Geeking Out: Higher Value to Lower Value
For most of my adult life I have argued in favor of free trade, toeing the laissez-faire line. However, there comes a time in any intellectual life when the facts before you cause you to question a long-held belief. Recently, I have had one of those experiences.
The economic benefits of free trade, supposedly handed down from the great Adam Smith himself, lie in a calculation of advantage. Smith did espouse the benefits of trade where an absolute advantage (where one nation is able to produce a good more cheaply than another) was had by each nation in producing a certain good, making trade an option that would improve the productivity of both nations. Later on, David Ricardo argued that trade also was advantageous when both nations could produce a good, but each of them focused on the one good that each of them could produce more cheaply, even if one of the nations could produce both goods more cheaply.
I know, if you haven't studied economics, this all sounds very complicated, and I'll admit, it took some concentration to really understand how this worked. And, in theory, when discussing two nations with comparable standards of living, each of them only producing one product to consume domestically and trade with one other nation, it works. Both countries are, in fact, better off, even if one of the countries can produce both goods more cheaply than the other.
However, this is much like saying that a feather falls to the floor at the same rate as a bowling ball. In a vacuum, this is true. In the real world it doesn't quite work. In the real world, one nation doesn't just trade one good with one nation. Instead, trade happens with millions of products with hundreds of countries simultaneously. And while Ricardo's theory looks good on paper, the feather never makes it to the floor quite as quickly as the bowling ball. It becomes even more complicated when you consider differing standards of living between two nations with differing rates of employment.
The argument is often made in free market circles, that trade is much like technology. When a country is able to obtain a good from another country more cheaply than it can produce that good itself, then it benefits the majority of people to trade that good, even though some workers may be temporarily displaced. They are displaced the same way when new technology arrives that makes those workers unnecessary for the task they are currently performing. As the argument goes, those workers are now freed up as resources to move on to more highly valued uses. Therefore the society becomes more productive, goods are obtained more cheaply, and the standard of living is raised.
A difficulty arises, though, when the standards of living are greatly skewed between the two nations. When this happens it becomes possible for a highly valued use of resources to be moved much more cheaply to another nation. And while this still frees the resources in the first nation, it doesn't free them up for more highly valued uses. Indeed, unless we're all going to become medical doctors and rocket scientists, it's hardly possible.
Hence, I have come to that point in life where a reversal of opinion, when faced with relevant facts, is upon me. You can now call me a protectionist. I now believe that our economy would be better served if we produced, ourselves, those things which we are able, and only traded freely for those things it is very difficult for us to produce.
Indeed, by way of Mish's Global Economic Trend Analysis I have found this report in the New York Times.
Companies — and their engineers — are being drawn here more and more as China develops a high-tech economy that increasingly competes directly with the United States.
A few American companies are even making deals with Chinese companies to license Chinese technology.
Xi’an — a city about 600 miles southwest of Beijing known for the discovery nearby of 2,200-year-old terra cotta warriors — has 47 universities and other institutions of higher learning, churning out engineers with master’s degrees who can be hired for $730 a month.
I guess I need to strike "rocket scientist" from my list of possible higher-valued uses. Looks like we all have to become MDs.
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Full Disclosure
Bloomberg reports:
The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.
The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.
This would be a major victory for the American people if it holds up. Personally, I don't think it will. I'm quite confident that our government will see clear that this never sees the light of day. One way or another.
by Carlton Smith Print This Post
Requiem for a Nation
A nation once began with words which rang of strength and beauty, "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government..."
The ideas that begat this nation were born of the age of reason, by the collective yearning of men to be free from tyranny. Free from the coercive hands of the elite class of men, who all through time have forced their lessers into servitude, sometimes by economic circumstance, sometimes by the force of hands, sometimes by the threat of imprisonment. These men attempted to create a government, limited in size and scope, and strictly balanced in power, as they knew the nature of power is to feed on itself and grow. They were educated men, and they knew the tales of history well. Power always grows. And the power of the state is the opposite of freedom. Always. Every time.
Not even 250 years from the founding of this experiment in freedom, the nation it created is gasping for its final breath. In one sense, the experiment was a success. It created an incredibly prosperous nation, with an unprecedented expansion of the standard of living. Nowhere has the world in its history, ever seen an expansion of wealth so thorough, with benefits apparent through all strata of society. Yet in the end it has failed.
Its failure began when it first shed the limits of its Constitution, believing that increasing the power of the central government would allow it to more good for more people. But the lessons of history were lost. The notion that power breeds corruption was ignored. And as the central government amassed more power, it attracted the sharks of great wealth. The more power the central government had, the more it could do for those who were willing to purchase its representatives.
Until recently the depths of the corruption were doubted. Allegations of conspiracy were derided. But now the writing is on the wall. It's as plain as day for all to see. Great financial institutions, having gained control of purse strings of the nation, converted a nation of great production into a nation of great debt. Debt that these few select owned. And now that the people have been bled to their limit, they have written themselves a blank check from the national treasury, hopelessly burying the nation in debt. A debt it can't hope to ever repay. There is no possible way to explain this without the existence of corruption and conspiracy so pervasive that it flows through the system unchecked.
And now the end is upon us. The last great bastion of our freedom is dying an ugly death. Another monstrous law, thinly veiled under the guise of providing health care, but actually intended to raise yet more revenue from the American people. The country is drowning in debt as the Financial parasites feed on the Treasury and more money is needed to keep them going. Now Congress will take it directly from the people. What's worse, is that they will do it without even going through the charade of a vote. Power has grown to a point where the pretense of representation is no longer even attempted.
Once the land of the free and the home of the brave, America is now the land of the tired. And the bankers expect us to bow down to their new rule. They're not even trying to hide it anymore.
by Carlton Smith Print This Post
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