Wow, and just when I was coming around on the whole bailout plan, the House of Representatives defeated Bailout, plan B, just a couple days after minority leader John Boehner torched Bailout, plan A. I think I've finally got my head around the whole short-term credit market and the commercial paper market enough to where I can see the banks' need for lots of capital. But I really love that invisible hand stuff! If the banks need money, some private entity should be able to pony up some money to buy the so-called "toxic debt" that may be worth only 50% of face value, but at a price lower than what the federal government would guarantee in order to make a profit, of course. However, if the "toxic debt" is truly worthless, the holders of said debt should completely write it off their books and see where the chips fall after that. Because, as we've seen this week, the markets hate unknowns.
But the reason I was warming to the Bailout, plan B, was because of the following three provisions:
1) The taxpayers would have gotten something in return; stock, warrants, some say in the companies they'd be helping. The potential to make some money back was there.
2) A provision to at some point pay for Bailout, plan B, if not in the rising future value of the "toxic debt" itself, then in the raising of taxes to cover the expenses. Plan B was not very specific about how not to leave a big gaping hole in the federal budget, but at least it required someone else 5 years in the future to have to deal with it.
3) The money would have been apportioned into three slices with some Congressional control over future dispensations. I'm more comfortable with taxpayer money being spent only if needed.
I hope all three of those provisions make it into Bailout, plan C.
But too bad. All moot. With Main Street's failure to give Wall Street a huge amount of money, Wall Street will be singing the blues on Beale Street because no one's partying on Bourbon Street or going to Broadway, and no one's shopping on Michigan Avenue, which reduces the number of advertising contracts from Madison Avenue. I'm glad I don't live on any of those metaphoric streets.
Tuesday, September 30, 2008
Monday, September 22, 2008
Let's Bailout Capitalism!
Over the weekend the treasury department put forth a bill now winding its way through the U.S. Congress that would allow the U.S. government to buy bad debt from several Wall Street firms in order to allow those Wall Street firms to continue to function. The number put out by the treasury department is "$700 billion". This is a huge sum the magnitude of which probably eludes most people.
$700 billion. That's $2,295 if every single American contributed. If $700 billion of debt was a GDP, it would be ranked 17th in the world behind the Netherlands and ahead of Turkey. We would need at least 12 Bill Gates's selling off their entire holdings to make it up. $700 billion is equivalent to 1,750 bridges to nowhere. If you laid 700 billion dollar bills end to end, the chain would stretch from the earth to the sun. On the plus side, it only adds 7% to our astronomically high national debt.
And this goliath of a sum of money is going from the taxpayers' pockets directly to the vaults of huge banks who are now seeing the downside of risky lending. In other words, not to the people who defaulted on mortgages and were foreclosed upon, but to banks which transfer more money every hour than you and I make in a lifetime and which practically define capitalism. I'm all for socialism of some things, but socialism of capitalism is a little too red for me. Our constitution guarantees lots of things to lots of individuals, but the right not to go bankrupt is not one of them. I mean, these banks took on these bad mortgage-backed securities knowing that they would be worthless unless enough homeowners were able to make payments: in other words, they took on risk, an essential part of capitalism.
Which brings up two good points from the NY Times:
$700 billion. That's $2,295 if every single American contributed. If $700 billion of debt was a GDP, it would be ranked 17th in the world behind the Netherlands and ahead of Turkey. We would need at least 12 Bill Gates's selling off their entire holdings to make it up. $700 billion is equivalent to 1,750 bridges to nowhere. If you laid 700 billion dollar bills end to end, the chain would stretch from the earth to the sun. On the plus side, it only adds 7% to our astronomically high national debt.
And this goliath of a sum of money is going from the taxpayers' pockets directly to the vaults of huge banks who are now seeing the downside of risky lending. In other words, not to the people who defaulted on mortgages and were foreclosed upon, but to banks which transfer more money every hour than you and I make in a lifetime and which practically define capitalism. I'm all for socialism of some things, but socialism of capitalism is a little too red for me. Our constitution guarantees lots of things to lots of individuals, but the right not to go bankrupt is not one of them. I mean, these banks took on these bad mortgage-backed securities knowing that they would be worthless unless enough homeowners were able to make payments: in other words, they took on risk, an essential part of capitalism.
Which brings up two good points from the NY Times:
"How is it that the administration and Congress, which have not tried to find huge amounts of money to, say, improve the nation’s health insurance system or repair bridges and tunnels, can now be ready to come up with $700 billion to rescue the financial system?"
Yeah! About health care: banks made poor decisions that could have been avoided. Lots (not all) of medical bills stem from conditions that cannot be avoided (breast cancer, lupus, fractured arm, sinus infections, autism, etc.). But we're supposed to pony up for banks and not for patients? And the other quote:
“Treasury’s 840-word legislative bailout proposal comes to more than $830 million per word,” Stephen Ellis, the vice president of Taxpayers for Common Sense, a fiscal watchdog group, said in a statement on Monday, adding that “when they come up with a title, that will drive the average dollar per word down.”
Tuesday, September 09, 2008
The Federal Gas Tax and How It's Ruining My Livelihood
We as a nation received some pretty harsh financial news in a statement from a secretary of Bush's cabinet to the media released over the weekend (when bad economic news is always released) that will drastically affect our already-slumping economy. I'm not talking about the government's takeover of Fannie Mae and Freddie Mac. I speak of course about the highway trust fund. Transportation secretary Mary Peters announced on Friday that the government will run out of money this month to pay for highway projects all around the nation, and states like Oklahoma are scrambling to defer payments for projects already bid, postponing upcoming bids, and basically grinding existing construction to a halt. So a disaster, right?
Well, from my own selfish perspective, absolutely! One of my company's projects was scheduled to bid this month, and now it won't. But the reason for the shortage in federal monies is because revenue from the federal gas tax has decreased, but the need for road projects has not. In other words, people are driving more miles while buying less gas. This is an effect of good fuel efficiency! We've been wanting it for years, and we're finally seeing what the effects are on our economy.
So, should anything be done? Of course! The federal gas tax, unlike a sales tax, stays at a constant rate of 18.4 cents per gallon no matter how much that gallon of fuel costs. When gas was at about $1.30 per gallon, it resulted in a 14% de-facto sales tax. Now that gas costs somewhere around $3.40 per gallon, the de-facto sales tax has decreased to around 5%. Having a gas tax that stays at a constant rate makes sense in a very narrow and theoretical way: the physical damage to highways comes from the number of user-miles driven on them, and not by the price of the gas burned to drive on them. But with improving fuel economy, more user-miles can be driven on highways for the same cost. Plus the cost of materials for construction has risen dramatically, partially because the cost of fuel has gone up so much. It would make much more sense for the road-building business if the revenue from the gas tax could be tied to the cost of the fuel since the cost of new construction of roads is going to rise right along with the cost of fuel anyways. The way things work right now is that the government runs out of money, large numbers of private contractors run out of work, people lose construction jobs, and drivers are stuck in more traffic.
Now, the trouble is getting a politician to agree to an increase in the gas tax. It will never happen. But like so many things, what's best for our economy is also just about the least popular idea ever. As it happens, most economists see the gas tax as way too low and think the gas tax should raise dramatically (at least a dollar per gallon). But politicians want to suspend the gas tax because lowering taxes is always a popular idea. Unfortunately, popular ideas always trump smart ideas.
P.S. Expect to see more earmarks because of this too.
Well, from my own selfish perspective, absolutely! One of my company's projects was scheduled to bid this month, and now it won't. But the reason for the shortage in federal monies is because revenue from the federal gas tax has decreased, but the need for road projects has not. In other words, people are driving more miles while buying less gas. This is an effect of good fuel efficiency! We've been wanting it for years, and we're finally seeing what the effects are on our economy.
So, should anything be done? Of course! The federal gas tax, unlike a sales tax, stays at a constant rate of 18.4 cents per gallon no matter how much that gallon of fuel costs. When gas was at about $1.30 per gallon, it resulted in a 14% de-facto sales tax. Now that gas costs somewhere around $3.40 per gallon, the de-facto sales tax has decreased to around 5%. Having a gas tax that stays at a constant rate makes sense in a very narrow and theoretical way: the physical damage to highways comes from the number of user-miles driven on them, and not by the price of the gas burned to drive on them. But with improving fuel economy, more user-miles can be driven on highways for the same cost. Plus the cost of materials for construction has risen dramatically, partially because the cost of fuel has gone up so much. It would make much more sense for the road-building business if the revenue from the gas tax could be tied to the cost of the fuel since the cost of new construction of roads is going to rise right along with the cost of fuel anyways. The way things work right now is that the government runs out of money, large numbers of private contractors run out of work, people lose construction jobs, and drivers are stuck in more traffic.
Now, the trouble is getting a politician to agree to an increase in the gas tax. It will never happen. But like so many things, what's best for our economy is also just about the least popular idea ever. As it happens, most economists see the gas tax as way too low and think the gas tax should raise dramatically (at least a dollar per gallon). But politicians want to suspend the gas tax because lowering taxes is always a popular idea. Unfortunately, popular ideas always trump smart ideas.
P.S. Expect to see more earmarks because of this too.
Wednesday, August 27, 2008
Some Thoughts on Russia - Georgia
Nearly 3 weeks after Russia first rolled tanks and soldiers into the territory of Georgia, we have a nearly daily stream of news reports detailing the many ways that Russia is violating the cease-fire agreement, which you almost never hear mentioned in the Western media without Sarkozy's name attached to it. And now Russia is officially recognizing the breakaway states of Abkhazia and South Ossetia as independent nations, the first step in a process by the territories to join the Russian Federation. There are so many stunning things about this development in the Caucasus.
- First, it's pretty amazing how quickly nations are joining one side or the other. The U.S., U.K., France, Germany, Poland, Estonia, Latvia, Lithuania and the Ukraine are all denouncing Russia as much as possible and proclaiming Georgia's right to its own "territorial integrity". Meanwhile, on the other side, Russia, Belarus, China, Moldova, and even America-hating Venezuela and Cuba have proclaimed that Russia was right to deploy peacekeeping troops to protect the security of its citizens.
- Soft propaganda from both sides is rampant. U.S. media always focuses on pictures of Georgians in anguish, while Russian media always focuses on pictures of Ossetians in anguish. I love reading the English version of ITAR-TASS's website, a website that looks like it came straight out of the Soviet oeuvre.
- Russia is really leaning on its regional allies to support them. They were really mad when Belarus waited a whole six days to finally back Russia. From ITAR-TASS:
Can't you just imagine a Bond-villain-like scenario with the Russian ambassador and his goons in his office in Minsk, stroking a cat and saying "Perhaps eets time to pay Lukashenko a visit to discuss eessue over cocktails. Molotov cocktails..."
- Posturing and saber-rattling is easily detected in the words both sides are choosing. Unfortunately, the Russians are the only ones with sabers to rattle. Other NATO countries are almost always reluctant to say anything confrontational, which is probably a good strategy. But the U.S. isn't reluctant. This is unfortunate, because the U.S. military is stretched dangerously thin, and everyone knows it. Therefore Russia will have the upper hand for awhile and there's nothing we can do about it.
- I don't think this could possibly escalate to Cold War levels, even with the added news about the U.S. and Poland installing a missile defense system. But before diplomacy can lead anywhere, the West must acknowledge that the South Ossetia conflict was started because of a poorly-thought-through invasion by Georgian forces into Tshkinvali. Every media source emphasizes Russia's forces invading Georgia and obliterating their military in violation with international law, but they all seem to conveniently under-report that it was that douchebag Saakashvili who ordered the invasion on a territory filled with people with Russian citizenship. Saakashvili should have known that Russia wasn't going to stand for it, particularly when most of Georgia's military forces were in Iraq and most of Russia's military forces were across Georgia's border. Almost every media report from Russia's ITAR-TASS makes prominent mention of Georgia's "blitzkrieg" on South Ossetia, and almost every media report from Western news sources conveniently glosses over that fact. If reconciliation is possible, American and European leaders are going to have to come to terms with the fact that the country with pending NATO membership is being led by a reckless idiot who will in all likelihood do more harm to NATO than good.
- Apparently Condoleeza Rice has become our de-facto new president. Every new statement by Putin, Medvedev, or other Russian authorities is always met by comments from Condoleeza Rice, not from President Bush. I think he's on vacation in Crawford, TX (I really couldn't say for sure), so that could be the reason for this sudden conspicuousness of the Secretary of State. It really doesn't matter though, just because the same Bush administration empty threats we usually hear from the president are now coming out of the mouth of the Secretary of State. U.S. diplomacy: everything stays on the table (except nuance).
- European ethnic groups are crazy. It's really easy for both sides to claim genocide based on ethnic cleansing because all these nations are founded on ethnic lines. Ethnic Georgians are killing ethnic Ossetians, while ethnic Russians are murdering ethnic Georgians, but since the Republic of Georgia was killing soldiers in the breakaway state of South Ossetia, and the Russian Federation killed people in the Republic of Georgia, it's hard to tell which actions are based on ethnic cleansing and which actions are based on strategic military missions.
- There is so much world news to comprehend, what with the Georgia thing, the deadliest case of civilian casualties by the U.S. military in Afghanistan, riots in Thailand, the breakup of Pakistan's coalition government and the revelation that Asif Ali Zardari is a nutjob, that it's simply astounding that 75% of our nations press corps is reporting and analyzing pre-scripted meaningless political drivel.
- First, it's pretty amazing how quickly nations are joining one side or the other. The U.S., U.K., France, Germany, Poland, Estonia, Latvia, Lithuania and the Ukraine are all denouncing Russia as much as possible and proclaiming Georgia's right to its own "territorial integrity". Meanwhile, on the other side, Russia, Belarus, China, Moldova, and even America-hating Venezuela and Cuba have proclaimed that Russia was right to deploy peacekeeping troops to protect the security of its citizens.
- Soft propaganda from both sides is rampant. U.S. media always focuses on pictures of Georgians in anguish, while Russian media always focuses on pictures of Ossetians in anguish. I love reading the English version of ITAR-TASS's website, a website that looks like it came straight out of the Soviet oeuvre.
- Russia is really leaning on its regional allies to support them. They were really mad when Belarus waited a whole six days to finally back Russia. From ITAR-TASS:
On the fifth day of the operation the Kremlin decided it was enough. The Russian
ambassador to Belarus, Alexander Surikov, said, "It is not very clear to us why
the Belarussian authorities modestly keep quiet.""One should be more explicit in expressing attitude to issues," he said.
Can't you just imagine a Bond-villain-like scenario with the Russian ambassador and his goons in his office in Minsk, stroking a cat and saying "Perhaps eets time to pay Lukashenko a visit to discuss eessue over cocktails. Molotov cocktails..."
- Posturing and saber-rattling is easily detected in the words both sides are choosing. Unfortunately, the Russians are the only ones with sabers to rattle. Other NATO countries are almost always reluctant to say anything confrontational, which is probably a good strategy. But the U.S. isn't reluctant. This is unfortunate, because the U.S. military is stretched dangerously thin, and everyone knows it. Therefore Russia will have the upper hand for awhile and there's nothing we can do about it.
- I don't think this could possibly escalate to Cold War levels, even with the added news about the U.S. and Poland installing a missile defense system. But before diplomacy can lead anywhere, the West must acknowledge that the South Ossetia conflict was started because of a poorly-thought-through invasion by Georgian forces into Tshkinvali. Every media source emphasizes Russia's forces invading Georgia and obliterating their military in violation with international law, but they all seem to conveniently under-report that it was that douchebag Saakashvili who ordered the invasion on a territory filled with people with Russian citizenship. Saakashvili should have known that Russia wasn't going to stand for it, particularly when most of Georgia's military forces were in Iraq and most of Russia's military forces were across Georgia's border. Almost every media report from Russia's ITAR-TASS makes prominent mention of Georgia's "blitzkrieg" on South Ossetia, and almost every media report from Western news sources conveniently glosses over that fact. If reconciliation is possible, American and European leaders are going to have to come to terms with the fact that the country with pending NATO membership is being led by a reckless idiot who will in all likelihood do more harm to NATO than good.
- Apparently Condoleeza Rice has become our de-facto new president. Every new statement by Putin, Medvedev, or other Russian authorities is always met by comments from Condoleeza Rice, not from President Bush. I think he's on vacation in Crawford, TX (I really couldn't say for sure), so that could be the reason for this sudden conspicuousness of the Secretary of State. It really doesn't matter though, just because the same Bush administration empty threats we usually hear from the president are now coming out of the mouth of the Secretary of State. U.S. diplomacy: everything stays on the table (except nuance).
- European ethnic groups are crazy. It's really easy for both sides to claim genocide based on ethnic cleansing because all these nations are founded on ethnic lines. Ethnic Georgians are killing ethnic Ossetians, while ethnic Russians are murdering ethnic Georgians, but since the Republic of Georgia was killing soldiers in the breakaway state of South Ossetia, and the Russian Federation killed people in the Republic of Georgia, it's hard to tell which actions are based on ethnic cleansing and which actions are based on strategic military missions.
- There is so much world news to comprehend, what with the Georgia thing, the deadliest case of civilian casualties by the U.S. military in Afghanistan, riots in Thailand, the breakup of Pakistan's coalition government and the revelation that Asif Ali Zardari is a nutjob, that it's simply astounding that 75% of our nations press corps is reporting and analyzing pre-scripted meaningless political drivel.
Friday, August 22, 2008
Biden Knows Toasted
Don't know for sure if it's going to be Joe Biden yet, but I created this side-by-side comparison of the senator from Delaware versus the Ritz chips pitchman and the gay blade himself George Hamilton, just in case.
Monday, August 11, 2008
Hey, Turns Out I'm a War Hawk
So as the Olympics presses on and more and more Americans learn heartwarming back-stories of Olympians and instantly become devoted fans, Russia has invaded Georgia after Georgia invaded a different part of Georgia. And since Russia is now attacking and controlling parts of the Republic of Georgia outside of the borders of the separatist areas of South Ossetia and Abkhazia, this would seem to me to constitute an act of war. War against a key ally near the middle East and a rare example of a working democracy in a region filled with dictators and oppressive regimes. In other words, something like Kuwait. So, when elder Bush lead the charge against Iraq back in 1990, Americans, NATO, the U.N., Santa Claus, Jesus and everyone in the free world got behind the effort to expel Saddam Hussein's forces from the tiny-yet-important emirate of Kuwait. At least this is what I remember from my 9-year-old brain augmented by a Wikipedia search (which suspiciously left off Santa Claus and Jesus. Hmm...).
What makes Georgia different? Well, it's got less oil, it's democracy isn't all that stable or fair, and, oh yeah, Russia is waaaaaay more intimidating than Saddam Hussein and his SCUD missiles. But if our American principles mean anything (and admittedly, they don't), shouldn't we be standing up for Democracy, to use a cliche? I actually liked this suggestion by Bill Kristol in today's NY Times:
If you're a developing nation pondering the pros and cons of establishing despotism, or even if you're well on your way towards abuse of your own citizenry, would you consider reforming your government towards openness in order to reap the economic benefits of a free market if you didn't believe you could be backed up by the democracies of the West should a massively powerful neighbor should start to throw its weight around? Of course not. The past and present leaders of Georgia and Ukraine have chosen to take the hard road towards democracy, and they should be rewarded with more than just empty rhetoric.
Am I advocating restarting a Cold War? Not necessarily (although that does seem to be the style of warfare that we're good at, rather than fighting insurgents in urban neighborhoods). But I think we should show a responsive force even if we won't use it, just to show we're serious. Maybe send an aircraft carrier up through the Bosporus into the Black Sea. That is, if we can spare one from our many other conflicts.
On another note, before this week, the word Osset, unfortunately for lazy crossword puzzle constructors like me, was too obscure to put in a puzzle. But now, I'd bet you could get away with it. So, I guess that's one positive about this whole mess.
What makes Georgia different? Well, it's got less oil, it's democracy isn't all that stable or fair, and, oh yeah, Russia is waaaaaay more intimidating than Saddam Hussein and his SCUD missiles. But if our American principles mean anything (and admittedly, they don't), shouldn't we be standing up for Democracy, to use a cliche? I actually liked this suggestion by Bill Kristol in today's NY Times:
For that matter, consider the implications of our turning away from Georgia for other aspiring pro-Western governments in the neighborhood, like Ukraine’s. Shouldn’t we therefore now insist that normal relations with Russia are impossible as long as the aggression continues, strongly reiterate our commitment to the territorial integrity of Georgia and Ukraine, and offer emergency military aid to Georgia?
If you're a developing nation pondering the pros and cons of establishing despotism, or even if you're well on your way towards abuse of your own citizenry, would you consider reforming your government towards openness in order to reap the economic benefits of a free market if you didn't believe you could be backed up by the democracies of the West should a massively powerful neighbor should start to throw its weight around? Of course not. The past and present leaders of Georgia and Ukraine have chosen to take the hard road towards democracy, and they should be rewarded with more than just empty rhetoric.
Am I advocating restarting a Cold War? Not necessarily (although that does seem to be the style of warfare that we're good at, rather than fighting insurgents in urban neighborhoods). But I think we should show a responsive force even if we won't use it, just to show we're serious. Maybe send an aircraft carrier up through the Bosporus into the Black Sea. That is, if we can spare one from our many other conflicts.
On another note, before this week, the word Osset, unfortunately for lazy crossword puzzle constructors like me, was too obscure to put in a puzzle. But now, I'd bet you could get away with it. So, I guess that's one positive about this whole mess.
Monday, August 04, 2008
Oklahomans Not Happy About Armageddon
Poll: Obama Support Low in State
(Tulsa World)
A new poll found little support among Oklahoma voters for presumptive Democratic presidential nominee Barack Obama.
The Oklahoma Poll found that Republican John McCain has broad support in the state to lead Obama by 32 percentage points, 56 percent to 24 percent. Seventy-one percent of those questioned said they are firm in their decisions.
...
"I would rather have had somebody different than John McCain on the Republican side, but I can't even believe who the Democrats picked," said poll respondent Billy Garrison, a registered Democrat who often votes Republican.
"I know our country will be in bad shape if Barack Obama is elected president," said Garrison, of Tulsa.
Another erstwhile Democrat, Charles Ogdon of Muldrow, said he believes Obama will be the next president, in part because Ogden believes an Obama presidency would fit biblical prophesies concerning Armageddon and the Second Coming.
But Ogdon isn't happy about it.
...
So, bad times for the Obama for Oklahoma campaign.
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