OldGeezer comments

Posted in: Obama says health care reform good for small businesses See in context

"with the American system denying services to sick people anyway, it's hard to argue Americans have unmitigated healthcare access if they don't qualify to begin with. (fallacy #1)"

Many of those without insurance get medical care anyways by using emergency rooms as free clinics. In 2006, 17.4% of all emergency room visits were by uninsured individuals. 12% of all emergency room visits were non-emergency. This not only puts a disproportionate burden upon emergency room staff, but it deprives those who really need emergency care from the attention that is required. This also means that the costs are transferred to those who do do pay, in the form of higher fees.

"The issue of rationed care is a misnomer since most issues are covered, for all family members, all the time, everyday, for the majority need to begin with. Sure not all issues, but why not ask what is on the list or not? Different Provinces here have different lists same in US States. This could be split up if too much to cover for everyone on the exotic stuff. Cosmetic surgery probably not, that's to be expected. Here you could also go with no list at all if you want. The point is that you don't have limitless money, which is why there are restrictions to begin with. Given your trillions of Chinese debt I can't see how you are allowed to ignore limitations anymore. (fallacy #2)"

"[Health services should not be guaranteed to] individuals who are irreversibly prevented from being or becoming participating citizens. An obvious example is not guaranteeing health services to patients with dementia." - Ezekiel Emanuel, White House Health czar

"Big Pharma wants this the most because they charge more money for exotic and experimental drugs that are proven to not work any better than what's out there. US has the Big Pharma but your standard of living is quite low, [...]"

The U.S. standard of living is extremely high, second only to Luxemburg. According to the OECDP, the 2007 gross national income (US dollars, current prices and purchasing power parity) was $46,098 for the U.S., compared to $37,970 for Canada, and $35,842 for the U.K.

"[...] thus you can't equate their existence in your country to your health if I live longer in Canada. (fallacy #3).

The U.S. population is highly diverse: 12.4% of the 2007 population was foreign-born (a quarter of whom are from Mexico) and 20.2% of the 2008 population were non-white. This significantly skews the life-expectancy averages. For example, in 2005, whites (both U.S. born and foreign born) had a life expectancy of 78.3 years, compared to blacks who had a life expectancy of 73.2 years. Moreover, lifestyle choices have a significant impact on health, but Americans are not inclined to let the government dictate diet and so forth.

"Doctors know there are better and cheaper choices (they're doctors, and highly trained experts). They can always offer you alternatives to expensive drugs though. This is equivalent to the Pentagon's $1000 toilet seat. Again you'll save a lot if doctors are not pressured into sales."

Doctors are not so much "pressured into sales" as much as they choose branded products over generics, unless you consider the profit motive to be "pressure".

"RandD has always been a cure looking for a disease, not the other way round. They focus on where to make money, not where they can help and most certainly not research for it's own sake. (ie: Viagra) Hence why marketing is such a force in the US but no where else. (fallacy #4)

Developing drugs that people actually need (diabetes) would result in massive savings to worldwide disease. RandD might even stop wasting time in areas where there are not successful towards that massive effort which is more worthwhile."

I do not agree with pill-pushing (it increases costs with dubious benefits), but you are repeating a stereotypical perception. In the United States, profitable drugs fund research in other, less-profitable areas. 15.9% of R&D expenditures in the United States are spent on cancer research, even though cancer drugs only make up ~5% to 7% of sales. That's a disproportionate expenditure.

"With a healthcare provider no longer being part of a money supply it is no longer concerned with having multiple patients for their paycheque but actually keeping people well instead. When a healthcare system succeeds there are fewer people involved. It's not a supply or demand paradigm to being with, and thus the heart of understanding the problem. (fallacy #5)"

Whether money is the concern or not, health care is still subject to supply and demand. There is only x amount of medical resources whereas there is nigh-infinite demand for medical resources. Whether the transaction is in dollars, IOUs, or beans, between patients and providers or government and providers, the difference in supply and demand must result in equilibrium that does not fulfill everyone's needs/wants. Moreover, the financial rewards are certainly part of attracting the best and the brightest to the medical field. As for health-maintenance, it is more of a life-style issue.

"If fewer people are sick the taxes needed to support it are less thus you save money/or use less. If more people are sick then the taxes go up, but the cost is split over the population making it cheaper by volume.

It doesn't matter, either way money goes to the right place, to help people."

In a study of 1992-2000 statistics, the CDC measured who used health care. At 6,125 visits per 1,000 individuals, senior citizens (age 65 or older) accounted for almost half of total visits. Yet, those are the ones that will be most impacted by the administration's proposed UHC rationing scheme.

"Here you can discuss the rationing list in more detail. Go ahead and put everything on the list if you want, see what the cost is. Split it up by total population or available population and it's still cheaper by the dozen than any insurance you could possibly ever have. Reducing your top ten most ridiculous procedures only makes that better."

In our system, if you want a ridiculous procedure, you have to pay for it. A fool and their money are soon parted.

"Stop shooting yourselves. USA has the best doctors for gun shot wounds because you need them and sometimes we call a few up here for assistance. If that were to drastically drop in line with other countries so obviously would your health care costs. (obvious fact #1)"

That's an absurd statement. 20.3% of emergency room visits were due to accidental falls. 9.5% were due to motor vehicle accidents. 5.9% were due to assaults.

Overall Fall Nonfatal Injuries and Rates per 100,000: 2,671.86 Overall All Transport Nonfatal Injuries and Rates per 100,000: 1,423.47 Assault All Injury Causes Nonfatal Injuries and Rates per 100,000: 513.80 Violence-Related Firearm Gunshot Nonfatal Injuries and Rates per 100,000: 17.96

Unintentional All Injury Causes Nonfatal Injuries and Rates per 100,000: 9,194.25 Unintentional Firearm Gunshot Nonfatal Injuries and Rates per 100,000: 5.2

Gunshot injuries constituted less than 3.5% of injuries due to assault and less that 0.00057% of injuries due to accident.

"By putting the incentive on the doctors or to people themselves to live a more healthy lifestyle, that can happen as a community. McD's and high fructose corn syrup aren't it either. (obvious fact #2)"

Doctors can't force people to adopt healthy habits or to change their lifestyle. Moreover, most Americans do not believe that it is the government's job to force such changes.

"This has always been odd how America doesn't have universal healthcare. I hope you can figure it out, but there is clearly many (too many?) misunderstandings and logical errata."

One major "misunderstanding" is the notion that Americans share the exact same priorities or views as that of other nations' people.

"I don't know, if American's get any fatter the land itself might open up under the pressure and also solve the problem. (flippant stupid comment born of frustration #1)"

Combined with your erroneous conclusions, I can't say that I am surprised by your comment. Many Americans live at the extremes, but that is a lifestyle choice.

"Solutions exist but it means looking at it from the perspective of putting yourself all in the same pool. The part of universal means your fellow Americans after all. That's why the expectation is different in other countries as well as the choices they have made."

The assumption that you are making is that solutions don't exist from any other perspective other than universal health care.

"Hope that answers the last post."

It didn't, but it certainly made it clear that you don't have a clue.

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Posted in: Obama says health care reform good for small businesses See in context

A few points.

Rationing: There are limits to what government funding will provide. The expectations that many Americans have is that any system will provide whatever they want, when they want it. Under UHC, prioritization will leave some patients, particularly those considered to have low expected outcomes or reduced life benefits, which is all just a nice way of saying that you are not expected to get better or that you are too old, so have some pain killers and wait for the end.

Wait times: Limited budgets results in wait times that can be as long as 14 - 24 weeks (e.g. Canada). That's not critical for most health problems, but for Americans that are used to 1 week or less wait times, it's unacceptable.

Reduced R&D incentive: What many people forget is that most of the top 20 pharmaceutical companies are based in the U.S. The top eight U.S. companies account for ~$33.3 billion dollars of R&D. UHC proponents argue that prices for medication will be lowered, but such cuts would have to include significant reductions in profit and that will unavoidably affect R&D expenditures. The Congressional Budget Office just released a report that indicated that no significant savings would be realized by the proposed UHC plan, so the benefits are somewhat dubious.

Reduced incentives for health care providers: Another way to reduce costs is to reduce pay for physicians. The result of this is a reduced incentive to spend the time and money to become a doctor. This actually encourages a dual system--a public system and a private system for the wealthy.

Nothing is free. For all of its proponents, UHC cannot change the principle of supply and demand.

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Posted in: U.S. House plan boosts taxes on rich to 20-year high See in context

What many "tax the wealthy" proponents fail to understand is that the wealthy will retain their tax loopholes and gain financial opportunities by lobbying politicians. It is natural selection: the most opportunistic and exploitative are the ones that will continue to succeed. For example, Goldman Sachs has been heavily represented in every recent administration (including this one), has received bailout money, made a profit loaning said money to local and state government, and stands to make billions more through the proposed cap-and-trade / carbon tax bill. The wealthy that provide jobs and economic growth on the capital/industrial side are going to be encouraged to move more and more production overseas, because those who keep production in the United States are going to lose out.

In the 1990s, with the signing of NAFTA, normalization of trade relations with China, and increasing of taxes, U.S. capital began moving out of country in vast amounts. In its place were temporary consumption-side jobs. This transfer of capital created huge profits for companies, but it basically set the stage for recession: real GDP exceeded potential GDP; consumption-side grew while capital-side shrank. Who really lost out? The American citizen-taxpayer. Who really won? Government and the investment banks.

Taxes and other fees are used to support government, but it must not be forgotten that it also influences decision-making in a global marketplace. If taxes are primarily targeted at income, it encourages capital-side flight. If taxes are targeted at economically static wealth, it encourages investment in capital assets. Taxes should be aimed at encouraging the creation of capital-side jobs in the United States, not encouraging capital flight.

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Posted in: Obama challenges critics on health care See in context

In April 2008, the National Institute for Health Care Management published a brief on the uninsured in the United States. This is the same brief that proponents of Universal Health Care cite. However, they do not talk about the specifics in it. Using U.S. Census data, the NIHCM found that 15.7% (!) were in the upper 20% of income earners. 27.5% were in the two middle income quintiles. 31.0% were in the bottom 20% income quintile. (Of those in the bottom quintile, 38.9% were "undocumented immigrants" / illegal aliens.) If illegal aliens are excluded from eligibility, it means that only 8.8 million, 18.9% of the uninsured would pass means-testing (unable to afford private insurance).

In effect, that means the UHC bill, a bill that would effectively eliminate most forms of private coverage, is really giving health care to just 2.87% of the U.S. population at the expense of the vast majority of citizen taxpayers. UHC would dwarf Medicare and Medicaid, two giant government health care programs. Note what the Congressional Budget Office had to say about those two existing programs:

"Measured relative to GDP, almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs—Medicare, Medicaid, and Social Security. For decades, spending on the federal government’s major health care programs, Medicare and Medicaid, has been growing faster than the economy (as has health care spending in the private sector). CBO projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035 and to more than 17 percent by 2080. That projection means that in 2080, without changes in policy, the federal government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years."

The proposed UHC program is both unnecessary and unwise. In terms of cost/benefits, it will cost far too much for what it will provide. Moreover, regardless of any promised "savings", it will accelerate the already incredible accumulation of government debt. The only thing that it is really good for is for government to to gain yet more power at the literal expense of citizens and private industry.

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Posted in: U.S. House plan boosts taxes on rich to 20-year high See in context

It is ultimately about reward vs. cost of opportunity. People are investing in areas that give sufficient returns with lower opportunity costs. High energy prices, high labor costs, and high taxes are deterrents as the first two raise the cost of operations and the other lowers the financial benefits. Combined, they makes investment in U.S. manufacturing far less attractive than overseas investment or government bonds. In fact, Goldman Sachs (yes, the same one that required a bailout) made a hefty profit by loaning local and state governments money. Government borrowing takes away from domestic investment and since the governments often raise local and state taxes to pay for the loans, they reduce the incentive for local and state investment.

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Posted in: U.S. House plan boosts taxes on rich to 20-year high See in context

The economic boom in the 1990s had to do with innovation in technology, higher profits due to outsourcing (reduction of production costs), and other factors exceeding the repressive effects of taxes. Taxes are never a positive factor for economic growth. Also, the budget never truly went black, because the U.S. government continued to borrow, increasing the federal debt every single year as it has done after Eisenhower. It's like balancing your checkbook while still borrowing money--it means you are controlling your rate of indebtedness, not preventing it.

Any tax structure must take resources away from the people and give it to the government (and those in authority). Government is a cost-center: it does not actually produce anything. It only reallocates resources to those that the authorities in particular government favors.

The larger a government, the more that it must take from the people in order to support itself. The economist (and social scientist) Mancur Olson wrote that government is like a stationary bandit that steals from people living in an area. It is in its best interest to avoid stealing so much as to reduce the amount that it can steal in the future. Moreover, it is in its own interest to "protect" the people that it steals from. (Think of "protection" rackets.)

It was for such reasons that the Founders of the United States had originally intended that the federal government be as small as practically possible. This would maximize freedom and liberty while providing for essential services (defense and stability). Apparently, the federal government is currently operating under the philosophy of becoming as large as practically possible.

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Posted in: Pennsylvania's Specter switches parties, bolstering Senate Democrats See in context

"I've looked at the polls. I can't win as a Republican, I can't win as an independent. The only way I have a shot is to be a Democrat."

Arlen Specter in a private meeting with Mel Martinez

Further evidence that George Washington was right... as if we needed anymore of it.

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Posted in: N Korea threatens nuclear, missile tests See in context

Most posters seem to be confused. North Korea does not do this in response to criticism or whatever the rest of the world does. It does this in order to generate a stronger response. By creating a strong response to its actions, it gains greater leverage when dealing with other countries. Therefore, North Korea will do whatever it wants to do and actually has more incentive to be belligerent if the international response is not strong enough. In a way, the more that it can get away with before getting its leash yanked, the more of an actual threat it becomes. This also increases its political leverage.

That is not to say that there isn't a limit. China is not interested in North Korea starting an actual war, so Pyongyang is highly unlikely to go that far. It geopolitical niche is that of gadfly or troll. Furthermore, that is why it is propped up.

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Posted in: U.S. cargo ship evades Somali pirate attack See in context

adaydream,

Actually, anti-piracy patrols started under the previous administration. Task Force 150 (Red Sea and Indian Ocean) was patrolling that region in addition to its counter-terrorism operations back in 2008. The force size was increased in response to piracy and there were only two ships taken in December of 2008. The only change is that Task Force 151 (Persian Gulf) is now responsible for the anti-piracy patrols in the region.

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Posted in: Obama to Muslim world: No U.S. war with Islam See in context

Also please remember that Adolf Hitler claimed to be Christian. But please do not blame all of Chistendom for not shouting that he isn't from the rooftops such that it was certain to reach your ears.

Was Hitler following the example of the founder of the Christian faith, Jesus? No. Is Bin Laden following the example of the founder of the Islamic faith, Muhammad? Yes.

And also remember, it was you who asked for a scholar. I merely gave what you asked for. As for myself, I did not need their fatwa to make my decision. Bin Laden is no Muslim no matter what he says, same as Hitler was no Christian.

Upon what clear teachings of the Koran do you base your evaluation of Bin Laden's claim? How is Bin Laden failing to submit to the teachings of Allah as given by his prophet Muhammad?

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Posted in: Geithner unveils sweeping overhaul of U.S. financial system See in context

What should be considered is that the shoe has yet to drop for the commercial credit market. I hope that some folks have plenty of hope stockpiled.

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Posted in: Geithner unveils sweeping overhaul of U.S. financial system See in context

I see some people are still passing around the koolaid. What has tangibly improved over the weekend? Nothing but better than expected reports and a promise of yet another bailout. Thus, what we are seeing in the markets is irrational behavior that has no bearing upon the economy's fundamentals.

"Looking For a Bottom, by Tim Duy: Given the length and depth of the current recession, it is natural for analysts to start looking for a bottom. In such an environment, bad news will be ignored while the seemingly good news is overblown. For example, the most recent initial unemployment claims report indicates that labor markets continue to deteriorate; we have yet to see a turning point consistent with improved conditions. Likewise, the durable goods report was heralded as a positive sign, but the jump in this volatile series needs to be taken in context of the severe drop the previous month. [...]

That said, things will eventually get less worse, if only because some sectors, such as new residential housing, will hit a bottom. And that bottom is not likely to be zero, and, I suspect, that bottom will be late this year or, at worst, early next year. That should not, however, be confused with an optimistic outlook, as the durability and strength of the eventual recovery is in doubt. I am confident that the economy will not spiral downward endlessly; I am more worried that the we will be left at a suboptimal equilibrium chiefly characterized by low growth and persistently high unemployment." "Looking For a Bottom", Tim Duy

"A paper on the state of the world’s public finances issued by the IMF in the run-up to the G20 meetings takes a stab at identifying and measuring the fiscal implications of the crisis for both rich and developing countries. Its conclusions are sobering. For rich G20 countries, fiscal balances will worsen by 6% of GDP between 2007 and 2009. Government debt will come off worse. Between 2007 and 2009, the debt-to-GDP ratio of rich countries is projected to rise by 14.5 percentage points. In the medium term, the outlook is even more worrying. Government debt for the average rich country will be more than 100% of GDP by 2014 compared with 70% in 2000 and 40% in 1980.

A great deal of uncertainty surrounds these estimates because so much depends on guesswork. Economic recovery, for example, could be slower than the IMF’s current projections: growth forecasts were revised down several times in 2008. Governments may also have to shoulder more burdens—private pension plans, which have been hammered by the crisis, may require government support. And the eventual cost of financial-sector bailouts will depend on how quickly and at what level prices stabilise of the assets governments have taken on. Past experience suggests that there is enormous scope for variation. Sweden had a recovery rate of 94% five years after its crisis in 1991; Japan had recovered only 1% of assets in the five years after its troubles of 1997.

The IMF points out that debt levels, while high, are not unprecedented by historical standards. But the worry is that primary fiscal balances in four-fifths of the rich countries studied by the IMF will be too high even in 2012 to allow debt to be stabilised, or brought down to 60% of GDP (which is the IMF benchmark for debt levels), even though revenues will recover as countries emerge from the crisis. What this implies is that, over time, fiscal deficits will have to be trimmed. And therein lies the rub.

Most rich countries have rapidly ageing populations. Unless entitlement systems are reformed (by reducing benefits) or tax bases broadened, fiscal deficits will rise still further. Some of the IMF’s ideas about how to do this will seem unpalatable: it argues that health systems, for example, will have to become less generous. But rich countries were always going to have to come to terms with the fiscal consequences of demographic pressures on existing welfare systems sooner or later. The crisis will bring this problem more urgently to the fore."

"One crunch after the other", TheEconomist.com

"Tim Geithner has finally revealed his plan to fix the banking system and economy. Paul Krugman, James Galbraith, and others have already trashed it.

[We spoke with noted economist Galbraith this morning. In the accompanying segment, he calls the Treasury Secretary’s plan “extremely dangerous.”]

Why?

In short, because the plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit Why does Tim Geithner keep repackaging the same trash-asset-removal plan that he has been trying to get approved since last fall?

In our opinion, because Tim Geithner formed his view of this crisis last fall, while sitting across the table from his constituents at the New York Fed: The CEOs of the big Wall Street firms. He views the crisis the same way Wall Street does--as a temporary liquidity problem--and his plans to fix it are designed with the best interests of Wall Street in mind.

If Geithner's plan to fix the banks would also fix the economy, this would be tolerable. But no smart economist we know of thinks that it will.

We think Geithner is suffering from five fundamental misconceptions about what is wrong with the economy. Here they are:

The trouble with the economy is that the banks aren't lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it. As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem. The banks, meanwhile, are lending. They just aren't lending as much as they used to. Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed.

The banks aren't lending because their balance sheets are loaded with "bad assets" that the market has temporarily mispriced. The reality: The banks aren't lending (much) because they have decided to stop making loans to people and companies who can't pay them back. And because the banks are scared that future writedowns on their old loans will lead to future losses that will wipe out their equity.

Bad assets are "bad" because the market doesn't understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are. House prices have dropped by nearly 30% nationwide. That has created something in the neighborhood of $5+ trillion of losses in residential real estate alone (off a peak market value of housing about $20+ trillion). The banks don't want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer.

Once we get the "bad assets" off bank balance sheets, the banks will start lending again. The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating. So they'll sit there and say they are lending while waiting for the economy to bottom.

Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears, and they'll be working it off for years. House prices are still falling. Retirement savings have been crushed. Americans need to increase their savings rate from today's 5% (a vast improvement from the 0% rate of two years ago) to the 10% long-term average. Consumers don't have room to take on more debt, even if the banks are willing to give it to them.

The two charts below from Ned Davis illustrate the real problem: An explosion of debt relative to GDP. The first is Nonfinancial Debt To GDP. The second is Total Debt To GDP.

In Geithner's plan, this debt won't disappear. It will just be passed from banks to taxpayers, where it will sit until the government finally admits that a major portion of it will never be paid back."

"Part I: Geithner's Plan "Extremely Dangerous," Economist Galbraith Says", The Business Insider

"The “Plunge Protection Team,” was smiling for the cameras after Wall Street stocks staged a 7% rally on March 23rd, after Geithner detailed his strategy to purge toxic assets from bank balance sheets. The S&P-500 Index and the Dow Jones Industrials posted their biggest one-day percentage gains since late October. The banking sector index posted its best one-day gain since 1993, driven higher by a 26% gain in Bank of America, a 25% advance in JP-Morgan and a 20% gain in Citigroup. Geithner could breathe a sigh of relief that the stock market didn’t replay the events of Feb. 10th, when his vague outline for subsidizing the banks was trashed.

This time around, Geithner was much more explicit, in detailing how taxpayer money would be placed at the disposal of Wall Street. By subsidizing private investors, who will bid against one another in auctions for toxic assets, supervised by JP-Morgan, the government can claim that the free-market is setting the prices. Neither the mainstream media nor the vast majority of the American public will realize or care how the Ponzi scheme works. All that matters is the values of investors’ 201-k’s.

How should investors react to the latest 20% recovery in the S&P-500 Index from its lowest levels set just two weeks ago? There have been several powerful rallies over the course of this 17-month old bear market, such as last October, when the Dow Industrials mounted a 1900-point rally in 48-hours, and a second 1,500-point rally after France, Germany, Italy, Spain, Holland, Austria and the United States joined forces to launch a $4-trillion bank bail-out, the biggest in history, with guarantees and fresh capital in a “shock and awe” blitz to halt the market meltdown.

Both rallies and many others since then were nothing more than Bull-traps. Stunning one-day rallies of 500-points or more in the Dow Industrials tend to be the signature of bear market rallies, in which the PPT engineers vicious short squeezes. Typically, it’s an ominous sign when a powerful 500-point+ rally simply stalls out the next day, then fizzles-out, and begins to turn lower. It means the retail investor hasn’t been duped by Wall Street pros, - who are anxious to book a quick profit."

"Can the Treasury's Ponzi Scheme Lift the Stock Market?", Gary Dorsch

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Posted in: Senate Republicans force delay on spending bill See in context

First of all gold was up to $900.00 an ounce in the '80's.

Gold pegged $850 on January 1, 1980, at the peak of the 79 oil crisis. The highest it hit in the late80s was $499.75 on December 14, 1987

I have always made the point that this crisis is of epic proportions. Who is saying the "economic crisis is supposed to abate by the end of the year[?]"

Don't look now, but the head of the Boston Federal Reserve, as well as the former head of the IMF said so. Of course, I consider them the useful idiots for politicians, but that was the sort of guidance responsible for justifying the stimulus package. Who wrote the stimulus package? Lobbyists did.

If there had been regulation that could have limited the exposure to toxic loans we would not see such an epic crisis. [...]

The largest creators of of these "toxic" securities were the GSEs at the sum of $4.443 trillion in 2007. Loan originators (eg banks) sent the loans to the GSEs for inspection (e.g. CRA rules) and guaranty. If they passed, the GSEs bought them. The GSEs securitized the loans and sold the new securities to banks with a guaranty (which many assumed would be backed up by the Federal government). The banks bundled these securities and sold them to intermediaries who resold them to Wall Street. Wall Street firms used these "guaranteed" securities in investment products, which in turn would fund or be used as collateral for other investments. If we did not have the GSEs, we would not have had the proliferation of "toxic assets" in the market.

I am not saying we should forbid any risky loans. I am not saying we should not allow loans to be bundled and sold. I am saying I am not smart enough to know the best solution but I have just outlined how without a bank or other financial institution's ability to "ship out" toxic loans they would have had to respond much earlier and adverted the massive scope of this crisis. It was Bush's job to regulate such matters. He not only failed in this respect but also in general with the needed improvements on regulating derivatives.

You have proved that our schools have failed.

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow Money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"

Constitution of the United States, Article I, Section 8

Congress creates the laws that regulates the GSEs, securities, and oversees them. The SEC is charged with enforcing those laws, it does not make them. That is why President George W. Bush and his Treasury Secretary had to ask Congress to impose regulations on the GSEs in 2004, 2005, etc.

http://online.barrons.com/article_email/SB123396551669058895-lMyQjAxMDI5MzAzNzkwNjc1Wj.html

Now Obama is telling us that if we do not do enough soon enough the damage will be disproportionally higher.

Do what? That's the rub. What is Congress and the President doing?

If we waste a few hundred billion in putting in too many efforts it will mean nothing in comparison to future losses if we do not succeed or we significantly under perform. We have already seen about $7 trillion in market value, real estate and other monetary losses. We knew about the problems over two years ago. There were plenty of indications that there were too many sub-prime loans four years ago. The Republicans dropped the ball in a major way. Now they are blocking and will continue to block what may be construed as zealous efforts to revive our economy.

Let's say that Republicans couldn't block anything in Congress. Would there have been reform of the GSEs? Nope. Who receives the most contributions from the GSEs? Republicans? Nope. Democrats? Yup.

http://online.wsj.com/article/SB122091796187012529.html

However, if one understands the dire need for stabilization of our financial markets and equally important the establishment of a bottom in the drop in real estate values then one would be less concerned with the hundreds of billions we are gambling to revive our economy and the many trillions of dollars of "principal" we have already lost and how we are very likely to continue to lose "principal" in the trillions in the future if the hemorrhaging is not stopped quickly.

Explain to me how the stimulus package "stabilizes" the financial markets or establishes a "bottom" in the drop of real estate values. Really. Go for it.

Intelligent people are not looking for a total turn around in one year of our nation's economy. We are looking to stop the hemorrhaging in one year and that would be a major success. We should be grateful for that alone after our markets and economy have been devastated to a point not seen in a very long time. And all of this occurred in a rather short period of time.

It would probably help if our politicians actually helped resolve economic problems through sound economic policies. Printing trillions to spend on their favorite programs isn't sound economic policy. I am sure that everything will seem so much better if I drank the Koolaid, but I prefer to think for myself rather than let the media and politicians do it for me.

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Posted in: Senate Republicans force delay on spending bill See in context

This is such an economic emergency that 90% of the stimulus package was to be used immediately, in 2009. Er.. wait. It wasn't even 75%. 50%? Not even close. 30%? Try 20.79% according to the Congressional Budget Office. So, if economic crisis is supposed to abate by the end of the year, why are there spending outlays past 2010? The stimulus package wasn't stimulus.

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Posted in: Senate Republicans force delay on spending bill See in context

SezWho2, mega-billions are being spent to bail out state programs and fund special interests programs. That's pork on a grand scale. It has almost nothing to do with "stimulus".

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Posted in: Senate Republicans force delay on spending bill See in context

Nessie, if legislators (such as Senators) aren't to blame for failing to take the proper corrective actions before the economic failure accelerates, then nobody is to blame. Do you follow?

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Posted in: Senate Republicans force delay on spending bill See in context

Currency comparison isn't the guiding measurement I would use. Why? Because their originating governments are devaluing them by printing more currency out of proportion to real economic output. Compare the USD, JPY, Euro, and GBP to gold, silver, and copper. That will give you a better perspective on inflation. Since 1979, gold has gone from about $230 to $936. That's more than 400% growth. Has the real economic output of the world grown by 400%? No, it hasn't. The driving force is inflation, as the governments of the world's largest economies "bail out" the banks.

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Posted in: Senate Republicans force delay on spending bill See in context

Billions of pork in this spending bill. Billions more pork in the omnibus. More than $3 trillion in all (including interest) when you consider the misguided, politically motivated spending spree. No, it's not a "straw".

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Posted in: Senate Republicans force delay on spending bill See in context

The writing is on the wall. Stop printing money, you fools!

"Gresham Investment Management LLC, the New York-based commodities investment company led by Henry Jarecki, has a record $1.2 billion committed from investors betting that inflation will send raw materials higher.

The $1.2 billion due in the next several months is “our biggest inflow of new money since we started accepting outside money in 2005,” Douglas Hepworth, the company’s director of research, said in an interview in Barcelona late yesterday. “It is basically the inflation story. The economic crisis will end at some point.”

Commodities, measured by the Standard & Poor’s GSCI Index of 24 raw materials, have outperformed stocks and lagged behind U.S. Treasuries this year as copper and gasoline rebounded. Government spending to revive economic growth will either boost both growth and inflation or just inflation, Hepworth said.

“I’m talking about the possibility of hyperinflation or stagflation,” Hepworth, 48, said. “We have some people betting on gold because it’s a stagflation bet.”

It’s a “very reasonable bet” that gold will lead gains in commodities this year, he said. Gold has climbed 6.7 percent, compared with 20 percent for copper and 32 percent for gasoline.

“It’s conceivable there will be more pain in commodities before the crisis ends,” Hepworth said. “But people are looking for very significant inflation afterward and that could take the form of inflationary growth if stimulus plans work or stagflation if stimulus plans don’t.”

"Gresham Expects Record $1.2 Billion for Commodities Investments", Claudia Carpenter, Bloomberg; March 6, 2009

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Posted in: Senate Republicans force delay on spending bill See in context

Career politicians don't care about JQP. They just try to look like they care about JQP. They worry about themselves and their political party... particularly since there's another Congressional election in less than two years.

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Posted in: Senate Republicans force delay on spending bill See in context

No. But at least he is addressing the real problems for the most part. It is a step in the right direction at least.

They are addressing the real problems? They're going to dissolve the GSEs? They're going to break up the banks and divest the investment sides? They're going to build nuclear power plants? They're going to build a new national power grid? They're going to get rid of the ethanol mandate? They're go to require executive salary and asset transparency in stockholder reports? Are they going to do any of this? When a person is clueless at land navigation, the worst thing you can do is "just do something" and walk in any direction that "looks good." When you are clues about economics, the worst thing you can do is "just do something" and try implementing any policy that "sounds good."

And I agree with you that the bail-outs were a mistake. And I cannot believe so few others fail to see that. Many are just following the lemming in front of them it seems.

People are panicking. They are in the "just do something" mode. This creates a dangerous impetus for policy-making.

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Posted in: Gorbachev criticizes Putin's party See in context

Wow. What are GSEs? Government Sponsored Enterprises. Examples: Fannie Mae and Freddie Mac. Need I write more?

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Posted in: Rove, Miers to testify on U.S. attorney firings See in context

Of course the previous administration replaced U.S. attorneys for political reasons (and legitimate ones, as well). Those attorneys are appointed in the first place. It's the standard political spoils process. Are there going to be any real repercussions? Not really... because both sides have done it and will continue to do so.

http://articles.latimes.com/2007/mar/14/nation/na-emails14

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Posted in: Senate Republicans force delay on spending bill See in context

likeitis,

Do you actually believe that President Barack Obama understands economics well enough to have the judgment to choose the correct policies? Do politicians in general understand economics well enough to form policy? Studying the Great Depression from an economics standpoint, it becomes clear that the President and Congress didn't have a clue. In fact, they messed up the system to the point where they actually prolonged the Depression. The more politicians get involved in the economics, the more they screw it up.

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Posted in: Senate Republicans force delay on spending bill See in context

SushiSake3,

Read my post to Nessie. You might learn something.

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Posted in: Senate Republicans force delay on spending bill See in context

My goodness... is someone here actually learning that career politicians (whether Democrat or Republican) are liars and crooks? By "coincidence," most of them are lawyers, too.

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Posted in: Senate Republicans force delay on spending bill See in context

Nessie,

My condolences on your amnesia. Even before 2007, there have been warnings about Fannie Mae and Freddie Mac.

This one is particularly damning: "The GSEs are increasingly in the asset management business, growing significant portfolios of mortgages and mortgage-backed securities. The GSEs are highly leveraged, holding much less capital in relation to their assets than similarly sized financial institutions. A consequence of that highly leveraged condition is that a misjudgment or unexpected economic event could quickly deplete this capital, potentially making it difficult for a GSE to meet its debt obligations. Given the very large size of each enterprise, even a small mistake by a GSE could have consequences throughout the economy. More than six out of ten institutions in the banking industry hold as assets GSE debt in excess of 50 percent of their equity capital. As shown in the accompanying table (Growth of the GSEs in the Last Decade), the outstanding liabilities of the GSEs have grown by more than five hundred percent since 1992, to $2.3 trillion at the end of December 2002. For comparison, the privately held debt of the Federal Government at that time was $3.0 trillion. In 2003, the Office of Federal Housing Enterprise Oversight (OFHEO), which oversees the safety and soundness of Fannie Mae and Freddie Mac, studied the risks posed by these GSEs to the financial system. Its study indicated that should a GSE experience large unexpected losses, the market for its and other GSEs’ debt might become illiquid. Institutions holding this debt would see a rapid depletion in the value of their assets and a loss of liquidity, spreading the problems of the GSEs into financial sectors beyond the housing market."

Analytical Perspectives, Budget of the United States Government, Fiscal Year 2005

Hmm... what's this? This problem existed long before 2005? "Recent analyses of systemic risk have concluded that some non-bank financial institutions are now so large and integral to the financial sector as a whole that their failure could lead to a systemic event. Fannie Mae and Freddie Mac—the two government-sponsored enterprises (GSEs) chartered by the federal government to support the secondary market for residential mortgages—are among the largest non-bank financial institutions in the world. Thoughtful observers have expressed concern that, if either of those Enterprises experienced severe financial difficulties, turmoil in the market for GSE debt could become severe and spread to other financial markets, substantially increasing systemic risk. Factors cited as justifying that concern include the huge size of the outstanding debt and mortgage-backed securities4 (MBS) of Fannie Mae and Freddie Mac, and the fact that, although investors perceive an implicit federal guarantee of those obligations, the government has provided no explicit legal backing for them."

"Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO", Office of Federal Housing Enterprise Oversight; February 4, 2003

Uh, oh. We are running out of years of President George W. Bush's administration. "Uncertainties about the Federal Government's liability have increased in some areas. Consolidation has increased bank size, and deregulation has allowed banks to engage in many risky activities. Thus, the loss to the deposit insurance funds can turn out to be unusually large in some bad years. The potential loss needs to be limited by large insurance reserves and effective regulation. The large size of some GSEs is also a potential problem. Financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

Analytical Perspectives, Budget of the United States Government, Fiscal Year 2002

Of course, this is the real clincher. "In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the [censored] Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans."

"Fannie Mae Eases Credit To Aid Mortgage Lending", Steven A. Holmes, New York Times; September 30, 1999

I censored the article for your benefit, Nessie. Here's a trivia question for you. Who was President in 1999? You get three guesses and the first two don't count.

Presidents don't make the laws, so I don't like to blame or credit them beyond their fair share. There is Executive branch responsibility, but partisans tend to blame the "other" party's Presidents and not their own.

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Posted in: Senate Republicans force delay on spending bill See in context

There are a number of issues at play. The market has still not shaken out. Warren Buffet isn't investing in common stocks, he's buying bargain-basement class A equity shares... and only in companies that won't be permitted to go under, like Goldman Sachs. So, if you're a regular Joe, now is not the time to go in unless you have money to gamble.

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Posted in: Senate Republicans force delay on spending bill See in context

Change and hope. Get rid of career politicians and the corrupt two-party system and you might see both.

"Although the total amount of earmarks in the bill will be less than the $17.2 billion included in all 12 FY 2008 appropriations bills, there are still thousands of unaccountable earmarks worth billions of dollars in the omnibus. Congress could have helped President Obama make good on his promises to cut earmarks. Instead, the appropriations committees decided that it was imperative to spend $4.5 million on wood utilization research and $2.9 million on shrimp aquaculture research, bringing total spending on those programs since 1985 to $95.3 million and $71 million respectively. Sen. Patty Murray (D-Wash.), who said of the President’s speech that “we know that if we make some sacrifices and the right investments we can move our state and country forward,” apparently believes that by spending $1.8 million on three YMCAs in her state she can fulfill that vision. She managed to abscond with 42 percent of the $4.2 million in spending on nine YMCAs in the FY 2009 omnibus bill."

Source: Citizens Against Government Waste (cagw.org)

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Posted in: Obama's plan to raise taxes on wealthy meets fierce opposition See in context

Politicians aren't stupid but savvy. They can't afford to let unemployment get too high and expect to remain in office so they try to fix things by running deficits, be they in the form of tax cuts or increased government spending.

It's ultimately a game of putting off the crisis that makes the market fluctuations so violent. Short-term gains in exchange for long-term stability. Ask a politician an economics question and he/she probably have no clue. Ask a politician what the polls say and they will probably know. I said that they are ignorant about the economic effects of their policies, not that they didn't understand the politics.

On the one hand, you're criticizing Obama for not allowing the economy to bottom out, however painful that may become, while on the other for not fixing things in the first five weeks.

Not correct. I'm critical of the administration for taking the wrong actions, not for failing to fix things. The economy is bigger than the government. The government can help or hinder, but not dictate. Expecting a turnaround in a short time is ludicrous. On the other hand, the bailouts and so-called stimulus spending is so wrong as to be insane from an economics perspective. The government is blowing billions on companies that are probably not worth saving. Moreover, federally subsidized companies such as Fannie Mae and Freddie Mac have been given boosts, despite being part of the fundamental problem.

http://online.wsj.com/article/SB122091796187012529.html

If the government wanted to do something without being part of the problem, it should have funded projects that would measurably improve the ability of the United States to compete in the international markets. It could have started a grid modernization project and ordered new power plants (nuclear and renewable). It could have eliminated the ethanol mandate and granted new tax credits for cogeneration (with added credits for solar systems). There's any number of things that they could have chosen to do that wouldn't have had such a deleterious effect on the long-term economic health of the country. It would have cost less and resulted in more employment. Of course, that's assuming that they really are interested in good answers

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