Here is one that sticks out:   A GUY WHO DRIVES           A CAR WIDE OPEN        IS NOT THINKIN’        HE’S JUST HOPIN’

When I had digested President Obama’s strident, partisan and angry oratory in Ohio two days ago, I had the impression he and his speech writers had not been and were not — THINKIN.’   Just hoping that the message would work since nothing else seems to be (working that is).

That messsage?  One the dems have been using a lot lately and one the President believes mitigates all of his disastrous spending policies:  The devil Republicans made me do it.  Especially President Bush.  Not the dems fault.  Blame anybody else but not them.

The crowd that was there loved it.  The ‘anti-Beck’ has spoken and the faithful cheered.

I didn’t buy it and I don’t think the the voters in Ohio will either.

Come on, who is the President kidding?

His Ohio visit and message wasn’t about the economy at all.  It didn’t address the problems nor offer any viable solutions.  There was no meat in it.

Nope.  It was nothing more than a campaign speech with all of the requisite negativity thrown at the ‘not-so-loyal’ opposition.

There is no place in today’s economic and political atmosphere for our President to be so decisive.  I can understand why Beck, O’Reilly, Olberman and the like do it (money, money, money — thank you ABBA).  But the President?  No way, Jose (not Canseco)!

The President’s primary job is to solve American problems, close behind is to be a cheerleader for our weary nation.

Come on Obama?  What have you and your fellow socialists Democrats done in the past two years?  Doubled and tripled the deficit, created unheard of debt and done absolutely nothing to fix unemployment.

The blame game only works so long and the dems deadline to drop out of the game was last spring.  Oh, yeah, Obama, what ever happened to that change in politics you promised us?  Same old same old.

I don’t like either party right now.  I hope you are with me on this.

Bush was an awful President.  The Republicans in Congress just made his terms worse.  But Obama is opening himself up to being right there at the top with Bush and the dems in Congress are not helping the President.

We need solutions from our leaders.  Not stonewalling and criticism.  But President Obama has really opened the door and the Republican leadership is going to go storming through.  I hope they do.

We need new and better leadership.  In Washington D.C. and in our own backyards (cities, counties and states–hope you heard about the city leaders in a small California town that were bleeding the working citizens to death with near $million compensation packages).

To mention just one important thing, we need to start over with a completely new tax code . . . and that will only happen if we get completely new leaders in Washington.  To change the anger and hatred in politics we have got to change the politicians.  In fact we need to rid our nation of the word “politicians.”   No career elected leaders, ever, just genuine citizens elected for a term or two.

I (we?) can only hope that the two parties tear at each other so much that we, the people, see them for what they are and start voting out every single multi-term elected official there is.

By the way, a VAT (value added tax) like most other developed nations have would be an excellent replacement for our income-tax system.  And the best way to stimulate the economy is to create jobs, give incentives to businesses, and then get government the heck out of the way.

This one I read.  I am not going to rate it but I will say that the headline caught me and the story was one I would not attribute to an economist.

Let me set the record straight.

The dollar is weak and has been for years.  In fact though, it is not even as low (particularly against the Euro) as it was a year ago.  Heck, all you need to do is travel outside of the Americas to know that this is true.  I paid the equivalent of $8 for a Whopper Combo in Turkey not too long ago.  Before that there was the $5 one scoop (tiny at that) ice cream in Rome (they call it Gillato so they can charge more — who says they Europeans haven’t learned American marketing techniques?).

But that was over a year ago.  Long before the FED and the Goverment started printing money and whaling on our debt structure.

Of course you would expect the dollar to be weak and continue so when the government is creating money out of whole cloth ( ad nihilo I think the philosophers call it . . . out of nothing).

The sad fact is that this doesn’t seem even close to ending.  Money will be pouring out of the proverbial presses for months, if  not years to come. The government thinks it has to do it to spur the economyl

If you have forgotten, or never paid attention to your Econ classes let me tell you how this works.

Right not there is one main way.

First, the FED creates money by buying bonds from the Treasury (in March they announced plans to buy at least $300 billion over the next year or so).  The government needs money to spend on stimulus packages (two at least and more likely to come) so they sell a few billion $$ of short term or long term bonds to the FED who pays for them with $$ they don’t have.  It is really all an electronic transaction but it works.  Say, $30 billion last month in 6 month notes purchased by the FED.

What does the government do?  They get that $30 billion electronic transfer and then spend it by sending it to the states or individuals in another transfer.  At the end of this loop the electronic transfer goes into someone’s (like you or me) account at a bank and we draw on it (usually with electronic spending with credit cards).

Bingo $30 billion into the economy.  But wait, there is more, if you spend it now you also get, this one time only — or actually everytime it happens . . . yes you get PUBLIC DEBT!  The government now owes $30 billion more to someone (often foreign government buy the debt . . . like China, which is a whole nother story).

I think you probably get the idea now.

The problem is that now our PUBLIC DEBT is becoming an increasing portion of total GDP.   Public debt was only 37% of GDP only two years ago and this year it is going to be north of 55%.  Sure interest rates are low and so the government doesn’t have to spend that much to pay the interest  . . . but what happens when the economy really turns and the FED has to raise rates?  Crippling debt coupled with crippling debt service (interest) bring . . . a bust.  But there is a way out.

President Obama is starting to recognize this and you should too.

The debt has to be paid and there are limited ways for the government to raise $$ . . . think taxes (by any name . . . excise fees on tires from China or increases in individual tax rates).  Tax receipts were down nearly 17% for the year ended Sep. 30 due to the economy (people stop spending) and corporate receipts were down nearly 55% (companies stop making profits . . . and how!).

Weak Dollar?  Jeez Louise!  Of course it is weak and it is going to get weaker.

What you need to know is that this can’t let this happen without planning ahead.

Saving money under the mattress is throwing it away as $$ weaken and are worth less (Germany in the 1920’s, Argentina in the 1980’s and Zimbabwe as you read.

So, like I pointed out last week, one great answer is to spend to stimulate the economy (buy things or invest).  That is what is beginning to happen but not nearly enough!

Markets are up, retail figures are not as disappointing as expected and consumer confidence is artificially low right now. A great time to invest or spend!

Spending turns that $30 billion mentioned above into $60 or $90 billion in the marketplace by something called the ‘multiplier’ (something for another day).  This helps the economy which puts tax $$ in the governments coffers and lets them pay of debt.  It also helps businesses put $$ to the bottom line and that means jobs.

Bottom line.  Weak dollar, shmaller . . .  the answer is to spend (wisely) or perish (not really quite that bad but you get the idea).

Start Christmas spending now.  Beat the rush and support our spendthrifty government!

Oh I can’t wait for 2010!

Thanks to flickr’s chego101 for the photo

As he mentioned in his recent speech on health care, Obama is being careful to place the blame on the prior administration.  Yes indeed, he did inherit a trillion $$  problem, but he has, at the same time, done nothing to improve it.

I have read economic texts that state that a federal deficit is nothing to worry about.  How can that be?  Someone has to come up with the money the government is spending above and beyond any income.  Lately it has been China, but Saudi Arabia, Russia and Brazil and other have been buying our Treasury debt as well.  Are these the ‘partners’ we need and want?

Part of the government’s response has been to let the $$ decrease in value when compared to other global currencies.  Aslo, the Fed has pegged interest rates at record lows (basically zero for short term inter-bank loans).  This has been good for the U.S. because our roughly $8 trillion of debt requires less interest right now (certainly for short term rates — i.e. 2 year Treasury notes are paying ONLY 0.94% and 6 month Treasury notes are at the fabulous rate of 0.19%).

Dang it affects all of us too.  Many are afraid of putting their savings into the stock market (and they should be too) but what are the alternatives?  I checked with a national financial institution today and their rates on savings of over $1,000,000 are ONLY about 0.30%.  That means you will only get about $30,000 a year for ‘investing’ your money in their Money Market Savings account.  Most of us have only a fraction of that are are earning only pennies every month on our savings.  True, check your most recent statement.

Jeese Louise folks.  Who could possibly say that deficits don’t matter??  Only government funded economists that want to convince you and I that it is true.  Bull-crap!

Of course deficits matter.  Don’t let anyone tell you different.

And our deficit this year (part Bush’s and part Obama’s) is going to be about $1.6 trillion!  By far the highest in history and one that makes the highest of the Bush era seem like ‘chump change.’

In fact our national debt (about to be $8 trillion) will be around one half of our entire GDP.  In another couple of years with more trillion $$ deficits we will be approaching  75%-85% Of GDP.  Are you kidding me?

How are we going to pay for this?  At only 2% our debt service could be $200 billion per year.  But how long is China, Russia and Saudi Arabia (you know . . . our closest friends and allies) and other governments (or investors) going to be willing to pay only 2%??  Not long when inflation of only 2% will eat up their profits.

The Treasury is going to have to start paying much higher rates to get anyone to buy and keep our debt afloat.

What will happen if inflation and other factors (most of which are inevitable: a declining economy, high unemployment, even more increases in government spending) cause the rates to go to 5%??  Or what if they soar to say 8 or 9%??  Or even higher?  Holy Mackeral, Batman!

How is our government going to manage to pay a $1 trillion per year debt service?  Total government spending this year is only about $3.7 trillion . . . income (taxes etc.) only about $2.1 trillion.  A third of spending on debt?  Half of income going to debt service??

Come on folks, this is just not sustainable.

You don’t have to be a genius (or a fake one with the title of ‘economist’) to figure out the coming problem is one of monumental scope.  And here is the worse news . . . the figures I have given you do not even contemplate the unfunded obligations of our government for Social Security or Medicare/Medicaid!

In a couple of years America will be on sale and it will be A FIRE SALE!!

Our big business will be bought for fractions of their real value by foreigners (China if those business have anything to do with natural resources).  Our real estate will be cheap even by today’s standards.  Our stock markets?  If we allow this to continue the shock of the past 20 months will seem like nothing more than a bump in the road.

So, we’ve got more to worry about.  And we, as Americans, must do everything possible to prevent this.

How?

1 – Make Obama live up to his promise . . . not a dime additional spent on health care reform (which we need).

2 – Get rid of the idiots in congress by NEVER voting for incumbents (term limits is the best solution but our elected leaders will NEVER let that come to pass — so don’t EVER vote for any of them).

3 – And finally press your elected leaders to do something now about unemployment and the debt (they both go together).

A strong America is an America out of debt.  A strong America is an America that is fully employed with good ‘tax paying’ citizens.

Just that easy.

Copy everyone you know with the blogs from this site and lets you and I and 300 million others start taking America back!

Join the band wagon.

Today.

Thanks for reading.

Scott

Sure, occasionally a few will get lucky and forecast  a bubble or something like that (remember ‘irrational exuberance’?).  But once they get lucky they hang on to their ‘model’ for too long and they miss the next leg up or down (the economy and not necessarily the markets).  We all suffer but they keep their big six-digit salary and bonuses!

Why?

Economics is art as much as science.  A few decades ago economists thought it would be cool to use complex mathematics (econometrics) to create models and forecast all sorts of things . . . stock markets, trade, employment, interest rates or whatever.  The fact is there are so many models now that someone, somewhere is bound to be right at any particular moment in economic history.  Then, as soon as the press, Congress, banks and investors are patting the lucky few on the back, something odd happens.  The science turns to art and the whole picture as ‘they’ see it blurs and some bubble bursts.

Ouch, there we go again.  Whammy, a few million jobs are lost, trillions are spent by governments and central banks go bottom fishing with interest rates that we all wish would translate to our credit card accounts.  Naturally taxes go up, government grows and the middle-class gets smaller — yes, the rich to get richer and the poor get poorer in just about any economic scenario since WWII.

I’m tired of this cycle of idiocy.  Furthermore I I have a solution.

We need a Supreme Court of Economists.  Nine of them.  Each with ten years experience (at least) and preferably (but not necessarily) an advanced degree in the field.  Oh wait, at least two of the nine have to be in industry or private practice and MUST have no academic credentials (i.e. they have NOT been resident economists at ANY institution of higher learning AND have NEVER worked for ANY government agency).

These nine economic jurists must be from at least five different ’schools’ of economic thought (one Keynesian, one Smithian, one Galbraithian, one supply sider or whatever) and there can be no more than two with similar takes on economics (based on actual evidence from the past).

This Supreme Economic Court must meet monthly and issue a ‘State of the Union’ paper each month.  This paper must show a consensus (majority) and be written so that any high-school graduate can understand it (now that is going to be tricky for any economist).  If there are alternative views by two or more dissenters these must also be provided.

Now comes the good part.  EVERY banker, Congressman, and financial analyst or advisor MUST read the monthly report.  The President too.  Then each of the above must sign a statement (monthly remember) that they agree with the paper or document why not.  These statements must be notarized and filed with some central agency (the economic police!).

All of the above must be made available to EVERY citizen to read and comment on if they want.  No legislation can be even drafted that is contrary to the consensus without a public majority vote.  By the way, we can have bunches of these courts in states, counties or bigger cities.

Furthermore, NO decisions can be made by any government entity or individual UNLESS such decisions are approved, in the majority, by the Supreme Economic Court.  Again, subject only to a public referendum.

All of the above can be tweaked as time goes on, but I am willing to bet dollars to donuts that if we followed this process we would avoid any prolonged economic downturn in the future.

Oh, by the way, the leader of this ‘court’ is appointed for life and . . . I get to be that guy.  Why not?  Take it or leave it.

Thank you for your attention and cast your vote for the above as soon as the ‘credit card debt’ bubble hits in about 3 to 6 months.

I’m not retreating.

A bunch of other, more wrong than right, economists should.

thanks to flickr’s dennis defrayne for the photo