Uneven Spots in the Economy

Over the past few months we’ve seen a few people lose their jobs and companies go out of business. We’ve seen most people and businesses suffer significant reductions in earnings and savings. But some people and organizations seem completely disconnected from what’s going on in the economy. Two organizations come to mind.
I really like Cox Communications. Not only do they have excellent local leadership and represent one of the best corporate citizens in our community, they bring wonderful technology to my house such as high speed internet and HD TV with DVR. This past week, however, when my employer was in the newspaper for cutting employee compensation, Cox announced significant price increases. While I like that they will add Fox News HD, I would have much preferred that they cut a bunch of other channels and reduce their fees. We’ll never put pressure on the obscene pay of Hollywood and media blowhards if we keep paying more to Cox who keeps paying more to the networks who pay more to the producers who keep paying more to the likes of Letterman, Winfrey and Maher.
I can’t stand paying property taxes. Taxing assets year after year is the most backwards, unprogressive, dilutive levy of all. And most of the tax revenue goes to fund education which I have chosen to bypass by sending my kids to a private school – the biggest expense in my life (except for income taxes). Just as the real estate market has gone to hell in a hand basket, Bibb County decides to increase assessment values by an average of 30%. I’ll be sending my appeal in as soon as I get their letter next week. I don’t care if they haven’t revalued in seven years and if they lower the millage rate to offset the higher values, this has to be the worst timing I’ve ever seen.

Do you see a similarity in the organizations above? Lack of competition. Or so they must think.

Easy Explanation of the Derivatives Market

Heidi is the proprietor of a bar in Detroit. She realizes that many of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. Word gets around and customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit. She gets no resistance when, at regular intervals, she substantially increases her prices, and her gross sales volume increases even more.
A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral. At the bank's corporate headquarters, expert traders transform these customer loans into securities and trade them on international security markets. Naive investors don't really understand the securities, but since the bond prices continuously climb, the securities soon become the hottest-selling items at some of the nation's leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi, who then demands payment from her alcoholic patrons. When the unemployed alcoholics cannot pay back their debts, Heidi is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, the securities drop in price by 90%. The collapsed bond values destroy the bank's liquidity, preventing it from issuing new loans and freezing economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firm's pension funds in the bond securities. They find they are now faced with big layoffs. Her wine supplier claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved, bailed out by a multi-billion dollar, no-strings attached, cash infusion from Washington. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Thirty years from now

Thirty years ago we thought people would travel by Jetson-like flying cars and live in colonies on the moon. Our dreams were based on traditional values of American individualism and freedom, enhanced by technology. Our biggest fears were nuclear confrontation with the Soviet Union and running out of fossil fuels.
Today, the Soviet Union is gone and we have more known fossil fuel reserves than ever. We’ve about given up on any kind of travel that leaves the ground. The visionaries of yesterday are retired, replaced by a much more powerful block of politicians and media who believe that a central state and political correctness will squash today’s anecdotal cases of greed, and produce fairness for all.
Here’s what I predict for 2039 if we continue on our current track:
· Health care in the U.S. will look a lot like today’s VA system. Rationing will cause a thriving private health care market, probably in India. The pace of medical breakthroughs will end because Washington will deny Big Pharma the big rewards that must accompany big risks.
· We will buy gas, tobacco, ammunition and non-organic produce in stores that resemble today’s Post Office branches. The service, hours and lines will be unbearable.
· AM radio will be gone; churches will be turned into community-organizer centers.
· Annual pay for all jobs in the U.S. will range between $1,100,000 and $1,600,000 ($26,000 to $37,800 in today’s dollars), depending on your age.
· Most Americans will live in 1,000 square foot concrete cubes in major cities. Suburbs beyond biking distances will become camps for the homeless.
· China will force nations to align with them, overtaking U.S. influence around the world. The Chinese Federation will establish a colony on Mars.
· Science will understand that population growth, underwater volcanoes and solar flare-ups influence the climate a zillion times more than hybrids, reusable shopping bags and flushing on the third use.

One last ray of hope: Right-wing Americans will take over a South American country, where individualism, competition and freedom will live on.

Obama owns this sick economy

Make any comment about the deepening economic mess and you can count on the same comment from Obama defenders: “he inherited a mess.”

But why was the economy a mess in January when Obama was inaugurated? The mechanical causes of the downturn were high gas prices and the bursting of the real estate/mortgage bubble. But far more important was the crippling fear that Washington was growing out of control. Bush started it with his damaging deficits and bailouts, and Obama has escalated things to levels that can’t possibly be sustained.

Business started losing confidence last summer when it became clear that Big Government (think Jabba the Hut) would be elected. Expansion stopped, plans to cut costs began and the stock market started its decent. We’ve suffered enormous reductions of wealth in the past year.

So where’s the recovery? To use a weather analogy, every time a green shoot appears in the business sector, the hard frost of government slaughters it. What sane business leader will expand when the forecast calls for higher taxes, further regulation, damaging social engineering and more promises than can possibly be delivered?

When you think “he inherited a mess”, you act in a way that compounds the damage. Obama’s plans for steep energy taxes, VA-style health coverage for all and redistribution of wealth are pushing the economy into a nuclear winter.

Every morning I think: kids, I’m sorry my generation has left you such a mess.

Getting ripped off

Funny thing, human nature. I would gladly give a stranger $100, but I’d risk my life to keep someone from ripping me off for $10.

I guess that’s why I get so upset with the direction of the current government. I’m glad to pay my share, but I am feeling increasingly ripped off by all the waste, fraud, stupidity and bureaucracy in Washington.

The government seems more interested in social engineering than the big, important issues such as Social Security, debt, illegal immigration, terror and increasing the supply of energy. No good career goes unpunished, while the Treasury is laid open to those who traditionally vote Democrat.

Here’s how it’s supposed to work. The government is like the dentist. While my dentist is a great guy and I thank God he’s there when I need him, I really don’t want to think about him except for an hour every six months.

If I could choose a government like I choose a dentist, I wouldn’t go to Dr. Obama.

Trial attorneys need to take John Edwards to the woodshed

If you ever needed an example of media bias, look at how little has been reported about John Edwards since he admitted to having an affair with Rielle Hunter last August. For years, the press adored the Breck Girl’s fancy looks, his class-warfare message, and the way he stuck by his wife when she learned she had cancer during last year’s campaign. All that adulation has now been quietly swept under the rug.

What a fantastic opportunity for trial lawyers to polish up their tarnished image. While some trial attorneys really do protect the weak and attack injustice, Edwards made obscene fortunes cashing in on peoples’ misfortunes. He was the poster child for lawsuit abuse.

Now is the time for some real justice. While the government is investigating his campaign finances, the trial lawyers need to lead a class action lawsuit to return all those political contributions to the special interest groups and misled liberals who supported Edwards. He should be disbarred. His wife, Elizabeth, should get everything he owns.

Greed, deceit, immorality, hypocrisy - the media should shine a bright spotlight on all that is John Edwards.

Crazy Joe sick pack

I’m feeling a little sick. No, not flu symptoms, but a queasy hopelessness that the stock market cannot recover and our kids are in deep doo-doo as long as people like Biden and Obama run Washington.

Since January 20th, I have been telling myself that the U.S. economy is so resilient that, no matter how bad the government screws up, we will regain our footing. After a week of Joe Biden in the news, I’m not so sure.

Last Thursday, Biden said we shouldn’t board planes and subways for fear of catching the flu. Thank goodness no one took him serious. Last Sunday, the VP said the cure for the economy was green energy and government health care.

I grew up three doors down from the Bidens in Wilmington. It should be really cool to know a Vice President. So why do I feel achy and nauseous?

Can we quarantine Joe for being obsessed with political power, the spotlight and spending other people’s money?