Nancy Pelosi is bringing down the country

It amazes me how dumb someone can be. The house voted down the "bailout bill", a good thing (and a topic of other posts). But it was defeated because of politics. Democratic politics!

For the rest of the week the Dems will try to spin that it was the republicans who "didn't come through." While it may be true that a majority of republicans voted against the bill, it's not the republicans that "didn't come through." Again, its the democrats. First, its always the leader's responsibility to make things happens. But, of course, a democratic leader has no responsibility. When things don't go the way they want, it's always somebody else's fault.

I also need to point out that over 90 DEMOCRATS voted against the bill. But again, obviously that's not Pelosi's fault. She's the leader. She can never be at fault. It must be someone else's.

Second, most republicans voted against the bill because their constituents told them to. That's how its supposed to work. This bill was voted down primarily because most American's who contacted their representatives told them NOT TO VOTE FOR IT. So they didn't.

Most people who contact they reps have something relevant to say. Most of those people have a brain, and aren't afraid to use it. They all realized that this bill was garbage. They told their reps to vote it down by a margin of 100:1.

Now the dems, led by Pelosi, are on TV trashing the republicans. I'm sure this will help things even more. Please. Nancy, you didn't deliver. Barney, anyone who thinks you're acting in the interest of any majority of the country is as nuts as you are. Both of you, shut up and let someone with a clue take over the leadership.

I wish this would stop the idiocy. I wish that these representatives would listen to somebody who has some idea of what they're talking about. NOBODY IN WASHINGTON FITS THIS REQUIREMENT. Oh, and someone like Warren Buffet is disqualified also, since he has far too much money in the game to be able to act in anyone's interest other than his own.

I Can't Stand It

I can't stand it! How can anybody not see the democrats attempt to usurp power through the treasury. I'm watching Harry Reid and Chris Dodd now complaining about how they can't get a deal done. Good! What they're proposing is idiocy.

Reid is blaming McCain for the problem. Yeah right. Dodd is saying they had things all worked out a week ago. Really? The problem didn't 'manifest' until 4 days ago. Lie Lie Lie! And the media just accepts this without question.

All I hear is Wah, Wah, Wah.

The republicans are just as stupid. As usual, they're trying to do things behind closed doors, making it look like they're either plotting or doing nothing useful. What the hell is wrong with these people!

It's obvious that none of them have any experience in dealing with financial matters. I find it outrageous that Barney Frank of all people is the high ranking financial official. Boy, there's someone with experience in "Main St." financial matters. Gak!

Reid just said, "We did not create the problem." More garbage! The dem leadership has done a great job deflecting the root cause of the mess. Remember, the problem has been caused by sub-prime mortgages. That's the root cause of everything. Nothing the dems have proposed does anything to address this. Instead, they want to increase the size of government to a point that can never be recovered.

This problem has been caused by the "fair housing act". This government program forced financial institutions to lend money to people who couldn't possibly pay it back. Sub-prime was created to fulfill this obligation. Not surprisingly, most people with sub-prime mortgages can't pay it back.

Nowhere in the democrat package is this addressed at all. Instead they want to bail out their friends and limit compensation. Oh, and give all power to the Treasury to dictate policy. Sweet deal! There's an impartial group.

What does any of this have to do with fixing the problem?

The ranking republican on the finance committee just announced that an invistigation has begun to determine why the SEC didn't catch any of this 6 months ago when they were asked to investigate. While this should be a good thing, we all know that nothing will happen.

Now all the CNBC talking heads are arguing. I wonder if anything can happen in Washington. I still wonder if anything should happen. Seems to me that the WM situation was handled correctly. JPM bought them out, valuing the garbage loans as, well, garbage. That's would should happen. The government has absolutely no business in this.

If the government would just leave the markets alone, they will clear themselves out.

Dillon Radigan just announced a plan that actually addresses the issue. I didn't hear who proposed it but it provides a mechanism for determining a true valuation of the mortgages on everyone's balance sheets and a framework for buying/selling/clearing them. Now that's what is needed! It addresses the issue directly without all the political bullshit. No bailout is needed. No sacrifice of democratic principles (as in democracy) is required. In this scenario the Fed only gets involved if liquidity becomes an issue, which is how it should be.

Too bad we know it'll never even be considered. At least not while the democrats have the majority in congress.

Thoughts on the Financial Crisis

Last night I tried to explain the current financial crisis to people who simply won't listen to facts. Using everything, positive or negative, as part of a political agenda solves nothing and mostly contributes to the problem by increasing angst! It pissed me off so much that I wrote the following paper:

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Executive Summary

The blame for the current economic crises spans not only both political parties, but also the “non-partisan” government organizations that are supposed to be responsible for monitoring and regulating the macro financial environment. These include both the Federal Reserve (The Fed), the Treasury Department, and the Securities and Exchange Commission (SEC). Their mismanagement of monetary policy at the highest level of government for almost two decades combined with irresponsible fiscal policy on the part of the congress and president is what created the environment for the failure of the system. The abuse of the system through total disregard of sound money management practice (ie. greed) by the banks, brokerages and investment houses within that environment has brought us to the brink of financial collapse on a scale much larger than that seen in the 20^th century depression.

Discussion

The easiest way to describe the problem is through a comparison with an earlier financial crisis. In 1971 President Nixon nullified the 1944 Bretton Woods treaty that had pegged gold at $35/ounce and effectively made the dollar the currency of the world. Removing the dollar from the gold standard meant that the dollar's value had to float, based on the confidence of other countries in the ability of the US to pay it's debts.

Now that there was no gold to back up the dollar, the value of the dollar plummeted (remember “devaluation” from the news in the 70's). More dollars were needed now to cover the US debt. How could this be fixed? The Fed turned on the printing presses and started printing more money. So, now there were more dollars and the debts could be paid.

However, money is subject to the same supply and demand rules as any other commodity. The more money printed, the larger the supply. If supply increases then value decreases. This over-supply of dollars led to runaway inflation. To counter it, a wage and price freeze was implemented. This accomplished nothing except to create more inflation as the supply of dollars continued to increase but the demand dropped due to the freeze. The combination of inflation combined with a slowing economy led to what was dubbed “stagflation”. Jobs were disappearing and GDP was dropping. Yet prices were increasing. This continued until the Carter administration.

It was Paul Volker, as Fed Chairman, who finally got things under control. Previously, the Fed tried to “fix” things by ratcheting up interest rates (as high as 13.5%). Volker abandoned this approach and instead began limiting the growth of the money supply. The unit “M3” was monitored, the amount of dollars in circulation world-wide. By lowering the supply, the value of the dollar increased and eventually stabilized. This left the country in a recession (he removed the inflation part of stagflation) but that also stabilized as the system equalized over the next few years. Volker's money management is a prime ingredient for the growth during the Reagan years.

Today we have the same problem as in the 1970's. When Allan Greenspan became Fed Chairman, he went back to old way of managing the central bank – jerk around with interest rates. However, he also realized that the economy could be stimulated by continuously increasing the money supply while artificially keeping interest rates low. Easy credit to the banks meant easy credit for consumers. The overall result was an economy that was supported primarily through consumer spending. The more credit, the more spending. The more spending, the more demand for dollars. The more demand for dollars, the more money is printed.

So, first the economic boom was maintained through consumer debt (ie. credit cards). Consumers were encouraged to spend all the money they didn't have to buy things they didn't need. Then, since credit was still easy for the banks, this approach was applied to mortgages. At first the good rates were given only to those that had the means to repay the loan. But then greed kicked in.

Now consumers who couldn't actually afford houses were given mortgages anyway through sub-prime loans. The reasoning was such that easy mortgages lead to an increase in demand for housing. So, housing prices increase. As property values increase, sub-prime loans could be refinanced, thus allowing the borrowers to continue to underpay on the loan. As long as property values continued to increase the borrower could always be re-qualified for a new sub-prime loan and the payments would keep coming.

In the meantime, qualified borrowers were encouraged to keep spending through easy access to home equity. Again, as long as property values continued to increase, the equity existed on paper and could be borrowed against.

While consumers were building debt at a rate never before seen in the history of the world, the US Executive and Legislative branches also went on a spending spree. Balanced budgets became irrelevant. Again, as long as spending continued, the economy, as measured by GDP, also grew. The US budgets became excessively bloated with entitlements and pork. Why not? All the government needed to do was have the Fed print more money.

Now, during the Clinton years, there was a “successful” effort to balance the budget. Government spending was kept within budgeted limits specified by taxable income. It made for spectacular headlines (and is still used as an example of “good” government budgeting). However, government trade policies were put in place resulting in a huge transfer of wealth to foreign nations. Free trade, open borders, and trade agreements were created that brought foreign goods into the country, generally much less expensive than local equivalents. The theory was that as long as commerce continued it would fuel the economy. Spending was spending – it didn't matter who was spending. The result? Huge trade deficits with billions of US dollars going out of the country. The budget was balanced at the expense of widening trade spreads detrimental to the US. And President Bush has compounded the problem by running up the largest deficit in history

And of course the printing presses just kept on printing those dollars. How much was printed? We don't know. By 2006 the number was so high that the Fed simply stopped counting. M3 was/is no longer tracked. Oh, also in 2006 Allan Greenspan retired and turned the Fed over to Ben Bernanke, who continued the same monetary policy as his predecessor.

Summarizing to this point: The supply of US dollars is so high that it is no longer tracked. Interest rates have been kept artificially low so that consumers have incentives to spend on TV's, iPods and houses they can't afford. The government is generally running a deficit, meaning they too are running on credit (weekly bond auctions are held to raise the money to finance the debt).

Now the banks wanted to mitigate some of their risk of holding all of the mortgages. Instead of simply holding and servicing the loans, they were packaged up and sold to brokerages and investment banks as collateralized notes or “Collateralized Debt Obligations” (CDO). These were again repackaged and resold to investors, marketed generally as safe investments.

The entire system created here can only function as long as spending continues. More spending = more demand. More demand = higher value. Higher value = more credit. More credit = More spending. And those printing presses keep right on going.

But, as soon as the spending slows or stops the system begins to unwind. Less spending = less demand. Less demand = lower prices = lower values. Lower values = lower credit. Lower credit means that the sub-prime mortgage holders can't refinance. Oops. Sub-prime rates reset upwards and those unqualified buyers can't pay. They default.

So the bank forecloses and takes the property. On a small scale this isn't a problem. However, the high volume of sub-prime loans that were given all defaulted simultaneously. Housing supply goes up because of all the foreclosures. Property values go down. Values go down = decrease in CDO value.

Decreasing CDO's on their own may not have been a problem. However, the way they were accounted for on the investment house books had them valued at full value. Now that value has disappeared. This leads to dramatic losses by the investment houses and the investors that were sold the CDO packages.

Now there are huge losses on the investment house books. The CDO's and the properties used as collateral are quickly losing value. As the investment houses experience losses they have to raise cash in order to pay their obligations. However, their books are filled with bad debt and no assets so nobody will lend them the money.

First Fannie May and Freddie Mac experienced this. Their entire business was mortgages and CDO's. And for reasons outside the scope of this paper they were carrying trillions more than they should have been. First the Fed allowed them to borrow money directly at almost no interest. However, it soon became apparent that mortgage and CDO value held by these institutions was almost worthless. With no capital, neither institution could do business. In the end, the Fed and the Treasury took them over.

And as a slap in the face to the American public, they guaranteed that these worthless investments would be covered by the good faith and credit of the US government. In other words, those holding the Fannie and Freddie debt, which now was worthless, would be paid anyway. This covered those holding this paper – primarily foreign governments. However, investors in these institutions were out of luck. Their investments were worthless.

They had nationalized the profits (taken whatever value was left and paid it out to other countries) and socialized the debt (the US taxpayer is now responsible for all the bad mortgages and CDOs – about $7.8 trillion.

Other institutions who had investments in this paper were also screwed. First Bear Stearns ran into trouble. The Fed, SEC, and Treasury jumped in and got JP Morgan to take them over by guaranteeing their debt (more for the taxpayer). Today Lehman and Merrill went over the edge. The Fed refused to help. By the end of the week we will probably lose Washington Mutual and AIG.

Anyone who says we're on the road to recovery is a moron. This CDO garbage has been used not only for sub-prime mortgages, but also standard, jumbo, and commercial mortgages too. With property values continuing to drop, this paper too will become worthless.

And so it goes.

Not to be overly pessimistic, but it is very possible that we could experience a complete collapse of the US monetary system. If foreign governments lose confidence in the US investment paper they're holding, they may begin dumping it at bargain basement prices. This will cause demand for the dollar to drop precipitously resulting in the dollar losing value against all other world currencies and causing inflation at a rate seen previously only in banana republics.

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Sources:

Publications from Agora Financial Company.

Wikipedia

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I feel better having written this. I know its a simplification of the situation but at least I've explained to myself. I'm sure I'll have additions and corrections to this. Of course, I may not bother since I'm probably the only one reading it anyway :-)

Who's racist?

Let's talk about the "bubba" vote. Apparently, according to "Meet the Press", the "bubba" vote could be instrumental in an Obama loss.

What's a bubba vote? To paraphrase, it's the dumb white men who will vote against Obama simply because he's black.

I see. So that's not a racist classification. It's OK to give white people derogatory names, call them dumb, and then blame them for something that hasn't even happened yet.

Don't try to label the blacks that are voting for Obama simply because he's black. That would be racist.

Oh, I see.

Bob Woodward has lost it

I just listened to Bob Woodward on Meet the Press. He's released a book showing what a mess the Bush whitehouse is/was throughout the Iraq war.

Duh!

Anybody with a brain knew that Bush had his own agenda for Iraq and wouldn't listen to anyone regarding its approach. However, to publish a book and imply that military / non-military relations have been permanently ruined is ludicrous. The next president will create his own relationship with the military. Bush's relationship is irrelevant.

Bob, what's your real agenda here?

You did a great job with Watergate. You helped expose corruption on an unprecedented level. Stick with that. If you've got a story in progress, expose it. Otherwise your motives are called into question.

Note to Republican Women

The choice of Sarah Palin for Vice President is definitely a momentous occasion. There is no arguing that fact. However, remember this; she was chosen for her qualifications. She was NOT chosen just because she's a woman! Continually harping the feministic view makes you sound like liberal democrats.

We do not want Sarah Palin to be equated with Hillary Clinton. Focusing on her political experience rather than gender will cause a complete eclipsing of the "Hillary" brand, who has no real experience at all.

Besides, using Sarah Palin as a springboard for the feminist agenda is self defeating:

• It distracts from the Presidential election (Oh yeah, that's what this convention is about...)
• It pisses off the other 50% of population who isn't female.

Contrast

The republican convention is still ongoing but I have to quickly comment on the differences between the party conventions. Please note that I am NOT a republican. I'm registered "unaffiliated" and have never voted a "party line."

The democratic convention was a week of nothing but bad mouthing the competition. The message seemed to be "Vote for us because things really suck now!" I wasn't inspired in the least. In fact, I was turned off completely. After watching a week of speeches I still don't what the candidate's objectives are or how he expects to accomplish them. All I got out of it is that they HOPE a lot will happen. Give me a break.

Additionally, doesn't anyone realize that the party rules were changed to avoid elite "embarrassment?" The role call, the actual purpose of the convention (remember, the convention is where the candidate is officially nominated) was skipped. This because some party elite (who shall remain nameless) would be embarrassed if the individual state delegations got to speak? What kind of crap is that?

That seems to be the dems approach to everything these days; lets change the rules so that it suits us. Never mind that the country is watching. Never mind that the convention has rules that have been followed for over a century. One of the "elite" might be embarrassed so we can't possibly follow the rules.

I've actually enjoyed watching the republican convention, at least to this point - its not over yet. Linda Lingle gave a great speach. Rudy Giuliani was fantastic. Both of them made their points. And, while they had negative things to say about the competition (as is expected), it wasn't couched in "hate." Humour was the approach.

Even Sarah Palin was a pleasure to listen to. She may have gone on a little long, but her message was positive.

Jeez, I can't believe I'm saying positive things about the republicans.

Finally, the role call was entertaining. It's fun to hear the state delegations cast their votes. They never just give the vote count, a short speech is always given. Of course, some of them are ridiculous, but some of them are quite funny.

Network news is Dead

You know, I started the evening by putting on MSNBC. It was going to be an interesting night at the republican convention and I wanted to catch their "color commentary".

I was absolutely shocked by what I saw and heard.

Instead of the discussion of political positions, background on the candidates and informative news on both red and blue candidates that I expected, I was treated to a group of talking heads spewing vitriol and challenges at the potential VP candidate. What ever happened to intelligent news? These people aren't news broadcasters, they're just packaging their own personal views as news and then ramming it down our throats as if it was law!

So I turned to Fox News. Why not? I keep hearing that NBC is in the pocket of the democratic national committee so lets see what their antithesis is saying.

It was just as bad.

Under the guise of "interviews", these broadcasters would ask questions and then interrupt the interviewee by spewing their own views as the answer. Then they would berate the guest for not answering or for wavering.

I turned to CSPAN. Thank g-d there's somewhere you can go to see what's happening and get an unbiased view. There are no commentators.

I'll never watch network news again. At least not without questioning absolutely everything they report.

Pain and Fatigue

Fibromyalgia has to be one of the worst diseases to have. Its neither degenerative nor life threatening but it feels like it should be. The worst part is that no matter how poorly I feel, I look fine to everybody else. So, most people who haven't experienced the pain and fatigue first hand tend to minimize what I'm feeling.

For example, sometimes I'll experience blinding headaches. Luckily, they're not frequent. But when one hits it excruciating! One side of my head feels like its exploding. Concurrently, my eye site on the same side blurs and it becomes almost impossible to think. I've reported these symptoms to my doctors (PCP and pain clinic) . The response? "It's a sinus infection." Or, " take some Tylenol."

Now, I realize that there's nothing these people can do for me regarding the pain. That's the nature of the disease. But its almost insulting to get a response like this! A sinus infection? No runny nose. No "discolored snot." No other symptom to indicate an infection. Tylenol? I've worked with these doctors for over 2 years at this point. They know that I don't complain about anything until I've tried all the obvious "fixes". We're talking about a pain that hasn't responded to any med including Vicodin! They prescribed it themselves! Why would anyone minimize something like this?

Ah hell, I'm really just venting because of how nasty I feel at the moment. The doctors and nurses have been really good for the most part. I know that they must be incredibly frustrated with anyone with FMS (Fibromyalgia) because there is minimal response to almost any treatment. It's a normal reaction to eventually just shrug your shoulders and minimize anything that you can't do anything about (The "I didn't really want that anyway" response).

It would be helpful if my wife would show some sympathy though! Even a hug would probably be helpful. But no! We have such different approaches toward sympathy and empathy. If our roles were reversed I'd make a point of trying to help her feel better. Instead, her response is to withdraw from me and pretend there's no problem. Ignore it and it'll go away. Note: This has gone on for so long that one of us will be "going away" soon. It's highly unlikely that this marriage can continue like this.

But that's another rant for another time.

In the meantime, after waking up this morning feeling like I played a full game at guard in the Patriots offensive line without pads, the meds are finally kicking in. I'll be able to do something besides lie here and bitch soon.

So, that's enough for now. Hopefully I can talk about something else later today.

PS. I just read over this post and even my response is "Wah, Wah, Wah!". Crap! Hopefully by venting like this I won't do it to my friends and family.