.
According to the morning news, General Motors CEO Rick Wagoner has been asked to resign by Obama and his administration as a condition of accepting more of your tax money to "rescue" the automobile maker.
I for one would not argue that Wagoner has managed GM so well he should stay. Nor would I argue against the idea that he should have long ago been dismissed from his position with GM.
But isn't that the job of the company's directors? For that matter, why doesn't Obama fire the board of directors as well. After all, they have oversight responsibility of the actions of the CEO.
For that matter, isn't the resignation of a CEO the expected outcome of a bankruptcy reorganization? Could we not have saved a great deal of taxpayer money by simply letting GM endure the usual course of free market action -- a bankruptcy?
If any readers thought for one minute we have not de facto nationalized the auto industry, the fact that the president can, by whim or design, terminate the employment of the CEO of an ostensibly private corporation should change your mind. The action further has to lead us to the conclusion that every banking and insurance CEO now serves at the pleasure of the president of the United States rather than for the benefit of the shareholder.
While we desperately need regulations and oversight to ensure that boards of directors really act in the best interest of the holder of common shares, instead we get a powerplay to nationalize heavy industry.
Oh, this doesn't affect you? If you participate in a union pension plan it probably does. If you own a 401K with a broad stock mutual fund, it likely does. Basically, the chances are high that this action affects you both in your retirement prospects and in future much higher taxes to pay for this nationalization.
In fact, this action casts the specter of government interference and control of any business which employs you, if not now then sometime in the future. Consequently, we need to conclude that we are now a socialist nation if not by law, then by the fact of the actions we so meekly let this president take.
By the way, the Obama administration has also discovered that Chrysler is not a viable stand-alone corporation. Odd this should be discovered after handing it tons of your money. But not to worry, the administration says it 'stands behind' Chrysler warranties. So I guess if you have problems with your Charger, or 300M, you should drive it over to the Post Office for repairs.
It is hard to be enthusiastic about these events.
.
Monday, March 30, 2009
Saturday, March 21, 2009
Are We broke?
.
According to several news reports, the proposed Obama Federal budget will lead the United States into an additional deficit of $9,300,000,000,000; that's over $9 trillion dollars.
The current national debt is $10.9 trillion dollars.
Summed up, the national debt in 2018 would be $20.2 trillion dollars.
Our CIA fact book says the United states total GDP (i. e. "the economy") is just a bit over $14 trillion.
If the government borrows money, via bonds, at 3.5%* interest, we are currently paying just over $381 billion in interest** to carry our existing national debt. We will need to add to that another $325.5 billion just to pay to borrow enough to cover the overspending of the Obama administration.
There are approximately 170 million tax filers, so on average we would need to pay an additional $1,915 each during the year to pay for the Obama spending deficit bringing our average tax load per filer to $4,159 each year just to pay interest on debt.
With a total debt of over $20 trillion and an economy sized by the GDP at $14 trillion, are we broke?
*TreasuryDirect indicates that in 2008 the total interest on national borrowing averaged 3.89%.
**TreasuryDirect shows that the total interest payments in 2008 were over $451 billion
.
According to several news reports, the proposed Obama Federal budget will lead the United States into an additional deficit of $9,300,000,000,000; that's over $9 trillion dollars.
The current national debt is $10.9 trillion dollars.
Summed up, the national debt in 2018 would be $20.2 trillion dollars.
Our CIA fact book says the United states total GDP (i. e. "the economy") is just a bit over $14 trillion.
If the government borrows money, via bonds, at 3.5%* interest, we are currently paying just over $381 billion in interest** to carry our existing national debt. We will need to add to that another $325.5 billion just to pay to borrow enough to cover the overspending of the Obama administration.
There are approximately 170 million tax filers, so on average we would need to pay an additional $1,915 each during the year to pay for the Obama spending deficit bringing our average tax load per filer to $4,159 each year just to pay interest on debt.
With a total debt of over $20 trillion and an economy sized by the GDP at $14 trillion, are we broke?
*TreasuryDirect indicates that in 2008 the total interest on national borrowing averaged 3.89%.
**TreasuryDirect shows that the total interest payments in 2008 were over $451 billion
.
Wednesday, March 18, 2009
What hath the Fed wrought?
.
Today's announcement that the private corporation called the Federal Reserve Bank (affectionately, the FED), which has the power to create money, will buy up to $300 billion worth of so-called "bad" mortgages, and United States Treasury bonds probably doesn't mean much to Joe and Jane six-pack.
People who follow the esoteric study of economic policy call it "monetizing the debt." What the heck does that mean?
Simply put the U. S. government, or its sponsored enterprises like the Federal National Mortgage Association (FannieMae), borrowed money which was created by issuing government bonds. OK so far that is like borrowing $30000 for an automobile and only being liable for the interest until you sell the car. So the "load" on your income is only the annual interest -- at 10% that would be $3,000. On a year to year basis -- you can afford the interest payments so nothing much changes in life.
What the FED has done is create some additional money to purchase the bonds. They are directly devaluing the greenback in your pocket. If you believed it buys a dollar's worth of goods today, after the FED action it buys maybe 90 cents worth of goods, simply because there are more of them, those which were created to buy the debt (bonds, mortgages, etc.).
In the case of your car loan, discussed above, it is as if you decided to pay it back with "personal consumer dollars" which you created all by yourself at home maybe on your computer. Now you can't really do that, but if you could, people would demand more of your personal "consumer dollars" because they would know you had just monetized your car value, or created more of them to buy the car.
That is what the FED is doing, and there are rumors that the bank plans to keep this up into the trillions of dollars.
Its called the "Zimbabwe solution" because it leads to enormous inflation.
I hope you are prepared. Here is a January 30, 2009 headline from the Sydney (Australia) Morning Herald: 231 million per cent inflation: Zimbabwe dumps currency. Are you ready for this?
Today's announcement that the private corporation called the Federal Reserve Bank (affectionately, the FED), which has the power to create money, will buy up to $300 billion worth of so-called "bad" mortgages, and United States Treasury bonds probably doesn't mean much to Joe and Jane six-pack.
People who follow the esoteric study of economic policy call it "monetizing the debt." What the heck does that mean?
Simply put the U. S. government, or its sponsored enterprises like the Federal National Mortgage Association (FannieMae), borrowed money which was created by issuing government bonds. OK so far that is like borrowing $30000 for an automobile and only being liable for the interest until you sell the car. So the "load" on your income is only the annual interest -- at 10% that would be $3,000. On a year to year basis -- you can afford the interest payments so nothing much changes in life.
What the FED has done is create some additional money to purchase the bonds. They are directly devaluing the greenback in your pocket. If you believed it buys a dollar's worth of goods today, after the FED action it buys maybe 90 cents worth of goods, simply because there are more of them, those which were created to buy the debt (bonds, mortgages, etc.).
In the case of your car loan, discussed above, it is as if you decided to pay it back with "personal consumer dollars" which you created all by yourself at home maybe on your computer. Now you can't really do that, but if you could, people would demand more of your personal "consumer dollars" because they would know you had just monetized your car value, or created more of them to buy the car.
That is what the FED is doing, and there are rumors that the bank plans to keep this up into the trillions of dollars.
Its called the "Zimbabwe solution" because it leads to enormous inflation.
I hope you are prepared. Here is a January 30, 2009 headline from the Sydney (Australia) Morning Herald: 231 million per cent inflation: Zimbabwe dumps currency. Are you ready for this?
Thinking about the bailout
.
I don't really know how to react to this data.
The combined value of the financial system bailout / stimulus in the Bush and Obama administrations is, as popularly reported, $1.2 trillion dollars. That is a number so big it is difficult to comprehend.
According to the Tax Foundation (which summarized IRS data), approximately 32% of US tax return filers owe no taxes. The balance of the 138 million filers bear the total burden of taxation.
Putting those two data groups together, if you in fact do pay taxes, the Bush-Obama adminstrations have just committed you personally to perpetually borrowing $12,632 with no intention of paying anything other that the interest each year. You had already been committed to a debt load of about $120,000. Now you are personally in debt through your federal government by something close to $135,000. That means that your "national" net worth - whatever it is - is lower by the same amount.
Assuming you, being the government, pay 3.5% (by issuing bonds) your federal taxes have just increased by $442 each year (in addition to approximately $4,500 you already owed each year to pay interest on your share of the national debt). As far as anyone can tell, this is the load you will pass on to your children, grandchildren and beyond. When the principal amount of the bonds come due, you - again being the government - will just issue more bonds. The principal, the national debt, will never be repaid.
The IRS numbers indicate the average taxpayer owes about $10,000 in federal taxes each year, so the added burden from the stimulus interest is an added 4% in taxes. Those are averages, and misleading, because the top 1% of taxpayers pays five times that amount according to the Tax Foundation.
Those are the numbers. Is the added debt load and annual cost worth it?
I don't really know how to react to this data.
The combined value of the financial system bailout / stimulus in the Bush and Obama administrations is, as popularly reported, $1.2 trillion dollars. That is a number so big it is difficult to comprehend.
According to the Tax Foundation (which summarized IRS data), approximately 32% of US tax return filers owe no taxes. The balance of the 138 million filers bear the total burden of taxation.
Putting those two data groups together, if you in fact do pay taxes, the Bush-Obama adminstrations have just committed you personally to perpetually borrowing $12,632 with no intention of paying anything other that the interest each year. You had already been committed to a debt load of about $120,000. Now you are personally in debt through your federal government by something close to $135,000. That means that your "national" net worth - whatever it is - is lower by the same amount.
Assuming you, being the government, pay 3.5% (by issuing bonds) your federal taxes have just increased by $442 each year (in addition to approximately $4,500 you already owed each year to pay interest on your share of the national debt). As far as anyone can tell, this is the load you will pass on to your children, grandchildren and beyond. When the principal amount of the bonds come due, you - again being the government - will just issue more bonds. The principal, the national debt, will never be repaid.
The IRS numbers indicate the average taxpayer owes about $10,000 in federal taxes each year, so the added burden from the stimulus interest is an added 4% in taxes. Those are averages, and misleading, because the top 1% of taxpayers pays five times that amount according to the Tax Foundation.
Those are the numbers. Is the added debt load and annual cost worth it?
Thursday, March 12, 2009
What's in it for you and me?
.
I can only shake my head sadly for the United States. Why? You can perform the "experiment" yourself. Just 'google' the phrase "Stimulus Package: What's in it for you?"
Ten or twelve years ago we seemed to be on a course of common sense. In those ancient days we thought that a tax and government spending program should be likened to knocking on your neighbor's door and demanding money. It had better be a very good reason the separate the friend next door from his or her money -- and should only be done sparingly.
If we applied that logic today, a number of folks seem to think its acceptable to knock on the door of the person living next door and demanding money to help pay for one's own personal mortgage, or any other of the thousands of pork items attached to the stimulus bill.
In fact, according to an article on this subject in the most recent AARP Bulletin, we are going next door and demanding our neighbors pay the state and local taxes on any new automobile we purchase in 2009. In fact, for those of us who are retired, the author of the item seems to think its OK for us to walk over to the neighbor's house and demand $250 each, cash on the barrel head, so that we personally can stimulate the economy at our discretion.
Do you remember when neighborliness was helping the person next door? Now Congress and this president have seemed to redefined the term more along the lines of shaking down that individual.
Have we become a nation of financial leeches on a personal level? Is all we ask "What's in it for me?"
The previous administration at least kept the focus on rescuing the banking industry - for a while. Confidence in the banking system -- meaning trusting that the bank will have money there when you need to withdraw it -- is a societal essential. But that administration did not seem sure which banks should fail and which should survive, leaving the perception that there were "personal favorites" within the industry. Then when the problem of unregulated derivatives (a kind of insurance in some ways) was understood, the rescue moved to investment banking and insurance companies like AIG.
Yes, that administration effectively printed money which did not exist to fund the initial TARP plan. That plan tossed our neighbor's money at some in the banking and insurance industry. How simple would it have been to use the money to shore up FDIC and simply protect each individuals bank account, while letting the weak fail no matter who they were?
The new administration and its Congress have done that twice more and House Speaker Nancy Pelosi is already hinting that another batch of money needs to be printed to give out in pet projects under the rubric of "stimulus." What are some of the things we are demanding our neighbors pay for? A list from SelfInvestor:
Dear Neighbor: We demand you pay for these things!
I can only shake my head sadly for the United States. Why? You can perform the "experiment" yourself. Just 'google' the phrase "Stimulus Package: What's in it for you?"
Ten or twelve years ago we seemed to be on a course of common sense. In those ancient days we thought that a tax and government spending program should be likened to knocking on your neighbor's door and demanding money. It had better be a very good reason the separate the friend next door from his or her money -- and should only be done sparingly.
If we applied that logic today, a number of folks seem to think its acceptable to knock on the door of the person living next door and demanding money to help pay for one's own personal mortgage, or any other of the thousands of pork items attached to the stimulus bill.
In fact, according to an article on this subject in the most recent AARP Bulletin, we are going next door and demanding our neighbors pay the state and local taxes on any new automobile we purchase in 2009. In fact, for those of us who are retired, the author of the item seems to think its OK for us to walk over to the neighbor's house and demand $250 each, cash on the barrel head, so that we personally can stimulate the economy at our discretion.
Do you remember when neighborliness was helping the person next door? Now Congress and this president have seemed to redefined the term more along the lines of shaking down that individual.
Have we become a nation of financial leeches on a personal level? Is all we ask "What's in it for me?"
The previous administration at least kept the focus on rescuing the banking industry - for a while. Confidence in the banking system -- meaning trusting that the bank will have money there when you need to withdraw it -- is a societal essential. But that administration did not seem sure which banks should fail and which should survive, leaving the perception that there were "personal favorites" within the industry. Then when the problem of unregulated derivatives (a kind of insurance in some ways) was understood, the rescue moved to investment banking and insurance companies like AIG.
Yes, that administration effectively printed money which did not exist to fund the initial TARP plan. That plan tossed our neighbor's money at some in the banking and insurance industry. How simple would it have been to use the money to shore up FDIC and simply protect each individuals bank account, while letting the weak fail no matter who they were?
The new administration and its Congress have done that twice more and House Speaker Nancy Pelosi is already hinting that another batch of money needs to be printed to give out in pet projects under the rubric of "stimulus." What are some of the things we are demanding our neighbors pay for? A list from SelfInvestor:
$20 billion for school renovations and $79 billion to avoid education related layoffs
$87 billion for Medicaid
$30 billion goes to road projects
$27 billion to continue unemployment insurance benefits
$20 billion for food stamps
$20 billion to digitize medical records
$8 billion for renewable energies
$7 billion for modernizing federal buildings
$6 billion for mass transit
$5 billion for for the construction and repair of public housing
$4 billion for community activist programs such as ACORN
$2 billion for child care subsidies
$650 million for coupons for digital TV conversions
$400 million for global warming research
$335 million for STD prevention
$50 million for National Endowment of the Arts
Dear Neighbor: We demand you pay for these things!
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