China Could Destroy the US

I'm a little surprised it took this long to come out, but from the headline China Worried about US Treasury Holdings,

China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending.

"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference Friday after the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

China has lent more money to Washington than any other lender, with loans totaling an estimated $1,000,000,000,000 (that's a trillion). Right now the dollar is relatively strong, as people are buying treasuries since they are considered to be the safest of all investments. The strength of the dollar is keeping inflation at bay.

So what would happen if China were to begin a concentrated effort to sell their treasuries? This could begin a wave of mass selling of treasuries at their current high price in order to lock in profits. This selling would have a couple effects. First, the price of treasuries would fall, which would make it more expensive for the government to borrow money, and would induce further selling of treasuries. Second, as foreign entities cash in their treasuries, they would want to convert dollars into another currency. This selling of the dollar would weaken the currency. The entire problem could become a downward spiral that would lead to a large devaluation of the dollar, which in turn would lead to an inflation problem.

As was stated in the paragraphs above, China could decide that holding treasuries is too risky for their liking and begin selling. Another reason China may begin selling is discussed further along in the article,

Wen expressed confidence the world's third-largest economy can meet its official growth target of 8 percent this year and emerge from the crisis "at an early date." But he said Beijing is ready to expand its 4 trillion yuan ($586 billion) stimulus if needed.

"We already have our plans ready to tackle even more difficult times, and to do that we have reserved adequate ammunition," he said. "That means that at any time we can introduce new stimulus policies."

Communist leaders worry about rising job losses and possible unrest amid a trade slump that saw Chinese exports fall 25.7 percent in February from a year earlier. They have promised to spend heavily to create jobs and boost exports.

In other words, China could decide that their money is better suited by spending within their own economy rather than collecting a minuscule amount of interest from the US Government.

The decisions China makes regarding the US debt that they hold could be the deciding factor for the direction the finances of the US take. This is something to watch and be wary of.


Questioning Politics

"Alternative" Political Parties

The following is an excerpt from the Monday Message mass email from the Libertarian Party dated February 23, 2009. My hope is that someday the general population will realize that there is a political party that more closely follows their own viewpoints than do the Republican and Democratic parties. We have a choice that extends beyond those two overly powerful parties. Learn about these "alternative" parties and make a more informed choice.

Backed by a growing swing vote that decides elections and support for its economic plans, the Libertarian Party is not an “alternative” political party. “Alternative” implies something outside the mainstream or an unconventional choice. The Libertarian Party, with its sensible balance of fiscal responsibility and social moderation, is, in fact, the nation’s only mainstream political party.In a nation where a vast swath of the electorate define themselves as generally fiscally conservative and socially liberal, it is the Democrat, Republican, Constitution and Green parties that find themselves isolated on the extreme left and right. Not only are these the voters who decide elections, poll after poll finds these voters generally agree more with the Libertarian Party than any other.

In their 2006 study of the American electorate, The Libertarian Vote, Cato Institute scholars David Boaz and David Kirby find between ten and twenty percent of the electorate is generally fiscally conservative and socially liberal – in other words, libertarian. A 2006 Gallup Governance Survey puts the “libertarian” vote at 21 percent, tied with the “liberal” vote and behind only the “conservative” vote at 25 percent.

That growing libertarian vote is getting close to the same percentage as those describing themselves and liberal or conservative and large enough to assemble a
winning coalition in election races. Many of the “unaffiliated” or “non-ideological” voters agree more with libertarians than with conservatives or liberals.

Much of the blame lies with ballot access laws placing an intolerable burden on citizens who wish to vote for something other than Republicans or Democrats. The Libertarian Party is hard at work in state legislatures across the country changing those laws.

Those same polls show majorities support the libertarian solution of reducing the size and government and expanding regulatory and tax relief for employers. They know it does more to create jobs and renew faith in the economy than spending $30 million on the “salt marsh mouse,” as Democrats propose, or spending $700 billion bailing out unsuccessful businesses and trillions more expanding government, as the past big-spending Republican administration and Congress did.

I am a registered Libertarian. I am strongly fiscally conservative. I am only moderate on social issues. If I were not a Libertarian, I would most likely be a Constitutionalist. For those of you who are both fiscally and socially conservative, I would strongly suggest checking that party out.

The point is...you don't have to settle for the lesser of two evils.


Questioning Politics

Thomas Jefferson Said It Best

The following are some interesting quotes attributed to Thomas Jefferson, from BrainyQuote:

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

My reading of history convinces me that most bad government results from too much government.

No free man shall ever be debarred the use of arms.

The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.

Banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.


Questioning Politics

Intervention Required

The Senate has passed a new spending bill in the amount of $410 billion. President Obama is expected to sign the bill immediately.

I know promises really have no place in politics, but you will recall that one of Obama's primary campaign promises had to do with eliminating earmarks, pork, and wasteful spending.

The omnibus spending bill includes more than 8,000 congressional "earmarks," which total almost $8 billion. The earmarks have caused critics to question President Barack Obama's pledge to end wasteful spending, but Obama administration officials say the bill is a holdover from the previous Congress.

I guess Obama is taking a free pass on this first budget of his? And, not surprisingly, the Republicans are having just as much fun on this spending spree as any of the Democrats.

Many groups, including the Libertarian Party, and requesting (as a hopeless formality, I'm sure) that Obama veto the bill.

America’s third largest party urged President Barack Obama Tuesday to live up to his promise to “end politics as usual in Washington” and veto a $410 billion spending bill. The legislation includes 8,570 earmarks totaling $7.7 billion, a practice Obama pledged to end as part of his pitch to voters during the 2008 election.

“Republicans already broke their weeks-old promise to stand for fiscal responsibility by fighting to have their fair share of earmarks included in the bill,” said Libertarian National Committee Communications Director Donny Ferguson. “Will Obama keep his promise to end earmarks by vetoing this bill, or will this be the latest in a long string of broken Obama promises? Is Barack Obama a man of his word, or just another politician?”

The White House has indicated Obama will sign the bill, despite his earlier promises to oppose earmarking.

“Republicans are banding together to grab taxpayer cash and Obama is ignoring his own pledge to stop the practice. With Republicans and Democrats working together to continue wasteful spending it’s abundantly clear the Libertarian Party is the only party agreeing with the American people that earmarks must be abolished,” said
Ferguson.

Passing large spending bills is acting like a drug for our government (GOP & Dems alike). They are getting such a rush from finding "new and improved" ways of spending our money. But the system is growing immune to the rush, so each new spending program is going to have to be more monumental than the last in order to get the same rush. Our government is on a downward spiral. It's time for intervention!!


Questioning Politics

What Went Wrong with AIG?

The following was originally posted by John Carney on The Business Insider. This analogy explains in simple to understand language what happened to AIG to make it such a drain on taxpayer money. Enjoy.

Still confused about how AIG lost its shirt by going into the securities lending business big time? We understand. It's terribly complex and full of words that make your eyes glaze over.

So we decided to break it down into the simplest terms Wall Street transactions can be explained: the two cows story.

You have two cows.

John Paulson borrows one cow so he can sell it for $100. He gives you $10 as collateral.

You buy your neighbors cow for $100, which you finance by taking out a $90 loan from the bank and use John's $10 to make up the rest.

You brag to everyone about your financial health. You have assets--two cows you own, plus one Paulson owes you--worth $300, and liabilities of just $100.

A third of the country goes vegetarian.

You thought your two cows were worth $200 and now they are worth $140.

You express confidence in your financial health. Your assets are now worth only $200--your two cows plus the one John owes you--but your liabilities are still only $100. If necessary, you could sell the assets at this distressed price and pay off all your loans.

You hold onto your cows because you are sure the market is "dislocated." Some day someone will want to eat beef again.

The rest of the country goes vegetarian. Your two cows are now worth $2 each to guys who want to make dog food.

John Paulson buys a cow in the market for $2 and he gives it to you as repayment of the loan. You now have three cows worth six bucks.

John wants his $10 back.

The bank calls. It wants its $90 back.

You call the Federal Reserve and ask for a bailout.

Questioning Politics

President Obama's Tax Plan

Questioning Politics

Another Step Towards Socialism

We shouldn't be surprised to see that there is now talk of nationalizing the failing car industry. It's interesting and saddening to see the steps that are being taken to lead down this slippery slope. I expect to see further steps being attempted in the coming months as the US economy continues to sputter on.

Questioning Politics

Obama Declares War

Obama gets thrashed in an article by Larry Kudrow on CNBC.Com. In discussing the State of the Union address during the week, Kudrow writes:

He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.

That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all — either for this recession or from the standpoint of expanding our
economy’s long-run potential to grow.

Is Kudrow taking it a bit too far by calling this a declaration of war? Maybe. Will Obama's plans to spend our way out of the recession work? At some point, the government can spend enough to revive the economy. But at what cost?

Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.

There is a lot to fear about the current spending plans by the administration, including the threat (promise?) of tax increases, and the specter of inflation in the near future, not to mention what are we going to do should this spending program not work.


Questioning Politics

Citi Is First In Line

It sounds like Citi is in talks with the Government to essentially nationalize the bank. It sounds like a very sweet deal for Citi. As Henry Blodget writes,

So Citigroup (C) has proposed that the US taxpayer and other preferred shareholders convert up to $75 billion of preferred stock into common stock, thus bolstering the company's tangible equity and putting it in less desperate need of a complete takeover.

And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.

Well, that's nice for Citigroup...and another ream-job for taxpayers. Citigroup's
common equity is currently worth $10 billion. If the US were to convert all $45 billion of its preferred at the current stock price, it should end up with 80% of the company, not 40%.

For the US to convert $45 billion of preferred to common and only get 40% of the company, Citigroup's existing common equity would have to be valued at $65 billion, not $10 billion, and the conversion price would have to be about $10 a share. Or the US would only be able to convert $4 billion of its $45 billion, which wouldn't help Citigroup's tangible equity ratio much.

Does this strike anyone else as completely corrupt? I hope there is more to the story that will come out as the situation unfolds. But as it is now being reported, it just doesn't sound fair or equitable to taxpayers.

The sad thing about the story is that this kind of corruption doesn't suprise me. I expect to hear about many more handouts in the billions of dollars this year. This is still only the beginning.


Questioning Politics

More Complaints about the Mortgage Bailout

A story on CNNMoney.com is backing up the points I was trying to make yesterday about the problems with the mortgage bailout.

Don't have a job?

Struggling to keep up with payments on a home worth less than half the mortgage?

Owe way more than your home's value, but can still afford the payments?

Sorry, but you likely aren't among the 9 million people who may get help under President Obama's $75 billion foreclosure prevention program.

The article went on to tell the story of a homeowner who is facing a similar situation to mine and thousands of others here in Vegas and in the Southwest in general.

Take Joe Martinez of Bristow, Va., who fits the profile of the "responsible" homeowner Obama cited in the plan. The government contractor and his wife thought they did everything right when they bought their brand new $600,000 house two years ago. They put 5% down and got a 30-year fixed-rate mortgage they could afford.

Others in their neighborhood, however, couldn't keep up with the payments. As foreclosure rose, the value of the couple's home plummeted to $450,000, leaving them doubtful they'd ever recover their investment.

Martinez called their lender to try to get into the Hope for Homeowners program, which would reduce their loan balance to 90% of the home's current value. But they were turned down because they weren't in default.

So two months ago, the couple stopped paying their mortgage, hoping they could then qualify. But even if they don't, they are willing to take the hit on their credit scores to stop throwing money down the drain.

"There's just no point to stay here," said Martinez, 29, adding he could rent the house across the street for half his monthly mortgage payment. "We don't want to give up our home, but it's never going to come back."

Martinez isn't interested in having his interest rate lowered. He would like to see some of his principal forgiven.

"Why would it be such a big deal for them to modify my loan?" he said, noting that his tax dollars are being used to finance the program. "Wouldn't that stabilize the economy?"

Is it time for we the people to all just stop paying our mortgages and walk away from our houses? The banks have already received our money in the form of taxpayer funded bailouts.

"Cutting principal is really what's needed to contain foreclosures," said Christian Menegatti, lead analyst for economic research firm RGE Monitor.

The next wave of mortgages may very well be instigated by those of us who are under water on our mortgages and just don't have any hope of ever getting back on the plus side. Nothing in the current mortgage bailout will do anything to solve the problem. We've been abandoned by our government after stealing our money to save irresponsible lenders.

Some experts, however, say Martinez is the exception. Those who can make their payments aren't likely to walk away because still need a roof over their head, said Howard Glaser, a mortgage industry consultant.

"Homeowners aren't day traders in their homes," he said. "The investment value is not an issue."

Really? Homeowners don't care about the value of their homes? Really?!!! We're the exception to the rule?!! REALLY?!!! That's exactly the kind of thinking that disappoints me most about this administration.


Questioning Politics

The Morgage Bailout Will Help Who?

He's gone and done it. Obama has unveiled his bailout for the mortgage industry to the tune of $75 Billion. Once again, it is a voluntary program to encourage banks and mortgage services to help troubled borrows refinance their mortgages or get their mortgages modified.

Those who know me know that I don't think the government should be spending any of our tax dollars to try and bailout mortgages or cars or banks or countries. Unfortunately, the government is going to spend our money, so I've resigned myself to complaining about how they spend it instead about whether they spend it or not.

The mortgage bailout is Obama's first attempt at actually trying to attack the heart of the economic downtown. It's about time somebody tries to do something about foreclosures, no amount of spendulus is going to help the economy until the housing market is turned around. But what is the program really going to accomplish?

I laugh at the fact that the bailout of mortgages amounts to $75 Billion, which is dwarfed by the spendulus package ($878 Billion) and the bank bailout ($700 Billion). Obama estimates his plan will help 9 million borrowers. A quick check of the math shows that amounts to $8,333 per borrower helped. The obvious question is how will 8 grand prevent anybody from losing their house over the long term? It doesn't add up!!

Troubled borrowers fall into one or more of three groups.

1) The economically challenged: those who have been laid off or have otherwise had income reduced due to economic conditions.
2) Sub-prime borrowers: those who got involved in crazy schemes to get them into houses they couldn't ever really afford.
3) Underwater mortgages: those who have seen the value of their home fall below the amount they owe on their mortgage.

Group 1 is out of luck. The bailout is only meant to help people who could afford their mortgage if the payments are reduced.

Group 3 is screwed. I'm especially bitter about this as I am a Las Vegas home owner and have watched my property value fall by about 45% over the past two years. I could not believe when I read the following passage:

...the new mortgage, including refinancing costs, can't exceed 105% of the current market value of the property, excluding many of the hardest hit.

My mortgage far exceeds the 105% threshold, as do most of the new buyers in California, Nevada, Arizona, and Florida. I just have to hope that I happen to be in an area that is considered the hardest hit. Certainly not a slam dunk decision for our government, as obvious as it might seem.

That leaves group 2 as the people most likely be helped by this program, but even that is a big maybe. Many of these borrowers did not provide income information for their home financing. It's entirely possible that the government can do nothing for them. Regardless, this group is the most irresponsible of the three groups, and deserves the help the least. So of course, they're getting the most help.

In my opinion, it's the responsible homeowners who are under water on their mortgage due to no fault of their own, other than buying at the wrong time, who could use the most help. My opinion is absolutely biased, since this is the category into which I fall. But I'm sure I'm not alone when I consider walking away from my house. My house must appreciate by 52% from its current level before I will break even. An optimistic holding period for reaching that goal is 10+ years. I never had any intention of staying in my house for over ten years. I look around at the homes I could buy now, and even at the homes I could now rent, and wonder why I should go on paying $500 more per month than the going market rate. I know I'm not the only one in this situation. But as a group, I don't see any help (from our own tax dollars) coming our way.


Questioning Politics

Oil Independence

I am not an environmentalist. I am against forcing people to go green. It should be the choice of the individual to spend the extra money to buy environmentally friendly products.

However, I am very concerned by our dependence on foreign oil. I received the following e-mail from the T. Boone Pickens Army. It's a good read.

Army!

We have to stay on offense! We can’t let the new Congress and the new Administration shove our dependence on foreign oil to the back burner. Here’s why. When we started the Pickens Plan last July, oil was at about $147 per barrel, gasoline at the pump was $4.11, and we were importing about 70 percent of the oil we use. Today oil is $100 per barrel less, but we are still importing about 70 percent of our oil. Why is this important? Because we are still at the mercy of foreign governments and unstable areas of the world for our oil supply. It is still a crisis, but it’s also an opportunity for us to fix it. Look at the headlines from just the past couple of days.

- Oil up $5 on OPEC cuts.
- Russia cut off natural gas supplies to Ukraine.
- Iran calls for oil embargo for supporters of Israel.

Just before the holidays, OPEC met to try to raise oil prices. OPEC delivers 40 percent of the daily oil supply. They decided to cut their output by 2.2 million barrels per day to try and get the price back in the $70 range. You've heard me tell you before that if consumption runs short of supply, then the only way to balance the books is by raising the price. What have we seen? Gasoline at the pump has jumped back over $2 per gallon in many areas and is moving back up.

Next headline: On New Year’s Day, Russia cut off natural gas supplies to Ukraine in a dispute over prices and payments. According to Reuters news service, “That has hit natural gas supplies to countries in eastern and southern Europe facing freezing temperatures and has worried European countries, which get one fifth of their gas through pipelines that cross Ukraine.” Think about that: The Russian government is willing to force its customers to pay whatever price it sets by cutting off supplies; not threatening to cut off supplies, but by actually doing it in the coldest part of winter. We don’t rely on Russia for our natural gas. We don’t import any of it, and we have plenty of our own natural gas supply.

The problem comes from that second headline – what happens if Iran and other Mideast and African countries decide to use oil as a weapon against us like Russia is using natural gas as a weapon against Ukraine? I’m not making this up. Here is what the Iranian News Agency reported over the weekend: "Pointing at Westerners' dependence on the Islamic countries' oil and energy resources, [Iranian leaders] called for cutting the export of crude oil to the Zionist regime's supporters the world over.” Iran understands how to leverage our over-dependence on foreign oil. OPEC understands how to manage output. We are left without any weapons in this price war. We have to remind our leaders in Washington that whether oil is a $50 a barrel or $150 a barrel it is the level of our dependence on foreign oil, not just the price, which puts us all at the mercy of unfriendly foreign governments and you don’t know when they will move against us.

-- Boone


Questioning Politics

Quote of the Day

Walter Williams, Professor of Economics, George Mason University:

"Imagine you see a person at work taking buckets of water from the deep end of a swimming pool, and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new President proposes for the economy."


Questioning Politics

Libertarians and Israel

The following is a mass e-mailing from the Libertarian party dated Jan. 5, 2009. I fully support the viewpoint held by the Libertarian Party on this issue. I don't understand what we have to gain by supporting Israel when there are many issues that ought to be addressed within our own borders that to me seem much more pressing. Enjoy.

Your Monday Message from the Libertarian Party:

Since its creation as a Jewish state in the late 1940s, Israel has been one of the main sources of tension and unrest in the Middle East. Now, more than 50 years later, Israel once again finds itself at odds with its Palestinian neighbors, forcing the hand of the United States to show where it stands on one of the most polarizing issues in modern history.

The tension between Jews and Arabs in the Middle East goes back thousands of years, and there is no easy solution to the issues in the Israeli/Palestinian dispute. Many U.S. presidential administrations have tried to act as brokers of power or arbiters of peace without any success. Libertarians aren't foolish enough to think we have the answer to solve the Israeli/Palestinian conflict. However, we do realize that steps can be taken by the United States to remove itself from injury in the conflict, and perhaps begin the process of long-term stability in the region. The biggest of these steps is to eliminate all economic and military aid to Israel and all other foreign countries. It's the general opinion of Libertarians that as far as the U.S. government should be involved, Israel should look out for its interests so long as its actions are not subsidized by the American taxpayer and Israel does not look to the U.S. for assistance. However, because Israel is the top recipient of foreign aid (aside from Iraq), it is reasonable to assume that some of the money given to it by the United States in foreign aid is used to either directly or indirectly support Israeli military operations.

Therein lies the problem.

There are several complications with U.S. foreign aid going to Israel. One, it makes the United States culpable for the actions of Israel that many times come with international condemnation. Secondly, it opens up the United States to cries of extreme bias in favor of Israel—a main catalyst for terrorism against U.S. interests at home and abroad.Critics of removing foreign aid from Israel cite that this is the United States turning its back on a staunch ally. However, this couldn't be further from the truth. The United States is not "giving up" on Israel by removing foreign aid as much as it is adhering to a principle of non-intervention—in Israel and across the world as well. Israel will still be a trading partner with the United States, and will benefit greatly from this trade. Additionally, Israel has a strong and effective military along with nuclear arms to deter aggression.

The United States' top priority needs to be the United States, and our billions of dollars of foreign aid to Israel have hurt our national security and international standing. "Contrary to the warnings of the do-something buffs, U.S. interventions in the Middle East have likely unleashed more anti-American terrorism and more pressure on energy markets than they have prevented," says Leon Hadar, a research fellow in foreign policy studies at the Cato Institute. In essence, the interests of Israel are not always those of the United States. However, it is not an analysis of what we have gotten in return from our relationship with Israel as it is an adherence to the principle of non-intervention. There is great wisdom in remaining disconnected from the problems facing other nations, especially when these problems are complicated and have negative consequences for getting involved. At issue for Libertarians in the current situation with Israel and Palestine is not so much who is right or wrong, but whether the United States should continue to support other countries with foreign aid. Libertarians may all feel differently on whether Israel is "justified" in invading Gaza, but Libertarians all agree that taxpayer-subsidized foreign aid to other countries is bad for business and bad for peace.

Treating Israel like any other country is not abandoning an ally, but freeing the United States from a cumbersome relationship of the likes George Washington, Thomas Paine and Thomas Jefferson all warned against hundreds of years ago. In the words of Jefferson, "peace, commerce, and honest friendship with all nations; entangling alliances with none."

Live free,

Andrew Davis
Director of Communications
Libertarian Party

Questioning Politics

The Time for Transformation Has Arrived

Today the House passed $787,000,000,000 in new spending under the guise of saving our economy from complete and utter destruction. It should be noted that none of the Republican members of Congress approved the bill, and even seven Democrats opposed the spendulus package.

The bill now goes up for vote by the Senate, where it is expected to pass with the support of the two "Republican" senators from Maine pushing it over the hump.

"We've done something today that's transformational for the nation," said House Speaker Nancy Pelosi, D-Calif., in a press conference after the vote.

House Appropriations Committee Chairman David Obey, D-Wisc., characterized the bill as "the largest change in domestic policy since the 1930s."

Does this talk of change and transformation scare anyone besides me? Personally, I like a free market system. I enjoy living in a Democracy. I don't want our country to transform into something else. I don't want this kind of domestic policy change. This kind of deficit spending is not healthy. In fact, this kind of deficit spending on the part of consumers is exactly why we are in this mess in the first place.

On top of the spendulus package that just passed, Obama is now considering a plan to subsidize the mortgages debt of homeowners facing foreclosure on their homes.

Details remain scarce, but at this point the subsidy plan entails having struggling homeowners take an affordability test and undergo a re-appraisal to see if they are eligible. The subsidy would allow servicers to adjust the loan terms without having the mortgage's investors take a loss, which should make them more open to the loan modification.

If the investors and mortgage holders aren't taking a loss, then who is? Taxpayers would take the loss. How is this fair to those who have been responsible about living within their means?

In my opinion, these policies are leading us perilously close to Socialism and/or Communism.

Questioning Politics.

Could This Be the End of Democracy As We Know It?

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship."

I believe this quote is attributed to Thomas Jefferson, although I could be wrong about that. Regardless of who said it, the point remains frighteningly true. I'm not about to say this current series of spendulus packages and government spending increases will be the cause of the downfall of the US government as we know it. But we should all be on high alert for further signs of a move towards socialism and/or widespread government dependence.

The late Dr. Adrian Rogers is credited with the following quote:

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."

It's important to be aware of the steps the government is taking and prepare yourself for the worst. I certainly don't want to be working for the benefit of someone else. If that's the situation we find ourselves in, we better have a plan of action to absolve ourselves of the problem. Any suggestions about what could be done?

Questioning Politics.

Quote of the Week

Morgan Stanley CEO John Mack apologized for his company's part in causing the housing bubble.

Rep. Michael Capuano, Democrat from the Boston area, rejected the apology with the following comment:

"You come here today on your bicycles after buying Girl Scout cookies and helping out Mother Teresa. You're saying, 'We're sorry. We didn't mean it. We won't do it again. Trust us.' I have some people in my (district) who have robbed some of your banks and they say the same thing."

I couldn't have said it better myself!!

If There Must Be a Tax Increase...

The other day, one of my favorite blogs, Independent Political Report, posted a letter from Ralph Nader regarding a financial transactions tax.

I have not paid attention to Nader or his views recently, but I appreciated some of the ideas put forth in this letter. For instance,

Let’s start with a fairness point. Why should you pay a 5 to 6 percent sales tax for buying the necessities of life, when tomorrow, some speculator on Wall Street can buy $100 million worth of Exxon derivatives and not pay one penny in sales tax?

The basis of my position on tax entails trying to find the most fair and equitable tax treatment for all people. I hate paying taxes, but I understand it is a necessary in order to provide for a safe and effective country. It doesn't seem fair to me that speculators are purchasing assets (stocks, bonds, etc.) without paying a sales tax, simply because of the type of asset it is. Nader goes on to say,

He adds that after the 1987 stock market crash, securities-trading taxes “or similar measures” were endorsed by then Senate Minority Leader Bob Dole and even the first President Bush. Professor Pollin estimates that a one-half of one percent tax would raise about $350 billion a year. That seems conservative. The Wall Street Journal once mentioned about $500 trillion in derivatives trades alone in 2008—the most speculative of transactions. A one tenth of one percent tax would raise $500 billion dollars a year, assuming that level of trading.
Economist Dean Baker says a “modest financial transactions tax would be enough to “finance a 10% across-the-board reduction in the income tax on labor.

I would love to see a decrease in my income tax bill. I don't believe a 0.1% tax added to my purchases of stocks would hurt me, nor would it affect most people.

There are conditions, however, to my support for a tax of this nature. I would only favor this tax if there is a reduction in income tax. This condition would be next to impossible to be included, with the economy in being in its current state.

Condition #2 is that there be a waiver of financial transaction taxes in 401(k) and other retirement accounts. Taxing retirement accounts would be counterproductive.

I don't anticipate ever seeing a proposal such as this being discussed seriously in Congress or the Senate. The big financial institutions who would end up paying a large chunk of the increased revenue just wouldn't allow it to happen. It's all just wishful thinking.

Obama for Change

All About the Stimulus

I read a very interesting article on CNNMoney.com about the need for the economic stimulus and why other proposals, such as giving the money directly to taxpayers might not be the best idea.

A lot of the article made sense to me, and I don't feel quite as uptight about what is going on in Washington.

On the other hand, a lot of it sounded like it could be propaganda. If given enough time, you could write a persuasive article for just about anything.

For me, the real question is why would anyone actually interested in the long-term welfare of this country wish to add another $1,000,000,000,000 to our deficit to knock a few months off a recession that will correct itself within a couple years at most?

In the end, it boils down to my lack of trust in the government agenda. I feel that although something might need to be done, this "stimulus plan" is not based in an effort to revive the economy. If left alone, the economy will rebound on its own like it always has and always will. It might take two or three years of pain, but this pain is essential to creating a healthy economy in the future.

The "spendulus" might knock a couple months off the length of this recession. But is that really worth adding $1,000,000,000,000 to the national deficit? Worse yet, is it worth the guaranteed inflation that will haunt us on the other side of the recession?