Wednesday, December 7, 2011

Shrinking Middle Class-- Two Directions

As we are constantly reminded the Middle Class has been shrinking significantly. True enough and it is a real problem, but what is the complete consequences of the skrinkage?

I read an article buried on page 15 of the Wednesday, November 16th, New York Times. The headline was "Middle -Class Areas Shrink as Income Gap Grows".

The article told a very interesting story beyond the headline. Based on a study done by Stanford University, the percentage of neighborhoods that were middle class had dropped from 65% to 44% since 1970.

We've heard similar things like that a lot before. I assumed that a shrinking middle class meant that those in the middle class were dropping out of the middle class, and by "out" , I assumed "down". By the way, I conducted a little informal poll, and those who I asked about what is meant by the middle class shrinking all said that people had drop out of it by going down in income.

As it turns out not everyone who left the Middle Class went down.

Roughly 50% of those no longer in the middle class had actually gone "up" and were no longer middle class because their incomes increased, and they moved "up" not "down".

Unfortunately more than 50% who left the middle class did move down.

Based on that report from Stanford, the percentage of affluent Americans actually rose from 7% to 14% since 1970; while the percentage of lower income Americans also increased from 8% to 17%. Both essentially doubled. Clearly the gap between the "haves" and "have nots" is growing more acute, but it's growing both ways.

Now I understand where much of the apparent growing affluence came from in the midst of otherwise economic decline.

Make no mistake about it, the growing income inequality gap is a serious and potentially dangerous problem. It is not healthy to be a society sharply divided betweeen "haves" and "have nots".

I have addressed solutions in a previous post, but at least the reasons for the shrinking middle class are not all negative, as I, and I assume most, have been lead to believe.


Friday, November 25, 2011

Deficit Reduction

Why don't we let the the Bush tax cuts expire for everyone? That would raise a whopping $4 Trillion, which is 2 1/2 times what the Super Committee was trying to cut the deficit. Why limit the expiration of the Bush tax cuts to those making more than $250,000 a year; that only raises a comparatively much smaller $800 Billion? Adding $4 Trillion to the $1.2 Trillion of automatic domestic and defense cuts, now set to take effect in 2013, would make a significant impact on our deficit and debt.

Frankly I didn't think taxes were so crushing for everyone under Clinton and the Bush's early years. The country prospered during those years.

Some agree, but think that letting the tax cuts expire for everyone will exacerbates the income gap problem, which may be a problem even more serious and dangerous than the debt problem. I have been very concerned about growing income gap for a quite while; long before OWS. I'm still waiting for solutions (in addition to the ones I offered in my last post) other than taxing the rich. Just taxing the rich won't solve that problem.

Also, I don't completely understand the "tax the rich" solution reasoning since all statistics on the growing income gap are stated in gross income; not net after tax income.

While it may not make complete sense to use gross income comparisons, that is the way it's done; presumably because that way makes the gap bigger. The reason why using gross income rather than net income makes the gap appear bigger is that, notwithstanding what most believe, the rich do pay a lot of taxes.

Therefore by calculating the gap using gross income, raising taxes on someone who makes $1,000,000 a year gross does not reduce his income for purposes of making an impact on the income gap. Tax him all you want, he still makes $1,000,000 ( maybe more since he'll say he needs more to pay his taxes). Therefore that won't narrow the income gap.

Also raising taxes on the rich doesn't raise the income of the middle class . My guess is rolling back the Bush tax cuts for everyone won't raise taxes for the poor, period.

As to our deficit and debt problems, it's amazing to me how relatively easy it would be to really go a good long way towards solving these problems simply by going back to 2001 tax rates. Our tax rates today are near historic lows . I bet Europe wished it had problems that could be solved that easily. That's why I get so upset with Republicans for their "no new taxes" mantra .

Both parties agree, to a lesser or greater extent, that the defense budget needs to be cut significantly; especially with our two wars winding down.

Democrats need to compromise as well by cutting ineffective domestic spending and simply raising ( beginning years down the road) the eligibility age for Social Security and Medicare a couple of years, slightly adjusting cost of living indexes, and implementing other comparatively painless entitlement tweaks.

Because many Americans seem to be healthier and living longer, adjusting entitlements shouldn't be much of a practical problem. The trend towards a longer and healthier life is hopefully only likely to continue. What's so magical about 65 for Medicare anyway? Means testing is another solution. I would personally forgo receiving Social Security payments beyond the amounts I paid in.

Letting the Bush tax cuts expire for everybody, making meaningful cuts in general and defense spending, and rationally adjusting entitlements would actually result in the goal we, and the markets, have had for our government -- "putting our fiscal house in order"

Let's do all of this now, and insure our children and grandchildren's financial future before it gets much tougher to do.


Tuesday, November 15, 2011

Occupy Wall St. Action Plan

It's time to do more than "occupying" and start coming up with ideas to narrow the growing income gap. That issue seems to be the one that most supporting OWS concerns seem to agree needs to be addressed.

The best way to begin to narrow income gap is through (i) a reformed corporate governance system which reins in runaway executive compensation and compensates executives based on actual merit and value added and (ii) a reenergized and reformed union movement to enhance middle class wages.
>1. Reformed corporate governance.

The current system is not effectively dealing with excessive executive compensation. We need a system that appropriately rewards actual value.

This principle also applies to entertainers and professional athletes.

> Shareholders need a much greater and effective voice; after all it's their money that being used to pay these sky high salaries and bonuses.

Over 60% of Amereicans, directly or indirectly, own stock in the market and some of the largest shareholder are union and employee pension funds.

Directors need complete independence from executives, and they need to exercise that independence in the best interest of the shareholders.

> Consultants who advise on compensation shouldn't base recommendations on comparables ( it becomes self fullfilling and circular), but rather develop a metric for determining actual value. They should be hired by the independent directors.

All this can be accomplished within the confines of our current legal system.

2. Reenergized and Reformed Union Movement.
> A. Private sector unions need to be strengthen by being more pro growth and less obstructionist. Union employees should in some way share in enhanced profitability.

Unions need to focus on their primary goal of protecting workers wages and benefits and preventing ownership from unfairly increasing ownership's profits at the workers expense.

However to be more effective, and garner general public support, unions need to reform in order to shed the image much of the public has of them.

Most of the public seems to view unions as self-serving obstructionists, with seemingly silly and unproductive work rules, whose leaders all too often unfairly enrich themselves in a variety of ways, and sometimes are outright corrupt.

Work rule must make sense and enhance, rather than retard profitability; while legitimately protecting workers health and safety.

Unions also need to be more responsive to competitive pressures from lower cost foreign labor. Leadership compensation and benefits need to be more transparent.

Unfortunately unions give their critics ample ammunition to attack them which results in discrediting much of the whole movement.

By being more pro growth, and working with, instead of against, management, the union movement can become a driver for increasing middle class income. By operating in a way that enhances the success of the companies for whom their members work, they can better insure the employees share fairly in that success.

B. As to the public sector, where the taxpayers are the owners, State and Local public employees should all be handled the same way the Federal government and the military are.

Maybe most people are not aware, but the Federal government employee unions have very limited rights. Pretty close to what the Governor of the State of Wisconsin would like. Pay and benefits are not negotiated by the union. Why no public outcry here?

First of all, let's remember that government is not in the business of making a profit, unlike the private sector. Therefore the concept of exploiting the workers to enrich the owners simply doesn't apply to the public sector.

Yes, we need State and Local employee unions to protect employees rights, but they should operate the same way as Federal government employee unions.

There is too much room for undue influence and abuse through political contributions, union leadership featherbedding and pension abuses. As we read in the newspapers almost every day, this kind of abuse occurs often on the state and local levels.

Another principle concern is that with government officials (it's not their money) negotiating with the unions (who make political contributions to those officials), there really is no one looking out for the interests of the taxpayers.

This differs from private industry where management is closely aligned with ownership in negotiations against unions and the concept of making contributions to the guys setting your salary doesn't exist.

As another example, retirement age should be same as private sector. Why the difference, except for police and fire?

As to police and fire, perhaps, they should be handled the same way as our all volunteer military. They are way too important to be affected by politics and union actions. However, given the nature of their work, they should be entitled to retire earlier than ordinary employees.

Finally, unlike the private sector, pubic sector costs are paid by taxpayers and therefore are a big part of our financial and debt crises, especially at the state and local levels.

> All that being said, I believe a revitalized union movement is crucial to narrowing the income gap. Reform is critical to making that happen.

In summary , these are areas where OWS or other activists should get involved to get actual results. Demonstrating is all well and good, but it's time to do something.

By raising workers wages through responsible union action and lowering executive compensation through increased shareholder participation and director independence, we can narrow the income gap within the parameters of a free and open democratic society.


Thursday, October 13, 2011

Taxes v. Income

I recently read a survey from the IRS which showed the percentage of federal income taxes paid, and adjusted gross income earned, by the top 1%, 5% and 25% of American taxpayers. If correct, the finding were pretty surprising to me.

The top 1% paid 38% of Federal Income Taxes ( "FIT"), but only earned 20% of Adjusted Gross Income("AGI") .

Likewise the top 5% paid 59% of FIT, but earned 35% of AGI .

The top 25% paid 86% of FIT .

Finally almost 50% of tax filers pay no FIT.

While the top 1% do make 20% of all income, they pay 38% of federal income taxes.

So much I guess for the 1% - 99% Occupy Wall St. mantra.

It is now widely recognized (although not well known) that almost half of American taxpayers pay no federal income taxes. While this doesn't cover social security and medicare taxes, those taxes are narrowly focused and people essentially get them paid back when they retire or get sick. They are not the same as federal income taxes which are used for most of our government expenditures.

The retort is that they do pay other taxes and that if they pay no federal income taxes, it is because they are not rich enough, too old or have big families.

By the way, I suspect a good portion of Tea Party folks are among those who pay very little or no federal income taxes.

Nonetheless there has to be concern from a societal point of view, when half of our citizens do not share in the burden of the cost of running our government. For that reason some conservatives are in favor of some kind of consumption tax at the federal level to insure that everyone pays some federal taxes. See Cain's 9-9-9 plan.

However what really surprised me is that while I always knew the "rich" paid most of the federal income taxes, I thought they made an even higher percentage of the income. Apparently they don't.

I'm not against raising taxes if needed to solve our fiscal problems, I just think it's important that people be aware that taxes are more fairly distributed than we are told. The rich, and the kind of rich, do pay their fair share and the less well off pay very little or none.

Perhaps if that were more widely known it would take some of the steam out of the class warfare frenzy and we can get down to solving our problems in a rational productive way.


Friday, October 7, 2011

Their Pay Is Too Damn High

One of my major concerns with the growing gap between rich and poor is not based on the wealth generated by capitalists, but rather with the outsized compensation paid to certain employees of companies, most significantly senior executives. Many are paid salaries and bonuses that are not rationally tied to performance or success. They are not risking their capital, yet get paid like highly successful capitalists; often whether or not their companies prosper.

There needs to be a recognition of sharing appropriately with those who make companies successful. I feel top contributors can only accomplish so much by themselves. They need contributions from many others in the organization to accomplish success for the company. At some point individual rewards should diminish going up the scale.

The opposite seems to be true today.

Superstars aren't all that great. There are many talented CEOs in waiting who could do just a good a job for a lot less than those currently running our public companies. The same is true of athletes, movie stars and other entertainers. There are limitations on what they can accomplish without the contribution of others.

As an aside, strangely enough no one in the Occupy Wall St. movement seems to complain about outsized pay to athletes and entertainers; in fact many march supporters ( i.e. Michael Moore, Sean Penn) are themselves overpaid movie stars and the like.

It is different for investors, but only to the extent they are risking their own money. The old investment banking model of investment bankers putting their own money at risk was fine. The problems arose when the investment banks went public and started risking other peoples money . No one was sufficiently looking out for the shareholders. The executives "feathered their own nests" with extremely high
compensation and non-merited based bonuses, and the shareholders let them.

Wealth needs to be shared more fairly, but not given away either. I'm not talking about redistribution of wealth, but rather an accurate assessment of the real value created. See the example of how pro golfers earn their pay versus how members of other pro sports teams get paid. The golfer has to earn his money every week.

Even in sports, top performers' contributions has its limits. One player on a team can only do so much without the help of others.

The usual left wing solution, taxation, however, is not the way to get there. It doesn't raise the compensation of the middle class to raise taxes on the rich. It may feel good to liberals, but it just gives the government more money and doesn't raise the incomes for those in the middle class on the "have not" side of the wealth gap.

Executives, especially commercial bankers, used to make very good, but not outsized, compensation. When and why did the shift occur?

The market should recognize the real value of employee contributions and the diminishing returns of any one person to the real creation of wealth.

Why doesn't it? Somehow those in control exploit their position of power to retain outsized rewards. The shareholders, the actual capitalists, should not let them get away with it.

We will always have classes of "haves" and "have nots". I've studied just a bit of history and have been struck by the fact that from the Greeks and Romans to the Soviet Union, it always seems that people eventually sort themselves out to create elites and the rest of society.

However it is dangerous to all if the gap becomes too wide. See French and Russian Revolutions. I've always maintained that the union movement actually saved capitalism in this country because it gave the working man his own "piece of the pie" and as a result he ferociously defended our system against the Communists.

Today we have a global economy which puts into play issues like cheap labor, the environment and free trade. It is hard to reconcile these currents on a national basis and there clearly is no appetite to do so on a global basis. Cheap foreign labor may in part be the reason for the loss of jobs on the lower end of the wealth spectrum, but it doesn't explain why the higher earners are getting so much more.

While I know it may be hard to put that "genie back in the bottle", and yes I know if you spread their compensation over their whole work force it may not be that much money, nonetheless it would be the right thing to do.


Friday, September 23, 2011

A Light Went On

I just saw a picture of the President of the Palestinian Authority handing a bid for statehood to the head of the UN , and a light went on in my head. Didn't the UN already grant statehood to the Palestinians in 1948 covering even more territory? As I recall the Palestinians rejected it.

Further from 1948 to 1967, didn't two Arab countries control the very territory the Palestinians now want for their state? What happened to the Palestinian state during that time?

Yes, I know many will say the past is irrelevant, but I still believe it is a very relevant factor in understanding the complete situation which most people today either aren't even aware or have forgotten or have chosen to ignore.


Thursday, August 25, 2011

Take some credit Mr. President

Why hasn't the President taken more credit for the good economic things that have happened to this country since he took office?

1. We are out of the recession which we got into during the last administration.

2. The Stock Market, where well over 50% of Americans ( it ranges up to 75% if you include pension funds) are invested , is up over 30%

3. Job net losses has stopped and we have been net adding jobs, particularly in the private sector. A big turnaround from the last administration.

4. The TARP saved the financial system and stabilized the economy, at no cost ( in fact with a profit) to the taxpayers; and while that started under the last administration , this one supported it.

5. The Auto Industry was saved and has now recovered.

6. Our corporations , where, remember many still work, are dong very well.

7. Inflationn remains low as are interest rates.

People say that while things have gotten better , it doesn't feel like it. What does that actually mean?

If you are among the 9-15% un or under employed , I get it. But what about the other 85-91%? Job losses have slowed substantially so there should be less fear of losing a job out there. If you have a job , your salary is probably the same or better.

Inflation and interest rates are low. Home prices are way way down and that's a real problem; but with low interest rates and prices it should be a great buying opportunity for first time buyers and other younger people looking to trade up.

Restaurants are reasonably busy, hotels and retail are doing better, sport venues continue to fill up for winning teams.

This is all happening under the Obama administration.

Unless you are among the jobless , I think it's largely psychological. I don't mean to be cynical, but what if we were told that the jobless rate had fallen below 8%, won't the rest of us employed people feel better.

If we felt better , we'd spend more and all of a sudden the economy would be growing faster. Remember full employment is considered to be around 4-5%; so even at those "ideal" levels, there would still be millions unemployed, but somehow that won't bother us as much.

Overall , many econonic things have improved significantly since the President took office and he should start taking more credit for it.


Friday, August 19, 2011

Refinance Idea

Here's an idea. The government is currently guaranteeing payment on billions of dollars of home mortgages which carry interest rates above today's rates. It would be a big boost to those borrowers if they could refinance their mortgage to lower their monthly payments and have more money in their pockets to spend and boost economic demand.

However since so many of those mortgages are "underwater" or otherwise don't qualify under today prudent underwriting standards, they would get turned down by private lenders if they tried to refinance.

Why couldn't the government agree to guarantee the refinancing of those mortgages? After all the government has already guaranteed them, so no additional funding would be involved since no principle would be reduced or increased. In addition,those new mortgages would be safer than the existing ones since the borrower would be better able to service the same amount of debt.

It would help homeowners, boost the economy and all at no cost the government beyond what it is already on the hook for. In fact it would also help the government since the borrowers on the loan it has guaranteed would be less likely to default if their monthly loan payments are lowered because of the refinance.

Most home mortgages can be freely prepaid, so I don't see a problem doing this.

I think this could be a big boost for homeowners and the economy at no cost to the government.

What am I missing here?


Thursday, August 18, 2011

Thing aren't that bad, and that's the problem

We keep hearing from our politicians and pundits, and we start believing it ourselves, that we are facing unprecedented problems in this country and that things are worse now than they have ever been. In short these are the worse of times for the United States.


What about 1929- 1939-- the Great Depression, massive unemployment , dust bowls, runs on the banks, Hoovervilles, breadlines, labor union clashes,etc.

What about 1940-43 -- Nazi Germany marching through Europe and advancing on Leningrad, Britain under siege, Pearl Harbor and Japan sweeping through the Pacific.

What about the 1950's with the Korean War and the expanding Communist Soviet Union and it's nuclear threat ( remember those drills hiding under school desk), culminating with the Cuban Missile Crisis in 1961. McCarthyism and its fall out.

Racism and bigotry were rampant. Eventually strife arose from the Civil Rights Movement in the 1960s and beyond , including the riots after MLK's assassination.

What about the Viet Nam War, with so many killed and wounded, and massive demonstrations, protests and civil disobedience in the 1960's and early 70's.

Remember all the years when we constantly lamented Urban Decay and the loss of our Farm Economy. Don't forget the era of Stagflaion and gas lines from the Arab Oil Embargo and the Savings and Loan Crisis. Our cities were crumbling and farmers couldn't make a decent living. The "inner cities " were dying.

Women and minorities did not have the rights and opportunities they have today.

We had some very bad recessions in the mid 1970s and early 1980s and 1990s. Don't forget the bursting of the DotCom bubble in 2001, with the economic down turn following that. Of course let's not forget 9/11.

Remember that in the 50s the top tax rate exceeded 70% and has been essentially falling since to where we are at today.

If we honestly examine it, the "good old days" weren't all that great.

Today, things comparatively aren't all that bad, and maybe that is why we have to amplify the problems we do have for some reason.

Of course the unemployment rate is a terrible problem, and debt and deficit are very serious problems that have to be dealt with. Housing prices are dreadful after the sub prime lending crisis set off the housing collapse which lead to the financial melt down and resulting Great Recession.

However inflation and interest rates are low. We are in the painful but ultimately beneficial process of de-leveraging our debt levels. Those who have jobs are doing reasonably well and are now feeling less worried. While home values have plunged most people are secure in their housing situation. The market has come back nicely from it's lows and the main market problems today appear to be in Europe and with our politicians. Our corporations are operating at very profitable levels and basically are awaiting increased demand to justify new hiring. Reportedly they are sitting on a mountain of cash but need to have confidence in the economy to invest it. Where will that come from?

Notwithstanding Standard and Poor's, the world believes that US Treasuries are still the safest investment in the world.

Our farm economy is so strong that it should be embarrassing to them to still be getting large government farm subsidies. For example, Iowa is in great shape, so what are they so angry about?

The wars we are involved in are being fought by volunteers who, for a variety of reasons, have chosen to be in the military. Therefore the rest of us really haven't had to sacrifice to fight these far off wars. The risk of a terrorist attack is real but sadly it is the nature of world we live in.

The one thing that really is broken is our political process. Our politicians, abetted by the pundits, have created a toxic atmosphere over things that in reality can be relatively easily dealt with by people of good will and reason. For example, Simpson Bowles would do the job, and relatively painlessly. Why hasn't either party embraced it? The so called Gang of Six are on the right track but partisan on both sides of the aisle block compromise at every turn.

Since our country's strengths are so extensive and our assets are so strong , we can do the things that need to be done, if the political will is there. We can afford to raise revenue. There certainly are areas where spending can and should be cut significantly. Meaningful adjustments to entitlements can be made in a relatively minor and thoughtful way which would have a major impact on bringing down the debt and the deficit.

Once a program which includes these things is developed and implemented, confidence in our political process will be restored and the economy will start to grow again and finish the job of solving our debt and deficit problems, as occurred in the 1990s when economic prosperity generated increased tax revenues from increased incomes and profits. We are lucky our problem are so solvable -- think Greece.

However, there are too many politician and pundits who don't want to solve our problems; no, they just want to win elections to gain or retain power. When will we all wake up to the fact that they care more about winning elections , with all the spoils that provides, than what is in the best interest of the country.

Maybe that has always been true, and is just a part of human nature, but it's so much more apparent these days.

Shared sacrifice through political consensus is the answer. Compared to what we have had to do in the past , it shouldn't be all that hard.


Friday, August 5, 2011


Gold-- I don't get it.

Yes, I know people have made a lot of money investing in gold (just like they did during the dotcom bubble), but I still don't have a clue why. It's pretty, sort of rare and has minimal industrial value, but I still don't get why it continues to increase in value.

What am I missing? It doesn't grow or produce a thing. You can't eat it. It pays no interest or dividend. It has limited industrial or practical value. Sure it may be pretty and make nice jewelry, but that's about it.

It's heavy and hard to transport, so if there really was an apocalyptic event what good would it be? Again you couldn't eat it or kill something with it. Who'd accept it in trade for what?

I'm not kidding, I don't get it. Somebody please enlighten me. I feel like the kid from the Emperor's new clothes fairytale. Gold isn't really worth anywhere near today's market price.


Theater of the Absurd

Now that the debt ceiling has been raised, all this talk about still lowering the AAA rating of US Treasuries is beyond silly, and boarders on absurd.

Let's start with the rating agencies, you know those guys that rated those subprime mortgage securities AAA. Lots of credibility there! These same guys are now going to say US Treasuries are not the safest investment?

How ridiculous they would look when, after a downgrade, the interest rate on USTs remain below other AAA rated countries debt. Looking at how in demand USTs are world wide, and how low the rate of interest buyers are willing to accept, maybe investors know something the rating agencies do not. Namely (politicians aside) the US is still the strongest, safest, most stable and transparent major country in the world and as such remains the safest haven for investors.

I don't think a downgrade will happen, which is why I call this whole controversy a bit of Theater of the Absurd. The rating agencies may be trying to make a point with all the cautions, outlooks and watches, but they'd look ridicules if they actually did it and lowered USTs below AAA.


Tuesday, June 28, 2011

No Country for Kurds

Why does almost no one talk about a country for the Kurds, but constantly focus on a country for the Palestinians?

The Kurds has been a separate people for centuries. They live in a relatively compact contiguous area which today constitutes parts of Turkey, Iraq, Syria and Iran. They are treated badly everywhere. In Turkey they are not even allowed to speak their own language. At least Palestinians are Arabs and Arabs have many countries. Do the Arabs really need another country, while the Kurds have none and the Jews just one.

Actually, I just had a thought-- what would have happened in 1948 if there were no Jews in the area? After the British left,would there have been the creation of a Palestinian State or, as I believe more likely, just Greater Syria/Jordan/Egypt? Maybe Greater Lebanon too.

Yes, I know the reality, at this point in time, is that we need the creation of a Palestinian state, but something tells me that, ironically, without the Jews living in the region with an historical claim to the land, there would be no thought of a Palestinian homeland.

As to the Kurds, some have suggested that if they were fighting Jews or if there were wealthier Kurds living in the US , we would hear more about a country for them.

All things considered the Kurds have a stronger claim to a country of their own than most countries in that region.


P.S. Don't even get me started on Tibet.

Get Real

Congress stop being crazy. Raise debt the ceiling now before the credit markets panic, and adopt Simpson Bowles as a long term economic plan.

I believe that would ignite our economy, create jobs and raise incomes. Yes, raise taxes/revenues, but put our fiscal house in order as well.

Unfortunately that is not the real aim of either party.

The Republicans don't want to solve the deficit problem, they want to eliminate government. They want to drastically cut down on the role of government, and are using this crisis as a means to accomplish that goal.

While the Democrats aren't nearly as bad, they are playing into the Republicans hands by refusing to make even sensible moderate changes to entitlements programs like refusing to raise the retirement age for Social Security by just 1 year and that beginning 30 years from now.

A strong, fiscally sound US would leave the hopeless EU in the dust and fend off rising China. All we need is the common sense approach embodied in the Simpson Bowles proposal.



Al Qaeda should "surrender" to US and announce that they no longer will attack us. Why do they keep fighting us. They are getting their "brains beat out" and would be more effective dealing with their other enemies if we weren't there killing their leaders.

Maybe they don't have to "surrender", but somehow make it clear to us that they are no longer coming after us. With all of our high tech drones, missiles and special forces , do they really want us as an active enemy? Given our new spirit of isolationism , I'm pretty sure we won't jump to the defense of our allies if Al Qaeda weren't threatening us.

We can then just declare that the War on Terror, at least as far as the USA is concerned, is over and we won.

Even the most fanatical can't really believe they can takeover the USA; so just give up and focus on someone they can beat without us involved like the Europeans and the rest of the Muslim world.

I thought you all would enjoy a good laugh.


Not your usual foreclosure story

Sunday June 19th front page NYT foreclosure article.

At last the story is out, sort of. Millions living rent free and more. The untold story of the foreclosure debacle. Now don't get me wrong, a whole lot of people have obviously lost their homes and are suffering , but according to that article, many are just staying put and living rent free, while the lenders are screwing up trying to foreclose, or as the article says, sometimes no longer even trying to foreclose. According to a defense lawyer many of his clients are renting out their properties, not paying their mortgages and pocketing the difference.

I'm not trying to disparage the vast majority who got in over their heads and may have been the victim of predatory lending practices , but my point is that the economic impact on many people in foreclosure may not be as bad as the headlines would lead us to believe. Not likely to hear about this Times article on the morning talk shows. It doesn't fit the conventional narrative, and frankly I was quite surprised (and pleased) it was done by the New York Times.

Also it all of this "sky in falling" foreclosure mania that is prolonging this recession and this article, if understood by the public, might somewhat lessen that negative perspective.


Wednesday, May 18, 2011

Re-Writing History

This is my response to a New York Times Op Ed May 17,2011 by Palestinian President, Mahmoud Abbas

I've heard it said that everyone is entitled to their own opinions, but not their own facts.

In his Op Ed piece,the supposed moderate president of the PLA gave a recitation of the facts of the creation of Israel and the Palestinian states that bears little resemblance to the facts as I, and most objective historians, know them.

In recounting the history of the UN's creation of an Israeli state and a Palestinian state, he never mentioned that Israel accepted that proposal. He failed to mention that the Palestinians rejected the UN proposal to create a Palestinian state and a Jewish state. He left out the fact that the Palestinians along with 5 other Arab countries, who had professional armies, declared war on Israel and attacked the nascent Jewish state. Their goal was to wipe Israel out.

They lost. Many Palestinians fled, and I won't even get into the debate as to why. Suffice it to say hundred of thousands Arabs did not flee and were not harmed in any way. Today they constitute a group of 1.3 million Israeli citizens. The fact that so many others fled was their decision.

From 1948 until 1967, the land which the Palestinians now want as the Palestinian state (and are going to the UN to have such a state so declared) was completely in Arab hands. A Palestinian state could have been declared by Jordan and Egypt and, among other things, no one would have had to live in refugee camps.

Why didn't they create the Palestinian state during that period? Whenever I have asked that very question over the years, I only get blank stares and comments about moving on. I believe it is a valid question and it's answer lies at the heart of the real problem. To give the Palestinians a state on anything less than all of the land which includes the state of Israel is an anathema to the Arabs.

Today there is talk of a two state solution. Everyone agrees, but not really.

Israel, ironically, would be doing what the Palestinian's brother Arabs didn't do, create a Palestinian state. This Palestinian state would be on land, the same in total area, and roughly the same geographically, as the pre-1967 borders.

There would be one Jewish state , Israel; and one Muslim state, Palestine. Of course, Jews and Muslims could live in either state. Much like the many Islamic and Christian states around the world.

President Abbas, and most of the Palestinians, view the two state solution much differently. One state , Palestine, would be overwhelmingly Muslim and Arab, and the other state , Israel would not be a Jewish state and in fact would be majority Muslim Arab, after the return of the Palestinians who ancestors left. His refusal to recognize Israel as a Jewish state says it all. It's not the same as recognizing Israel as a state, as he does.

I don't believe that the President Abbas's solution is what the rest of the world thought a two state solution would be. Of course Hamas won't even go that far.

Why hasn't this been made clear to us in the West?

History is being re-written as evidenced by President Abbas' NYT's Op Ed piece, and given the world's antipathy towards Israel, few seem to care.

Monday, April 11, 2011

Reprise-- Happy Now?

I was listening to Morning Joe today and they spent a great deal of time again bashing Bankers and Wall St. about the bailouts and the come back of Bank and Wall St. profitability and bonuses, while Main St. has not recovered.

Of course, Main St. is recovering, if not as fast. I also noted that they didn't talk about how well most farmers have done with the rise in commodity demand and food prices, or how well Texas has done with soaring oil prices. Both farmers and oil companies get billions of dollars in direct subsidies from the taxpayer that, unlike the Bank bailouts, don't even have to be repaid.

No all they beat on was the surviving Banks that have returned to profitability and big bonuses. Naturally, they didn't mention the Banks that got wiped out like Lehman Brothers, Baer Stearns, Washington Mutual, Wachovia and all the scores of regional and community banks that went under; along with their executives who lost their jobs and savings.

They also never mentioned that those Banks have repaid all of the "bailout" funds along with a handsome returm to the taxpayers.

Nor did they mention that "recovered" Banks like Citi have a current stock price of $4 ,down from $50 before the crisis.

Since they were so unhappy that the Banks are profitable again and paying bonuses , I thought I'd re-post my post on this very subject back on January 12, 2010. It's truer and more relevant today than it was back then.



Here's a future news story that should make the American public, pundits and politicians happy:

"Banks announce record losses today and cancellation of all bonuses.

The Dow Jones plunged to below 4,000 with resulting massive losses in all 401(k)s, employee pension funds and other pubic investment vehicles.

Housing prices dropped another 40% with complete shutdown of lending by weaken banks.

Jobless rate approaches 20%."

At last the public, pundits and politicians are happy because they really socked it to Wall St and those Bankers. Boy does that feel good.


Posted By Eric Schiller to Meditations at 1/12/2010 12:15:00 PM

Thursday, March 31, 2011

For Foreign Eyes Only

I read in the Financial Times of London last week that the " Federal Reserve made a record contribution of $79.3 B to the US Treasury from investments in its large portfolio of mortgage bonds."

Today I read in the same foreign publication that the US Treasury is forecasting (on a very conservative basis) a profit of almost $24B from TARP and called it "a positive outcome for despised bail-outs that were once estimated to cost hundreds of billions of dollars."

I read the NYT and WSJ, both days, and saw nothing about this positive economic news. I guess good news about banks doesn't sell newspapers, at least in this country. I also didn't hear about it on Morning Joe, CNN, Fox, etc.

Despite what Neil Barofsky and Elizabeth Warren have said, and of course their views appear in our press regularly, the TARP not only saved this country from economic disaster, but made a tidy profit for the taxpayer to boot.

And as to moral hazard concerns , tell that to the shareholders of Lehman, Baer Stearns, WaMu, Merril Lynch, Wachovia, AIG and others, and all their former executives who lost their jobs and most of their fortunes. Even survivors like Citi saw the value of their stock go from $50 to $1( now back up to $4) and Bank of America's stock plunged as well, and their Chairman lost his job. I think there is plenty of moral hazard arising from this crisis.

As to "too big to fail", recall the words of Paul Krugman in his column about Canada. He noted that Canada was not suffering the same degree of financial distress and observed that "Canada has only 5 banks and they are all too big to fail", so that alone was not the cause of the financial crisis.

Why can't our press tell the American people about all this?


Thursday, March 10, 2011


The following was written in January but I just got around to posting it, so I apologize if these aren't very current; however the issues are still relevant.

I noticed several anomalies in the news lately, along with some really troubling news.

1. Nicolas Kristoff wrote about the negative societal affects of growing income inequality . He cited the increase in crime and unwanted teenage pregnancies as evidence of such negative societal affects . However while I agree that the growing gap in income equality is a very serious problem, I checked and confirmed that crime and teenage pregnancies have actually dropped significantly during this period of growing income inequality.

2. I recently read an article in the Chicago Tribune about the serious problem of lenders abandoning properties before finalizing foreclosure after the foreclosure had been filed and the owners moved out. By dropping the foreclosure before it was final, the lenders left the property vacant and an eyesore or worse for the neighborhood. If that wasn't bad enough ,the article went on to cite a government statistic that some lenders even had walked away from 60% of their defaulted loans before filing a foreclosure, which which the article implied, further exacerbated the vacant property problem.

I asked myself if those lenders never even filed foreclosure action, why did the owners move out? Indeed they could still be living there "rent free". I called one of the neighborhood organization referred to in the article and asked that question. He agreed my question was a good one and didn't have a good answer except to say that the report I questioned didn't come from them. He agreed that there would be no reason to leave if a foreclosure hadn't even been filed. Nevertheless I'm sure the Trib thought it made for good reading. The author of the article didn't answer my email.

3. Earlier one morning I heard a NPR report that studies showed that political assassins were motivated almost solely by desire for notoriety as opposed to political extremism. Why hasn't more been said about this report as part of the on going discussion on this issue?

4. Most troubling, a large number young urban lawyers in Pakistan are supporting the murder of a governor who advocated repeal of a blasphemy law. What hope is there for Pakistan when those who presumably are sworn to uphold the law, celebrate a cold blooded murderer.

Quck Hits- Contradictions

Contradictions abound:

1. How can we can we be for improving education and at the same time cut teacher compensation, benefits and rights?

2. Public employee unions -- if the right to bargain collectively is such a time honored embedded scared right supported by the President in Wisconsin, why don't his federal employees have those time honored sacred rights?

3. Why is what the Republican recently did in Wisconsin so undemocratic, but the Democrats fleeing the state to avoid a quorum on a vote is just fine?

4. How can Huckabee criticize Natalie Portman but not Bristol Palin?

5. How did we have a "no fly" zone in Iraq protecting the Kurds for many years before the war, but find it so difficult and dangerous to so in Libya?

6. How can we dramatically cut current spending at a time our economy has not yet recovered?

7. Why is it so unpalatable to our current seniors to raise the social security retirement age from 67 to 68 beginning 50 years from now?

8. Why did we create a bi-partisan commission to come up with ideas to deal with the deficit and then completely ignore its recommendations?

Tuesday, January 4, 2011

Back in time

We hear a lot abut how the Afghan War has been the longest war in US history. Why haven't we been able to win, and more pointedly, didn't we realize that no one since Alexander the Great has been able to militarily prevail there(and even he had to marry one of the local princesses).

Bush is justifiably criticized for not finishing the job and diverting attention to Iraq. Why did Bush neglect Afghanistan all those years. What went wrong?

Then I began to remember what actually happened in the beginning of the Afghan War.

Recall that the Bush Administration actually realized that we should not invade ourselves; but rather our strategy was to give air and special forces support to local anti-Taliban forces known as the Northern Alliance. It was the Northern Alliance who would, and did, defeat the Taliban. They were fierce and competent fighters ( no U.S. training required) and, most importantly, they had the support of the people.

What changed and why? I don't know the answer, but it's surprising to me that almost no one mentions the original strategy and how effective it was; without a massive US ground presence.

Why are the Afghans, who are born fighting and raised with a rifle in their hands, in such need of our training now? What happened to the fighters of the Northern Alliance? It's leader Massoud had been killed, but that was before the war began. Has our support been such a corrupting influence on the government to turn the people back toward the Taliban?

Why don't we just go back to the original strategy-- air support and, at most, special forces on the ground. The rest is up to the Afghans, as it was in the beginning.