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.