Defeat of the Bailout Bill

I can't help but wonder if yesterday's defeat of the Bailout Bill isn't the equivolent of the passengers on the Titanic refusing to help an unpopular captain steer the ship and then saying, "Serves him right, now he'll sink," when he hit an iceburg.

You can't lose

NPR ran a story this morning on how much collecting tractors has been gaining a following in both Europe and here. Apparently, tractor prices are jumping at a rate of about 100% a year.

They talked to one gentleman who has been collecting tractors for about 5 years now. According to him, it is his "retirement plan" and "you can't lose."

Anyone remember when the only risk in the stock market was not being in it? Anyone remember when you couldn't lose by investing in real estate? When was the last time you saw something increasing in price by doubling every year and it wasn't a bubble?

Anyone think this guy will need a bailout eventually?

Market Meltdown

All that seemed to be on NPR today was discussion about the status of the markets and as they talked I had a lot of comments. Some of which I remember now, hours later.

Everyone is busy decrying the "greed" of Wall Street by which they mean corporate America. Hypocritical. Now that "we" are in this mess because of "them," we get mad at them, and in the rush of emotion, fear, and panic, you hear all kinds of crazy things. One listener posited that "we" should send them to "jail" for what they have done "to us." Another suggested that the government, giant wet-nurse to the nation, should step in an allow bankruptcy judges to unilaterally change the mortgages and loan notes. But here is the thing, or at least the first thing: The "we" that got us into this mess is the same "we" who wants to blame the faceless "thems" and send them to jail. For the big banks and big insurance companies to have gotten into all this trouble with their mortgages, they had to lend the money to someone. That someone came to them wanting a loan and was delighted to get a loan. That someone wanted the loan, in many cases, to pay for something that has subsequently turned out to have been a poor purchase decision. That someone would have been very angry had they been turned down for a loan because the bank thought the house was worth far less than a "certified" appraiser. "We" wouldn't be in this mess without the "someones" I described who are, wait for it, the same main-street middle Americans who are outraged and calling for the heads of the captains of Wall Street. If "we" want the culprit, "we" need to look in the mirror.

I don't hold Wall Street blameless either, but I certainly understand a captain of business following what works. More accurately perhaps, I'm not going to force him to choose between a decade of what would have been dismal performance for his company by making sound decisions and dismal decisions in order to keep his job. Make no mistake, had any of these "thems" done what we are now telling them they should have done, their stockholders (including the "we") would have forced them to resign because their profits were so low. The short-term now-now-now demands of the American Public set all of this up. The greed and short-sightedness of the public made this disaster a disaster, and our lack of patients and unwillingness to sleep in the bed we made are going to make it worse.

There is a song refrain that says, "I want it all. I want it all. And I want it now" or something like that and that encapsulates the American Public, especially the baby boomers (who might be the most me oriented generation ever). The public wanted their parent's standard of living (attained over their parents' lifetime) immediately. They wanted stock to go up fast and rewarded short term performance. Worse, they punished poor short term performance which, as mentioned causes fund managers to either focus on the short term exclusively or to get a new job. They wanted new TVs, new computers, new cars, new ipods, bigger houses, all right now. Borrow all you need up front and then pay it off over a lifetime instead of save it over a lifetime and only get the STUFF at the end. What did that do? Well, the first thing that happened is huge credit card debt -- buy now, pay later. Better yet buy now, pay a little later so you can buy more then too. Hey, look you can borrow against your house like a giant credit card for those really big purchases (or to pay OFF your credit card giving you more credit there). This rush of buying was akin to a sprint only no one saw it. Of course, if everyone bought everything they'd ever need in the next year, then we'd have a bunch of activity for a year and then a sudden drop off. Worse, that drop off would then cause lay offs at exactly the time when everyone is trying to pay for everything. We created an economy that is driven by these credit transactions and when there was not enough money in the system to keep things going "at pace" the "we" borrowed it just like a sprinter injecting steroids. Like that sprinter, we could not keep up the pace forever and eventually, something broke. That's the problem with momentum economics.

Also when everyone is buying something,it increases demand which, in turn, increases price. Prices go up until suddenly demand drops and then prices fall. The guy who buys an item at the top, now loses all that value and says he loses money. It's more accurate to say he lost illusory value for which he paid "real" money. Of course, if the seller of that item turned around and sunk that money into something that also lost value, then it's almost like losing illusory money as well.

That brings me back to greed. Readers may recall a previous blog entry about people who were just voluntarily walking away from their mortgages because they still owed more than the property was worth. When people do that, it furthers all that bad debt, corporate collapse, and recession we keep hearing about. Additionally, one of those default credit swaps (insurance policies on mortgages) has to then be paid which is yet another blow against AIG and others. The irony is that these same people who are walking away from their signed word (the note and mortgage), are the same ones who are blaming the greed of Wall Street. If what the bankers did is "criminal" "bank fraud" then I think walking away from a mortgage you could pay if you chose is equally bank fraud.

We also have to ask ourselves what sort of society we are creating. More and more I see a no-fault society where we, be it big brother or whoever, moves in to save everyone from their own mistakes. Bad investment? We make it good. Lost your job? We make it good. It's all about shifting responsibility. It's all about not feeling like what just happened to you is not your fault; that someone should have prevented it. That someone is never the victim because, to us, the word victim implies guiltlessness. It's all the bank's fault because they should have known not to lend money to me when I asked for it by filling in fraudulent information on my loan application. Shame on them.

I note that I've heard a lot of criticism of the "free marketers." They are getting blamed for this mess but they caused "deregulation" which everyone now knows is synonymous with "greed" and "irresponsibility." The thing I'm noting thought is that this is not a test of deregulation and free market economics because you aren't allowing half of that approach to operate. In a free market, you pays your money and you takes you chances. If you do well, you do really well and reap a windfall. If you screw up, you reap the whirlwind and get hammered by the free market. It is the latter part our society is now predisposed to prevent and THAT throws the whole thing off balance. The good must balance the bad and the goods of a free market are all huge, BUT SO ARE THE BADS. The true free marketers are the ones saying that we should not rescue AIG or Fannie and Freddie; that it's now time to take our medicine no matter how bad it tastes. Fair weather free market doesn't work.

Now lest you think I am a total free marketer, I have to say I'm not sure that I am. The free market is essentially a Darwinian system and, in evolution, extinction is the rule. The problem is that when you get something as major as AIG or Fannie and Freddie going extinct, it drags a lot down with it, often through fear and panic. The market is not called the thundering herd for nothing. When a company gets so big and affects things on a national or international scale, when the government "cannot allow it to fail," then it seems to me governance of that company almost becomes a position held in trust. We either have to treat large companies as trusts for the nation or we have to prevent them from becoming so large and influential that they need to be treated as trusts. I don't like those options; the capitalist in me is hiding his head. But the protection of the larger population means we need to make sure that the extinction of any given part cannot threaten the whole.

I heard this morning that the Dems want to do a couple of things: 1) Give bankruptcy judges the power to re-write mortgages and 2) change the executive compensation for companies that are being helped by Federal funds. I'll begin by saying that I agree 100% with the Dems that the government should allow itself to renegotiate its loans with the borrowers who are in default. I could not disagree more about the rest. We have something called freedom to contract which should govern the loans. If the gov wants to buy the loans and then renegotiate, that's fine, but it should HAVE to buy them. Deciding for the lender that it is better for the lender to renegotiate violates the freedom to contract. Worse though is stepping in and telling a company that it's pay structure for its executives is now something other than what it was. Again, this interferes with contract. It also provides a huge incentive for the executives of these companies to turn down aid. At the very least, the executive should have the immediate ability to quit under the terms of their old pay package before a new one is imposed. We also must consider that a lot of the so called golden parachutes are coupled with the exiting employee's obligations to keep information confidential.

International Talk like a Pirate Day

Today is apparently International Talk Like a Pirate Day. Think about pirates. Think about what they really did. Think about them raiding, killing, raping, and so forth. Then ask yourself if this is really something you think we should be honoring by emulating them?

I realize it's fun to talk like a pirate and that pirates have a certain glamor. The make good Halloween costumes and Kiera Knightley looks great as one, but this day makes little sense.

Georgia and the Sudetenland

I heard an interesting opinion on NPR this evening on the way home from work. The topic was the Georgian-Russian conflict that is going on as I speak. The expert, a history professor, was comparing the similarities between modern Russia and Germany between the world wars. Both nations, he argued, were feeling that they had fallen and needed to reassert their national greatness. Both nations want/ed to reestablish their "natural" territorial boundaries. The analogy was chilling. The expert went on to suggest that the unified West should stop Russian integration into the EU, punish the Russians by dissolving their special committees in the UN, and so forth.

And let us not forget the recent tendency of the Russian government to assassinate annoying ex-patriots in other sovereign countries.

If Russia is in the same position as Germany circa 1938, I don't know why this expert thinks any of the things he suggested will make a damn bit of difference. Does anyone think that canceling the Olympics in 1936 would have stopped Hitler's Germany from its aggressive course of action? This is a Neville Chamberlain tactic and it is doomed to the same results, again, assuming the analogy between Germany and Russia holds water. The ONLY thing that would have checked Germany would have been a military response by England, France, etc. When the "Allied" world did not respond militarily, then Hitler saw it as a lack of resolve and was encouraged to go further. Plugged back into Russia's invasion of Georgia, whatever pretense they are using be it a need for "living room" or because they are "obligated a peacekeepers" the implications of the 1938 example are staggering.

Of course this isn't 1938. While we are in a recession as we were in '38, many other things are different. For example, the U.S. military is currently deployed meaning it is busy and not able to respond if it wanted to (and don't think the Russians don't know it.) Also, The Russians have nuclear weapons and that is the most chilling aspect of all. Take a moment to think what would have happened during WWII if Hitler had had nuclear capability in 1938.

One thing is the same though. The thought of getting a unified anything from the West is just as absurd now as it was then. If 1938 is the truest analogy in history, then as in 1938, I am sure that, human nature being what it is, we will delay too long before acting.

4x100 Men's Relay

Congrats to the U.S. Men's 4x100 relay team. Last night was super exciting! Congrats also the the qualifying team that broke a record to get us to the finals; your work, although less glamorous than the photo finish of the final, was no less crucial. That footage is among the all time great Olympic moments.

Congrats also to Katie Hoff who took silver. We were cheering for you so hard. Your every bit as great as anyone on the U. S Swim Team. You rock!

Olympic mercenaries

Maybe I’m over-sensitive, but something I’ve seen in the Olympics really bothers me. I’m used to modern baseball, football, etc teams trading players. The NBA has players from all over the world. Yet, it really bothers me when Olympians, including coaches to some extent, immigrate to other countries for the sole purpose of having an easier road to the Olympics. I guess I think the Olympics are supposed to be different; that it is about representing your country instead of finding an international sponsor so you can get in. I think the Olympics are about each country sending its own, native grown, very best to the games instead of hiring mercenaries to do its athletics for it. There are exceptions, of course, like the now-German gymnast who moved to Germany to find leukemia treatments for her child, but they seem to be the exception, not the rule. Instead this seems like the Olympics are taking yet another step to make them indistinguishable from professional athletics with a four year championship.

SUVs vs Crossovers

Has anyone seen the Chevy advertisement where it starts out taking about how not all SUV’s have bad gas mileage and then goes on to talk about the new Chevy CROSSOVER? Maybe someone should tell GM that an SUV is is not the same thing as a Crossover. A Crossover is a car designed for the late 20’s person whose life style is crossing over (get it?) from single and fancy free to family. Its not as sporty as a sports car, but not as, well, family as a minivan or an SUV. Hence the name.

This is like talking about how not all oranges are equally hard to peel and then doing an ad for your new apple.

Baby-Boomers of their word

I saw this on the BBC yesterday. My response is not suitable for children.

I was a bit outraged. It’s one thing to default on a loan because you can’t pay it. It’s another to default on a loan because you made a bad choice. Then I realized which generation we were talking about: the I shouldn’t have to be responsible for anything generation, the ME generation, the I-deserve-to-be-rescued-from-my-own-stupidity folks. You buy a house at an over inflated price. In a market that had experts warning that real estate was over-valued. And suddenly you should be able to just walk away and stick it to the folks who gave you the loan to do it? Stick to the man right? Stick it to BigBank. Jokes on them, right? Oh and stick it to their share holders. And their account holders. And the folks who work there. And the tax payers who will have to fund the bail-out. To quote John Travolta in Broken Arrow, “Fuck ‘em if they can’t take a joke.” And after all, isn’t your asshole just that much more important than that of your fellow creatures? It’s great, you made a mistake and now you don’t have to live with it. It’s like getting into a car drunk, getting pulled over, and getting to blame the passenger for letting you drive.

Who selected the house, jack ass? You did. Who decided to buy it. You again, jack ass. And who should have to eat the consequences if the house falls in value?

Oh, it would have meant dipping into your retirement? Oh well you shouldn’t have to do that? Nope. Life, Liberty, Pursuit of Happiness, and never having to dip into your retirement account are your rights as an American. Absolutely. Your retirement is much more important than the salary of the bank employee who gets laid off. Why? Obviously because its yours and they are just a faceless bank person. We all know how much more important YOU are.

You selfish turd.

Now, I don’t have any sympathy for BigBank who got itself over extended. I hate BigBanks with a passion, I really do. And they are taking it on the chin because they were stupid to lend money in the first place for property that wasn’t worth it. They should have had the expertise, but instead they had greed. And now they are getting bent over and I revel in it.

Right up to the point where you decide the financially best thing to do is walk away and stick it to them when you don’t have to. Thousands of Americans are honest-to-God worried about HOW they will afford their next house payment. People are being evicted who NEED their houses and who got suckered into bad loans because they were stupid, ignorant, or uninformed. But you are just gonna walk away, not because you have to, but because you don’t want to have to make that payment that you could make. And in doing that you will damage the economy and make it even worse for all the others who don’t have your ability to choose. Aren’t you just a saint?

So here’s what I hope. I hope you end up not able to find a new place to live, having cast away your last one. I hope you end up with nowhere to live. I hope you end up living in a cardboard box, and a leaky one at that. Of course, you would probably think that someone should rescue you from that particular bad decision too. After all, it wasn’t your fault was it?

Fat Chance

Learned something stupid on NPR today and I couldn’t wait to blog about it. It seems that the lovely city of Los Angeles noticed that they have the highest concentration of obese people in south LA as well as the highest concentration of fast food establishments in south LA. Realizing immediately the crisis this posed to their fair city where everyone must be California thin, they acted with dispatch and put a moratorium (ban) on constructing any new fast food places in that area.

1) That would be the government telling you that you can’t do something with your land which, IMHO is a “taking.” Further, it is discriminatory taking that violates principles of free trade since it isn’t against all restaurants, just those which are “fast food.” (Leave aside that the issue of determining which places are fast food and which are not is entirely subjective and that almost all fast food places offer a salad and all sit down places offer something high calorie and fattening.) This is like saying you can put in a Target store but not a Wal-Mart. This measure is illegal.

2) Some major assumptions about cause and effect seem to be in play here. The City Council assumes, or at least their remedy assumes, that the proliferation of “fast food” is what causes the obesity (and that obesity is bad and that they are obligated to clean it up). But what if the fast food has come to be where it is because that is where the obese people are? What if there is something in the life habits of the obese people that makes fast food more appetizing? If that’s the case, the proliferation of fast food is only a symptom and not a cause. Banning it simply means the obese people will have to travel further for it, and this in a city that already battles smog and pollution. Further, the ban hurts the economy and may cause a slight slow down in local construction.

3) The Council is apparently looking for a way to encourage non-fast food restaurants to move into the city and hopes that this moratorium will both give them time to think of a better way to fix the “problem” as well as allow non-fast food places to get established. The restaurant association points out that many people who patronize fast food do so because it is, theoretically, fast. This dovetails with the previous point, but if that is the case then there is no reason to think that by stopping the development of new fast food places, you will somehow get people to go to “slow food” places if they don’t have time. Maybe the reason that no sit-down places really existed in the area is because they can’t survive there. If that is the case, this measure only stops the development of vacant lots that would otherwise become something.

4) I think we also need to ask ourselves where this road is going. Here in Illinois we banned smoking in all public places and within 15 feet of the door to such a place. Of course it’s for our own good and we should trust in the legislature to know best what that is; after all we ordinary citizens aren’t really smart enough to do so. Now L.A. is passing laws to deal with obesity, for its citizen’s own good, etc. What’s next? Will we legislatively impose the food pyramid upon the population for its own good. Make it a misdemeanor to eat more than one candy bar in a week? Will we say you can’t eat a Big Mac in a public building? Maybe all food should be prepared by government chef’s using approved recipes constructed by expert nutritionists and served in city cafeterias?

Nope, not a fan of this. I think I’ll have Big Mac for lunch out of protest.