Explaining Economics one 6 Pack at a time.


  • Category Archives Politics

  • Gay Marriage

    Posted on April 22, 2009 by drinker

    I personally don’t care.  On my list of candidate positions it is just above if we agree on our choice of cereal.  Both sides on this issue really take it too far in the ramifications of either having gay marriage or not having gay marriage.  The pro-gay marriage side would have you believe that it is on the same level as forcing blacks to use certain water fountains or blocking the right to vote.  The anti-gay marriage side would have you believe that the nuclear family will instantly break apart and die because Tim and Tom or Jane and Joan got married.  For the pro-gay side lets be serious, you can do everything an actual married couple could do except have some of the legal protections from the state.  For the anti-gay side the no-fault divorce and Hollywood has already made a mockery of marriage.

    Now that I have given my opinion, let us go into some little tidbits of things I thought about pertaining to this issue.  I like to look at things to find out the hidden consequences or things that most people did not think to include in their equations.

    Why did government get involved with marriage to begin with?
    The government or at least the United States Federal government did not really care who was married till the 1930s.  For those that took a history course the reason they started caring in the 1930s who was married to who was that social security benefits were started then.  Once the government started  paying people they begin to want to have a say in what is going on (this is a hint to anyone taking government money).  In the 1930s gay still meant that the person was just happy.  It was not really even considered that marriage was anything but a man and a woman (or women).

    Why did government give benefits to being married?
    There are a few reasons for this but the biggest is that hetero sexual marriage has a tendency to produce little future tax payers.  In addition the best way to ensure that the little taxpayers truly grow up to be taxpayers and not little criminals is to try and keep the parents in the same house.  Please don’t comment that there is no proof that kids grow up better in a house with mother and father I don’t care about your lies.

    Is there any downside for gays and gay marriage?
    Why yes there certainly is.  Although it is would not be noticeable for about three generations.  Let us assume that being gay is genetic (or at the very least people genetic predisposed to be gay).  In addition once gay marriage is legally recognized it will become social acceptable to be openly gay.  I would say it is acceptable now, but I guess it not true everywhere.  Here comes the downside.  When people stop hiding that they are gay and stop marrying heterosexuals the primary mechanism for the transfer of the “gay-gene” will be halted.  Remember that so many of us are unplanned pregnancy, and in a gay relationship there just is not an unplanned pregnancy.

    I think we should all think about what the state of home decorating will be in 60 years.  Do we really want that?

    This entry was posted in Politics, Random Thoughts for the Day and tagged . Bookmark the permalink.

  • Government Mismanagement and Corruption

    Posted on April 21, 2009 by drinker

     

    Well it seems that there is a report out that the TARP program could be mismanaged and is open to corruption.  In other news water is wet and Lindsey Lohan is unstable. 

    Did anyone seriously think that when the 700 billion dollar number came out that is was going to be spent wisely?   I thought it was joke when I first heard it, a bad one but still a joke.  It turned out that it was a joke on us.  To top it off a few months later we get a gigantic stimulus bill that will also have to be paid for.  Then the regular budget of the government will run into numbers unthinkable.  Who the hell is going to pay for all this?  We are.  The rich will pay for it directly while the poor will pay by inflation.

    This whole debacle is just another in a long list of examples of government mismanagement of money.  This not just an American problem, all governments have the same problem.  It has to do with a combination of human conditions.  Greed and Sloth are the most prevalent.  Greed in that the various representatives want to get the money to pay back constituents and their own pockets.  Sloth in the bureaucrats and the elected reps in ensuring the money is spent after due diligence.  The reason they can do all of this is that it is not their money, it is ours.

    I really thought I had more to write on this, but so much of it is too obvious.

    This entry was posted in Economics, Politics and tagged , , , , , , . Bookmark the permalink.

  • Nature will always win and The Origins of the Crisis

    Posted on April 6, 2009 by drinker

    The current financial crisis is a big example of how nature will always equalize a system.  When the consequences of an action are eliminated the rate of the action will increase.  Eliminate the hangovers and people will drink more.  I would at least.

    All things in nature will eventually equalize themselves, because a system imbalance cannot exist for long.  For instance if you eliminate the wolves; the deer will eventually over populate the area and start committing suicide by jumping in front of your car.  I think they miss the wolves too much.  So the system self equalizes. 

    Another example of risk and reward system we should all me familiar with is our sex lives.   What do you think would happen if a bunch of 20 something’s were kept on college campus but were told that pregnancy could not happen and STDs could not be caught?   In three months half the campus would be pregnant and the other half would be scratching themselves wondering what is wrong with their pubes.  I am not condemning them.  I would have taken part in such an experiment too (I would have been a whore but nobody wanted to be a whore with me).  So much for memories, either way you should have gotten my point.

    The current crisis can be tracked to who ever let Fannie Mae and Freddie Mac to buy very crappy mortgages.  The rest of the funny financials like collateralized debt securities and derivatives were simply the mold that grew from the cesspool of Fannie and Freddie taking risks no one in their right mind would take.   Normally when a private corporation would take unneeded risk it would burn out and die or outside investors would refuse to underwrite the endeavor.  What made Fannie and Freddie different was that they were tacitly guaranteed by the government.  This means that the underwriters had less risk of failure because if worst came to worst the government would take care of everything.  These underwriters, investors or gamblers saw rewards that were better than the risks of underwriting the companies. 

    For period of time the imbalance of the system was balanced periodically without crashing the system because the gains and leverage were not great enough to cause the system to collapse.  Housing prices went up and went down for all of eternity.  What made this different was the timing.  Stocks were tanking after the dot bomb debacle (another example people not using their heads) and the Fed was trying to get the economy moving again.  The Fed lowered interest rates making money very cheap.  In any boom and bust cycle there are still winners.  These winners began investing in real-estate. 

    Shortly before this time Herb Moses an executive a Fannie Mae was playing hide the salami with Barney Frank.  Barney Frank at this time was in charge of making sure Fannie Mae was doing good business.  He opposed the transferring of Fannie and Freddie oversight from the Department of Urban and Housing development to the Treasury Department.  Granted either one is still a government run.  It seems that a government department whose job is to get people into housing would have a conflict of interest with a company who provides financing for homes.  So if said company will provide additional financing for the department’s projects they would overlook the horrible risks they were taking.  I have no proof that this is what happened.  But it is not too much of stretch to think this is what was going on.  Especially since the ramifications became so clear a few years later. 

    Without anyone to watch over Fannie and Freddie and many investors willing to take extra risks because the government would back any risks these organizations ran rampant.  The CEO’s of the companies and the attendant executives began writing bonus rules that had nothing to do with long term viability of the organization.  So the bonuses that were given were for the amount of assets in management (or mortgages owned).  There bonus had nothing to do with the quality of the assets.  Who here can see what is about to happen next?  Raise your hand.

    Fannie began taking all the mortgages they could get from the private companies in the market.  These were sold as all kinds of securities and what not.  Investors not knowing what fannie was doing but believing the government would come to the rescue were willing to write checks to fannie.  The private companies realized that they would not hold the mortgage more than a few months to a year would sell the mortgages to Fannie.  The risk was off the private company but they still had the reward of the first year’s mortgage payments and other service fees. 

    The price of homes began to sky rocket.  Soon few people could afford a home with traditional methods.  But the private company could make up crazy mortgages that started off with smaller payments.  The buyer could afford these teaser rates in the beginning but by the time the real rates came the mortgage would be owned by another company (usually Fannie or Freddie).  These artificial buyers could only maintain this growth for so long.  Soon the market collapsed. 

    In this game of hot potato Fannie and Freddie were left holding the potato.  Which means that the we the American tax payer was actually holding the hot potato.

    This entry was posted in Economics, Politics and tagged , , , , . Bookmark the permalink.

  • Bank of Obama

    Posted on April 6, 2009 by drinker

    Does anyone think that the government not accepting the money back from TARP a good idea?

    I am against this on so many levels.  How can anyone who is not a total communist think that this is good idea.  If you were against the bailout to begin with how could you not want them to give the money back?  If you were for the bailout (and not a communist) of course this would be a sign that the banks are doing just fine and the crisis has passed. 

    I initial thought that they way we would see government control more and more of our lives and economics was through a more soft style power like carbon credits.  But it now seems that they want something more direct.  And how else could you control things more completely then by actually controling the money. 

    The primary reason for the mess we are in was because of the government directly jamming loan requirements down the throut of the banks and by allowing Fannie and Freddie to buy crappy mortgages and take on excessive risk because the government would come to the rescue.  All of the other crap about secruitzation of debt and repackaging loans would not have been possible without Fannie artificially taking more risk then would normally be acceptable.  And no one in the government would stop it.

    Does anyone really think this is a good idea?  And who else is really scared of this?

    This entry was posted in Conspiracy Theories, Economics, Politics. Bookmark the permalink.

  • We are all rich when we are all poor

    Posted on March 30, 2009 by drinker

    What fascinates the hell out of me is that some very smart people do not understand that not everyone can be rich.  Nor can everyone be poor either.  We are rich or we are poor based on the people around us.  Both Ted Rall and Cynthia Tucker do not understand how basic everyday economics work.

    Although both are correct in criticizing the executive pay of these failing institutions, what they fail to recognize is aside from pulling back a little bit on the pay for CEO’s there will always be both wealthy, rich, poor, and a bunch of levels in the middle.  I also made a very conscience decision putting in both wealthy and rich as different levels. 

    To the primary reason I wanted to post about tonight.  The amount of middle class people has not changed in percentage of the population.   The primary reason has nothing to do with economic policies or anything that complicated.  The middle class are the people who make more than the lower class but less than the rich.  The factory workers were never really middle class.  The manager at the plant was middle class and the diner owner was middle class.  Could the factory worker live comfortably with the two point five kids and a white picket fence?  Maybe it really depended on the supply of houses with white picket fences.  But that is my point.  What does the average person today have in comparison to thirty years ago?

    Today the average household owns two cars (with reliability and features Mercedes Benz did not have), a HDTV in one or two rooms, air conditioning in almost every room, cell phones, cable TV with 100 plus channels, a computer with internet, some type of game system, and health care that those in the 1970s could only dream of (even if it’s expensive).   

    Mean while in the 1970s when according to Cynthia Tucker all was great, the average American made car was complete junk, went 0-60 in 3.4 months, got about 15mpg, and were good for about 80K miles.  Air conditioning was something only the rich people in the neighborhood had.  A house might have two TVs only one worked.  Cable was something for rich people also, if they even had it all.  There were no cells phones.  Ok that last one is bonus.  The personal computer was just a series of blinking lights.  Geeks really were geeks.  The internet was for even bigger geeks.  And healthcare although cheap was abysmal by today’s standards. 

    So where did all the productivity gains that the rich people ran away with go? It came back to the “poor people” in the form of better stuff for “poor people”.   One can argue that all the stuff is not worth it, but when it comes to economics the stuff and the services that people can have does matter.  Also if someone did not want the stuff they do not need to purchase the items.  

    The second point I want to make is directly related to the statistic mentioned in Cynthia’s editorial.  I don’t think there is anything wrong with it.  I think it actually shows exactly what it should show.

    A few years ago, Earl Wysong of Indiana University and two colleagues published a study on social mobility in this country. As outlined in the Economist, a right-leaning British news magazine, they “compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70 percent of the sons in 1998 had remained at the same level or were doing worse than their fathers in 1979. The greatest social mobility occurred in those families already at the top of the income ladder,” the magazine reported.

     

    So 70 percent of the study did not move up the income ladder?  No kidding.  Not everyone can move up the income ladder since they have to move past someone else and then that person would move down the income ladder.   I would bet the statistics would come out that 1/3 moved up, 1/3 stayed the same and 1/3 went down.  Also 66% is really close to “almost 70%”. 

    The second part of the statement deals with that most of the social mobility was in the upper income brackets.  This too can be easily explained without it coming down to something evil republicans did by reducing taxes.  In 1979 a college degree was still a premium and those with them came from more affluent backgrounds.  While a high school education pre 1979 may have been good enough, after that is simply was not good enough.  One needed to have something besides a high school education.  So simply showing that those who were affluent made better gains was primarily because they had access to a college education and valued it earlier.  In addition it tends to the children of the rich that become the wealthy.  The grandchildren become drug addicts and home move porn stars.  So it sort of works out in the end.

    Did some people become obscenely rich, while others were brushed to the wayside?  Yes.  Do I wish that people could live in a minimal of comfort even when they are on the lowest rungs of the economic ladder?  Yes.  And they do, but in comparison to the truly poor in this world they are doing pretty damn good, even if everyone else around them is doing better.

     

    This entry was posted in Economics, Politics and tagged , , , , , , . Bookmark the permalink.

  • Healthy Mae and Pharma Mac

    Posted on March 25, 2009 by drinker

    With all the discussions about the changes to the healthcare industry in the United States I figured I should put my two cents in.  Not  to mention with the way the dollars been going you’re better off using your pennies as projectiles thrown at the car in front of you that is too slow at the green light, then using them to actually purchase something.  Back to the point, which is how I see the new healthcare system shaping up. 

    First and foremost I do not believe the private system is going anywhere.  Simply put there is far too much money in it.  In addition don’t forget that everyone with socialized medicine needs the USA’s private system for when things need to get done and it’s not an emergency situation.  Given that we are not going to get rid of the private system lets discuss the options.  The private system is there to make money.  Never forget that one fact.  The private insurance industry tries to insure people that it thinks will not cost them more then the premiums the people pay.   When someone has obvious aliments that will cost the insurance company more money than they can make in premiums it will not insure the person.  It is simply bad business.  I don’t blame them per say given that they are in the business to make money.

    If a strictly government run system were to replace the current hodgepodge of private and public insurance with a strict government only system it will be a disaster.  The reason being is that the government run system will not start to fail till long after it was too late.  It will fail for the same reasons the rest of the government programs in this country eventually fail.  It will be run into the ground by a series of political appointees, unions, lobbyists and lawyers.  It will start off all well and good but in ten years it will start to show its strain.

    Where does that leave us?  How can the two systems be combined to satisfy everyone?  Or at least long enough to function till artificial intelligences takes over our decision making for us all ( I for one welcome our future robot masters  and hope they enjoy my sarcastic humor).  I am usually a very pro-business kind of person and I am still pro-business when it comes to the healthcare industry, but something has to be done about the coverage given to high risk and those with prior conditions.  Those with high-risk conditions and/or prior conditions are almost impossible to insure and still be profitable.  The price to be paid would simply be too high for the person to pay.  What if the government plan would take care of this high risk pool? 

    I am going to go out on a limb and say that the end result system will be something similar to the mortgage industry.  Purely private companies will handle the gravy of the healthcare industry.   This means that the industry will cover those they think will not actually need the healthcare.  After all they are betting that you will use less healthcare resources then you pay for each year.  The government program will then take care of the high risk people or at least handle the high risk portion of their care. 

    The system will be able to leverage the existing infrastructure and allow for most the private insurance companies to slowly fade out of existence over the next twenty or so years.  This will primarily happen as each election will bring in a new politician who will promise to have the government funded system take on more and more of what was provided by the private companies.  The private insurance companies will react as most private business react, they will allow the government to keep nibbling at the services they offer, till one day before they know it, the private companies will have no use. 

    I have one other way that this will go down too.  This is the more cynical approach but given the intelligence of those running the whole darn thing it seems just as likely to happen.  The politicians will create the healthy mae and pharma mac (HMPM) almost private not quite public either corporation.  But unlike the above mentioned scenario, HMPM will not be a retail service.  They instead will be a sort of re-insurer.  They will be the dump where the private insurance companies put the people they cannot make any money from.  In the first go round the system will work very well as common sense rules will apply.  HMPM will evaluate the people and do the right thing by taking only calculated risks.  But soon the pseudo private nature of the company will come through.

    HMPM will have their CEOs make their bonuses not on the smart decision making of their auditors, the bonuses will be based on just how many people they “insure”.  The politicians will be paid a portion of the bonuses via campaign donations till soon every basket case the private insurance can find will be on the HMPM roles.  They will agree to insure them with sole express knowledge that they will dish the person off on HMPM. We all see where this going right?  The private companies will just dump and dump and dump till it all just collapses.  This should be just about in time for me to retire. 

    This system should last long enough for either me to die or for our computers to treat like little pets.  Personally they way my dog spends her days are pretty damn good.  Sit down, lift a paw and get a treat.  I might even be able to do better than that.  With all this crap going on, smoking seems like a pretty good habit to pickup.  It could solve the social security problem.

    This entry was posted in Conspiracy Theories, Politics and tagged , . Bookmark the permalink.

  • And the corruption begins

    Posted on March 19, 2009 by drinker

    Ok its not like corruption ever stopped, its just has  a lot more to feed it now.  And larges pots of money feeds corruption.  I knew the stimulus would attract the flies like a pile of dog crap. 

    I look at obama and his crew and see a typical academic arrogance with the stimulus bill and the extra spending bills.  Arrogance may be too strong of word but what I mean is they seem to think that while other governments have failed to spend the money properly they will succeed.  They are making a very good go at it with the media.  The speechs about holding people accountable for where the money gets  spent are all well and good but it won’t get spent correctly.  And I can’t think of anyone who really did a good job of spending our money. 

    But what will happen is that after about a year the bulk of the spending money will begin to hit the local governments and by that time americas attention will be on the next great thing.  Perhaps the budding adult movie career of Britney Spears will captivate us at that point I don’t know.  Part of me thinks the reason for so much of the stimulus money being spent so long after it was signed may be because by then (a year from now) they will be able to do as they please with it.

    I need another beer.

    This entry was posted in Economics, Politics and tagged , . Bookmark the permalink.

  • How to piss off the Europeans

    Posted on March 18, 2009 by drinker

    I can’t think of better way to piss of the Europeans then to start universal health insurance in the United States.  I say why should we be paying for all the research and development costs of new procedures while they can just leach off of our hard earned money.  Not to mention all of the European firms that spend all that money on research and development of new drugs can save that money. 

    The overpriced system in the United States allows for the socialized mendicene states to survive.  The new treatments are created so that they can be done in united states where they can charge and arm and a leg to fix your arm or leg.  Once the initial treatment is perfected and the initial investment is recouped the rest of the world can now benefit from it.  Pharmacutical companies will end up being the biggest losers in this new plan.  Primarly because the jackpot they get when they invent the next viagra will be eliminated.  But that also means that no one will invest to invent the next viagra. 

    This brings me to one of my primary principles of life.  No risk no reward.  No reward no risk.  Talent will follow the money.  I can’t think of another cliche but you get he point.  The top researcher or two may do it for the love of the task but there are about another hundred people in the chain that are not doing their job for the love of it.  These include other researchers, book keepers, IT guys, janitors, and general managers.  Without these jobs being done the researchers can not do their job.  All of these other people want to get paid, because at the end of the day they want to take their money and do something or someone they enjoy.

    So now that nobody can hit the jackpot by inventing the next great thing in medicine, the research and development will dryup.  Sure the charity money will still be their but the private money will slowly leave the market.  It will be replace by government research money which will be determined by the amount pictures showing hookers with the congressmen then the actual use of the end product.  Ironicly the amout of hookers and congressmen pictures is inversely proportional to the price of viagra.

    Smokem if you got em.  Mind as well look cool

    This entry was posted in Economics, Politics and tagged , , , . Bookmark the permalink.

  • And they overplayed their hand

    Posted on March 17, 2009 by drinker

    I want to say I am sorry to the 8 of you how read this.  I deprived you with my wisdom for a week.  I am sure you are all very sad.  Unfortunately for me, your sad because I decided to write again.

    In today’s post I want to talk about government overplaying their hand with their bailout money and thank god they did.  In this story about the strings the government attached to the bailout money the banks have basically balked at taking the money or they are trying to give it back.  In classic government fashion everyone tried to get their little social engineering or pet project task on the strings of the bail out money.  I am very thankful for that.

    In general am not a big fan of large government.  The primary reason is that the government is incompetent.  Like the old saying about those that can’t do something, teach it.  Well those who can’t work, go to the government.  And of course my disclaimer about some people at the government actually trying to do the right thing.  That being said I love to limit the governments power.  By returning the money and overall telling the government bureaucrats to stay out their business they are limiting the governments power.  Which I think is great.  In addition it is less of my money going to people who are incompetent (If you needed this money then you were incompetent).

    Here’s to the government continuing to overplay their hand.

    This entry was posted in Economics, Politics and tagged , , . Bookmark the permalink.

  • Ted Rall is officially a Communist

    Posted on March 10, 2009 by drinker

    Insulting CEOs (while letting them keep their perquisites) may be fun. But it doesn’t begin to address what’s killing the U.S. economy: the rancid notion that one person’s hard day’s work deserves more pay than another’s.

    Ted Rall for those who don’t know is a writer who is left of, well everybody come to think of it.  The primary premise for this editorial is that the CEOs of these failed banks should be tarred and feathered and that is something we agree on.  But after that we differ on just about everything else.

    I don’t like CEOs who get paid enormous amounts of money and run the company into the ground.  I believe in rewarding success and not failure.  But I firmly believe that some people should have more than others, if they deserve it because of their efforts.   I also think that the only person who can get someone out of crappy financial situation is themselves. 

    First we must recognize people are not poor because of the money they have or don’t have.  They are poor because someone else has more money.  Poor and Rich are both relative.  Always remember that.  Even in the height of communist Russia there was still rich and poor. 

    “In 1980, according to a Forbes magazine study, executive compensation was 40 times the average worker’s pay; by 2007, that had soared to more than 400 times,” CBS News reported on February 25th. Now that the companies those ridiculously compensated executives were charged with running are tanking, CEO pay is coming under attack by pundits and politicians.

    So what does this mean to the average employee?  Let’s say the average employee makes 50K a year and that there are 100000 employees in the company.  How much would it matter to each employee if the difference between 40 and 400 times was distributed evenly between those employees?  50K a year multiplied by 40 is 2 million.  Then 50K multiplied by 400 is 20million.  This yields a difference of 18million.  But what does that mean to the 100K employees; about 180 bucks a piece.  What would this have done to the average employee’s bills, something between diddly and squat. 

    I want people to know that I do not think they deserve to get paid if the company goes down the toilet.  They should be the last ones paid but when they do well they should be richly compensated.  But the current compensation scheme is out of whack.  I would like to see a limit on salaries.  Before you call me a hypocrite I think there should be additional types of compensation.  Their money should come from bonuses and shares of stock in the company.  The bonuses would be paid at the end of the fiscal year based on the net profit of the company while the stock would be rewarded to the CEOs but it could not be sold for 2 years. 

    This brings me back to my primary purpose of my post.  People should get paid what their days worth of work is worth.  I am sorry that the best someone can do is ask “do you want fries with that” but why should that person get the same as someone repairing an electrical circuit on the top of telephone pole.  A job that is both hard and dangerous.  Or perhaps someone guy making a decision that could destroy or rejuvenate the company.  I know that most left wingers believe that the CEOs of many companies are heartless pricks but in actuality they are human beings who care about their employees.  They might not be as caring as we would like but very few of them don’t sweat over laying people off. 

    Although there are still too many pricks out there.

    This entry was posted in Economics, Politics and tagged , , , . Bookmark the permalink.



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