Don't Fix What Ain't Broke

This is a tightly guarded secret. Nobody in the media will report it: the American economy is not broken. 

Sure, almost every measurable metric is down: consumer confidence, spending, travel, and so on, and so forth. But I don't think there is anything wrong with it considering that instead of spending, Americans are finally putting something into their personal savings.

Sure, a part time house painter making $20,000 per year can't get a mortgage to buy a 900 square foot shack in CA for $350,000. But I don't see a problem with that.

Sure, America isn't buying 17,000,000 cars a year any more. And we aren't chewing through 1.15 billion cell phones a year any more. But I don't see a problem with buying a new car every ten years and a new cell phone every two or three.

America isn't broken. We are finally saturated. After a decade of over-buying, over-spending, over-consuming, we have stopped being frivolous.We don't need four cars, eight TVs, a media room, or a TIVO that can record every episode of Sapranos and stream it to a four hundred dollar iPhone.

Our politicians don't want us to save. They want us to take out the fattest mortgage possible and build another Super-Sized McMansion.  They don't want us to conserve. They want us to consume. Spend. Spend. Spend. Deplete our every resource. Debt is good. Debt is American.


It isn't a recession. It is a return to normallacy. But the media won't say that. And our elected officials deny it with every breath.

I have a suggestion for them: don't fix what ain't broke. The sheeple are fleeing the Imaginary Land of Milk & Honey. They're finding more familiar pastures. Less expensive ones.

I, for one, am not looking back.

Our Toxic Money Pit

My friend Alix (we survived the doldrums of High School together) asked me what I thought about this whole credit implosion. I responded with a bit of my interpretation of "How We Got Here," and my unabashed opinions on what we should do:

• I never liked Fannie or Freddie and always wanted them reformed. When the GOP tried to rein them in, the Dems said the GOP were being racists who didn't want minorities to "share the American dream of owning a home."
  
  
• The reality of the matter was that 20 years ago, the banks and investors had more money than anyone wanted to borrow. So they bought some politicians and fabricated a scam based upon difficult-to-understand mortgages, with the ultimate goal of getting people to borrow way more money than they normally could .
  
  
• Even more clever, the banks didn’t actually care so much about lending their money to low income consumers who would never pay it back. They sourced the loans, bundled them together into packages, and sold those packages to other people and institutions at a fictional rate. So a bank might provide the cash for a bunch of sub-prime loans, but then get it back, plus a huge commission, when those loans were packaged and sold to someone else.
  
  
• In the meanwhile, all this credit is flooding into the "market," and there are more cash-laden Home Buyers (ie: suckers) than there are Home Sellers (ie: future suckers), the laws of Supply & Demand kick in, and there is a rapid inflating of housing prices as the Recent Sellers had to buy new homes. With their unexpected profit, these New Buyers take out bigger loans (which they normally couldn't afford) for bigger houses (which they normally couldn't afford,) and the banks make bigger profits.
  
  
• Repeat the process for a decade. Except the banks have grown addicted to their new found fortunes. And in order to perpetuate the Ponzi scheme, they brew a cauldron of investment poison Jim Kunstler describes as: so complex that they could only be created with the aid of computers. The result is that hardly anyone -- perhaps even nobody in or out of Wall Street -- really understands what they represent. In fact, this alphabet soup of engineered securities -- CDOs, CDSs, MBSs, SIVs, etc -- was cooked up from a recipe of Ponzi algorithms. They were designed to be mathematically indecipherable, except by computers, in an alternative universe of model-making that bore only a superficial relation to the real world. That was their dirty secret. And the dirty secret of the Great Bail-out is that, in the real world, we will never be able to discover the actual trading value of these things at any number above zero. This is why they are called "toxic."
  
  
• Ultimately, the cycle ground to a halt, and we discover that all these banks made horribly bad investments. They went to the race track, bet on all the wrong horses, and now expect tax payers to pony up the money the bookies are here to collect.
  
  
• I say: let credit restrictions tighten! I have no problem if credit gets much more restrictive and 21yr old busboys can no longer buy a $500K house, a Lincoln towncar, and a 120" plasma TV on $40000/yr. I never bought what I could not afford and have no remorse for those who did. They can move out of the McMansion and rent an apartment and stop crying that their Xbox was repo'ed.
  
  
• Sure,I will lose money on my 401K, but it was an INVESTMENT, I opted in, but at low risk, and I diversified. My loss is real, but not substantial. And I expect it will recover inside of the next 40yrs when I go to cash out.
  
• We learned nothing from the S&L scandal of the 80s.We learned nothing from the Internet Bubble of the 90s. And it looks like the villains who created this recent toxic money pit are trying to push the burden of paying for their mistakes onto the tax payer.

I say let them all collapse. Perhaps it will end the cycle of greed and stupidity. But I doubt it.

Hard wired

I'm always fascinated to find Easter Eggs hiding in brain. Little oddities that reiterate how little I really know about this crazy dance of life.

Here's how to reveal a bug in human wetware:
While sitting at your desk, lift your right foot off the floor and make clockwise circles. Now, while doing this draw the number "6" in the air with your right hand. Your foot will change direction. There's nothing you can do about it.

I can't explain this one. Maybe somebody can. But doing so would ruin the magic. I say it is hard wired. A glitch left over from yesteryears.

Secret: The true burden of our debt

Here's something neither politcal "party" wants you to know: America is in unbelievably. deeply in debt. If the debt were spread out equally among all our citizens it would be $161,287 per man, woman and child - - or $645,148 per family of 4, for a grand total of forty eight trillion dollars. ($48,000,000,000,000!!)

What our elected officials will confess to is a debt of $8 trillion and some change. That is commonly called Total America Debt and is defined as the sum of all recognized debt of federal, state & local governments, international, private households, business and domestic financial sectors, including federal debt to trust funds. But it excludes the un-funded liabilities such as social security, government pensions and Medicare.

If you included the liabilities (or the ones we can foresee) total debt in America becomes $48 trillion. See the image above for a breakdown of un-funded liabilities and their cost per household.

And if you want to lose even more sleep, realize that nobody is predicting the long term cost of our wounded troops (34,650 as if 05/19/07) returning from Iraq. There may be medical bills for each of them for years or decades to come. And nobody has begun to even estimate the size of the bill for that.

The Republicans do not want to tell you the true depth of our debt because they know it will add even more fuel to the fire and accelerate the downward spiral of Bush's popularity numbers. And god-forbid somebody wake up and realize we've spent $438B (BILLION!) in Iraq.

(For the curious, the money we've spent on Iraq could have sent 21,000,000 kids to college for four years. The money we've spent on Iraq could have hired 7,000,000 more school teachers. The money we've spent on Iraq could have sent 58,000,000 children to fully funded Head Start programs. The money we've spent on Iraq could have built 4,000,000 homes for American citizens. Instead it bought us: 3600 dead men and women in the armed forces, almost 35,000 wounded men and women in the armed forces, and as many as 72000 dead Iraq citizens. But on the good side, Halliburton's stock has gone from $8.94 in July, ‘02 to a recent high of $37.93.)

The Democrats do not want to tell you the true depth of our debt cause they know the first items that will be cut in order to (shudder) balance the budget will be social programs and minority spending. Both of which will have negative results on their popularity.

So we are spoon fed lies by both sides. Our elected officials are sitting in office spending and spending and spending as quickly as they possibly can, knowing the burden of the debt doesn't fall on THEIR shoulders. It will be our burden to bear. And our children. And our grand children.

It is easy to spend somebody else's money. But who bears the budren of that debt?

The illusion of immigration reform

I'm going to share a secret: Exactly none of our elected officials in Washington want to do anything about immigration and exactly none of our elected officals in Washington plan to do anything about immigration.

Exhibit A: The Republicans are not going to offend their financial masters in Big Business. If the pool of cheap, uneducated, uninsured, un-demanding labor were to vanish, Big Business would have to pay decent wages, provide decent benifits, and pay taxes to employ legal citizens. And trust me, SOMEBODY will fill any and every job out there. The universe abhors a vacuum. And Big Business abhors anything that affects their profits. So the GOP isn't going to make any serious movement toward real reform.

Exhibit B: The Democrats are not going to offend potential minority voters. They believe it was the minorities that got them elected (because the wealthy are usually voting along GOP lines) so if the Democrats do anything to impede the flow of more and more foreign immigrants, then they'll offend their voter base and not get elected for another term. So the Democrats are not going to make any serious movement toward real reform.

Exhibit C: Perhaps I'm the only one who remembers this, but WE HAVE IMMIGRATION LAWS NOW! They aren't being enforced. WE HAVE IMMIGRATION OFFICERS NOW! They aren't being staffed properly. None of our elected officials are funding or supporting the policies and procedures we have in place right now. So why would they do anything differently in the future?

The secret? They're humoring the voters. They are going through the motions to make it appear as if they are seriously going to resolve the problem. They point fingers at the other side. They thump their chest and decry their plan to be the best for the nation. They cast blame when nobody does anything. But they are doing something, they are playing both sides against the middle. But like a gang of rats on an ungodly huge treadmill, for all their running and panting, they end up going nowhere.

If our elected officials were truly interested in immigration reform, we could fund and build the biggest and most heavily guarded border the world has ever seen. We could seed a mine-filled DMZ the likes of which would make the Koreans piss themselves. We could surveill every inch of it ever second of the day with modern security systems. We could conduct military training for every branch of the armed services on the border: snipers, air strikes, special forces, coastal fire support.

Across the top: "Abandon all hope yee who enter here!"

But, we don't. At least our elected officials don't. They put on their top hats, whip out their magic wand, and prestidigitate their flimsy illusion of immigration reform. As long as they keep promising and never deliver, we'll keep electing them in the hopes that one day the rabbit comes out of the hat. They know that. So they all, Democrat and Republican alike, perpetuate the political stage show, and we never question the secret of the magicians' tricks.