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September 15, 2011


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The Fed opted for a bizarre move to trade short term bonds for long term bonds in a move to reduce long term interest rates and take away the safe haven for investors' money. This I suppose was supposed to drive them to the equity markets. But, did it? Down 286. It may drive the further to gold and silver a way of putting your money under the bed. Please just leave the economy alone and it will recover. The talk is doing more to destroy confidence than the actuall numbers. Unemployment is holding steady not increasing. It is natural for the emerging markets, who feed off the US and Europe , to slow down when we slow down. Who else can they sell to?--Africa?


Today Barney Franks pointed out how little Obama understands the economics of America when he disagreed on taxing Municipal Bond interest a piece of the President's "tax the Rich" program. He presented the case that this will simply make it much harder for states and municipalities to raise funds and put more pressure on the Feds to bail them out. Of course, to his credit, Barney did point out that Municipal Bonds are a significant portion of his personal holdings!


Moody, not to be outdone by S&P, downgraded Bank of America, Wells Fargo and CITICORP today based on the fact that the Fed may not bail them out again if the economy tanks. It seemed to ignore the strength they have added since 2008.

Just another day in the weird world of this administration.


Today's numbers on housing starts and permits were encouraging. While the overall numbers are pathetic for America the rate of change was somewhat encouraging. Housing starts were down dramatically in the Northeast (30%) but the rest of the country almost made up for it. When you consider the Hurricane and floods from the Tropical storm in August and the impact on the Northeast perhaps housing starts were not too bad. On the encouraging side Housing permits were up 3%. When you consider that the banks are escalating their foreclosures and about 2.5 Million homes are yet to be foreclosed on the fact that houses are being built at all is encouraging in a time when people are predicting another recession.


When the European Common Market was formed it was easy to assume they would eventually become the United States of Europe and come together for the common good as our states did 200+ years ago. Now that the individual pieces of the Common market are struggling the group must decide if they are one for all or all for one. Greece will likely fail. Italy and Spain are in trouble. It would take a heroic effort for the rest to save them all. But, these are different ethinic and political entities with 2000 years of tribal competition. Is there the political will to come together? Will the Netherlands, the Germans, the Fins, etc risk all their capital to bail out the weaker elements? Can the stronger countries impose their austerity conditions on the weak in order to turn them around and justify their risk? Here in America we fought our civil war and unified but similar questions remain. Can the liberals of California, New York and Illinois be saved by the rest of the states? Under the American system these three states who are reluctant to balance their books control huge voting blocks in the fiscal system administered by Congress and the Federal Government. At the moment Chuck Schumer of NY, Nancy Pelosi of California and President Obama of Illinois represent a huge power base in the Federal Government and a safety net for those three big states in continuing their spending ways. This political control does not exist in Europe. Thus the failure of Greece and perhaps others is likely. Remember the USSR? It was similar to Europe except that it had a dictatorship imposed over it and a communist economic system. It too was a system of ethnic tribes and it too failed under economic stress. So, in the months and years ahead Europe will have to decide if the Euro was a step forward or a dream not worth pursing thru the pain of tough times. The failure of Greece unto itself will not be a big deal but the signal it sends to the rest of the world could be. In some ways it would be the same as if NATO failed to come to the defense of Turkey should Iran attack them. And, in the United States fiscal policy is now a verbal debate and political contest that will detemine how many generations can live off their children's future earnings before the children bail out. Hopefully, America is learning a valuable lesson watching Europe.


So it's all about the math? The math is simple: we spend $1.4 trillion a year more than we take in. Like it or not we will be fighting these terrorists of the rest of our lives and paying for it. In one form or another we owe the seniors of this country their social security money back with interest--add that to the national debt.(Obama and the government act as though they pay social secutity--they do not! They were the trustees of social security money paid in by the workers of the US and their EMPLOYERS. Just for my small company that is a combined employee/employer investment of about $500,000 a year and after 37 years of investment should be worth an astonishing $73.5M for our 40 or so employees. There are 9 million or so small businesses for whom the federal government is the trustee of our retirement funds. The federal government obviously is a highly suspect "trustee" for us as they are Congress and Congress has been highly reckless and irresponsible with the funds using them to offset what would have added on to the $14T in debt they are currently showing on the books. The math is that the feds actually owe these businesses' employees many Trillion more dollars in retirement funds. Thus, Perry's referral to the ponzie scheme nature of our trustees. This game the politicians are playing with cuts and taxes on the "future" using a ten year window to delay the consquences of their policies is irresponsible. The solution is simple: let managers manage to the resources we have. Cut the federal budget 2% a year for the next 5 years and you will get to a balanced budget. the managers will find the waste be it resources or people without Congress's help. Get rid of the compunded 6% annual increase in expenditures. Redo the actuarial tables on Social security every 5 years and begin to actually invest the dollars in a real trust fund. When the ecnomy turns around the revenues will increase you do not need rate changes.In fact rate changes in recessions are the reason the economy burns out and government grows. They take more and more money out of the private sector during every upturn.

The President's math attack is nothing but a cover to increase the immediate revenue pot while we push spending cuts into the fantasy budgets of the future making it look like we are accomplishing some fiscal austerity. This is a plan to get the Republican's to block it and make them look like they favor the rich--which of course they do. But, that is not the real issue--the deficit and entitlements. It is simpy more of the same an attempt to reduce losses in the Senate and save his Presidency. By the time the American people get him out of there and get the Senate back into balance the debt will exceed $20T and the accrued entitlements will
be unpayable just like Greece. It is not class warfare--it is leveling the playing field just as he told Joe the Plumber. That's the realistic math on this situation.

'Liberal Anxiety Neurosis',I would think, is the NORM at this point.
Personally, I passed neurotic and went right into PSYCHOTIC OBCESSION as information or wrather the lack of, began streaming in on this President. It led me to review one of your previous 'BLOGS '(Machiavelli's Obama). Bill McCormick's 'Post' of Aug 5th on "America a Welfare State"; totaling Federal,State,and Local :welfare,healthcare and pension costs,DUMBFOUNDED me. I had never before seen that summation. It is no wonder, politicians fail to enlighten us with these kind of perspectives.
Another perspective they failed on was the "GROSS DEBT"/GDP percentage. They speak of that ratio using the 'Public Debt'portion.
That allows a much smaller, more convenient number. However, if you watched the CSPAN coverage this week of the Special Debt Commission and Doug Elmendorph (CBO Head);you came away with the term "FROZEN".
Mr. Elmendorph attempted to 'shake them a bit'and mentioned his consultation with a research team concerned with the effect of 90% or greater ratios of DEBT/GDP.
The term 'FROZEN ECONOMY'surfaced. This is where we are 'IN FACT'. Its implication is that either a 'TAX CUT' or 'SPENDING CUT'
could drive the Economy into RECESSION. Way too many eyes 'GLAZED OVER' on that Commission. I think our chances of success rest with a very small number on that Commission. Sen Toomey of PA seemed to have a grasp of the SURGICAL NATURE of the TASK ahead.
This is going to be way over the head of the ADMINISTRATION.

How to Reps feel about Perry? From my chair he is arrogant, anti-science, anti-intellectual. I don't get the complaining about government intrusion in daily life when he has proposed that all girls in Texas be vaccinated for HPV. Isn't that an intrusion of the highest sort?

He is not for me, but comments please. Polls show Romney at only 31 percent in NH where he should be well ahead, and where he has to win.
The idea of Perry as the Rep candidate is not too far fetched.

You fail to note that Obama out polls Perry by 11 and Romney by 5. Against a generic Rep, the Rep is a little ahead. This points to the weakness of the Rep field.

Add to that Democratic strategist James Carvell's comment to the President on the Brooklyn and Nevada elections: "It's time to panic!" I'm in the hills of Utah with several small business owners and as sad as it is to see the President is fast becoming Jimmy Carter II: incompetant and disrespected. Carter has never recovered and Obama may not either.

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