According to President Obama, we need more government.to provide 'fairness' for the American middle class. The latest series of scandals -- Benghazi, the AP snooping situations, and the IRS targeting of conservative groups, should serve to show why government is not likely to be the solution to the problem of getting the economy going again.
Government scandals are not new and are certainly not limited to the Democrats. Republicans are just as willing to bend government to their will as the Democrats. That's why government is not the proper place to put our trust. Our trust should belong in the free market, not in the bureaucrat, who may have another agenda.
Regulators can have a will of their own and it is very hard for the average citizen or company to fight them, especially when the regulators are willing to bend the law.
Free markets don't have political biases. Free markets are all about individuals trying to make a better life for themselves and their families through their own efforts.
Government is about taking from one person by force and giving to another. Those on the receiving end typically vote for politicians willing to do pretty much anything to demonize their opponents. Again, Republicans are just as likely to do this as Democrats.
Health care and pretty much every other endeavor should be provided in the free market. The government should butt out. By having medicare, medicaid and Obamacare, the US virtually guarantees that health care will be doled out according to the whims of the ascendant political party and the losers will pay and suffer the indignities of a disastrous health care system.
A good example of this is education. Look where government employees and politicians get their education. Then compare that to where the children of the middle class get their education. This is the outcome you get when government is providing the service.
Pretty much the same applies to all of the provisions of government services. The free market delivers best. The government, ultimately, is mainly a purveyor of corruption. Witness the current plight of the Obama Administration.
Thursday, May 16, 2013
Wednesday, May 15, 2013
Are You Still Unhappy With Wall Street?
Those who invest in the US stock market have nothing to complain about. Stocks are on a tear in 2013 and have produced returns north of 8 percent annually over the past 100 years. What else does that well?
It has been almost impossible to avoid a lush retirement if one simply salted away money into an index fund regularly over the past 40 years.
So why do you continue to hear that Wall Street cannot be trusted and why do Congress and the Administration continue to try to crush Wall Street under a sea of litigation, regulation, and hyperbole.?
Will we really be better off without Wall Street? The average American has had the rare ability to simply plump his money down into an index fund and retire in splendor ($ 2,000 salted away in an IRA annually produced over $ 2 million in 40 years). I guess this kind of independence is too much for politicians to bear.
No one who has ever purchased an index fund at any time in history and still owns it today has a loss. In fact, it would be hard to find anyone who hasn't made an enormous amount of money in their index fund.
But, give Obama some time. Besides bludgeoning Wall Street into submission, his administration has sounded the first bugle in its war against IRAs.
Look for more of this. Obama will leave no stone unturned in his war against America's middle class. The war against Wall Street is designed, one supposes, to prohibit the average American from funding his retirement safely and force more Americans to fall back onto the US government for their retirement.
It has been almost impossible to avoid a lush retirement if one simply salted away money into an index fund regularly over the past 40 years.
So why do you continue to hear that Wall Street cannot be trusted and why do Congress and the Administration continue to try to crush Wall Street under a sea of litigation, regulation, and hyperbole.?
Will we really be better off without Wall Street? The average American has had the rare ability to simply plump his money down into an index fund and retire in splendor ($ 2,000 salted away in an IRA annually produced over $ 2 million in 40 years). I guess this kind of independence is too much for politicians to bear.
No one who has ever purchased an index fund at any time in history and still owns it today has a loss. In fact, it would be hard to find anyone who hasn't made an enormous amount of money in their index fund.
But, give Obama some time. Besides bludgeoning Wall Street into submission, his administration has sounded the first bugle in its war against IRAs.
Look for more of this. Obama will leave no stone unturned in his war against America's middle class. The war against Wall Street is designed, one supposes, to prohibit the average American from funding his retirement safely and force more Americans to fall back onto the US government for their retirement.
Friday, May 10, 2013
Jamie Dimon's Lament
Shareholders will vote soon. Right. Wrong. Shareholders typically have no idea that they are shareholders. Shareholders' agents -- pension funds, endowments, foundations, money managers -- these folks vote the shares, acting as agents for shareholders.
What do these agents think? They think that capitalism is fundamentally flawed and that corporations spend too much time seeking profit opportunities. Instead, public companies should be more concerned with 'activism.'
How does this help the ultimate shareholders? It makes them poorer. Retirement income is lowered and assets are frivolously wasted by the so-called agents.
But, what do the agents care. It doesn't affect them in the slightest.
In the name of corporate governance reform, these 'agents' are trying to impose an outside (of the company) Chairman of the Board for Citigroup, replacing Jamie Dimon and pushing Dimon to a subsidiary role. This would recreate the corporate governance structure that prevailed at Enron (and others) before they famously slid into a scandalous bankruptcy.
JP Morgan is one of the best performing large financial institutions in the world. Shareholders have been richly rewarded for the past five years by owning stock in JP Morgan. So, what to do?
Make a mountain out of a mole hill out of a $ 6 billion hedging loss by the great whale! What a waste of time! That loss did not keep JP Morgan from producing huge income and income growth, even in the same time period as the $ 6 billion loss!
So, what's the right answer? Decapitate JP Morgan. Maybe, we can create another Enron.
The move to replace JP Morgan as Chairman is anti-shareholder. If successful (and it will be ultimately), it will weaken JP Morgan, make retirees poorer and less able to cope financially, and enrich politicians and wealthy social activists (and their foundations and endowments). It will also serve to continue to undermine free markets and common sense.
What do these agents think? They think that capitalism is fundamentally flawed and that corporations spend too much time seeking profit opportunities. Instead, public companies should be more concerned with 'activism.'
How does this help the ultimate shareholders? It makes them poorer. Retirement income is lowered and assets are frivolously wasted by the so-called agents.
But, what do the agents care. It doesn't affect them in the slightest.
In the name of corporate governance reform, these 'agents' are trying to impose an outside (of the company) Chairman of the Board for Citigroup, replacing Jamie Dimon and pushing Dimon to a subsidiary role. This would recreate the corporate governance structure that prevailed at Enron (and others) before they famously slid into a scandalous bankruptcy.
JP Morgan is one of the best performing large financial institutions in the world. Shareholders have been richly rewarded for the past five years by owning stock in JP Morgan. So, what to do?
Make a mountain out of a mole hill out of a $ 6 billion hedging loss by the great whale! What a waste of time! That loss did not keep JP Morgan from producing huge income and income growth, even in the same time period as the $ 6 billion loss!
So, what's the right answer? Decapitate JP Morgan. Maybe, we can create another Enron.
The move to replace JP Morgan as Chairman is anti-shareholder. If successful (and it will be ultimately), it will weaken JP Morgan, make retirees poorer and less able to cope financially, and enrich politicians and wealthy social activists (and their foundations and endowments). It will also serve to continue to undermine free markets and common sense.
Thursday, May 9, 2013
Cantor Off Track
Eric Cantor has mostly good ideas, but his latest effort at appearing 'kindler and gentler' is a good example of modern Republican policy initiatives at their worst.
Fearing the appearance of always saying no, Republicans like Cantor look for ways to push 'feel good' concepts to compete with Democrat 'feel good' concepts. Cantor's bill to provide for time off instead of cash for overtime pay is a good example. What Cantor should be doing is trying to repeal the overtime laws, not make them even worse.
Why is the government defining overtime? Why isn't that something that should be worked out between employer and employee? Why presume that one size fits all? Arranging overtime should be strictly a discussion between employer and employee. Government bureaucrats should take a hike.
By introducing legislation like this, Cantor joins a long list of Republicans that seem willing to outdo their Democratic brethren in pushing the government into more nooks and crannies of areas that should be left to private citizens. The government should butt out and Cantor should know that.
Fearing the appearance of always saying no, Republicans like Cantor look for ways to push 'feel good' concepts to compete with Democrat 'feel good' concepts. Cantor's bill to provide for time off instead of cash for overtime pay is a good example. What Cantor should be doing is trying to repeal the overtime laws, not make them even worse.
Why is the government defining overtime? Why isn't that something that should be worked out between employer and employee? Why presume that one size fits all? Arranging overtime should be strictly a discussion between employer and employee. Government bureaucrats should take a hike.
By introducing legislation like this, Cantor joins a long list of Republicans that seem willing to outdo their Democratic brethren in pushing the government into more nooks and crannies of areas that should be left to private citizens. The government should butt out and Cantor should know that.
Saturday, May 4, 2013
Hold The Applause
The stock market roared on Friday, relieved, one supposes, that the onset of a new depression has not yet begun. A paltry 156,000 new jobs were created in April, which, normally, would be bad news. But previous month's revisions gave 2013 a monthly average of over 200,000 jobs created per month. That was better than previously thought, but is dismal and inadequate to reduce unemployment unless folks simply quit looking for work.
Since Obama took office, 9.5 million Americans have given up looking for work. Why bother, when there are alternatives? Besides, the Obama Administration and the Congress have made it almost un-American for businesses to hire anyone, so why not go with the flow.
It's pretty amazing that the pitiful record of the Obama Administration on the economic front has now become acceptable. Europe has gotten use to the spectacle of double digit unemployment and widespread economic stagnation. It looks like America is following suit.
Since Obama took office, 9.5 million Americans have given up looking for work. Why bother, when there are alternatives? Besides, the Obama Administration and the Congress have made it almost un-American for businesses to hire anyone, so why not go with the flow.
It's pretty amazing that the pitiful record of the Obama Administration on the economic front has now become acceptable. Europe has gotten use to the spectacle of double digit unemployment and widespread economic stagnation. It looks like America is following suit.
Thursday, May 2, 2013
Keynes was right: rate cuts don't work
Today the ECB lowered their lending rate. They are moving toward the US Federal Reserve effective target of zero interest rates. It's done nothing for the US, why should it offer any hope for Europe.
Keynes argued persuasively in the 'General Theory' that, absent the 'animal spirits' of entrepreneurs, lowering interest rates may have little or no effect on a stagnant economy. He was right.
Lower rates don't make an employee that is paid $ 50,000 in wage and salary but costs $100,000 to hire (because of government) worth doing. You can subsidize rates --make them negative -- and it won't matter.
An economic policy that confiscates profits from businesses, pushes labor costs to a multiple of what the employee actually receives in income, arbitrarily outlaws important free-market economic initiatives (Keystone), and rewards political cronies (Solyndra) is not likely to produce economic growth quite apart from the level of interest rates.
Tinkering with Fed policy might matter if the other economic policies were not in place. But, the other policies are in place and they matter.
With an Administration fighting a daily war against free markets, the economy is not going to go anywhere. The economy needs a return of 'animal spirits' in the business community, as Keynes argued. Absent that, expect more of the same dismal economic news.
Keynes argued persuasively in the 'General Theory' that, absent the 'animal spirits' of entrepreneurs, lowering interest rates may have little or no effect on a stagnant economy. He was right.
Lower rates don't make an employee that is paid $ 50,000 in wage and salary but costs $100,000 to hire (because of government) worth doing. You can subsidize rates --make them negative -- and it won't matter.
An economic policy that confiscates profits from businesses, pushes labor costs to a multiple of what the employee actually receives in income, arbitrarily outlaws important free-market economic initiatives (Keystone), and rewards political cronies (Solyndra) is not likely to produce economic growth quite apart from the level of interest rates.
Tinkering with Fed policy might matter if the other economic policies were not in place. But, the other policies are in place and they matter.
With an Administration fighting a daily war against free markets, the economy is not going to go anywhere. The economy needs a return of 'animal spirits' in the business community, as Keynes argued. Absent that, expect more of the same dismal economic news.
Wednesday, May 1, 2013
From the European Front
While yields on Italian debt are lower, the rest of the economic news continues to get worse. Unemployment in the Eurozone reached 12.1 percent on average according to figures released this week, while major strikes and employee walk outs plague Greece, Spain, and France according to today's NY Times. The European economy is still in free fall.
Surprisingly, you hear almost no news about the European economy other than self-serving statements from Euro-officials about how the crisis is over. The crisis is not over; it is deepening.
Politically, Europe is moving toward the extremists on the right and on the left. The European center, devoted to big government and the welfare state, is losing credibility with voters. The great European experiment has run out of (other people's) money. Now the day of reckoning is at hand.
Americans traveling in Europe report increasing street crime, especially in frequently-visited tourist areas. Life is changing in Europe and it is not getting better.
Americans should pay attention. We are on the same path. The next shoe to drop in the US will be Obamacare. When Americans realize that they are paying for insurance and health care that they cannot afford, do not want and do not need, the rebellion will begin here. US debt is on an unsustainable path and the economy is weakening. The stock market and improving home prices are about the only bright spots. Employment gains have corroded and GDP growth is disappearing from view.
The American media does not tell this story and glosses over the hard facts on the ground. But the media will become irrelevant as the facts on the ground will eventually overwhelm a fawning media. The American economy is getting worse and Europe is headed for a depression.
Surprisingly, you hear almost no news about the European economy other than self-serving statements from Euro-officials about how the crisis is over. The crisis is not over; it is deepening.
Politically, Europe is moving toward the extremists on the right and on the left. The European center, devoted to big government and the welfare state, is losing credibility with voters. The great European experiment has run out of (other people's) money. Now the day of reckoning is at hand.
Americans traveling in Europe report increasing street crime, especially in frequently-visited tourist areas. Life is changing in Europe and it is not getting better.
Americans should pay attention. We are on the same path. The next shoe to drop in the US will be Obamacare. When Americans realize that they are paying for insurance and health care that they cannot afford, do not want and do not need, the rebellion will begin here. US debt is on an unsustainable path and the economy is weakening. The stock market and improving home prices are about the only bright spots. Employment gains have corroded and GDP growth is disappearing from view.
The American media does not tell this story and glosses over the hard facts on the ground. But the media will become irrelevant as the facts on the ground will eventually overwhelm a fawning media. The American economy is getting worse and Europe is headed for a depression.
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