Thursday, October 28, 2010
Click here for the story.
Sunday, October 24, 2010
As the mid-term elections come into view there is much discussion of what the TEA Party is. Many of my friends on the left, and I have a number of friends on the left, some of my best friends in fact, I feel have a misunderstanding of the nature of the TEA Party. I would like to address a few points brought up by these friends and give a frank an honest assessment from my perspective of what the TEA (Taxed Enough Already) Party is and where it may be going.
First the essence of the TEA Party is right there in its name. Taxed Enough Already. This is the defining element that brings the TEA Party together. Most within the movement see government as far too large and far too expensive. Most T Ps would like to see a much smaller state, and as importantly one that adheres to the Constitution. This is the over riding ethos. In many ways it is a quazi-libertarian perspective. This is the core component of the TP.
What many people do not remember is that the Tea Party really started with Ron Paul’s candidacy. I have long been a fan of Dr. Paul and during the entire Republican debate cycle for the 2008 presidential nomination the little known (then) congressman from Texas made his case for really shrinking the state.
As a stock broker I actually pitched him once on becoming a client! He passed. But everyone in my brokerage knew I liked Dr. Paul and after the first debate a couple of brokers came to me and said that they were very impressed. They couldn’t believe that someone would actually articulate what they were thinking, namely that the wars were a mistake and that government was too big.
It is also forgotten that Ron Paul raised more money in one day by far than any presidential candidate ever had, over $6 million on Guy Fawkes day 2007. This burst of funds kept him around for the rest of the debates and shocked the establishment into paying attention. It was the beginning of a new era in politics, though the establishment originally dismissed Dr. Paul as a kook. Little did they know that Dr. Paul would soon be arguably the most powerful Republican in the House.
The foundation had been laid with Dr. Paul. But it was the economic meltdown that really catalyzed the TEA Party as we now know it.
In late 2008 the world went into a tailspin. Like I said I was, was, a stock broker. That time was downright scary and by the end of 2008 I was no longer a stock broker. It was a sad time for me personally because I saw the fortunes of many good people severely reduced through no fault of theirs or mine but because the business cycle created by the Federal Reserve kicked in in a way unlike anyone had seen since the Great Depression. The point is all hell broke loose and many people became less wealthy very quickly, including myself.
During that fall the economic stimulus bill was passed, but not without raising the ire of the general population.
Secretary Paulson went to Congress and said that marshal law was a very real possibility if Congress didn’t pass the bailout.
The Congress voted it down because they were overwhelmed by call from their constituents telling them not to do it. Then the next day the market went down 777 points. (Footnote, that day the opening bell didn’t ring. If that ever happens again pay very close attention that day to your investments.) The day after that Congress voted again and the bailout passed.
Once the bailout was law Paulson informed the American people that the money was not to be used to buy up “toxic assets” as had been promised, but instead would be given to the banks so that they could sure up their balance sheets.
The American people smelled a rat. By the end of that winter many Americans were in a state of disbelief as the Feds seemed to be grabbing more and more control over the economy for the benefit of vested interests and to the detriment of middle class folks.
Rick Santelli famously voiced this sentiment on CNBC, which began the TEA Party as we now know it.
Though I think that with time some of his assessments, even Mr. Santelli would now say were wrong, that it was the homeowners for instance that were solely to blame for the mortgage meltdown (though this isn’t exactly what he said) this spark burned across the internet in the next few days.
A lot of middle class folks looked at Santelli’s rant and basically said, “You’re Goddamn right Rick.”
The point is the foundations of the TEA party are not in social conservatism but in fiscal conservatism. Yet interestingly most of the attacks on the TEA party are not on fiscal grounds these days, because frankly all but the extreme left realize that we are in dire straights economically and a continuation of the past 2 years is nuts, but on cultural grounds.
So, finally, let me address a few points that my friends on the left have raised about the TEA Party.
1. It is retrograde. It is a “conservative” movement of the Jerry Falwell Moral Majority kind.
False. The TP is not retrograde. To characterize it as such is to continue to see the world through 20th Century political glasses. To be liberal or “progressive” was never really to move forward, I think even many liberals would agree. It was to move in another direction, one that created a larger state, which many people thought made life more fair and therefore was “forward” thinking. Unfortunately this philosophy also creates entrenched bureaucracy that stifles innovation and new ideas and often undermines its original goals.
The TP, though it has many conservatives (late 20th century kind) within it’s ranks, this is not where the energy lay. There is no widespread support for the wars abroad (though they are tolerated by the majority of the TP admittedly) but there is huge support for increasingly free markets and lower taxation. Before Marx, that which increased individual liberty was considered “forward thinking..” For many within the TP this non-Marxist definition of “progress” is what is embraced.
2. The TP is full of hicks that I can’t relate to as an urban liberal.
Whether one can relate to the people in the TP is of course a matter of personal temperament and general outlook on life. But what comes out of the old media is a TP full of shrill angry voices. This is not the TP I know. There are many people within it’s ranks to be sure who raise their voices, but most people at these gatherings are far more tolerant of dissenting views than one might think if one has never gone to a rally with an open mind.
There will be much a liberal will disagree with at such a gathering, but so long as one continues to make a point in a thoughtful and non-dismissive way, generally one will be respected if not agreed with.
There are of course blowhards who simply will not listen to an opposing point of view. But this is found with every political group.
3. The TEA Party is full of religious nuts.
There is an element of religiosity in the TP. Some social conservatives have joined the movement because they see it as better than the alternative. But the TP is not a socially conservative movement at its core. You can be gay and have a place at the table. You can even be fore gay marriage and have a place at the table. You can be fore the legalization of pot and still be welcomed, and even celebrated by some elements. You can be ardently against Pat Robertson and his ilk and have a place at the table. So long as your pet issue does not involve coercion by the state, you will be welcomed by most.
One of the signs one sees a lot at rallies is “Read Ayn Rand.” Ayn Rand was a hard core, and I mean HARD CORE, atheist, yet she and her writing are a very important part of the TP movement.
4. The TEA Partiers are all racists.
False. In fact people of color are very much welcomed by much of the TP. One reason being that the Tea Party is very sensitive to this charge and recognizes that most of the TP is white. They also recognize that their deep opposition to the expansion of the state is often characterized as veiled opposition to a better life for non-whites. The TP throws off this dogma yet is sensitive to the issue of race, though not in the way that many in the media would prefer. For many to oppose the state is to be racist. This view is an old and wrong view in the eyes of many in the TP.
There are no doubt some elements of racism within the TP, but that is reflective of society, and is not tolerated by most people within the TP.
It is interesting to note that 3 Tea Party congressional candidates who have a very good chance at winning are African Americans. This makes the Congressional Black Caucus very uncomfortable.
5. The TEA Party is full of white people.
There is no doubt that this is true. It is very fair to say that most TEA Partiers at this point are white. This is changing however and there are increasingly more shades of skin in the crowds. Far more than what one would see at a traditional GOP rally for instance.
6. The TEA Party is astroturf.
This charge was made early in the TEA Party’s emergence. Many on the left could not believe that such massive resistance to the state could emerge without the help of big bad Republican donors. They were wrong as time has shown.
The Dems tried to start a “Coffee Party” which was pure Astroturf which soon withered into an historical footnote because it didn’t have the deep, real support of the TP.
7. Wait don’t the Koch Brothers fund the TP? That’s what they say on the news.
The Koch brothers have long been part of libertarian and conservative politics. Yes they have written hefty checks, and supported the TP. But they didn’t birth it, nor do they control it. A wrong move by the Kochs and much of the TP would turn its back on them. The thing is they believe in small government and always have. Supporting a grass roots movement to limit government seems pretty natural to me.
Their involvement is for instance nothing (well more than nothing) compared to George Soros who has tried to buy the entire Democratic party and move it to the far left.
8. The TEA Party is just part of the GOP.
False. The TEA Party is a very real challenge to the GOP. The establishment GOP is far more scared of the TP than the Democrats are. The TEA Party is really bringing in outsiders. These outsiders are not bought and sold like traditional GOP (and Dem) candidates. They can make choices independently which is the last thing Washington wants. The GOP establishment has a good thing going and doesn’t want Tea Partier “turds in the punchbowl” ruining their party.
There are many other points to be addressed but this is it for the time being.
Saturday, October 23, 2010
Please let markets correct. If you do not let them we are just going to die a death of a thousand rate cuts, or now QE efforts.
The main reason in my estimation that we continue to slog along in this economic ugliness is because the markets have not been allowed to correct.
Home prices want to go down. Most consumer product prices want to go down. Some commodities are conversely trending up. Either way we are fighting reality.
Now “reality” is not always ideal. Ask anyone in a bar this. But once a vacation from ones senses become a ruinous stupor one must reassess.
The economic geniuses in Washington and in New York refuse, at the detriment of most other Americans, to let the market correct. They keep building walls and digging moats in the hope that the current economic and political order can be maintained. They believe that what is going on is merely a storm to be weathered, not a complete economic earthquake that will bring down their castle no matter how hard they try.
In one sense it is perfectly natural. Self preservation is the most basic of instincts and Fed chiefs and politicians have gotten to where they are by developing this instinct to an art. So how these folks are acting may be entirely rational from their perspective. Rational or not, it is killing this country.
The world has changed, and is continuing to change. 10 years ago people spoke of an “information revolution.” Well folks the revolution is here.
Certain groups hold onto information in an effort to use it to their advantage. This has been the game for eons. In my view, so long as this is not done in a fraudulent or dishonest way, there is nothing wrong with this.
However what constitutes what is valuable in the marketplace and society is fundamentally changing. Whereas it was until very recently the ability to hold onto and manage information in the shadows that was most valuable for an economic actor, now it is the ability to innovate and create that the world is saying is most valuable.
Vested interests though are not keen on letting sunlight and new ideas in, so they stonewall. That is what our political and economic establishment is doing right now. They see their advantages being stripped away one by one by technology and by a population used to fumbling about in a blurry reality of very incomplete information, but which now has a fresh pair of glasses on. The prescription of the lenses will never be perfect but the world view of the average person is infinitely more clear than just a few years ago thanks to the information revolution.
This means that the market for ideas is now much more liquid. There are more actors. It is also more volatile. The economic and political actors who could once simply dismiss the unwashed middle class as essentially uninformed hicks have now had the tables turned on them. It is current establishment’s antiquated thinking, Keynesian economics, a vested 2 party system, that puts them at a disadvantage. In many ways the uninformed hicks, are at least as informed about things as the current establishment is. This scares the establishment.
Some of this new found power has taken the form of the Tea Party. For the time being the GOP seems to think that it has gotten the Tea Party’s unbridled energy under the reins. I think this is just the beginning of what is to come and the GOP may indeed be dying, even as they now celebrate what they think will be big gains in November. The game is fundamentally changing. The GOP and the Dems, and their machines will have to either radically change or perish.
This seems obvious to me at this point. Everything is changing, and changing a great deal. The advantage America has as a society have is that we at least have a tradition of innovation and ingenuity where other countries do not. China for instance has 2000 years of conservative Confucianism to deal with. We were born on the frontier and we can again flourish. But we need to let the newly informed America emerge. If we do not, and continue to allow interests that have a vested interest in clinging to the past (and I sure as poop don’t mean gun owners and religious people here) to determine our collective future we will soon have much bigger problems than what we are dealing with now.
If the current establishment does not yield in a fundamental way soon, there will be a very large dislocation, and it will be very painful for everyone.
So instead let’s embrace the information revolution. Let’s put some faith in markets. Let the power of crowd sourcing work its magic. Let’s let new ideas shine, instead of sweeping them under the rug. Let’s encourage our young people to actually learn. Let’s figure out how to detach ourselves from the horrible national debt that hangs like an albatross around our neck. Let’s figure out how to transition off of oil and give the middle finger to the rest of the world that thinks its got us over a 50 gallon drum. Let’s get to know our neighbors. Let’s focus on our families. Let’s cut taxes. Let’s let innovation grow. Let’s let the market work!
Our current economic crisis, and it is a crisis, is not because of markets that were too free. It is in fact because we have not allowed the market to breathe for decades. Let’s breathe again.
Thursday, October 21, 2010
Wednesday, October 20, 2010
But the fact that China would make such a move, in a time of economic challenge, just shows the degree to which China feels comfortable breaking with its weary partner the USA.
Things are developing very quickly with China, though there still is not much coverage of it.
China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.
China experts said on Tuesday that Beijing’s assertive stance on rare earths might also signal the ascendance of economic nationalists, noting that the Central Committee of the Communist Party convened over the weekend.
Click here for the story.
Monday, October 18, 2010
Now, Huang, who was born in China and is a legal US resident, faces a rare criminal charge — that he engaged in economic espionage on China’s behalf.
Click here for the story.
Sunday, October 17, 2010
Saturday, October 16, 2010
The economy is starting to spasm in all sorts of weird ways right now. Corn is also up 60% in 3 months. This is what happens when The Fed decides that it is REALLY going to crank the printing presses.
The sudden surge in prices—cotton has risen up to 56% in three months—has alarmed manufacturers and retailers, who worry they may be forced to pass on higher costs to recession-weary consumers.
The December cotton contract hit $1.1980 a pound minutes after the opening of trading on the IntercontinentalExchange Inc. on Friday. It is officially the highest price since records began back in 1870 with the creation of the New York Cotton Exchange.
Click here for the story.
It is always wise to have an emergency fund on hand. In the midst of a deep recession more people are seeing the wisdom of a short term savings pool.
Figure out your net worth. Add your assets and subtract your liabilities. Are you in the plus or minus column?
Now that you have a snapshot of your financial situation figure out how much is coming in each month vs. going out. If you have more going out than coming in you’ve got to address this issue first. Cut expenses or raise income, whatever you wish or both, but you have to have some wiggle room to effectively save.
Do not rely on credit cards as a safety net. First it’s usually pretty expensive money. Second those limits can always be cut by your credit card company. A $3000 limit can be cut to $500 instantly.
If you eat out, stop. Cook at the house. Once you have your 6 months in cash you get to eat out again. Cooking at home can save big bucks.
Figure out what 6 months of expenses are for your family. For a middle class family of 4 think in terms of $30K to $35K. This is your bogie. Depending on where you live this number may be higher or lower.
Put the money away, like a rat. If you are not a saver by nature pretend you are one. Seriously, act differently than the spendthrift you have been. Don’t tell anybody, just start to live like a frugal person would. Do this until you have your pile of cash and your financial peace of mind. By then your habits will be so ingrained your new frugal nature just might stick.
Thursday, October 14, 2010
Saturday, October 9, 2010
Taleb is not perfect of course, none of us are, however he makes a great point. The Nobel committee in Sweden consistently has awarded the Prize to Keynesians though Milton Friedman (The King of the Monetarists) and F.A. Hayek (of the Austrian School) also won the award. The Swedes have rewarded those who supported the expansion of the money supply and the state consistently. But what are we to expect from Scandinavians?
Paul Krugman won the Nobel Prize just as the really dark clouds of the economic crisis started to gather. It was a huge nod to his thinking and the endorsement gave increased legitimacy to the New York Times columnist, who in turn influenced many of the policy makers (who tend to skew older) who still think that the Times is the source for good information.
Of course the real failure is not with the Nobel Prize Committee, which did indeed fail, but with our economic and political decision makers, and ourselves. We wanted to believe the old economic magic would work, desperately. Because if it didn't, and lets be honest, I think a lot of people in their heart of hearts knew that it was more likely to fail than succeed, we didn't know what to do. Our world had been based on 401k balances, and Social Security, and increased real estate values. These things defined us economically, and in some ways even as human beings.
So like a jilted lover we refused to believe that it was over and we clung to memories of what once was.
Krugman looked at us and said, "Don't worry, a policy of red roses and promises ought to bring Ms. Economy back, you'll see."
But the economy as we knew it is not coming back. She is long gone and living with a biker in Frensno.
We must now come to terms with this. But we if we look deep we will begin to realize that the old economy really was a pain in the ass anyway. With each passing year she wanted more. More taxes, more debt, more government. It never seemed to end. And she left just as the credit card ran out.
If we were smart we'd bid her good riddance, and move on to new possibilities.
As we transition into a 21st century economy we must start dealing with reality. We must embrace sound money.
What is sound money? Lets start with a gold standard, or a hybrid of gold/silver/and copper.
What does sound money do?
1. It ensures that the money in your bank account really is worth something.
2. It handcuffs the central banks which have a huge vested interest in expanding the paper money supply, even to the point of collapse (?) As the central banks are arguably the most powerful entities on the globe they will fight sound money at every turn, as they have.
3. And this is a very important point that I haven't heard much talk of. SOUND MONEY IS SUSTAINABLE MONEY.
What do I mean by sustainable money? Simply, by reigning in the ability of central banks to inflate infinitely, a greater premium will then be placed on those parts of the economy that are able to grow legitimately with better products etc. Waste will greatly be curtailed.
One of the reasons the Amazon rain forest is being plowed under (in addition to the lack of real property rights on the frontier) is because money supplied to logging and ranching interests is cheap. If gold backs a currency this money becomes much more expensive and so curtails those economic actions that simply only work with gobs of fiat money.
There is of course one, (I am sure there are many more than one, I'm just riffing here) obvious issue that presents itself.
If this cheap money is reined in does this not in turn create into a less robust economy? After all, many people are employed bulldozing trees in the Amazon Basin.
In a sense yes. There are obvious serious economic "costs" associated with sound money. To be sure such a transition would be difficult. It would make the state as we know it very heard to maintain in the short term. In the end though it would be worth it.
It is interesting to me that so many on the "left" are for the expansion of the state fueled by cheap paper money that is probably responsible for the death of more species than anything else.
Paper money, as we have employed it for the past 80+ years has destroyed people and places and animals and dreams. Gold on the other hand is a "natural" alternative to the monetary Frankenstein we now have, and it is one I think more people who are truly interested in sustainability must come to understand. I think it is a real key to how we move forward.
In the days ahead I am going to think more about the "gold as sustainable money issue."
Anyway, below is the article I referenced above. Enjoy.
Nassim Nicholas Taleb, author of “The Black Swan,” said investors who lost money in the financial crisis should sue the Swedish Central Bank for awarding the Nobel Prize to economists whose theories he said brought down the global economy.
“I want to make the Nobel accountable,” Taleb said today in an interview in London. “Citizens should sue if they lost their job or business owing to the breakdown in the financial system.”
Click here for the story.
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