ECONOMICS-101

JOBS, JOBS, JOBS

(To the tune of "Where Have All the Flowers Gone?")

Where have all the good jobs gone . . . .

Long time passing.

Where have all the good jobs gone . . . .

Long time ago.

Dec. 2, 2007 (From SAWYER2008.com): Conservatives, notably Rush Limbaugh, Bill Kristol, the Wall Street Journal, will justify tax cuts for capital gains on the specious argument that those entrepreneurs who are risking everything to start a new business, are providing new jobs. Capitalism and good old fashion entrepreneurship is what made this country, say they. Not so fast, say I.

America has had entrepreneurs for over three centuries. A few lived in stately manors or large prairie ranch houses while most ordinary citizens lived in hovels, rented houses or sod huts. We had "entrepreneurs" during the Great Depression, but most Americans barely scraped by. Until 1945, this country did not have a middle class. After World War II, the American Economy was one of the few left intact. The demand for U.S. goods created a demand for U. S. workers. Previously scorned, labor unions were allowed to organize the workforce, and wages soared. The standard of living for the working class greatly improved. For the first time in our long (entrepreneurial) history, the people who manufactured consumer products actually could afford to own those products.

For the first time, an American middle class came into existence. Workers bought cars and built houses away from their rented homes in the core cities. Suburban shopping centers sprang up. Interstate highways populated with motels and fast food restaurants were constructed. People could afford vacations, and weekend homes. Most importantly, ordinary folks, who never dreamed that they could own their own businesses, opened restaurants, started up retail stores, became builders, and sent their kids to college. Airplane travel became affordable and common.

The new middle class became the new entrepreneurs, only there were a lot more of them. (more about "entrepreneurs and risk takers below)

SO WHAT HAPPENED?

Starting in the 1970's American manufacturers started moving their operations overseas where labor was cheaper, taxes lower, and regulation less obtrusive. Good manufacturing jobs began to disappear. While our politicians, Republican AND Democrat, and our political pundits, like Limbaugh, Hannity, Cavuto, those two Fox business analysts (the one with the big ears and the big guy named Charles (who reminds of my cousin Bobby) assure us that "free trade is good for everybody," I have to wonder where they got their Economics Degrees.

Basic Economics: People grow food and manufacture products for their own needs. Anything grown or produced above their personal needs is called surplus. Surplus is then traded with other people and other countries in exchange for their surpluses. That is the simple basics of free trade. It is called reciprocity - the basics of which most of us learned during the first week of College - Economics 101. In recent years, America has experienced a trade deficit of over $800 Billion. (2006, 2007, 2008).(http://www.census.gov/foreign-trade/balance/c0004.html#1991) Republican, Democrats, Mssrs. Limbaugh, Hannity, Cavuto, big ears and Cousin Bobby, just what part of reciprocity do you not understand? Where did you get the idea that $800 Billion in deficits is a good idea? Free trade my ass.

Do the math: A manufacturing job pays, what, $50,000 per year? At $500 Billion in trade deficits (2006), that comes to 10 Million good jobs we have shipped overseas. This is free trade?

We have a trade deficit with China of about $400 Billion per year (2006). Wow ! ! With that much money, will China eventually own the Earth? Well maybe. First let me tell you something that you (and the smart people above) don't know. Well, maybe Cavuto knows. China runs a trade DEFICIT with the rest of the world. Uh huh. We ship our jobs and spending money, to China and they buy THEIR stuff from someone else. Why? Mr. Cavuto? Mr. Hannity? Big Ears? Bobby?

Your concept of free trade sucks !!

Indebted to the labor unions, the Obama administration has threatened a tariff on Chinese Steelmakers. In retaliation, China has threatened higher tariffs on several American products. Can you say Smoot-Hawley ? Tariff wars prolonged the Great Depression and they have no place in today's world.

SO, knowitall, WHAT NEEDS TO BE DONE?

(click here STIMULUS)

Glad you asked. In the last twenty years, during a time of stagnation in the European Union, there has been one success story to report; One European Nation leads the EU in per capita industrial output; and is second (to Luxembourg) in per-capita income. Industrious Germany? Nein. France? Non. Switzerland? Non, nein, and no (ask someone)? Nope . . .

IRELAND

What are you smoking, Sawyer ?!? Yes Ireland. In just over a generation, Ireland has evolved from one of the poorest countries in Western Europe to one of the most successful. It has reversed the persistent emigration of its best and brightest and achieved an enviable reputation as a thriving, knowledge-driven economy.

Living standards and economic stagnation has been left behind. Ireland now has the second highest gross domestic product (GDP) per capita within the European Union (after Luxembourg), one-third higher than the EU-25 http://www.heritage.org/Research/WorldwideFreedom/bg1945.cfm" \l "_ftn1#_ftn1" \o average, and has achieved exceptional growth. In the past 20 years every major world corporation has located facilities here. Nicknamed the Celtic Tiger, the Irish Economy is booming.

Recent data suggest Ireland has a higher gross domestic product per capita than Denmark, Canada, the Netherlands, Japan and Britain. How in the world did Ireland do it? Many explanations have been offered for Ireland’s exceptional economic performance:

1. Macro-economic stability resulting from the decision to attack the debt by controlling public spending, rather than by increasing taxes: For a small, open economy, curbing public spending proved to be the productive way forward. It created room for tax cuts while simultaneously lowering the debt ratio. Lower taxes and a more stable macro-economic background translated into a huge burst of private sector activity, employment, and confidence in the government. After the cessation of civil war in the Eighties, the newly-elected conservative government did three things:

(A) They acquired a line of credit from the European Union (can you say stimulus package?).

(B) They slashed pension benefits, and

(C) They reduced corporation taxes from 22% to 15%. Always obsessive about education, Ireland then could provide good workers and lower taxes. Then after prospering for the ensuing 9 years, what did the Irish do (Barack? Barney? Nancy? Harry? Karl? Vladimir?) Raise taxes? Nooooooooo.

THEY CUT TAXES AGAIN

Ireland cut its corporate taxes - yet again - to 12%.

2. Social partnership through a unique model of wage determination, involving extensive consultation and agreement among the social partners: The two key elements were wage restraint in return for income tax cuts and ongoing participation in economic decision-making through social partnership committees.

Domestic interest rates plunged as investor confidence grew, triggering a rare occurrence in modern economics: an expansionary fiscal contraction.

3. Foreign investment: Favourable corporate taxation is the main fiscal incentive for foreign direct investment. Ireland offered a preferential tax rate of 10 per cent on corporate profits from export-oriented manufacturing and services.

By the way, when you heard John McCain and Fred Thompson discuss Ireland's success during the 2008 election, know that they got their information from my website (Sawyer2008.com)

(October 6, 2009) With unemployment hovering around 10% and the deficit at a record high of nearly $1.5 Trillion (three times the "unacceptable" standard set by the Bush deficit last fiscal year), what does the Speaker of the House suggest as a cure? The Value Added Tax (VAT). This tax is used in all European Union countries, as well as many other countries.

Simply put, VAT is a charge on various stages of production of goods or commodities. In most countries, VAT is a tax in lieu of a sales tax. The "value added tax" has been criticized because the burden of it relies on personal end-consumers of products and is therefore a regressive tax (the poor pay more, as a percentage of their income, than the rich). Just like the corporate tax on my MAXX SS.

Defenders claim that excising taxation through income is an arbitrary standard, and that the value-added tax is in fact a proportional tax in that people with higher income pay more at the same rate that they consume more. Classes of goods are taxed at different rates. Therefore VAT is at most a flat tax. Baloney ! ! The VAT effects younger people more. Older people are more likely to have big ticket items, cars, refrigerators, houses, etc. already paid for. Younger people aremore likely to be purchasingthese items in the near future.

So, I suppose Nancy Pelosi wants to eliminate the sales tax altogether and impose the VAT tax sort of like the 'fair' flat tax? I can live with that. Ahh, ye of faith. VAT would be assessed - but all of the existing taxes would remain.

In the United States, only Michigan used a form of VAT known as the "Single Business Tax" (SBT) adopted in 1975, as its form of general business taxation. It is the only state in the U.S. to have used a VAT. I owned 17 retail stores in Michigan, and that tax put me out of business. VAT really worked well for MIchigan, didn't it Nancy?

I digress.

The top federal corporate tax rate in the United States is 35% - the highest in the world now that Japan in September 2009 finally dropped its top rate to 32%. Anyway, our individual states add an additional minimum of 4% state corporation taxes to the tax burden. And with the proposed increase in the Obama tax plan, our top rate will go to 40%. Wow ! ! Is that incentive to attract more business to the USA, or not Mr. Obama?

AN EPIPHANY

I had lunch the other day with Harry Reid and Michael Moore and as they handed me the check. they told me that corporations aren't paying their fair share of taxes.

I used to drink that Kool-aid too, but one day I had an epiphany. I had driven 1288 miles to NW Arkansas to buy a 2006 Chevrolet Malibu Maxx SS, a car no longer manufactured (morons), from Steve Smith GM. After I left the dealership, I noticed that I had left my credit card behind. Rushing back, I was surprised to find my Salesman reading a newspaper; the receptionist eating lunch; the Sales Manager picking his nose.

Me: What's going on here?

Salesman: What do you mean?

Me: Shouldn't you be passing the hat?

Salesman (dialing security): for what ?

Me: To pay the corporate taxes on the car you just sold me.

Salesman (waiving off the security guard): The tax is figured in the sticker price.

Security Guard (holstering his weapon): Everyone, except liberals, knows that.

Then I had an epiphany - Corporations don't pay taxes, people do - their 'fair share' is figured in the price of the products we buy. Huh.

WHAT WOULD I DO?

(No 2,700 page bill needed here, Congressmen)

First of all, I'll tell you what IS NOT working: Every day (or so it seems), Fox News runs a story featuring some woman with an apron, standing behind the counter of her artsy-craftsy specialty shoppe (funded by her husband's dental practice) telling us how small businesses are creating all the new jobs in this country (implying that hers is one of them), and (by implication) extolling the virtues of giving small businesses (meaning her) tax breaks so they can expand and create more jobs . . . don't you see?

So I'm absently contemplating this economic miracle while driving up the street to get a slice at my neighborhood Uno Pizza place. What's this? They tore down the Fina Gas Station and replaced it with ? WALGREENS ? Wonderful. Now I won't have to drive six blocks to that other Walgreens. Noting with irony that that intersection (Fiddlesticks and Daniels) now has a Walgreens pharmacy, a CVS pharmacy, a Publix with a pharmacy, and a 7-Eleven (where I have it on good authority, the night clerk also sells drugs), I proceed to get that slice of pizza. There are no cars in the parking lot. Rats ! They aren't open for lunch.

There's a sign on the door; I'll just see what their hours are. Hastily scrawled on the paper sign are these words: "Sorry, out of business." A National pizza chain, open TWO YEARS is out of business? Next door to Uno, I see they just opened a new restaurant (Sam Snead's Pub). So maybe the Uno employees found new work. Wait a minute, said I, stomach growling. A drug store on all corners ? One restaurant closes, another opens? How does this scenario remotely contribute to a creation of new jobs?

IT DOESN'T.

In Ft. Myers, in the last year alone, 13 new restaurants opened - 14 existing restaurants closed. Did Walgreens create new jobs? No it didn't. They will take jobs away from CVS across the street, or Publix, kitty-corner (but I'm betting the night clerk keeps going). So, even if it is true that capital gains tax breaks creates jobs, what kind of jobs are we creating with this largesse? Congress renewed the tax breaks and unemployment went UP 10% in April (2011). For argument's sake, would that smug lady with the apron think it marvelous job creation if a small artsy-craftsy business just like hers opened across the street (like Walgreens) or right next door (like Slammin' Sammy's). I think not. If the competition put her out of business (I speak from experince, here), would a new job be created or would an old job just be lost - or both.

Either way, how many more Walgreens do we need? Or Starbucks? Or Office Depots; Best Buy's; Borders; Circuit City's; Blockbuster Videos; Robert Hall's; Western Auto's; Acme (catch-a-roadrunner) Company's ? When one goes under, another takes its place. But we just move sideways - no jobs are created. What would President Sawyer do?

CREATE NEW JOBS

During the 70's and 80's we became a "Service Economy." Who says so? The new educated elite liberal says so. With their long-standing fear of carrying a lunchbox to work, these elites made the computer their future. Sitting on one's ass in front of a computer monitor sure sounds better than rolling tar on a 110 degree roof, and because the educated elites comprise almost all of the makeup of the political class, they make the rules. So a college degree became all important, and skilled and semi-skilled jobs became obsolete in their way of thinking.

Trade classes were cut back in public education, and college curriculum courses were emphasized. Those who were not necessarily cut out for academia or just preferred to work with or create something with their hands were discarded. The elites looked down their noses at them. A prime example of this is the way a Sean Hannity sneers at the $100,000 compensation that the UAW has gained for some of its workers, while rationalizing the millions that they make for talking into a microphone three hours a day. Another is the Clintons' proposal for a high "vice tax" on "Joe Six-Pack's" beer and cigarettes, while eschewing any taxes on the elites' cigars and chablais.

Manufacturing jobs were sent overseas with merely a whimper from either the liberal elites, or the conservative business owners who stood to gain, including those sent to Mexico vis Bill Clinton's NAFTA Treaty. Now those jobs are gone. While campaigning for President in 2008, John McCain "candidly" told the people of Detroit that those jobs were gone forever.

JOHN MCCAIN WAS MISTAKEN

We CAN BRING MANUFACTURING JOBS BACK TO THE USA, As I explained in my letter to Detroit's Mayor Dave Bing (to which he couldn't be bothered to reply) (click here), How??

ELIMINATE TAXES ON CORPORATIONS

Corporation income taxes amount to 10% * OF OUR TOTAL FEDERAL REVENUE. The taxes we get from our manufacturing amounted to 4% of our budget. 4% !! Our deficits are infinitely higher. And, I just told you corporations don't pay taxes anyway. Corporation taxes are a tax on the people who buy their products - you and me.

If Ireland can attract manufacturing with 12% taxes (10% on favored exports), manufacturers will flock to the USA with 0 taxes. No tariff wars, no unfair competition, no huge deficits, no 2,000 page legislation. Just doin' business in the freest country on the planet. Just the return of those well-paying jobs to the good ole U.S.A.

Where have all the good jobs gone . . . .

Long time passing.

Where have all the good jobs gone . . . .

Long time ago.

Where have all the good jobs gone . . . .

Gone to the U. S. everyone . . .

Someday, we'll ever learn . . . someday we'll eeeeeeeevvverrr learrrrrrrrrrrrn.

* This just in - 9% in 2010

HAWLEY-SMOOT (and other myths)

The U.S. runs a trade deficit with almost every country in the world. Bad ? Not necessarily. Small deficits are more than offset by the jobs created on both sides and both economies grow (If you can't take my word for it, e-mail me). We are harmed by deficits when they become disproportionately large, such as the deficits we run with China. (click here).

We sell about $400 Billion worth of goods to China annually. That's good. China sell us about $800 Billion annually - that's good for China, not so good for us. I explain why on the China page. This is partly caused by American businesses sending their jobs to China, where regulation is less cumbersome, and labor is cheap.

According to my little calculator, @ $40,000 per munufacturing job, that comes to 20 Million American jobs sent to China. Thanks Congress. Thanks Labor Unions, Thanks George Bush. Thanks Julia Roberts . . .uh never mind.

Why do we put up with it? Fire Congress. Fire Barack Obama. Bring those jobs back home. Read the column to your left to find out how.

On my China page, I suggest we should impose a 25% tariff on Chinese Imports, and I state my reason why. But many (mostly conservatives) argue, that protective tariffs incourage retaliations and all countries wind up losing.

REALLY? MAKE YOUR CASE

Well, argue they, after the Crash of '29, Congress passed the Smoot-Hawley tariff bill and the ensuing retaliatory tariffs from our trading partners sent the world into the Great Depression.

All of which is absolutely true.

All of which is totally irrelevant.

What's that stupid cliche? "At the end of the day?" No, not that one. Um . . . "We need closure", no, no . . . "sex addiction" c'mon, think, oh yeah . . . "Comparing apples and oranges?" Yeah that one. When the market crashed, Messrs Hawley and Smoot figured they could raise tariffs and we would come out of the recession at the expense of our trading partners. However, comparing the failures of Smoot-Hawley with the circumstances of today employs one key fallacy (drum roll please): Prior to the 1929 crash and prior to Smoot-Hawley in 1930, the United States enjoyed a trade surplus with our trading partners

(www.nber.org/databases/macrohistory/rectdata/07/m07028.dat ).

Today we have huge deficits. So, if we impose a tariff on China, and they retaliated with a similar tariff on the U.S., taken to its logical conclusion trade ends between the two countries; Americans will be forced to purchase goods from American manufacturers, made by American Workers (including 20 million new workers), and goods will cost a little bit more.

Is this a good thing? It may depend upon whom you ask. Ask the 20 million unemployed who now will have a job or Sean Hannity, who will have to pay a little more for his Cadillac Escalade ? But add in the fact that China no longer has a say in our foreign policy; no longer can enlarge its military (as they are doing now); No longer exports dangerous, unregulated products to the USA? Not a bad trade off if you ask me.

In the 30's we enjoyed a trade surplus - we sold them more than they sold us - with our trading partners. Then when the market fell, we raised tariffs, expecting bigger surpluses to recoup our economy. Our trading partners (mostly Mexico and Europe, who also were in dire straits, took umbrage - the trade wars were on, and everyone lost out.

Let this put an end to that ignorant Smoot-Hawler analogy.

CAPITAL GAINS TAX CUTS

Headline: Republicans cut capital gains taxes, and the economy booms. That makes sense in that, say, this makes sense: All weird people are liberals, therefore all liberals are weird people. It sounds about right, but it isn't.

In his rebuttle last weekend to the Obama plan to let the Bush tax cuts expire in 2010, Mike Huckaby finished his non-explanation (paraphrased) that oncreasing capital gains will hurt small business . . . whereupon his voice trailed off and that was that. Obviously not a businessman himself, he wasn't sure exactly how it worked that business and job creation benefitted from lower capital gains taxes, but, by God, the Obama plan was going to hurt business and hurt the economy.

Well, I used to own a chain of retail stores, and was Reg. V.P. for a whole lot of businesses, and frankly, I cannot see any connection between the success or failure of a business and the rate of capital gains taxes - one has nothing to do with the other, Mssrs Huckaby, Hannity, Morris, Limbaugh. And, with your zero background in business, I doubt that you can either.

THE MYTH

CUTS IN CAPITAL GAINS TAXES AID BUSINESS AND CREATE JOBS.

How? Businesses don't pay capital gains taxes. When the owner or accountant for a small business sits down at the end of the tax year to fill out their tax form (1120S), there is no place on their tax form that says anything about capital gains (Don't take my word for it ( click here ), Because Capital Gains taxes have NOTHING to do with small businesses. Noooooottthhhinnnnnnnnng.

What about regular corporations (S-Corps) ? Regular Corporations don't pay Capital Gains taxes either. Yeah, I know. When you click on that green thingy above, the 1120 (Regular) Corporation form refers to capital gain net income (line 8) and Net gain (9). Not to worry - this refers to the rental or sale of property - as in This corporation owns a building - report activity here. But, it has nothing to do with the running of or profits from that Corporation.

WHAT ARE "C" AND "S" CORPORATIONS ?

(YOU ASK)

A "C" Corporation is an artificial entity under which a business can be formed that protects the owners (shareholders or stockholders) from personal liability incurred by the operations of the corporation. Owners derive their income from dividends paid on the stocks they own in the corporation. Dividends are earned from corporation net profits - profits derived AFTER the corporation pays corporate taxes on its GROSS PROFITS.

An "S" Corporation (popular with single owner businesses) is pretty much the same, except the owner (stockholder) treats the corporation as a personal business. While the taxes are filed on a separate tax form, the profits and losses are treated as ordinary income on the individual's personal income tax.

"S" Corpers enjoy the shield from personal liability afforded the stockholders in a regular ("C") corporation.

CAPITAL GAINS TAXES - AND TAX CUTS.

In my article on this page, I explain what I would do about bring jobs back to this country - I WOULD ELIMINATE TAXES ON MANUFACTURING AND EXPORTS. So, when I point out what a useless effort it is to cut capital gains taxes in the next paragraph, you know that I am the biggest tax cutter in American History. Furthermore, I explain exactly how and why cutting theae taxes is a good idea, and I challenge ANYONE to tell me where I'm wrong, and to tell me what THEY would do better. BRING IT.

Mr. Hannity, Mr. Limbaugh, explain to me how one job is created by cutting capital gains taxes. I have just explained that businesses don't pay capital gains taxes. It's irrefutable. They pay corporate taxes, or ordinary income taxes, on their profits. BUT, I concede that the stockholders DO PAY capital gains taxes on their dividends at a much lower rate than the Income Tax rate. So, purchasing stocks and getting dividends pays off for the stockholder, all right. But how does that encourage businesses to hire more employees - it doesn't.

Some years ago Rush Limbaugh was touting the Bush capital gains tax cut - citing the ensuing rise in the economy as proof that those tax cuts were working. A (female) caller tried to tell him that when someone buys a share of stock, not one dime goes to the company itself. If one purchases, say, General Motors stock, he buys it from a broker who sells him GM shares that the broker bought from some other GM stock owner - not from General Motors. Rush, ever the expert says that's nonsense, and rudely blew her off.

Ticked off - said caller, a long-time listener, called back the next day to tell Rush off. To his credit, Rush put her back on. She reiterated her (correct) position, whereupon Rush again told her she was wrong, but thanks for calling.

When you buy a share of stock in a "C" Corporation, NOT ONE DIME GOES TO THE COMPANY, much in the way that when you buy a loaf of bread, none of the money goes back to the farmer who grew the wheat. So, if no money goes to the company, how does that company benefit from a cut in the capital gains tax ? IT DOESN'T. How does that encourage the creation of more jobs ? IT DOESN'T.

DO SMALL BUSINESSES NEED INVESTORS TO START UP A COMPANY?

The theory behind capital gains cuts is to create an incentive for people to start or invest in a business by making taxes lower. Good idea. I have suggested that we eliminate most corporates taxes. But in reality, very very few businesses are created by someone investing. Fewer than 2% of startup businesses are created this way. When I suggested that method to my accountant, he said: "What happens is that a business goes through the process and the bureaucratic headaches; advertises for funding via an IPO, and then the whole thing falls on its face."

Businesses are started by bank loans. Period. Business owners cannot take advantage of capital gains tax breaks unless their business is a monetary success, and until that owner sells that business. 90% of all businesses fail within five years. The owners of successful businesses (10%) don't sell them - they just don't. Therefore capital gains pay no part in the startup or operation of a small business - and therefore, play no part in the creation of jobs.

SO, WHO BENEFITS FROM CAPITAL GAINS TAX CUTS ?

Wall street brokers and Las Vegas gamblers.

Wall Street brokers earn their keep from commissions. People buy stocks through a broker - the broker gets a commission. Sell a stock - the broker gets a commission. Sell a stock at a loss, the broker gets a commission. Like your local bookie (click). Professional Gamblers can write off their losses against their winnings (if they come out ahead) and they can pay the lower capital gains taxes (Although I may have made this one up). Do Wall Street Brokers or professional gamblers provide jobs? NO CHANCE.

Why, then, do the Republicans push so hard for and defend a policy that does nothing to create new businesses or provide jobs? Read my How We Got Screwed Page and know the truth.

Finally the ensuing economic gain was not because capital gains taxes are good, but because ALL tax cuts are good.

HISTORICAL INCOME TAX/CAPITAL GAINS TAX CHART

http://www.huppi.com/kangaroo/TaxTimeline.htm#income

THE LOUDEST VOICE IN THE ROOM

Shortly after Hurricane Charlie hit and business was booming, I was asked, by several residents for whom I had prepared detailed estimates for hurricane shutters for their homes, to give a presentation of my company’s products and a short seminar on hurricanes before a lot of homeowners in their Charlotte County gated community. At these gatherings rarely, for one reason or another, do I make any sales, but I am always glad to take the time.

Also, I had sold a few jobs there before. When I finished I invited the participants to take one of my business cards. Because of the large number attending, and because I had run out of business cards, I had printed out some on my computer - some that were slightly smaller, as it turned out, than ordinary business cards.

When I inquired of one of those for whom I had already given a quote if they were ready to purchase, I got this reply (paraphrased): “You know, I was speaking to a lady whose opinion I respect and she said ‘ if he gives out a business card like this, what can we expect from him if we buy his shutters’? I conveyed to my “customer” that her friend was an idiot, and I took my leave forthwith, vowing never to make a presentation to a homeowners’ group again. To this day, I won’t even speak to OUR association.

Which segues into my biggest gripe - the loudest voice in the room. You know, he’s that man or woman who attends the board meetings and speaks with authority on every subject, and people tell you later on “I respect his opinion.”

He’s the suit that I encountered as an 18-yar-old assembly line worker at Oldsmobile. The guy that barked orders to everyone, or that young engineer (who graduated high school two years before I) that my dad always said was going places. He’s General Westmoreland, or George Romney, or Fred Thompson up on the big screen. Square-jawed, tall, look-you-in the eye, speak with authority. How about Dan Rather, or Bill Clinton, perhaps Hillary Clinton or Bella Abzug, or Barack Obama, smug and self assured.

Rod Blagojovich, Al Sharpton, those dot.com billionaires.

We respect their opinion. Why do we respect other people's opinions, even if we have no clue as to the veracity or accuracy of their words or even their mannerisms? I have no idea. Why do I care? Why do self assured people bother me? Because, cynic that I am, I know that when the going gets tough these people will usually let you down.

Neither Ronald Reagan nor Abraham Lincoln had command voices. Ross Perot talked a lot, but command ? Huh uh. Rush Limbaugh? Ummm maybe.

When that red-faced, newly-annoited savior of General Motors went before congress and gruffly told the committee members, with that stern, sincere look on his pink face, that GM needed to tighten their belt, and he would see to it (with a $45 Billion Dollar handout from the taxpayers) that GM would be back on its feet in no time, by golly, I just started an office pool to take bets on how soon this clown would be canned - cynic that I am. He lasted four months.

When the new tall CEO AND Chairman of General Motors, Ed Whitacre who appears to be of Native-American ancestry paraded across my 55” HD Screen last year and told us all how GM was coming back, I started another office pool. But last Thursday, I had to eat crow. Tonto marched right into our living room and announced that General Motors had repaid the entire loan, with interest (Wow. Shade's of Lee Iacocca). Hat in hand, I told my wife the good news, and further complimented the GM chief on his backdrop of a nicely-lighted and clean assembly plant (unlike the dungeon In which I toiled during the 60’s).Yesterday, I learned that GM was able to pay back the loan (with all that interest) because they received another loan from the Gummit to cover it. GM Boss speak with forked tongue.

Draw your own conclusions.

June 23, 2010 Update: Can you say General McChrystal?

SO WHAT HAPPENED?

. . . continued Dec. 2, 2007 (From SAWYER2008.com) In closing questioning at a 2008 Congressional hearing, Treasury Secretary, Henry (you can call him ‘Hank’) Paulson, Federal Reserve Chairman, Ben Bernanke, and SEC Chairman Chris Cox were each asked by House committee Chairman Henry (don’t call him ‘Hank’) Waxman in a blatant attempt to further their claim that it was Wall Street that created our present “financial crisis,” whether sub prime loans were the cause of the current financial crisis. (Actually, it was Wall Street - but more on that later).

(February 13, 2010): See the "more later" below, when I get in the mood to write it (like when I'm not sober).

All three witnesses attributed the housing collapse to sub prime mortgages. As briefly as I know how, let me explain: Regular people with real jobs were buying homes, and seeing their investments appreciate at a good rate. Those people who could not qualify for a mortgage loan (not enough income, poor credit rating, etc.) were missing out. Many formed or joined government subsidized advocacy groups such as ACORN to lobby congress and to pressure lending institutions into providing creative financing so that they too could get in on the real estate boom.

Donning teashirts and chanting "What do we want ? Housing. When do we want it? Now," they sat in at bank lobbies or picketed bank branches. Progressive politicians, particularly those like Barney Frank and Chris Dodd who regularly are paid off with large donations from such organizations passed legislation pressuring lenders to lend money to people, many of whom had no real means of repaying those loans. Not to worry. The value of homes was increasing so rapidly, that even dead beats were assured of making a profit - particularly those dead beats who have been milking handouts from the government for years - even generations.

Well, here are some points to ponder: Politicians give home owners tax breaks that are not available to renters : interest deductions, homestead exemptions; large deductions for capital gains.

Contrary to popular opinion, the banking industry is a tightly regulated. When bank examiners make their surprise call upon a lending institution, primary among their purposes is to make sure that the lending institution maintains the Federally-mandated balance between assets and bad loans.

The have-nots believed that they should share in the housing boom, inability to meet mortgage obligations notwithstanding. They joined advocate groups like ACORN and got a republican congress to pass and BillClinton to sign the 1998 . . . . bill. ACORN et al pressured lending institutions into making these risky loans. Third parties advertised for zero down payment and made the loans and then resold them to banks and thrifts.

Banking institutions are kept under tight raps by federal examiners. If their bad debt to assets ratio reaches a certain point, examiners force them to put more of their assets into reserve, thus preserving the financial integrity of the bank. Higher reserves means less money to lend, thus reducing a bank’s profitability. Not to worry. Help is on the way. Fanny Mae and Freddie Mac are quasi private entities set up by congress? To purchase mortgage loans from banks and thrifts, thus freeing up capital for these banks to make additional loans.

With Federal legislation and liberal advocacy groups encouraging them, and risk greatly reduced through quick resales to banks, Independent lenders signed up any warm body they could find, and then re sold the loans to banks. In turn, Freddy and Fanny assumed the mortgages from the banks. And why not? So what if homeowners couldn’t afford mortgage payments? Because of the increased demand, prices were rising so rapidly that even deadbeats could re sell for a quick profit.

So what went wrong?

With huge bonuses in the balance, Freddy and Fanny executives cooked the books, and collected their rewards.

Because of increased demand, home prices soared.

So what happened?

Now, once again, many of these same people who have "lost their homes" are out in their red tee shirts chanting: "What do we want? Healthcare. When do we want it? Now."

The word implied, but never spoken is "free" as in free welfare, free food stamps, free abortion, free housing, free healthcare. Here's some free advice: " What do we want? Jobs. When do we want them? Now."

You know the old expression . . . . .

. . . . TIM GEITHNER HAPPENS

Jan 30, 2009: In dire economic times like these; in our darkest hour; in an economy headed for a crash; when it looked as though all was lost, what we needed was an economic guru to gallop out of the night on his white horse to impart his knowlede, roll up his sleeves, and save us all.

Instead - we got Tim Geithner.

Timmy was the only man on the planet who could rescue us from this mess. And we need him right now - that's what a frantic Obama Administration told us breathlessly. Tim Who? What is his expertise ? Well, this is the answer to Myth 3 and Myth 4 on my Homepage - ready?

More than anyone, anywhere, Tim Geithner caused this recession. Tim Geitner was one of the 7 equal members of the Board of Governors of the Federal Reserve Board (The Fed). Currently, there are two vacancies on the Board. As the board member responsible for the district that includes the New York Reserve Bank (as in Wall Street - Hello !), Geitner was the most influential member of that board. In reality the Chairman, Ben Bernanke, has no more say over any other board member - and as head of the New York banking district (which, of course, includes Wall Street), Geithner and his district have more say than others.

All barnyard animals are equal. Some are more equal than others. (Animal Farm, 1945).

The chief responsibility of the Fed is to maintain the integrity of the currency - essentially to keep inflation low . Their target inflation rate is 2%. Until 1987, the Fed controlled inflation by controlling M2 (the money in circulation plus savings plus time deposits). In 1987 the geniuses at the Fed decided we no longer had to guard the moneysupply - inflation was under control, and M2 was boring. Besides controlling the supply of money they printed brought them afoul of powerful enemies - more later.

First. It is totally irresponsible of the Federal Reserve, starting with Alan Greenspan, to drop the Federal Reserve lending rate to a low mark of 2%. So, In fact 1% interest rates are just plain stupid. Yet that's the level to which the Fed lowered rates - most recently in 20. At these rates, everyone will be tempted to borrow money - and everyone did just that.

Banks made risky real estate loans (after all if the deadbeat couldn't make payments, he could sell his house and make a huge profit. Where's the risk? Ummmm. well . . . . read on.

Beginning in 2005, fearing runaway inflation, the Fed increased interest rates 17 TIMES ! !. (For chart click here) What did this mean ? Well, for the banks and Wall Street it meant a huge increase in interest collected on credit card and home mortgage debt. For the consumer, it meant higher monthly payments. In 2005 the prime rate was 1% which meant that most home mortgage interest rates were about 4%. Over the next three years, for little apparent reason (Google inflation tables online) Mssrs.Geithner, Bernanke and friends raised the prime rate to 5 1/4%.

So, if you had an adjustable rate on your home mortgage of, say, $300,000, at, say 8 1/4% interest (3 over prime) your monthly payment jumped from about $1,500 to around $2,300, a whopping 53% increase. Now if your monthly income didn't happen to go up by $800.00, you were hurting - big time. So by the end of 2006 ordinary people with jobs fell behind in their mortgage payments; the hot real estate market started cooling; home values dropped; mortgages were defaulted; construction (the second largest U.S. employer - behind retail) ground to a halt. And so the cycle spiraled downward. Nothing to do with ACORN at all (well, almost nothing).

THIS REEEAAAAALLLYYY IS GOING TO PISS YOU OFF

Mr. Geithner didn't have to raise interest rates to fight inflation (in this case - imagined inflation). The Fed actually has two other tools at their disposal. (1) They can stop printing money, or (2) They can require that member banks (that's all banks) keep more of their deposits in reserve (preferable alternatives in ordinary economic times, but impossible when your government is running the presses at the mint overtime to print money for the "Economic Stimulus). Either way, money becomes scarcer; rates on NEW loans goes up; demand drops, inflation drops. SO why didn't Geitner, Bernanke and friends open door number 2 or 3 ?

If you stop printing money, Congress can no longer pay for all of those pork-barrel projects (I mean stimulus) that get legislators re-elected. Government contractors and suppliers get paid NOW. And, Congress compulsively purchases votes with their "earmarks," so they are not going to cut spending. Also, the Fed doesn't mess with the people who approved their 14 year appointment to the Federal Reserve Board. So, raise the reserve amounts for banks? Ahahahahahah ha ha. Here's the quiz. How many of the Federal Reserve Board members are umm Doctors? Roofers? Farmers? Auto Repairmen? Here's a shock. None. They are all Bankers and Wall Street Brokers - didn't see that coming did you?

January 24, 2010, update: Congress weighs Obama re-appointment of Ben Bernanke.

GOT IT ? ! !

So the bankers of the Fed raised the prime rate, and the banks raised your interest payments - all in the name of controlling inflation, that in 2005 and 2006 did not exist. And we all paid the price. Then, because their Fed-generated gains killed the housing market, not just the sub-primers, but regular mortgage customers, even Wall Street and the banks finally felt your pain. Then the Politicians dutifully bailed them out with YOUR money.

Party first, politician second - you, not at all.

January 24, 2010: Update: Paul Krugman, in his column in today's New York Times, proffers his endorsement of Ben Bernanke to be re-appointed as Chairman of the Federal Reserve, noting that Mr. Bernanke was responsible for getting Mr. Krugman his teaching position at Princeton.

As if I needed any further reason to reject Mr. Bernanke's re-appointment

April 6, 2011, Update: In today's NYT< Paul Krugman opinined that our leaders spend too much time agonizing over what might happen, and too little time working on what IS happening. Proving the old saw about a broken clock being right twicw a day.