We recently had a conversation with a woman who just started dabbling in the real estate market. For purposes of this note, she will be referred to as Jane.
Jane is a legal secretary in Los Angeles and doesn't strike one as the type that would, say, belly up to a Vegas crap table and lay a grand down on one throw of the dice. Yet, Jane is making a big bet, much bigger than a grand, that Ben Bernanke will bail her out of a stupid investment.
Jane bought a loft, for investment purposes, in downtown Los Angeles. It's a small loft. We have actually lived in residences that had bigger bathrooms than the size of this entire loft unit. Whatever she laid down for this dog house, Jane confessed to us that her monthly nut--mortgage payment, real estate taxes and common fees-- amount to about $2,200 per month. She has owned the loft for three months. It's still not rented.
At first she tried to rent it out for $1800 per month. She is now down to $1400 per month and still no takers. Welcome to the final stage of the real estate boom. Jane is dead in the water on this baby. Who the hell loaned her the money for this nutty investment? She is paying out of her own pocket the monthly $2200 hit. And while all this is going on, Ben Bernanke and his brigade are still raising interest rates. The real estate market is slowing already, before any further hikes. The next hike will destroy the value of this loft. It will tank in price.
Jane may not understand, but you need to keep your eye on the Fed before making real estate investments (or most other investments for that matter). The Greenspan years at the Fed will someday become known as the easy years. Easy money, easy times. We don't think Bernanke will get off so lucky.
When the Fed is flooding the markets with easy money, it bails out a lot of people who make stupid stock market investments and stupid real estate investments. Tough times are tough for even the shrewd. Jane is not in the shrewd camp. Her investment is going down the tubes, unless of course Bernanke loses his mind, goes on a days long bender, walks back in the office about a week later, and in a tequila fueled craze cuts the discount rate, cuts the reserve requirement and cuts the Fed funds rate, just because it feels good. Not likely, but that in essence is what Jane is betting on.
What are you betting on?
Tuesday, June 27, 2006
Tuesday, July 26, 2005
The Invasion of Panama: "There was something else going on."
With George Bush I as Commander and Chief, the United States invaded Panama in December 1989.It has been a long time since I have thought about this invasion but, my curiosity about the deeper reasons for this invasion have recently been awakened.
A few days ago I spoke to a former marine who was one of the first marines leading the U. S. invasion. This guy is a pretty red, white and blue kind of guy and gave me some patriotic reasons for the invasion. You know, the normal "Noriega was a bad guy kind of stuff".
But after careful probing and questioning, it became obvious that even he had some reservations about what the invasion was all about.
This is what he finally said to me:
"You know there was something else going on when that invasion took place. We had some target buildings we were given to destroy. The buildings weren't any type of military threat to us and we kind of looked around at each other and said 'What the hell is this all about?', but we followed orders and blew the buildings up. I really think that grabbing Noriega was a secondary reason for the invasion. There was something else going on."
He had a very puzzled look on his face at this point.
-RW
A few days ago I spoke to a former marine who was one of the first marines leading the U. S. invasion. This guy is a pretty red, white and blue kind of guy and gave me some patriotic reasons for the invasion. You know, the normal "Noriega was a bad guy kind of stuff".
But after careful probing and questioning, it became obvious that even he had some reservations about what the invasion was all about.
This is what he finally said to me:
"You know there was something else going on when that invasion took place. We had some target buildings we were given to destroy. The buildings weren't any type of military threat to us and we kind of looked around at each other and said 'What the hell is this all about?', but we followed orders and blew the buildings up. I really think that grabbing Noriega was a secondary reason for the invasion. There was something else going on."
He had a very puzzled look on his face at this point.
-RW
Saturday, May 7, 2005
Inside The Mind Of Steven D. Levitt : A Review of Freakonomics
Steven D. Levitt (with Stephen J. Dubner) has a hot new bestseller Freakonomics: A rogue economist explores the hidden side of everything.
In the introduction, Levitt makes abundantly clear that his book has no central theme. I can almost agree with this assessment. The book is indeed much more a blog type compendium of different topics, rather than an exposition on one theme. But I did find one theme that runs through out the book. Levitt poses interesting questions, reports interesting facts and occasionally makes clever arguments, but these questions, facts and arguments are surrounded by misleading statements, hazy statements, inaccuracies, poor logic, sloppiness and outright errors.
These flaws run from the minor to the grand scale. Indeed,one must begin by considering that Levitt clearly believes that through out the book he is "doing economics." In fact, although he does tend to include some type of cost benefit analysis in most chapters, his analysis tends to be much more that of a sociologist than that of an economist. Consider the titles of some of his chapters: "What Makes a Perfect Parent?", "Where Have All the Criminals Gone?" and "What Do School Teachers and Sumo Wrestlers have in Common?"
Further although there is an implication by Levitt that he is writing theory, he is in fact more of a historian reporting on past data.(For the important distinctions between theory and history, see Ludwig von Mises' Theory and History.)So instead of a book of economic theory, we have a flawed book on sociological history.
On a minor scale, Levitt tends to use misleading chapter titles. His chapter "What do School Teachers and Sumo Wrestlers have in Common?" comes up with the answer: some in both groups cheat to get ahead. Since there are some in almost any group that will cheat to get ahead, there is nothing distinctive about this supposed "link"
It is the same as saying "What does Steven Levitt and the members of the offensive front line of the New York Giants football team have in common?" Answer: They all use cell phones. The facts in both cases are true but they result in no new insight, but the questions themselves tend to mislead one into thinking that there is some type of distinctive link in the answers when there is not. At most the chapter title is a sloppy effort at being cute.
Levitt goes from bad to worse in the title of his next chapter: "How is the Ku Klux Klan like a Group of Real Estate Agents?" His answer: they both use privileged information to their advantage. Again, nothing remarkable about this chapter, since everyone uses privileged information to their advantage (Indeed that is pretty close to the definition of an entrepreneur!)
Levitt's presentation is so sloppy that it almost fails to get across the point that privileged information is used by the Ku Klux Klan and real estate agents. In short, it is a pretty bad example used to get in a little, quite interesting, history about the Ku Klux Klan.
As for sloppy and hazy arguments, in one chapter, Levitt relates the story of how a pre-school attempted to solve a problem of children being left late after school. The pre-school instituted a fine for parents who left their children late. With the new stated policy (It was only a $3.00 fine), more parents left their children late.
Levitt in the next chapter on page 45 calls this cheating: "So if...day-care parents...cheat are we to assume that mankind is innately and universally corrupt?"
Given all the cheating going on in the world, it is quite odd that Levitt uses this as one of the examples, which only by the wildest stretch could be called "cheating." In fact, it really is a story about the limits of knowledge, and how people will change their actions when more knowledge becomes available.
In Levitt's next chapter sloppiness is coupled with an implied wrong conclusion. Levitt does the math and shows that on a per hour basis "The per hour death rate of driving versus flying...is about equal." He then concludes "The two contraptions are equally likely... to lead to death." He ends his analysis of flying versus driving with this conclusion, which tends to imply that it doesn't matter whether you fly or drive. But, in fact, using Levitt's own data the clear conclusion is the exact opposite of what Levitt implies. The clear conclusion is to fly whenever possible. Why? Because you get there faster, which means you are traveling a shorter amount of time at the per hour death rate. If it takes five hours to fly from New York to Los Angeles and three days or 72 hours to drive, then if the death rate per hour is the same, the risk by driving is close to 15 times greater. If you do nothing else after reading his book other than take Levitt's implied conclusion on driving versus flying and drive instead of fly, Levitt has increased your chances of dying when traveling by nearly 15 times!
Levitt's chapter on names continues the trend of sloppiness, haziness, illogic and poor conclusions.
He tells us that "...it isn't famous people who drive the name game." He uses the fact that no parents are naming their daughters Madonna as part of his argument that this is proof that parents don't name their children after famous people, but this is just sloppy logic. Just because parents don't name their children after Madonna doesn't mean many parents aren't naming their children after famous people. In fact only a page away from where Levitt tells us that famous people don't drive the name game, Levitt lists the most popular black names in California in the year 2000. Number 4 was Michael and Number 2 was Jordan. Hmmm, it seems to coincide with a period when there was a pretty famous basketball player on the court, named Michael Jordan.
In short, I could literally write a book (maybe many books) detailing the errors, sloppiness, inaccuracies, haziness and poor theory going on in this book. And I haven't even touched on the errors in his chapter on Roe v.Wade. (Levitt is probably most well known for his theory that abortions reduce crime, see Steve Sailer for a critique of this theory.) Nor have I discussed his love affair with regression analysis, which is a questionable method to prove theory in the social sciences (See Leoni and Frola)
In a sense though, this book is a great mystery book. The great mystery being just what marketing plan was implemented to drive this disaster onto the best seller list?
In the introduction, Levitt makes abundantly clear that his book has no central theme. I can almost agree with this assessment. The book is indeed much more a blog type compendium of different topics, rather than an exposition on one theme. But I did find one theme that runs through out the book. Levitt poses interesting questions, reports interesting facts and occasionally makes clever arguments, but these questions, facts and arguments are surrounded by misleading statements, hazy statements, inaccuracies, poor logic, sloppiness and outright errors.
These flaws run from the minor to the grand scale. Indeed,one must begin by considering that Levitt clearly believes that through out the book he is "doing economics." In fact, although he does tend to include some type of cost benefit analysis in most chapters, his analysis tends to be much more that of a sociologist than that of an economist. Consider the titles of some of his chapters: "What Makes a Perfect Parent?", "Where Have All the Criminals Gone?" and "What Do School Teachers and Sumo Wrestlers have in Common?"
Further although there is an implication by Levitt that he is writing theory, he is in fact more of a historian reporting on past data.(For the important distinctions between theory and history, see Ludwig von Mises' Theory and History.)So instead of a book of economic theory, we have a flawed book on sociological history.
On a minor scale, Levitt tends to use misleading chapter titles. His chapter "What do School Teachers and Sumo Wrestlers have in Common?" comes up with the answer: some in both groups cheat to get ahead. Since there are some in almost any group that will cheat to get ahead, there is nothing distinctive about this supposed "link"
It is the same as saying "What does Steven Levitt and the members of the offensive front line of the New York Giants football team have in common?" Answer: They all use cell phones. The facts in both cases are true but they result in no new insight, but the questions themselves tend to mislead one into thinking that there is some type of distinctive link in the answers when there is not. At most the chapter title is a sloppy effort at being cute.
Levitt goes from bad to worse in the title of his next chapter: "How is the Ku Klux Klan like a Group of Real Estate Agents?" His answer: they both use privileged information to their advantage. Again, nothing remarkable about this chapter, since everyone uses privileged information to their advantage (Indeed that is pretty close to the definition of an entrepreneur!)
Levitt's presentation is so sloppy that it almost fails to get across the point that privileged information is used by the Ku Klux Klan and real estate agents. In short, it is a pretty bad example used to get in a little, quite interesting, history about the Ku Klux Klan.
As for sloppy and hazy arguments, in one chapter, Levitt relates the story of how a pre-school attempted to solve a problem of children being left late after school. The pre-school instituted a fine for parents who left their children late. With the new stated policy (It was only a $3.00 fine), more parents left their children late.
Levitt in the next chapter on page 45 calls this cheating: "So if...day-care parents...cheat are we to assume that mankind is innately and universally corrupt?"
Given all the cheating going on in the world, it is quite odd that Levitt uses this as one of the examples, which only by the wildest stretch could be called "cheating." In fact, it really is a story about the limits of knowledge, and how people will change their actions when more knowledge becomes available.
In Levitt's next chapter sloppiness is coupled with an implied wrong conclusion. Levitt does the math and shows that on a per hour basis "The per hour death rate of driving versus flying...is about equal." He then concludes "The two contraptions are equally likely... to lead to death." He ends his analysis of flying versus driving with this conclusion, which tends to imply that it doesn't matter whether you fly or drive. But, in fact, using Levitt's own data the clear conclusion is the exact opposite of what Levitt implies. The clear conclusion is to fly whenever possible. Why? Because you get there faster, which means you are traveling a shorter amount of time at the per hour death rate. If it takes five hours to fly from New York to Los Angeles and three days or 72 hours to drive, then if the death rate per hour is the same, the risk by driving is close to 15 times greater. If you do nothing else after reading his book other than take Levitt's implied conclusion on driving versus flying and drive instead of fly, Levitt has increased your chances of dying when traveling by nearly 15 times!
Levitt's chapter on names continues the trend of sloppiness, haziness, illogic and poor conclusions.
He tells us that "...it isn't famous people who drive the name game." He uses the fact that no parents are naming their daughters Madonna as part of his argument that this is proof that parents don't name their children after famous people, but this is just sloppy logic. Just because parents don't name their children after Madonna doesn't mean many parents aren't naming their children after famous people. In fact only a page away from where Levitt tells us that famous people don't drive the name game, Levitt lists the most popular black names in California in the year 2000. Number 4 was Michael and Number 2 was Jordan. Hmmm, it seems to coincide with a period when there was a pretty famous basketball player on the court, named Michael Jordan.
In short, I could literally write a book (maybe many books) detailing the errors, sloppiness, inaccuracies, haziness and poor theory going on in this book. And I haven't even touched on the errors in his chapter on Roe v.Wade. (Levitt is probably most well known for his theory that abortions reduce crime, see Steve Sailer for a critique of this theory.) Nor have I discussed his love affair with regression analysis, which is a questionable method to prove theory in the social sciences (See Leoni and Frola)
In a sense though, this book is a great mystery book. The great mystery being just what marketing plan was implemented to drive this disaster onto the best seller list?
Monday, May 2, 2005
In The Enron Audience
Saw the Enron documentary film on Saturday.
The woman sitting next to me kept letting out an all knowing laugh every time the film showed a clip of Ken Lay or Jeff Skilling saying something positive about Enron in the days before the collapse.
Somehow I doubt she was so all knowing before the collapse. And I wonder if she owns a condo here in Chicago, morgatged to the hilt. I wonder if she will be letting out her all knowing laugh when Alan Greenspan's money tightening tanks the real estate market.
The woman sitting next to me kept letting out an all knowing laugh every time the film showed a clip of Ken Lay or Jeff Skilling saying something positive about Enron in the days before the collapse.
Somehow I doubt she was so all knowing before the collapse. And I wonder if she owns a condo here in Chicago, morgatged to the hilt. I wonder if she will be letting out her all knowing laugh when Alan Greenspan's money tightening tanks the real estate market.
Friday, March 18, 2005
Free Market Solves Discrimination Problem
Overheard at a McDonalds:
White man says to black man, "Yeah you should definitely check them out. They used to be real racist, but they need truckers really bad now."
White man says to black man, "Yeah you should definitely check them out. They used to be real racist, but they need truckers really bad now."
Monday, June 21, 2004
LAX and 9-11
Is there a reader of this blog who may have some inside details?
Approximately the week before the attacks on the WTC and the Pentagon, I was at LAX .(The exact date I believe was either the Thursday or Friday before Labor Day.) Late that morning while heading to the terminal and inside the terminal, I saw more police at LAX than I had ever seen pre-9-11.There were literally dozens of police patrol cars parked outside. Inside, my ID along with others in the terminal was checked a number of times. Even as I was heading to go up the escalator there was an airline employee ( I believe it was an airline employee, it's possible she worked for the airport but she did have some sort of uniform on.) checking ID's at the bottom of the escalator with a police officer on each side of her. It was very unusual and again THIS WAS THE WEEK BEFORE 9-11. I am curious as to what was going on? I wonder if perhaps there is somebody at LAX who remembers the incident and can provide me wth more details?
Approximately the week before the attacks on the WTC and the Pentagon, I was at LAX .(The exact date I believe was either the Thursday or Friday before Labor Day.) Late that morning while heading to the terminal and inside the terminal, I saw more police at LAX than I had ever seen pre-9-11.There were literally dozens of police patrol cars parked outside. Inside, my ID along with others in the terminal was checked a number of times. Even as I was heading to go up the escalator there was an airline employee ( I believe it was an airline employee, it's possible she worked for the airport but she did have some sort of uniform on.) checking ID's at the bottom of the escalator with a police officer on each side of her. It was very unusual and again THIS WAS THE WEEK BEFORE 9-11. I am curious as to what was going on? I wonder if perhaps there is somebody at LAX who remembers the incident and can provide me wth more details?
Friday, June 4, 2004
Analysis From A Bio-Terroist Expert
Met with a bio-terrorist expert on Thursday. Bottom line: A dirty bomb will kill many, a chemical attack will kill many, but nothing compares to the devastation a bio-terror attack could inflict. With a dirty bomb or a chemical attack, deaths could be in the thousands. A bio attack could be, on a worst case scenario, in the 10's of millions
Thursday, May 20, 2004
A Review of Ben Mezrich's UGLY AMERICANS
A Review of Ben Mezrich's
UGLY AMERICANS:
The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions
The first non-fiction book written by Ben Mezrich was Bringing Down The House: The True Story of Six MIT Kids who took Vegas for Millions. In that book, as the title clearly states, Mezrich detailed the activities of MIT whiz kids who took Vegas for millions. They did it by winning at the blackjack tables, thousands of dollars at a time.
In Ugly Americans: The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions, Mezrich is back detailing the exploits of big money winners. In this case though, the winnings aren�t thousands of dollars at a time, but millions at a time.
Mezrich tells the true story of a Princeton grad who ends up in Japan, without knowing a word of Japanese. He is brought there by a mysterious expatriate derivatives trader, who was then working for Kidder Peabody. The Princeton grad is only identified by the pseudonym John Malcolm. The derivatives trader is identified by the pseudonym Dean Carney.Through Carney, Malcolm, who thinks he is headed to Tokyo, ends up trading the Nikkei Index for Kidder Peabody in Osaka.
He does this until Joesph Jett�s infamous bond trading, at Kidder Peabody in New York, results in hundreds of millions of dollars in losses for the firm. This results in the closing of Kidder�s trading operations in Japan. Malcolm, out of a job, lands back on his feet in Osaka as a trading assistant for Nick Leeson. Leeson is, of course, the 26 year old rogue trader who lost nearly two billion dollars and brought down the oldest bank in England, Barings Bank, and which ultimately results in Malcolm being out of a job for a second time.
With these two adventures under his belt, the mysterious derivatives trader, Carney, brings Malcolm from Osaka to Tokyo, where Carney has started up a hedge fund.
It is while working directly for Carney that the money winnings get real big and Malcolm ultimately walks away with $50 million in his pocket.
The tale of how all this occurs is told in superb fashion by Mezrich. He is a storyteller that knows how to tell a tale with suspense and an observant eye. The reader of this tale will feel like he is part of the action and won�t want to put the book down. It�s a page turner.
Mezrich also knows how to pick the topics for his writing. In this tale the reader is not only exposed to high stakes trading, but also to Japan�s underground world of exotic women and Japan�s mafia, the Yakuza.
This book, in no stretch of the imagination, can be classified as an inside account of how hedge funds work. Anyone looking for a detailed explanation of how a hedge funds work will be disapointed by this book. This is a tale about an adventure set with the backdrop of the expatriate life of a bunch of traders in Japan. But, never the less, it does give a good taste, a snapshot if you will, of how the Carney hedge fund operated. Indeed, what we find particularly attractive about the Carney hedge fund, that Mezrich reports on, is that it tends to trade positions based on information advantage. This is a particular method of trading that, we believe, can be one of the most advantageous with limited pitfalls when done correctly. Do your homework. Understand a situation better than anyone else, and you can sometimes spot glaring inefficiencies in the market that can lead to huge profits. This is the big hidden lesson in this book and it is what makes this book a must read. As Mezrich quotes Carney, reporting on one of �Carney�s Rules,� �The key is to figure out the real, intrinsic value�and get it for much, much less.� This is a much better method of trading for hedge funds or individuals alike, versus the momentum, model building and trend following methods that many individuals and hedge funds use. It is trading based on model building that brought down Long Term Capital Management. And we believe that it will be model building methods, trend following methods and momentum trading methods that will result in huge losses in the not too distant future for many hedge funds and individual investors, when the trends change because of changes in Fed monetary policy. Trend followers, momentum traders and model builders, always miss the inflection points. Information traders, seeking information advantage, don�t necessarily get caught up in these problems.
You can read this book for its pure adrenaline packed adventure tale, but make sure you take to heart Carney�s Rules of Trading. The mysterious Dean Carney knows how to trade and of what he speaks.
UGLY AMERICANS:
The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions
The first non-fiction book written by Ben Mezrich was Bringing Down The House: The True Story of Six MIT Kids who took Vegas for Millions. In that book, as the title clearly states, Mezrich detailed the activities of MIT whiz kids who took Vegas for millions. They did it by winning at the blackjack tables, thousands of dollars at a time.
In Ugly Americans: The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions, Mezrich is back detailing the exploits of big money winners. In this case though, the winnings aren�t thousands of dollars at a time, but millions at a time.
Mezrich tells the true story of a Princeton grad who ends up in Japan, without knowing a word of Japanese. He is brought there by a mysterious expatriate derivatives trader, who was then working for Kidder Peabody. The Princeton grad is only identified by the pseudonym John Malcolm. The derivatives trader is identified by the pseudonym Dean Carney.Through Carney, Malcolm, who thinks he is headed to Tokyo, ends up trading the Nikkei Index for Kidder Peabody in Osaka.
He does this until Joesph Jett�s infamous bond trading, at Kidder Peabody in New York, results in hundreds of millions of dollars in losses for the firm. This results in the closing of Kidder�s trading operations in Japan. Malcolm, out of a job, lands back on his feet in Osaka as a trading assistant for Nick Leeson. Leeson is, of course, the 26 year old rogue trader who lost nearly two billion dollars and brought down the oldest bank in England, Barings Bank, and which ultimately results in Malcolm being out of a job for a second time.
With these two adventures under his belt, the mysterious derivatives trader, Carney, brings Malcolm from Osaka to Tokyo, where Carney has started up a hedge fund.
It is while working directly for Carney that the money winnings get real big and Malcolm ultimately walks away with $50 million in his pocket.
The tale of how all this occurs is told in superb fashion by Mezrich. He is a storyteller that knows how to tell a tale with suspense and an observant eye. The reader of this tale will feel like he is part of the action and won�t want to put the book down. It�s a page turner.
Mezrich also knows how to pick the topics for his writing. In this tale the reader is not only exposed to high stakes trading, but also to Japan�s underground world of exotic women and Japan�s mafia, the Yakuza.
This book, in no stretch of the imagination, can be classified as an inside account of how hedge funds work. Anyone looking for a detailed explanation of how a hedge funds work will be disapointed by this book. This is a tale about an adventure set with the backdrop of the expatriate life of a bunch of traders in Japan. But, never the less, it does give a good taste, a snapshot if you will, of how the Carney hedge fund operated. Indeed, what we find particularly attractive about the Carney hedge fund, that Mezrich reports on, is that it tends to trade positions based on information advantage. This is a particular method of trading that, we believe, can be one of the most advantageous with limited pitfalls when done correctly. Do your homework. Understand a situation better than anyone else, and you can sometimes spot glaring inefficiencies in the market that can lead to huge profits. This is the big hidden lesson in this book and it is what makes this book a must read. As Mezrich quotes Carney, reporting on one of �Carney�s Rules,� �The key is to figure out the real, intrinsic value�and get it for much, much less.� This is a much better method of trading for hedge funds or individuals alike, versus the momentum, model building and trend following methods that many individuals and hedge funds use. It is trading based on model building that brought down Long Term Capital Management. And we believe that it will be model building methods, trend following methods and momentum trading methods that will result in huge losses in the not too distant future for many hedge funds and individual investors, when the trends change because of changes in Fed monetary policy. Trend followers, momentum traders and model builders, always miss the inflection points. Information traders, seeking information advantage, don�t necessarily get caught up in these problems.
You can read this book for its pure adrenaline packed adventure tale, but make sure you take to heart Carney�s Rules of Trading. The mysterious Dean Carney knows how to trade and of what he speaks.
Thursday, April 29, 2004
Me and My Cabbie
On a recent business trip to New York, I hailed a taxi at the airport to take me to my mid-town Manhattan hotel. Upon entering the taxi, I gave the driver the address to my hotel and, in a perfunctory fashion, I asked the cabbie, "How's it going?"
In reply, he told me that prices were too high.
Gas prices for his taxi were climbing, he told me.. Food prices were climbing. And they just raised the price at a storage locker facility where he was renting space.
Since I follow prices for a living, I knew of what he spoke. "Yeah," I agreed, "prices are climbing. Most people don't realize it yet, but they are climbing and it is only going to get worse."
"You should buy some gold to protect yourself, if you can," I advised.
He then proceeded to lecture me for the rest of the trip on why he would not buy gold.I didn't say anything. I just let him talk. Gold, he told me, has very little use. It has some use as jewelry but outside of that it has no use, was the gist of his argument.
"You can't even eat gold," he said. He labored on the fact that you couldn't eat gold, for some time. This seemed to prove to him that gold was nearly useless.
As we arrived at my hotel and since I had an unopened Nestle's Crunch bar in my briefcase, I offered to pay my fare with the bar. "Heh, heh," he laughed.
"No," I said "take it. Why would you want paper dollars? You can't eat them,you can't even make jewelry out of them."
He laughed nervously again. "No, no," he said "I don't eat candy."
"But you can't eat any dollars I give you either," I said.
I then decided to give him a short lecture in economics to help bail him out of his predicament.
"You see some things sometimes have value simply because of their exchange value," I said. " You and I both accept dollars in payment for our services because we know we can exchange them for other goods and services we want. When something is widely accepted in exchange, economists call it a medium of exchange. It doesn't necessarily have to to have any other use. Dollars are a medium of exchange. We can't eat them, but we accept them in exchange because once we have them, we can buy
food with the dollars or we can exchange the dollars, as you know, for many, many other things."
"Now the one drawback of dollars is that the government can print more of them any time it wants. By printing more dollars and spending them, it is competing against you for things you want. That's where gold comes in. To increase the gold supply you have to dig it out of the ground.This is hard and expensive work. The government can't print more gold. The government can't produce gold at will. That is why the government has always maintained a propaganda campaign against it. FDR even made it
illegal to own gold. This legislation stayed on the books for decades. But
despite all this, many people still respect gold as the ultimate medium of exchange. And when the government begins to aggressively print more paper dollars, more and more people choose to hold some of their monetary reserves in the form of gold. That is why gold is valuable. No, you can't eat gold, but it's exchange value can't be corrupted by the government either, and exchange value is very important."
"Now again I am going to offer to pay this fare two ways. One with this bar which you can eat, or with these dollars which have no value outside of exchange value. Now if you accept these dollars, you are at least implicitly acknowledging that exchange value exists and I think you are a smart enough man to know that prices are going up because more of these dollars are being printed. Now if you are a real smart man, now that you understand exchange value, you should go and do something smart and hold some of your reserve funds in a medium of exchange that the government can't print at will. That's gold."
"Now, as far as this cab fare, will it be something you can eat or something that only has value in exchange?"
"I understand," he said "I see why dollars have value, and why gold has even more stable value."
I paid him the fare in dollars. As he counted it, he asked, "How many new dollars are they printing?"
"A lot," I said, " an awful lot."
---
Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.com and author of The Fed Flunks: My Speech at the New York Federal Reserve Bank.
Buy "The Fed Flunks" Now:
In reply, he told me that prices were too high.
Gas prices for his taxi were climbing, he told me.. Food prices were climbing. And they just raised the price at a storage locker facility where he was renting space.
Since I follow prices for a living, I knew of what he spoke. "Yeah," I agreed, "prices are climbing. Most people don't realize it yet, but they are climbing and it is only going to get worse."
"You should buy some gold to protect yourself, if you can," I advised.
He then proceeded to lecture me for the rest of the trip on why he would not buy gold.I didn't say anything. I just let him talk. Gold, he told me, has very little use. It has some use as jewelry but outside of that it has no use, was the gist of his argument.
"You can't even eat gold," he said. He labored on the fact that you couldn't eat gold, for some time. This seemed to prove to him that gold was nearly useless.
As we arrived at my hotel and since I had an unopened Nestle's Crunch bar in my briefcase, I offered to pay my fare with the bar. "Heh, heh," he laughed.
"No," I said "take it. Why would you want paper dollars? You can't eat them,you can't even make jewelry out of them."
He laughed nervously again. "No, no," he said "I don't eat candy."
"But you can't eat any dollars I give you either," I said.
I then decided to give him a short lecture in economics to help bail him out of his predicament.
"You see some things sometimes have value simply because of their exchange value," I said. " You and I both accept dollars in payment for our services because we know we can exchange them for other goods and services we want. When something is widely accepted in exchange, economists call it a medium of exchange. It doesn't necessarily have to to have any other use. Dollars are a medium of exchange. We can't eat them, but we accept them in exchange because once we have them, we can buy
food with the dollars or we can exchange the dollars, as you know, for many, many other things."
"Now the one drawback of dollars is that the government can print more of them any time it wants. By printing more dollars and spending them, it is competing against you for things you want. That's where gold comes in. To increase the gold supply you have to dig it out of the ground.This is hard and expensive work. The government can't print more gold. The government can't produce gold at will. That is why the government has always maintained a propaganda campaign against it. FDR even made it
illegal to own gold. This legislation stayed on the books for decades. But
despite all this, many people still respect gold as the ultimate medium of exchange. And when the government begins to aggressively print more paper dollars, more and more people choose to hold some of their monetary reserves in the form of gold. That is why gold is valuable. No, you can't eat gold, but it's exchange value can't be corrupted by the government either, and exchange value is very important."
"Now again I am going to offer to pay this fare two ways. One with this bar which you can eat, or with these dollars which have no value outside of exchange value. Now if you accept these dollars, you are at least implicitly acknowledging that exchange value exists and I think you are a smart enough man to know that prices are going up because more of these dollars are being printed. Now if you are a real smart man, now that you understand exchange value, you should go and do something smart and hold some of your reserve funds in a medium of exchange that the government can't print at will. That's gold."
"Now, as far as this cab fare, will it be something you can eat or something that only has value in exchange?"
"I understand," he said "I see why dollars have value, and why gold has even more stable value."
I paid him the fare in dollars. As he counted it, he asked, "How many new dollars are they printing?"
"A lot," I said, " an awful lot."
---
Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.com and author of The Fed Flunks: My Speech at the New York Federal Reserve Bank.
Buy "The Fed Flunks" Now:
Wednesday, April 28, 2004
Watching Arnold Pump Legislation
There is a man who lives in Southern California and who is originally from Austria. His sister also now lives in Southern California and owns a restaurant that specializes in Austrian food. Over the years the Austrian-born Arnold Schwarzenegger would occasionally visit the restaurant. The man and Arnold would generally briefly chat when he visited.
After Arnold announced he was running for governor, he visited the restaurant again. The man, who regularly chatted with Arnold in the past, rushed over to talk to Arnold, like in the old days. Arnold shrugged and indicated he couldn't talk to the man. "The bodyguards, the bodyguards. They won't let me," Arnold said.
Who knows what insight this provides into the man that is now governor of California?
The bodyguards wouldn't let him?
Recently, Arnold declared victory in getting a worker's compensation bill passed. The legislative conference committee that approved the bill did not receive it until a Thursday morning at 3:35 a. m. Three minutes later the six-member panel approved the 77-page bill unanimously, with no analysis presented and no copy of the bill given to anyone but the committee chair.
In reporting on the passage of the bill, The Los Angeles Times stated:
"...even some friendly Republican lawmakers were rattled by the governor's
methods...the workers' compensation revamp 'has not been done in an open and transparent manner...' said Assemblyman Keith Richman (R-Northridge)."
The Times went on to report that "The governor said: 'I always did campaign and say, 'Let the sun shine in and let the people be aware of what's going on.' Here though, 'we had to make decisions quickly.'"
The voters of California will most certainly give Arnold a pass on the way he pushed through this legislation. Indeed, the way he pushed through the legislation is probably not on their radar screen of concerns at all.
It appears that Californians are also ready to give Arnold a pass if he breaks another campaign promise, i.e. the campaign promise of not raising taxes.
A recent poll shows that most Californians would not be upset if taxes were raised and they wouldn't be upset with Arnold for breaking this promise.
You see, most Californians seem to like the "can do" governor, even if what he is doing is the opposite of what he promised.
Interestingly enough, it was the Austrian-born, Nobel Prize winning economist, Friedrich Hayek, in his brilliant book, The Road to Serfdom, who warned about such type politicians. He was writing about leaders of nations and of totalitarian regimes, but you have to wonder if some of what he wrote doesn't apply to Arnold.
In a chapter of the book titled, "How the Worst Get On Top," Hayek wrote:
"We must return for a moment to the position which precedes the suppression of democratic institutions... In this stage it is the general demand for a quick and determined government action that is the dominating element in the situation, dissatisfaction with the slow cumbersome course of democratic procedure which makes action for action's sake the goal. It is then the man or party who seems strong and
resolute enough 'to get things done' who exercises the greatest appeal."
That sure sounds like Arnold. Arnold wants to get things done."We had to make decisions quickly," he says.
What he is getting done with this can do action is the question, though.
He prides himself on being a free market oriented governor. But, it has to be asked if he really understands what free markets are about.
A 77-page workers compensation bill may be many things, but it is certainly not a free market product. In a free market, you don't have workers compensation bills at all. You leave it up to individual businesses to offer workers compensation packages, if they feel "the market" demands that they do.
As far as increased taxes are concerned, that is simply an expansion of government. It is taking it from the general public and passing it on to special interest groups of one sort or another.
In upcoming months, Arnold will have to deal with next year's California budget. As things stand now, a 14 billion dollar deficit exists. Arnold can solve the budget problem by standing firm on his no new taxes pledge and by starting to cut back on the bloated California government expenditures. Or, he can take the easy road, use some of his popularity to give a speech, tell all Californians that they must sacrifice "for the good of the special interests, er ah, the great state of California" and wack it to them by raising taxes in a very complex manner so they all think it is the other guy who will be paying most of the new taxes.
How Arnold deals with this budget deficit is going to be a good litmus test as to what kind of character we have here.
If he fights strongly to lower the budget and not raise taxes, then California may truly have a terminator of big government growth. On the other hand, if he does raise taxes, then California has nothing but another lying politician, who is watching which way the wind is blowing.
The whole country needs to keep an eye on how all this develops. Arnold has charisma and the Republican Party knows this. Utah Senator Orrin Hatch has introduced a resolution to amend the Constitution's ban on non-American-born presidents by allowing people who have been U.S. citizens for at least 20 years to be elected to the White House.
The Salt Lake City Tribune quotes Hatch as saying: "If Arnold Schwarzenegger turns out to be the greatest governor of California, which I hope he will, if he turns out to be a tremendous leader and he proves to everybody in this country that he's totally dedicated to this country as an American . . . we would be wrong not to give him that opportunity."
The greatest governor of California, Orrin? Will see about that. Maybe if his
bodyguards let him.
After Arnold announced he was running for governor, he visited the restaurant again. The man, who regularly chatted with Arnold in the past, rushed over to talk to Arnold, like in the old days. Arnold shrugged and indicated he couldn't talk to the man. "The bodyguards, the bodyguards. They won't let me," Arnold said.
Who knows what insight this provides into the man that is now governor of California?
The bodyguards wouldn't let him?
Recently, Arnold declared victory in getting a worker's compensation bill passed. The legislative conference committee that approved the bill did not receive it until a Thursday morning at 3:35 a. m. Three minutes later the six-member panel approved the 77-page bill unanimously, with no analysis presented and no copy of the bill given to anyone but the committee chair.
In reporting on the passage of the bill, The Los Angeles Times stated:
"...even some friendly Republican lawmakers were rattled by the governor's
methods...the workers' compensation revamp 'has not been done in an open and transparent manner...' said Assemblyman Keith Richman (R-Northridge)."
The Times went on to report that "The governor said: 'I always did campaign and say, 'Let the sun shine in and let the people be aware of what's going on.' Here though, 'we had to make decisions quickly.'"
The voters of California will most certainly give Arnold a pass on the way he pushed through this legislation. Indeed, the way he pushed through the legislation is probably not on their radar screen of concerns at all.
It appears that Californians are also ready to give Arnold a pass if he breaks another campaign promise, i.e. the campaign promise of not raising taxes.
A recent poll shows that most Californians would not be upset if taxes were raised and they wouldn't be upset with Arnold for breaking this promise.
You see, most Californians seem to like the "can do" governor, even if what he is doing is the opposite of what he promised.
Interestingly enough, it was the Austrian-born, Nobel Prize winning economist, Friedrich Hayek, in his brilliant book, The Road to Serfdom, who warned about such type politicians. He was writing about leaders of nations and of totalitarian regimes, but you have to wonder if some of what he wrote doesn't apply to Arnold.
In a chapter of the book titled, "How the Worst Get On Top," Hayek wrote:
"We must return for a moment to the position which precedes the suppression of democratic institutions... In this stage it is the general demand for a quick and determined government action that is the dominating element in the situation, dissatisfaction with the slow cumbersome course of democratic procedure which makes action for action's sake the goal. It is then the man or party who seems strong and
resolute enough 'to get things done' who exercises the greatest appeal."
That sure sounds like Arnold. Arnold wants to get things done."We had to make decisions quickly," he says.
What he is getting done with this can do action is the question, though.
He prides himself on being a free market oriented governor. But, it has to be asked if he really understands what free markets are about.
A 77-page workers compensation bill may be many things, but it is certainly not a free market product. In a free market, you don't have workers compensation bills at all. You leave it up to individual businesses to offer workers compensation packages, if they feel "the market" demands that they do.
As far as increased taxes are concerned, that is simply an expansion of government. It is taking it from the general public and passing it on to special interest groups of one sort or another.
In upcoming months, Arnold will have to deal with next year's California budget. As things stand now, a 14 billion dollar deficit exists. Arnold can solve the budget problem by standing firm on his no new taxes pledge and by starting to cut back on the bloated California government expenditures. Or, he can take the easy road, use some of his popularity to give a speech, tell all Californians that they must sacrifice "for the good of the special interests, er ah, the great state of California" and wack it to them by raising taxes in a very complex manner so they all think it is the other guy who will be paying most of the new taxes.
How Arnold deals with this budget deficit is going to be a good litmus test as to what kind of character we have here.
If he fights strongly to lower the budget and not raise taxes, then California may truly have a terminator of big government growth. On the other hand, if he does raise taxes, then California has nothing but another lying politician, who is watching which way the wind is blowing.
The whole country needs to keep an eye on how all this develops. Arnold has charisma and the Republican Party knows this. Utah Senator Orrin Hatch has introduced a resolution to amend the Constitution's ban on non-American-born presidents by allowing people who have been U.S. citizens for at least 20 years to be elected to the White House.
The Salt Lake City Tribune quotes Hatch as saying: "If Arnold Schwarzenegger turns out to be the greatest governor of California, which I hope he will, if he turns out to be a tremendous leader and he proves to everybody in this country that he's totally dedicated to this country as an American . . . we would be wrong not to give him that opportunity."
The greatest governor of California, Orrin? Will see about that. Maybe if his
bodyguards let him.
Monday, April 26, 2004
An Open Letter to Alan Greenspan
Dear Chairman Greenspan,
I note in your most recent testimony before the U. S Senate Joint Economic Committee meeting that you are not that concerned about inflation. In fact you said at that hearing:
Chairman Greenspan, I think you need to get out more. You have been Federal Reserve Chairman for nearly 17 years now and it is must be hard to remember what it is like to be a common man. I wonder when was the last time you drove your own car, or pumped gas into one.
In the near 17 years you have been Fed Chairman, you have increased the money supply (as measured by M2) by some 3.4 trillion dollars. Yes, time goes by fast, doesn't it? But when you started to run the show in 1987, M2 money supply stood at only 2.7 trillion dollars, now it is at 6.1 trillion dollars.
Fortunately for you, foreigners have been absorbing a lot of these dollars or we would be having near hyper-inflation by now. China, Japan, Germany, Russia, everyone is seeing their dollar reserves explode. U. S. dollar denominated debt is also being absorbed overseas. Japan, for example, has been buying $20 billion of Treasury debt every month. They now own nearly $600 billon in Treasury debt. China owns about $170 billon. You are one lucky Chairman to have them around. Former Fed Chairman Paul
Volcker calls it the munificence of strangers.
But I think the Europeans and Asians are finally starting to get tired of absorbing all these dollars and, in addition, you are still pumping them out. Since the start of this year you have pumped in another 170 billion dollars. Because of this, inflation is starting to creep up. And one thing we all learned from the inflation of the 1970's is that once prices start to creep up, more and more people become less interested in holding dollars and much more interested in getting rid of them by bidding up assets--any kind of assets.
We are probably in the very early stages of this happening, right now.
In an attempt to put you more in touch with the experiences of the common man, I have put together a list of simple tasks that you might want to complete. I hope you try these. Once these tasks are completed, I would like to know if you still hold the same opinion about inflation as you did before you completed the tasks.
Your first task is to go by a gallon of milk. If you haven't done this in 17 years, it is going to be quite a shocker. Milk prices are high but it looks like they are headed even higher.
According to the Los Angeles Times, milk prices will probably hit record highs of $3. 50 per gallon soon.
Once you have the gallon of milk, make sure you stop to pump some gas into your car. And you guessed,it, gasoline prices are climbing also.
According to Reuters
Now that you have your tanked filled it is time to take a drive out of Washington D.C. Drive over to Maryland and do a little house shopping. Here is what the Washington Post is saying about the current real estate market in Maryland:
Once you have recovered from the sticker shock of housing prices and head back into Washington D. C., you should grab a meal. Now, don't head over to the Fed where you have your own private dining room. I want you to go out, have a meal, and reach into your wallet and pay for the meal yourself. Head over to Smith and Wollensky's, it is a first class dining spot. And I am sorry to say prices are up there also. Here's what the Washington Times reported about restaurant prices:
Restaurants are raising menu prices, reducing portion sizes and steering customers to less expensive items to offset the high costs of beef...Smith & Wollensky raised prices three times in 2003... "We've had no choice because it's been outrageous,"
Get a good nights sleep tonight because I have one more project for you tomorrow, Chairman Greenspan. Tomorrow, I want you to imagine that you have to fix up your house yourself, or that you are putting on an addition to your house. We are going to head over to Home Depot to do this. Here's what the New York Post is reporting about prices at Home Depot:
And The Post didn't stop with it's reporting at Home Depot. Here is how they finished that story:
So you see Chairman Greenspan, what most people do on a regular basis is something like this: They drink milk, fill their car tanks with gasoline, have an occasional dinner out and head back home. The only problem, Mr. Chairman, is that milk prices, gasoline prices, food prices and home prices are all headed higher. In other words, while your statistics may not indicate that there is much inflation, people that have to live daily normal lives are seeing it everyday.
I have seen reports that you like to go over these statistics (the ones that are leading you to believe there is no inflation) at night while soaking in the tub. Chairman Greenspan, I think it is time you get out of the tub.
Your 17 years of irresponsible money printing ( Paul Volcker calls it:
"Stimulus beyond anything I have ever heard of in history.") is about to make it very difficult for the average person to make ends meet as inflation kicks into high gear.
I know you are in a real bind, because the minute you start fighting inflation you are going to hurt all those people that have been speculating in the real estate bubble that will surely coming crashing down. On the other hand, if you don't start fighting infaltion, you know the inflation will only become worse, hurting pensioners,savers and laborers. You have certainly created a mess.
My only advice to you would be to stop playing politics. You are 77 years old, do what is right and end this money madness. Stop printing money. You know this is the right thing to do. You in fact explained the problem very well in 1966:
Yes, Chairman Greenspan, "the law of supply and demand is not to be conned." The money explosion you have created is starting to be reflected in prices. Yes, just like you wrote in 1966 "prices must eventually rise."
I hope you do the right thing and stop printing money. But I am not betting on it. I'm putting a good chunk of my money in gold. You see. You had it right in 1966, "Gold stands in the way of this insidious process [An insidious process you are now controlling!]. It stands as the protector of property rights."
Sincerely,
Robert Wenzel
I note in your most recent testimony before the U. S Senate Joint Economic Committee meeting that you are not that concerned about inflation. In fact you said at that hearing:
More broadly, however, although the recent data suggest that the worrisome trend of disinflation presumably has come to an end, still-significant productivity growth and a sizable margin of underutilized resources, to date, have checked any sustained acceleration of the general price level and should continue to do so for a time...As yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building.
Chairman Greenspan, I think you need to get out more. You have been Federal Reserve Chairman for nearly 17 years now and it is must be hard to remember what it is like to be a common man. I wonder when was the last time you drove your own car, or pumped gas into one.
In the near 17 years you have been Fed Chairman, you have increased the money supply (as measured by M2) by some 3.4 trillion dollars. Yes, time goes by fast, doesn't it? But when you started to run the show in 1987, M2 money supply stood at only 2.7 trillion dollars, now it is at 6.1 trillion dollars.
Fortunately for you, foreigners have been absorbing a lot of these dollars or we would be having near hyper-inflation by now. China, Japan, Germany, Russia, everyone is seeing their dollar reserves explode. U. S. dollar denominated debt is also being absorbed overseas. Japan, for example, has been buying $20 billion of Treasury debt every month. They now own nearly $600 billon in Treasury debt. China owns about $170 billon. You are one lucky Chairman to have them around. Former Fed Chairman Paul
Volcker calls it the munificence of strangers.
But I think the Europeans and Asians are finally starting to get tired of absorbing all these dollars and, in addition, you are still pumping them out. Since the start of this year you have pumped in another 170 billion dollars. Because of this, inflation is starting to creep up. And one thing we all learned from the inflation of the 1970's is that once prices start to creep up, more and more people become less interested in holding dollars and much more interested in getting rid of them by bidding up assets--any kind of assets.
We are probably in the very early stages of this happening, right now.
In an attempt to put you more in touch with the experiences of the common man, I have put together a list of simple tasks that you might want to complete. I hope you try these. Once these tasks are completed, I would like to know if you still hold the same opinion about inflation as you did before you completed the tasks.
Your first task is to go by a gallon of milk. If you haven't done this in 17 years, it is going to be quite a shocker. Milk prices are high but it looks like they are headed even higher.
According to the Los Angeles Times, milk prices will probably hit record highs of $3. 50 per gallon soon.
Once you have the gallon of milk, make sure you stop to pump some gas into your car. And you guessed,it, gasoline prices are climbing also.
According to Reuters
There is no relief for U.S. consumers at the gasoline pump, as the national price for motor fuel hit a record high for the fourth straight week,
increasing 2.7 cents over the last week to $1.813 a gallon on Monday, the government said.
Now that you have your tanked filled it is time to take a drive out of Washington D.C. Drive over to Maryland and do a little house shopping. Here is what the Washington Post is saying about the current real estate market in Maryland:
[The] market is spinning beyond crazy toward unattainable... [One house
recently] attracted 15 contracts and sold for $100,000 over list price. [A] second house also fetched multiple contracts and sold for $1.1 million, also $100,000 over the asking price.... a builder recently paid $750,000 for a tear-down in Bethesda -- three-quarters of a million dollars for the land alone..."The only people who are selling are people who are dying, getting divorced or moving into nursing homes."
Once you have recovered from the sticker shock of housing prices and head back into Washington D. C., you should grab a meal. Now, don't head over to the Fed where you have your own private dining room. I want you to go out, have a meal, and reach into your wallet and pay for the meal yourself. Head over to Smith and Wollensky's, it is a first class dining spot. And I am sorry to say prices are up there also. Here's what the Washington Times reported about restaurant prices:
Restaurants are raising menu prices, reducing portion sizes and steering customers to less expensive items to offset the high costs of beef...Smith & Wollensky raised prices three times in 2003... "We've had no choice because it's been outrageous,"
Get a good nights sleep tonight because I have one more project for you tomorrow, Chairman Greenspan. Tomorrow, I want you to imagine that you have to fix up your house yourself, or that you are putting on an addition to your house. We are going to head over to Home Depot to do this. Here's what the New York Post is reporting about prices at Home Depot:
Prices have risen tremendously."...building wire prices jumped 25 percent to $500 for a 500-foot roll... I-beams cost $560 per ton versus $300 in April 2003, up 86 percent. Cut plate, the key structural for walls, is $650 vs. $320. Rebar is $420 vs. $300 a year ago...Lumber prices exceed $400 per 1,000 board feet.
And The Post didn't stop with it's reporting at Home Depot. Here is how they finished that story:
Soybeans and soy oil have been the strongest components of the Dow
Jones-AIG Index average. Beans hit a record of $9.52 per 60-pound bushel.
So,it's not only beef buyers that are seeing higher prices. Vegetarians are
feeling the pinch also, The Post continued:
Shoppers pay $4.19 for 5.25 ounces of soy-based vegetarian bacon vs.
$3.29 in July 2003.
So you see Chairman Greenspan, what most people do on a regular basis is something like this: They drink milk, fill their car tanks with gasoline, have an occasional dinner out and head back home. The only problem, Mr. Chairman, is that milk prices, gasoline prices, food prices and home prices are all headed higher. In other words, while your statistics may not indicate that there is much inflation, people that have to live daily normal lives are seeing it everyday.
I have seen reports that you like to go over these statistics (the ones that are leading you to believe there is no inflation) at night while soaking in the tub. Chairman Greenspan, I think it is time you get out of the tub.
Your 17 years of irresponsible money printing ( Paul Volcker calls it:
"Stimulus beyond anything I have ever heard of in history.") is about to make it very difficult for the average person to make ends meet as inflation kicks into high gear.
I know you are in a real bind, because the minute you start fighting inflation you are going to hurt all those people that have been speculating in the real estate bubble that will surely coming crashing down. On the other hand, if you don't start fighting infaltion, you know the inflation will only become worse, hurting pensioners,savers and laborers. You have certainly created a mess.
My only advice to you would be to stop playing politics. You are 77 years old, do what is right and end this money madness. Stop printing money. You know this is the right thing to do. You in fact explained the problem very well in 1966:
But the process of cure was misdiagnosed as the disease: if shortage of
bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913....The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices
must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods...The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit
spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
Yes, Chairman Greenspan, "the law of supply and demand is not to be conned." The money explosion you have created is starting to be reflected in prices. Yes, just like you wrote in 1966 "prices must eventually rise."
I hope you do the right thing and stop printing money. But I am not betting on it. I'm putting a good chunk of my money in gold. You see. You had it right in 1966, "Gold stands in the way of this insidious process [An insidious process you are now controlling!]. It stands as the protector of property rights."
Sincerely,
Robert Wenzel
Saturday, April 24, 2004
An Ex-Girlfriend, a Construction Worker and My Landlord
If you want to know what an economic bubble looks like as it is occurring, keep an eye on the real estate market.
The landlord that I rent office space from is, I'm guessing, about 50 years old. He was born in Iran and left Iran around the time the Shah was overthrown. For most of the more than twenty years he has been in the United States, he has been in the garment business. Women's dresses, I believe.
It's a tough business, he has told me.
About three years ago, he decided to leave the garment business to enter the real estate market full time. His experiences can attest to the fact that we are certainly in a Bull Market in real estate. About six months ago he bought a building in downtown Los Angeles for $4.2 million. He was just offered $9.6 million for it.
I told him to sell and put some of the money in the bank. "This is a real estate bubble. When interest rates start to climb, the bubble is going to burst," I said to him
He nodded. "I may sell but I have to put it back into real estate, otherwise I will have a huge tax bill," he said.
What a scam, I thought. I know the government for decades has been promoting the real estate market, but here is the icing on the cake. Yeah, you might make some money in the real estate market, if you catch the cycle right, but if you try and take some out, the government is going to take a good chunk of it. Roll it back into real estate and the government won't mess with you for awhile.
An ex-girlfriend of mine called this week. She recently moved to Houston. It sounds like things are tight for her. Instead of renting, she decided to participate in the Great American real estate boom and bought a condo. And it sounds like she has bitten off more than she can chew, as far as the mortgage payment. She doesn't seem to like Houston either. She's a real looker and when she is not falling for the rap of an economist, she tends to date athletes and sports agents.
I guess it is a further sign of the real estate crazy times, but she informs me that she has her eyes set on some Houston real estate developer.
There is real estate talk everywhere. Just yesterday while at a pizza joint, I was eavesdropping on the conversation at the table next to me. There were three construction workers at the table and, surprise, they were talking about their homes and real estate in general.
Apparently one of the construction workers comes from the old school, when he asked one of the others, "How many years before you have your mortgage paid off?"
The other construction worker replied, "Oh no. I am not going to pay it off. I am going to use it as a cash cow. Every few years when the value goes up I am going to take the money out (by borrowing against the increased value)."
I'm looking at these construction workers and thinking to myself, these guys really have no clue as to what is going on.
Alan Greenspan is pumping money into the economy, and especially the real estate market, at double digit rates. He has been doing this, almost non-stop, since he became Fed chairman in 1987. This means he has been doing this roughly 17 years. Pumping money for 17 years is a long time to pump money. At some point in time price-inflation will kick in, regardless of how much more productive the overall economy has become. And that some point in time may be now, given the falling dollar, rising oil prices, rising steel prices, rising rubber prices and the general rise in commodity prices.
The commodity price rise is only likely to get worse. And when things get worse on the price-inflation front, the Fed will slowly start to raise rates and slowdown the flood of easy money. And that's when all hell will break loose.
The construction worker who is using his home as a "cash cow" will get laid off, since the construction industry is all part of the mega real estate industry that Alan Greenspan is now fueling with easy money. He won't be able to find comparable work, he won't be able to make his mortgage payments, the debt on his house will be more than the declining value of his house. He will file bankruptcy and lose his "cash cow," i.e. his house.
My ex-girl friend works in the automotive industry, which is another industry that is always a major beneficiary of an easy money environment. She will lose her job, also file bankruptcy and dump the Houston real estate developer (who will certainly have plenty of financial problems of his own). She will probably end up marrying a .250 hitter from some major league baseball team.
My landlord will come to regret the day he didn't pay the taxes on his gains and put some money aside. If he thinks the garment business was tough, wait until he sees what happens to the real estate market once Alan Greenspan turns off the monetary spigot.
There are many, many sad stories taking shape during this Alan Greenspan inspired Real Estate Bubble, I hope your life won't be caught up in one of them.
The landlord that I rent office space from is, I'm guessing, about 50 years old. He was born in Iran and left Iran around the time the Shah was overthrown. For most of the more than twenty years he has been in the United States, he has been in the garment business. Women's dresses, I believe.
It's a tough business, he has told me.
About three years ago, he decided to leave the garment business to enter the real estate market full time. His experiences can attest to the fact that we are certainly in a Bull Market in real estate. About six months ago he bought a building in downtown Los Angeles for $4.2 million. He was just offered $9.6 million for it.
I told him to sell and put some of the money in the bank. "This is a real estate bubble. When interest rates start to climb, the bubble is going to burst," I said to him
He nodded. "I may sell but I have to put it back into real estate, otherwise I will have a huge tax bill," he said.
What a scam, I thought. I know the government for decades has been promoting the real estate market, but here is the icing on the cake. Yeah, you might make some money in the real estate market, if you catch the cycle right, but if you try and take some out, the government is going to take a good chunk of it. Roll it back into real estate and the government won't mess with you for awhile.
An ex-girlfriend of mine called this week. She recently moved to Houston. It sounds like things are tight for her. Instead of renting, she decided to participate in the Great American real estate boom and bought a condo. And it sounds like she has bitten off more than she can chew, as far as the mortgage payment. She doesn't seem to like Houston either. She's a real looker and when she is not falling for the rap of an economist, she tends to date athletes and sports agents.
I guess it is a further sign of the real estate crazy times, but she informs me that she has her eyes set on some Houston real estate developer.
There is real estate talk everywhere. Just yesterday while at a pizza joint, I was eavesdropping on the conversation at the table next to me. There were three construction workers at the table and, surprise, they were talking about their homes and real estate in general.
Apparently one of the construction workers comes from the old school, when he asked one of the others, "How many years before you have your mortgage paid off?"
The other construction worker replied, "Oh no. I am not going to pay it off. I am going to use it as a cash cow. Every few years when the value goes up I am going to take the money out (by borrowing against the increased value)."
I'm looking at these construction workers and thinking to myself, these guys really have no clue as to what is going on.
Alan Greenspan is pumping money into the economy, and especially the real estate market, at double digit rates. He has been doing this, almost non-stop, since he became Fed chairman in 1987. This means he has been doing this roughly 17 years. Pumping money for 17 years is a long time to pump money. At some point in time price-inflation will kick in, regardless of how much more productive the overall economy has become. And that some point in time may be now, given the falling dollar, rising oil prices, rising steel prices, rising rubber prices and the general rise in commodity prices.
The commodity price rise is only likely to get worse. And when things get worse on the price-inflation front, the Fed will slowly start to raise rates and slowdown the flood of easy money. And that's when all hell will break loose.
The construction worker who is using his home as a "cash cow" will get laid off, since the construction industry is all part of the mega real estate industry that Alan Greenspan is now fueling with easy money. He won't be able to find comparable work, he won't be able to make his mortgage payments, the debt on his house will be more than the declining value of his house. He will file bankruptcy and lose his "cash cow," i.e. his house.
My ex-girl friend works in the automotive industry, which is another industry that is always a major beneficiary of an easy money environment. She will lose her job, also file bankruptcy and dump the Houston real estate developer (who will certainly have plenty of financial problems of his own). She will probably end up marrying a .250 hitter from some major league baseball team.
My landlord will come to regret the day he didn't pay the taxes on his gains and put some money aside. If he thinks the garment business was tough, wait until he sees what happens to the real estate market once Alan Greenspan turns off the monetary spigot.
There are many, many sad stories taking shape during this Alan Greenspan inspired Real Estate Bubble, I hope your life won't be caught up in one of them.
Thursday, March 11, 2004
The Soros New World Order: A Review of George Soros' "The Bubble of American Supremacy"
It is rare to come across an author who footnotes an earlier embarrassing prediction.
George Soros in his new book, The Bubble of American Supremacy, provides such a footnote when he reminds readers that earlier on he had predicted the collapse of the global capitalist system. Certainly not a minor prediction by any measure. "I ... made an unconditional prediction ..., in 1997, when I predicted the imminent collapse of the global capitalist system. Later I had to eat my words," Soros writes.
It is also rare to come across an author who has $5 billion, let alone an author who has spent $5 billion to save the world. Soros, by his own accounting, tells us he has spent such sums. Since $5 billion has not been enough to save the world, Soros has again put pen to paper and written a new book.
George Soros' book is an attack on the Bush Administration's military adventure into Iraq. Lest some mistake the Soros attack as an attack on nation building by the Bush Administration, Soros clearly sets things straight. "My particular concern is that the debacle in Iraq will prevent future efforts and nation building," Soros tells us.
Soros, in other words, is an international meddler. While he does spend some of his own vast fortune on his schemes and while he does not like the way George W. Bush meddles, he most certainly is a meddler himself and has no qualms about taxing the citizenry to add to his billions in an effort to save the world.
"Total international assistance amounted to $5.6 billion in 2002. This amount represents only 0.18% of global GDP...countries at the center of global capitalist system enjoy far too many advantages over countries at the periphery," Soros tells us.
It's easy to see where Soros is going with these comments. "..in 1992, I proposed that a $10 billion IMF program to Russia should be earmarked for the payment of social security and unemployment benefits,"Soros writes.
This is a curious comment given the state of social security in the United States and the fact that it is so close to the precipice of collapse that even Alan Greenspan warns that changes must be made. It becomes even more curious when one evaluates another comment written by Soros, "The dismantling of the welfare state is a relatively new phenomenon whose full effects have not yet been felt."
Soros cites the United States as a country that has dismantled its welfare state. One, of course, would get objections from many that the United States has in anyway dismantled its welfare progams, a country that has an ever expanding social security base, medicare base and unemployment insurance program. But, this is what Soros writes.
In other words, Soros is a very confused thinker. The book is chock full of such confusion. Clearly, Soros' vision of the world hasn't got much clearer since his embarrassing forecast of imminent collapse of the global capitalist system. Further, don't mistake Soros for an isolationist. For Soros military action and nation building is not out of the question, military action is, indeed, a last resort for Soros. George Soros is not against a New World Order. He simply wants it to be the Soros New World Order as opposed to the Bush New World Order.
George Soros in his new book, The Bubble of American Supremacy, provides such a footnote when he reminds readers that earlier on he had predicted the collapse of the global capitalist system. Certainly not a minor prediction by any measure. "I ... made an unconditional prediction ..., in 1997, when I predicted the imminent collapse of the global capitalist system. Later I had to eat my words," Soros writes.
It is also rare to come across an author who has $5 billion, let alone an author who has spent $5 billion to save the world. Soros, by his own accounting, tells us he has spent such sums. Since $5 billion has not been enough to save the world, Soros has again put pen to paper and written a new book.
George Soros' book is an attack on the Bush Administration's military adventure into Iraq. Lest some mistake the Soros attack as an attack on nation building by the Bush Administration, Soros clearly sets things straight. "My particular concern is that the debacle in Iraq will prevent future efforts and nation building," Soros tells us.
Soros, in other words, is an international meddler. While he does spend some of his own vast fortune on his schemes and while he does not like the way George W. Bush meddles, he most certainly is a meddler himself and has no qualms about taxing the citizenry to add to his billions in an effort to save the world.
"Total international assistance amounted to $5.6 billion in 2002. This amount represents only 0.18% of global GDP...countries at the center of global capitalist system enjoy far too many advantages over countries at the periphery," Soros tells us.
It's easy to see where Soros is going with these comments. "..in 1992, I proposed that a $10 billion IMF program to Russia should be earmarked for the payment of social security and unemployment benefits,"Soros writes.
This is a curious comment given the state of social security in the United States and the fact that it is so close to the precipice of collapse that even Alan Greenspan warns that changes must be made. It becomes even more curious when one evaluates another comment written by Soros, "The dismantling of the welfare state is a relatively new phenomenon whose full effects have not yet been felt."
Soros cites the United States as a country that has dismantled its welfare state. One, of course, would get objections from many that the United States has in anyway dismantled its welfare progams, a country that has an ever expanding social security base, medicare base and unemployment insurance program. But, this is what Soros writes.
In other words, Soros is a very confused thinker. The book is chock full of such confusion. Clearly, Soros' vision of the world hasn't got much clearer since his embarrassing forecast of imminent collapse of the global capitalist system. Further, don't mistake Soros for an isolationist. For Soros military action and nation building is not out of the question, military action is, indeed, a last resort for Soros. George Soros is not against a New World Order. He simply wants it to be the Soros New World Order as opposed to the Bush New World Order.
Wednesday, March 10, 2004
A Letter to a Friend on the Logic of Real Estate Investing
Hi Dan,
It was interesting talking to you today about your decision with Dave to buy your own office space. It sounds like your decision is based on the old investment analysis that goes: real estate was up last year, it was up the year before that and even the year before that and for the last 2,500 years.
I can tell you for a fact it is this type of analysis that causes people to lose money in the stock market all the time. You see if you do rear view mirror investing, you will never get out of the market in time.
You need to look at what is in front of you and what is in front is higher gas prices, steel prices, gold prices, etc. and a dramatically falling dollar. This
means that soon Alan Greenspan is going to raise rates and they are going to rise VERY quickly. I could go on about all the U. S. debt held by foreigners that will come flying back into the United States and the exploding deficits, but you should get the picture. The music is about to stop.
You work in the real estate industry (The mortgage biz will completely dry up.). It sounds like you have lots of real estate investments (Rents can drop. Talk to people in San Francisco where rents are down more than 30%.) And now you want to buy your office place? Diversification, to some degree, is always a smart thing. To have all your assets in one industry is suicide.
Good luck, but now when the music stops, you can't say you weren't warned. I hope you really think about this. It's probably going to get real ugly out there in the market. Lots of people will lose everything. I hope you aren't one of them.
Regards,
Bob
---
Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.com and author of The Fed Flunks: My Speech at the New York Federal Reserve Bank.
Buy "The Fed Flunks" Now:
It was interesting talking to you today about your decision with Dave to buy your own office space. It sounds like your decision is based on the old investment analysis that goes: real estate was up last year, it was up the year before that and even the year before that and for the last 2,500 years.
I can tell you for a fact it is this type of analysis that causes people to lose money in the stock market all the time. You see if you do rear view mirror investing, you will never get out of the market in time.
You need to look at what is in front of you and what is in front is higher gas prices, steel prices, gold prices, etc. and a dramatically falling dollar. This
means that soon Alan Greenspan is going to raise rates and they are going to rise VERY quickly. I could go on about all the U. S. debt held by foreigners that will come flying back into the United States and the exploding deficits, but you should get the picture. The music is about to stop.
You work in the real estate industry (The mortgage biz will completely dry up.). It sounds like you have lots of real estate investments (Rents can drop. Talk to people in San Francisco where rents are down more than 30%.) And now you want to buy your office place? Diversification, to some degree, is always a smart thing. To have all your assets in one industry is suicide.
Good luck, but now when the music stops, you can't say you weren't warned. I hope you really think about this. It's probably going to get real ugly out there in the market. Lots of people will lose everything. I hope you aren't one of them.
Regards,
Bob
---
Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.com and author of The Fed Flunks: My Speech at the New York Federal Reserve Bank.
Buy "The Fed Flunks" Now:
Monday, February 23, 2004
THE SIMPLETON AND THE SECRETARY IN WASHINGTON: A review of "The Price of Loyalty"
In the Peter Sellers film classic, Being There, Sellers plays a simple-minded gardener. When Seller's character is asked his view on political subjects, his replies in the film are along the lines of "You need to water flowers in the
spring for them to blossom in the summer".
Sellers� simpleton answers are misinterpreted by the sophisticates around Sellers as being the casting of pearls of wisdom by Sellers, when in fact Sellers doesn't have a clue. In Ron Suskind's book The Price of Loyalty, a reporting on the experiences of Paul O'Neill while he was Treasury Secretary, one gets the sense that O'Neill at times wondered if he was dealing with a similar simpleton in the person of President George W. Bush.It�s clear in the book that O'Neill was obviously asking himself, "Does President Bush have a clue?"
Suskind writes:
As for National Security Council meetings, Suskind writes that O'Neill reports that Bush allowed Condoleezza Rice to run them.
It is these observations alone, of Bush by O'Neill, that will make this an important book for historians studying this Bush Administration. But there is much more we learn from this book. We learn that the Bush Administration in its earliest days was very much focused on regime change in Iraq. Suskind reports:"O'Neill said...'From the start, we were building a case against Hussein and looking at how we could take him out and change Iraq into a new country...' "
And, of course, we learn about O'Neill. Indeed if one can picture George Bush as in someways the gardener in Being There, O'Neill can certainly be seen as a similar character. A character that just doesn't quite get the Big Picture or the nuances in the little things.
Time after time, O'Neill positions himself as the honest man, the get things done person, the thinking out of the box person, when in fact he bumbles along, misses the important points and finally ends up getting fired. O'Neill's bumbling adventure in Washington would be hilarious, if it wasn't for the seriousness of the topics at hand and the ramifications for America's future.
Some have already declared that George Bush is the worst president the United States has ever had. As O'Neill reveals himself in this book through Suskind, it is not a stretch to view this Treasury Secretary as among the worst to be Treasury Secretary in the history of the United States.
It is nothing short of alarming that a book of more than 300 pages revealing the thoughts of O'Neill when he was Treasury Secretary does not once address the topic of government spending. Indeed, the entire book contains the term federal spending just once. Yet through out the book on page after page, we are harangued about O'Neill's quite legitimate concerns of a growing deficit. But his solution is to battle Bush and advise against any tax cuts without ever mentioning, or even acknowledging, that there is indeed a second part to the equation, specifically spending cuts. Not once!
For O'Neill there is only one solution to growing budget deficits, more taxes. All government expenditures are simply assumed as a given. For a Treasury Secretary who prides himself on thinking out of the box and finding solutions to problems big and small, it is remarkable that he doesn't find even one dollar worth of government expenditures that should be eliminated.
Like O'Neill's curiosity about a president who shows no engagement, asks
no questions and seemingly doesn't get it, one must ask about O'Neill,
Does the man have a clue?
He simply doesn't engage, ask questions or seemingly care about government spending.
It is because of this that O'Neill has to be viewed as nothing more than a spend and tax big government advocate.
So where did O'Neill focus his time, while Treasury Secretary if not on spending cuts? On attempting to design regulations that limit carbon dioxide emissions! On a trip to Africa with rock star Bono, where he determines water wells are the answer.
Yes, the Treasury Secretary based on a murmur from Bush, helped the Environmental Protection Agency's chief Christine Whitman design a carbon dioxide policy that everyone else in the Administration including the President seemed to ignore. The plan was never implemented.
From there O�Neill's next big stand took place during his tour of Africa, where seemingly entirely missing the oppressive, socialistic nature of many of the African governments as a major cause of their poor economic situation, he calls for United States support in building water wells in parts of Africa. His call for water wells gained as much support as his carbon dioxide initiative. Zero.
In the book, we learn that O'Neill views Vice-president Dick Cheney as a significant influence in the Bush Administration. At one point, which can only be viewed as hilarious, O'Neill attempts to mimic the manner in which Cheney holds meetings, of course, with none of the success that Cheney has when he holds meetings.
In its proper context, this book must be viewed as a major embarrassment not only for the president but for O'Neill himself.
Indeed, while O'Neill trumpets his independence and forthrightness, we know through the book that O'Neill recognizes early on that there was no evidence of Weapons of Mass Destruction in Iraq. On this major issue though, the bumbler decided to go with the flow and instead of voicing his concerns publicly, he decided to take a tour of Africa with Bono.
Ron Suskind's book, thus, does a tremendous service in providing a glimpse into just exactly how some major players in this empire operate, with little that can be said positively about them in terms of integrity, principles or deep understanding.
spring for them to blossom in the summer".
Sellers� simpleton answers are misinterpreted by the sophisticates around Sellers as being the casting of pearls of wisdom by Sellers, when in fact Sellers doesn't have a clue. In Ron Suskind's book The Price of Loyalty, a reporting on the experiences of Paul O'Neill while he was Treasury Secretary, one gets the sense that O'Neill at times wondered if he was dealing with a similar simpleton in the person of President George W. Bush.It�s clear in the book that O'Neill was obviously asking himself, "Does President Bush have a clue?"
Suskind writes:
There were a dozen questions O'Neill expected the president to ask...Bush didn't ask any. He looked at O'Neill not changing his expression..The
President said nothing. No change in expression.
"I wondered from the first, if the President didn't know the question to ask",O'Neill recalled, or did he know and just not to want to know the answers?
Or did his strategy somehow involve not showing what he thought? But you can ask questions, gather information, and not necessarily show your hand. It was strange.
O'Neill started to wonder about the President...The problem O'Neill felt,was that this President's lack of inquisitiveness or pertinent experience... meant he didn't know or really care about the position of the U. S. Government.
O'Neill was watching Bush closely. He threw out a few general phrases, a few nods, but there was virtually no engagement.
As for National Security Council meetings, Suskind writes that O'Neill reports that Bush allowed Condoleezza Rice to run them.
It is these observations alone, of Bush by O'Neill, that will make this an important book for historians studying this Bush Administration. But there is much more we learn from this book. We learn that the Bush Administration in its earliest days was very much focused on regime change in Iraq. Suskind reports:"O'Neill said...'From the start, we were building a case against Hussein and looking at how we could take him out and change Iraq into a new country...' "
And, of course, we learn about O'Neill. Indeed if one can picture George Bush as in someways the gardener in Being There, O'Neill can certainly be seen as a similar character. A character that just doesn't quite get the Big Picture or the nuances in the little things.
Time after time, O'Neill positions himself as the honest man, the get things done person, the thinking out of the box person, when in fact he bumbles along, misses the important points and finally ends up getting fired. O'Neill's bumbling adventure in Washington would be hilarious, if it wasn't for the seriousness of the topics at hand and the ramifications for America's future.
Some have already declared that George Bush is the worst president the United States has ever had. As O'Neill reveals himself in this book through Suskind, it is not a stretch to view this Treasury Secretary as among the worst to be Treasury Secretary in the history of the United States.
It is nothing short of alarming that a book of more than 300 pages revealing the thoughts of O'Neill when he was Treasury Secretary does not once address the topic of government spending. Indeed, the entire book contains the term federal spending just once. Yet through out the book on page after page, we are harangued about O'Neill's quite legitimate concerns of a growing deficit. But his solution is to battle Bush and advise against any tax cuts without ever mentioning, or even acknowledging, that there is indeed a second part to the equation, specifically spending cuts. Not once!
For O'Neill there is only one solution to growing budget deficits, more taxes. All government expenditures are simply assumed as a given. For a Treasury Secretary who prides himself on thinking out of the box and finding solutions to problems big and small, it is remarkable that he doesn't find even one dollar worth of government expenditures that should be eliminated.
Like O'Neill's curiosity about a president who shows no engagement, asks
no questions and seemingly doesn't get it, one must ask about O'Neill,
Does the man have a clue?
He simply doesn't engage, ask questions or seemingly care about government spending.
It is because of this that O'Neill has to be viewed as nothing more than a spend and tax big government advocate.
So where did O'Neill focus his time, while Treasury Secretary if not on spending cuts? On attempting to design regulations that limit carbon dioxide emissions! On a trip to Africa with rock star Bono, where he determines water wells are the answer.
Yes, the Treasury Secretary based on a murmur from Bush, helped the Environmental Protection Agency's chief Christine Whitman design a carbon dioxide policy that everyone else in the Administration including the President seemed to ignore. The plan was never implemented.
From there O�Neill's next big stand took place during his tour of Africa, where seemingly entirely missing the oppressive, socialistic nature of many of the African governments as a major cause of their poor economic situation, he calls for United States support in building water wells in parts of Africa. His call for water wells gained as much support as his carbon dioxide initiative. Zero.
In the book, we learn that O'Neill views Vice-president Dick Cheney as a significant influence in the Bush Administration. At one point, which can only be viewed as hilarious, O'Neill attempts to mimic the manner in which Cheney holds meetings, of course, with none of the success that Cheney has when he holds meetings.
In its proper context, this book must be viewed as a major embarrassment not only for the president but for O'Neill himself.
Indeed, while O'Neill trumpets his independence and forthrightness, we know through the book that O'Neill recognizes early on that there was no evidence of Weapons of Mass Destruction in Iraq. On this major issue though, the bumbler decided to go with the flow and instead of voicing his concerns publicly, he decided to take a tour of Africa with Bono.
Ron Suskind's book, thus, does a tremendous service in providing a glimpse into just exactly how some major players in this empire operate, with little that can be said positively about them in terms of integrity, principles or deep understanding.
Saturday, February 7, 2004
The Truth About Ronald Reagan And Its Importance In Today's World
Ronald Reagan is dead. In coming days, he will be eulogized by the media,by assorted other pundints and by politicians alike as a great president. In reality, I believe the invasion of Grenada, during Ronald Reagan's watch, put the United States back on its feet as a military adventurer. In addition, Ronald Reagan as a champion of free markets and free enterprise is largely a myth. Few see things this way today and few saw them as such during Reagan's presidency. Only Murray Rothbard (1926-1995) in a journal article, The Reagan Phenomenon, was able to see through the actor's polished
style to the true consequences of Reagan the presidency.
As best as I can determine, the Rothbard journal article was written sometime in the mid-1980's.The article is quite remarkable, in that Rothbard was able to see, back then, many of the trends in government that currently dominate today.
Rothbard starts by warning that:
He then identifies the contradictions in the Conservative Movement of modern times:
Certainly in this day and age of the Patriot Act and "material witnesses" being held without basic rights, Rothbard's point regarding the contradictory nature of "Getting Big Government Off Our Backs" and the crushing of civil liberties in the name of "National Security," should be more obvious than ever. Yet Rothbard was able to see this trend developing in the Reagan Administrations more than a decade ago.
The all-out political and military confrontation Rothbard wrote about in his article was, back then, chiefly about the Soviet Union. But seeking "all-out political and military confrontation" has not been eliminated as a characteristic of the modern day conservative movement, it has merely been replaced with confrontation in the Middle East.
Rothbard also wouldn't be surprised by George Bush's ties to the religious right and Bush's declaration that it is beacause of "God's will" that we are occupiers in the Middle East. He saw it in Reagan and wrote:
Following the disaster in Vietnam, United States citizens were, in general,not in favor of United States military adventures in foreign lands. The public had had it with war. Ronald Reagan changed this with the invasion of Grenada. It is my contention that Reagan's invasion of Grenada was the first step in United States post-Vietnam military adventures. It was an important step and Reagan started it all. It was the taste of victory against the tiny island of Grenada that set the stage for the invasion of Panama, Iraq War I and the current occupation of Iraq. Reagan's adventure into Grenada and its quick victory wiped out the hesitation to go to war that the Vietnam experience engendered in the masses.
Rothbard explained this desire for quick victory:
Rothbard also wouldn't be surprised by the problems the United States is having in Iraq, back then he wrote of the United States experience in Lebanon:
On the domestic front, Rothbard explains how Reagan sold out even before he was elected:
Reagan was of course the biggest spender in American history until George W. Bush. It should be instructive that Bush claims to model his presidency, not based on that of his father, George H. W. Bush, but on that of Reagan. Bush is doing nothing but traveling further down the path of war, the stomping on civil liberties,theocracy and huge government spending that were the essence of the Reagan presidency. Indeed, it is helpful in understanding the complete picture to think of the current Bush
Administration as nothing more than the Reagan Administration on steroids.
Rothbard concluded his article this way:
Indeed, the jury still remains out on this question. While the public in general will this week, on news of Reagan's death, hail him as a great leader, the consequences of the trends he set: war, huge government spending etc. are impacting citizens of the world today. Great inflation is ahead. The United States military adventure is a mess. And while George Bush, the man who has unhesitatingly embraced and expanded Reagan's big government spending and military adventuresome ways, could be booted from office in November, he is likely be replaced by John Kerry,who has to-date raised no serious concerns about the encroachment of government in private lives in the name of "National Security," and whose solution to the Iraq occupancy is to bring in the United Nations to help with our interfering in Arab affairs.
Murray Rothbard saw the problem more than a decade ago, will the general public see it now, when it is breathing down their neck? Ronald Reagan is dead but his policies continue on. It would be too much to ask of the general public to recognize Reagan as the spark plug of the current mess. One can only hope that they at least recognize the mess itself.
style to the true consequences of Reagan the presidency.
As best as I can determine, the Rothbard journal article was written sometime in the mid-1980's.The article is quite remarkable, in that Rothbard was able to see, back then, many of the trends in government that currently dominate today.
Rothbard starts by warning that:
The presidency of Ronald Wilson Reagan has been a disaster for libertarianism in the United States,and might yet prove to be catastrophic for the human race.
He then identifies the contradictions in the Conservative Movement of modern times:
The Conservative Movement of modern times has had three basic, and
mutually contradictory, tenets: (1) 'Getting Big Government Off Our Backs'by rolling back statism and establishing a free market economy; (2) crushing civil liberties whenever crime, 'national security', or 'morality' are threatened, i.e. whenever civil liberties become important; and (3) seeking an all-out political and military confrontation with 'atheistic world Communism'
Certainly in this day and age of the Patriot Act and "material witnesses" being held without basic rights, Rothbard's point regarding the contradictory nature of "Getting Big Government Off Our Backs" and the crushing of civil liberties in the name of "National Security," should be more obvious than ever. Yet Rothbard was able to see this trend developing in the Reagan Administrations more than a decade ago.
The all-out political and military confrontation Rothbard wrote about in his article was, back then, chiefly about the Soviet Union. But seeking "all-out political and military confrontation" has not been eliminated as a characteristic of the modern day conservative movement, it has merely been replaced with confrontation in the Middle East.
Rothbard also wouldn't be surprised by George Bush's ties to the religious right and Bush's declaration that it is beacause of "God's will" that we are occupiers in the Middle East. He saw it in Reagan and wrote:
For conservatives, the State as Theocrat and Moral Enforcer and the State
as Mass Murderer have always taken precedence over the feeble goals of freedom and free markets.
Following the disaster in Vietnam, United States citizens were, in general,not in favor of United States military adventures in foreign lands. The public had had it with war. Ronald Reagan changed this with the invasion of Grenada. It is my contention that Reagan's invasion of Grenada was the first step in United States post-Vietnam military adventures. It was an important step and Reagan started it all. It was the taste of victory against the tiny island of Grenada that set the stage for the invasion of Panama, Iraq War I and the current occupation of Iraq. Reagan's adventure into Grenada and its quick victory wiped out the hesitation to go to war that the Vietnam experience engendered in the masses.
Rothbard explained this desire for quick victory:
Conservatives know that the average Americano, while scarcely an enthusiast for civil liberties, doesn't like the FBI (or still more, the Internal
Revenue Service) snooping in his private papers, and doesn't like the idea of government busily stamping out sin in his backyard. And while the average American cheered the U.S. invasion of Grenada to the rafters, righteously enjoying the sight of the U.S.clobbering a tiny island devoid of even a regular army, he has quite a different view of getting bogged down in some hellhole in a perpetual and losing war, or in being incinerated in a nuclear holocaust.The average American, in short, possesses that "complex of vaunting and fear" that Garet Garrett noted as the hallmark of citizens of Empire. On the one hand, emotional identification with 'your' nation-State,and a desire for it to bully and dominate the entire world. On the other, hysterical panic at the machinations of some satanic Enemy or other, an Enemy who is monolithic, omnicompetent and malevolent, and who can only
be faced down with continuing shows of force, the only thing which he can 'understand'. To the extent that he is non-interventionist, the American is
interested not in justice, but in fear of stalemate, fear of loss of face, fear of
not being able to show that his nation is the best and biggest by winning a relatively quick victory.
Rothbard also wouldn't be surprised by the problems the United States is having in Iraq, back then he wrote of the United States experience in Lebanon:
And so the U.S. sends the Marines, like a bull in a china shop, into Lebanon,without knowing or caring about any of the dozens of ethnic and religious
groups that have been there, and have been hating and battling each other (often with good reason) for literally hundreds of years. We land there, and all of a sudden there are these pesky folk with rifles, calling themselves Druze, or Shiites, or Sunnis. Bunch of Arabs, undoubtedly all tools of Moscow. And so when the U.S. Embassy or military headquarters is car-bombed, the U.S. comes to the conclusion that whoever did it are "pro-Iran Shiites". Not being able to find the people responsible, the U.S. engages in a Nazi-like spiral of ascribing collective guilt. If these are "pro-Iran Shiites", it must mean that the Iranian government is behind the bombings...
On the domestic front, Rothbard explains how Reagan sold out even before he was elected:
The Reagan Revolution, in contrast, sold out before it even began. The tip-off came at the Republican convention of 1980 when Reagan surrendered to the Liberal Republican enemy after having defeated them decisively for the nomination. It was not just making the defeated George Bush Vice-President; that much of a concession to party unity is traditional in American politics and usually means little. For Reagan also summarily got rid of almost all of his hard-core ideological advisers, and let back in to run the campaign, and then his Administration, the very pragmatists and Trilateral Commission adherents he had previously fought strongly against.
The Reagan sell-out was the most thorough and complete on 'Plank One'- the free-market part - of the conservative triad. Understandably: since conservatives don't really care about the free-market as they care about compulsory morality and especially war with Communism. The sell-out on the free-market is massive and enormous. A quick rundown will suffice. Reaganomics, as enunciated by Reagan himself before the convention and by conservatives generally, promised the following programme: a sharp cut in the federal budget, a drastic cut in income taxes, a balanced budget by 1984, deregulation of the economy, and return to a gold standard. Reagan has managed to convince both conservatives and liberals, and the American
public, that he did accomplish the first and second points of this list... Conservatives bought this myth because they wanted to see Reagan accomplish what he had said he would; liberals were happy to adopt it so that they could wail about how Reagan was causing untold misery and starvation by his drastic cuts. Actually, the budget was never cut; it has always skyrocketed under Reagan. Reagan is by far the biggest spender in American history. He is also the biggest taxer. Taxes were never cut. The piddling and. much publicised income tax cut was always, from the very
beginning, more than compensated by the programmed Social Security tax increases, add by 'bracket creep', that sinister system by which the federal government prints more money, thereby causing inflation, and also thereby wafting everyone into a higher tax bracket, whereupon the government completes the one-two punch by taxing away a greater proportion of his income.
Reagan was of course the biggest spender in American history until George W. Bush. It should be instructive that Bush claims to model his presidency, not based on that of his father, George H. W. Bush, but on that of Reagan. Bush is doing nothing but traveling further down the path of war, the stomping on civil liberties,theocracy and huge government spending that were the essence of the Reagan presidency. Indeed, it is helpful in understanding the complete picture to think of the current Bush
Administration as nothing more than the Reagan Administration on steroids.
Rothbard concluded his article this way:
Meanwhile what we have to worry about is a question far more serious than the key to the puzzling Reagan personality. Not only as libertarians, but still
more as human beings and members of the human race, we have to ask ourselves the question: Is There Life After Reagan? The jury is still out on that one.
Indeed, the jury still remains out on this question. While the public in general will this week, on news of Reagan's death, hail him as a great leader, the consequences of the trends he set: war, huge government spending etc. are impacting citizens of the world today. Great inflation is ahead. The United States military adventure is a mess. And while George Bush, the man who has unhesitatingly embraced and expanded Reagan's big government spending and military adventuresome ways, could be booted from office in November, he is likely be replaced by John Kerry,who has to-date raised no serious concerns about the encroachment of government in private lives in the name of "National Security," and whose solution to the Iraq occupancy is to bring in the United Nations to help with our interfering in Arab affairs.
Murray Rothbard saw the problem more than a decade ago, will the general public see it now, when it is breathing down their neck? Ronald Reagan is dead but his policies continue on. It would be too much to ask of the general public to recognize Reagan as the spark plug of the current mess. One can only hope that they at least recognize the mess itself.
Wednesday, July 23, 2003
Is Alan Greenspan Just A Political Opportunist?
Is Alan Greenspan a phoney, political opportunist? That’s the now public opinion of an economist who knows Greenspan since 1948 when they both attended the New York University School of Commerce.
The economist, Dr. Pierre Rinfret, has been publishing on the internet his recollections of individuals in business, politics and elsewhere that he has known over a very long and successful career. Rinfret’s observations on everyone from Richard Nixon (He was an economics advisor to Nixon) to Lee Iacocca are a no holds barred personal glimpse into the values and character of these individuals as observed by Rinfret (And it does appear that in retirement Rinfret is having some fun settling a few old scores).
On Greenspan, Rinfret charges that Greenspan “is living proof that merit does not count but political influence counts far more...”
After Greenspan closed down his consulting business to join the Fed, here’s what Rinfret found:
“One of the absolute lies about him is that he retired from his consulting business a wealthy man. Absolutely and totally untrue. When he closed his economic consulting business to go on the Board of the Federal Reserve he did so because he had no clients left and his business was going under. We even went so far as to try and hire some of his former employees only to find out he had none for the six months prior to his closing. When he closed down he did not have a single client on a retainer basis. His only source of income was his speech making.”
The economist, Dr. Pierre Rinfret, has been publishing on the internet his recollections of individuals in business, politics and elsewhere that he has known over a very long and successful career. Rinfret’s observations on everyone from Richard Nixon (He was an economics advisor to Nixon) to Lee Iacocca are a no holds barred personal glimpse into the values and character of these individuals as observed by Rinfret (And it does appear that in retirement Rinfret is having some fun settling a few old scores).
On Greenspan, Rinfret charges that Greenspan “is living proof that merit does not count but political influence counts far more...”
After Greenspan closed down his consulting business to join the Fed, here’s what Rinfret found:
“One of the absolute lies about him is that he retired from his consulting business a wealthy man. Absolutely and totally untrue. When he closed his economic consulting business to go on the Board of the Federal Reserve he did so because he had no clients left and his business was going under. We even went so far as to try and hire some of his former employees only to find out he had none for the six months prior to his closing. When he closed down he did not have a single client on a retainer basis. His only source of income was his speech making.”
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