Speak Without Interruption » Finance

Corruption Is Good, In the Right Hands

Congressman Billybob — Sat, 24 Jul 2010 12:27:56 +0000

Corruption Is Good, In the Right Hands
I listened to every word of President Obama’s statement on signing the financial institutions’ “reform” law, Wednesday morning. This was a filthy job, but somebody had to do it. The longest applause during the entire charade was when Obama thanked Rep. Barney Frank and Sen. Christopher Dodd for their “tireless work” in getting this bill passed.
Now, class, let’s conduct a brief review. First, not every Act that contains the word “reform” actually reforms or improves anything. As your grandma used to say, “Just because the cat has kittens in the oven, doesn’t make them biscuits.”
Second, this “reform” law doesn’t lay a finger on the two federal lending corporations, Fannie Mae and Freddie Mac, which were at the heart of the phony financial instruments which nearly crippled the national economy. Why would they, of all institutions, be left out?
Back up a bit. Senator Dodd, both then and now, is Chairman of the Senate Banking, Housing and Urban Affairs Committee that handles finance legislation. As such, he helped write and pass the original laws which required lending institutions to make increasing numbers of bad loans to increasingly dubious homeowners, in the interests of “fairness.”But Senator Dodd was in bed with the very interests who sought to profit from these unworthy transactions. In fact, one of the major private malefactors in the collapse was Countrywide Mortgages.
They had a separate department to make special, low interest loans to “friends of the CEO.” Dodd was one of those friends. He never released documents on his sweetheart loans. But the stench form his office that he’d been bought and paid for, was too high. Sen. Dodd has declined to run again for the office he has owned for decades, Senator from Connecticut.
It turns out that Dodd was far from alone in being bought off with loans. Here is the key paragraph from the article this week in Human Events: “New documents released by [Congressman] Issa show 173 sweetheart deal loans from Countrywide Financial Corporation were given to 42 Fannie and Freddie employees as the company was negotiating exclusive agreement to sell Fannie Mae billions of dollars in questionable, sub-prime mortgages at a discounted rate.”
What about Rep. Barney Frank, the other half of the corrupt duo which received the standing ovation Wednesday morning? He was then on and is now Chairman of the House Financial Services Committee that deals with finance bills. He was literally in bed with the people at Fannie Mae. Herbert Moses, who was in charge of new products at Fannie Mae including the toxic derivatives, was at one time a sex partner of Rep. Frank. According to Frank, they “remain friends.”
Perhaps that was why Frank repeatedly assured the American people that “there are no problems at Fannie Mae,” just before Fannie Mae collapsed like a house of cards in a hurricane. Rep. Frank’s position in Congress is, unfortunately, safe for as long as he draws breath, regardless of how dishonest those breaths may be.
The process was a triangle trade. Countrywide, which collapsed and stuck the taxpayers with hundreds of million dollars in losses, paid bribes to federal officials in the form of cheap mortgages. The officials in turn paid bribes to Dodd and Frank in the form of “contributions.” The payoff is that the “financial reform” Act keeps its hands off Fannie Mae and Freddie Mac.
And the President and his party thank Dodd and Frank for their “fine work in passing this reform.” Is anyone surprised?
The main lesson that all of this teaches to any rational American should be this: The Obama Administration has no opposition whatsoever to corruption in public office. In fact, it endorses and applauds such corruption, when it favors preferred interest groups. (All this is without mentioning Rep. Charlie Rangel, who should already be in the Big House for tax evasion, rather than the House fighting mere ethics charges….)

About the Author: John Armor practiced before the Supreme Court for 33 years. John_Armor@aya,yale.edu His latest book, to appear in September, is on Thomas Paine. www.TheseAreTheTimes.us

John Armor, Esq.
Box 243, 421 Kettle Rock Road
Highlands, NC 28741
828.200-0320
John_Armor@aya.yale.edu
www.TheseAreTheTimes.us

Bernie Madoff claims another victim

Muhammad Cohen — Fri, 28 May 2010 11:20:01 +0000

Ghostwriters do more than simply make sure that the story gets written and that the grammar is right. If you want to see the value of a ghostwriter, read No One Would Listen by Harry Markopolos, the man who blew the whistle no one heard on Bernard Madoff’s $65 billion scandal. The book, which I reviewed in Asia Times, details how Markopolos uncovered the scandal and tried, yet failed, to expose it to the world. The book reveals, above all, how thoroughly despicable Madoff and his conduct were.

Markopolos tells the story in his own words, animated by disgust for Madoff and the US Securities and Exchange Commission that ignored Markopolos’ repeated attempts to stop Madoff, and apparently without the aid of a ghostwriter. Markopolos, who is undoubtedly an honorable man and by all rights ought to be seen as a hero, is portrayed as such an unsympathetic figure, driven over the edge by the pursuit of Madoff, his white whale, that only Markopolos himself could have written it that way.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, financial crisis, and cheap lingerie.

When your friends can’t explain why they voted for Democrats, give them this

seamus — Fri, 14 May 2010 15:46:28 +0000

Pick Your Reason

10. I voted Democrat because I believe oil companies’ profits of 4% on a
gallon of gas are obscene but the government taxing the same gallon of gas
at 15% isn’t.

9. I voted Democrat because I believe the government will do a better job of
spending the money I earn than I would.

8. I voted Democrat because Freedom of speech is fine as long as nobody is
offended by it.

7. I voted Democrat because I’m way too irresponsible to own a gun, and I
know that my local police are all I need to protect me from murderers and
thieves.

6. I voted Democrat because I believe that people who can’t tell us if it
will rain on Friday can tell us that the polar ice caps will melt away in
ten years if I don’t start driving a Prius.

5. I voted Democrat because I’m not concerned about the slaughter of
of babies through abortion so long as we keep all death row inmates alive.

4. I voted Democrat because I think illegal aliens have a right to free
health care, education, and Social Security benefits.

3. I voted Democrat because I believe that business should not be allowed to
make profits for themselves. They need to break even and give the rest away
to the government for redistribution as the democrats see fit.

2. I voted Democrat because I believe liberal judges need to rewrite the
Constitution every few days to suit some fringe kooks who would never get
their agendas past the voters.

1. I voted Democrat because my head is so firmly planted up my ass that it
is unlikely that I’ll ever have another point of view.

A Measured Voice

write2bfree — Fri, 30 Apr 2010 18:26:47 +0000

Charles Dickens’ novels show the degradation and exploitation of the working poor, but his solution (as pointed out by Orwell) was that those in power would become better people and in their new-found compassion create a safer, healthier environment for the workers. This would extend even to educational opportunities and a chance to move up the ladder, but only so far, never far enough to threaten the existing order.

To counter this “benign ruler” point of view, some people in the early 1900s began to organize the working poor. Those most effective and trustworthy came from that background and took action. The work of Camus and Orwell springs from a real knowledge of poverty (Camus) or being an outsider among the privileged (Orwell). It must be pointed out that Camus took a dim view of Marx, and Orwell was horrified by Stalin’s Communism. But these two writers have held the greatest influence in the minds of Western thinkers who call themselves liberal. Camus went so far as to coin the term “libertarian socialist.”

The rise to political and economic power of the European workers had a parallel in the United States. While Communism was a hothouse flower that died quickly and Socialism remains a mystery to most Americans, the societal changes that occurred here were spurred by two forces basic to this country: a distrust of concentrated power and a belief in individual freedom. In this, both conservatives, liberals and those in the middle (that is, almost everybody – to paraphrase Camus) share common ground. Unionization helped, and so did “top-down” changes.

The liberal reluctance to classify people, either in groups or as individuals, comes from the concern that this leads to elevating one group or individual above others. But liberals in their rush toward equality in the 1960s and early 1970s overran the boundaries, and began to exalt those groups that had been previously held down. In the fray, the individual was lost. For liberals, the search for new groups to “free” became the doctrine.

However, in conservative doctrine, the individual is only free as long as he or she conforms to the dominant power group’s rules. The idea that new rules might be positive threatens their world view. This is experienced as a personal assault on their core values, even if it is not. While conservatives profess to be against “top down” order, in fact, they support it when it serves them (the recent immigration law in Arizona, for instance). At the same time, they believe that within the established order they are free.

Both liberals and conservatives, when they classify groups fall into the Hegelian abyss of duality, a never-ending cycle of dominance and submission punctuated by violence (which “history” can be seen to be). Both lose their moral and ethical balance and sense of measure that inspires their vision of freedom.

Behind every liberal deserving of the name stands a rebel who is sensitive to injustice and is compelled to act. The liberal who wants change for others, but does not change his or her own life, is just as status quo in his or her thinking as a conservative. Behind every conservative is an absolutist who wants to see his life style codified. There have been powerful cases made for the concept that human nature and the world we live in is ruled by immutable laws. One issue is that these laws are not agreed upon, and another is that there are dimensions we will never understand, and finally, there are those who see random phenomena as part of the norm. The rebel perceives that change must occur through every level of society. Even if the world were to be 9/10ths perfect, the rebel would not be satisfied. The rebel is an agent of change. As such, he or she will always be at odds with society.

Some people dream of a harmonious world where people with different points of view live equally and freely. But others prefer a society that affords them a modicum of safety and stability, including a hedge against diversity and change. In any case, both liberal and conservative thinking tends to live on the boundaries of human nature

Very few people ask what responsibilities are inherent in their freedom. What is the impact of rights for one person, for a minority, for the majority, and for society, on other people, and on society? What are our responsibilities as an individual? None, some, many?

Camus wrote that among the apparent truths about human nature is that each of us must always believe oneself to be innocent, and has a need to dominate and “see oneself as a hero.” Is freedom our goal? Stability? Peace? Does real freedom from the violent past begin when we can honestly and modestly confront the questions of individual and societal rights, their consequences, and their relationship to our own innocence and need to dominate? Was Camus right, that until we find that sense of measure, we will be lost?

BEING NICKELED AND DIMED TO DEATH

timbryce — Mon, 05 Apr 2010 10:51:52 +0000

For those of you who possess a credit card with a “rewards” program, have you ever stopped to think who pays for the reward points? Let me give you a hint, it’s not the credit card companies. Such programs are popular among consumers and used to obtain such things as travel, books, CD’s, DVD’s, electronics and photography, home and garden items, sporting goods, toys, gift cards, and a lot more. Some even help you finance the purchase of a new car. The more you use it, the more points you accumulate for freebies; sounds great, right?

In reality, every time you use your credit card, the merchant is charged extra for reward points. Now, you don’t really think the merchant is going to foot the bill for your rewards do you? Of course not. Instead, he is forced to raise his prices to compensate accordingly. This means you are footing the bill for all of this. Interestingly, some reward programs have a policy whereby you forfeit the reward points if you do not use them within a certain period of time. When they expire, the points revert back to the credit card company who keeps the money associated with them. Not a bad little scam is it? Someone in the marketing department of the credit card companies was really on the ball as this program significantly induces consumers to use credit cards as opposed to checks or cash.

The point is, whether we know it or not, we are all getting “nickeled and dimed” to death, and I’m sure we can all site instances where we, the consumers, are being duped into paying for what appears to be innocuous costs. For example:

* A penny sales tax as levied by a government body. A penny here, a penny there, and it all adds up rather fast.

* Wire transfer fees to move money from one account to another. This is a favorite of U.S. banks. Not only do they charge you for the service, but they hold your money for 24 hours so they can make interest on it. In this day and age of electronics, you would think such a service would be cheap and instantaneous; maybe in Europe and Asia, but not in the United States.

* Paying a surcharge on fuel, particularly as the price of gasoline falls.

* Products priced at “Just $X.95″. I wonder why some people have an aversion to round numbers. I have never bought anything at such a list price, something is always added on to it, particularly “handling and shipping” charges. Let us also not forget the 9/10 cent added at the gas pump.

Regardless of how little we seem to be paying, it all adds up over time, and is paid by the consumer and nobody else. Actually, I think it is rather brilliant marketing to make consumers believe they are saving money. It’s not the nickels and dimes that bother me, it is the pettiness that rubs me the wrong way and how we are being treated as suckers. Maybe we should return the favor and pay our bills less five cents, whereby they have to send us a $.42 letter notifying us we are in arrears. I would love to see them turn that over to a collection agency.

Nonetheless, I now have a true appreciation for the old proverb, “If you take care of the pennies, the dollars will take care of themselves.”

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is the Managing Director of M. Bryce & Associates (MBA) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim’s columns, see:
http://www.phmainstreet.com/timbryce.htm

MGM ‘lion’ picks Macau over Atlantic City

Muhammad Cohen — Fri, 19 Mar 2010 17:34:22 +0000

A couple of years ago, I visited Atlantic City to write a feature as a special correspondent for Macau Business magazine. My only previous visit to Atlantic City had been to try out for Jeopardy about 15 years earlier, when I took the test, ate the buffet at Merv Griffin’s hotel (Merv also produced Jeopardy), and drove straight home.

Atlantic City was depressing back then, like the Louis Malle film of the same name, and it was still sad when I returned. The few bright spots included Angelo’s Fairmont Tavern, a red brick Italian restaurant with great fish and a signed photo of Frank Sinatra over the bar; The Quarter, a Cuban themed mall at The Tropicana, though the hotel had been seized by regulators en route to its third owner in about as many years after a bankruptcy; and Borgata, the newest, biggest and fanciest casino in town that brought Las Vegas style and customers under 60 to Atlantic City.

Last week, MGM Mirage announced that it would sell its 50 percent stake in Borgata to settle a five year long probe by New Jersey casino regulators into its Macau partnership with Pansy Ho, the daughter of Macau casino mogul Stanley Ho. State investigators deemed the younger Ho an “unsuitable” partner for MGM. In the wake of that finding, MGM chose Macau over Atlantic City and kept its partnership with Pansy Ho, as I wrote in Asia Times.

“Absolutely the right decision for MGM,” IGamiX managing partner Ben Lee told me. “Asia is a short, medium and long term growth story. The States is a mature market. If MGM gave up Macau, they would find it extremely difficult to get back in again, and nobody in Asia would ever take them seriously after that.”

The kicker is the report from New Jersey investigators skewers MGM for ignoring its own findings about Stanley Ho’s underworld ties and his relationship with Pansy Ho, and for being less than forthright with casino regulators. The report gives a whole new meaning to MGM lion besides that 63 ton bronze sculpture of Leo outside the MGM Grand Macau.

But MGM doesn’t seem to think its dishonesty matters, even though it runs highly regulated businesses in several other jurisdictions, is listed on the New York Stock Exchange, and hopes to get another stock listing in Hong Kong this year. MGM acts as if its settlement with New Jersey puts that corporate duplicity, now in plain public view, behind it; instead, perhaps the report should lead investors and regulators ask, “If MGM lied to New Jersey, how can we be sure it’s not lying to us?” Otherwise MGM’s apparent deceit and arrogance will keep paying off.

The Next Asia: banker’s book doesn’t add up

Muhammad Cohen — Sun, 21 Feb 2010 17:27:41 +0000

Stephen Roach was one of the big shots on Wall Street for decades before moving to Hong Kong to head investment bank Morgan Stanley’s Asian operations. Lauded as a “thought leader” in the finance world, Roach’s book The Next Asia demonstrates how little thought it takes to win that accolade. Roach doesn’t have much to say about Asia that you haven’t heard before, but the book is instructive as an illustration of the arrogance that crashed the global economy and believes those same bankers deserve seven figure bonuses so they can try again.

We Have No…..

Bob Grant - Editor — Fri, 12 Feb 2010 10:10:11 +0000

We Have No…..

by Bob Grant

We have no lodge on mountain up high,

We have no jet on which to fly.

We have no yacht on which to ride,

We have no mansion in which to hide.

We have no Harley on which to cruise,

We have no closet with mountains of shoes.

We have no tailor to make our clothes,

We have no autos lined up in rows.

We have no minks made into coats,

We have no stash to buy others votes.

We have no debt carried on our back,

We’re happy as hell – that’s a fact Jack!

Fix corporations to fix campaign finance

Muhammad Cohen — Sat, 30 Jan 2010 04:59:22 +0000

The US Supreme Court’s wrongheaded decision on corporate campaign contributions raises the specter of billions of corporate dollars flooding the electoral process. But the core issue goes beyond campaign financing. It’s time to restore corporate sanity, as I wrote in The Guardian. From spending millions on lobbyists to paying eight-figure bonuses to self-proclaimed masters of the financial universe that collapsed the global economy, corporations have gone crazy. The problem is simple – shareholders that own companies have lost their rightful power to supervise the executives who manage them, so can’t prevent them from acting recklessly and spending investors’ money foolishly; the inmates are running the asylum. The solution is also simple – fair corporate elections that give investors a legitimate chance to elect boards of directors that will, as the law requires, protect shareholders’ investments. Until corporations fix their own elections, they shouldn’t meddle in others.

A Christmas Present from New York City’s MTA

Minnette Coleman — Thu, 17 Dec 2009 17:12:48 +0000

The Metropolitan Transportation Authority handed the citizens of New York City big lumps of coal yesterday in the form of big service cuts. Two subway lines will be shut down, lots of bus service will decrease and they will phase out free fare for the city’s school children.

Did they get a memo to make the New Year intolerable from the chairmen of the Board of Nasty- Scrooge and the Grinch?

If you have ever visited the Big Apple and ridden the subway you know that it is not the cleanest place in the way. And during non peak or rush hours it is sometimes not that efficient. But it is the fastest way to get around the city if you know where you are going. I have been on the train at 8:45am with people who get to work 10 stops away before 9:00am. If I get on the train at 5:05pm I can be in my house by 5:25pm. When it works it works.

But it looses money in ways that make no sense. A few weeks back the MTA was criticized for how track work is done during the week. Workers clock in at 8:00am than stand around and do nothing until 10:00am or 10:30am because they can’t re-route the trains until after rush hour. During an 8 hour shift they may work as little as four hours.

Yet the MTA is always crying broke. When the announcement about the cuts was made public yesterday no one could believe how unreal the MTA was being. In some areas people will have to walk a mile to get a bus because their local line is being taken out of service. And the bus line they will have to walk to won’t run on Sunday. One person interviewed by news media said: “What do they (the MTA) know about riding buses? They ride in limousines.”

You get that feeling when you think about all the families struggling to make ends meet that have now been tossed a new expense they definitely can’t afford. It costs me almost $90 to have a monthly Metro-Card to ride the buses and subways. Many children do not go to school in their immediate neighborhood. It is not within walking distance and their parents don’t have cars or the time to drop them off at school each day. High school students have it the worst. One of my daughters had to take two trains and a bus to get to school. What if they had cut the service for the bus in the area of her school? She would not have been able to complete Bard High School Early College with a high school diploma and an Associates Degree (as offered for the very tough Bard curriculum) and she would not have gotten credits transferred to Drexel University so that she could complete her Bachelors Degree program in three years instead of four. It saved her family money. But if there were budget cuts of this magnitude three years ago by people who ride in limos and probably send their kids to private school in a private car she might have had a less than stellar academic preparation for college.

That’s just my side of it. Imagine having three kids in school and having to dish out $270 a month for transportation. Children will stop attending school. Parents will stop paying their rent and utility bills to buy transportation. Some will have to cut back on their grocery bills if they want to keep their children in school.

There has to be another way to deal with the MTA. Some years back the MTA threatened to take out a bus line that was critical to the needs of the elderly in Harlem. Letters were written to encourage those making the cut to come to the area and see how it would affect the citizens who needed it the most. What some of the elderly finally did was get with their representatives and showed them what it would be like if the bus was taken out of service. They would have to take the train and walk up a steep incline for two blocks once they got off in Harlem. Those from the city and the MTA who joined these feisty senior citizens couldn’t breathe by the time they got to the top of the hill. Needless to say the bus route still exists, although it may be terminated with the current cuts.

There isn’t enough revenue to have the great New York City Subway system we need and we don’t want or need more taxes. How about we get rid of some of the fat cats that thought of this plan and have never visited the neighborhoods they are affecting before? How about we take away all the privileges so they can understand what the common man has to go through?

That would be a great Christmas stocking stuffer for them.

Moving Forward with the Fantasy of Life

Minnette Coleman — Wed, 02 Dec 2009 18:55:08 +0000

This time last year I was swimming in Christmas presents that I had purchased for my family and a few friends. I hadn’t spent that much since I am a careful shopper but I had more funds to do as I pleased. This year there is less money to spend all around and I am not halfway through my list. I am not disturbed by this change, I accept it as a challenge. You see I am eagerly awaiting the new because life moves on even when we don’t want it to.

My daughter was surfing the Internet looking at her favorite thing, over priced shoes. Each sentence started with “If I had the money. . .” She did not complain but there was a little pain in her voice. Perhaps it was the pain of not having the money to waste on a $1200 pair of boots reduced to $600. It looked like a good deal. After all 50% off is a good deal. But it’s only good when you can afford it.

“Do you have $600?” I asked.

She smiled as she said: “I don’t have 600 cents.”

“So why do you need these boots?”

Quickly she explained that they were practical- 5 boots in one. The designer had created an over the knee boot that could be worn several different ways by unzipping certain sections. She went on to explain that a few other designers had tried this with coats and dresses. “Just think, mom, you go on a business trip and you don’t need luggage because you are wearing five different outfits.”

Sounded excitingly futuristic but in reality it was completely unaffordable for most people, including us.

While many people are complaining that they can no longer live the lifestyle to which they were accustomed I have watched others excel in spirit just making it from day to day. Was there a time when I would have spent $600 on a pair of boots? No, I never made that kind of money. But I have boots that costs much more that I got on sale for much less. They were well made and still in good shape since they weren’t a seasonal fashion item. My goal these days is not to stay in fashion but to move forward, stay alive and out of debt.

If we look back on our past greed we may see where we made our mistakes. It could have started with buying things that we really couldn’t afford or trying to live in a way we knew we couldn’t afford.

We counted on the bonus factor every year. We counted on continual raises even when we weren’t producing. We used credit cards to fund our fantasies so we could pay them off later. A little interest went a long way until the bubble burst and we were left up to our necks in reality.

Not all of us can live like the rich. We need to learn how to live with our miniscule funds.

That doesn’t mean we can’t live well. My first trip to Europe was spent at 5 star hotels because I used all the means I had at my disposal. No one who saw us there knew we got the friends and family discount, or that I had paid for the airfare with points saved over a few years. We were living within our means because the $600 a night room only cost us $50 a night. I didn’t loose my head and eat at restaurants that were as costly either. I was trying to enjoy myself not live out a fantasy about money I didn’t have. But I know of people who had to have the whole façade. The airfare to a five star hotel had to be first class. The meals had to come from the best places, the clothes so expensive that when they got home they had to work tremendous amounts of overtime or sell their stocks to pay off the credit cards. It wasn’t real but they had to live in the fantasy for as long as they were credit card approved.

As I was checking out of the hotel in Rome a woman was arguing with a clerk that she had enough on the card to pay for the room. He explained over and over that she didn’t and that in order for the card to be used she would have to get approval from the credit card company. She found it embarrassing that he would not do this for her but he explained in perfectly unaccented English that it was her responsibility to contact the company before check out and he snapped a rather abrupt “Next” to dismiss her. The fantasy that she had been living for five days (I had seen her enter the hotel with bags from all the posh stores) came to an end before she even returned to the states. Rather than contact the company of that card she pulled out another. Her husband frowned as she explained it was the only way. He was thinking down to road to repaying debt and probably wondering if she could take back all of her purchases.

We don’t need to return to those days of greed and overspending. It is time to move on and become practical on every level. Perhaps for someone who would have paid $1200 for a pair of boots the $600 is an affordable steal. There are still those people out there. But most of us are still trying to break even, get to a normal place of consumer consumption that isn’t breaking our backs. Most of us are trying to keep jobs and saving more in case the job disappears. There will be fewer raises and bonuses as we get closer to the end of the year. There will be those of us with seasonal jobs that may not even collect unemployment come January.

So we move forward instead of looking back and sighing over things lost in the economy of the less than frugal. We pay attention to our wallets instead of our fantasies. Every penny matters, every dollar counts. And in the end we put food on the table and do what we can to get our kids into college. It is time we accept this truth: survival is the only fantasy that matters.

A Man-Made Financial Disaster

Alan Caruba — Sun, 15 Nov 2009 13:17:18 +0000

A Man-Made Financial Disaster

By Alan Caruba

You will recall that, shortly before the end of the 2008 political campaign, the White House announced a threat to the entire financial system and called on Congress to enact emergency spending powers. The Emergency Economic Stabilization Act of 2008 was enacted on October 3, 2008.

Just eighteen days earlier an event occurred that slid under the radar screen of virtually the entire mainstream media. On Thursday, September 15, 2008, at approximately 11 A.M., the Federal Reserve noticed a tremendous draw down of money market accounts in the nation, amounting to $550 billion dollars. It occurred within an hour or two. The money was removed electronically.

It has never been made public which accounts were affected, nor where the withdrawn funds were sent. If we knew those facts, we would know who launched an attack on the United States that has been more devastating than any in our history.

Had the Federal Reserve not closed down the accounts involved it is estimated that by 2 P.M. $5.5 trillion would have been withdrawn and the entire economy of the nation would have collapsed. It would have been followed within a day with the collapse of the world’s economy.

What followed was the sub-prime mortgage loan debacle that can be traced to the government’s intervention into the housing loan marketplace via Fannie Mae and Freddie Mac. They ended up owning fifty percent of all the loans.

Americans were using home ownership as a credit card and government policies were mandating the issuance of bad loans in the name of “social justice.” Home ownership became “a right”, not an aspiration.

Throughout the 1990s, as communities revalued homes, increasing their alleged worth in order to impose higher property taxes, it was only a matter of time before a financial collapse became a reality. Virtually every State was spending beyond its means and increasing property taxes was the preferred choice to make up the difference.

That collapse, however, was initiated by unknown persons at precisely the time Americans were preparing to select a new president. That was not a coincidence.

In the October edition of “Budget & Tax News”, a publication of The Heartland Institute, a non-profit, free market think tank, there was an article by Sandra Fabry, the government affairs manager for Americans for Tax Reform and executive director of the Center for Fiscal accountability, a project of the organization.

The article was titled “61% of National Income Goes to Government.”

“Americans this year had to toil until August 12 to pay for federal, state, and local governments, according to the annual Cost of Government Day report by the Americans for Tax Reform Foundation and Center for Fiscal Accountability.”

“In 2009, the government will consume a whopping 61.34 percent of national income.”

The redistribution of income has reached a point in which 30.36 percent of the money Americans earn is consumed by federal spending. State governments take their percentage as well in income, sales, and other forms of taxation.

It means that Americans worked for 111 days of the year just to pay for the costs of the federal government and federal spending has reached a record 28.5 percent of GDP.

With the passage by the House of the government’s attempted takeover of the nation’s healthcare system and the up-coming cap-and-trade bill, a massive tax on energy use, there is no telling how many more government spending programs, huge redistribution schemes, Americans will be obliged to pay for.

The Obama administration swiftly embarked on an unprecedented spending spree, “bailing out” General Motors and Chrysler, in effect owning AIG, the insurance giant, and giving funds to various banks to “stimulate” loans, i.e. credit, that Americans and their business enterprises depend upon to function.

Peter Schiff, CEO of Euro-Pacific Capital, has long argued that the problems of the American economy were created by excess credit and debt, and that a massive infusion of credit and debt into the economy only exacerbates the problem. He is right.

The “stimulus” has not worked and the billions still unspent by the program should be returned to the American treasury. Taxes should be cut in order to allow Americans to save or spend their own money. Contracts with civil service and teacher’s union should be renegotiated. A vast regulatory revision to remove obstacles to economic growth should be implemented.

Meanwhile the government’s “official” figures say 10.2 million Americans are out of work, but the actually figure is estimated to be closer to 17 million or more. Nothing is being done to facilitate hiring with tax credits and reduced taxation of small businesses, nor are the highest corporate taxes in the world being reduced to encourage domestic investment and growth.

And our present difficulties began on September 15, 2008 in a calculated attack that got Barack Obama elected and was immediately followed by all the subsequent efforts to grow the federal government ever larger to make more Americans dependent upon it. The Obama administration has increased the national debt more than all previous presidencies combined.

There is a determined effort under way to undermine the free market capitalist system that made America the greatest economic and military power in the world. Both the White House and the Democrat-controlled Congress are parties to it, but the identities of those who launched that September attack remain hidden.

Editor’s Note: To read about the electronic attack, click on
http://www.capitalismgonewild.com/2009/02/electronic-run-on-banks-550-billion.html

Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center – he blogs daily at http://factsnotfantasy.blogspot.c

A Look Back: One Year of Independence

cmusico — Sat, 03 Oct 2009 19:45:54 +0000

This month marks a rather large milestone in my life — it’s the official one-year anniversary of my real-world independence. This time last year, I moved into my apartment in Jersey City. Sure, I stayed in the dorms at Seton Hall University, but I always went home for the summer. This was different, though. This time I was moving out for good.

In that time, we’ve seen a lot go on in the world around us. Our economy collapsed, the Mets collapsed (again), the Phillies actually won the World Series, the Steelers won another Super Bowl, we had our first black president, and about 3,000 celebrities passed away.

Personally, I’ve seen a lot happen as well. I’ve lost about 20 pounds, seen my job transform in good and bad ways, and learned a whole lot about how strong and resilient I can be when necessary. I’m a big believer that a lot of the events that happen in our lives do influence how we act with regard to our finances. Here are eight of the most important lessons that I’ve learned in the past year — and lived to tell you all:

Family is important and will always be there for you. I could go on forever about how this is true, but the moment that really brought it home — quasi-literally — for me was when I thought everything was falling apart. My rent went up, I was forced to take more unpaid days off at work, and I wasn’t sure if I would be able to continue to live the life that I wanted. I really thought my money would run out. This was way off-base, but it took a phone call home one snowy night this past February to my mother to set me straight. She made me realize that all the money I was pooling should be used as tools for my goals, not just to sit idle. This epiphany moment helped me take a fresh look at my finances — and life.
You can stretch a paycheck as far as it needs to go. Seriously. I never thought that I could only spend $30 a week on food and eat well, but I can. I also never thought that I could have a BlackBerry, go to a gym, keep the lights on, have cable and a DVR box, and pay for all my other bills on the shrinking paycheck I have … but I can. If you plan, set boundaries, and have the discipline to stick with it, you’d be surprised how far your dollar can still go.
You can make two slices of toast, two cups of coffee, two eggs, and a cup of oatmeal in 15 minutes. A nice, healthy, hearty, and cost-effective breakfast in about the time it takes to move up in line at my local Dunkin Donuts during rush hour. To put it in perspective, if you break down the cost for the food supplies, my breakfast only cost me about $1.50. How much did your latte at Starbucks cost you? Exactly.
You can also go out on a date and drink $80 worth of beer. You really can. This was right when I first moved to Jersey City and was spending gobs of money on going out, buying clothes, and doing whatever struck my fancy. While this wore off quickly, it taught me the value of budgeting for going out. It also taught me the value of not chugging beer. I’m not in college anymore.
You’re tougher than you think — largely out of necessity. Life throws a lot at you. I’ve had to deal with layoffs, pay cuts, furloughs, general discontent, overall stress, overwork, no-motions, and various personal situations in the past year. I’m still here to talk about it, though. So will you. You do what you have to do.
You can fix simple things in the apartment — or at least get someone to show you. Anyone who knows me personally knows that I’m no Bob Vila. Hell, I’m no Tim Taylor, either. But, I’ve learned how to fix recalcitrant toilets, swap out batteries for carbon monoxide detectors, and fight fruit flies and other creepy crawlers that you can keep out with steel wool.
You can work out without joining a gym. When I first moved to Jersey City, I didn’t join a gym. This was really weird for me, as I had been going to gyms and fitness centers fairly regularly for the last six years. I couldn’t set aside money right away to do it, so I just made sure I stuck to a nutritious (I cheat once a week or so) diet, invested in a Swiss Ball, a mat, and some resistance cords, and made sure I walked at least four times per week. I kept off weight and was in good shape until I saved enough to join a gym. While I prefer to go to a fitness center, I know now that if I had to go back to working out on my own that I absolutely could.
Making your lunches for the week saves you a ton of money and time. It takes me approximately 25 to 30 minutes to grill four turkey burgers, one can of tuna fish, a steam-fresh bag of veggies, and a can of beans for five meals. All said and told, those supplies cost me approximately $5.50. That’s a little more than a dollar a day. A typical lunch in Manhattan, unless you count McDonald’s dollar menu, will cost at least $5, if not more.

There are more lessons that I’ve learned along the way in my journey to independence, which I believe to be the point. All of the times — good and bad — will help to forge my character and prepare me for what’s waiting for me around life’s corner.

My Golden Parachute

cmusico — Thu, 24 Sep 2009 10:54:23 +0000

We haven’t heard much about it lately in the media, but the idea of a golden parachute came from the tremendous severance packages chief executive officers of large companies would get upon leaving their respective companies. We’re talking about millions of dollars in cash, stock options, and anything else of any real value that they could throw at them.

When we had our major financial collapse last year, there was intense scrutiny on these CEOs who were being removed from their posts for, well, failing to do their jobs. But, they still got crazy packages, golden parachutes if you will.

Today, we’re not going to be talking about millions of dollars worth of stock options or an eight-digit lump sum of cash. We’re going to talk about how to utilize any substantial monetary gift you receive from family, friends, or circumstance for the betterment of your financial health.

Every month around this time, I have my federal student loan payment deducted automatically from my money market account. Usually, my private student loan bill comes to my apartment at this time as well. (I don’t automatically have that deducted because the lender doesn’t have the same level of online access the federal loan provider gives.)

Because of pay cuts, furlough days, and the expense of living right outside Manhattan, I can’t set aside the full amount I have to pay per month for both of these loans. OK, OK, you’re thinking … isn’t that breaking about 239847 of your tips, commandments, and principles?

Well, not exactly. My grandfather came across an opportunity to receive a rather large sum of money for a small piece of property. He decided to put it into an account that paid him monthly. In turn, he gave me monthly installments for my first two years out of college. He’ll now give it to my brother for a couple of years, and then my sister. The amount is more than enough to cover my school loans — and that was his intention for it when he decided to give this to us.

Now, it would have been very easy to say, “OK, well, my grandfather is giving me this money so I don’t have to worry about setting aside money for loans for two years … par-tay!”

I decided against that. I realized that I would eventually move out of my parents’ house when the right opportunity presented itself. I also recognized that I would most likely have to stretch my paycheck to ungodly limits because of the area in which I work and now live. So, I figured it would be difficult for me to set aside the entire payment without sacrificing for other essential items. After my monthly payments dried up, then I’d have to be scrambling to cover the payments — most likely tapping into my emergency fund, which would only perpetuate a vicious cycle of spending.

Consequently, while I lived at home, I decided to pretend I wasn’t receiving any money for my loans and set aside the full amount in addition to what my grandfather gave me. This way, I wouldn’t have to worry about setting exactly exactly how much I needed. I created a cushion for myself, assuming that in several years I will be making enough money that I can pay off even more than my monthly bill.

This has definitely come in handy now, since my paycheck quite frankly ain’t what it used to be. I set aside as much as I can for loans, but it doesn’t cover the full amount. But, due to my saving and creating a cushion for myself for two years, I have approximately $8,000 set aside specifically for my college loans. If I didn’t set aside another penny for my college loans, I could pay for at least two years.

I can’t tell you how much this puts me at ease, and it was all really simple. When I was at home, I had plenty of money to set aside because I wasn’t paying for rent, food, utilities, internet, etc. It just took some discipline (because trust me, I had plenty of discretionary things I wanted to spend my money on) and foresight to realize that I didn’t want to hamstring myself once I did strike out on my own.

So today, if you are fortunate enough to be receiving (or have received) any large monetary gifts, look at how you are using it. Compare that to the personal finance goals you’ve set for yourself and see if it matches up.

For example, say you have two primary goals right now: building up $5,000 in your emergency fund and paying off $3,500 in credit card debt. You’re just starting out, so you have nothing saved in your emergency fund yet. If you have received, say, a gift of $7,500 … take $5,000 immediately and set it aside for your emergency fund. Goal achieved; forget about it. Take the remaining money and pay off $2,000 of that credit card debt. That’s a huge load off your shoulders, and a good start toward becoming debt free.

There’s a lot to be said for enjoying yourself with gifts, and I believe that to be true. But, sometimes you may have to sacrifice the short-term pleasure for a longer-term gain — a better credit score, money in the bank, and overall better financial health.

Create a golden parachute for yourself today. Having a cushion now is more important than ever.

Credit Cards are Tools — Not Crutches

cmusico — Sun, 20 Sep 2009 18:31:30 +0000

Everyone is getting all up in arms about credit card use nowadays, how they can entrap you with high interest rates and a never-ending cycle of paying off bits and pieces — to no avail. Honestly, if you use credit cards to finance a life that is way beyond your means, then yes, that will happen to you. However, like anything else, credit cards can be a great tool. You just have to be smart about how you use them.

My mother made me apply for a credit card as soon as I turned 18 (well, OK, she didn’t make me — I always wanted one of my own). It had a very low credit limit — $500 — but the point was to begin to build my credit history. That way, when I got older and would have to apply for those pesky things called student loans and have credit checks run for apartments, I would have a good credit score and avoid rejection.

Due to the fact that the limit was so low, it really behooved me to pay off my balance each month. All I really paid for at the age of 18 was gas for my car, CD, and some clothes, anyway. When I headed off to college, I found that more and more credit card companies would send me pre-approved applications. It was then that I learned the value of the credit card. I already knew I had the discipline to not spend more than I knew I could pay back in full (barring any emergencies).

I saw that there were different classes of credit cards: some offered points toward different goods, kind of like when you go to arcades on the boardwalk. Others offered cash back depending on how much you spent per month. Yet others offered to give you points toward any travel — cruise, gas, car, airplane, etc. — you happened to go on. Most of these didn’t charge you an annual fee to use the card (there are some, particularly the higher end ones from American Express, which charge you a fee per month — or yearly — just to have one).

So today’s tip of the week is simple: Find a credit card with a rewards system that makes sense for you. And, do NOT pay an annual fee. There are plenty of cards out there that do not make you pay one and offer rewards, too. Don’t fall into that trap.

I have two credit cards that I use regularly: my Capital One card and American Express Blue Sky card. The Capital One card gives me cash back on my purchases, about 1 percent from every bill. So, if I spent $600 last month, I would have accrued approximately $6. I can cash out whenever I want, and the company will send me a check in the mail.

I applied for and received my American Express card when I was in college, because I had illusions of traveling around the world after graduating. After you accrued a certain amount of points, you could take off $100 and beyond on travel (as long as you booked it with your American Express card). I do travel a bit, though it is largely within the continental 48. It’s also for my full-time job, which means I don’t use my credit card to book it anyway.

So, after awhile I stopped using the card and predominately whipped out my Capital One card to get more cash back. That said, I had already accrued enough points on my American Express to take off $100 toward a trip. So, I figured that some day down the road, I’d use it. Then, I found out the company was offering additional benefits besides money off of travel. If you had enough points, you could get gas cards, entertainment cards, and plain American Express gift cards. I had enough to get approximately $200 in gift cards. Score! Now, I can spend some money on items I was holding off on — more dress slacks that fit me, etc. — because I’ve been stretching my paychecks to their limit already.

That’s the point — credit card companies realize that they are a commodity, and that it is going to take something additional than not making you pay an annual fee to make you a customer. Whether that’s a low APR or rewards, they will do what it takes. So today, take a look at the credit cards you do have. Are you getting points, cash back, or other benefits that satisfy you? If not, I suggest you start shopping for a new one today.

If you don’t have a credit card, you should have one. Apply for one today. Go online, Google the major credit card companies, and see what they have to offer. If you have been, say, a Capital One customer for some time so your card doesn’t have any of these benefits, call and see if you can get an upgrade. Most will be happy to oblige, especially if you have been a loyal member.

Having a credit card with rewards is a lot like having savings in interest-bearing accounts. You should make your hard-earned money work for you — that way, you can begin to reap the rewards. With savings, that is an additional few bucks added to your account each month. With credit cards, it can mean an unexpected shopping spree like the one I’m about to go on.

Happy credit card hunting!

Paycheck Palooza

cmusico — Thu, 17 Sep 2009 22:51:29 +0000

Wednesday’s are generally good days. You’re halfway through the week, “hump day” if you will. (I know, I know. Today’s Thursday. This is a postmortem.) We’re almost to the weekend. Furthermore, when I used to live at home, it was the day of the “Good Breakfast” — a sausage and egg sandwich on a bagel, with a few extra sausage patties on the side.

But every other Wednesday it’s even better. Why? Pay day! My job pays us every other week, which gives me an opportunity to add to my checking and savings accounts — which is always a good thing.

Because my paycheck varies a bit each pay period due to furlough days at least once per month, every time I sit down to allocate my money I do as follows:

take out a slip of paper;
put the total amount of the paycheck at the top;
go through my budget columns and enter in how much I set aside, all the while subtracting that same amount from the slip of paper;
put amount for miscellaneous spending in a separate category (Basically, I keep a record each month of how much I spend on food, miscellaneous credit card expenditures, ATM withdrawals, transportation, vitamins, and bar tabs … because when I first moved into my new apartment, I didn’t … and … well, it was almost disastrous. Expect a blog post soon on my first taste of real-world freedom, which is almost at it’s year anniversary.);
enter the paycheck amount into my checkbook ledger; and
reconcile the checkbook and make sure it is the same amount as I have totaled in my budget book, and my online bank balance.

I like to reconcile my checkbook twice a month, because my bimonthly paycheck gives me an excuse to do so. I already have out all of my financial information, so it’s just begging to be done. You really can get away with doing it once per month when you get your statement, though.

Since it’s mid-month, I am not checking my net worth. I do that at the beginning of each month. Read this for why I think it is vitally important to do so.

Because my paychecks have shrunk due to my company’s response to the economy, I’ve been stretching a lot and relying on the cushions I created for myself when I lived at home for certain items. That way, I don’t tap into my savings that I’ve been accumulating for other goals. Check out a subsequent blog post on why I decided to do that starting with my first job out of school. I hated myself for doing it originally, but now I’m really glad I did.

Honestly, that — relying on cushions and not setting aside exactly how much you need for certain items — can be a tad risky if you’ve just started on your personal finance journey. If you are just trying to establish good habits now, this probably isn’t the best route. Email me if you need any help or guidance here. Nonetheless, I believe I have the discipline to make it work until I make more money again — I’ll explain this in that upcoming blog post on cushions.

For now, though, my job is done. I’ve entered in my paycheck, budgeted, and reconciled — all in about 15 to 20 minutes. Once you have a system in place, you can do it this quickly as well. Until next time, happy budgeting!

Illegal immigrants are “Nurtured” by our society

psuedowriter — Tue, 15 Sep 2009 22:33:53 +0000

I read a story yesterday in the SF Chronicle: “New school nurtures immigrant youths tested by life.” It was all about how New York and California have opened new, small, specific schools to teach English to new teen-aged immigrants. The kids get a wonderful, specialized education and have a much better chance of succeeding in our society than most other immigrants who are placed in the traditional public schools.

It’s all very heart-warming, until you start to think about the implications. In the first place, many of these kids are illegal immigrants; only a few are truly what we historically think of as “refugees”. In the second place, these schools are using public funds to specially train staff and run the classrooms. In the third place, many of these young people will go on to take places in our colleges and eventually the work force, which may also seem like a great thing until we understand that their presence deprives the same number of citizens—taxpayers, if you will—of having those opportunities.

At this point, let me state that my maternal grandparents came to the United States from Mexico. Their last name was Sandoval (some of that history is recorded in my novel, The Grindstone). As these legal minority issues go, that makes me half Latino, or Mexican-American, as the politically correct people like to say. Therefore, I can assure you that all of the opinions expressed in this essay derive from concern over the educational system—not to mention California and the country—and not from any racial prejudice.

A little information from the Center for Immigration Control*:

“According to a recent study by the Urban Institute, if immigration had come to an end in 1970, the 1990 population of the United States would have been 229 million rather than 249 million. Thus, immigration, directly and indirectly, accounted for 44 percent of all growth over those two decades. A 1995 estimate by the Center for Immigration Studies puts the current share of population growth due to immigrants and their U.S.-born children at just over 50 percent.”

“Over the past 25 years, the nation has added 60 million people. Given current problems, such as water shortages, the accumulation of wastes, persistent poverty and recurring cycles of unemployment, can we realistically accommodate another 60 million people over the next 25 years and another 75 million in the following 30 years? Indeed, it is argued by a growing number of scientists that we are already overpopulated.”

As a teacher, I see the major problem with public schools as being the incredibly high immigrant populations that we are forced to deal with (I will explain this in much more detail in a future essay). In the greater scheme of global brotherhood and advancement, all of the aims of these “special schools” are wonderful things. In the meanwhile, the taxpayers of today are suffering, and I don’t think most of us like it.

Around the country, many people today are angry at President Obama because his economic bailout plan calls for those citizens who were very responsible in their home buying habits to help pay for those people who knowingly overextended themselves, or just plain should not have bought a home because they could not afford it. At least most of those people are American citizens, and have to pay some share of the tax burden, no matter what percentage that might be. Yet we are not angry about the vast sums of money, the stress on our educational system and other social systems, that the politicians blithely throw at illegal immigrants because of “political correctness” and trying to please some small (although definitely growing) and very vocal minorities?

Most parents I know are feeling the crunch with their own children. I often hear such comments as: “My kid(s) better be out of the house by age 30, because I don’t want to support them any more. I’ve got to save for my own retirement.” Well, if we don’t want to support our own children for the rest of our lives, why are we willing to support both adult illegal aliens and their children for the rest of our lives? If a family moved into your house without your permission and said: “You are going to shelter us, feed us and educate us for the next ten years while we make some money here,” would you put up with such an outrage? In essence, that is what is happening, only with millions of unwanted visitors, not just one family. Wouldn’t our tax dollars be better spent on our own children, or on ourselves?

I will let the economists carry on that argument. As a teacher, I am outraged that our government places an unbearable burden on the educational system, and teachers in particular. Again, I want to stress that, like The Center for Immigration Studies, I am definitely not against immigration. As with my grandparents, however, I believe that we should limit the number of people allowed into our country, and ensure that those fewer people are dedicated to learning our language, gaining our citizenship, embracing our culture, and contributing to our economic welfare.

If the influx of illegal immigrants were to stop cold today, it would probably take us several generations to get the system back under control. Our politicians talk endlessly about the “challenge”, yet they do nothing to close the flood gates. Instead, we continue to “nurture” the people who swarm uninvited into our country and destroy our economy and our educational system.

Politicians, we have met the enemy, and it is you.

Six Steps to Budgeting Bliss

cmusico — Mon, 14 Sep 2009 23:38:36 +0000

I’ve taken the lessons my mother has taught me about planning and budgeting and broken it down into six steps. Follow these to establish your personal finance plan, and you will have the foundation in place for success — no matter what small obstacles or larger life events may come your way.

Here are the six (in order):
1. Figure out your net worth.
2. Set goals for yourself.
3. Determine how much money you spend per month.
4. Take your paycheck and start allocating for your expenses.
5. Set aside your savings.
6. Adjust accordingly.

Common cents? Sure, but sometimes we all need to get back to basics. Read on for more information on each step.

Figure out your net worth.
I firmly believe that you need to know how much you’re worth, whether positive or negative, before setting any goals. If you don’t know what your current financial situation is, then how is it possible to set the proper and necessary goals for yourself? People see the term “net worth” and freak out about how to calculate it — it’s not as hard as you think. It’s actually pretty simple.

Basically, your net worth is assets (what you own) minus liabilities (what you owe).

Examples of assets — short term, long-term, and tangible — include:
– checking accounts;
– savings accounts;
– money market accounts;
– stocks;
– bonds;
– 401(k) or a similar retirement account;
– IRA (Roth or Traditional);
– life insurance;
– house;
– car; and
– boat.

Examples of liabilities include:
– student loans;
– mortgage;
– credit card debt; and
– personal loans (for a car, etc.).

For me, that means taking my assets (checking, money market, stocks, bonds, certificate of deposit, 401(k), Roth IRA, and life insurance) and subtracting my federal and private student loans. The last time I calculated my net worth, the first week of September 2009, my assets came to $86,443.20. My only liabilities are my student loans, which is approximately $34,720.38. So, my net worth is $51,722.82.

Set goals for yourself.
Now that you know your net worth, you can set your goals accordingly. If you’re not sure where to start, talk to people you trust. I suggest breaking up your goals into short, medium, and long term.

Here are my goals for now:
Short-Term Goals:
– Stay in the black.
– Remain on top of day-to-day finances.
– Keep disciplined.
– Enjoy myself within reason.

Mid-Term Goals:
– Save money for my gym membership.
– Save money for next summer’s vacation.
– Continue contributing to 401(k).
– Save money for Roth IRA.
– Establish/maintain multiple revenue streams.

Long-Term Goals:
– Purchase or rent a place of my own.
– Pay off all college loans in full.
– Become financially independent.

Determine how much money you spend per month.
Now is the time to take all of your monthly bills and expenses, and add them up.

Let’s say that you pay the following bills every month:

Rent — $850
Utilities — $100
Cell Phone — $100
Cable/Internet — $60
Transportation — $60
Charity — $20
Food — $120
College Loans — $360
Gym Membership — $70
Discretionary Expenses (going out, etc.) — $160

That’s a grand total of $1,900. This is essential to know when you move onto the next steps.

Before we get there, though, a word about some bills that you may only pay every six months or so. It’s best to break them down by month and include them on the list. That way, you can set aside money monthly and not be surprised when you get your car insurance bill in the middle of the year, for example.

It also may be hard to figure out how much to budget for discretionary expenses, since it could vary. The best thing to do is save every single receipt you have from going out, shopping for clothes, etc., and write it down for one month. See how much you spend, and add that to your list of bills and expenses. It’s best to maybe overestimate a bit, so you budget for more and create a cushion for yourself.

Also, oftentimes utility bills can vary depending on usage (unless you pay a flat budget rate per month and then either owe or are due money at the end of the year). If you pay the bill in full each month, take the highest bill you had (probably either in the dead of winter or heat of summer) and imagine that is your bill each month. That way, you create a cushion for yourself during the fall and spring when you generally don’t spend as much on utilities and don’t have to worry when peak usage months — usually in the winter and summer — come along.

Take your paycheck and start allocating for your expenses.
First, take 10 percent of your paycheck and earmark it for savings. Write the figure off to the side, and save it for later. We’ll get to it.

*A quick word about tithing. Depending on your religious beliefs, you may have been taught that you should set aside a certain percentage of your earnings for God, the church, whatever you believe. This decision is personal, and entirely up to you. I was raised in the Catholic Church, but do not set aside 10 percent of my earnings for tithe. I do contribute monthly to one charity, and budget money accordingly. I can tell you it is far less than 10 percent of my earnings. I believe that if you are to set aside money for God, that you should have a purpose for it. If that means contributing to it weekly at church, fine. Charities? Fine. But do it for a reason. If you don’t have a reason, or are not able to, then don’t do it for now. As you get older and your income grows, if you want to reassess for philanthropy, then do so at the proper time.

Now, onto the expenses. We totaled the bills per month — I’m going to operate under the assumption that you receive a paycheck twice per month. Therefore, I’m going to take all of the bills listed above and split them into two.

Now let’s say that after taxes, insurance, disability, 401(k), or anything else that is taken from your paycheck before you receive it, you clear $2,500 per month. You get paid twice per month — so every two weeks, you get a paycheck for $1,250. Now, split all of your monthly bills into two, and allocate enough funds for half of each of the bills (if you get paid weekly, split it into four, monthly, don’t split it at all, etc.). So, for the bills I listed in the last step, this is how the paycheck should be allocated:

SAVINGS: $125
Rent — $425
Utilities — $50
Cell Phone — $50
Cable/Internet — $30
Transportation — $30
Charity — $10
Food — $60
College Loans — $180
Gym Membership — $35
Discretionary Expenses (going out, etc.) — $80

That is a grand total of $1,025. Mind you, we’ve already taken out 10 percent for savings, yet this example case has $225 left. How lucky! Now, how you use this money depends on the financial goals you have already created for yourself. If you are just starting out and have no emergency fund set up, I would suggest that you take the extra money in addition to your preallocated savings and put it toward your emergency fund. We’ll talk more about that in the next step.

If you have an emergency fund set up, you can take the extra money and set it toward your saving goals, or keep it in your checking account and pad your allotment for discretionary expenses, food, or transportation — whatever your specific needs are. It’s up to you, so choose wisely. More importantly, choose according to the goals you have already set for yourself. Do this with every paycheck you receive.

Set aside your savings.
Now that you’ve already earmarked a particular amount for your savings, it’s time to allocate it according to your goals. Let’s say that this example case is fresh out of school and has no emergency fund set up, no cushion whatsoever. This person wants to have a six-month emergency fund for his vital expenses before saving for any of his other goals.

Going back to his list of bills above, the only things I would subtract are the gym membership and charity. These are not vital to his keeping the lights on. But honestly, you may feel that you have to go to the gym — you need to determine for yourself what you would need during a time when you’re not getting a regular paycheck. I would cut in half his discretionary expenses, because if he was out of work, he should realize he needs to cut back on going out until he gets back on his feet.

So, let’s say that per month (without charity, gym membership, and half of discretionary expenses), he would need $1,730. Multiply that by six months, and he would require a cushion of $10,380. I would take the $125 per paycheck, and the $225 extra per paycheck and stash it away in a savings account until he reached that amount.

After that is when the fun begins. Since you have an emergency fund in place, you can start taking your savings and allocating according to your goals. Let’s say that he wants to save for a Roth IRA contribution, vacation, and a new car. If he takes $125 and $225, a total of $350 per paycheck, he can split it among the three, and let interest add an additional boost.

How you split it depends on your goals. If the vacation is coming up in three months, but you don’t see yourself buying a car for eight months and won’t contribute to your Roth until the end of the year, then I would put slightly more money away for vacation. That’s me, though. How you split it is up to you, and that’s the beauty of it.

Adjust accordingly.
Now that you’ve put your plan into place — keep track of it all in a budget book. That way, you have it right in front of you and can track your progress as often as you’d like. I recommend reconciling your checkbook and savings accounts every time you receive your monthly statements in the mail (or email).

I also assess my net worth once per month, but do this according to your comfort level. If you’d rather do it every other month, or even quarterly, that works as well. I would just caution against only doing it once a year, and doing it more frequently than once a month. A lot can happen in a year, and quite honestly, checking your net worth every week will drive you crazy more than anything.

When you do reconcile your checkbooks and recalculate your net worth, more often than not if you have a good plan in place using my process, you shouldn’t have to change things much. But, if you have a major life change, it is important to readjust your allocations and your budgeting to meet those needs.

The beauty of having it all in front of you, on paper, is that you have a living history of how you have budgeted thus far. This will help you see where you’re at, where you need to be, and how to fill that gap.

Christopher’s Commandments

cmusico — Mon, 14 Sep 2009 23:34:52 +0000

Save at least 10 percent of your yearly income.
Have goals for yourself — and write them down.
Do not spend money on items you cannot afford to pay immediately.
Treat credit cards like a privilege, not a right.
Have a cushion for yourself.
Stay on top of all purchases, bills, and other financial information.
Keep it simple when it comes to personal finance.
Have a disciplined plan, but be flexible when necessary.
Do not go it alone — ask for help.
Reward yourself within reason.

For more detailed information on each one, read on.

Save at least 10 percent of your yearly income.
The current recession has taught people to start saving money again, which can be looked upon as a silver lining to this storm. For years, the savings rate was less than 0 percent, meaning people were actually spending more money than they made. That’s a recipe for disaster. The law of compounding interest tells twentysomethings that if they can begin to stash money away now in different savings accounts and stocks, that there will be more time for the money to grow on its own. Ipso facto, at the end of your working career, your money will have had more time to collect interest and give you a bigger nest egg. The problem is, generally speaking, twentysomethings don’t have high incomes and consequently do not have the ability to stash away as much cash.

Don’t let your current financial situation, whatever it may be, force you to believe you can put off saving money. Start small. Stash 10 percent of each paycheck away for savings. It’s important to know what you’re saving for (another commandment), but I suggest you put away enough money for an emergency fund — approximately three to six months’ worth of living expenses — first.

Have goals for yourself — and write them down.
I’m a firm believer that nothing becomes concrete until it is written down, tangible, literally in your hands. This goes for your financial goals, too. It doesn’t have to be an elaborate spreadsheet breaking down goals into weekly checkpoints. It can be a simple list of short, medium, and long-term goals that you would like to work toward. I suggest you put them inside your budget book, wallet, or wherever you will see it when you assess your finances.

Honestly, it can be a simple bulleted list. Here are mine as of right now:
Short-Term Goals:
– Stay in the black.
– Remain on top of day-to-day finances.
– Keep disciplined.
– Enjoy myself within reason.

Long-Term Goals:
– Purchase or rent a place of my own.
– Pay off all college loans in full.
– Become financially independent.

That’s it. I have it inside my budget book so I’m constantly reminded of what I’m working toward. I highly suggest you do as well.

Do not spend money on items you cannot afford to pay immediately.
This is really more common sense than anything else. If you don’t have the money to buy something you really want, force yourself to wait, save, and get the money to buy it later. This is a good exercise in self-discipline, especially since credit cards are so easy to get and, when used improperly, can lead to disaster. I’ll explain more in the next commandment.

With that said, there are a few exceptions to this rule. I believe that, in addition to emergencies of a medical nature or totaling a car, there are three basic items that you shouldn’t feel bad about purchasing without having all of the money for it upfront: an education, a house, and a car. This doesn’t mean you should put $5 down on a house that costs $500,000, but unless you’re blessed with a vast sum of money, you will have to take out loans and pay off these items monthly. We’ll talk about budgeting often on Living With Common Cents.

Treat credit cards like a privilege, not a right.
It’s really easy to get credit cards. It’s also fairly simple to get ones with high credit limits, though credit card companies are forced now to be a tad more stringent regarding who they approve. Credit cards can be a great tool, especially ones with cash rewards and otherwise when you spend enough money. The problem is, once you fall behind on your credit card payments and only pay the minimum balance (usually about $10 or $15), the interest rates can reach upwards of 20 percent per month. Most loan sharks wouldn’t think of charging that much.

Use your credit card wisely, and only use it for items you know you could pay off that moment if you had to pay in cash. The interest rates are too overbearing and the stakes — a poor credit score — are too high for you to fall into credit card companies’ trap. Seriously, it’s not worth it.

Have a cushion for yourself.
Obviously things happen in life. You know, those unexpected issues that you didn’t plan for. Your car may break down, you may need to get some teeth pulled, lose your job, or God forbid you find yourself in the hospital for an extended period of time. While you may not foresee these major life-changing events, you can try to create a buffer for yourself by having at least three-to-six months of living expenses stashed away in an interest bearing savings account that you can access at any time. Money markets are good for this, since they generally give slightly better interest than standard savings accounts. Certificates of deposit (CD) have better interest rates than the other two I mentioned, but generally cannot be accessed without penalty until its term (can be anywhere from three months to multiyear depending on what you pick) is complete.

I only have a three-to-four month emergency fund in my money market account, but that is because I have at least two months’ worth of cushion for each of my budgeted expenses in my checking account. That way, I have some breathing room and avoid risking overdraft penalties.

It may take some time to build this account up to the amount require. You might also think that you’re missing out on investing in a 401(k) or other long-term accounts, but if you should need to tap into funds for unforseen expenses, you’ll be glad you sacrificed the time to do this.

Stay on top of all purchases, bills, and other financial information.
This may seem like another bit of common sense, but you’d be surprised how many people throw away receipts, never reconcile a checkbook, and then seem surprised when they go to the ATM and can’t take out $10 dollars to buy a six-pack of beer. It is so important to keep track of your expenses, your bills, and your account balances. I suggest going out and buying a budget book — they run about $3 – $4 dollars at virtually any convenience store. While you can keep track of your accounts online, I also suggest that you maintain a paper balance for each of these accounts as well. You can’t always rely on the power of cloud computing to keep your finances in order.

You should also keep your receipts each month, just in case a false charge comes up on your credit card bill. That way, you can dispute the charge and save yourself from fraud. Make sure that after each credit card bill is paid that you shred all of your recepits, so sensitive account information doesn’t get into the wrong hands.

Keep it simple when it comes to personal finance.
Don’t overthink your finances. You may be tempted to do this every time you see a commercial about a financial services company, but I can tell you from experience that you can only do more harm than good. Make a plan, stick with it, and move forward. If you have a sound foundation in place, then there is no need for you to check your accounts every single day, revamp your allocations every week, etc.

If you’re saving for five or six different goals after you’ve established an emergency fund, you don’t need a separate savings account for each one. I saw that encouraged on a personal finance Web site and did a double take. How many people sincerely want to have seven separate savings accounts? Open one, have a budget book that separates all the money you contribute to it for your separate goals, and move on with your life. I have one checking account, money market, certificate of deposit, 401(k), Roth IRA, and brokerage account. The money market and CD are at the same banking institution. I try to streamline things as much as possible — and I hope you will, too. There’s only so much you can keep track of before something may unfortunately fall through the cracks.

This also goes for investing in stocks or funds. The stock market, especially now, takes more dips and jumps than we’re used to. Historically, the stock market has shown that you will get a positive return on your money, but you will have to endure some hiccups. If you’re just out of school and my age (a twentysomething), you have plenty of time to ride out the bumps in the road. In fact, I firmly believe that until you can contribute fully to a 401(k) and IRA (Roth or Traditional), you shouldn’t be dabbling in stocks. You can contribute $5,000 per year to an IRA. The 401(k) is a tad more complicated, largely because it is tied to a formula tied to a quarterly Consumer Price Index for all urban consumers. This year, the max is $16,500. Next year, though, there are reports that it could drop to $16,000. Basically, contribute the same percentage of your paycheck that your company is willing to match, if it does that sort of thing. At the end of the day, if you’re contributing approximately $15,000 per year and have money left over, do what you think will work according to your own goals.

Basically, just keep things simple for yourself. We’re not all rocket scientists, and we shouldn’t be tempted to look at our finances in that same light.

Have a disciplined plan, but be flexible when necessary.
I’ve talked about how important it is to set goals, create a plan, and to stick with it. While you shouldn’t succumb to every wind of change, there are some times when life events will occur when you will have to readjust your plans accordingly. Pay cuts, raises, increased insurance premiums, new family situations, moving to a new place, and other events will obviously force you to look at the way you budget. You may have to change things a bit, or you may not.

Have a strong base, but be willing to readjust if you have to — don’t let life or your finances pass you by.

Do not go it alone — ask for help.
Your personal finances are personal, but that doesn’t mean you should take this journey alone. To give yourself the best chance for success, I suggest you take the maxims from this Web site, as well as others, and assess what you think will work best for you. I also suggest talking to someone you trust, whether that’s a family member, friend, financial planner, God, whoever you believe is looking out for your best interests. Lay out your plans, and see what they think. You don’t have to do what anyone else says to the letter, but I strongly suggest utilizing other people’s experiences, as they can only help you better forge your own financial plan.

Reward yourself within reason.
This last commandment is the one I struggle with the most, to be honest. I look at what I have, and I’ve always been afraid to tap into it because I like to see the numbers going up — not down.

It’s important to remember that money is a tool, and tools are to be used. It’s like the servants and the talents I talked about in my Epiphany (link to Epiphany blog) post. If you bury your tools and do not use them, you’ll lose them. Especially as twentysomethings, this is the time we can go out and enjoy ourselves. We need to save some money for ourselves to go out, have fun, see a movie, pursue a hobby, do whatever it is we like to do after we leave our jobs.

Obviously we need to spend within reason and not fall into debt because of a few bar tabs, but we should splurge every once in a while. The entire point of budgeting and planning is so that we can enjoy ourselves. We save toward our goals, that proverbial rainy day. That way, when it pours … we’re ready.

A Russian Warns Americans Against a Communist Takeover

Alan Caruba — Sun, 30 Aug 2009 22:30:03 +0000

A Russian Warns Americans Against a Communist Takeover

By Alan Caruba

There is considerable irony involved when a Russian warns Americans against what is taking place before their eyes as President Obama seeks to transform and ultimately acquire dictatorial powers by a series of steps that are both bold and obvious.

In April, Stanislav Mishin’s post on his blog, Mat Rodina, was published in Pravda. The title was “American capitalism gone with a whimper.”

You can read the commentary at
http://english.pravda.ru/opinion/columnists/107459-american_capitalism-0.

Having lived under Communist rule in the former Soviet Russia, Mishin and his fellow Russians were literally freed by the fall of that regime that began with the overthrow of the Czar in 1917 by the Bolsheviks. What followed was an experiment in Communism that killed millions of Russians as a succession of dictators, starting with Lenin, sought to impose an economic and political system that simply does not work.

Mishin enumerated the ways the path to the present effort to destroy capitalism and our political system has been laid in America.

“First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather than the classics.” There are few that would argue that the American education system is not controlled by the National Education Association, a union, and the American Federation of Teachers, a union. Both have long supported the Democrat Party. Virtually every way one can measure the system reveals its failure to educate the millions passing through government schools.

“Then their faith in God was destroyed, until their churches, all tens of thousands of different ‘branches and denominations’ were for the most part little more than Sunday circuses…” America is a “religious” nation if one looks at the survey numbers of those who say they believe in a supreme being. This, however, is not reflected in the breakdown of moral values as seen in the spread of pornography, the use of illegal drugs, the divorce rate, and the touchstone issue of abortion in America. Our popular culture is drenched in sex and violence.

“The final collapse has come with the election of Barack Obama,” says Mishin. I would argue that the threat Obama poses to the U.S. Constitution and to our economy is indisputable. “His spending and money printing has been (a) record setting,” all pointing to an America that “will resemble the Wiemar Republic and at worst Zimbabwe.” The former preceded the Nazi takeover of Germany in the 1930s and the latter’s money is worthless.

What better way to destroy America than to destroy the value of the U.S. dollar, the standard against which all other currencies are set? If you want to know why Obama has instituted the spending of billions in just over a half year’s time and imposed a $9 trillion deficit on the nation, you need look no further for an explanation.

Nor did it escape Mishin’s notice, having lived in a nation in which all industry was under the control of a central government, that under Obama the government now owns General Motors and that the President demanded and got the resignation of the company’s former president. Every other CEO in America got the message. No where in the Constitution will you find permission for public money to be spent in this fashion.

The ironies and the threat to our nation continue. “Prime Minister Putin…warned Obama…not to follow the path to Marxism, it only leads to disaster.”

In brief, here’s the case for free market capitalism as opposed to government-run enterprises and interference.

The U.S. Postal Service was established in 1775. It took 234 years to get it right. It is broke.

Social Security was established in 1935. It has had 74 years to get it right. It is broke. Cost of living increases to recipients will not be enacted for the next two years. It is broke.

Fannie Mae, an intrusion into the housing and mortgage market place was established in 1938. There have been 71 years to get it right. It is broke and it was a major contributing factor in the failure of the mortgage lending system and the present failures of banks across the nation. Likewise, Freddie Mac was established in 1970. After 39 years to get it right, it is broke.

The “war on poverty” set in motion in 1964 was a classic “redistribution of money” as a transfer to “the poor.” Now the nation is, for all intents and purposes, broke.

Medicare and Medicaid were established 1965. After 44 years, both are broke.

The Obama administration is allegedly seeking to “reform” both by rationing medical services to the elderly while expanding the systems to require all Americans to involuntarily purchase insurance. Universal healthcare requires more doctors. Until tort reform is enacted and until doctors can be free to practice in a free market, there will be fewer and fewer doctors.

The trillions of dollars spent by TARP and the Omnibus Appropriations Act of 2009, are showing no signs of working. ACORN, a “community organizing” group received millions and is likely to be given a working role in the forthcoming U.S. Census, a program that is part of the Department of Commerce, but whose management has been transferred to the White House!

“The proud American will go down into his slavery without a fight, beating his chest and proclaiming to the world how free he really is. The world will only snicker,” predicted Mishin.

If the town hall meetings and “tea parties” from coast to coast are any indication, Mishin is wrong that Americans will not fight. A forthcoming September 12 protest gathering in Washington, D.C., is likely to draw more than a million protesters to the capitol.

Obama and his panoply of “czars” have only a few months in which to manufacture a “crisis”as a pretext to transfer all power to the White House. They will fail.

Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center – he blogs daily at http://factsnotfantasy.blogspot.com .

CREDIT SCORES

timbryce — Tue, 11 Aug 2009 11:17:12 +0000

Whether we like it or not, our lives are greatly impacted by our financial credit scores. If you have a good credit rating, lending institutions are more than happy to loan you the money to buy a house, a boat, a car, help you start a business venture, or whatever. If you have a bad rating, you’re basically stuck in Nowheresville.

For our younger readers, your credit score begins the day you get a revolving line of credit, such as a credit card or gasoline card, or purchase something on time, such as a house, furniture, or whatever. Your ability to pay off debt is monitored and scored from this point to the day you finally die (and pass your financial troubles to your heirs). In other words, it is an albatross hanging around all of our necks.

Interestingly, most consumers pay little attention to their credit scores which are ultimately maintained by three major credit bureaus: Experian, TransUnion, and Equifax. A lot of people seem to prefer operating in the dark. I guess ignorance is bliss. To the rest of us, it’s a wise move to periodically look over your credit report and make sure it is an accurate accounting of your credit history. If it is wrong, it could do considerable damage to your reputation from a financial perspective.

Your credit score is primarily a reflection of your ability to pay your debt. Period. Remarkably, your income is of little concern in this regards. Just because you make a lot of money, it doesn’t necessarily mean you will use it to pay off your debt. Instead, they carefully monitor your credit cards and loans. In particular, they analyze the amount of credit available to you, your outstanding balance, and if you are paying it off on time. Late payments are flagged accordingly. From this, they calculate a credit score which lending institutions use to pass judgment on you. Having a good credit score, therefore, is a sign you are able to manage your finances responsibly. It should be noted that gender, race, and religion are not considered when determining scores.

Although the credit report is available free to you once a year, the credit score must be purchased separately for a modest fee. Perhaps the best place to begin to study your credit profile is at the web site, Annual Credit Report, a free service to guide you through requesting a credit check.

We all understand what is necessary to raise credit scores; in a nutshell, don’t bite off more than you can chew, and pay it off on time. However, knowing this and having the discipline to implement it are two different things, as evidenced by our current recession which was started, in large part, by people defaulting on home loans (and don’t get me started on the idiots who loaned them the money in the first place).

At the time of this writing, the Experian credit bureau reported that America’s “National Score Index” was 692 which, by my estimate, is a “Good” credit rating (“B”). This is either an overly generous estimate or perhaps Experian is telling us our economy is not as bad as we thought and is indicative of a healthy rebound. I suspect the latter as their numbers are based on fact, not speculation.

If anything, this recession has taught us the virtue of paying attention to credit ratings, both for the consumer and for lending institutions. Like it or not, it is how we quantify an individual’s financial responsibility. Regardless of your credit score though, always remember this: The less money you have, the less likely you will get a loan. Conversely, if you already have a lot of money, you’ll get all the cash and credit you want. Sorry, that’s just the way it is. I don’t make the rules, I just report them.

Such is my Pet Peeve of the Week.

Keep the Faith!

(A tip of the hat to T.D.P. for the topic suggestion)

Note: All trademarks both marked and unmarked belong to their respective companies.

For a listing of Tim’s Pet Peeves, click HERE.

Download Tim’s new eBook (PDF), “Bryce’s Pet Peeve Anthology – Volume I” (free) DOWNLOAD).

B.O. is an economic ignoramus or a devious Marxist

Ben Cerruti — Mon, 27 Jul 2009 02:45:01 +0000

B.O. is an economic ignoramus or a devious Marxist
By Ben Cerruti

Recently B.O. said “Wall Street took unnecessary excessive risks and almost our entire economy into depression”. It is unfortunate that he knows so little about economics and the fact that what happened on Wall Street was the EFFECT rather than the CAUSE of the economic tsunami. In fact, if not ignorant he certainly is disingenuous since the Wall Street to which he is referring happens to be the entity that markets the debt issued by the Treasury. Firms like Goldman-Sachs are in essence an arm of the Treasury. The fox in the chicken coop.

In regard to the economic crisis that occurred on Wall Street, its CAUSE was initiated when the Fed placed an excessive amount of money into the economy to address the recession that started just prior to the GWB presidency and extended to ease the economic blow of 9/11. This inordinate amount of money deposited into our banking system had to be loaned out since that is how banks make money. The ability to easily sell the loans removed the liability of foreclosure and the result was the accelerated development of creative loans to meet the demand.

The increased demand caused home prices to increase markedly attracting speculators. The increased need for buyers of these loans was met by Wall Street’s investment bankers. They created bonds that were backed by a bundled package of a variety of mortgage types and initially priced by a complicated mathematical formula. Called Mortgage Backed Securities (MBS) they became considered as highly desirable investment vehicles and were sold worldwide.

Meanwhile, attempting to counteract what was occurring the Fed started to reduce the money supply. This increased the Federal Funds Rate multiple times but was unable to curb the excesses that had been created and the housing price bubble finally burst. The collapse of housing prices also resulted in the collapse of the market for MBS. Their value could no longer be adequately determined by the market or by the original pricing mechanism due to this complexity of this security. Thus Wall Street investment banking firms could no longer provide liquidity for these securities and faced imminent bankruptcy.

The Federal Government stepped in to adroitly bail the leading investment banking firm Goldman-Sacks (GS) out, not only by loaning them $Blillions but by bailing out AIG who owed them $20 Billion. Of course then Secretary of the Treasury Henry Paulson, who was a previous President of Goldman-Sachs, was not at all an influence in this happening. If you believe this I have a bridge to sell you.

You might also be interested in the fact that when Paulson became Treasury Secretary he was allowed to avoid Capital Gains Tax on some $200 Million worth of GS.stock he sold. By the way GS was also allowed to become a full fledge bank and thus to be able to borrow from the FED discount window at a rate of between 0 and 0.25%. Fractional reserve rules allowed them to loan up to 10 times this amount out at much higher interest rates. No wonder their earnings have gone through the roof.

B.O. knows that GS and their ilk are essential accomplices in the management of federal debt. It is unfortunate but true that the FED over many decades has aided and abetted the fiscal dalliances of the legislative and executive branches of our government by trying to micro-mange the money supply. This has allowed Wall Street firms like GS to become too necessary to fail. B.O. is now criticizing that in which he is a willing and contributing participant.

In my view, our President is either ignorant or disingenuous or both. In any event he appears to me to be a very good prevaricator. It stands to reason that our economic future cannot be based on false premises. It is obvious to me that B.O. believes like Karl Marx that “the end justifies the means”. He is on the road to Socialism/Marxism regardless of the economic consequences

Now a senior citizen, Ben Cerruti has been involved in espousing his views in writing for the last 20 plus years. He has been published numerous times in various San Francisco bay area newspapers and has been actively involved in taking positions on ballot measures to the point of writing the arguments and rebuttals and appearing on television to state his position. He has had extensive correspondence with Milton Friedman, renowned economist and Nobel Laureate that provided him with intimate knowledge of the functions of the Federal Reserve System.

He carries with him a lifetime of experience in business, marketing, sales and finance. His background has included periods with his own manufacturer’s representative business, as well as, with the securities business as a registered representative and in the real estate business as a licensed broker. His education comprises gaining a BSEE degree at UC Berkeley, postgraduate study in business, economics, marketing and other studies including the operation of securities and commodities exchanges, economic factors affecting financial markets, business operations and financial statements.

Being literate in the html language of the Internet, he presently has developed two websites one of which is http://arationaladvocate.com dealing with socio-economic commentary. The other is http://adultcommunityresalehomes.com that is devoted exclusively to Brentwood California’s Summerset Active Adult Community for the benefit of all homeowners, realtors, lenders and potential buyers.

A lifetime conservative he is presently being published on several websites including his own.

Borrowing, Spending and Regulating, Oh my!

Alan Caruba — Wed, 15 Jul 2009 20:12:37 +0000

Borrowing, Spending and Regulating, Oh my!

By Alan Caruba

It sometimes seems to me that the Congress and the White House are determined to put an end to the nation through a combination of exorbitant borrowing and insane spending.

At the end of May, an article in USA Today reported that “The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.”

These trillions reflect various retirement benefits such as Social Security, Medicare, Medicaid, and the new prescription medicine benefits. Then there are programs to aid Americans who have lost jobs, are behind on their mortgage payments, or just want to buy a new car by declaring their old one a “clunker.” When you add in the so-called “stimulus” bill, the bailout of General Motors, and the TARP bailout to financial and insurance firms, it adds up.

Robert Samuelson, a syndicated columnist, asked in May “Just how much government debt does a president have to endorse before he’s labeled ‘irresponsible’?”

While facing $63.8 trillion in obligations, Samuelson noted that “From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that’s atop the $1.8 trillion deficit for 2009.” It doesn’t stop there, however, “Obama’s health plan might cost $1.2 trillion over a decade; he has budgeted only $635 billion.”

Did President Obama and every member of Congress flunk arithmetic in grade school? How can they possibly believe that the actions they have taken and presumably intend to take with regard to an insane healthcare reform and massive tax on all energy use add up to anything than the total financial failure of the United States?

It adds up, according to USA Today, to “an extra $55,000 a household to cover rising federal commitments made just in the past year…” I don’t know about you, but I don’t have $55,000 to spare. The economy has pretty much wrecked any plans I made to earn enough to cover my present expenses.

According to the Investor’s Business Daily, “American families over the last year already lost 8% of their net worth—in part as a result of inept government meddling, past and present.”

The result will be “Near-record deficits increasing at record rates (that) will push the public debt of the U.S. beyond the economy’s plausible capacity to pay—70% of GDP (Gross Domestic Profit) by 2012, heading quickly to 82% of GDP in 2019 and on pace to be astronomically higher soon thereafter.”

As someone who thanks a merciful God for the ability to check my checking and savings accounts’ balances via the Internet, all these enormous numbers and percentages tend to make my head spin. I understand them in the abstract, but I can barely get a grip on them in terms of the vast amounts of money they represent.

There are, however, still other numbers that are strangling the nation’s capacity to somehow get out of this mess.

For several years, Wayne Crews of the Competitive Enterprise Institute has taken an annual look at the growth and the cost of federal regulations. He deserves to be beatified for this task. They are published in a report titled “Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.” On June 3, the latest report made its debut. Here’s a snapshot of how a nation strangles to death on regulations:

Federal agencies issued 3,380 new rules in 2008. Federal regulations ate practically 10% of what the U.S. economy produced last year. At $1.172 trillion, the cost of regulation is nearly equal with $1.2 trillion in income taxes.

Regulatory costs are a huge hidden tax. The federal government spent $2.98 trillion in 2008 and businesses spent more than a third of that amount on regulatory costs.

Crews points out that, “Rolling back regulations would constitute the deregulatory stimulus that the U.S. economy needs.

We’re all on this roller coaster together and there can be no happy ending to the ride.

Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center, www.anxietycenter.com . He blogs daily at http://factsnotfantasy.blogspot.com .

Start a Business? Are You Ready?

Author 101 — Fri, 10 Jul 2009 14:45:12 +0000

Do you plan to give up your job and start a new business of your own? What would that take? What would be your new responsibilities? Probably more than you planned. In new business, your security is the biggest thing you give up. The idea of having a paycheck in the same amount you can count on every week is gone. The benefits you get now, your insurance, or whatever it is that you count on is gone. When you work for someone else you have set responsibilities, when you work for yourself, you are responsible for everything. Scary huh?
Failure? The myth that nine out of ten businesses close in their first year may or may not be completely true. According to more recent Dun and Bradstreet data, 76 percent of new companies were still in business after two years, 47 percent after four years, and 38 percent after six years. These estimates are substantially different than what is still commonly believed.

These business survival statistics are based on the number of new business licenses applied for each year, which are not renewed on following years. The licenses could be for a person selling crafts at the swap meet on Saturdays, or someone in a temporary business, or just as a tax shelter. Some of these “failed” businesses could have been sold or transferred to another individual. These estimates are hard to prove either way, but realistically, most new business does fail.

Statistically, more men are self-employed than are women. Women may be selling themselves short in the business world. Although times have changed, society has taught us in the past that men are leaders. All of our past presidents have been men. Women need to realize that starting a business requires attention to detail, devotion, commitment, and nurturing, all of which are natural characteristics of themselves. Women make great entrepreneurs, but the business failure rate is equally sexed.

Studies show businesses that do survive longer had more cash up front to invest. Other survival factors include the owner‘s age, higher education, and previous experience in their field.

According to a 2002 United States Census report, most business owners are between the ages of thirty-five and sixty-four and have had ten to nineteen years of work experience prior to self-employment. More experience in life and business seem to translate into more competent decision-making. How much “life” experience do you have?

Ask yourself these other questions as well, and be honest with yourself–it doesn’t help your chances for success to lie! How do you keep your own personal finances? Do you balance your checkbook regularly? Do you have credit card debt? Loans? How you manage your personal finances is a good sign of how you will manage your business finances.

It’s easier to be successful if you’re motivated to work for someone else–there’s that guaranteed paycheck every week. Working for a paycheck usually means there will be someone to give you direction and instructions on how to complete a job; someone who sticks their boot in your ass to get you going. But when you require your own boot, in your own ass, it’s harder to get that “kick.”

If you think you’re ready to be your own boss, do your research and by all means, don’t “mortgage the farm.” Make sure your personal ducks are all in a row and you won’t be jeopardizing your future or the future of your family.

Read more about business start-up at http://booksbydenbow.weebly.com/business-books.html.

Carol Denbow is the author of several books including “Are You Ready to Be Your Own Boss?” a 144 page, easy-to-read and comprehend business start-up book available at Amazon.com.

Donald Trump and Robert Kiyosaki endorse networking as a business. Do you have what it takes for this industry?

maryepopkin — Thu, 09 Jul 2009 18:43:29 +0000

So you want to start a home based business now what?

You have made the decision to become an entreprenuer and start a home based business but with so many different comensation plans, products, established companies and start up businesses the choice can become a daunting task.

If you have been searching you will hear over and over again about all the money you can make in MLM, or network marketing. Yes, it is true you can achieve financial freedom in this industry however; why is it that only about 3% actually achieve the financial freedom when the other 97% either burn out or move on to the next latest greatest business opportunity.

So how do you become the MLM success story instead of the people who scream MLM is a scam. First MLM isn’t a scam to paraphrase J. Paul Getty give me 100 people giving 1% effort instead of me doing 100% effort. In essense you create leverage and when done properly it is a successful business realtionship for you and the people you attract to your home based business.

Here are some things I have learned over the past 3 years in this industry why people fail in MLM. They don’t understand the industry, they quit too soon, they fail to make a game plan, and lastly they really didn’t have the proper mindset to become an entreprenuer.

I talk every week to people who don’t even realize they are in MLM because it has gotten the reputation of being a scam when the opposite is true. So why is scam associated with MLM because most people are presented this industry as work from home. It isn’t a job it is a business and like any other business you don’t get a weekly paycheck. Now to the entreprenuer that is a great thing because they want what MLM actually does produce and that is the ability to write your own paycheck. You will hear people use that as a way to get you to look at their home based business opportunity but what you need to do is fill in the blank. Yes, you can write you own paycheck but you have to put the work, time, passion and effort into it before you see a paycheck.

So before you “fire your boss” realize you are starting a business and there will be some costs but when you compare it to starting a “brick and motar” business the costs are minimual. So realize there will be a start up expensise and probably some monthly expensises but this is a business not a job. Which brings me to another thing a lot of people don’t understand about this industry it isn’t for everyone. Now when you join a home based business they will tell you to start by sharing the model with your friends and family. Honestly that is what we are paid for advertising and marketing the business opportunity so letting your friends and family know you are now involved in ABC business makes sense but don’t expect them all to sign up. Not everyone is drawn to self employment and even if they are inclined to be self employed they might not want to be in the business you have choosen. Too often people become desperate to build a team and they don’t interview the person who wants to be on their team. They need to realize this is a business, they will be some expenses and also a time commitment on their part. So if you start looking for business parters instead of just trying to “tell and sell” everyone on becoming a business owner and make large money you will grow a team of motivated business partners.

Often people start out very excited and tell everyone they know how great their business opportunity is and how much money they will be making. Then when they don’t see instant results and their friends and family tell them when you make money I’ll join they often quit. However; there are those who put up flyers, place free classified ads, do some social networking and still make the mistake of quitting too soon. You need to plant those seeds and let them grow. Now you might need to look at your “game plan” to make sure it is working. Which actually brings me to another reason people fail to succeed in MLM they don’t even have a game plan.

Imagine if you were starting a business would you just one day say I want to own a shoe store or restaruant for example and not create a business plan and model. Why do people think in the home based business industry they don’t need to create a business plan and model? You need to make goals and have a plan of daily, weekly and monthly activities to achieve success. If you study the one’s who succeed in any business you will find they have set goals and created a blue print for achieving those goals. This is your business so you need to find how you want to market your business and then go into action. For some people that might mean working only 5 hours a week others might be able to put more time into their business but I will tell you it is one of the major attractions for me personally to start a home based business verses a “brick and mortar” business.

If you choose to open a store or restaurant you need to be there during the hours of operation or hire someone to be there during business hours. In additon when the place is close you still need to be working on things as inventory, bookkeeping, stocking and the list goes on. With a home based business you do get the freedom to pick you hours but you still need to put time into your business in order to make it grow. Often you won’t see a profit for a few weeks, months or maybe even a year depending on how you are working your business. Yet, if you look at a new store owner they realize that profits might not show up for 5 years and they might be working their business 40 to 60 or more hours a week. It always amazes me when someone starts a home based business and they think great now I have a website on the internet and the sales and signups will just appear without me doing any work or spending any money or advertising.

Which brings me to my final reason people don’t succeed in this industry they aren’t cut out to be entreprenuers. You need to have the correct mindset that you are the CEO of your business and work it as a professional. Even if you are only putting 5 hours a week into your home based business you need to run it professionally with your blueprint and goals as your objective. If you have money to spend on advertising great if not you need to learn effective and creative ways to advertise for free. Just remember what this industry rewards are people who know how to market the company they have choosen as their home based business.

In closing understand the industry. Make a game plan and test it long enough before you quit. Often you just need an adjustment or more time doing what you are doing to succeed. Too many people quit too soon because they don’t see immediate results when what they should be doing is continuing to work their game plan and make adjustments as they work on their marketing skills. Lastly are you really an entreprenuer? If you aren’t passionate about what you are doing how do you expect others to follow you? Remember it all begins with you having the proper mindset and seeing yourself as a success the results will follow.

Mary Ellen Popkin
SAHM, Professional Marketer,
Published Self Help Author and Creator of

http://www.MentorWithMaryEllen.com

Home Based Business http://www.TheGreatestBiz.com

Am I Ready to Start a Business? 10 personal questions to ask yourself before you commit

Author 101 — Sun, 05 Jul 2009 15:44:15 +0000

No, we won’t begin with “Do you have a master’s degree?” Although education does matter, higher education is not a requirement for starting or succeeding in a new business. In fact, according to a 1992 United States Census Bureau report, only 5.3 percent of business owners have a Master’s degree or higher education. 9.4 percent had less than a high school education—some only up to the eighth grade. Oddly enough, only 17 percent had any business education. The founder of Dell Computers was a college dropout. Starting out of his garage, he managed to excel above all of the world’s top computer manufacturers. One in three computers sold today is a Dell.
What you will need is more commonly known as “street smarts” or common sense. In addition, you will need to have certain individual qualities, or personality traits. Most individuals who are successful in business and in “life” possess these traits. Take the quiz and see how many of the following questions you can answer with a confident “yes.”

Do I have energy, and am I in good health?
Am I a self-starter?
Do I have a willingness to work hard?
Am I a good organizer?
Am I able to make decisions?
Am I able to make plans and follow through?
Am I able to inspire and direct others?
Am I honest (and be honest!)?
Do I regularly balance my checkbook and avoid debt?
Am I a jack of all trades and a master at one???

If you can honestly answer all the above questions with a “yes,” you may be the type of individual who is well qualified to operate a successful business. But before you close the deal, be sure you have educated yourself in the field you’ve chosen. Research and learn the process necessary to start and operate your own successful business.

Read good books relating to your type of business and get the education you need to be successful.

If you’re unsure of your response to any of the ten questions listed above, it’s possible that if you attempt starting a business, you may fall into the ninety percent of new businesses which fail in their first year. The statistics can be startling, but they are a reality. You may want to re-consider your business idea.

Carol Denbow is the author of several books including “Are You Ready to Be Your Own Boss?” a 144 page, easy-to-read and comprehend business start-up book available at Amazon.com.

REQUEST FOR WHATEVER (RFW)

timbryce — Fri, 22 May 2009 10:57:05 +0000

If you have ever served in a sales position for a major company, you will inevitably come across a request from a government agency to make a bid for their business, be it at the federal, state or local level. This is typically called an RFP (Request for Proposal), an RFI (Request for Information), an RFQ (Request for Quotation) or, as I like to call it, an RFW (Request for Whatever). I say this because I do not have a lot of respect for these bid processes and have found they are more rigged for a particular vendor than they are honest requests for competitive business. Government agencies perform RFW’s to try and demonstrate to the public they are being fair and forthright in their bidding process, but the reality is you really don’t have a chance of winning the contract unless you already have the inside track.

We’ve done our fair share of RFW’s over the years. We’ve won some, but also lost many others. For example, there was one state government where we had two agencies who had already purchased our products. When the state wanted to have all of their agencies and departments purchase similar products, we thought we had the inside track due to the two agencies. We then went about the process of producing a comprehensive and professional response to the RFW, and at a reasonable price I might add. The size of the contract was such that just about everyone in our office dropped what they were doing in order to concentrate on the RFW. We felt pretty good about the proposal we produced and confident we would be the winning bid. However, despite all of our efforts, we lost the contract which went to a competitor with a greatly inferior product. Only years later did we find out that our competitor had a local salesman who wined and dined the state’s evaluation team, even going so far as to arrange for some hookers to take an “active” part in the selection process. In other words, we never stood a chance.

I don’t mind losing on a level playing field, but when the chips are stacked against you before you even get started, my Scottish blood begins to boil. This little episode forced us to rethink our policy on RFW’s and, as a result, we no longer waste our time on them. If someone wants our products, we instruct them to use the “sole source” designation, meaning they must declare we are the only vendor who offers this type of product. This works fine for us, but think about it, the government is stacking the deck against others by doing this. None of this sounds very fair or honest does it? But this is what happens when you try to pacify the public.

Such is my Pet Peeve of the Week.

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

For a listing of Tim’s Pet Peeves, click HERE.

Download Tim’s new eBook (PDF), “Bryce’s Pet Peeve Anthology – Volume I” (free) DOWNLOAD).

SEO Strategies for Financial Websites

amabaie — Thu, 14 May 2009 11:44:14 +0000

SEO Strategies for Financial Websites

by David Leonhardt

Here are a few SEO tips specific to financial websites.

First, understand that people are very sensitive and possessive about their money. Your website has to ooze credibility if you want to convert traffic to customers. You probably know this already, but keep it in mind when you hire an SEO consultant. He or she needs to make sure that SEO changes do not reduce the credibility of the website.

Are you selling services locally or nationally/globally? If you are selling locally, there is no point fighting for national rankings. People will search for “bookkeeping southern California” if they need somebody local, and you have a fighting chance to rank for that search term. But the investment required to compete with all the other sites and outrank them for “bookkeeping” just isn’t worth it.

Design your website around the services you offer. Don’t place a link in the main navigation menu that says just “services”. Have a page for accounting, a page for bookkeeping, a page for tax filing, a page for each individual service you offer. Why? Two reasons:

A page centered around bookkeeping has a better chance ranking well for “bookkeeping southern California” than a page centered around services. The focus on one topic makes it clearer to the search engines what the page is about.
People searching for a specific service, such as bookkeeping, should land on a page specifically about what they search for. You will convert more visitors that way. And nobody searches for financial services; they search for the specific service they need, whether it be insurance, or accounting, or investment advice, etc.

Make sure you are participating on Tipd.com and PFbuzz.com. These are great places to get ideas for link-bait viral content. It’s a great place to submit your own content (search-engine-friendly links) and get the attention of financial bloggers who might be interested in linking to your content.

Most SEO strategies and tactics can be applied across almost any sector, so don’t forget to do all the good things you would for any other website. What I mention in this post are a few items that are specific to financial websites.

“Getting Around Congress?” – It’s Much Worse than That

Congressman Billybob — Mon, 20 Apr 2009 18:45:52 +0000

“Getting Around Congress?”
It’s Much Worse than That

by John Armor

The Treasury Department announced today that it would “convert its preferred stock in the nation’s largest banks into common stock.” The stated advantages were that this would allow Treasury to aid more banks without going back to Congress for more money than what was already approved. Some Administration officials even said that this would “get around Congress.”

That alone would be bad enough. But the actual meaning of this action subverts the entire Constitution and is an assault on the American people. It is a take-over of American government, similar to the take-overs that occur every month or so, in tin-pot dictatorships around the world.

Harsh charges. Here is the evidence:

The Constitution does not give the President of the United States the power to spend a single dime. Nor does it give such power to the Supreme Court. The power to raise money (through taxes) and to spend that money on governmental purposes is given solely to Congress, in Article I.

There are times when the President or the Chief Justice are able to spend money by their own decision. But such events occur ONLY when Congress has previously acted to authorize such spending,

Anyone who has ever read the Constitution, or even anyone who has ever heard the song on School House Rock, “I’m just a Bill,” knows this is true.

Article I lists the specific powers of Congress, a list that has long been violated, but that’s not today’s subject. Then, it lists the restraints on Congress’ powers, including this in Section 9:

“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

What does the word “appropriation” mean? It means that Congress must state an amount of money, and also state the purpose for which it is to be spent. The statement of a purpose is just as important as the amount.

Could Congress legitimately pass a law that said, “We appropriate $1 trillion dollars for the Treasury Secretary, for him and the President to spend for the improvement of the nation’s economy, as they see fit”? Such a law would be unconstitutional because it abdicates Congress’ mandatory role in the nation’s finances.

Why is this also an attack on the American people? First, as the Declaration of Independence states, governments derive their “just powers” only from “the consent of the governed.” This latest financial move by the Obama Administration is designed to cut Congress, and the people who voted for Congress, out of the political equation.

The Constitution also speaks to this point. It provides in Article I that all revenue bills (that means taxes) must “originate in the House of Representatives.” Remember that when the Constitution was written, the House was the only point at which popular will, actual voting by citizens, took place. Senators were them elected by the State legislatures; Presidents were elected by independent members of the Electoral College.

The experience of other governments, beginning with England but including dozens of others, boiled down to this: the people do not have control of their government unless they elect their own representatives, who in turn have the power of the purse. The House of Representatives was originally given that power, but the Obama Administration is now stealing that power away.

The theft is not occurring wholesale, since the mainstream media might notice and comment. It is happening retail, a mere trillion dollars at a time. It is now five hours since the Treasury Department announced this change. No one anywhere in the media has, according to my Internet searches, even bothered to ask whether this is constitutional.

The take-over has begun. What will we do about it?

About the Author: John Armor is a former Professor of Political Science and a 33-year member of the Supreme Court Bar. He also attended a Tea Party last Wednesday, and will keep attending them until the President, the Congress and the Supreme Court start obeying the Constitution.

Toxic Money v. Toxic Assets

dromkeen — Thu, 09 Apr 2009 14:42:07 +0000

Our economy is going through a lot of turmoil right now and there is a push to find the bastards to blame. But if we concentrate too much energy on those at fault and too little energy on correcting what went wrong then we will be equally culpable when we go through this again.

So let’s get a handle on this by going back to the beginning.

Economies grew out of society’s attempt to take advantage of human strengths: different special and valuable skills in different people. Some people were better at hunting and some were better at making hunting tools. If the hunter kept all of his kills then the toolmaker would have to hunt too instead of making it easier to catch prey and the hunter would be using sub-par equipment. If they share the kill then both can concentrate on what they do best with the net result of more to share for everyone. This led to the development of money so that all specialties could share in the wealth of the community. Take special note. Money is NOT wealth. Wealth is the accumulated value of an individual’s, or society’s, production. Money is merely the unit of measure for the production. A key part of what has gone wrong in today’s economy is that money is sought after for itself.

When the wealth of an economy is measured we use the term Gross National Product (GNP) to describe it. We express GNP in terms of dollars. So we already know about money being an increment. As a matter of fact, we have diagnosed a cancerous blight on an economy that has too much money for its production: Inflation. In spite of this there is a faction in our investment community that practice the generation of money without any increase in production. They rely on transactional calculations that take advantage of some investors not being as savvy as others. This is sometimes called arbitrage. An economy can withstand a certain amount of these transactional proceeds. A small amount may even help the investment markets run smoother.

But there is an end to this limit before it becomes obnoxious and ultimately devastating. This end is hard to define and will change according to what is going on in the production and employment levels in our society so we need to watch it and keep it at workable levels. But our recent past has had notable lapses in watchfulness.

Let’s start with the egregious events of Spring 2001 when an industry stole billions of dollars from the citizens of California. Without increasing production, power-trading companies “sold” electricity to each other ticking the price up at every “sale” before finally releasing the energy to the grid. No new dams, no new plants, just ink on paper, or LCD displays on computer screens. One of those companies, ENRON, was ultimately caught trying to hide this ill-gotten booty under Caribbean mattresses until the you-know-what hit the you-know-what.

As a result of ENRON thousands lost millions.

More recently it was mortgages. The scam here was to bundle high-risk mortgages together into one tradable security with the idea that someone else can have the risk while I get the money. This bundling led to more bundling of even more risky mortgages. Buyers of bundles then bundled them with other bundles and sold the new bundles to other bundlers, and so on. A most perverted pollution of the sound investment strategy called diversification. So when a higher than expected percentage of increased risky mortgages started to default bundles started to become devalued. Since individual bundles had been rewrapped into other bundles this house of cards came tumbling down. Banks did not know what their assets were worth. (They couldn’t see how much wealth they had buried under all that money.) Since they can only lend a percentage of their assets they had to stop giving customers credit. Grind and crunch and all lending came to a halt. Since there is a time gap between producing something and selling it the inability to borrow interrupted production. Layoffs followed. More mortgages defaulted blowing up more and more bundles. The ability of banks to evaluate their wealth got murkier and their ability to lend got worse.

And millions lost billions as a result of mortgage bundles.

In view of this I have deep suspicions about any public figures who still insist our country is better off with an unregulated economy. Our economy has a toxic virus of toxic money (not toxic assets as they are popularly called) that cannot be wholly cured. A small strain may help investing run smoother but if it is allowed to run rampant the results are catastrophic. Among other responsibilities, our elected government officials are entrusted to secure the health of our futures in the economic theater. They are the people who must step up to the plate to look beyond culprits and implement controls to keep transactional proceeds at a healthy level.

For if they don’t, the next time billions may lose trillions – I don’t think there is enough production on Earth to handle that.

The Domino Theory

Bill Hazelgrove — Wed, 18 Mar 2009 20:53:04 +0000

When we were in Vietnam they said that if Vietnam fell then the rest of Indochina would go Communist. They invoked the Domino theory to say one thing will cause another. Ten years later we left and Vietnam became a Communist country and nothing else happened. Then they said that if we didn’t go in and take over Iraq they would have a weapon of mass destruction and throw it our way. The domino theory again. If we don’t act then certain doom. We went in and could not find a weapon of mass destruction. We are still there. Then they said that if we didn’t reelect the President the evil doers would come over and attack us and by the way we are on high alert for another attack. The other candidate looked very wimpy after some well placed swiftboating and we added torture and wiretapping the entire population to our Bill of Rights. Then they said that if we did not immediately give seven hundred billion dollars to the banks all hell would break loose. We gave seven hundred billion and all hell broke loose anyway. Then they said that if we did not bail out AIG to the tune of one hundred and seventy billion then the entire financial system would disintegrate. We gave AIG the money and they gave it to foreign banks and brokers and other people who they won’t even name. The financial system might fall apart anyway and AIG is probably going away. The domino theory only works on fear and it has worked well for forty years. When I was a kid I used to line up dominoes on the floor and push one down and watch them fall. It was pretty cool. But sometimes, for no reason at all, the dominoes just stopped on their own. Go figure.

http://www.billhazelgrove.com

The stupidity of ‘cheap’

John Joss — Wed, 04 Mar 2009 14:21:19 +0000

John Ruskin wrote: “There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” These days many of us are looking carefully at our bank balances, striving for economy, trying to avoid unnecessary expenditures. Whatever we do, we must avoid ‘cheap.’ It’s never worthwhile in the end.
Where I came from—an England that unfortunately no longer exists—‘cheap’ was usually accompanied by the word ‘nasty.’ Cheap and nasty. Do you feel queasy reading that? You should. Cheap is too often nasty.
That’s a healthily skeptical way to look at what we’re being asked to buy these days, even if our fortunes are declining The stigma goes to the core of our lives and our negotiations, as we grovel for cheap—value and quality be damned.
Before we explore ‘cheap,’ consider the costly alternatives and their challenge to our tastes and pocketbooks. How often do we see purchased objects—cars and houses, foods and wines, entertainment and architecture—sold as imagined superiority? My favorite example: Rolex, purveyed for decades as a better way to keep time. The old pitch (verbatim): “Men who guide the world’s destinies wear Rolex watches.” Logical corollary: “Wear a Rolex watch, you’ll guide the world’s destinies.” Puh-leeze. My Timex works excellently for 99.99% of the problem. Furthermore, I neither expect nor wish to guide the world’s destinies.
Don’t mistake me about price. Getting needless cost out of products is good. ‘Value engineering’ is vital, a skill in which engineers simplify products, reduce parts count, specify the least expensive materials needed, refine labor-efficient assembly. After that, they test for performance and longevity. Value engineering cuts cost and raises profit. I am criticizing products in Ruskin’s sense: cutting quality and ignoring the end use and the customer, thus failing the value equation.
Immense fortunes are made—e.g. Walmart’s bevy of billionaires—peddling products for less that have been made worse. For people on budgets, like most of us, this might seem like a good deal. It isn’t. You and I have made such purchases, often without realizing it, and regretted it. For example, it pays to look carefully at labels for country of origin, if they’ll admit it.
Do the math. If the product you buy for 75% of the price of a quality substitute lasts half as long, you’ve made a rotten deal. Today it’s ‘cheap.’ In a few months, when it stops or breaks, you must replace it. If you buy the same product again, you are stupid. You’ve paid 50% more for what you wanted.
I own a Kent-Cosby hairbrush (‘Best British Brushes’), made in England, bearing the royal endorsement (“By appointment to her Majesty the Queen”). Kent-Cosby was founded in 1777. My mother bought it for me when I entered the Royal Navy at 16. I am older today but the brush is like new. I don’t need another one. This means that the manufacturer might risk going out of business.
Wrong. Over the last umpteen years I have bought Kent-Cosby hairbrushes for my family—three daughters, who have also bought the same make for their daughters. So the one brush purchased for me two or three generations ago has earned the maker many other sales, and many more word-of-mouth recommendations.
In service from others, the same math apply as for product purchase. Someone who does a merely acceptable job, or one that is sub-par, is a bad deal in real economic terms compared with a true professional who charges more and gets great results. As in all purchases, value is always the key criterion.
Would you buy surgery or dentistry from the ‘cheapest’ bidder? I thought not.

Have Faith

dromkeen — Sat, 28 Feb 2009 17:08:53 +0000

        The President hath decreed that we, as a unified nation, will fix what’s wrong with our economy. I strongly agree with this. I have faith. But that faith is not based on any of the ample collection of strengths possessed by President Obama. I have faith in Nature. Not human nature. Just Nature.
        Nature is the universe. Everything that is anywhere at all. The laws and forces of Nature are the same everywhere. Black holes, pulsars, dark matter, etc. all are governed by the same forces as toxic assets, vise tight credit, and Wall Street collapses. The force of Nature that is the source of my faith is called Evolution.
        That word usually springs to mind Darwin, ape-men, and school board controversies. The Evolution that I will speak of covers so much more than the biological level that Darwin focused on. For example, Biological Evolution is the force of Nature that rewarded a decreasing tail size in the pre-human beings who forsook the trees and took to the grasslands so that now we now only have a tailbone left. But Evolution also worked so that now when we are confronted by natural phenomena beyond our reckoning we experiment and theorize to build a better understanding of its ingredients rather than deifying the phenomenon into another Zeus or Apollo.
        Evolution is the force that changes life forms that are better able to pass Nature’s tests or, if they fail, eliminates them . Our economy works the same way. While there are any number of shortfalls in what’s going on in America right now, the single factor whose solution would have the greatest positive impact is the damming of the credit stream by banks. At the root of this damming is fear. At the root of fear is the lack of understanding and clarity. Banks just don’t know the full extent of the toxic assets on their books and the books of their fellow banks. Since the health of any bank, and thus their lending potential, is a factor of their asset value, having the government infuse money into the mix will clarify somewhat whose assets are worth what and then loosen the credit strings - in theory.
        But what if instead of lending more bank executives pay themselves huge bonuses. Well, the public outcry at such a diabolical display of crass audacity would cause these obnoxious executives to be ousted (and hopefully imprisoned) and replaced by a new management team that vows not to repeat the same tactic. This new team will have learned that they risk similar treatment if they engage in similar behavior. Their motives will be to toe the line, at least for the time being. But in this mix there is likely to be some replacements who actually believe in their moral responsibility. Search committees will be seeking candidates with high ethical fiber. The test that this economic crisis represents will influence the emergence of more ethical banking behavior. And it is the overwhelming force of the market, us, that will energize this because now we are paying closer attention to what the executives are doing. The watched pot may never boil but the watched thief will NOT steal.
       The fix first, and the oversight next. That way the force of Nature that we are will continue to influence what form our economy will take. Until the next crisis arises and we get to stamp out that next chapter of evil expecting to fly under the radar.

Lent as Economic Salvation

Minnette Coleman — Wed, 25 Feb 2009 16:19:41 +0000

A Baptist friend once told me that Catholics didn’t know what a good thing they had in Lent. We were both trying to loose a few pounds at the time and my friend, soon to become a minister, proselytized stating the virtues of being forced to fast during Lent. Although her point was taken having grown up in a grade school where the nuns demanded to know what you were giving up for Lent, I paid her no attention. I had done my share of fasting from candy, sweets and one year into college beer, which I really never liked.

As a lax Catholic I seldom observe Lent, the forty day period between Ash Wednesday and Easter. It is not just a time of fasting but a time of penitence. Maybe my giving up beer in college was not far off the mark. I was trying to redeem myself for that one night I spent on the floor of the dorm bathroom praying to a porcelain god. I vowed never to do that again, as we all do when we are in that sad position over the toilet bowl and I didn’t for many years . But I made it a point not to drink that Lenten season and didn’t feel the urge to overdo it when Easter arrived and someone offered me a bottle reminding me my fast was over. I didn’t have the taste for it any longer and even rejected the offer of a glass of wine. I realized I didn’t need it.

I had learned to do without during Lent.

This year I am thinking about the many people on the precipice of economic ruin. Those who have the funds to shop, gamble, travel, do what they please and haven’t cut back on anything because they just know they aren’t going to loose their income. I think about the families with children who have never heard of Lent, families who are trying to explain why they will no longer be going out for pizza and a movie once a week. I think about the couple saving for a house and how they swear there is nothing else they can do without to help them increase their savings.

Lent can be the perfect time to change.

It would not be prudent for the parents of children used to having everything they want to suggest they all sit down together and decide what to give up for almost 6 weeks. Children who have been awarded their every desire tend to think they should be denied nothing. Instead parents could decide to cut back on weekly outings of movies and game rooms as well as those budget busting pizza parties and let the children decide on the one weekend a month they will go out . The children can also decide which treat- food or activity. This gives them a little power in the situation and makes them feel part of the solution to a family problem.

Once you get started on family cutbacks it might become easier to explain why certain foods are disappearing from the table. Children can be involved in meal planning when you place a list of foods you have purchased before them. Suggest they find recipes on the Internet and create a family cookbook. This can be a great start to a family working together. And it teaches children how to compromise and be frugel as well as creative.

When my husband and I were saving for our first house we sat down and talked about what we could do without. We didn’t go out during the week, meeting our friends after work for happy hour or having dinners at restaurants. We had lunch out on Saturday twice a month. While our friends made fun of us and called us cheap we not only saved enough for a down payment but we had enough for a Caribbean vacation. When he was forced into retirement and the price of everything went up we reminisced about those days and made more cuts to our household budget. With the kids grown and out of the house we had been going out to dinner, drinks, movies. Now we have a date night a week at home and one night out at lunch or dinner a month. The date night at home consists of watching a movie or a show that appeals to both of us after dinner we cooked together. Sometimes it includes a bottle of wine, a lot cheaper in a liquor store in in a restaurant. When we go out once a month and decide to do dinner we usually go to a place that has half price on bottles of wine that specific night. As for movies we go on Saturday or Sunday before noon when the New York movie houses costs only six bucks. Any other time the movies here are $12 a person. All these things can save a couple money but the most important thing is that you learn to work together and be together. Thats what gets you through the hard times.

As for those who are suddenly hit with having so much less they teeter towards suicide there is hope. Start with the fact that if you have a lot you have enough. Most of the people I know, men and women, have enough clothes and shoes. And while not shopping may not be the best thing for the economy it may be the best thing if you don’t have the cash to back up the plastic you plan to use. Learn to shop well. Whats in fashion is not always destined to be forever chic. Start by going through your wardrobe and finding classic pieces that you can wear for years. Stop shopping every day or every time you pass your favorite store. And if you must shop, window shop. Learn to look and not buy what you cannot afford. Maybe someone will notice that you are wearing last year’s little black dress and comment on it to embarrass you. Don’t be. While they are making fun of you laugh all the way to the bank with the money you saved that can go towards decreasing your debt and saving you from literally being put on the street. It will make you stand taller and prouder and look like you have lost weight. And not just in pounds.

This is a good time to create meaningful patterns of doing without. It will not kill you to give up your favorite wine every night, new shoes every week, a new designer bag every month. You will appreciate everything you purchase if you save for it. I heard of a woman who puts five dollar bills aside everytime she gets change. She saved $1200 one year. I started doing that and found I had enough cash on hand to pay the computer guy when we thought my husband’s hard drive failed.

It’s the little things that we will have to do to repent for a life of free spending. But those little things could be our salvation.

“The glass is 90% full.” “No! It’s 10% empty.” Your choice?

John Joss — Fri, 20 Feb 2009 13:55:37 +0000

The U.S. economy, and much of the global economy, is retrenching. There are many causes, some nefarious or naive, some cyclic or naturally caused (what goes up must come down—nature’s oscillations). Either way, we’re seeing a ~10% adjustment worldwide. It has happened before. It will happen again. Guaranteed.
For an individual suffering layoff, foreclosure or other severe dislocation of his or her life, this is a catastrophe, a 100% problem. No argument. For regions such as Detroit, it’s a huge challenge, even if you believe, as I do, that the auto industry is suffering from self-inflicted wounds.
Blame is everywhere. Consider, as one example, a sensible homeowner who is being foreclosed, who can afford monthly payments but not balloon usury. Lenders would be better served helping that homeowner stay. The home’s value will recover in time. Yet many lenders refuse even to negotiate with borrowers. In a cut-off-the-nose-to-spite-the-face orgy of pique, they foreclose—such nice people, such great managers, such logic—and take a huge, avoidable loss, while dumping a family onto the street. The economy on all sides goes down with them.
For the other 90% of the people, the situation varies from a threat to a concern to an annoyance to an inconvenience to . . . no effect. Some even benefit.
So what do we do? Panic? Run in circles, scream and shout, e.g. the media, goosing naïve audiences (for money)? Wring our hands? Or do we assess our status, count our positives and negatives, analyze courses of action, decide, and act? What is the most effective approach? Well, duh.
If you or I knew that for about 10% of our working lives we would be out of work, short of cash, struggling for survival, what would we do? We would—gasp, choke—save for that rainy day and sail through it. Many do just that, knowing that such dislocations are normal. The grasshoppers, feeling entitled 100% of the time, just lie back, moan and ask for handouts. When they get the handout, they go out and buy something frivolous they don’t need. ’Twas ever thus.
Consider, in context, the trillion-dollar bailout being enacted to jumpstart the U.S. economy, which relies for 70% of its commercial activity on consumer action. The annual GDP is ~$14 trillion. So the commitment represents a hair over 7% of GDP —over the minimum three-year life of the program, that’s less than 2½% per year. Any organization or person who can’t handle this sort of effect should opt off the Planet and take up some other activity.
While the mindless media gasp and stretch their eyes, punching up those BILLIONS as they love to do, gulling the rubes (for money), sensible people think, analyze, plan and take action. This approach will serve them well as we oscillate back to full function. When is this predicted? 2010—one year’s pain. Aw, how sad.
This is a good time to start a new company: nowhere to go but up, in a world thirsting for courageous new ideas in many fields: biotech, nanotech, energy, computing, medicine, ‘green’ vehicles . . . an endless, global list.
Of course opportunism and greed, legitimate or underhanded, also thrive, as they did in the Great Depression. The ‘haves’ take the opportunity to buy up distressed . . . everything. They know that the situation will improve. They end up owning . . . almost everything. You can, as they say, look it up.
What will happen this time? Stay tuned. But be sure that real winners will win and whining losers will lose. Is the glass 90% full or 10% empty. Your choice?

The Art of Giving- The Time is Now

Minnette Coleman — Thu, 12 Feb 2009 15:41:04 +0000

You tell yourself you don’t have a dime to spare. You wish the man in the ragged coat would withdraw his hand and not ask for your help. You are tired of seeing the homesless person with the dog sleeping outside on the cold ground. You wish the agencies to assist the needy would loose your phone number.

How can you possibly help? How can you give? You want to make an example for your children but financially you are barely surviving. They need to learn to save, to earn, to do without. You remind them of their good fortune: the roof over their head, the meals they never miss, they clothes they have to wear. They need to learn that even those with less give. In fact studies have shown that the poor often donate and give more than the middle class. They know what its like to do without so they share what little they have. It is an example for all of us to follow in these times. There is an art to giving.

Not everyone can give money, let’s start there. Right now most of us are in that down to our last dime feeling. We need to hold on to what we have because we suddenly understand the full meaning of the statement tomorrow is not promised. We each have something to give other than whats in our wallets and there are receipients for our non-monetary generosity.

Volunteer- There are many places that need people who can work phone lines, teach computer skills, paint walls, etc.
Donate items – Cutbacks have caused many libraries, especially in public schools, to go without. Give books in good shape that can enhance reading programs. In winter people need coats and warm clothes. You can actually find shelters where women escaping abuse will need children’s clothes and items for themselves. Make sure that what you give is something that you would wear in premium condition, not something you would through away.
Shop for neighbors- The elderly and shut ins may not be able to afford to hire people to go to the grocery store for them or pick up their prescriptions. Take their list when you go shopping. Kinder still when they offer to pay you for gas and time turn it down.
Help someone with their resume. Especially a fellow employee who has just learned he has lost his job.
Take the elderly to the doctor-You will get to know your neighbors as you do a good deed. They have a lot of knowledge to offer.
Read to someone- To a school class, to the blind, to a person in a hospital
Seperate your recycling in order to help give someone an income- In places where people can get 5 cents per bottle it makes sense to seperate your trash so that someone can financially benefit from it. Just think 20 bottles or cans only bring $1.00. It may mean something to eat to the person collecting the items.

That is just a short list of what you can do to help others and feel good about yourself. If you are daring enough you can approach your children to see what they are thinking, what they would like to give. You may be surprised at the ideas that come from the young. Do not be afraid, be proud. Once they see you give and they learn to give it will be easier for them to understand why they cannot always receive.

The time to start is now.

Titanic and the Economics of Class

Bill Hazelgrove — Wed, 21 Jan 2009 17:50:08 +0000

Titanic hit an iceberg and sank. When they rescued the fifteen hundred people from the icy Atlantic they found a disproportionate amount of first class people. There were some from second class, further down in the ship, but very few from steerage down in the bowels. It seems the Captain and his crew had concentrated on saving the wealthy over the the middle class and lower class passengers. When a crisis occurs there is a run for the boats and those of privilege usually get in. Recently, there was an interesting quote from a banker in the New York Times. He said they were going to use the bail out money to shore up their accounts and invest in “banks of interest”. In other words, the bankers are going to buy other banks with the bail out money and make sure they have enough reserves to weather the storm. They are going to make sure they are in the boats and well away from the ship. The real tragedy of Titanic was the fact that over a thousand people drowned in the frigid waters in range of people sitting in half filled boats. Yet, no one returned to help them. They were afraid, they later said, of being swamped. At the Bankers Association Meeting other bankers reiterated the mantra that they were going to concentrate on opportunities but that they had no real plans to lend the bailout money to consumers. So the American middle class, strangling on a lack of credit and asking for this needed money, will not get it. The boats will not return. When the inquiry into the sinking convened in New York, there were many who cried class warfare. The immigrants in steerage mostly died while the upper crust of the world managed to get into the few lifeboats. The officials of White Star said there was no choosing between classes of passengers, but there were simply not enough boats. The banks are still hemorrhaging. Bank of America just asked for another twenty billion and experts say that still won’t be enough. Seems all that speculating in derivatives and mortgage backs was kept off the books. So they will continue to suck up all the bail out money and the middle class will get none of it. The gilded top will sail through for a while but will falter because the coal of any steam engine is the lifeblood and the middle class is the coal of our economy. Even the bankers must know their ship is taking water faster than they can bail now. Like Captain Smith, who asked his ship’s architect about Titanics fate with four of her watertight compartments gashed open, the bankers know the words floating up from the depths of our economic distress…she will founder.

http://www.billhazelgrove.com/