Goldbugs unite!

http://online.wsj.com/article/SB123440593696275773.html

The Wall Street Journal, 11 February 2009.

Joe Gwinn

I'll admit right up front that I grasp economics about as well as I
grasp brain surgery. But I wonder, if one can suddenly exchange US paper
money for gold, what's to stop China and other countries that have been
buying our debts from cashing in the worthless paper and taking our gold
reserves? Unless the paper money was very seriously devalued first, this
would strip our gold reserves and leave us with nothing but worthless
greenbacks that nobody trusts anymore.

Jon

"Jon Anderson" wrote in message
...
I'll admit right up front that I grasp economics about as well as I grasp
brain surgery. But I wonder, if one can suddenly exchange US paper money
for gold, what's to stop China and other countries that have been buying
our debts from cashing in the worthless paper and taking our gold
reserves?
Unless the paper money was very seriously devalued first, this would strip
our gold reserves and leave us with nothing but worthless greenbacks that
nobody trusts anymore.

Jon


A very good question. And the answer is...nothing would stop them.

France tried it in 1971. That's one reason why we have fiat money now.

--
Ed Huntress

"Ed Huntress" wrote:

A very good question. And the answer is...nothing would stop them.

France tried it in 1971. That's one reason why we have fiat money now.

In response to the Great Depression, and at the request of President Franklin D.
Roosevelt, Congress passed the Gold Reserve Act on 30 January 1934; the measure
nationalized all gold by ordering the Federal Reserve banks to turn over their supply to
the U.S. Treasury. In return the banks received gold certificates to be used as reserves
against deposits and Federal Reserve notes. The act also authorized the president to
devalue the gold dollar so that it would have no more than 60 percent of its existing
weight. Under this authority the president, on 31 January 1934, fixed the value of the
gold dollar at 59.06 cents.

Bibliography

Friedman, Milton, and Anna Jacobson Schwartz. A Monetary History of the United States,
1867–1960. Princeton, N.J.: Princeton University Press, 1963.

"Wes" wrote in message
...
"Ed Huntress" wrote:

A very good question. And the answer is...nothing would stop them.

France tried it in 1971. That's one reason why we have fiat money now.

In response to the Great Depression, and at the request of President
Franklin D.
Roosevelt, Congress passed the Gold Reserve Act on 30 January 1934; the
measure
nationalized all gold by ordering the Federal Reserve banks to turn over
their supply to
the U.S. Treasury. In return the banks received gold certificates to be
used as reserves
against deposits and Federal Reserve notes. The act also authorized the
president to
devalue the gold dollar so that it would have no more than 60 percent of
its existing
weight. Under this authority the president, on 31 January 1934, fixed the
value of the
gold dollar at 59.06 cents.

Bibliography

Friedman, Milton, and Anna Jacobson Schwartz. A Monetary History of the
United States,
1867-1960. Princeton, N.J.: Princeton University Press, 1963.

Don't start doing a Gunner on us, Wes. g From then until 1971, central
banks of all countries member of the Breton Woods Agreement were empowered
to demand gold of other countries in exchange for their currency. France
took a run at ours, and Nixon responded by taking us off the gold standard
so the French couldn't bleed our reserves.

Meantime, as you may recall from an earlier discussion, there are two issues
he One is being on a gold standard, like we had until 1971, and the other
is allowing free exchange by individuals between gold and currency. That's
what FDR shut off -- of necessity, during the Depression. But we remained on
a gold standard. That limited our monetary policy and made us vulnerable to
actions by unfriendly or semi-friendly countries, like France at the time,
should they try to beggar us.

Most of the sophisticated gold bugs with a background in economics want the
latter, but care less about the former. The hard-bitten ones want both.

BTW, unless there is some newer law of which I'm unaware, the states can
mint gold coins.

--
Ed Huntress

"Ed Huntress" wrote:

Don't start doing a Gunner on us, Wes. g From then until 1971, central
banks of all countries member of the Breton Woods Agreement were empowered
to demand gold of other countries in exchange for their currency. France
took a run at ours, and Nixon responded by taking us off the gold standard
so the French couldn't bleed our reserves.


I was trying to find a link to confirm what I remembered. I seems we told other nations
we would pay them at 60% back during FDR's time.

From what I can tell, the gold standard limits growth. Of course if growth is fictitios,
should it not be limited?

I don't have a jones for gold. I do believe that rational instruments of exchange should
be used. I wonder what our fico score would be if rated as a person vs a nation?

Wes
--
"Additionally as a security officer, I carry a gun to protect
government officials but my life isn't worth protecting at home
in their eyes." Dick Anthony Heller

On Thu, 12 Feb 2009 09:44:17 -0500, Joseph Gwinn
wrote:

Goldbugs unite!

http://online.wsj.com/article/SB123440593696275773.html

The Wall Street Journal, 11 February 2009.

Joe Gwinn
----------------
While appealing, history is not on your [or any one else's] side.

We have tried gold backed currency.

We have tried gold/silver backed currency. [bimetallism]

We have tried silver backed currency [silver certificates]

We are currently using fiat currency. [Federal Reserve note]

All of these have failed in one way or another, and inflation,
while slower with some and faster with others is still a
continuing problem, with periodic deflation sinking the entire
economy from time to time.

When you always do what you have always done, you will always get
what you always got. Insanity is repeating the same actions and
expecting a different outcome.

Somewhere there is a fundamental flaw in the economic model, and
more of the same only better, faster, cheaper, etc. is not the
cure.

IMNSHO, it is vital to implement a "zero based" [no prior
assumptions] critical/objective study of the US economy to try to
determine what went and what will go wrong, and then take
preventative measures to avoid yet another boom/bust cycle, as
these appear to be increasing in both amplitude and frequency.

Given the literally trillions of dollars being spent on rescue
efforts [c. 10 trillion in the US alone at last count], it would
appear to be common sense to spend a few hundred million to a few
billion to determine just WTF is going on here.

These periodic economic meltdowns, now global in nature, have
costs far beyond money as these frequently precede domestic
socio-political catastrophe [e.g. Weimar Germany/Tsarist Russia]
and major armed conflicts.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Just follow the money.

Who profits at times like this?

It really isn't difficult at all. Just hard to admit, and even harder to
change.

"Elliot G" wrote in message
m...

Just follow the money.

Who profits at times like this?

It really isn't difficult at all. Just hard to admit, and even harder to
change.

The short-selling ghouls.

I'm all for tarring and feathering them. d8-)

--
Ed Huntress

I just can't resist this one... It's just TOO good to pass.
(my apologies to all those who kill filed me for this very behavior)

http://www.nytimes.com/2009/02/11/bu...wall.html?_r=3

New York Times

Some Banks Want to Return Government Money

By LOUISE STORY
Published: February 10, 2009

Wall Street banks have taken billions of taxpayer dollars. Now some of them are
starting to wonder if they should give the money back.

dot dot dot (snippage to get to the good part quickly)

Industry groups say the new rules are unfair.

“The contract says that Congress can change the law, and we were obviously
concerned,” said Scott Talbott, senior vice president for government affairs for
the Financial Services Roundtable. “But we didn’t think they would tip the
scales this far. The more of these retroactive rules they place on institutions,
the more institutions will look for an exit strategy.”


LOL!

Mr. Talbott must not have read his credit card agreement lately

cavelamb wrote:


“The contract says that Congress can change the law, and we were obviously
concerned,” said Scott Talbott, senior vice president for government affairs for
the Financial Services Roundtable. “But we didn’t think they would tip the
scales this far. The more of these retroactive rules they place on institutions,
the more institutions will look for an exit strategy.”


LOL!

Mr. Talbott must not have read his credit card agreement lately


Damn. I was mentally composing a snide remark about credit card agreements as I read your
post and you beat me to it.

Wes

On Feb 12, 10:15*am, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Thu, 12 Feb 2009 09:44:17 -0500, Joseph Gwinn

wrote:
Goldbugs unite!

http://online.wsj.com/article/SB123440593696275773.html

The Wall Street Journal, 11 February 2009.

Joe Gwinn

----------------
snip
When you always do what you have always done, you will always get
what you always got. *Insanity is repeating the same actions and
expecting a different outcome.
snip
http://dollardaze.org/blog/?post_id=00107

On 2009-02-12, F George McDuffee wrote:
Somewhere there is a fundamental flaw in the economic model, and
more of the same only better, faster, cheaper, etc. is not the
cure.

The fundamental flaw is the highly leveraged banking model where
investments are made by means of lending, instead of taking equity.

I read somewhere, which I cannot prove with certainty, that over the
last several decades banking has not been profitable to the society,
once you factor in the costs of bailouts.

i

On Thu, 12 Feb 2009 12:59:42 -0600, Ignoramus13596
wrote:

On 2009-02-12, F George McDuffee wrote:
Somewhere there is a fundamental flaw in the economic model, and
more of the same only better, faster, cheaper, etc. is not the
cure.

The fundamental flaw is the highly leveraged banking model where
investments are made by means of lending, instead of taking equity.

I read somewhere, which I cannot prove with certainty, that over the
last several decades banking has not been profitable to the society,
once you factor in the costs of bailouts.

i
----------------
I have seen the same observation, and it seems plausible. Indeed,
based on not only the current bailouts, but the very considerable
losses that are sure to result from their operations
[mark-to-market CDOs], more than likely the banks, in aggregate,
have generated huge net real GDP losses, in addition to the royal
"screw job" they have given their stockholders. This is a shame,
because the contributions of the local and regional banks show
that this should be [and is, under proper leadership] a vital
wealth generating, not a wealth destroying sector.

Several other industries are also in capital sink category, civil
aviation being a prime example.

If it were possible to factor in all of the cost shifting, cost
externalization, and non-monitary factors such as "quality of
life," I am sure there would be a large number of industry
sectors the country would be better off not having.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Here the ever-acerbic, but very to the point editorial by Charles
Munger, Berkshire Hathaway vice chairman, in Washington Post. Munger
is a republican. Berksire owns 21% of WPO.

http://www.washingtonpost.com/wp-dyn...021003122.html

How We Can Restore Confidence

» Top 35 Opinion Articles
» Most Popular on washingtonpost.com
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By Charles T. Munger
Wednesday, February 11, 2009; Page A19

Our situation is dire. Moderate booms and busts are inevitable in
free-market capitalism. But a boom-bust cycle as gross as the one that
caused our present misery is dangerous, and recurrences should be
prevented. The country is understandably depressed -- mired in issues
involving fiscal stimulus, which is needed, and improvements in bank
strength. A key question: Should we opt for even more pain now to gain
a better future? For instance, should we create new controls to stamp
out much sin and folly and thus dampen future booms? The answer is
yes.
This Story

*
In the Tanks: A Debate on the Financial Rescue Plan
*
Geithner's Magic Tricks
*
Playing Down the Price Tag of the Fiscal Stimulus
*
A Rush-and-Shush Rescue
*
How We Can Restore Confidence
*
An Unfinished Product

View All Items in This Story
View Only Top Items in This Story

Sensible reform cannot avoid causing significant pain, which is worth
enduring to gain extra safety and more exemplary conduct. And only
when there is strong public revulsion, such as exists today, can
legislators minimize the influence of powerful special interests
enough to bring about needed revisions in law.

Many contributors to our over-the-top boom, which led to the gross
bust, are known. They include insufficient controls over morality and
prudence in banks and investment banks; undesirable conduct among
investment banks; greatly expanded financial leverage, aided by direct
or implied use of government credit; and extreme excess, sometimes
amounting to fraud, in the promotion of consumer credit. Unsound
accounting was widespread.

There was also great excess in highly leveraged speculation of all
kinds. Perhaps real estate speculation did the most damage. But the
new trading in derivative contracts involving corporate bonds took the
prize. This system, in which completely unrelated entities bet
trillions with virtually no regulation, created two things: a gambling
facility that mimicked the 1920s "bucket shops" wherein
bookie-customer types could bet on security prices, instead of horse
races, with almost no one owning any securities, and, second, a large
group of entities that had an intense desire that certain companies
should fail. Croupier types pushed this system, assisted by academics
who should have known better. Unfortunately, they convinced regulators
that denizens of our financial system would use the new speculative
opportunities without causing more harm than benefit.

Considering the huge profit potential of these activities, it may seem
unlikely that any important opposition to reform would come from
parties other than conventional, moneyed special interests. But many
in academia, too, will resist. It is important that reform plans mix
moral and accounting concepts with traditional economic concepts. Many
economists take fierce pride in opposing that sort of mixed
reasoning. But what these economists like to think about is
functionally intertwined, in complex ways, with what they don't like
to think about. Those who resist the wider thinking are acting as
engineers would if they rounded pi from 3.14 to an even 3 to simplify
their calculations. The result is a kind of willful ignorance that
fails to understand much that is important.

Moreover, rationality in the current situation requires even more
stretch in economic thinking. Public deliberations should include not
only private morality and accounting issues but also issues of public
morality, particularly with regard to taxation. The United States has
long run large, concurrent trade and fiscal deficits while, to its own
great advantage, issuing the main reserve currency of a deeply
troubled and deeply interdependent world. That world now faces new
risks from an expanding group of nations possessing nuclear
weapons. And so the United States may now have a duty similar to the
one that, in the danger that followed World War II, caused the
Marshall Plan to be approved in a bipartisan consensus and rebuild a
devastated Europe.

The consensus was grounded in Secretary of State George Marshall's
concept of moral duty, supplemented by prudential considerations. The
modern form of this duty would demand at least some increase in
conventional taxes or the imposition of some new consumption taxes. In
so doing, the needed and cheering economic message, "We will do what
it takes," would get a corollary: "and without unacceptably devaluing
our money." Surely the more complex message is more responsible,
considering that, first, our practices of running twin deficits depend
on drawing from reserves of trust that are not infinite and, second,
the message of the corollary would not be widely believed unless it
was accompanied by some new taxes.

Moreover, increasing taxes in some instances might easily gain
bipartisan approval. Surely both political parties can now join in
taxing the "carry" part of the compensation of hedge fund managers as
if it was more constructively earned in, say, cab driving.

Much has been said and written recently about bipartisanship, and
success in a bipartisan approach might provide great advantage
here. Indeed, it is conceivable that, if legislation were adopted in a
bipartisan way, instead of as a consequence of partisan hatred, the
solutions that curbed excess and improved safeguards in our financial
system could reduce national pain instead of increasing it. After the
failure of so much that was assumed, the public needs a restoration of
confidence. And the surest way to gain the confidence of others is to
deserve the confidence of others, as Marshall did when he helped cause
passage of some of the best legislation ever enacted.

Creating in a bipartisan manner a legislative package that covers many
subjects will be difficult. As they work together in the coming weeks,
officials might want to consider a precedent that helped establish our
republic. The deliberative rules of the Constitutional Convention of
1787 worked wonders in fruitful compromise and eventually produced the
U.S. Constitution. With no Marshall figure, trusted by all, amid
today's legislators, perhaps the Founding Fathers can once more serve
us.

The writer, a Republican, is vice chairman of Berkshire Hathaway Inc.,
which owns 21 percent of The Washington Post Co.'s common stock.

The Wall Street Journal, 11 February 2009.

Joe Gwinn
----------------
While appealing, history is not on your [or any one else's] side.

We have tried gold backed currency.

We have tried gold/silver backed currency. [bimetallism]

We have tried silver backed currency [silver certificates]

We are currently using fiat currency. [Federal Reserve note]

All of these have failed in one way or another, and inflation,
while slower with some and faster with others is still a
continuing problem, with periodic deflation sinking the entire
economy from time to time.

When you always do what you have always done, you will always get
what you always got. Insanity is repeating the same actions and
expecting a different outcome.

Somewhere there is a fundamental flaw in the economic model, and
more of the same only better, faster, cheaper, etc. is not the
cure.

IMNSHO, it is vital to implement a "zero based" [no prior
assumptions] critical/objective study of the US economy to try to
determine what went and what will go wrong, and then take
preventative measures to avoid yet another boom/bust cycle, as
these appear to be increasing in both amplitude and frequency.

Given the literally trillions of dollars being spent on rescue
efforts [c. 10 trillion in the US alone at last count], it would
appear to be common sense to spend a few hundred million to a few
billion to determine just WTF is going on here.

These periodic economic meltdowns, now global in nature, have
costs far beyond money as these frequently precede domestic
socio-political catastrophe [e.g. Weimar Germany/Tsarist Russia]
and major armed conflicts.


We already know the cause of these periodic meltdowns. It's called
Capitalism. What's the big mystery? Just look at history and you see the
same thing happens over and over to all capitalistic systems. They boom and
then bust over and over. Business competition ends in monopoly and the
wealth of a nation winds up in the hands of an elite few. There has been
something like 13 recessions since WWII. That's pretty regular if you ask
me. The only thing preventing them from being much worse than they have been
has been the intervention of government. Without it the booms and busts are
more often and more severe.

Capitalism is a system of winners and losers. Most are losers. When the
busts come you get more losers than in good times but that is how the system
works. Don't like what is happening now? Then you need to do a lot more than
just make a few changes at the margins. Free markets have once again done
what they have always done. The question is why people don't ever learn? If
you let the market decide everything for you then you have to accept the
damage that comes with a market based economic system. It seems that as bad
as it's getting that most Americans are still willing to accept the
downturns like this one. Maybe one of these days more people will see the
folly of the idea that the Bush administration provided us; "let the market
decide". Well, it did. How do you like it? Markets have no mercy.

Hawke

On Thu, 12 Feb 2009 20:11:23 -0800, "Hawke"
wrote:



The Wall Street Journal, 11 February 2009.

Joe Gwinn
----------------
While appealing, history is not on your [or any one else's] side.

We have tried gold backed currency.

We have tried gold/silver backed currency. [bimetallism]

We have tried silver backed currency [silver certificates]

We are currently using fiat currency. [Federal Reserve note]

All of these have failed in one way or another, and inflation,
while slower with some and faster with others is still a
continuing problem, with periodic deflation sinking the entire
economy from time to time.

When you always do what you have always done, you will always get
what you always got. Insanity is repeating the same actions and
expecting a different outcome.

Somewhere there is a fundamental flaw in the economic model, and
more of the same only better, faster, cheaper, etc. is not the
cure.

IMNSHO, it is vital to implement a "zero based" [no prior
assumptions] critical/objective study of the US economy to try to
determine what went and what will go wrong, and then take
preventative measures to avoid yet another boom/bust cycle, as
these appear to be increasing in both amplitude and frequency.

Given the literally trillions of dollars being spent on rescue
efforts [c. 10 trillion in the US alone at last count], it would
appear to be common sense to spend a few hundred million to a few
billion to determine just WTF is going on here.

These periodic economic meltdowns, now global in nature, have
costs far beyond money as these frequently precede domestic
socio-political catastrophe [e.g. Weimar Germany/Tsarist Russia]
and major armed conflicts.


We already know the cause of these periodic meltdowns. It's called
Capitalism. What's the big mystery? Just look at history and you see the
same thing happens over and over to all capitalistic systems. They boom and
then bust over and over. Business competition ends in monopoly and the
wealth of a nation winds up in the hands of an elite few. There has been
something like 13 recessions since WWII. That's pretty regular if you ask
me. The only thing preventing them from being much worse than they have been
has been the intervention of government. Without it the booms and busts are
more often and more severe.

Capitalism is a system of winners and losers. Most are losers. When the
busts come you get more losers than in good times but that is how the system
works. Don't like what is happening now? Then you need to do a lot more than
just make a few changes at the margins. Free markets have once again done
what they have always done. The question is why people don't ever learn? If
you let the market decide everything for you then you have to accept the
damage that comes with a market based economic system. It seems that as bad
as it's getting that most Americans are still willing to accept the
downturns like this one. Maybe one of these days more people will see the
folly of the idea that the Bush administration provided us; "let the market
decide". Well, it did. How do you like it? Markets have no mercy.

Hawke

-------------
Sounds good, even plausible, but until the data is compiled and
examined we don't know. For all we *KNOW* sunspots may be the
problem.

For the first time with the computerization of most significant
transactions, instant communications via the net/web, and the
development of super computers, we have the opportunity to not
just theorize but investigate in detail. Indeed, the various
bailout schemes provide the perfect opportunity to "inject" money
into a sector and then track what happens, sort of a gigantic
"design of experiments" project for the whole societ/economy.

One major problem in the US is that much of what is public
economic data/statistics in other countries such as Canada, NZ,
Australia, etc. is now privatized, and not available unless you
are willing to spend thousands of dollars. We [the US] appear to
still accumulate and reduce much of the data through government
agencies such as the BLS and BEA, but this is "sold" to private
firms for distribution at a profit.

If you follow the NG discussions, you know that I am attempting
to determine what process/criteria was used by the mandarins to
decide what economic sectors get the money injections.

I am having little success as current economic data is not
available or is available only in highly aggregated format.

Indications now are that the output multiplier data by SIC/NASIC
for commodity output, wage out put and employment output [number
of people hired], plus possibly some others was indeed used, but
that some sort of weighting was used for the data items to
produce an aggregate "score" so the rank order on this "score" of
the SIC/NASIC industries was what the three pigtail mandarins
thought it should be, e.g. none of that nasty old manufacturing
(that we just got rid of), but plenty of information technology,
financial services, education, and medical jobs requiring college
credentials.

Bloomberg already filed FOIA requests for this and several other
"rescue/rejuvination" related items and was told in effect "blow
it out your ear."

Even if the Adam Smith model is no longer functional [it had a
good run, 200 years ain't bad] in the "brave new world order,"
until and unless we do the research, we won't know what to
replace it with, and all we can do is shuffle the deck and hope
for better luck on the draw next time. I know as a country and
species we can [and should] do better than this....


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

"F. George McDuffee" wrote in message
...
On Thu, 12 Feb 2009 20:11:23 -0800, "Hawke"
wrote:



The Wall Street Journal, 11 February 2009.

Joe Gwinn
----------------
While appealing, history is not on your [or any one else's] side.

We have tried gold backed currency.

We have tried gold/silver backed currency. [bimetallism]

We have tried silver backed currency [silver certificates]

We are currently using fiat currency. [Federal Reserve note]

All of these have failed in one way or another, and inflation,
while slower with some and faster with others is still a
continuing problem, with periodic deflation sinking the entire
economy from time to time.

When you always do what you have always done, you will always get
what you always got. Insanity is repeating the same actions and
expecting a different outcome.

Somewhere there is a fundamental flaw in the economic model, and
more of the same only better, faster, cheaper, etc. is not the
cure.

IMNSHO, it is vital to implement a "zero based" [no prior
assumptions] critical/objective study of the US economy to try to
determine what went and what will go wrong, and then take
preventative measures to avoid yet another boom/bust cycle, as
these appear to be increasing in both amplitude and frequency.

Given the literally trillions of dollars being spent on rescue
efforts [c. 10 trillion in the US alone at last count], it would
appear to be common sense to spend a few hundred million to a few
billion to determine just WTF is going on here.

These periodic economic meltdowns, now global in nature, have
costs far beyond money as these frequently precede domestic
socio-political catastrophe [e.g. Weimar Germany/Tsarist Russia]
and major armed conflicts.


We already know the cause of these periodic meltdowns. It's called
Capitalism. What's the big mystery? Just look at history and you see the
same thing happens over and over to all capitalistic systems. They boom
and
then bust over and over. Business competition ends in monopoly and the
wealth of a nation winds up in the hands of an elite few. There has been
something like 13 recessions since WWII. That's pretty regular if you ask
me. The only thing preventing them from being much worse than they have
been
has been the intervention of government. Without it the booms and busts
are
more often and more severe.

Capitalism is a system of winners and losers. Most are losers. When the
busts come you get more losers than in good times but that is how the
system
works. Don't like what is happening now? Then you need to do a lot more
than
just make a few changes at the margins. Free markets have once again done
what they have always done. The question is why people don't ever learn?
If
you let the market decide everything for you then you have to accept the
damage that comes with a market based economic system. It seems that as
bad
as it's getting that most Americans are still willing to accept the
downturns like this one. Maybe one of these days more people will see the
folly of the idea that the Bush administration provided us; "let the
market
decide". Well, it did. How do you like it? Markets have no mercy.

Hawke

-------------
Sounds good, even plausible, but until the data is compiled and
examined we don't know. For all we *KNOW* sunspots may be the
problem.

For the first time with the computerization of most significant
transactions, instant communications via the net/web, and the
development of super computers, we have the opportunity to not
just theorize but investigate in detail. Indeed, the various
bailout schemes provide the perfect opportunity to "inject" money
into a sector and then track what happens, sort of a gigantic
"design of experiments" project for the whole societ/economy.

One major problem in the US is that much of what is public
economic data/statistics in other countries such as Canada, NZ,
Australia, etc. is now privatized, and not available unless you
are willing to spend thousands of dollars. We [the US] appear to
still accumulate and reduce much of the data through government
agencies such as the BLS and BEA, but this is "sold" to private
firms for distribution at a profit.

If you follow the NG discussions, you know that I am attempting
to determine what process/criteria was used by the mandarins to
decide what economic sectors get the money injections.

I am having little success as current economic data is not
available or is available only in highly aggregated format.

Indications now are that the output multiplier data by SIC/NASIC
for commodity output, wage out put and employment output [number
of people hired], plus possibly some others was indeed used, but
that some sort of weighting was used for the data items to
produce an aggregate "score" so the rank order on this "score" of
the SIC/NASIC industries was what the three pigtail mandarins
thought it should be, e.g. none of that nasty old manufacturing
(that we just got rid of), but plenty of information technology,
financial services, education, and medical jobs requiring college
credentials.

Bloomberg already filed FOIA requests for this and several other
"rescue/rejuvination" related items and was told in effect "blow
it out your ear."

Even if the Adam Smith model is no longer functional [it had a
good run, 200 years ain't bad] in the "brave new world order,"
until and unless we do the research, we won't know what to
replace it with, and all we can do is shuffle the deck and hope
for better luck on the draw next time. I know as a country and
species we can [and should] do better than this....


You can investigate all you want but you will still come up with the same
results. Which is that it's the system itself that doesn't work. You're
right about it working pretty well for a couple hundred years but it's no
longer doing the job. It's also as simple as us making the country into a
financial center instead of a manufacturing one. But we really had no other
choice. Last I heard our manufacturing was only 12% of GDP. The big problem
is that finance was hitting 21%. We were making all our money from financial
services. Just look at how much of the stock market was made up by the
financial sector until lately. It was the major sector. The deleveraging
process has taken it down to 10% of the stock market value.

As I said, this is not new. In Kevin Philips' book he details how every
country that has gone from the world's top manufacturing nation to the top
financial one has crashed. This has happened to the Dutch, French, British,
and now us. In a capitalistic system somebody has to lose and with a
worldwide free market that means most countries are going to be losers. We
tried to stay on top by resorting to financial manipulations and not by
making products to sell to buyers. That doesn't work. In a global
marketplace we probably just don't have what it takes anymore to be on top.
So, should we simply accept that we are going to be in the category of loser
nations? Or do we do something new and innovative? I'm for really trying new
things to keep our people from declining economically. I don't think most
businessmen are courageous enough to make big changes. After all, most
businessmen are conservative. I don't have the answers but I do know that
what we did in the past will not work in the future. I'm for
experimentation. I'm also for dumping the idea that markets will fix
everything. Hell, it creates as many as it solves, if not more. Our problem
isn't money it's people. The ones running the show have bungled things. We
have tried to make changes by electing Obama. The question is will he make
the bold changes needed or will the forces of the status quo stymie him.
Only time will tell.

Hawke

On Thu, 12 Feb 2009 21:18:54 -0800, "Hawke"
wrote:
snip
You can investigate all you want but you will still come up with the same
results. Which is that it's the system itself that doesn't work. You're
right about it working pretty well for a couple hundred years but it's no
longer doing the job. It's also as simple as us making the country into a
financial center instead of a manufacturing one.
snip
----------
Again, while this seems plausible, what hard data is there to
back this up? What are the mechanisms involved? And, above all
what specific things be changed?

In automotive terms, is the problem the car is running bad
because of a clogged fuel filter and a bad tank of gas, or are we
in a car careening along the interstate at high speed in heavy
traffic, next to a gasoline tanker, with the wheels about to come
off and the gas tank set to explode in a fireball, ala Pinto?
Again no one knows.

What seems to be true is the famous observation "Capitalism is
fine, its the Capitalists that are the problem."

Even in this bon mot, there are some serious difficulties in that
most of the personalities [negatively] involved in the current
situation did not use their *OWN* money as would be assumed from
the name Capitalist, but rather were "hired hands" using other
peoples money, taking the lion's share of any gains, with the
stockholders fully absorbing any losses, and in numerous cases
simply making off with the funds, i.e. Enron, Madoff.

I think it was Ed that observed that a major portion of the
problems with economics is that it is far too limited in the
range of phenomena and data it examines, particularly when it
attempts to project likely results/outcomes.

Economics is also overly prone to simplifying assumptions that
make calculations possible, if not easy, which are totally at
odds with everyone's experience, the most fundamental of which
may be the assumption of rationality of the participants, with a
close second being the assumption of information availability.

The historical record shows that popular myth and personal
"scripts" [about the way things are and how the world operates]
have far more impact than any hard data [even if it is available]
and rational calculation [even if the individual knows how to
perform/interpret].

I suggest the following specific immediate actions will help
stabilize the current economy, although these will provoke howls
of outrage from the people making/extracting considerable profit
from the existing system:

(1) No more sales on margin of stocks, bonds or other financial
instruments. This will not prevent people from borrowing money
to invest, but they will have to do it outside their broker or
the market. It is the same logic that prohibits ATMs in casinos.

(2) Elimination of special capital gains tax treatment on the
profits from sales of stocks or other assets held for less than 3
years. Possibly a graduated tax should be imposed with a rate
100% of any gain for an asset held less than ten days, tapering
to the standard tax rate over 3 years, with further rate
reduction up to 5 years, possibly to zero.

(3) Eliminate the tax deductibility of all interest, for
individuals and corporations.

(4) Impose a small [e.g. 0.1%] transaction tax on all exchange
stock, bond, foreign exchange trades. The tax is so small that
the effect will be minimal on transactions based on real needs
(as these occur relatively infrequently), but will make
speculative churning unprofitable.

(5) Impose unitary taxation on interstate/transnational
corporations to minimize transfer pricing and tax evasion. That
is, if 50% by dollar volume of a corporation's sale occur in
state "X," then 50% of the corporate profits are assumed to have
been earned in state "X" and are subject to that state's
income/franchise tax. The same thing for countries. If 75% of a
corporations sales are in the United States, then 75% of its
profits were earned here, and subject to US taxes.

(6) Revise the corporate bankruptcy laws to prevent extended
operation under bankruptcy protection. One year from filing,
with another year extension possible if the referee can see
substantial progress, but in any case chapter 7 liquidation after
2 years. The record indicates that zombie corporations operating
under the advantages of bankruptcy "suck the life out" of the
health corporations in the same economic sector, as well as being
capital sinks in the aggregate.

(7) Elimination of the corporate income tax, with the
substitution of a much lower gross receipts tax with no
exemptions. This will simplify the tax returns, and insure that
the corporations cover at least part of the public costs of their
operations. A graduated gross receipts tax could be helpful in
discouraging the formations of companies that are "too big to
fail."

(8) Elimination of the tax deductibility on US tax returns for
the construction, operation, and depreciation of plants,
facilities, and machinery not located in the US. There appears
no good reason why the US taxpayers should promote in any way the
off shoring of jobs and facilities. Any tax breaks or deductions
should be at the discretion of the country where the
plant/facility is located, and deducted from that tax bill, not
the US tax bill.

There are many more items that can be suggested.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

You can't make this stuff up. Capitalism in action....

============
California’s Napolitano Makes $220,000 From 1998 Campaign Loan

By Timothy J. Burger

Feb. 13 (Bloomberg) -- During a decade in Congress, California
Representative Grace Napolitano has pocketed more than $200,000
of political contributions by charging as much as 18 percent
interest on money she loaned to her own campaign.

The suburban Los Angeles Democrat made the $150,000 loan in 1998,
when she was first elected to the U.S. House of Representatives.
Through Dec. 31, her campaign committee has used donations to pay
Napolitano $221,780 of interest while reducing the principal by
just $64,727, a review of her Federal Election Commission filings
shows.

snip

For Napolitano, a 72-year-old grandmother of 14, the campaign IOU
has been a profitable asset, far outperforming stocks since the
loan started accruing interest in May 1998. Over the same period,
an investment in the Standard & Poor’s 500 stocks, with
reinvested dividends, would have lost more than 7 percent,
according to Bloomberg data.

In the first five months of 2008, Napolitano’s campaign paid her
almost $68,000 of interest, according to FEC records. An
additional $15,227 of principal was paid last May.

snip

Biggest Asset

The debt is the biggest asset listed in Napolitano’s
financial-disclosure filings, which don’t include personal
residences. A former Ford Motor Co. secretary, Napolitano
withdrew $150,000 for the loan from an employee-stock retirement
plan. Ford shares, which traded for about $45 in May 1998, closed
yesterday at $1.79.

Napolitano gave the money to her campaign in March 1998 and began
charging 18 percent interest on May 3, 1998, after the deadline
passed for moving the funds into another retirement account
without early withdrawal penalties, according to FEC records.

Napolitano cut the interest charge to 10 percent in July 2006. As
of Dec. 31, the campaign owed $85,273 of principal and $5,549 of
unpaid interest, according to FEC filings.

When the FEC investigated her opponent’s 1998 complaint about the
loan, Napolitano’s lawyer, Diane Fishburn, said the 18 percent
interest rate was “not out of line with the rates on other
unsecured loan transactions.” The FEC concluded that the interest
rate, while “high,” was allowable.

snip
----------------
http://www.bloomberg.com/apps/news?p..._Lw&refer=home
Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Thu, 12 Feb 2009 09:44:17 -0500, Joseph Gwinn
wrote:

Goldbugs unite!

http://online.wsj.com/article/SB123440593696275773.html

The Wall Street Journal, 11 February 2009.

Joe Gwinn
----------------
Looks like someone took your advice to heart.

==========
Agents seize contents of Phoenix bank box connected to huge
mortgage-fraud case
ShareThis
By Denny Walsh

Published: Friday, Feb. 13, 2009

Acting U.S. Attorney Larry Brown said Friday federal agents
seized gold coins estimated to be worth $413,000 from a Phoenix
safe deposit box belonging to former fugitive Christopher J.
Warren of Sacramento, who fled the country in the face of a major
fraud investigation.
snip
Days before he absconded from Las Vegas on a private jet to
Ireland and then on to Lebanon, Warren rented the box under the
name Mark A. Seagrave, the same alias he was traveling under when
arrested, Brown said.

Warren is accused by federal authorities of being a key player in
one of the nation's largest mortgage and investment scams, with
$100 million in losses to lenders and investors calculated thus
far. He is charged in a criminal complaint in Sacramento federal
court with conducting a continuing financial-crimes enterprise
based at Loomis Wealth Solutions in Roseville.

snip

Warren told the crew of the private jet that he was carrying $5
million in gold and showed them some gold. He had arranged to be
met in Beirut by armed escorts. The gold has not been recovered.

When he was picked up in Buffalo, Warren had $70,000 in cash
stashed in a shoe he was wearing and four ounces of platinum
worth nearly $6,000.
-----------
http://www.sacbee.com/latest/story/1624786.html


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Blame Game
Who are the 25 People Most Responsible For the Financial Crisis?
By Alex Jarvis, 9:00 AM on Fri Feb 13 2009, 8,507 views


Time wants to know who you think is most to blame for the current financial
fiasco. They have a neat community polling application that lets you rate people
by their guilt or innocence. Currently at number one: Phil Gramm, chairman of
the Senate Banking Committee from 1995 through 2000. Congratulations, Phil! Or, not.



http://consumerist.com/5152888/who-a...nancial-crisis