Showing posts with label economic collapse. Show all posts
Showing posts with label economic collapse. Show all posts

Thursday, April 12, 2018

CPT Predictions Ten Years Ago - 2008 Presidential Election coverage - Taking Back America – This is My Country!

This is the third installment in a series of ten-year old articles from the Coltons Point Times, a time before Barack Obama was elected President, when he and Hillary were engaged in a titanic battle for the future of the Democratic party and the nation.  How little seems to have changed since then. 


April 1, 2008

Yes it is time for change!

If the people of America want to get control of their country now is the time but it can only happen if they take responsibility for what happens in their country. You see, people seem to have forgotten the rest of the story when it comes to our Bill of Rights. When they published the full title of the Amendments to the Constitution the editors left out part of the title. It should have read the Bill of Rights and Responsibilities.

There is no better generation to fix that problem than the battle tested, Cold War conditioned, oil shortage hardened Baby Boomers who are the only generation of the past century to understand the price of freedom and the dangers of democracy. I think every person who cares and wants things better should wear a tee shirt and paste bumper stickers that proclaim, “This is My Country!”
We can start by telling the politicians who want to be president that we the people will tell them what we need and what to do. Last time I checked they work for us. So the true Agenda for Change will be presented in this series of articles on Taking Back America. The pollsters, political advisors and advertising agencies that put words or sound bytes into the mouths of politicians have it all wrong. They are the very people who got us into this mess.

No we need to give government back to the people, give God back to the government and give meaning back to our Declaration and Constitution. We need to provide what people need, stop promoting what we don’t need, and start seeing government act like our friend and protector rather than a front for greed and power hungry individuals or corporations.

America must be wealthy, not the rulers who try and run or own America. Don’t you think those who claim to know have victimized us for long enough? We want a nation where housing laws protect the homeowners not the mortgage and financial institutions. We want banking laws that protect the citizens not the credit card companies, debt collectors, lawyers and hidden fees.

Our government licenses telephone companies, television and radio stations, banks, mortgage companies, investment banks, doctors and stock brokers among many others, while we regulate the stock market, commodity market (including the price of oil and food), energy companies, interstate commerce, foreign aid and practically every other aspect of our lives. Do you feel protected?

We spend more money protecting oil producing nations, arms dealers, drug companies, banks and investment houses than we do protecting people and that has simply got to change. Look at the cost, $500 billion and 4,000 American lives in Iraq to protect the Arab nations from Arab terrorists, or is it the Arab oil producers from disruption? What do we get? Record oil prices, no effort by OPEC to increase production and lower prices, and the scorn of the world.

Or how about our Afghanistan experience? We spend billions to chase the terrorists out of Afghanistan into hiding in Pakistan, a nation where we spend billions more to protect the military and government that gives the terrorists safe haven. We have no viable foreign policy, we just support the arms dealers of the world who make sure there is always civil unrest, genocide and demigods running amok where we can spend billions more defending people. If America stopped financing war directly and indirectly do you think the arms dealers would spend their own money to cause wars?

Back in the good old USA we have more than enough wars of our own to fight against the destruction of our immune systems by the pharmaceutical companies, the addictions imposed on us by television, video games, hospitals and doctors, the health care industry, the wellness industry, the physical education industry, and all those who think the only way to good health is through the pocketbook.

Then there are the phone companies, banks and credit card companies with their incredible hidden fees and confusing billings, insurance companies that increase rates for reasons having nothing to do with their insurance coverage, the media whose message is always influenced by the advertising dollars it might generate, and the government who works for everyone but the people it is supposed to represent.



Oh it is time for change all right, and the change we need must be cataclysmic to do any good. All the shadowy figures that profit from our difficulties, steal from our treasury and attempt to influence our minds and destroy our wills are counting on us being too weak, too self-centered and too preoccupied to bring about change but I say they are wrong. Once again the bad guys have underestimated the power of freedom and the will of the people.

Proudly display your sign This is My Country and then do what they don’t expect, show you care. Help establish the Agenda for Change that we need, not the one politicians say we need. Start out by making a concerted effort to send a message to the oil profiteers by joining in a national effort to stay at home from Memorial Day until the Fourth of July, Independence Day, and reduce oil and gas consumption as much as possible.

Spend weekends with your family, seeing what you missed in your community, state and surrounding areas. Enjoy the local festivals and events. Turn off television and limit your time on the Internet and we can start to get back our nation. Asking you to save money does not sound like too much to ask. Please share this article with anyone and everyone you can by directing them to: http://coltonspointtimes.blogspot.com/.

Comments and suggestions are welcome.

What are the targets for change?

1. Money Mongers of the Financial Institutions

Who are these people and what threat do they represent? Well, the intricate web of interlocking ownership, access to media, control of pricing in stocks, currency, commodities and bonds, and insulation from scrutiny probably make this the single most powerful force on Earth, capable of controlling governments and destroying opposition without ever getting their own hands dirty. You see they are invisible to the general public.

Financial institutions control the world simply put and they do not serve the world in the process, as serving is not a good return on investment. They set up mutual funds to consolidate investment power and get government to create more sources of funds and turn them over to the financiers to manage such as pension funds, 401K funds, IRAs and many others.

They create financial “experts” to tell us what is happening to our investment markets and how to invest what money we do control completely ignoring the conflicts of interest when the greatest beneficiaries of the advice are the market makers, the very financial institutions whose experts are giving supposedly objective market advice.

What does that mean? The media takes the advice of industry experts and tells us the price of oil is going up because of the potential for a hurricane in the gulf that may or may not disrupt supply lines and drilling operations. A suicide bombing in Iraq shows that the crude oil supply from that country is not stable so a shortage of future oil may result if a bombing of the oil pipelines is successful. Cold weather in American means there will be a shortage of heating oil no matter that there are sufficient inventories already in the country. So the price of oil goes up, and up and up.

Who benefits? The owners of the crude oil, the companies that pay them for the crude, the banks that finance the companies, the stockholders that own shares of the companies, the IRAs, 401Ks, pension funds and mutual funds that pump money into the companies, the companies selling and buying their stocks, or the companies setting market prices? Guess what, all of them could be part of the financial institutions benefiting from the market manipulations caused by the speculative reports on the industry by the media.

So why does the Federal Trade Commission and Securities and Exchange Commission let them do this? The FTC and SEC are supposed to be our government watchdogs protecting the public from unscrupulous financial manipulators. For two years the same financial sector was behind the unethical, immoral and often-illegal manipulation of the sub-prime mortgage markets as well which nearly sent the USA into recession and certainly left millions of homeowners in foreclosure. Where were the federal regulators?

2. Mortgage Lenders – Vampires of the Golden Dream

Even though mortgage lenders can be owned, controlled or manipulated by the financial sector and banking institutions they are often set up independently until they finish preying on an unsuspecting public, having got caught using questionable practices (sub-prime loans for example), using heavy handed tactics, misleading consumers and initiating mortgage foreclosures.

When this happens the lenders now approaching bankruptcy get bought out by the financial and banking sectors that are seeking to acquire real estate property at far below the loan value. So losses are written off, property is acquired far below the loan value, new mortgages are written to resell or refinance the property, a few million people lose their homes due to foreclosures, and the financial institutions now have a new division with secure assets and credit worthy clients.

Of course we then lose sight of the fact illegal mortgages and unethical selling practices caused the bail out cycle to take place. Or that mortgage lenders, sales people, lawyers and credit rating firms were all players in this billion-dollar scam. That closing fees, collection fees and late fees have made someone millions of dollars at the expense of the hapless homeowners.

Finally even the government backed mortgage programs like Fannie Mae and Freddie Mac, (what great names for federal backed mortgage players), not to mention the long list of programs such as VA, Indian, Rural, Low Income and other federal mortgage and housing programs must be ever more vigilant to root out corruption, contract fixing, slipshod construction and repair work, inefficient heating and utilities and other problems that beset our federal and state housing efforts.

3. Credit Card Industry Standards, Fees and Collection Methods

Now this is an area of regulatory meltdown and benign neglect involving federal and state agencies ranging from the FTC to Congress, from the SEC to Justice Department. There is a body of law at both the state and federal levels that regulates these practices but no one seems to pay attention.

The issuance of credit cards through the mail and Internet and the proliferation of offers from credit card companies are astounding. The never-ending changes in interest rates charged, the justification for such changes, the explanation of such practices and the downright deception in consumer information is appalling and predatory.

Fees change constantly for ATM charges, handling, processing, vendor, fraud, security, and any other excuse to stick it to the consumer. Credit rating companies feed information to credit card companies and collection companies making the whole business of debt collection a financial windfall to lawyers, collection agencies, process servers and even the courts. Lies regarding the rights of the cardholder are overwhelming to most people, threatening to them and their credit, and fraught with heavy-handed tactics.

Simply stated there is no protection for people from getting the cards, understanding the changing fees, and especially getting caught in the late payment and collection process. Debts are written off yet collection efforts go full steam. When debts should be forgiven efforts are still made to scare the consumers into making payments. If we allow a credit card company to write off the bad debt, then why is the collection industry pursuing the poor consumer with no money? Why are the bad debts written off years before the debt is forgiven to the consumer?

4. Health Care Industry Cost, Insurance and Unnecessary Treatment

Just look at the facts and there is no doubt this system is broken. In 2006 we spent $2.1 trillion on health care, over $7,026 for every person in the USA, and it took over 16% of our Gross Domestic Product. That is 4.3 times more money than we spent on defense. The cost of health care increases at more than double the inflation rate annually.

At 16% of GDP we have the highest health care costs of any developed nation with the next highest being Switzerland 10.9%, Germany 10.7%, Canada 9.7% and France 9.5%. Americans spent one third more on health care than any of these nations, and while 50 million Americans do not have health insurance all of the citizens in the other nations mentioned receive health care. At our current pace we will be spending $4 trillion on health care in just 7 years, by 2015.

With the war in Iraq one might expect the cost of health care for veterans to be substantial as treatment in the war zone is far improved from earlier wars and for every death of a soldier there are 9 wounded soldiers that return home. Yet the cost of veteran’s health care drops to $5,000 per person, $2,000 less per year than civilians.

What is causing these statistical aberrations? Are we much sicker than citizens of the other nations? Is there a greater medical risk to civilians in America than our soldiers in Iraq? Why are 50 million Americans uninsured when all of the citizens of other nations receive health care?

According to the latest statistics employer paid health insurance premiums in the USA were $11,500 for families and about $4,200 for individuals. That means annual health insurance premiums account for a substantial portion of health care costs. Something is very wrong with the system.

So what is the average educational debt for new doctors coming into the market? According to the Association of American Medical Colleges, the average educational debt of indebted graduates of the class of 2006 (including pre-med borrowing) is $130,571. The average debt of graduating medical students increased in 2006 by 8.5 percent over the previous year. 72 percent of graduates have debt of at least $100,000. 86.6 percent of graduating medical students carry outstanding loans. 40.2 percent of 2006 graduates have non-educational debt, averaging $16,689. Source: AAMC 2006 Graduation Questionnaires.

So how much do they make when they graduate? Cardiologists were the most sought-after specialists last year, fetching salaries ranging from $234,000 to $525,000 and averaging $320,000 a year, according to surveys. Close behind cardiologists are radiologists and orthopedic surgeons. Now why do we loan med students the money when bank financing would be readily available in light of their low risk?

5. Pharmaceutical Industry Proliferation of Prescription Drugs

This can be short and sweet. In 2002 we spent $162 billion on prescription drugs and in 2006 we spent $217 billion on prescription drugs. One out of every five Americans takes 5 or more prescriptions per day. All Americans average 2.9 prescriptions per day. Our senior citizens, who are increasing very rapidly with the aging of the Baby Boomers, averaged $559 for prescriptions in 1992, $1,205 for prescriptions in 2000, and $1,912 in 2005 with spending expected to reach $2,805 in 2010.

Every day it seems the health authorities announce yet another prescription drug that does not work, or whose long-term effects are determined to be more dangerous than expected. Yet every day it seems there are new prescriptions for new diseases. We live longer but spend far more. Kids are over-prescribed with Ritalin and other drugs. They are addicted to drugs they don’t even take raiding medicine cabinets for the new drug culture.

6. FDA (Food and Drug Administration) Drug Approval Process

If drug prices in America have been rising almost five times as fast as inflation then the FDA must assume some of the responsibility as they are the regulatory agency charged with overseeing the over-the-counter and prescription drugs so abundant in our society.

The FDA new drug approval process with layers of clinical animal and human trials is the most costly, most lengthy and often most bizarre in terms of protocols and criteria for approval in the world. It is a process designed for the benefit of wealthy pharmaceutical companies, not for the small and independent research companies and laboratories.

Major pharmaceutical firms have managed to negotiate with FDA for new drug approval even if the drug extends the life expectancy of the patient by just 30 days. Yet when these products are sold to the public no one seems to mention they might only be good for 30 days at a cost of thousands of dollars

Things have gotten so ridiculous in the approval process that television ads for the drug Celebrex contain so many warnings of side effects and drug interactions that the ad actually states “the FDA says the benefits may outweigh the risks” when taking it. Are they crazy? It might be safe to take it?

Human trials approved by FDA require a protocol where half of the patients are given a placebo rather than the drug so results taking the drug can be measured against a control group not taking the drug. Not a bad practice unless the drug is experimental and the disease is going to kill the patient.

For example, stage 3 cancer patients have weeks or months to live. At stage 3 any normal and extremely expensive treatment like chemo, radiation or surgery has already failed. When they are offered a chance to participate in an experiment that might save their life and the option is certain death you might think they would jump at the chance, but that is not the case.

Why would they sign up when only half the people will even receive the treatment, with the other half getting meaningless placebos? If they are in the half that gets the candy and not the drug they die. If they get the drug there is a chance they might live. When you are facing death there should not be a 50-50 chance you won’t get the treatment.

Other problems with the industry include their price gouging, opposition to generic drugs selling for much less, opposition to foreign drugs also selling for much less, payments to doctors for prescribing their drugs, and unsubstantiated claims regarding over-the-counter drugs like cough syrup which has been proven to do no good.

7. Agriculture – Food Testing, Ingredients and Source

You go to the grocery store, check the fresh meat, see something that looks nice and red and fresh and buy it. Or maybe you buy the chicken to fry up for dinner. Then again you might buy pet food for your favorite dog or cat. Now did anyone tell you fresh meat like beef should not be red? Did they tell you color dyes and carbon monoxide are used to give the cuts of meat that color and they are injected in the butcher shop?

Did they tell you the chicken was raised in a hen house and pumped with hormones, steroids and God knows what else to fatten it up for the slaughter? Did they tell you about everything you just bought included rendered animal parts?

Did they mention rendering plants use raw product including thousands of dead dogs and cats; heads and hooves from cattle, sheep, pigs and horses; whole skunks; rats and raccoons? Did they mention the millions of maggots swarming over the carcasses? Did they tell you the carcasses would be ground up and cooked to create batches of yellow grease, meal and bone meal, and that the meat and bone meal would be used as a source of protein and other nutrients in poultry, swine and pet foods?

That the animal fat is used as an “energy source” and millions of tons will be trucked to poultry ranches, cattle feed-lots, dairy and hog farms, fish-feed plants and pet-food manufacturers where it is mixed with other ingredients to feed the billions of animals that meat-eating humans, in turn, will eat.

When you look at the ingredient label and it says the meat included protein it sounds good but is that protein from the rendered carcasses and what are the health consequences of eating a standard diet of rendered byproduct? The deadly Mad Cow disease was caused by feeding rendered products to cattle.

8. Campaign Reform – Empty Promises and Empty Wallets

For the first time in our history the presidential campaign alone in 2008 is expected to cost over one billion dollars. Now that is a whole lot of money being spent to win a job that pays $400,000 a year and only lasts four years. One billion dollars spent to make $1,600,000. If that is the result of capitalism then we might have a problem.

Campaign reform has been talked about more and acted upon less than any other issue facing congress and the president. Political advertising costs are criminal. Some campaigns spend more money raising money than they do getting elected. Special interest groups give to candidates, give more to national political parties, more to state political parties and then spend money themselves to influence elections.

Over $1 billion will be spent running for president and that can be changed if the president and congress have the guts. Paid ads can be stopped, special interest funding can be stopped, and a logical schedule for primaries can be held. Candidates can receive free media time since all the airways are government regulated. Voter registration can be increased.

There are about 226 million people eligible to vote in the USA and about 142 million are registered to vote. In 2004 about 121 million did vote for president. That means about 53% of the eligible voters participated in the last presidential election, a pretty weak total for the citadel of democracy in the world. That needs to be fixed. Require automatic voter registration with social security cards or drivers licenses if need be but get people back involved in the process. We can’t make people vote but we can make sure they have the opportunity to vote.

9. Immigration Reform – The Slumbering Social Issue of the Day

So far the candidates have done a masterful job of avoiding the issue of Immigration reform although before the campaign heated up they had a variety of ideas to offer. Now it seems the ideas have been taken off the table in hopes no one noticed they flip flopped on an issue.

There are a few areas of agreement. For one everyone agrees we need to strengthen border security on both the Canadian and Mexican borders. We also acknowledge that there are millions of Mexican workers illegally in the USA gainfully employed at jobs typically not wanted by Americans. What to do about them is a huge problem.

Since there is widespread opposition to any kind of amnesty program allowing them to remain without consequence perhaps a better alternative would be to allow those illegal immigrants and their families to remain with a permanent work visa if they are gainfully employed and have paid taxes in the United States.

They are here and they pay our income and sales taxes. They have cars and drivers licenses. They are making a substantial contribution to Social Security even though they cannot draw benefits. What amnesty are we giving them? If we throw them out don’t we owe them back their income, sales and social security payments? I say they have paid enough already for a permanent visa and they should be welcomed if they complete our citizenship requirements.

If the illegal immigrants that are gainfully employed and contributing to our tax and social security system are granted permanent work visas, overnight we will reduce the border security issues saving substantial money and improving relations between our two countries. This will free up resources to pursue the criminal elements from foreign countries that come illegally for far more sinister reasons.

Not only do millions of illegal immigrants pay taxes and provide services we would not otherwise have but they are also victims to hordes of unscrupulous people involved in car sales and repair, medical treatment, legal assistance, and many other areas because they have no way to protect themselves. They cannot go to law enforcement agencies for help, as they would be prosecuted. The simple act of granting well-earned permanent work visas would stop predators from taking advantage of their status.

For more go to: http://www.coltonspointtimes.blogspot.com/

Saturday, July 06, 2013

The World's Only Superpower - What does it mean?

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Well, for a long time America has been the single super power in the world and how have we handled the responsibility?  It may take many years for historians to be able to fairly assess the performance of our government in terms of world affairs the past few decades.
 
As the financial engine that powers the world we have certainly helped the world economy but then our financial greed also led to the greatest collapse of housing, stock market values, treasury notes, and employment opportunity since our great depression in the 1930's.  Oh yes, because we are the last world super power we took down most of the world in our collapse.
 
 
Science and technology are also areas of great contributions in America weighed against equally great potential for harm.  Genetically altered seed developed in America made it possible for the USA to become the breadbasket for the world, often saving nation after nation faced with broken infrastructure, war, genocide or drought conditions.
 
Now we are discovering that there are dangers in the genetic manipulation as it may render much poorer results in the nutritional value of the crops produced, it can destroy the productivity of the land used to produce the crops, and may have a severe harmful effect on our immune system and it's ability to protect us from disease.
 
 
In terms of military muscle again the USA is dominate and we do have this desire to be the savior of the world.  In fact we love the world so much more than half of our military capacity is deployed around the world, not in the USA.
 
American presidents from Jefferson through Lincoln to Eisenhower have warned us of the dangers of the military-industrial complex in which our structure of civilian control of the military by having the president be commander in chief of all the armed forces, can be compromised.
 
As you can see from the following tables, Defense spending, according to President Obama's own office, now equals 17% of our total budget, and 57% of our new spending.  Sounds pretty substantial for a country winding down two wars.
 
 
 
One day someone in Washington will finally turn attention to why our defense spending as a percent of total federal spending keeps rising even when we stop fighting wars.  Perhaps then we will hear the dire warnings from presidents Jefferson, Lincoln and Eisenhower about the potential dangers ranging from national and international bankers to  defense contractors and arms dealers.
 
Until then Uncle Sam will remain the ever considerate Uncle Sugar to a host of bad people and bad ideas.
 
 
Warnings from Presidents
 
If the American people ever allow private banks to control the issue of their  currency, first by inflation, then by deflation, the banks…will deprive the people of  all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
 
“I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson
 
The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating. -Thomas Jefferson
 
History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by  controlling money and its issuance. -James Madison
 
 
If congress has the right under the Constitution to issue paper money, it was  given them to use themselves, not to be delegated to individuals or corporations. -Andrew Jackson
 
The Government should create, issue, and circulate all the currency and  credits needed to satisfy the spending power of the Government and the buying power of  consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. -Abraham  Lincoln
 
Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands. – Theodore Roosevelt
 
Despite these warnings, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote: I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of  credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most  completely controlled and dominated Governments in the civilized world no longer a  Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. -Woodrow  Wilson

Years later, reflecting on the major banks’ control in Washington, President Franklin Roosevelt paid this indirect praise to his distant predecessor President Andrew Jackson, who had “killed” the 2nd Bank of the US (an earlier type of the Federal Reserve System). After Jackson’s administration the bankers’ influence was gradually restored and increased, culminating in the passage of the Federal Reserve Act of 1913. Roosevelt knew this history.

The real truth of the matter is, as you and I know, that a financial
element in the large centers has owned the government ever since
the days of Andrew Jackson… -Franklin D. Roosevelt
(in a letter to Colonel House, dated November 21, 1933)

[Next story to feature NSA, Cyber Security, Homeland Security, Edward Snowden and other fun stuff.]
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Thursday, February 09, 2012

Internet Service Stocks - Once Again Facing Imminent Collapse

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The cyber world of dot coms has seen a rather tumultuous start to the 21st millennium.  It began with the dot com boom and bust that peaked in 1999-2000.  As the after market crashed, reality set in, and options morphed from retirement funds to wallpaper, most people believe it was a situation that was overdue.  There was no foundation to support the high flying stock values in the market place.  Seemingly overnight 60-70% of the value of many of these companies vanished.

What insidious dark forces were at work in the high flying tech sector to bring such chaos and devastation to the silver lining?  Well, where do I start?  Perhaps the most obvious can be found in the faces of the new tech Wizards.  Often what is not there is more telling than what is.  Their faces seemed too clean, too unblemished, and too confident.


They lacked the lines and scars of experience found etched in the faces of the Old World masters, meaning those people in business prior to 1999.  When the Wizards were still in diapers and cutting teeth, the old masters were setting in motion a sustained economic growth unparalleled in the history of the US, and the world.

Once e-mails became the staple of American leisure time, and the pc became the Source for all that is, then the Wizards declared the old economy to be a dinosaur and relegated the veterans of American capitalism to be ready for the museums.


That was how we ended the last millennium and the results were quite expected.  The wisdom of the Wizards of technology gave us a stock prices collapse, options evaporated, losses continue to mount and the seemingly endless money pit went dry.  Yes, the Internet certainly speeded up everything, including failure.

Where did the e-commerce Wizards go wrong?  If blame is to be assigned at all, it should be assigned to those that bought the hyperbole in the first place.  For a short time all rules of economic logic and reason were suspended.  For a short time greed dominated the marketplace.


Look at what we forgot.  Revenues were no longer important.  Profitability vanished.  Multiples were no longer relevant.  Market caps were established by smoke and mirrors.  Executive experience was no longer considered necessary.  At times being young enough to have zits was an acceptable substitute for training.

So what if there was no market for the new product or service, the "Internet" would fix all that with its vast new market of consumers.  The principle of supply and demand gave way to the concept of creating demand regardless of need and regardless of supply.

The same with using traditional media and advertising.  The power of the Internet would fix that too.  Conventional broadcast and print media would soon be obsolete, and certainly weren't needed for the e-commerce high flyers.

As for competition, copycats flourished as the new economists determined that the Internet would create such a massive new consumer market that anything and everything could be sold.  Have faith in the digital revolution and trust the cyber gods.


In one form or another capitalism has existed in this country for about 500 years.  We fled unfair taxes, traded Manhattan for costume jewelry, and beat up the English over tax on tea, all before we even had a country.  Now our capitalist system has been a dominant world force for a couple of hundred years.  Yet in the course of 12-18 months the high-flying Wizards of the new economy were going to change all that and bury tradition in the ashes of the cyber firestorm.

By the 4th quarter of 1999 it seemed the cyber gurus might be right as greed and need sucked the masters of the old economy into the furious world of dot coms.  Suddenly the names attached to the IPOs read like a guest list to a presidential fundraiser or Board meeting of the Metropolitan Museum.  Familiar names.  The backbone of the American financial infrastructure.


Well folks, the fad flopped.  Along the way we discovered the Wizards really didn't know it all.  A lot of people got burned, and a lot of people got hurt.  Many compromised their values for the quick buck.  Those rushing to jump on the e-commerce bandwagon, despite the warnings and suspicions of the old economy warriors, found the wagon missing when they landed.

Less than a year after the spectacular ascent of the cyber gods, came the even more spectacular fall.  In the vernacular of the cyber psychics, the ascension never quite got off the ground.  It will take years for the impact to be realized.  Make no mistake, through it all the cyber revolution has forever changed the American and world landscape.  Even in many positive ways.


So in the spirit of David Letterman, perhaps we should establish the top ten misconceptions from the coming out party for the cyber revolution, sort of a new millennium report card for the years 2000-2001.  Clearly these represent the views of the author and will be far from all-inclusive, but I would hope many contributions will be added by more informed readers.

Lesson #10:

The rules of capitalism do not apply to the new economy of the cyber world.

Sorry folks, but capitalism is capitalism no matter what the industry or technology.  The same rules apply to capitalism that always applied to capitalism whether we are in the industrial age, the service age, or the cyber age.  A business still needs a product, revenue and profits to succeed.


Lesson #9:

In the cyber world experience is not necessary for success.

There is still a need for competent and experienced management.  Having Internet access to more choices and information and bigger markets does not automatically result in management knowledge and wisdom.  As always, experience is a process of learning, not declaring.

Lesson #8:

Acceptance of new technology will happen overnight.

It took 70 years for radio to mature in America.  Fifty years for television to take hold.  Vinyl records were around for 75 years before compact discs really replaced them.  Even eight track recorders died a very slow death.  Phones became accepted in the last half-century.  Computers have been in development since the 1940's.  Cable TV has been in use since the 1950's.  And still not all homes in America have phones, personal computers or even cable television.


Lesson #7:

Technology breakthroughs will benefit all related technologies.

So as long as the public buys a new technology, they will buy all new technology.  I don't think so.  The market explosion in video games and high tech gadgets was supposed to mean we are adapting to the cyber world.  Yet Sony sold 80 million Play stations (a high tech marvel at the time) but only 20% of the buyers had access to the Internet.

Lesson #6:

The new economy would render traditional masters of the old economy obsolete.

This is a bold and arrogant perspective with no historical basis.  In our system of capitalism winners and losers are determined by sustained performance, adaptability, access to resources, and staying power.  Often times the traditional economic leaders let others make mistakes before embracing new concepts.  Never will that be more apparent than if or when retailing giants Wal-Mart, K-Mart, Target and J.C. Penny suddenly become the dominant forces in e-commerce.



Lesson #5:

The millions and millions of new Internet users represent an entire new market for consumer goods and services.

This might sound logical but it is based on an unfounded assumption.  What in the world do we think these millions of new users have been doing before the Internet?  They still bought everything they needed from traditional sources.  The Internet does not represent a new market but an opportunity to shift the market share from traditional consumer sources to cyber sources.  To achieve that, the consumer must be given a reason to change buying habits.  Access to the Internet is not a reason, just an opportunity.

Lesson #4:

The Internet will foster unlimited new opportunities in audio and video broadcasting including interactive communication.

Well guess what folks, who in the world will ever have time to surf 500 video channels, 10,000 audio broadcasts, not to mention the hundreds of interactive channels for every major retailer and cause in America?  Already the many but still limited choices on cable television have left the public in a quandary.  Interactive tests have failed miserably.  Over 5 million websites exist before the real broadcast benefits of the Internet have been felt.

Lesson #3:

The Internet itself can provide all the advertising opportunities necessary for the new economy players.

With millions of users in the US one would think this could be true.  But the truth of the matter is the Internet has resulted in market segmentation and fragmentation on a level never before seen or experienced.  What the technology of the Internet has done is give the consumer the chance to exit or ignore ads like never before.  Our click happy culture has discovered the ability to spend an average of a few seconds looking at a screen before zapping along.  So while we are bombarded by more cyber driven commercial messages than radio or television ever dared throw in our face, reach and frequency no longer have meaning.

Lesson #2:

The Internet technology will render all current forms of communication technology obsolete.

This statement implies that the Internet, as well as existing communication technology, is good in the first place, which remains to be proven.  However, whether one surfs the web or works the remote, there is a furious competition for your attention.  Demographic analysis is more complex than ever.  The "known's" of traditional media remain much clearer than the "unknowns" of the Internet.  Don't look for this to change any time soon.


Lesson #1:

Thanks to the Internet, the world will never be the same.

Instant worldwide communications has indeed given us the opportunity to be better informed, better educated, and easier misled than at any other time in our history.  High technology has given us a new way to communicate.  But communications without morality and standards has created a whole new playing field for purveyors of fraud, deceit and corruption.

I count this as a misconception, but with positive leanings, for the power of information and education will, in time, result in a world with more truth.  In a Biblical sense, the Internet will finally bridge the horrible gaps in communication between people and races and maybe even religions.  Ever since we were cursed with multiple tongues as a lesson in ancient Babylon, we have been separated by language.  The cyber world is tearing down those barriers.


So What About Today?

As we sit on the verge of the Face Book IPO for $10 billion has much changed over the past decade?  Not really.  People now lose over $50 billion in fraud, credit card theft, cell phone theft and identity theft thanks to the digital revolution.

Now electronic banking has expanded digital crime to new frontiers.  As we clearly saw this past recession, the Internet age has greatly speeded up the creation of new crimes and the execution of those crimes on a worldwide basis.



Even today the Internet has become the haven for massive "Internet service companies" like Face Book, Google and Yahoo among many others.  With Face Book preparing to make a run at becoming the most valuable company in the world when the IPO is issued, it will leave Face book worth $100 billion, are we hell bent for another major Internet adjustment and market crash?

In terms of establishing fair market value for Internet companies, there is no justification for the Face Book valuations because it is just as impossible today as it was ten years ago to determine the real value of Internet advertising.


Think of this, 90% of the Face Book revenues come from advertising and Internet advertising has been dropping each year as businesses are developing the statistics to prove there is no value in the ads that bombard our computer screens.

With most ad revenues dropping at least 10% this past year, we are on the cusp of seeing a major collapse in the real value of such ads, the real impact on earnings, and the real annoyance factor from being blasted by ads.

Also, in an ad industry with few standards and no guarantees, how long will companies pay exaggerated prices for such ads?  As ad revenue continues to drop what will the Face Books of the world do to maintain stockholder value?

Increase ad prices?  Hardly.  Charge Face Book members a user fee?   Most certainly.  Sell more and more personal data of the members?  That has already begun as you will note from the massive new increase in junk mail based on the sale of your personal information and personal interests stolen from your emails, and web searches.

I predict a massive devaluation of Internet service companies because of their foundation of cards.  This Internet advertising base can evaporate overnight, was never based on loyalty to begin with, violates every accounting standard known in terms of determining the long term value of a company, and is so vague and unregulated those who profit from the stock price manipulations will never be prosecuted for the massive fraud they are currently using to concoct fair market value.


The stock market is dancing on thin ice with the highly inflated Internet service companies and the manipulation of prices and values.  How many normal people will ever get a chance to buy Face Book stock in this new IPO?  Who bought the initial $10 billion since it has all been pre-sold?  Why are certain Internet companies stock priced so high?

These and other issues relating to the rise and fall again of Internet stocks will be examined. In the meantime, you should think about it and study what is taking place so you aren't victimized like the millions of stockholders the last couple of times people operated in the Dark Side of the Internet with our money.


Maybe it is time to consider a break from the Internet world and enjoy what you might have left behind.
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Thursday, April 29, 2010

Financial Reform Moves Forward - What Must Be Fixed to Make it Real?

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Now that the Senate Republicans have agreed to debate the financial reform bill we will finally get to see the real intent of Congress to tackle the Wall Street problems. Missing from the Democrat bill the media claims the GOP was blocking, when in fact the GOP wants it just as bad as the Democrats, are a number of critical elements that better be addressed in the floor debate.



First, the major cause of the economic collapse was the housing element in which sub-prime mortgages were forced on the public by the drop in mortgage standards by our monstrous housing agencies Fannie Mae and Freddie Mac. These federally funded agencies who insure most of the mortgages in America reduced down payments from 20% to zero and allowed a technique called the Stated Income loan, or NIV for "No Income Verification". Most fraud on mortgage applications resulted from use of this technique in which applicants would just state how much income they earned without offering proof. This opened the floodgates to fraud.

Now a second feature of the extent of fraud and deception came in the repackaging of the loans into pools, called collateralized debt obligations, CDO, which was how Wall Street intended to cash in on the trillions of dollars in the mortgage market and the astounding increase in home values in the decade before 2006. Of course the demand for CDOs continued long after the housing market became stagnant and it became obvious certain markets were far overpriced.



To keep the housing market moving the Federal Reserve steps in and buys mortgage backed securities from the two housing agencies and banks. By March 31, 2010, the Federal Reserve had purchased $1.2 trillion of mortgage-backed securities from banks and $200 billion of direct obligation debt of Fannie Mae and Freddie Mac, for total purchases of $1.4 trillion. As a result of these actions, the Federal Reserve now owns almost 25% of the stock of mortgage-backed bonds. Assuming that banks turned these excess reserves into loans at a typical 10:1 ratio, the increase in money supply would be $12 trillion. That's more than the current amount of outstanding mortgages in the United States!

Finally, the Treasury Department has estimated the total additional US spending to prop up the two federal agencies will be $188 billion dollars. This is above and beyond the Fed money. Treasury says $85 billion will be lost along with $49 billion in foreclosure activity by Treasury, a total of $237 billion in taxpayer exposure with a total loss expected of at least $134 billion. That means we will have about $1.5 trillion at risk in supporting the housing market.



Nothing in Senate financial reform bill addresses the issues concerning housing including the CDO issue, relaxed down payments, the stated income loans, Treasury aid, foreclosure aid and Federal Reserve aid, all of which is still at risk. That means the predator mortgages, fraudulent mortgages, even foreclosures saved by the government will cost the government at least $134 billion. That sounds like an incredible windfall for all the thieves who ripped off the government. A reason for the omission may be that the changes in federal rules and policy that led to the actions were approved late in the Clinton administration, a move Clinton already acknowledged was a failure of his to stop his people from changing the rules.



The Senate bill also fails to address the conflict of interest of the credit reporting agencies who gave the CDO packages triple A ratings to help sell them even though many were defaulting within months after issue. Since the brokerage houses selling the packages were paying the millions of dollars in lucrative fees made by the credit agencies, there was intense competition to approve them regardless of the real value of the mortgage pool. Some contained as much as 90% stated income mortgages. Nothing is in the Senate bill to stop the conflict of interest nor punish credit agencies for fraudulent ratings.



Also there is nothing in the bill to review the actions by the government that opened the floodgates to bank control over the economy. Once again the absence of this area may well be inspired by the fact it was the Clinton people who made the changes. In the '90s Wall Street took over Clinton's Treasury Department and all of the regulatory agencies (Clinton's Treasury Secretary Robert Rubin came from Goldman Sachs). In 1998 Rubin, his deputy Larry Summers, Allen Greenspan (Fed Chairman) and Arthur Levitt (SEC Chairman) gave Wall Street a major victory -- defeating a modest proposal to regulate the then nascent, exploding derivatives market (e.g., mortgage backed securities). In 1999 Glass-Steagall was repealed. From 1995 to 2009 the six biggest banks (Morgan Stanley, Goldman Sachs, Wells Fargo, Citigroup, JP Morgan Chase and Bank of America) grew from 20 percent to 62 percent of GDP. These Wall Street victories gave us the Great Recession of 2008.



Finally there is the Consumer Protection Agency offered by Obama. For some odd reason he places it under the Federal Reserve which operates autonomous from the government and whose actions also played a role in the financial collapse. That is a big mistake. If anything, we should be auditing the Federal Reserve to find out what they are doing with America's currency, not adding to their powers.
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Wednesday, April 28, 2010

The Shootout at the Capitol Corral - Congress versus Goldman Sachs

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After two weeks of pre-meditated murder by Obama, the SEC, Senator Carl Levin, Senator Chris Dodd and the Democratic leadership in Congress, in which the president and his gang pilloried the Demons from Wall Street, the heavy weights from Goldman went before Congress in a 10 hour marathon Tuesday for a public shootout.

It was no contest. The Democrats had virtually persecuted the Goldman gang in the days leading up to the hearing before the Senate Permanent Subcommittee on Investigations with civil charges from the SEC, a public scolding from former Goldman poster boy Obama, and charges of misconduct by the two Senators in their haste to get a financial reform bill through the Senate.



The court of public opinion was swayed, but not convinced, that the Obama style of liberal spending and bigger government was needed, but it was not over yet. That had to be decided in the outcome of the hearing. But this shootout was a rerun of the most famous shootout in the history of the wild west, the gunfight at the O.K. Corral.



The gunfight at the O.K. Corral has been portrayed in numerous Western films. It has come to symbolize the struggle between law-and-order and open-banditry in frontier towns of the Old West, where law enforcement was often weak or nonexistent. The fateful battle took place in Tombstone, Arizona, where Wyatt Earp, Doc Holliday, Virgil and Morgan Earp fought the Clantons and McLaurys.

One group of fighters represented rural Democrats from Texas who were involved in the cattle-trade in a remote area of Arizona territory which had been desert just a few years before. The other faction, (the Earps) had come from the East with the frontier, and represented the very different city interests of Yankee Republican capitalists and businessmen who were attempting to manage a silver-mining boom-town with Eastern expectations of behavior.



The battle left three rural Democrats dead and the Yankee Republican capitalists in control and the outcome of the shootout at the Capitol Corral had just about the same outcome. Before the dust had settled the Democrat Senators with their thousands of pages of briefings, tons of staff and seats behind the elevated bench were outfoxed, outclassed, outsmarted and out to lunch. The Yankee capitalists had won again.

Now I worked on the hill a couple of times and have been to many a hearing and I do not remember a time when the Congress ever looked so disheveled, disoriented, ill-prepared and out matched than this particular hearing. The politicians, well they looked every bit the good old boys and the Goldman gang the city slickers. This battle turned out no different than the last shootout back in 1881.



Of course the liberal media are sure to paint a different picture because the Democrats are their champions of the far left redistribution of wealth philosophy and Heavens knows the media may soon be out of work and in need of a redistribution of wealth to take care of them. But the outcome of this battle was never in doubt to any honest observer.



Three levels of Goldmanites testified with the junior executives first, the senior executives second, and the CEO Lloyd Blankfein last. Committee Chairman Carl Levin started out the attack, and his effort soon withered into a constant repetition of the same old question because a socialist thinker clearly has no clue how a capitalist system works. The juniors executives had him so flustered he constantly was searching through the thousands of pages of documentation trying to figure out where in the world the emails he quoted were to be found.

Like good junior execs, the Dapper Dans from Goldman seemed to be taking forever to find whatever the Senators were talking about. There was little continuity in the questions and no follow up questions, even when the opportunity presented itself. As the hearing droned on and on with each Senator grilling the Goldman gang the interrogators got more and more confused until one might have asked what they were doing at the hearing.

When the senior executives took the floor and started explaining the complex and highly complicated world of Wall Street high finance, as played by the biggest and best in the world, the look of utter confusion was in all the Senate faces. One by one they acknowledged defeat when they admitted they did not understand the intricacies nor mind set of Wall Street.



By the time Blankfein took the center seat even John McCain, with all his years of experience, was left befuddled and dazed. The white flag of surrender was raised and finally the hearing was brought to a close. Perhaps the power of Goldman was most obvious by the fact the New York Stock Exchange, and every foreign stock exchange in the world, crashed when the hearing started and the Dow was down over 200points before it was through.

When the actions against Goldman can cause world stock markets to tumble one can only surmise Congress might have underestimated their standing. But Goldman went further as the Goldman stock was about the only publicly traded stock to gain in value on this day. It was an exclamation mark on the power of the money changers.

To be honest, I have done many critical articles about the activities of Goldman over the past few years and was hoping some of my questions would be answered. They were not to be. Our Senators seemed to lose their minds when attempting to extract guilty pleas or inside information to prove how dastardly Goldman had acted during the economic meltdown.



By the end of the hearing Goldman was assuring Congress they would help the committee with new provisions of the financial reform bill that would have a chance of meeting the needs of America while bringing some sort of discipline, ethics and transparency to the Wall Street wagering in the markets.

That's a good thing since no members of the Committee seemed to comprehend what was going on. Obama is certain to have no comment as what is there for him to say? Tuesday was a big victory for Goldman. They demonstrated that no matter how intense their opposition may come after them, they are up to the challenge.

Perhaps now the stock market can continue it's upward momentum. And one last point on the fading liberal power of the Obama Democrat machine. About midway through the hearing the committee took a recess so the Senators could go vote on the procedure to move the financial reform bill to the floor. It was the second straight day good old Harry Reid brought it up for a vote and for the second straight day the Republicans and a Democrat defeated the Obama initiative.

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