Today some detail leaked out about the $700B bailout package that Hank Paulson has requested on behalf of the banks. Wall Street Journal had an article in a very obscure section disclosed some of these details:
First, it appears that the bailout is not restricted to mortgage debt or mortgage backed securities. Even credit card debt may be included. So this is intended to be a wholesale bailout for the pure benefits of the banks.
Second, Paulson and Bernanke believed that these bad debts should be priced based "held-to-maturity: formula, not the current book value. So the bailout is a complete giveaway to the banks.
You may not understand what held-to-maturity (HTM) valuation accounting means. Let me explain, when a bank purchased a debt security, it paid, say, $1000 for that debt. Under HTM, the debt will always be listed as $1000 in value, no matter what the current value of the debt may be. Obviously most of the debt securities that the banks are holding now have declined significantly in value, because the debtors don't have the ability to pay in many cases. It is very common some of the debt securities are trading at below 30 cents on the dollar. That means the $1000 asset that the bank holds is now worth only $300. Yet Hank Paulson and Ben Bernanke would like to give the banks $1000 (HTM value) for the assets that worth only $300.
Now you understand that the whole bailout is a scam. It is a scheme to enrich the banks at expense of taxpayers! How dare they are! They thought the public is so gullible that they would not even understand what is going on. That is why they brazenly requested $700 B complete giveaway for their friends on the Wall Street. When asked why $700 billion? You know what they answered: "we don't know. It is an arbitrary number!"
People, are you really so sheepish that you are willing to be fleeced? You got to stop this criminal deception!
By the way, the US government does not even have $700B to spare. It has been running budget deficit since Bush took the White House. National Debt already stands over 10.6 trillion dollars. Where is this money coming from? It is going to come from printing from paper! That means inflation will for sure to go up. It is just a form a stealth tax on all the savings of ordinary people.
I am really sickened by this. All these criminals! Because they think people are so stupid that they can get away from it.
A lot of people argue that we have to do this bailout. No, we don't. Yes, the banks are not lending right now. That is healthy, because US is already overly in debt. We all need to de-leverage. That means many banks will HAVE to go bust! We cannot simply re-inflate the financial system to create another bubble! We need to take the pain. The banks first, then American consumers. Yes, we have to pay higher interest rate. Borrowing will be more difficult. Consumer spending will slow down. But That would be normal. Isn't overspending and over borrowing that got us into this mess in the first place? Why do we want to give $700B easy money for the banks so they can lend unscrupulously and invest badly again?
You have to watch this video. God bless Marcy Kaptur, the Democratic Representative from Ohio.
Wednesday, September 24, 2008
Monday, September 22, 2008
Hank a lot (Mother of all Bail-outs)
Over the weekend, Treasury Secretary Hank Paulson deviced a $700 billion bail-out package for all the banks, to take on the underperforming mortgage securities on their balance sheet. Christmas came to the Wall Street early this year. Hank a lot, Paulson!
Most striking is the boldness of Paulson's request. He basically asked for a blank check to do whatever he sees fit. He specifically requested that no court oversight should be allowed! Yeah, we should all trust that Hank Paulson won't do anything hanky panky with his old Wall Street pals. Give me a break! Talking about put a fox to guard hen house!
The reason for the bail out sounded very solid. They have depicted a near apocalyptic outcome if the bailout is not done right now: financial melt down, multi-year depression, loss of jobs, close of factories, end of the civilization as we know it. Fear. No, even more than that. Terror. They want to terrorize all of us into submission (accepting the bailout proposal). I think they have done similar thing very successfully: they have used our fear of terrorism to slowly take away the liberty from us. They have succeeded in doing that. Now they will succeed in taking away our hardly earned savings! American people are gullible sheep! High finance is so complex and who understands it? Let's just trust that these people are doing the right thing and have us taxpayers' interest at their hearts. LOL.
Is this $700 B bail out necessary? Absolutely no. The only argument for the bailout is that: banks have all but stopped lending, even after the Fed vowed to wide open its check book to offer low-interest loans for these banks (through the Fed discount window). So the thinking goes like this: if banks stop lending, economy will grind to a standstill.
Not so fast. As I have pointed out, consumers are de-leveraging: not borrowing! Corporations other than the financial industry are in very good shape. Most of them have sufficient cash cushion to weather the storm. In fact, Microsoft just announced today it is using the cash on its balance sheet to buy back $40 Billion worth of its own stock. So corporation can live without borrowing at least for now.
So it is not end of the world if banks stop lending. Banks will never stop lending anyway. It is their business. If some banks stop doing that, that will cause their own demise. Why would they do that? They are doing it now ONLY TO HOLD THE PUBLIC HOSTAGE. They are acting like cry baby: woo, woo, if you don't bail us out, we will not lend.
We should not cave in. We should not allow them to socialize their losses. When they were making huge profits, they did not ask us to share with them. They dished out hundreds of millions dollars of bonuses to their top executives. Now they are asking us the poor taxpayers to rescue them! Take a hike! You could die. There will be others taking your place! Capitalism does not lack risk takers.
The moral hazard is tremendous. They are all trying to get big so they will be regarded to be too big to fail. Bank of America has bought MBNA, CountryWide, and Merrill Lynch. Wachovia does not want to stay behind. It is trying to buy Morgan Stanley. Nobody wants to end up like poor Lehman, right?
All these banks seem to have a put option written for them against the taxpayers, if you understand what a put option means. This all started from 1998 LTCM bail-out engineered by Alan Greenspan. They used to call it "Greenspan put". More accurately, it should be called "taxpayer put".
Now the $700B bailout package seems to be set in stone. I still think it could work in taxpayers favor if sufficient oversight and accountability are present. We cannot let these banks to dump their bad debts to us at inflated prices. And we also need to make sure we can sell these debts at fair market value later on. If we can accomplish that, the taxpayers may not lose too much in the end. If we allow Hank to do whatever pleases him, then we will have a big bill to pay, for generations to come.
We know American households are broke, and the government is even more broke. We don't have the $700B. We did not have the $39B used to bail out Bear Stearn. Neither the $200B plus for Fannie and Freddie. Nor the $85B for AIG. Where is the money coming from? Printing press. We live in a fiat money system. Worthless paper can turn into green dollars, not so magically. It is a form of stealth tax. We all pay for it, not knowingly. It is reflected in higher prices we pay for food, energy, and everyday stuff. In another word, it is called "inflation". Instead of letting the asset (real estate asset) bubble to burst completely, the Fed is trying to print more money to keep it inflated. No wonder oil price today rocketed up more than $16 to >$120/barrel, largest single jump ever! Hank a lot, Paulson! Way to go Ben!
Most striking is the boldness of Paulson's request. He basically asked for a blank check to do whatever he sees fit. He specifically requested that no court oversight should be allowed! Yeah, we should all trust that Hank Paulson won't do anything hanky panky with his old Wall Street pals. Give me a break! Talking about put a fox to guard hen house!
The reason for the bail out sounded very solid. They have depicted a near apocalyptic outcome if the bailout is not done right now: financial melt down, multi-year depression, loss of jobs, close of factories, end of the civilization as we know it. Fear. No, even more than that. Terror. They want to terrorize all of us into submission (accepting the bailout proposal). I think they have done similar thing very successfully: they have used our fear of terrorism to slowly take away the liberty from us. They have succeeded in doing that. Now they will succeed in taking away our hardly earned savings! American people are gullible sheep! High finance is so complex and who understands it? Let's just trust that these people are doing the right thing and have us taxpayers' interest at their hearts. LOL.
Is this $700 B bail out necessary? Absolutely no. The only argument for the bailout is that: banks have all but stopped lending, even after the Fed vowed to wide open its check book to offer low-interest loans for these banks (through the Fed discount window). So the thinking goes like this: if banks stop lending, economy will grind to a standstill.
Not so fast. As I have pointed out, consumers are de-leveraging: not borrowing! Corporations other than the financial industry are in very good shape. Most of them have sufficient cash cushion to weather the storm. In fact, Microsoft just announced today it is using the cash on its balance sheet to buy back $40 Billion worth of its own stock. So corporation can live without borrowing at least for now.
So it is not end of the world if banks stop lending. Banks will never stop lending anyway. It is their business. If some banks stop doing that, that will cause their own demise. Why would they do that? They are doing it now ONLY TO HOLD THE PUBLIC HOSTAGE. They are acting like cry baby: woo, woo, if you don't bail us out, we will not lend.
We should not cave in. We should not allow them to socialize their losses. When they were making huge profits, they did not ask us to share with them. They dished out hundreds of millions dollars of bonuses to their top executives. Now they are asking us the poor taxpayers to rescue them! Take a hike! You could die. There will be others taking your place! Capitalism does not lack risk takers.
The moral hazard is tremendous. They are all trying to get big so they will be regarded to be too big to fail. Bank of America has bought MBNA, CountryWide, and Merrill Lynch. Wachovia does not want to stay behind. It is trying to buy Morgan Stanley. Nobody wants to end up like poor Lehman, right?
All these banks seem to have a put option written for them against the taxpayers, if you understand what a put option means. This all started from 1998 LTCM bail-out engineered by Alan Greenspan. They used to call it "Greenspan put". More accurately, it should be called "taxpayer put".
Now the $700B bailout package seems to be set in stone. I still think it could work in taxpayers favor if sufficient oversight and accountability are present. We cannot let these banks to dump their bad debts to us at inflated prices. And we also need to make sure we can sell these debts at fair market value later on. If we can accomplish that, the taxpayers may not lose too much in the end. If we allow Hank to do whatever pleases him, then we will have a big bill to pay, for generations to come.
We know American households are broke, and the government is even more broke. We don't have the $700B. We did not have the $39B used to bail out Bear Stearn. Neither the $200B plus for Fannie and Freddie. Nor the $85B for AIG. Where is the money coming from? Printing press. We live in a fiat money system. Worthless paper can turn into green dollars, not so magically. It is a form of stealth tax. We all pay for it, not knowingly. It is reflected in higher prices we pay for food, energy, and everyday stuff. In another word, it is called "inflation". Instead of letting the asset (real estate asset) bubble to burst completely, the Fed is trying to print more money to keep it inflated. No wonder oil price today rocketed up more than $16 to >$120/barrel, largest single jump ever! Hank a lot, Paulson! Way to go Ben!
Thursday, September 18, 2008
Finally someone is bold enough to say something about the crimes Bush/Cheney have committed
This is a reprint of a news item from the Associated Press
Vermont candidate to prosecute Bush if she wins
By JOHN CURRAN, Associated Press Writer Fri Sep 19, 3:45 AM ET
BURLINGTON, Vt. - Lots of political candidates make campaign promises. But not like Charlotte Dennett's. Dennett, 61, the Progressive Party's candidate for Vermont Attorney General, said Thursday she will prosecute President Bush for murder if she's elected Nov. 4.
Dennett, an attorney and investigative journalist, says Bush must be held accountable for the deaths of thousands of people in Iraq — U.S. soldiers and Iraqi civilians. She believes the Vermont attorney general would have jurisdiction to do so.
She also said she would appoint a special prosecutor and already knows who that should be: former Los Angeles prosecutor Vincent Bugliosi, the author of "The Prosecution of George W. Bush for Murder," a new book.
"Someone has to step forward," said Dennett, flanked by Bugliosi at a news conference announcing her plan. "Someone has to say we cannot put up with this lack of accountability any more."
Dennett and two others are challenging incumbent Attorney General William Sorrell, a Democrat, in the Nov. 4 election.
Bugliosi, 74, who gained fame as the prosecutor of killer Charles Manson, said any state attorney general would have jurisdiction since Bush committed "overt acts" including the military's recruitment of soldiers in Vermont and allegedly lying about the threat posed by former Iraqi dictator Saddam Hussein in speeches that were aired in Vermont and elsewhere.
"No man, even the president of the United States, is above the law," said Bugliosi.
The White House press office didn't respond to a request for comment Thursday. But Republican National Committee spokesman Blair Latoff denounced Dennett.
"It's extremely disappointing that a candidate for state attorney general is more concerned with radical left-wing provocation than upholding the law of Vermont," Latoff said. "These incendiary suggestions may score points among the most fringe elements of American society, but can't be settling for anyone looking for an attorney general."
Anti-Bush sentiment runs deep in Vermont. It's the only state Bush hasn't visited as president, and one whose liberal tendencies make it unlikely he will.
In 2007, the state Senate adopted a resolution calling for Congress to begin impeachment proceedings against Bush and Vice President Dick Cheney.
Last March, the towns of Brattleboro and Marlboro voted to seek indictments against Bush and Cheney over the war, and dozens of other towns voted at town meetings to call for his impeachment.
Sorrell, who is seeking a sixth term, said he doesn't believe a Vermont attorney general would have the authority to charge Bush.
"The reality is, in my view, that unless the crime takes place in Vermont, then I as the attorney general have no authority under Vermont law to be prosecuting the president," Sorrell said.
Vincent Bugliosi, left, speaks at a news conference in Burlington, Vt., Thursday, Sept. 18, 2008. Bugliosi, the author of the book, 'The Prosecution of George W. Bush for Murder.' was in Vermont to support the candidacy of Progressive candidate for attorney general of Vermont, Charlotte Dennett, right.(AP Photo/Toby Talbot)
Vermont candidate to prosecute Bush if she wins
By JOHN CURRAN, Associated Press Writer Fri Sep 19, 3:45 AM ET
BURLINGTON, Vt. - Lots of political candidates make campaign promises. But not like Charlotte Dennett's. Dennett, 61, the Progressive Party's candidate for Vermont Attorney General, said Thursday she will prosecute President Bush for murder if she's elected Nov. 4.
Dennett, an attorney and investigative journalist, says Bush must be held accountable for the deaths of thousands of people in Iraq — U.S. soldiers and Iraqi civilians. She believes the Vermont attorney general would have jurisdiction to do so.
She also said she would appoint a special prosecutor and already knows who that should be: former Los Angeles prosecutor Vincent Bugliosi, the author of "The Prosecution of George W. Bush for Murder," a new book.
"Someone has to step forward," said Dennett, flanked by Bugliosi at a news conference announcing her plan. "Someone has to say we cannot put up with this lack of accountability any more."
Dennett and two others are challenging incumbent Attorney General William Sorrell, a Democrat, in the Nov. 4 election.
Bugliosi, 74, who gained fame as the prosecutor of killer Charles Manson, said any state attorney general would have jurisdiction since Bush committed "overt acts" including the military's recruitment of soldiers in Vermont and allegedly lying about the threat posed by former Iraqi dictator Saddam Hussein in speeches that were aired in Vermont and elsewhere.
"No man, even the president of the United States, is above the law," said Bugliosi.
The White House press office didn't respond to a request for comment Thursday. But Republican National Committee spokesman Blair Latoff denounced Dennett.
"It's extremely disappointing that a candidate for state attorney general is more concerned with radical left-wing provocation than upholding the law of Vermont," Latoff said. "These incendiary suggestions may score points among the most fringe elements of American society, but can't be settling for anyone looking for an attorney general."
Anti-Bush sentiment runs deep in Vermont. It's the only state Bush hasn't visited as president, and one whose liberal tendencies make it unlikely he will.
In 2007, the state Senate adopted a resolution calling for Congress to begin impeachment proceedings against Bush and Vice President Dick Cheney.
Last March, the towns of Brattleboro and Marlboro voted to seek indictments against Bush and Cheney over the war, and dozens of other towns voted at town meetings to call for his impeachment.
Sorrell, who is seeking a sixth term, said he doesn't believe a Vermont attorney general would have the authority to charge Bush.
"The reality is, in my view, that unless the crime takes place in Vermont, then I as the attorney general have no authority under Vermont law to be prosecuting the president," Sorrell said.
Vincent Bugliosi, left, speaks at a news conference in Burlington, Vt., Thursday, Sept. 18, 2008. Bugliosi, the author of the book, 'The Prosecution of George W. Bush for Murder.' was in Vermont to support the candidacy of Progressive candidate for attorney general of Vermont, Charlotte Dennett, right.(AP Photo/Toby Talbot)
Did I just call the bottom of the market yesterday?
Maybe yesterday was the capitulation. Today the stock reversed the trend of early slide and ended up fast and fierce. Dow was up 410 points, going back up above the 11000 level, ending up 3.9%. Nasdaq was even giddier, up 100 points, or 4.9%. S&P 500 was up 50 points, or 4.3%. Wachovia Bank(WB), which was rumored to be in talk to buy Morgan Stanley, powered up a whopping 59%.
In the morning, news outlets reported that the central banks of various countries were working with the Fed in a coordinated way to provide sufficient liquidity for the banks around the world. Even that news failed to change the sour mood on the Wall Street. Dow erased an earlier gain of close to 200 points, and traded down more than 140 points in the middle of the day. Then there was a report that the Government is contemplating on setting up an entity to "absorb" the bad debt banks are carrying on their balance sheet. This entity would be modeled after the Resolution Trust Corp (RTC) set up in late 80s by the government during the savings and loan crisis. The idea is that the government entity would purchase bad mortgage debt from all the banks, and sell it to investors. The entire process may take several years. Saddled with the bad mortgage debt, banks currently are very cautious in lending to businesses and individuals. With out bank lending, economy may grind to a halt, the end result of which is unthinkable (multi-year depression). With the government taking over the bad debt, banks will be freed of these "toxic" assets and start to lend again, which will slowly lead to economic recovery.
I guess this may be the best option out of all the worst ones. This is what often referred to as "privatizing profit and socializing loss" of the US financial system. Tax payers are left to hold the bag when banks gambled with depositors' money. When banks are making billions of profit, tax payers don't get to share with it. But now when they are making huge losses, tax payers have to shoulder them. Is this "laissez faire" capitalism?
Yesterday I was questioning the wisdom of selling assets for cash by investor mass. Today it is becoming even clearer that cash is worthless. But people are just so frightened by risk that they are doing irrational things. That is why they have been selling all risky assets, including even money market, in exchange for safe cash, which is treasury bills. Annualized 3-month treasury yield went to almost ZERO! In some case, people are willing to buy treasury bills at negative yield. Talking about insanity! We are living in a fiat money society. Money is a piece of paper. Central banks can print as much as you want. Oh my Lord, what a bunch of blind!
Buy stocks (but be choosy), believe me. Stock is incoming producing asset, unlike commodities which yield no income. I don't want to buy fixed income in this situation when the Fed's printing press is running 24/7.
In the morning, news outlets reported that the central banks of various countries were working with the Fed in a coordinated way to provide sufficient liquidity for the banks around the world. Even that news failed to change the sour mood on the Wall Street. Dow erased an earlier gain of close to 200 points, and traded down more than 140 points in the middle of the day. Then there was a report that the Government is contemplating on setting up an entity to "absorb" the bad debt banks are carrying on their balance sheet. This entity would be modeled after the Resolution Trust Corp (RTC) set up in late 80s by the government during the savings and loan crisis. The idea is that the government entity would purchase bad mortgage debt from all the banks, and sell it to investors. The entire process may take several years. Saddled with the bad mortgage debt, banks currently are very cautious in lending to businesses and individuals. With out bank lending, economy may grind to a halt, the end result of which is unthinkable (multi-year depression). With the government taking over the bad debt, banks will be freed of these "toxic" assets and start to lend again, which will slowly lead to economic recovery.
I guess this may be the best option out of all the worst ones. This is what often referred to as "privatizing profit and socializing loss" of the US financial system. Tax payers are left to hold the bag when banks gambled with depositors' money. When banks are making billions of profit, tax payers don't get to share with it. But now when they are making huge losses, tax payers have to shoulder them. Is this "laissez faire" capitalism?
Yesterday I was questioning the wisdom of selling assets for cash by investor mass. Today it is becoming even clearer that cash is worthless. But people are just so frightened by risk that they are doing irrational things. That is why they have been selling all risky assets, including even money market, in exchange for safe cash, which is treasury bills. Annualized 3-month treasury yield went to almost ZERO! In some case, people are willing to buy treasury bills at negative yield. Talking about insanity! We are living in a fiat money society. Money is a piece of paper. Central banks can print as much as you want. Oh my Lord, what a bunch of blind!
Buy stocks (but be choosy), believe me. Stock is incoming producing asset, unlike commodities which yield no income. I don't want to buy fixed income in this situation when the Fed's printing press is running 24/7.
Wednesday, September 17, 2008
Is this capitulation?
Holy! We got a brief reprieve yesterday. But today is another brutal carnage on the Wall Street. Dow is down almost 450 points, or 4.1%, Nasdaq down 109 points, 4.94% (!), and S&P off by 57 point, 4.71%. This is breathtaking! Dow is now below 12000. Gold shot up almost 12% and silver up more than 14%. All these was precipitated by the Fed's $85B bailout of AIG. Fear! Is this the final capitulation? It certainly feels like. I have gone though the dot com bust. I thought that was brutal. Lord, Lord, Lord! Please save us!
In my yesterday's post, I analyzed that Corporate sector (Business Sector, outside of the financial) of the US economy is pretty healthy. It is the government sector and household sectors that are debt-ridden and under strain. Judging from retail sales and consumer spending, I think households are starting to de-leverage and repair the balance sheet by cutting spending. But the government sector has yet to show any sign of restrain in spending. That is because the twin wars are costing us dearly. We GOT TO STOP the senseless and wasteful wars! We may not be able to end it abruptly. But certainly we have to start the process of pulling out of Iraq! That is why it is so crucial to elect Obama, and pressure him to rein in defense spending.
I understand why people sell financial stocks. But I don't get it why people are selling shares of perfectly healthy and strong companies such as Intel and Cisco. We are living in fiat money society. Cash is worthless paper. Why sell the income-producing assets (common stock) in exchange to fast depreciating cash?
I guess fear is now the dominant force of the market. I think when everybody is selling assets and demanding cash, (the Fed will keep printing cash to meet the demand), the smart move would be to go against the herd. But you have to have the stomach to take it.
Confidence takes a long time to restore. We are still in the dark tunnel.
In my yesterday's post, I analyzed that Corporate sector (Business Sector, outside of the financial) of the US economy is pretty healthy. It is the government sector and household sectors that are debt-ridden and under strain. Judging from retail sales and consumer spending, I think households are starting to de-leverage and repair the balance sheet by cutting spending. But the government sector has yet to show any sign of restrain in spending. That is because the twin wars are costing us dearly. We GOT TO STOP the senseless and wasteful wars! We may not be able to end it abruptly. But certainly we have to start the process of pulling out of Iraq! That is why it is so crucial to elect Obama, and pressure him to rein in defense spending.
I understand why people sell financial stocks. But I don't get it why people are selling shares of perfectly healthy and strong companies such as Intel and Cisco. We are living in fiat money society. Cash is worthless paper. Why sell the income-producing assets (common stock) in exchange to fast depreciating cash?
I guess fear is now the dominant force of the market. I think when everybody is selling assets and demanding cash, (the Fed will keep printing cash to meet the demand), the smart move would be to go against the herd. But you have to have the stomach to take it.
Confidence takes a long time to restore. We are still in the dark tunnel.
Tuesday, September 16, 2008
Turmoil on the Wall Street
You've seen it yesterday: Lehman Brothers filed for bankruptcy protection after failing to reach a deal with potential buyers (Barclay and Citi were rumored to be the interested parties) over the weekend. Meanwhile, Merrill Lynch, one of the marquis investment banks on the Street, agreed to be bought by Bank of America in a deal valued at $50B. This deal was viewed as BoA bailing out Merrill. Furthermore, rumors about impending bankruptcy of AIG caused people to believe more bad news is yet to come. Stock sold off around the world, with Europe down more than 4% and Asia down close to 5% before US stock market opened. As you would expect, the Monday trading on Wall Street was bloody. Dow declined more than 500 points, or 4.4%, worst single day decline since the burst of dot com bubble seven to eight years ago. It was indeed a "black Monday".
To make things worse, pundits were all sounding doom and gloom. A NYU economist, Nouriel Roubini, even warned that American's deposits in the banks are at risk (I think he should shut up, or be locked up for inciting run on banks). Our old pal Allan Greenspan said this is the worst crisis in last hundred years. That means the 1929 depression was even better than current financial and economic crisis. I think all these pundits have their ulterior motives (not very noble often time) to try to scare people, and further weaken people's confidence.
I think the current crisis in a large part is a crisis in confidence: people don't know how to evaluate the risky assets after having burned by subprime mortgages. So they start to sell all the assets for cash. So if you take a look, ALL asset classes are under selling pressure, even the darlings just a few months ago (oil and commodities). It will take a long time to restore confidence.
I have been a critic of the Fed and US government for creating such crisis in the first place. But the action, or lack of action of the Fed and the Treasury department over the weekend, was a wise decision. I think history will prove that not bailing out Lehman was the right move. Collapse of Lehman is no big deal. The Fed should not even have bailed out Bear Stearns earlier this year. But Fannie and Freddie were entirely a different matter. Taking out Fannie and Freddie was necessary and a right move, in my opinion. Today, the Fed maintain the Fed Funds rate at 2%, which is a big sigh of relief. I was really worried about that Fed would cave in to the pressure from the Wall Street and lower the interest rate. At this point lowering interest has no positive effect at all. It in fact would be counter productive, causing further panic in the financial markets. Lowering interest rate would do nothing to reduce investors' risk premium, which is very high right now.
So what is my assessment of the situation? Should we sell stock and stay in cash, or this is a great opportunity to buy? Before I tell you my opinion, let me show you my thought process:
If one looks at the entire US economy in three segments: household sector, government sector and corporate sector, and then analyzes the health of each sector, he or she should be able to see more clearly where problems lie and what are the solutions.
1) US household is under stress, there is no doubt about that. Consumer spending has been outpacing consumption for a long time, financed by cheap credit provided by foreign investors. Since 2000, medium household income actually shrunk in real term by $1000, according to some reports. Wealth gap has widened significantly. The ultra rich have seen their wealth grow fastest in decades, while middle to lower class people are suffering. When the US consumer cannot borrow against their future income, they started to borrow against their assets, their houses. Due to the artificial low interest rate engineered by Allan Greenspan and the Fed, Americans were able to extract tremendous amount of cash from home equities, and spend the cash as on home remodeling, vacation, or buying bigger nicer cars. Then the house prices start to decline, that is when many people begin to see equities in their houses evaporated. Mortgage default rate start to rise rapidly, creating a chain reaction in the world financial institutions who willing lent to these overstretched homeowners.
Now US household is deleveraging, trying to repair the balance sheet. That is a good thing. But expect consumer spending to decline in the next few years, and financial service industry will have to de-leverage, too, to shrink their balance sheets as well. So the demise of a few financial institutions is just the normal course of the consumer adjustment we are witnessing now. That is good in long run, painful in near term.
2) The government sector is also under stress. Tax revenue has not grown, due to the big tax cut Bush enacted back in 2002. In the meanwhile spending has rocketed, largely due to twin wars we are fighting in Iraq and Afghanistan. The government cannot continue to rely on printing money to finance the deficit spending. So we either have to raise the tax or cut spending, or both. You can't raise tax on middle class in this economic environment. I support Obama's tax plan to raise taxes on the wealthy, who have disproportionally benefited under the Bush tax plan. In the meanwhile, we have to cut spending. That is difficult: you cannot cut social security or medicare. Healthcare for the uninsured will be extra money the government has to spend. And the national infrastructure is also in dire need of repair (bridge collapse in Minneapolis was an indication). We also have to invest in alternative energy (wind mills) to wean our dependence on fossil fuel. So where the cut can come from? The only place is Iraq and Afghanistan war spending. The whole war on terror is a self inflicted pain. As you know, the US government had all the tools to prevent 9/11 from happening. If you don't believe they made 9/11 happen, you should at least believe they LET 9/11 happen. So the whole war-on-terror spending is just waste of money and resources. We can save that for more productive use, such as building the national energy and transportation infrastructure and investing in healthcare. That is why it is so important to elect Obama as President coming November.
3) US corporate sector, apart from the financial institutions or auto industry, is very healthy. Profit margins are at all time high. Earnings have been strong. Corporations are awash with cash, balance sheet is pristine. US companies are very competitive compared with companies of other nations. So the US corporate sector is very strong. We have to encourage corporations to invest in the US to create jobs and grow household income. I think Obama has detailed plan for that.
So what is my opinion?
If Obama wins, I will buy stocks with all the money I have. If McCain wins, and he continues the Bush policy, then I will have to cash out to invest in gold and swiss franc.
We got to elect Obama!
To make things worse, pundits were all sounding doom and gloom. A NYU economist, Nouriel Roubini, even warned that American's deposits in the banks are at risk (I think he should shut up, or be locked up for inciting run on banks). Our old pal Allan Greenspan said this is the worst crisis in last hundred years. That means the 1929 depression was even better than current financial and economic crisis. I think all these pundits have their ulterior motives (not very noble often time) to try to scare people, and further weaken people's confidence.
I think the current crisis in a large part is a crisis in confidence: people don't know how to evaluate the risky assets after having burned by subprime mortgages. So they start to sell all the assets for cash. So if you take a look, ALL asset classes are under selling pressure, even the darlings just a few months ago (oil and commodities). It will take a long time to restore confidence.
I have been a critic of the Fed and US government for creating such crisis in the first place. But the action, or lack of action of the Fed and the Treasury department over the weekend, was a wise decision. I think history will prove that not bailing out Lehman was the right move. Collapse of Lehman is no big deal. The Fed should not even have bailed out Bear Stearns earlier this year. But Fannie and Freddie were entirely a different matter. Taking out Fannie and Freddie was necessary and a right move, in my opinion. Today, the Fed maintain the Fed Funds rate at 2%, which is a big sigh of relief. I was really worried about that Fed would cave in to the pressure from the Wall Street and lower the interest rate. At this point lowering interest has no positive effect at all. It in fact would be counter productive, causing further panic in the financial markets. Lowering interest rate would do nothing to reduce investors' risk premium, which is very high right now.
So what is my assessment of the situation? Should we sell stock and stay in cash, or this is a great opportunity to buy? Before I tell you my opinion, let me show you my thought process:
If one looks at the entire US economy in three segments: household sector, government sector and corporate sector, and then analyzes the health of each sector, he or she should be able to see more clearly where problems lie and what are the solutions.
1) US household is under stress, there is no doubt about that. Consumer spending has been outpacing consumption for a long time, financed by cheap credit provided by foreign investors. Since 2000, medium household income actually shrunk in real term by $1000, according to some reports. Wealth gap has widened significantly. The ultra rich have seen their wealth grow fastest in decades, while middle to lower class people are suffering. When the US consumer cannot borrow against their future income, they started to borrow against their assets, their houses. Due to the artificial low interest rate engineered by Allan Greenspan and the Fed, Americans were able to extract tremendous amount of cash from home equities, and spend the cash as on home remodeling, vacation, or buying bigger nicer cars. Then the house prices start to decline, that is when many people begin to see equities in their houses evaporated. Mortgage default rate start to rise rapidly, creating a chain reaction in the world financial institutions who willing lent to these overstretched homeowners.
Now US household is deleveraging, trying to repair the balance sheet. That is a good thing. But expect consumer spending to decline in the next few years, and financial service industry will have to de-leverage, too, to shrink their balance sheets as well. So the demise of a few financial institutions is just the normal course of the consumer adjustment we are witnessing now. That is good in long run, painful in near term.
2) The government sector is also under stress. Tax revenue has not grown, due to the big tax cut Bush enacted back in 2002. In the meanwhile spending has rocketed, largely due to twin wars we are fighting in Iraq and Afghanistan. The government cannot continue to rely on printing money to finance the deficit spending. So we either have to raise the tax or cut spending, or both. You can't raise tax on middle class in this economic environment. I support Obama's tax plan to raise taxes on the wealthy, who have disproportionally benefited under the Bush tax plan. In the meanwhile, we have to cut spending. That is difficult: you cannot cut social security or medicare. Healthcare for the uninsured will be extra money the government has to spend. And the national infrastructure is also in dire need of repair (bridge collapse in Minneapolis was an indication). We also have to invest in alternative energy (wind mills) to wean our dependence on fossil fuel. So where the cut can come from? The only place is Iraq and Afghanistan war spending. The whole war on terror is a self inflicted pain. As you know, the US government had all the tools to prevent 9/11 from happening. If you don't believe they made 9/11 happen, you should at least believe they LET 9/11 happen. So the whole war-on-terror spending is just waste of money and resources. We can save that for more productive use, such as building the national energy and transportation infrastructure and investing in healthcare. That is why it is so important to elect Obama as President coming November.
3) US corporate sector, apart from the financial institutions or auto industry, is very healthy. Profit margins are at all time high. Earnings have been strong. Corporations are awash with cash, balance sheet is pristine. US companies are very competitive compared with companies of other nations. So the US corporate sector is very strong. We have to encourage corporations to invest in the US to create jobs and grow household income. I think Obama has detailed plan for that.
So what is my opinion?
If Obama wins, I will buy stocks with all the money I have. If McCain wins, and he continues the Bush policy, then I will have to cash out to invest in gold and swiss franc.
We got to elect Obama!
Friday, August 29, 2008
I am voting for Barack Obama
Wow, what a great acceptance speech by Barack Obama at the Democratic National Convention (DNC)! Before the speech, I had doubt. Now I am completely on board. No more cynicism. Let's get Obama elected the President of United States of America!
It was fitting that yesterday marks the 45-year anniversary of MLK's famous "I have a dream" speech. The very fact that a black man is nominated to be the presidential candidate of a major political party is a testimony to how far this country has progressed. There is no turning back. For those who are still hanging on to the old way of politics, your days are coming to an end!
In his speech, Obama talked about his humble beginnings, and the values he was taught with by his mother and grandparents. He admitted that his father did not have much influence on him. He was more shaped by "his (father's ) absence".
He also laid out his policies, item-by-item, in a way that ordinary people can understand. For example, to counter McCain's accusation that he is going to raise taxes on the middle-class, he said he is going to cut taxes on 95% of the families.
But most importantly, at least to me, he addressed some of the issues that democrats have been commonly criticized for. The republicans have long criticized that democrats don't have a set of clear principles, and they follow the polls to please people in order to get elected. Yesterday, Barack Obama answered those criticisms very eloquently.
He contrasted the republican principles vs. his democratic principles. The republicans talk about "Ownership Society". But in reality it means "you are on your own". But democrats believe we have "mutual responsibilities" to each other. As Obama puts it: "We are our brothers' keepers, and our sisters' keepers."
I thought this is a great comparison, and is exactly what I had hoped the democrats would say for a long time. The republicans often claim moral superiority over the democrats. But where is the morality to favor big businesses and refuse to raise the minimum wage for the low-income workers? (I believe in America, if you choose to work, you ought to be able to earn a living wage! That is the moral responsibility of the entire society to the less fortunate segment of our community). Where is the morality to oppose abortion while turn a blind eye to the deaths and destruction in some inner city America? The republican principles have so many contradictions to bordering hypocrisy.
Obama also talked about his belief in what the appropriate government's roles in our lives. Here again, republican believes are full of contradictions. It has become a cliche to the republicans that government does not work, and the less government regulation the better. Yet they want you all to vote for them so they can occupy the government positions to prove that government indeed does not work. The Bush Administration really proved that its government does not work: from the mis-management of the Iraq War, to No-Child-Left-Behind, to Hurricane Katrina fiasco.
If the republicans want the government out of our lives, why do they insist on regulating people's morality? I am a Christian, and I have a set of values that I believe will benefit everyone. But I can't impose my values to others, and let alone having the government to impose my values to everyone in the country. Yes, we disagree on many issues, but we should always seek common ground, not to be bogged down by our disagreements. That was what Obama preached last night. He touched on a few very controversial issues (abortion, gay marriage, and gun control) and illustrated where we may find common grounds.
Most importantly, unlike the republicans who cynically claim that government simply does not work (so they should outsource critical government functions to the private businesses run by their cronies), we democrats believe government plays a critical role in some of the functions of the society, as clearly laid out in the US constitution, such as providing common defense (not only defending foreign threats, but also environmental threats). Obama also gave other examples of where the government can make a difference: education, promoting scientific advancements and technological innovations. Unlike the cynical republicans, we democrats believe "yes we can". Yes, we can, under the right leadership! It was not the government that failed us. It was the lack of leadership in the past eight years that has failed us!
Obama also showed that he is a new breed of democrats, not exactly in the mold of traditional so called "liberals". He talked about "personal responsibilities", in the same breath of "mutual responsibilities". He wants to "cut wasteful government spending", not exactly the kind of "big government liberal" the republicans make out of him. I call this new brand of democrats "progressive". And I am so happy to see them becoming more prominent in the democratic leadership.
Go Obama!
It was fitting that yesterday marks the 45-year anniversary of MLK's famous "I have a dream" speech. The very fact that a black man is nominated to be the presidential candidate of a major political party is a testimony to how far this country has progressed. There is no turning back. For those who are still hanging on to the old way of politics, your days are coming to an end!
In his speech, Obama talked about his humble beginnings, and the values he was taught with by his mother and grandparents. He admitted that his father did not have much influence on him. He was more shaped by "his (father's ) absence".
He also laid out his policies, item-by-item, in a way that ordinary people can understand. For example, to counter McCain's accusation that he is going to raise taxes on the middle-class, he said he is going to cut taxes on 95% of the families.
But most importantly, at least to me, he addressed some of the issues that democrats have been commonly criticized for. The republicans have long criticized that democrats don't have a set of clear principles, and they follow the polls to please people in order to get elected. Yesterday, Barack Obama answered those criticisms very eloquently.
He contrasted the republican principles vs. his democratic principles. The republicans talk about "Ownership Society". But in reality it means "you are on your own". But democrats believe we have "mutual responsibilities" to each other. As Obama puts it: "We are our brothers' keepers, and our sisters' keepers."
I thought this is a great comparison, and is exactly what I had hoped the democrats would say for a long time. The republicans often claim moral superiority over the democrats. But where is the morality to favor big businesses and refuse to raise the minimum wage for the low-income workers? (I believe in America, if you choose to work, you ought to be able to earn a living wage! That is the moral responsibility of the entire society to the less fortunate segment of our community). Where is the morality to oppose abortion while turn a blind eye to the deaths and destruction in some inner city America? The republican principles have so many contradictions to bordering hypocrisy.
Obama also talked about his belief in what the appropriate government's roles in our lives. Here again, republican believes are full of contradictions. It has become a cliche to the republicans that government does not work, and the less government regulation the better. Yet they want you all to vote for them so they can occupy the government positions to prove that government indeed does not work. The Bush Administration really proved that its government does not work: from the mis-management of the Iraq War, to No-Child-Left-Behind, to Hurricane Katrina fiasco.
If the republicans want the government out of our lives, why do they insist on regulating people's morality? I am a Christian, and I have a set of values that I believe will benefit everyone. But I can't impose my values to others, and let alone having the government to impose my values to everyone in the country. Yes, we disagree on many issues, but we should always seek common ground, not to be bogged down by our disagreements. That was what Obama preached last night. He touched on a few very controversial issues (abortion, gay marriage, and gun control) and illustrated where we may find common grounds.
Most importantly, unlike the republicans who cynically claim that government simply does not work (so they should outsource critical government functions to the private businesses run by their cronies), we democrats believe government plays a critical role in some of the functions of the society, as clearly laid out in the US constitution, such as providing common defense (not only defending foreign threats, but also environmental threats). Obama also gave other examples of where the government can make a difference: education, promoting scientific advancements and technological innovations. Unlike the cynical republicans, we democrats believe "yes we can". Yes, we can, under the right leadership! It was not the government that failed us. It was the lack of leadership in the past eight years that has failed us!
Obama also showed that he is a new breed of democrats, not exactly in the mold of traditional so called "liberals". He talked about "personal responsibilities", in the same breath of "mutual responsibilities". He wants to "cut wasteful government spending", not exactly the kind of "big government liberal" the republicans make out of him. I call this new brand of democrats "progressive". And I am so happy to see them becoming more prominent in the democratic leadership.
Go Obama!
Saturday, August 23, 2008
Have the Beijing Games changed the West's view about China?
As the Beijing Olympic Games are approaching to the end, a lot of Chinese are wondering: has hosting the Games succeeded in changing the West's stereotypes about China?
I have been wondering the same question. what I found out seems to be very disappointing: the Beijing Olympics only served to reinforce the stereotypes about China.
Leading up to the Games, all Western media focused on one talking point: how China was preparing the Games as a propaganda tool to project a better image to the world. But what we Chinese are saying? We want the world to see the REAL China first hand. There have been too much distortion in the Western media about China. We were hoping the Olympic Games can help change that.
The opening ceremony was a big bang. Everyone I met told me it was spectacular, unprecedented, incredible, (add your own adjectives here). Initially I was very happy. I was proud. But after carefully examining, I sense these praises are not exactly what we are looking for. Yes, many people were awe-stricken by the 2008 drummers counting down to the opening of the Games. But I sense that awe was a little bit condescending. It is not the kind of awe when people watch the first man landed on the Moon. Nor the kind of awe that people have when they watch Usain Bolt dashing to the finishing line, leaving others in the dust. It is rather the kind of awe when people see thousands of ants transporting food, seemingly without any supervision, or when people see the bees dancing in front the bee hive, signaling where the flowers are. It is that kind of condescending awe most of the Westerners felt when they were watching those spectacular performances of the Opening Ceremony.
In their view, the Chinese are like machines, displaying absolute conformity and non-individuality. The group synchronized performances at the Opening Ceremony only help reinforce that view. To them, we are just like the ants, or the bees.
Then you may ask, what about all those gold silver and bronze medals. As of now, China has won 89 medals, second only to the US. Fifty of those medals are gold, far surpassing the US. Shouldn't we be proud? Shouldn't that change people's view about Chinese?
To westerners, Chinese are typically nerds who are good at math and sciences. Sports are the fun thing that the Chinese does not know much about. Even though Chinese athletes have won so many medals, that fact still does not change their view. They think Chinese athletes are just manufactured goods. They are not even human. They are the products of a nationally organized sports machine or factory. They believe: we western athletes play sports for fun, and the Chinese train for sports only to get gold medals. Chinese sports programs are just like factories that churn out athletes.
Back in 1996 when the Olympics were held in Atlanta Georgia, NBC ran a program that provided stories about the real life of the athletes. When it was about the American athletes, NBC showed how these men and women loved the sports and were having fun playing in the Olympics. But when it came to the Chinese athletes, the stories were often very sad. The Chinese athletes were picked by the government to be trained in sports camps. They left their families at very young age, and spent their childhood training for sports. To them, sports were not for fun. They were for winning gold medals to glorify the Chinese nation. So all the Chinese athletes were shown to be under tremendous pressure. What NBC implied in the program was obvious, the Chinese don't like sports. They just use sports to serve propaganda purposes.
So with this view, no matter how many medals the Chinese athletes win, it does not change a bit the stereotypes about China and Chinese.
So for those Chinese who pin too much hope that Olympics would help the world see the real China, wake up. It ain't gonna happen!
So stop worrying about what other people would think about you. Don't give a damn about their opinions. Let them say whatever they want to say. Let us just have some fun!
Let the Games continue!
I have been wondering the same question. what I found out seems to be very disappointing: the Beijing Olympics only served to reinforce the stereotypes about China.
Leading up to the Games, all Western media focused on one talking point: how China was preparing the Games as a propaganda tool to project a better image to the world. But what we Chinese are saying? We want the world to see the REAL China first hand. There have been too much distortion in the Western media about China. We were hoping the Olympic Games can help change that.
The opening ceremony was a big bang. Everyone I met told me it was spectacular, unprecedented, incredible, (add your own adjectives here). Initially I was very happy. I was proud. But after carefully examining, I sense these praises are not exactly what we are looking for. Yes, many people were awe-stricken by the 2008 drummers counting down to the opening of the Games. But I sense that awe was a little bit condescending. It is not the kind of awe when people watch the first man landed on the Moon. Nor the kind of awe that people have when they watch Usain Bolt dashing to the finishing line, leaving others in the dust. It is rather the kind of awe when people see thousands of ants transporting food, seemingly without any supervision, or when people see the bees dancing in front the bee hive, signaling where the flowers are. It is that kind of condescending awe most of the Westerners felt when they were watching those spectacular performances of the Opening Ceremony.
In their view, the Chinese are like machines, displaying absolute conformity and non-individuality. The group synchronized performances at the Opening Ceremony only help reinforce that view. To them, we are just like the ants, or the bees.
Then you may ask, what about all those gold silver and bronze medals. As of now, China has won 89 medals, second only to the US. Fifty of those medals are gold, far surpassing the US. Shouldn't we be proud? Shouldn't that change people's view about Chinese?
To westerners, Chinese are typically nerds who are good at math and sciences. Sports are the fun thing that the Chinese does not know much about. Even though Chinese athletes have won so many medals, that fact still does not change their view. They think Chinese athletes are just manufactured goods. They are not even human. They are the products of a nationally organized sports machine or factory. They believe: we western athletes play sports for fun, and the Chinese train for sports only to get gold medals. Chinese sports programs are just like factories that churn out athletes.
Back in 1996 when the Olympics were held in Atlanta Georgia, NBC ran a program that provided stories about the real life of the athletes. When it was about the American athletes, NBC showed how these men and women loved the sports and were having fun playing in the Olympics. But when it came to the Chinese athletes, the stories were often very sad. The Chinese athletes were picked by the government to be trained in sports camps. They left their families at very young age, and spent their childhood training for sports. To them, sports were not for fun. They were for winning gold medals to glorify the Chinese nation. So all the Chinese athletes were shown to be under tremendous pressure. What NBC implied in the program was obvious, the Chinese don't like sports. They just use sports to serve propaganda purposes.
So with this view, no matter how many medals the Chinese athletes win, it does not change a bit the stereotypes about China and Chinese.
So for those Chinese who pin too much hope that Olympics would help the world see the real China, wake up. It ain't gonna happen!
So stop worrying about what other people would think about you. Don't give a damn about their opinions. Let them say whatever they want to say. Let us just have some fun!
Let the Games continue!
Tuesday, August 05, 2008
Was Bruce Ivins a scapegoat for the FBI
If you still recall, back in 2001, there was an anthrax in the mail incidence that killed several people and hospitalized several others. In the past SEVEN years, the FBI was trying to find out who did it. First the FBI found a wrong person, Steven Hatfill, and ended up having to pay $5.8M to Hatfill to settle a lawsuit against the FBI by Hatfill.
Last week, only after the death of Bruce Ivins, a government bioterrorist research scientist, ruled as suicide, the FBI leaked to the media that Ivins was FBI's prime suspect for the 2001 anthrax case. I stress that the FBI leaked the information, because officially, the FBI did not say anything. Under intense public pressure, FBI started to provide more information about their investigation of Ivins. They claim that Ivins was a homocide maniac, according to Ivins' "psychotherapist".
But friends of Ivins vehemently defended Ivins as a smart, outgoing, and caring person. To the friends, it is utterly unbelievable that Ivins could be the person who sent out anthrax laced letters.
Now more and more evidence has emerged that the FBI may be just looking for another scapegoat to blame on. They have deliberately put pressure on the objects of their investigation, in an attempt to destroy them psychologically. Steven Hatfill was tough enough to endure the pressure and prevailed. But Bruce Ivins was less lucky.
This makes me wonder: is the FBI interested in finding the real criminal, or just looking for a scapegoat to cover the whole thing up? My suspicion is the latter. Then that begs the question: what does the FBI want to cover up? why the FBI may not want to find out the truth about the 2001 anthrax incidence?
Read more about this story by clicking here:
Last week, only after the death of Bruce Ivins, a government bioterrorist research scientist, ruled as suicide, the FBI leaked to the media that Ivins was FBI's prime suspect for the 2001 anthrax case. I stress that the FBI leaked the information, because officially, the FBI did not say anything. Under intense public pressure, FBI started to provide more information about their investigation of Ivins. They claim that Ivins was a homocide maniac, according to Ivins' "psychotherapist".
But friends of Ivins vehemently defended Ivins as a smart, outgoing, and caring person. To the friends, it is utterly unbelievable that Ivins could be the person who sent out anthrax laced letters.
Now more and more evidence has emerged that the FBI may be just looking for another scapegoat to blame on. They have deliberately put pressure on the objects of their investigation, in an attempt to destroy them psychologically. Steven Hatfill was tough enough to endure the pressure and prevailed. But Bruce Ivins was less lucky.
This makes me wonder: is the FBI interested in finding the real criminal, or just looking for a scapegoat to cover the whole thing up? My suspicion is the latter. Then that begs the question: what does the FBI want to cover up? why the FBI may not want to find out the truth about the 2001 anthrax incidence?
Read more about this story by clicking here:
Saturday, July 26, 2008
Housing bill to bail out the banks
Last week, the House democrats pushed to pass the "housing bill", aimed at providing financial "help" for the "distressed homeowners". The bill also provides guarantee for Fannie and Freddie's $5 trillion mortgage debt.
As I have mentioned before, there are two major problems that the nation is confronted with: subprime mortgage crisis, and runaway inflation fueled by rising prices of commodities. You might be amazed by the fixation of the politicians on the former one, and scant attention that they pay to the latter. You should not be surprised, because the first problem is the problem of the banks, and the second one is the problem of ordinary folks. Do you really expect politicians to care much about the problem of ordinary people?
While all the media circus is focusing on mortgage crisis, the mortgage delinquency rate (defined as 30 days payment overdue) for the first quarter of the year (latest data available) was only a little bit above 6%. The actual foreclosure rate is less than 1%. Vast majority of the homeowners are paying their bills on time. What the housing bill will do is to reward a tiny minority of those who engaged in irresponsible speculation on the housing market or bought homes they cannot afford, while punishing the vast majority of us who are financially responsible. The true objective of the housing bill is to bail out those banks that have engaged in reckless, fraudulent, or even predatory lending, and the investors who were gambling on the subprime housing market.
If the politicians truly want to help people and the nation's economy, they should do something about the inflation. The bloody fact about inflation is that, it is created by the government's excessive printing of money. As Milton Friedman has pointed out, inflation problem everywhere and every time is a monetary problem. When inflation occurs in Zimbabwe, Sudan, and many African countries, we all know that was caused by the government excessive printing of paper money. But when inflation occurs in US, why all of sudden we are at a loss about what has caused it?
The housing bill essentially will put the $50 trillion mortgage debt Fannie and Freddie owes, on the books of the Treasury department, virtually tripled the amount of debt US government owes. That will put further pressure on the value of US dollar, leading to even higher rate of inflation. If you think the gas price is high now, wait until the housing bill becomes law.
Politicians, democrats or republicans, are crooks. They are fed by big business interests, and do whatever it takes to advance those interests. Sad thing is that the public is so ignorant and gullible. I tell you, I really doubt the so-called 'democratic system". What good doe it to do to ordinary people? You might as well go back to the "benevolent authoritarian" system that China has.
I admit that I am confused.
As I have mentioned before, there are two major problems that the nation is confronted with: subprime mortgage crisis, and runaway inflation fueled by rising prices of commodities. You might be amazed by the fixation of the politicians on the former one, and scant attention that they pay to the latter. You should not be surprised, because the first problem is the problem of the banks, and the second one is the problem of ordinary folks. Do you really expect politicians to care much about the problem of ordinary people?
While all the media circus is focusing on mortgage crisis, the mortgage delinquency rate (defined as 30 days payment overdue) for the first quarter of the year (latest data available) was only a little bit above 6%. The actual foreclosure rate is less than 1%. Vast majority of the homeowners are paying their bills on time. What the housing bill will do is to reward a tiny minority of those who engaged in irresponsible speculation on the housing market or bought homes they cannot afford, while punishing the vast majority of us who are financially responsible. The true objective of the housing bill is to bail out those banks that have engaged in reckless, fraudulent, or even predatory lending, and the investors who were gambling on the subprime housing market.
If the politicians truly want to help people and the nation's economy, they should do something about the inflation. The bloody fact about inflation is that, it is created by the government's excessive printing of money. As Milton Friedman has pointed out, inflation problem everywhere and every time is a monetary problem. When inflation occurs in Zimbabwe, Sudan, and many African countries, we all know that was caused by the government excessive printing of paper money. But when inflation occurs in US, why all of sudden we are at a loss about what has caused it?
The housing bill essentially will put the $50 trillion mortgage debt Fannie and Freddie owes, on the books of the Treasury department, virtually tripled the amount of debt US government owes. That will put further pressure on the value of US dollar, leading to even higher rate of inflation. If you think the gas price is high now, wait until the housing bill becomes law.
Politicians, democrats or republicans, are crooks. They are fed by big business interests, and do whatever it takes to advance those interests. Sad thing is that the public is so ignorant and gullible. I tell you, I really doubt the so-called 'democratic system". What good doe it to do to ordinary people? You might as well go back to the "benevolent authoritarian" system that China has.
I admit that I am confused.
Friday, July 18, 2008
America's twin financial woes and how to solve them
The current financial crisis in the USA boils down to two problems: subprime mortgage, and inflation. I have argued in my previous post that the more devastating one of the two is inflation. Subprime problem affects largely the Wall Street financial institutions, while inflation affects every single consumer, particularly those in the lower economic ladders.
To solve the financial crisis, we have to address these two problems. My argument is that: if we address the inflation problem first and head-on, other problems will be resolved easily as a result.
So how to solve the inflation problem? First we have to look at the root cause of inflation.
1) Inflation is caused by excessive printing of the dollar
As the great economist Milton Friedman stated: "inflations are always the result of increases in the supply of credit money: it is easy to print paper, and governments that have begun issuing paper money have always eventually fallen to the temptation of just printing and spending new money."
The root cause of inflation is the excessive money creation by the Federal Reserve. As the world's reserve currency, US dollar affects inflation not only in the US, but around the world.
2) Printing money was necessitated by increased government spending
Why did the Fed print so much money to begin with? To finance the run-away US government spending. After Bush took over the White House, he immediately reduced personal and corporate taxes across the board, fulfilling his campaign promise. Then the US entered two wars, against Afghanistan and Iraq. Government entitlement was also expanded during this period (Medicare prescription drug benefits for the seniors, or the Part D Program), plus all those pork barrel spending the congress likes to lavish on their own home states.
Now the common sense dictates that if you increase spending, you have to have the income to pay for it. Not in this case, because the government tax income was greatly reduced by tax cuts. Now what do you do? You print money, that is the only way out.
That is why US dollar has been steadily declining in value since 2001, which led to accelerating pace of inflation.
To stem the inflation, I have the following remedies. But I doubt any politician would have the courage to adopt them:
1) Pull out of Iraq
We went in for the wrong reason, we have to get out, before the war bankrupts USA. I am not suggesting pull-out immediately, but a measured and definitive time table of military draw-down seems to be the only way to get us out of there.
2) Increase taxes on the wealthy
The widening wealth gap in the US is alarming. In this time of war, some personal sacrifices are needed. The poor have sent their sons and daughters to Iraq. It is only fair that the rich need to pay their duties. We have to roll back the Bush tax give-aways to the wealthiest of the wealthy.
3) Adopt a long-term strategic energy policy to reduce reliance on fossil fuel
If it was not because of the oil, we would not have gone to the war with Iraq. That is undeniable truth. Let's not fake it. Imagine how much the US has to spend each year on military to protect the oil trade. The amount is staggering. We have to produce reliable source of renewable energy domestically (such as wind, solar, and bio-fuel). And we also have to conserve energy consumption. Currently the US is consuming 25% of the world's oil production, while the US population is only 4% of the world total.
4) The Federal Reserve has the reverse the excessive money printing process.
How can it do that? By raising the interest rate. I bet if the Fed starts to raise interest rate, US dollar will rise in value and commodities prices will start to fall. That will be a huge shot in the arm for consumer confidence and business confidence. Once confidence is restored, I think subprime problem will be eased as well. Part of the subprime issue is the lack of confidence of investors in the value of those mortgages. Restoring confidence will help the market to clear out all the liquidity excesses and mislocations.
To solve the financial crisis, we have to address these two problems. My argument is that: if we address the inflation problem first and head-on, other problems will be resolved easily as a result.
So how to solve the inflation problem? First we have to look at the root cause of inflation.
1) Inflation is caused by excessive printing of the dollar
As the great economist Milton Friedman stated: "inflations are always the result of increases in the supply of credit money: it is easy to print paper, and governments that have begun issuing paper money have always eventually fallen to the temptation of just printing and spending new money."
The root cause of inflation is the excessive money creation by the Federal Reserve. As the world's reserve currency, US dollar affects inflation not only in the US, but around the world.
2) Printing money was necessitated by increased government spending
Why did the Fed print so much money to begin with? To finance the run-away US government spending. After Bush took over the White House, he immediately reduced personal and corporate taxes across the board, fulfilling his campaign promise. Then the US entered two wars, against Afghanistan and Iraq. Government entitlement was also expanded during this period (Medicare prescription drug benefits for the seniors, or the Part D Program), plus all those pork barrel spending the congress likes to lavish on their own home states.
Now the common sense dictates that if you increase spending, you have to have the income to pay for it. Not in this case, because the government tax income was greatly reduced by tax cuts. Now what do you do? You print money, that is the only way out.
That is why US dollar has been steadily declining in value since 2001, which led to accelerating pace of inflation.
To stem the inflation, I have the following remedies. But I doubt any politician would have the courage to adopt them:
1) Pull out of Iraq
We went in for the wrong reason, we have to get out, before the war bankrupts USA. I am not suggesting pull-out immediately, but a measured and definitive time table of military draw-down seems to be the only way to get us out of there.
2) Increase taxes on the wealthy
The widening wealth gap in the US is alarming. In this time of war, some personal sacrifices are needed. The poor have sent their sons and daughters to Iraq. It is only fair that the rich need to pay their duties. We have to roll back the Bush tax give-aways to the wealthiest of the wealthy.
3) Adopt a long-term strategic energy policy to reduce reliance on fossil fuel
If it was not because of the oil, we would not have gone to the war with Iraq. That is undeniable truth. Let's not fake it. Imagine how much the US has to spend each year on military to protect the oil trade. The amount is staggering. We have to produce reliable source of renewable energy domestically (such as wind, solar, and bio-fuel). And we also have to conserve energy consumption. Currently the US is consuming 25% of the world's oil production, while the US population is only 4% of the world total.
4) The Federal Reserve has the reverse the excessive money printing process.
How can it do that? By raising the interest rate. I bet if the Fed starts to raise interest rate, US dollar will rise in value and commodities prices will start to fall. That will be a huge shot in the arm for consumer confidence and business confidence. Once confidence is restored, I think subprime problem will be eased as well. Part of the subprime issue is the lack of confidence of investors in the value of those mortgages. Restoring confidence will help the market to clear out all the liquidity excesses and mislocations.
Friday, July 11, 2008
Struggles of Asian Americans
The other day, my son was mimicking the accent of a Chinese lady working in his school cafeteria: " du yu wan a peessa? give me a dolla!" (do you want a piece of pizza? give me a dollar if you do).
I was very upset that he did that. I asked him why he would do that. He said his classmate taught him this and he felt it was funny. And my son is only 11.
This is not a funny matter. Asian Americans (and many other immigrants in America) who have an accent speaking English often feel that they are treated unfairly. Speaking with an accent gives people an impression that the person is poorly educated. Sometime ago, a close friend of mine told me that he could not get promotion or work at a position he felt well qualified, purely because of his accent. Our mouths may speak with an accent, but our brains do not think with an accent, I heard someone once declared.
The trouble is that not every type of accents are treated equally. European accents (particularly of west and north Europe) are treated favorably. On the other hand, Asian accents and Spanish accents do not receive the same favor.
When I was in Cornell many years ago, I read about an undergraduate Chinese American student expressing his feelings about his heritage in a Chinese email forum. He said he was often shamed of being with his parents, because of their accents.
The struggle of our first generation Asian immigrants is enormous. We are a very family-focused culture. We work hard and sacrifice personally, hoping to bring a better life for our next generation. We save a lot, and rarely care about our own outward appearance. We would be very willing to buy a $100 shirt for our children, but for ourselves, we buy the least expensive ones. We speak in accents. We have a lot of feelings, but find it difficult to express them because of the language hindrance.
We thought if we work hard to bring good lives for our children, they would appreciate us, and be grateful to us because of our love and sacrifices. But the sad thing is, we are losing our children. Our children don't feel proud of their parents, and their heritage and cultures. And we the parents, after so much personal sacrifice, are gradually losing the hearts and minds of our children.
You cannot blame our children for that. Our children can rarely find a role model, or a hero, that has Asian background, to look up to. What they can only see in the media make them so conscious about themselves, because the media are black and white dominated (used to be only white dominated).
I have an advice for all our struggling Asian parents: every summer break, bring your children to Asia. Let them witness first hand the vibrant culture there. Bring them to places and teach them the history about those places. Let them have a chance to see the culture programs of our native lands. I am hopeful our children will soon discover the beauty in our own cultures, find heroes in our history and people, and feel proud of being themselves.
Working hard is not enough. Saving lots of money for your family is not adequate. You need to care about the spiritual needs of your children.
I was very upset that he did that. I asked him why he would do that. He said his classmate taught him this and he felt it was funny. And my son is only 11.
This is not a funny matter. Asian Americans (and many other immigrants in America) who have an accent speaking English often feel that they are treated unfairly. Speaking with an accent gives people an impression that the person is poorly educated. Sometime ago, a close friend of mine told me that he could not get promotion or work at a position he felt well qualified, purely because of his accent. Our mouths may speak with an accent, but our brains do not think with an accent, I heard someone once declared.
The trouble is that not every type of accents are treated equally. European accents (particularly of west and north Europe) are treated favorably. On the other hand, Asian accents and Spanish accents do not receive the same favor.
When I was in Cornell many years ago, I read about an undergraduate Chinese American student expressing his feelings about his heritage in a Chinese email forum. He said he was often shamed of being with his parents, because of their accents.
The struggle of our first generation Asian immigrants is enormous. We are a very family-focused culture. We work hard and sacrifice personally, hoping to bring a better life for our next generation. We save a lot, and rarely care about our own outward appearance. We would be very willing to buy a $100 shirt for our children, but for ourselves, we buy the least expensive ones. We speak in accents. We have a lot of feelings, but find it difficult to express them because of the language hindrance.
We thought if we work hard to bring good lives for our children, they would appreciate us, and be grateful to us because of our love and sacrifices. But the sad thing is, we are losing our children. Our children don't feel proud of their parents, and their heritage and cultures. And we the parents, after so much personal sacrifice, are gradually losing the hearts and minds of our children.
You cannot blame our children for that. Our children can rarely find a role model, or a hero, that has Asian background, to look up to. What they can only see in the media make them so conscious about themselves, because the media are black and white dominated (used to be only white dominated).
I have an advice for all our struggling Asian parents: every summer break, bring your children to Asia. Let them witness first hand the vibrant culture there. Bring them to places and teach them the history about those places. Let them have a chance to see the culture programs of our native lands. I am hopeful our children will soon discover the beauty in our own cultures, find heroes in our history and people, and feel proud of being themselves.
Working hard is not enough. Saving lots of money for your family is not adequate. You need to care about the spiritual needs of your children.
Tuesday, June 10, 2008
Sweet 3G iPhone
As expected, Steve Jobs unveiled 3G iPhone during his keynote in WWDC 08. However, the phone wont be available until July 11.
Apple has abandoned revenue sharing arrangement with the wireless carriers and allow the carriers to subsidize iPhone. That is why the new iPhone will cost as less as $199 for the 8GB version. In contrast, an 8GB iPod Touch costs $299.
IPhone software 2.0 is the central piece of Apple's strategy. The support of third-party software developers is essential to the ultimate success of the iPhone platform. The reason why Microsoft Windows OS became a dominant platform is because the enormous independent software support. Apple is determined to foster such an independent software developers community for its iPhone platform. The PC war is over and Microsoft has won. But the war on mobile platform has just begun, and iPhone is pulling way ahead of the pack, despite its relative late entry.
Mobile platform can be HUGE. Many people in the developing world may ONLY use mobile phones to access the internet. I think MID (Mobile Internet Device) will be as big as PC. On the hardware side, the battle is between Intel's Atom (x86) and ARM's ARM core. On the software side (OS side), it may be between Google's Android and Apple's iPhone. Palm foolishly gave away its software control and solely relied on Microsoft's mobile platform (Palm spun out Palm OS to PalmSource which later was acquired by and withered in a Japanese mobile software company called ACCESS). RIM's blackberry is only an email platform, at current moment, and I would not be surprised it will adopt a similar strategy of Apple's. But it may be too late for RIM to catch up. Microsoft's mobile platform is pretty much dead, I believe.
I would use any pullback in Apple stock prices to buy more its shares.
Disclaimer: I own shares in Apple common stock.
Apple has abandoned revenue sharing arrangement with the wireless carriers and allow the carriers to subsidize iPhone. That is why the new iPhone will cost as less as $199 for the 8GB version. In contrast, an 8GB iPod Touch costs $299.
IPhone software 2.0 is the central piece of Apple's strategy. The support of third-party software developers is essential to the ultimate success of the iPhone platform. The reason why Microsoft Windows OS became a dominant platform is because the enormous independent software support. Apple is determined to foster such an independent software developers community for its iPhone platform. The PC war is over and Microsoft has won. But the war on mobile platform has just begun, and iPhone is pulling way ahead of the pack, despite its relative late entry.
Mobile platform can be HUGE. Many people in the developing world may ONLY use mobile phones to access the internet. I think MID (Mobile Internet Device) will be as big as PC. On the hardware side, the battle is between Intel's Atom (x86) and ARM's ARM core. On the software side (OS side), it may be between Google's Android and Apple's iPhone. Palm foolishly gave away its software control and solely relied on Microsoft's mobile platform (Palm spun out Palm OS to PalmSource which later was acquired by and withered in a Japanese mobile software company called ACCESS). RIM's blackberry is only an email platform, at current moment, and I would not be surprised it will adopt a similar strategy of Apple's. But it may be too late for RIM to catch up. Microsoft's mobile platform is pretty much dead, I believe.
I would use any pullback in Apple stock prices to buy more its shares.
Disclaimer: I own shares in Apple common stock.
Sunday, June 08, 2008
Clinton's concession speech
I watched Clinton's concession speech on youtube (you got to love the Internet). When she was talking about how much she has accomplished and thanking her supporters, her tone was full of excitement and emotion. But when she starts to talk about supporting Obama, her voice turns solemn and mechanical. I would still characterize her concession and support for Obama as lukewarm.
's
She made her entire campaign look like a movement about women's rights. I am glad that Obama did not make his look like one about civil rights or minority rights. When Clinton was saying all sorts of things about Obama, none of which was true, such as Obama was less qualified then she or McCain, and Obama was sexist, Obama did not respond in kind. Looking back, I really did not recall Obama said anything bad about Clinton throughout his campaign. Even when Clinton made that outrageous RFK assassination allusion, Obama did not clamor on and attack Clinton. Imagine if Obama made similar comment regarding Clinton, what Bill would say.
I am just glad the whole thing is over. With or without the support of hillbilly, Obama will prevail in November.
's
She made her entire campaign look like a movement about women's rights. I am glad that Obama did not make his look like one about civil rights or minority rights. When Clinton was saying all sorts of things about Obama, none of which was true, such as Obama was less qualified then she or McCain, and Obama was sexist, Obama did not respond in kind. Looking back, I really did not recall Obama said anything bad about Clinton throughout his campaign. Even when Clinton made that outrageous RFK assassination allusion, Obama did not clamor on and attack Clinton. Imagine if Obama made similar comment regarding Clinton, what Bill would say.
I am just glad the whole thing is over. With or without the support of hillbilly, Obama will prevail in November.
Saturday, June 07, 2008
Apple WWDC next week. I want my 3G iPhone
Next week, Apple will hold its annual WWDC in San Francisco. The rumor is that the 3G version of iPhone will be revealed. I think more exciting is the software 2.0 for iPhone. Third party software vendors can sell their software for iPhone directly on iPhone. Same functionality will also be available on iPod Touch. I am sure I will get an iPod touch. My son has been begging me so long. As for the iPhone, I have to wait for a few more months.
What other new products are in store for WWDC? We will find out soon.
What other new products are in store for WWDC? We will find out soon.
Tuesday, June 03, 2008
What should Hillary do next?
Tonight, the democratic primary is finished. It is obvious Obama will get the votes needed to clinch the party nomination. Hillary Clinton held a meeting with her supporters in New York. Still not willing to concede, she asked the crowd: what should I do now?
Hillary, I got some suggestions for you:
First, you should start praying, praying really hard. The month of June is a strange month, as you have pointed out before. Lots of strange things could happen. You never know. Pray. For the desired accident to happen. Obviously, you should pray to the devil in this case.
Second, in case the devil does not listen to your prayers, you have another option. Join the Republican party and run against McCain. You still have a chance to beat McCain. You have done more damage to the Democratic party than McCain did. You have smeared Obama's reputation more than McCain did. More right-wingers support you than McCain. You got Bill O'Reiley praising you every night. Ann Coulter promised to campaign for you. What you need to do is to switch to the Republican party. You style and your character fit that party very nicely anyway.
Lastly, in case this does not work either, you can ran for McCain's Veep. McCain can really use you to woo the support of the right-wingers. You have proven to be more credible to the neo-cons than McCain. You and Macky will be a dream pair made in hell.
Hillary, I got some suggestions for you:
First, you should start praying, praying really hard. The month of June is a strange month, as you have pointed out before. Lots of strange things could happen. You never know. Pray. For the desired accident to happen. Obviously, you should pray to the devil in this case.
Second, in case the devil does not listen to your prayers, you have another option. Join the Republican party and run against McCain. You still have a chance to beat McCain. You have done more damage to the Democratic party than McCain did. You have smeared Obama's reputation more than McCain did. More right-wingers support you than McCain. You got Bill O'Reiley praising you every night. Ann Coulter promised to campaign for you. What you need to do is to switch to the Republican party. You style and your character fit that party very nicely anyway.
Lastly, in case this does not work either, you can ran for McCain's Veep. McCain can really use you to woo the support of the right-wingers. You have proven to be more credible to the neo-cons than McCain. You and Macky will be a dream pair made in hell.
Monday, June 02, 2008
Economics of public transportation
A few weeks ago, the Walls Street Journal editorial ran a commentary criticizing government support of public transportation. (Given the reputation of WSJ's editorial board, I am not surprised by its view). One of the chief reasons WSJ did not like public transportation is that the business of public transportation has never been profitable on its own. Public transportation always requires government subsidies. That is true in Europe, and probably also true in Japan and China.
But is profit the only measure we should use here? From the microscopic level, considering only the economics of public transportation as a business, I agree that public transportation is not a good "business". But it does not mean it is not a good public policy to support it.
If you look from the societal level (macroscopic level), the picture is more positive. The cost of public transportation is obvious, government subsidies. But the benefits of public transportation cannot be ignored. First and foremost, it reduces the society's aggregate consumption of energy. More people uses public transportation, less money will be spent to import oil from the middle east. Yes, the government has to spend money to subsidize public transportation. But the money spent by the government remains in this country, creating jobs, and producing income multiplying effect on the economy. Otherwise, the money would have been spent to import oil/energy from foreign countries anyway. That money does not create any job in this country, and does not stimulate domestic economy.
Now is a great time to encourage public transportation and wean the nation off the dependence of foreign oil. Consumers are already cutting back personal driving, and looking for alternative transportation options. We need the government on all levels to lend its support for building a better public transportation infrastructure and implementing sound long term policy to incentivize the public to take public means of transportation. And in a long run, as ridership rises, public transportation may indeed become a profitable business on its own right, without requiring government subsidies.
But is profit the only measure we should use here? From the microscopic level, considering only the economics of public transportation as a business, I agree that public transportation is not a good "business". But it does not mean it is not a good public policy to support it.
If you look from the societal level (macroscopic level), the picture is more positive. The cost of public transportation is obvious, government subsidies. But the benefits of public transportation cannot be ignored. First and foremost, it reduces the society's aggregate consumption of energy. More people uses public transportation, less money will be spent to import oil from the middle east. Yes, the government has to spend money to subsidize public transportation. But the money spent by the government remains in this country, creating jobs, and producing income multiplying effect on the economy. Otherwise, the money would have been spent to import oil/energy from foreign countries anyway. That money does not create any job in this country, and does not stimulate domestic economy.
Now is a great time to encourage public transportation and wean the nation off the dependence of foreign oil. Consumers are already cutting back personal driving, and looking for alternative transportation options. We need the government on all levels to lend its support for building a better public transportation infrastructure and implementing sound long term policy to incentivize the public to take public means of transportation. And in a long run, as ridership rises, public transportation may indeed become a profitable business on its own right, without requiring government subsidies.
Sunday, June 01, 2008
Big oil companies take advantage of high gas price
I watched a video yesterday on youtube, created by American Solutions, about high gas prices. At first, I thought this was another video complaining about high gas prices. After I finished watching, I realized this is just another propaganda war the energy industry is waging, to convince people that the solution to solving high gas prices is more drilling! I have a hunch, the American Solutions organization (www.americansolutions.com), is backed by the energy industry.
Let's take a look at the root causes of the current energy crisis, if we can call it a crisis. High gas prices are caused by high crude oil prices. Why have crude oil prices gone up some much since Bush took over the White House? "Experts" would tell you that it is caused by increasing demand for oil and decreasing supply of oil. But if you take a look at the demand, demand grew less than 3% per year during this period. Yes, supply has seen some disruption, due to Iraq war. And some oil fields are seeing the production of oil declining. But the true cause of high oil prices does not lie here. We should put the blame squarely on US central bank (the Fed) monetary policy. The Fed has been engaged in currency manipulation since 2001. It was the Fed's deliberate policy to devalue US dollar, by printing excessive amount of fresh paper money, thus lowering interest rates, at one time to an absurdly low level (1%), to fund expanding government spending to support two wars. Since 2001, the Fed has stopped reporting a very important indicator of monetary supply, M3. Because they were afraid that M3 would reveal the massive increase of money supply.
But the market is efficient. You cannot cheat the market. Since 2001, the value of US dollar has been in a free fall against major foreign currencies. Crude oil is priced in US dollar, as are all other traded commodities. When the value of US dollar goes down, naturally the prices of commodities go up.
On top of that, you have gotten the parasite Wall Street bankers, who used the easy money offered by the Fed to speculate on the commodities market. Not only oil prices have gone through the roof, so have the prices for gold, silver, corn, cotton, and any commodity that you can name. The argument that the rise of oil price was only caused by demand/supply imbalance is completely false. Instead of using US dollar to price oil, if you have used gold to price the crude oil, the prices have not gone up much at all!
So what's the solution to high oil prices?
First, stop the Fed! The Fed's monetary policy destroyed the savings of US middle-class. Those who are on fixed incomes, such as retirees, are hit the hardest. Prices everywhere have gone up. Some people start to have problem to even pay for food and utilities! If the Fed is allowed to continue the devaluing of the dollar, middle-class will be destroyed. The US will descended into a third-world country in a few years!
Second, we have to have a long-term energy policy that has substance more than politics. Energy conservation should be the central piece of the new policy! Per capita energy consumption in the US is ten times higher than in India and China. We Americans cannot go on like this. I do not blame the US consumers. The Blame lies on the government, whose policy is NOT driven by public interest, BUT BY THE INTEREST of the energy companies, the automobile industry.
Public transportation is almost non-existent in the US, because the government does not support it. Highways and roads were built for individual automobiles, not for buses loading and off-loading passengers. Railways are limited. Building were built with the mandate to offer ample parking for individual cars.Every government policy here, including the highway bill, is to encourage individual driving and discourage mass transportation! Automobile industry and the energy industry were the primary beneficiaries of the policy. (Even with the support the government, the US auto industry is still failing. I predict in not so distant future, the US auto industry will be completely gone, ceding to the Asians and Europeans, just like the textile and electronic industries).
Let's take a look at the root causes of the current energy crisis, if we can call it a crisis. High gas prices are caused by high crude oil prices. Why have crude oil prices gone up some much since Bush took over the White House? "Experts" would tell you that it is caused by increasing demand for oil and decreasing supply of oil. But if you take a look at the demand, demand grew less than 3% per year during this period. Yes, supply has seen some disruption, due to Iraq war. And some oil fields are seeing the production of oil declining. But the true cause of high oil prices does not lie here. We should put the blame squarely on US central bank (the Fed) monetary policy. The Fed has been engaged in currency manipulation since 2001. It was the Fed's deliberate policy to devalue US dollar, by printing excessive amount of fresh paper money, thus lowering interest rates, at one time to an absurdly low level (1%), to fund expanding government spending to support two wars. Since 2001, the Fed has stopped reporting a very important indicator of monetary supply, M3. Because they were afraid that M3 would reveal the massive increase of money supply.
But the market is efficient. You cannot cheat the market. Since 2001, the value of US dollar has been in a free fall against major foreign currencies. Crude oil is priced in US dollar, as are all other traded commodities. When the value of US dollar goes down, naturally the prices of commodities go up.
On top of that, you have gotten the parasite Wall Street bankers, who used the easy money offered by the Fed to speculate on the commodities market. Not only oil prices have gone through the roof, so have the prices for gold, silver, corn, cotton, and any commodity that you can name. The argument that the rise of oil price was only caused by demand/supply imbalance is completely false. Instead of using US dollar to price oil, if you have used gold to price the crude oil, the prices have not gone up much at all!
So what's the solution to high oil prices?
First, stop the Fed! The Fed's monetary policy destroyed the savings of US middle-class. Those who are on fixed incomes, such as retirees, are hit the hardest. Prices everywhere have gone up. Some people start to have problem to even pay for food and utilities! If the Fed is allowed to continue the devaluing of the dollar, middle-class will be destroyed. The US will descended into a third-world country in a few years!
Second, we have to have a long-term energy policy that has substance more than politics. Energy conservation should be the central piece of the new policy! Per capita energy consumption in the US is ten times higher than in India and China. We Americans cannot go on like this. I do not blame the US consumers. The Blame lies on the government, whose policy is NOT driven by public interest, BUT BY THE INTEREST of the energy companies, the automobile industry.
Public transportation is almost non-existent in the US, because the government does not support it. Highways and roads were built for individual automobiles, not for buses loading and off-loading passengers. Railways are limited. Building were built with the mandate to offer ample parking for individual cars.Every government policy here, including the highway bill, is to encourage individual driving and discourage mass transportation! Automobile industry and the energy industry were the primary beneficiaries of the policy. (Even with the support the government, the US auto industry is still failing. I predict in not so distant future, the US auto industry will be completely gone, ceding to the Asians and Europeans, just like the textile and electronic industries).
Monday, May 26, 2008
Hillary Clinton has no shame
Hillary Clinton does not have any sense of shame. It was she who made a senseless comment about RFK assassination in June of 1968. Now she is turning around and attacking the Obama campaign for hyping up the incidence. Obama did not say much about the her comments. He showed his class by accepting the silly explanation and "apology" from Clinton.
Should we make a big issue out of this incidence? I think yes, we should. This incidence, along with many others, such as her comments about dodging sniper's bullets in her 90s Bosnia trip, goes a long way to show her CHARACTER, or lack of. SHE BASICALLY HAS NO SHAME. She cares only about winning. She does not care about the party. She cares less about truth. She has no principle. She will use any means to achieve her ends, which is to win the election. She would rather destroy the democratic party than not being able to win the nomination. That is her.
To say that she did not mean anything evil in her comment about RFK assassination is simply an insult to the intelligence of the voters, particularly of the so called "low-income rural WHITE working class" she has been so carefully pandering to. Mrs. Clinton, we heard it loud and clear. You were hoping some miracle might happen that Mr Obama would all of sudden be assassinated in June as RFK was in 1968. Then you would become the Democratic nominee. Shame on you. You have got no trace of human decency left in you! If God forbidden, some crazy racist would attempt to assassinate Mr. Obama, we would hold YOU accountable for inciting that to happen. You are typical of what a dirty politician is all about!
Mrs. Clinton, why don't you just run as a Republican, so we will have some peace within the Democratic party? Go join McCain. He is looking for a VEEP. He might consider you!
Should we make a big issue out of this incidence? I think yes, we should. This incidence, along with many others, such as her comments about dodging sniper's bullets in her 90s Bosnia trip, goes a long way to show her CHARACTER, or lack of. SHE BASICALLY HAS NO SHAME. She cares only about winning. She does not care about the party. She cares less about truth. She has no principle. She will use any means to achieve her ends, which is to win the election. She would rather destroy the democratic party than not being able to win the nomination. That is her.
To say that she did not mean anything evil in her comment about RFK assassination is simply an insult to the intelligence of the voters, particularly of the so called "low-income rural WHITE working class" she has been so carefully pandering to. Mrs. Clinton, we heard it loud and clear. You were hoping some miracle might happen that Mr Obama would all of sudden be assassinated in June as RFK was in 1968. Then you would become the Democratic nominee. Shame on you. You have got no trace of human decency left in you! If God forbidden, some crazy racist would attempt to assassinate Mr. Obama, we would hold YOU accountable for inciting that to happen. You are typical of what a dirty politician is all about!
Mrs. Clinton, why don't you just run as a Republican, so we will have some peace within the Democratic party? Go join McCain. He is looking for a VEEP. He might consider you!
Friday, May 23, 2008
Which problem is worse: housing or inflation?
The congress seems to be obsessed with subprime mortgage problems and the housing downturn. But is it really the biggest problem that ordinary people are facing?
I have done a small-sample survey among people living in my area. It is not scientific, but I think is pretty representative. People are not really worried about housing or subprime at this moment.
There are four groups of people when it comes to housing: 1) Ordinary house owners, who stay put in the current environment. They don't care how the house prices are going. They will stay in the house no matter what. 2) Stretched house owners. These people can't afford the houses they currently have. They can decide to move out, letting the house to foreclose. They may experience some short term hardship. But rentals are plenty. With the glut of unsold houses and condos, I don't think rents will go up very much. This group of people will be OK eventually once they get rid of the houses they were lured in by unscrupulous real estate agents and the greedy mortgage brokers. 3) Speculators. These people are in for making a quick profit, and now are stuck with the houses they can't sell. To this group of people, I would say: good luck. and 4) Renters. These people actually hope the house prices would drop from the insanely high levels to more reasonable and affordable price point.
So clearly, housing problem is not as bad as it is made out to be for consumers. It is certainly bad for the Wall Street financial institutions. The go-go days of mortgage speculation is gone. Their books are chalk full of subprime mortgages. They got only themselves to blame. Now they are asking the government and the Federal Reserve to bail them out. That is precisely what they have been getting. And that is also why the politicians are so eager to rescue them out of the subprime meltdown.
But for ordinary people, inflation is a much bigger problem. Just take a look at the price labels at the gas stations, and go for a grocery shopping. You will see price for almost everything has gone up, from milk to cereals, eggs to vegetables. The government tries to deceive us and themselves by focusing on the completely flawed CPI (Consumer Price Index), saying that CPI excluding food and energy is still below 3% per year. That is just plainly ridiculous.
The whole government policy is favoring the banks, and hurting ordinary people. The Fed keeps printing new dollars to give to the Wall Street banks, just to keep them afloat. That just destroys the value of dollar. That is why dollar is trading like a piece of worthless paper in the foreign exchange markets against almost every other major currency.
When dollar goes down, anything that is priced in dollar will go up in price, oil, gold, silver, platinum, diamond, metals, you name it. The cause of inflation is NOT due to the lack of supply of products, but due to the EXCESS supply of money. (No one has said about short supply of gold or silver. Why the price for gold or silver rose more than five-fold in matter of four years.) When you have more money chasing the same amount of products, prices will certainly go up. So the root cause of the widespread inflation has the Fed to blame! First Allan Greenspan, who flooded the system with money supply by lowering interest rate to absurdly low 1%, which created the housing bubble and subprime crisis. Then Mr. Bernanke did it again, just to rescue the banks and financial institutions who were gambling in the housing market with investors and depositors money (not their own money). These monetary actions, coupled with the irresponsible fiscal policy of the Bush Administration (run-away government spending for the two wars), conspired to destroy the value of dollar, hence the value of our savings and income. Middle-class America is taking the full brunt, while the super-wealthy who own real assets are actually benefiting.
It is about time. About time to have a regime change in the US.
I have done a small-sample survey among people living in my area. It is not scientific, but I think is pretty representative. People are not really worried about housing or subprime at this moment.
There are four groups of people when it comes to housing: 1) Ordinary house owners, who stay put in the current environment. They don't care how the house prices are going. They will stay in the house no matter what. 2) Stretched house owners. These people can't afford the houses they currently have. They can decide to move out, letting the house to foreclose. They may experience some short term hardship. But rentals are plenty. With the glut of unsold houses and condos, I don't think rents will go up very much. This group of people will be OK eventually once they get rid of the houses they were lured in by unscrupulous real estate agents and the greedy mortgage brokers. 3) Speculators. These people are in for making a quick profit, and now are stuck with the houses they can't sell. To this group of people, I would say: good luck. and 4) Renters. These people actually hope the house prices would drop from the insanely high levels to more reasonable and affordable price point.
So clearly, housing problem is not as bad as it is made out to be for consumers. It is certainly bad for the Wall Street financial institutions. The go-go days of mortgage speculation is gone. Their books are chalk full of subprime mortgages. They got only themselves to blame. Now they are asking the government and the Federal Reserve to bail them out. That is precisely what they have been getting. And that is also why the politicians are so eager to rescue them out of the subprime meltdown.
But for ordinary people, inflation is a much bigger problem. Just take a look at the price labels at the gas stations, and go for a grocery shopping. You will see price for almost everything has gone up, from milk to cereals, eggs to vegetables. The government tries to deceive us and themselves by focusing on the completely flawed CPI (Consumer Price Index), saying that CPI excluding food and energy is still below 3% per year. That is just plainly ridiculous.
The whole government policy is favoring the banks, and hurting ordinary people. The Fed keeps printing new dollars to give to the Wall Street banks, just to keep them afloat. That just destroys the value of dollar. That is why dollar is trading like a piece of worthless paper in the foreign exchange markets against almost every other major currency.
When dollar goes down, anything that is priced in dollar will go up in price, oil, gold, silver, platinum, diamond, metals, you name it. The cause of inflation is NOT due to the lack of supply of products, but due to the EXCESS supply of money. (No one has said about short supply of gold or silver. Why the price for gold or silver rose more than five-fold in matter of four years.) When you have more money chasing the same amount of products, prices will certainly go up. So the root cause of the widespread inflation has the Fed to blame! First Allan Greenspan, who flooded the system with money supply by lowering interest rate to absurdly low 1%, which created the housing bubble and subprime crisis. Then Mr. Bernanke did it again, just to rescue the banks and financial institutions who were gambling in the housing market with investors and depositors money (not their own money). These monetary actions, coupled with the irresponsible fiscal policy of the Bush Administration (run-away government spending for the two wars), conspired to destroy the value of dollar, hence the value of our savings and income. Middle-class America is taking the full brunt, while the super-wealthy who own real assets are actually benefiting.
It is about time. About time to have a regime change in the US.
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