Archive for October, 2007

Bush Acknowledges World War III (October 29, 2007)

Posted in Bush, Iran, Iraq on October 29, 2007 by e-commentary.org

Bush and Dr. Strangehate are intent on expanding World War III into Iran.  Bush has exhausted the Army and the Marines and will now launch the Navy and the Air Force into the fray.  He may simply hire more mercenaries such as Blackwater, the Hessians who helped undermine Hussein, the Kelly Girls of the killing profession.  Greed in the Green Zone expands.

With a little (a lot of) creative diplomacy, the Iranian people could be converted to allies or at least not adversaries.  When the Iranian people are allied with the West, their leaders will follow.  Bush intends to unite the Iranian people.  In opposition to the United States.  Russia senses an opportunity to pursue its own Operation Iraqi Liberation (OIL) or Operation Iran Liberation (OIL).  Bush will encourage the courtship of our enemies.

Organized resistance in America will not develop until Bush calls up the Cub Scouts or reinstitutes the Front Door Draft.  When the children of the Ruling Class must obtain draft deferral consultants in addition to college admission consultants, some influential Americans may quit following their stocks and take stock of America’s situation in the world today.  Bush + Cheney + Giuliani Draft Dodging Consultants, LLC; “When you have other priorities”; Since 2009.

Bumper sticker of the week:

Be nice to America or Bush will invade and bring democracy to your country.

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Greed on Steroids (October 22, 2007)

Posted in Bankruptcy, Economics, Society on October 22, 2007 by e-commentary.org

One score years ago, Greed was just good.  Now Greed is God.  God is Greed.  Those who embrace one seem to embrace the other.  Greed is now on steroids.

In theory, Chapter 11 of the Bankruptcy Code addressing business reorganization exists because of an assumption that a “going concern” business is synergistic and provides positive public externalities such as steady jobs, established customer networks, etc.  In other words, the business provides some value beyond the price of the individual assets.  Liquidating the business rather than rehabilitating it, the argument goes, expunges the possible public benefits.  In practice, however, Chapter 11 often is like a second marriage, the triumph of hope over experience.

Today, the hedge fund managers and private equity boys pursue an opposite tack.  They take a going concern, sell the assets and vaporize the “going concern” value.  They finance the disintegration with OPM (Other People’s Money) and pay reduced taxes for their assault on the public weal.  Instead of an “invisible hand” promoting the common weal, we are allowing others to cut off our hands.

America now rewards the destruction rather than the creation of wealth.  Once upon a time, risk was the handmaiden of reward.  Envy–the desire for something that someone else has–can be a positive incentive particularly if the owner of the coveted item seeks something owned by someone else.  Markets develop.  In a properly functioning capitalist system, an individual presses his nose against a showroom window and then goes out and puts the same nose to the grindstone to acquire the wherewithal to acquire the good.  However, those accumulating money today are not taking any personal risk or making a sacrifice, although their actions risk the stability of a precarious Economy.

In a short time, the hedge fund managers and private equity boys also have managed a non-hostile takeover of both the Democratic and Republican Parties with little resistance.  They own C. Schumer and H. Reid and H. Clinton.  No one is protecting the public.  The SEC (Securities and Exchange Commission) is now a wholly-owned subsidiary of the NYSE (New York Stock Exchange).

Bumper sticker of the week:

Feed The Homeless To The Hungry

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The Legacy Of “Easy Al” And Easy Money (October 15, 2007)

Posted in Economics, Federal Reserve, Gold Standard, Greenspan, Housing on October 15, 2007 by e-commentary.org

John and Johanna, Juan and Juanita, Ivan and Ivana, their story is archetypical in architecture today.  They should have purchased a 1400 square foot starter apartment, but they were induced and seduced into purchasing a 2200 square foot single family two-story home.  They could not afford much more than the down payment.  They could not afford the subsequent 359 monthly payments.  They are being evicted.  They will have to live somewhere, someone observes.  They need to find a 1400 square foot apartment, but there are few available and many other evictees and evacuees competing for them.  And what about the 2200 square foot abode?  It sits empty.  (See the e-ssay dated April 24, 2006).

“Easy Al” Greenspan never met a problem he would not fix with a fix of easy money.  The Fed is charged with addressing monetary policy not fiscal policy.  He set fiscal policy without even acknowledging the need for safeguards against the irrationality his monetary policy unleashed.  Be suspicious of someone who falls under the spell of one and only one cult commentator; someone should distill the thoughts of 371 (give or take) thinkers in developing a worldview.  The Gold Standard crowd almost appears reasonable.  At least a gold standard sets a standard for the money supply.  Sound monetary policy requires a “goods and services” standard/benchmark.  The amount of paper injected into the economy should be measured against the goods and services.  Instead, more money than necessary was hurled at problems thereby begetting more problems.

Bumper sticker of the week:

“A cynic is a man who knows the price of everything and the value of nothing.”  Oscar Wilde

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Housing Again (October 8, 2007)

Posted in Economics, Housing on October 8, 2007 by e-commentary.org

A house is a bundle of 1) sticks, 2) dirt, and 3) money/interest obligation.  The Truth In Lending Act requires the lender to provide basic information about the terms of a loan.  A $100,000 house subject to a 30 year mortgage at 10 percent requires the borrower to pay a total of over $316,000 during the life of the loan.  Thus, more than 2/3rds of the money ($216,000) pays for the money; less than 1/3rd ($100,000) pays for the sticks and the dirt.

When interest rate drops to 5 percent, the borrower pays a total of over $192,000 during the life of the 30 year loan.  Thus, less than 1/2 of the money ($92,000) pays for the money; more than 1/2 ($100,000) pays for the sticks and the dirt.

Reducing the interest rate reduces the total purchase price of the sticks, dirt and money/interest obligation needed to acquire the house.  When Greenspan reduced the Federal Funds Rates in 2001 and mortgage interest rates dropped, the price of the money/interest obligation dropped correspondingly.  Those who had the sticks and the dirt at the time were in the money.  Others were able to acquire a house (sticks, dirt, and money/interest obligation), for at least a few years.  Those who obtained a house in the early days of the run-up with a fixed rate mortgage of 5 to 6 percent have a “bird’s nest on the ground” if they keep a cool head.

The interest rate in a typical adjustable rate mortgage (ARM) adjusts upward in the next months and years even if other interest rates do not rise.  When the interest rate rises to 15 percent, the borrower pays a total of over $455,198 during the life of the 30 year loan.  Thus, almost 4/5ths of the money ($355,198) pays for the money; little more than 1/5th ($100,000) pays for the sticks and the dirt.

Many of the ARMs are more difficult to refinance because they include “pre-payment penalties” if the notes are paid early.  A borrower could pay off all but the last month’s obligation and then pay off the last month according to the terms of the note.  Some judges might allow it; some would not.  The pre-payment penalty provisions should be stricken because they are 1) against public policy, 2) unconscionable, 3) fraudulently obtained, 4) buried in adhesion contracts, and/or 5) _________.  There will still be an economic impact because so many investors were fooled and/or fooled themselves into believing that they would receive the substantial returns from the ARMs and other bogus instruments.

The “wealth effect” now has been supplanted by the “poverty effect.”  The “multiplier effect” is being supplanted by the “divider effect.”  And there is not a whole lot that the Fed can do to improve our lot.

However, Al Greenspan recently announced unambiguously that the credit crunch is behind us.  In the near future, no one will even remember this latest pronouncement and hold him to it.

Bumper sticker of the week:

“Time is money, money is time, that is all ye know on earth, and all ye need to know.”    John Maynard Keats

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The Right To Give Offense (October 1, 2007)

Posted in First Amendment, Iran, Law on October 1, 2007 by e-commentary.org

A wing nut like Ahmadinejad, the President of Iran, is invited to speak at Columbia University.  Let him speak.  The First Amendment “right to give offense” among other rights does not excuse a fusillade of offensive comments as part of a long-winded introduction.  Why would some wing nut like Lee Bollinger, the President of the U, trash the guy in his introduction.  A university president at a large, profitable corporate American university is primarily interested in the bottom line, the profitability of the entity, the endowment at the end of the day.  Columbia could have run a profit by running a polite conversation.  Again, America looks rude, petty, coarse, uncivil, uncivilized, arrogant and intolerant.  Again.  And again and again.

Bumper sticker of the week:

Love Your Enemies
It Confuses Them

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