According to the Obama Administration, another economic stimulus might be required because the “full impact of the old stimulus bill has already been felt.” Strangely enough, they seem to have forgotten that not one, but two, stimulus bills have already been passed, neither one approved of by the majority of American voters according to the polls. As a result, North Dakota has gained 1,800 jobs since the stimulus bill was passed (largely from oil industry jobs that have not been impacted by the stimulus) and meanwhile the other 49 states and the District of Columbia have all lost jobs since the stimulus.

                The apparent total lack of effect from the two stimulus bills is worrisome because A. 7,000 people every day see their unemployment benefits run out and B. the nation’s present 9.8% unemployment is a meaningless statistic. In reality it appears that stimulus or magic or miracle, whatever might be done is now roughly six million jobs short and the U-6 statistic which accurately measures the nation’s jobless rate shows that 17% of Americans are without jobs and California, where officially the jobless rate shows 10.1% suffers in reality an 18.5% U-6 unemployment rate depressing the Golden State’s economy.

                The only urgencies emerging out of all this are the administration’s recent   A. commitment of 40,000 troops to attack Fox News . . . and

B. the unending pressure to get emergency attention paid to the President’s Obamacare health initiative because “people will die” according to the commericials showing the president’s recent address to congress. Amazingly, despite all this unprecedented urgency, very little of Obamacare is set to begin before 2015 and virtually none of it before 2013 . . . utterly astonishing deliberation for a program “crucial to the whole recovery,” no?

                The president is still getting maximum humor and effect from blaming conservatives and the Bush administration for the financial meltdown with some version of his oft-repeated“I don’t want to hear from the people who caused the mess” charade. It is amazing to Ol’ Rajjpuut that 55% of the voters are so UN-informed as to blame conservatives and the free market itself for the evils of our present financial chaos. The informed will excuse Rajjpuut for this brief reminder of the history of our present collapse, to wit:

1.       Liberal Democrats and Jimmy Carter’s 1977 CRA (Community Reinvestment Act) was the first set of mortgage-guarantee laws which required lenders by law to make terribly ill-advised house loans to the worst possible credit risks

2.      The laws were not well crafted, so after they helped drive the nation’s inflation rate to 18-19%, mostly they were ignored and lenders were unthreatened by the ill-conceived CRA.

3.      By 1995, ACORN employed a different tactic. Clever lawyers like Barak Obama would extort the banks and other mortgage lenders to comply with the provisions of the CRA or be faced with mountains of non-compliance complaints and bad PR. Typically, the banks would cave in within two weeks and not only agree to make a certain amount of bad-loans every year but also would fund some sort of ACORN donation as well.

4.      But it was decided in 1998 by Bill Clinton and liberal Democrats to put teeth into the actual mortgage-guarantee picture itself. Accordingly a new set of mortgage-guarantee provisions were added which in combination with the CRA put the ill-advised mortgage-guarantee picture on steroids.

5.      By late November, 2003 James Stack of Investech.com was warning of the danger from a housing-industry investment bubble and the oncoming sub-prime mortgage collapse. January, 2005, the Bush Administration and Republicans in congress come to agree with Stack’s assessment and seek to pass laws to rid the nation of the worst provisions within the CRA and ’98 mortgage-guarantee laws. Democrats defeated their efforts.  Thirty months later in July, 2007, some Democrats saw the danger and a very weak bi-partisan law was created . . . however, it proved way too little, way too late.

6.      Financial meltdown began to be noticeable by late 2007.

So, Mr. Obama and the liberal Democrats are at least 10,000 times more culpable for the financial mess than Mr. Bush or the conservatives were.   And now, the Democrats would like the nation to continue to believe that the fox Democrats should not only continue to run the henhouse but that we citizens should overlook the fact that two, not one:  two, huge stimulus packages have already been created and doubled the country’s national debt . . . they are positioning themselves to ask for another monstrous stimulus package . . . hopefully, Americans are starting to feel “fool me once . . . .”

Ya’all live long, strong and ornery,

Rajjpuut

Market Chaos Theory 101

B.                                                              B.  No one could have foreseen it coming

Rajjpuut will deal with those three big lies in good time . . . .

                So-called “Chaos Theory” (which states that a butterfly flapping its wings over the Continental Divide near Leadville, Colorado might be the cause of tomorrow’s hail storm over Green Bay, Wisconsin) was much ballyhooed and otherwise applauded in recent decades. Most people applaud it, alas, without understanding its greater ramifications. In a sentence, small changes in ongoing systems can have huge effects eventually.

                Few people appreciate that chaos theory is nothing new . . . it’s called “free-market” theory in economics and has been appreciated by folks like Henry Hazlitt for centuries. Hazlitt gave the best and simplest example of this “market chaos 101” idea in his “Broken Window Parable” from his classical economic masterpiece: “Economics in One Lesson.”

http://jim.com/econ/chap02p1.html

                Anyone in America who hasn’t read or doesn’t understand the Broken Window Parable is too ignorant to be allowed to vote. Unfortunately, 95% of American voters do not understand it and thus we repeatedly elect officials who create the type of financial mess we see all around us . . . .

                Small changes can have totally unforeseen big picture effects in our economy. And what of huge changes? What of GSBs and GIBs? (Government Spending Boondoggles and Government Interference Boondoggles) of immense proportions such as Social Security? Medicare? Medicaid? Jimmy Carter’s CRA of 1977? Bill Clinton’s new mortgage-guarantee legislation? The 1913 stealth creation (see the non-fiction work:  “The Creature from Jekyll Island”) of the Federal Reserve Bank? FDR’s confiscation of gold and 69% devaluation of the American dollar? Bernanke’s printing press money now constituting fifteen times the amount of circulating dollars we had in 2008? What of Obama’s bailouts and government interference in American business? If, as Thomas Sowell recently and so eloquently put it

http://710knus.townhall.com/columnists/ThomasSowell/2009/10/13/magic_numbers_in_politics

(and Hazlitt would heartily agree) a huge increase in the demand for ice cream can mean higher prices for catchers' mitts (fewer dairy cows are slaughtered for their leather and leather goods supply shrinks thus driving up prices) . . . if economic interconnections are everywhere and everywhere unappreciated or mis-understood, tinkering with a beneficent economy can lead to problems and wholesale attack on the economy can lead to ruin.

                The United States in the 43 years following the end of World War II averaged between 62%-65% home ownership, roughly 64%: by far the highest in the world. We also had an almost ethereal substance working for us: “The American Dream.” The American Dream might involve your kids actually getting a high school diploma; or better yet going to college and graduating; or owning your own business; or inventing something and selling your invention; or owning rental property . . . The idea was always the same, you would make a breakthrough somehow and your children would be better off than you. 

As Sowell put it, however, there is a natural balance, for everything and a cost requirement (sometimes a huge cost) to change that balance. The cost of the liberal GIB (government interference boondoggle) attacks in CRA ’77  (Carter’s Community Reinvestment Act) were thankfully small. The law was so poorly crafted that even though it required lenders by law to make financially unsound loans, a lot of people and Bankers just ignored it and after the horrific inflation of the Carter years (19% in 1980 and the start of ’81) the country’s problems largely ebbed away.

However, a new tactic evolved in 1995. Personified by ACORN attorney Barak Obama, it looked like this: using the vague provisions of the CRA to deluge banks and mortgage companies with a flood of legal claims and paperwork that had the potential to put them out of business for months at a time . . . Obama, and his ilk, extorted the lenders, in exchange for a promise to comply with some percentage of loans every year, and usually a contribution to ACORN, thus the ACORN attorneys and ACORN-created problems would “go away.” But even that wasn’t good enough . . . .

In an all-out attack on the “evil” landlords (mostly conservatives and Republicans) it was decided that the four and a half decade balance around 64% home ownership was NOT good enough (“every single American ought to own his own home”) and the Clinton ’98 mortgage-guarantee laws were passed. In combo with the CRA, the ills of mortgage-guarantee legislation were now put upon vile steroids . . . the result according to Sowell, Rajjpuut and Hazlitt was that the 69% home ownership the country briefly knew in 2004-2005 has today cost us 15,400,000 lost jobs as well as a whole world of fiscal turmoil. The reason that balance around 64% home ownership persisted was that beyond that point, you’d be selling homes and loaning money to people who could never be expected to pay their mortgages and who would, of course, lose those same homes to foreclosure. So glancing again at the key points of this blog from further up the page:

                Three big lies surround our current financial debacle.

A.      The unregulated free markets caused this crisis

B.     No one could have foreseen it coming

C.      The Bush Administration and conservatives in general allowed it to happen or to get worse than it should have

Referring to item A: Obviously it was three GIBs (the ’77 CRA; ACORN/Obama-type lawyers abusing the CRA to extort banks; and the ’98 Clinton mortgage-guarantee laws) that created the crisis.

 As far as B above: in late November, 2003, James Stack of investech.com started publishing his “housing industry bubble” chart weekly and predicting the power of our sub-prime mortgage crisis to unravel the entire economy. By mid-January, 2005, the Bush Administration and Republicans and conservatives in general tried to undo the worst evils of the CRA and Clinton’s mortgage-guarantee laws, but were defeated by the Democrats. By July, 2007, the problems were becoming evident to everyone and a very weak bi-partisan bill was passed. But this proved way too little, way too late and the financial systems began to melt down before the end of 2007.

Referring to lie C: The conservatives of both parties; the Republicans in general; and the Bush Administration in particular had their hands tied by the liberals chortling and applauding as they saw the home ownership percentage slowly rise to 69%.

As Sowell’s column and Hazlitt’s Broken Window Parable illustrate, everything is connected to everything in a free market. Sowell says, “. . . it makes no sense to have laws and policies that declare some given goal to be a "good thing," without regard to the repercussions, which spread out in all directions, like waves that spread across a pond when you drop a rock in the water.”

Ya’all live long, strong and ornery,

Rajjpuut

 Understanding the Financial Mess 101

                As Rajjpuut was watching the dog and pony show wherein Barak Obama’s highly objectionable healthcare speech (actually a string of lies and half-truths) was passed off as “bi-partisanship logic” and America-first thinking . . . he was amazed at the conservatives and particularly the Republican conservatives repeatedly applauding and giving our traitorous president a constant standing ovation. Joe Wilson’s “You lie!” was the only honesty heard during the entire hour. It’s time Republican leaders grew a pair . . . each! Not just one pair for the entire contingent . . . . Obama and the liberal Democratic leadership are willfully destroying the country and 55% of the people still believe the lie that the cause of the collapse was the actions of conservatives. How tough can it be to pull a mini-Ronald Reagan and actually communicate the facts?  Isn't it about time that every thinking American had the facts before them in such a manner that anyone could understand who really caused this problem?

                Fact 1: The CRA (Community Re-investment act of 1977 sponsored by Carter and the Democrats FORCED the lending institutions to knowingly make, by law, terrible loans to people who could NOT afford to repay their mortgages. Thankfully, the law was written without all the teeth of the . . .

                Fact 3: However, even well before that, a new tactic had emerged. ACORN on a broad basis as early as 1995 hired Barak Obama and other unprincipled lawyers to extort the lending institutions by threats of making business impossible to conduct due to constant litigation on behalf of these bad-risk unqualified would-be loan recipients . . . .

                Fact 4: As early as late November, 2003, James Stack of investech.com was warning of a housing industry bubble in danger of bursting and a sub-prime mortgage crisis. By January, 2005, Bush and the Republicans saw the danger clearly and created a bill to counteract most of the worst features of  the CRA and Clinton’s mortgage-guarantee law. They were, however, defeated by the Democrats. It wasn’t until July, 2007 that the Democrats agreed there was danger and a weak bi-partisan bill was finally passed that proved to be way too little and way too late.

                Fact 5:  The compounding of the problem that has also been blamed on “excesses in the unregulated free market” as well as the Bush administration and conservatives in general is an Economics 101 case study in why government should never interfere in a well-running free market institution like when 64% of the people own their own homes, highest percentage in the world.  How did this mess arise?  Institutional investors have traditionally been highly reluctant to invest in mortgage assets because of their extremely undesirable characteristics.  As part of Lyndon Johnson’s “Great Society” in 1968 Fannie Mae and later  in 1970 Freddie Mac became the huge entities we know today. They were, in short, institutions formed to buy mortgages that the free markets did not want.

Fact 6: However, some clever individuals discovered that if you obtained guarantees by Fannie Mae and Ginnie Mac what resulted was an investment grade bond rating even Wall Street would buy.  Hence the birth of the mortgage-backed security, a result of government interference, pure and simple.

Fact 7: The Community Reinvestment Act of 1977 was another government interference. It was a blatant attempt to force low-income housing upon the system.  Soon private banks and Fannie Mae were FORCED to loan large amounts to borrowers who logically could not be expected to meet their mortgages, even for low-income housing, every month, people that ordinarily would be considered ultra-high risk.  The bad part was that banks paid huge penalties whenever federal auditors found noncompliance with the ridiculous standards of CRA.  Thus was born the subprime loan. Once again government interference in the market place was the cause of the problems that would arise.  Fact 7 1/2: Later the mortgage-guarantee legislation Laws of 1998 under Bill Clinton put the federal non-compliance penalties on steroids . . . and these same people were now buying $200,000-$500,000 homes.

Fact 8: Later securitized mortgage pools, leverage with huge debt, were found to produce spectacular returns for money market funds, insurance companies, wall street brokers, school districts in Europe, governments like that of Iceland, hedge funds, banks themselves, and various other large money pools . . . again the opportunity created for huge profit (so long as housing prices were rising and not too many foreclosures were occuring) and huge disaster (when normal market forces prevailed as they always do) was part and parcel of outright foolish government interference in the free markets. The size of these pools became enormous and their collapse was an unmitigated catastrophe for all invested in them.

                Fact 9: The conservatives cannot logically be blamed for much having to do with the sub-prime lending crisis. Even though home ownership in the country had varied from 62%-65% since 1946, the highest rate in the world, liberals said “everyone must be able to have their own home.” This was, besides being a ridiculous conclusion, a not too well-hidden attack on the landlords of the country which is about 64% Republican and a very conservative group of people.

Ya’all live long, strong and ornery,

Rajjpuut

By the time Social Security goes bankrupt in 2018 that will be a mistake that took 86 years to fully hatch, rather a tiny one by liberal standards. The Grandfather of all liberal mistakes in Medicare, which will go bankrupt in 2016 and right now owns financial obligations for $34 TRillion it canNOT pay and this time they ran up all that debt in only 51 years when that sad date comes around. Obamacare is being set up to “rescue Medicare” and then establish it’s own identity.   In case you didn't realize it, all four laws:  those two entitlement laws (Social Security and Medicare) and the two mortgage-guarantee laws (1977 under Jimmy Carter and 1998 under Bill Clinton) were 98% Democratic mistakes passed over the opposition of Republicans^^ which created our present financial panic . . . all four laws constitute their liberal legacy to us.  This is the legacy that Bill Clinton was so worried about!

Think on Medicare: $34 TRillion?  Do you, can you realize how much that is? Probably not, so let Ol’ Rajjpuut help you out: 

How Much is $34 TRillion? How much is 34 Trillion anything?

It’s three times the present national debt . . . .

Start your year with 25 days vacation, when you return get to work:  your solemn obligation is to spend $100 Billion a day that’s $34 Trillion . . .

Go back to the big bang 11.5 Billion years ago and start building cars, say 3,000 cars every year, yesterday you completed your 34 Trillionth car, didn’t you? You did   . . . .

Return to the year zero, and Bethlehem and the manger scene, now I’ll allow you to spend $34 Million a day right up till tomorrow when, sorry, I’ll have to cut you off      . . . . sorry. 

Still can’t fathom it? Think of it like this, it’s too damn much money to waste on a government frigging** boondoggle!

Ya’all live long, strong and ornery,

** as we type, Obama’s white house projected that on top of our $11 Trillion national debt . . . in fact BOTH the White House Office of Management and Budget and the nonpartisan Congressional Budget Office (CBO) predicted the budget deficit this year would swell to nearly $1.6 trillion, a record, and far beyond last year’s 2008 budget deficit of $455 billion. They foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May. Didn’t Obama say he was going to cut the National debt by ¾ by the end of 2012? That ought to make the deficit soar and . . . and . . . build up a new national debt even bigger: CLEVER!!!!!  When the world (soon?) drops the dollar as its reserve currency . . . this is why.

            . . . for the mess he helped create. There was no more enthusiastic advocate of the mortgage-guarantee legislation and the derivatives addition to the financial markets than the “old lion” of the Fed about nine years ago. In 2004, after James Stack of Investech.com had been warning first about the mortgage-guarantee collapse and the derivative mess for almost a full year, Mr. Greenspan went so far as to applaud derivatives like this: “Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” Words of a wise man . . . NOT!

            Warren E. Buffet had commented only a few months earlier that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” . . . but the man in charge of the shooting gallery, the man who had to be expected to know, Mr. Greenspan, was praising them to the hilt -- AMAZING!

            Treasury secretary Timothy Geitner who as Greenspan’s right-hand man should have known better, now says that “derivatives blindsided the government.” Well, yes, you put a crap game into effect, you might expect that gambling would take place, no? And a whole lot of smart banks and brokerages have never once “invested” in derivatives because “quite frankly we don’t understand how they work,” according to world famous financial operative George Soros.

            The Greenspan “legacy” is sorely tested today by anyone in the know. Because of his position as the chief financial overseer of the country, Greenspan’s opinion held sway when derivatives were discussed. These exotic contracts supposedly promising to protect investors from loss never had a more devoted champion than the ex-fed chairman himself. “We have found over the many years that derivatives have been an exceptional vehicle and extraordinarily useful in transferring risk from those who shouldn’t be taking risk to those who are willing and able of doing so.” Those words in 2003 were followed in the next breath by these: “We think it would be a mistake to more deeply” regulate those contracts.  The problem was, of course, GREED . . . one of the two motivations always at play in the markets: greed and fear. 

            When so many aggressive investors were getting rich overnight on derivatives, the “play” became accepted as commonplace. When those derivatives even began to involve mortgage loans . . . well the rest is history. Thank you, Mr. Greenspan, your legacy is safe in my hands.

Live long, strong and ornery,

Rajjpuut