Posts Tagged ‘Wisdom

20
Mar
09

Beware the Rabid Bunny Government

Good advice is rare and precious.  I have received one such nugget that I truly strive to live by; it was given to me by my boss at my first job.  I was complaining about feeling backed into a corner by a situation and he responded swiftly, possibly before he even realized it, saying “then why’d you let them?  Why did you get yourself into a situation that put you into a corner?”

I am unsure that wiser words have EVER been said.  After chewing on it for a few days, my young self grabbed onto those words as a way of life.  What he said made me stop and look at my role in every situation and changed me in a profound way.  It is not difficult to live away from the corners, but it does take courage.  To stay out of the corners means always being up front and carefully considering the implications of decisions.  Most importantly, it means doing the right thing, regardless of where that may leave me.  In the end, I can live without excuses and without regrets.

So this is where we come to AIG and Congress.  Talk about being cornered.  For simplicity’s sake, we will look at this in the context of AIG.  Please do not mistake this simplicity for naivety.  The problem is much more far-reaching than this, I know.  BUT CAN YOU BELIEVE WHAT HAPPENED TODAY?????  The latest bill passed by the House is a perfect example of what happens when we put comfort above results.  It’s somewhat ironic that in looking out for one’s own interest, he turns over control of the situation.  The situation itself takes control and the results are unsavory.

It all started when the government got backed into a corner.  It reacted like an animal frightened for its life, looking for the easy way out.  I’m sure there was a collective sigh of relief when the imminent collapse of the financial industry was staved off by a mere $160 or $200 billion (whatEVER, who’s counting).    AIG took the money, ill-advised as it may have been.  But now that the panic has subsided, the cornered-bunny-government has had an opportunity to consider what it gave up – not just money, but trust, reputation, and most likely, employment.  Back to the corner.

This time the bunny has rabies.  It is mad and it is not afraid.  Another panic-stricken vote has been taken and the government is expecting to be freed again, but I don’t expect it will be so simple.  If this latest bill passes the House, which it certainly will, our rabid bunny-government is going to fully punish the working people for the misdeeds of their employers and the poor decisions made to “help” them. 

I do not relish paying $165 million in bonuses to the motley fools who ran a company into the ground, but there is a contract in place.  Right now, the rabid bunny-government should not be allowed to tax these employees at a rate of 90%.  Yes, if you have not seen the news, the tax rate in this bill is 90%.  The American taxpayers now own 80% of AIG.  We should be able to make a decision regarding these bonuses.  I don’t remember electing officials who intended to tax at a rate of 90%, who say “we’ll let the states and cities take care of the rest.” 

Of course we, the owners of AIG, have no opportunity to make any decisions because the bunny-government leapt into this AIG purchase with nothing but survival in mind.  Instead of reacting like rabid bunnies, our congress should have treated the stock purchase in AIG like that in any business.  Contracts should have been reviewed and negotiated.  That would have been the time to review such exorbitant compensation, not now that the deal has been made and hands have shaken.  It is quite unpalatable to see a government backtracking to save face and passing discretionary tax laws that are incredibly unfair.  I believe that the text of the bill specifies bonuses paid in 2009, but what if there is a loophole.  What if bonus pay becomes fair game at a 90% taxation rate? 

We citizens should be very concerned.  We should be working together to eradicate such behavior from our government.  Class warfare may be peaking right now as the upper class is blamed for all of society’s ills, but we cannot detest the rich at the cost of liberty.  That is simply too expensive.  The bitterness that pervades the American public is sure to be our undoing.  We should not stand idly by, thumbing our noses at the rich who are about to be undone.  If we do, next time it will be us in the corner.

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01
Feb
09

The Stimulus in the Corner

A man I look up to a great deal gave me some advice.  It was the best advice I have ever gotten.  I felt backed into a corner with no way out, so I was complaining and he said, “Why would let someone back you into a corner?  If you live right, you’ll never be in the corner.”  At first, I thought he just didn’t understand that I didn’t have a way out.  Then I realized that I had absolutely gotten myself into the situation and I had no choice but to find a way out, by changing my attitude in a drastic way.  The funny thing is, I don’t even remember the situation I was in.  I just remember this advice and the many choices I have made because of it. 

Our nation is backed into a corner.  Collectively, we were irresponsible and we landed ourselves up against a wall with now way out.  We achieved some financial success, but saw no reason for gratitude.  Instead, we borrowed more to satisfy our every whim.  Then, we failed to hold our leaders to any standard.  In our apathy, we stopped expecting honesty and objectivity from our media.  Now, we have a mess and we need to change our attitude.  Actually, we need to change our entire lives.  Everything needs to be different. 

We’ve been offered a solution in the form of an economic stimulus.  Now the question is whether to take it or leave it.  It is so appealing.  We could accept this solution at little or no cost – right now.  Eight hundred and nineteen billion dollars is so much money.  Properly spent, it could solve all of our problems, to be sure.  What then, would it leave our children with?  The interest alone on this $819,000,000,000.00 is more than we have spent on the war in Afghanistan.  The size of the spending package is equal to the national budget in 1984 and it is two thirds of our current budget, that’s for all government spending.  All of it.  In the ’90’s, a $19 billion dollar stimulus package was on the table and Bill Clinton, not known for fiscal responsibility, said it was too aggressive.  That was less than a quarter of the size of this package just a little over 10 years ago.  This money means $5000.00 for every household in America.  Right now, to fund the bill, every household would have to cough up $5,000.00.  When the nation is paying it back in 20 years, our children will bear the burden of $819 billion plus all that interest.  The tax burdenwill be crushing.  What this means is that this package will create another bubble, tantamount to the housing bubble or the tech bubble, that is destined to burst.  The question is, what will become of the next generation when this colossal bubble bursts?  If we pass this stimulus package, we are keeping ourselves backed into this corner. 

So what if we don’t?  I would love to say that this is a media-induced frenzy, and there is some evidenct to that point.  It is not hard to believe that if the economic situation is dire enough, we will do anything to solve it long before we take the time to truly consider our options.  And let’s be informed.  In the ’80’s, a time that keeps popping up in the media, unemployment hovered around 7 per cent and peaked briefly around 10.  It was believed then that if unemployment sunk below 6 per cent, inflation would run out of control.  Six to seven per cent unemployment was the goal then and that’s exactly where we are now.  We are moving higher, but is that the result of media-induced hysteria?  Everybody I know is employed right now, but nobody will spend.  When spending stops, commerce stops.  When commerce stops, production stops.  When production stops, jobs are lost. 

Also, the housing numbers for December are in.  New mortgages rose by 6.5% in December.  January is proving to be one of the busiest months many in the mortgage industry remember.  Those official numbers will be in within the next few weeks.  Interestingly, this optimistic news did not get a lot of press.  I, for one, am so hungry for positive economic data that I leapt on the news.  I waited for it to be touted near and far, but then, it fell flat.  In fact, to recall the exact figure I had to find the Australian version of the Wall Street Journal. 

Another thing we cannot deny – corporations are still making money.  American business is still profitable.  It may not be as profitable as shareholders and board members would like, but profits are there.  In the ’80’s, a lot of business was not profitable, not at all.  Then, the general population seemed to have enough common sense to understand that some years are better than others.  This was not a profitable business cycle.  This is not where we are right now. 

I have to wonder if our situation merits $819,000,000,000.00?  I really, truly want to believe that it does not.  But I don’t want to be wrong.

So every time I am confident that the media has hyped us to the edge of sanity, I remember the reason we are here.  Hedge funds.  A credit market gone wild.  In the last decade, the United States has lost ground as a producing country.  We offer services, intellectual property, and money.  Even in the beginning, when I was young and clueless, I looked at our credit markets and wondered where the money was coming from.  How, I wondered, did Household credit have enough reserves all of a sudden to loan billions of dollars to high risk customers?  It seemed that every company was doing this and I knew a very small bit about reserves and risk factors and it simply didn’t make sense.  I was 27 when I noticed this, and I was certainly no economist.  SO, how did Alan Greenspan miss it?  How did the OCC miss it?  How did we end up here where are lending institutions have a trillion dollar shortfall in reserves?  That is the crux of the problem, one trillion dollars, or one and a half, but whose counting?  When I remember that huge number, I have to wonder, do we need $819,000,000,000.00?  Possibly.  Should we take it?  Will it make a difference?  Will it make it worse?

It will make it worse.  It may save us now, in the short term, but we should be very concerned about what we are leaving to our children.  If we could find it within ourselves to change our way of life and to change our attitudes, we could keep our children out of the corner.




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