Cowboy Confessional

Democrats are cows.

Now I’m not accusing women in Democrat party leadership of being free range bovine, though Hillary is looking more the part as her rump roast ripens.  Nor am I saying men in the party leadership are a bunch mindless heifer humping bulls, despite that description fitting Bill rather well.  Nor do I imply that Democrat voters share a herd mentality, though my Republican friends constantly argue that the proposition is validated by evidence.

Once the Republicans have stable political philosophy, I’ll take their opinions seriously.

What I am saying is that in matters of economics, Democrat party chieftains have the cranial density of your average angus and the stubbornness of a Texas longhorn.  With either species (bovine or Democrat politician), whacking them in the forehead with a two by four produces no meaningful response (however, the good people of Nevada seem ready to apply that process to Harry Reid).  Preaching blindly simple matters of macroeconomics to Nancy Pelosi or Barack Obama would be like orating to oxen:  neither audience is bright enough to grasp the concepts.

Outside of conscripted societies, economics is based on people creating things of value.  Exxon puts gas in your car, allowing you to get to your job where you create things of value for other people who buy them from your company, generating your paycheck so you can rent an internet connection to read this blog, click on the advertising and put money in my pocket, which I’ll use to buy some gasoline as well.

Government produces nothing.  The only product of value it can create is keeping one person from harming another, and even that government tends to do poorly.  Only a Keynesian or otherwise enfeebled person perceives that government spending increases economic prosperity, for they fail to see the direct and highly individualized essence of value (I value a good steak while my vegetarian pal values tofu – guess which of us voted for Obama).

Democrats utter lack of insight into the basics of economics has caused the Federal Reserve Bank of San Francisco to warn about next year’s double dip into recession.  Abbreviating their economic discourse, the San Francisco Fed basically said the odds are good and getting better that we will slide into phase two of the Great Recession (“the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer.”)  This has instigated Fed infighting concerning deficit spending stimulus and other unicorn concepts.  Despite spending at a rate that has launched America toward an inescapable economic collapse, some bovine roaming the White House war room insist that more spending will generate economic growth in the same way that their first round didn’t (can you hear Rahm Emanuel mooing?)  Politicos in the Fed – and, yes, Fed officials have personal and political motives for their decisions – are debating if rampant spending, and artificially keeping interest rates at zero percent, is wise. It ain’t.

The only upside to the looming second dive into the economic sewer is that it will most likely occur as Obama faces reelection, assuring his one term status.

Sadly, Obama has assistance.  His Herford helpers in congress are doing everything possible to prevent economic growth by slowing economics.  The two glaring weaknesses in the economy today are zero job growth and banks not lending.  In such an environment only crackpots and cattle would pass legislation that slowed both even further.  Yet, congress has managed both in one bill by taxing banks an extra 6.7% (based on Wells Fargo’s estimate of the new regulatory and tax burden and their 2009 earnings).

With that heavy new yoke Wells is unlikely to hire anybody or lend businesses money with which to do so.

The essence of economics is people creating value.  The essence of government is preventing such.  The essence of America when barn yard animals (donkeys and cows) run Washington is killing the American dream.

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“Hand over $42,000 grandma,” said Rham Emanuel, casting his perpetually sinister snarl at your nana, thrusting his hand in her drooping bra while rummaging through her private depository.

Though believable, this Rham report has not occurred, though I have few doubts that the resident White House weasel enjoys groping old ladies (as well as young boys and small farm animals).  But your grandma, grandpa, son, daughter, wife, neighbor and you owe $42,000 thanks to many Congresses who mismanaged your money.  And odds are Uncle Sugar will collect in the coming years because the American fiscal house of cards is ready to collapse.

That is what thirteen trillion dollars of accumulated debt will get you.

It is no secret that trusting congress with money is like trusting Al Qaeda with nukes – little good can come of it.  Over the years politicians have financed everything from submarines to farm subsidies with borrowed bucks.  In quainter times Senator Everett Dirksen allegedly quipped about the mounting federal debt “A billion here, a billion there, pretty soon, you’re talking real money.”  Those billions added up and the Fedz started talking trillions.

Then came Bush and Obama, two peas in the spendthrift pod, and all semblances of fiscal sanity vanished without a trace.

Between Bush’s utterly unconstitutional bank bail-out and Obama’s trillion dollar slush fund (known to his acolytes as stimulus), your shared debt rose about two trillion dollars (a 15% bump) in less than a year’s time.  All this excludes for the moment an even larger annual deficit from Barack’s scheduled subsidized healthcare system, which will make current deficits appear miserly by comparison.  All in all, the defined federal budget has you in hock up to your nostrils.

That’s the “good” news.

Lost in mind-numbing numbers – so large that they defy comprehension – are temporarily solvent programs soon to go bust.  For a few decades Congress feared voter wrath over unbalanced budgets.  They covered deficits by borrowing from the Social Security cash horde.  This maneuver made it appear that the budget was balanced (it was not).  About six years from now, the last of the cash in Al Gore’s fabled lock box will be spent.  After that the only way grandma will get her monthly remuneration will be for the Social Security administration to collect on the IOUs congress wrote – the same congress that racked-up thirteen trillion in debt and blessed the Bush/Obama spending sprees.

That’s the “good” news.

Medicare is in worse shape.  Even after Obamacare adjustments, the system has $38 trillion in unfunded obligations, or roughly three times the current debt.  Your accumulated Medicare payroll taxes will be depleted within a decade and the only way to buy grandma a new hip will be either out of your own pocket, or for the federal government to go even further into debt.  No amount of economic growth and associated tax revenues can counter the growing Social Security and Medicare outflow.

That’s the “good” news.

Without cutting benefits and budgets, the interest on the debt is scheduled to equal annual Social Security and Medicare outlays in less than two decades (to put painful perspective on that, if you have a baby this year, the interest on the federal debt will be as large as either unfunded Social Security outlays or unfunded Medicare outlays by the time your baby exits college).  That’s the bad news.  Since Medicare and Social Security are functionally insolvent, they will likely add to the budget deficit in the coming years since no congressman has the spine to take money away from old ladies and opt for deeper indebtedness.

They remember cat food.

In the Carter years, inflation was growing faster than kudzu.  Old folk on fixed incomes were known to eat Tender Vittles because that was preferable to going hungry.  Politicians rapidly enacted Social Security cost of living increases tied to inflation, which had the unappetizing effect of draining Social Security funds faster.  Some protested and suggested reigning in entitlement spending.  The lesson learned by a few former congress critters was that threatening to reduce support for old people was a fast path to the unemployment line.  The odds of future congresses cutting grandma’s monthly stipend are somewhere south of zero.

In short order Congress will either have to massively cut spending, hike taxes to stratospheric levels, or go even deeper in debt.  More debt is not an option.  Recent events in Greece show that there is a limit to sovereign debt, and once America’s credit rating slides, the cost of borrowing will rise and adding debt will be both difficult and expensive, leading the United States into the same debt death spiral the Greeks endured.  Raising taxes causes economies to grind to a halt as less money remains for investing in business, employment and consumption.  That leaves eviscerating the federal government itself, which I would endorse even if the budget were perpetually balanced.  But as always, those who suckle the federal teat will bite hard to keep the milk flowing.  Like calves that refuse to wean, you have to drag them from the utter and isolate them in a holding pen.

Congress may eventually slash budgetary perks to save grandma, their jobs, and avoid Zimbabwean sized inflation.  So farewell welfare.  Adieu unemployment.  Hasta la vista health and human services.  Adios agriculture department.  Nice to know ya NASA.  Toodle-oo Department of Transportation.  Later labor.  Ciao foreign aid … Hmmmm.  Maybe I should become an Obama backer.  His extravagances may force scraping of most of the federal government.

That’s the good news.

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The Greek economy is bofo’ed (sorry, couldn’t resist).

Predicting economic doom is best done by Malthusians and other enfeebled individuals, so I hesitate to step in their pile of intellectual effluvium.  Yet it is difficult to look at Greek government excess and Grecian socialist selfishness and not predict that the land that whelped Plato and his Republic is about to go bust.  As always a little perspective is painful and necessary.

Anyone who dislikes math, economics or politics can instead tune into E! … or MSNBC.  Their depth is the same.

Greece cranks about 2% of the European Union’s GDP, which for an island nation is an unexpected feat.  However, they are well up the list of countries in the world in terms of debt as a percent of their GDP, owing 108% of what they produce in a year.  The only nations more insolvent than the Greeks are places like Jamaica, Lebanon and Zimbabwe (actually, you have to add Japan, Singapore and Italy, but those countries crank out more wealth per head).   The wastrel United States is about half as indebted as Greece (though that is 2009 data and does not include Obama’s spending spree, which the IMF estimates pushes the US up to 96%), which shows how the Greeks are going to Hellas in a hand basket.

The first point where this analysis gets interesting is the imperfect European Union.  In a mash-up of nations with only geography as a common denominator, they managed to cobble together rules of engagement that could confuse a lawyer.  Their constitution weighs in at over 65,000 words, and that excludes protocols and annexes (the United States Constitution is a parsimonious 7,600 words, including 222 years of amendments). In a vain attempt to make the EU lord, master and micromanager of every aspect of life, and in trading competing national interest against one another, the EU created an unworkable mess.  This is not why Greece is heading down the economic drainpipe, but it shows one of the reasons why the EU will fail in rescuing Greece – the situation is too slippery (really, I am sorry for the puns – I blame society).

In order for Greece to not fail requires two events, one likely and the other not.  The first is that they require a short-term bailout.  Already Germany and the IMF (a.k.a. the United States taxpayer) are ready to bail-out Greece and keep their bonds from achieving the same valuation as the Zimbabwean $100,000,000 note (which at its terminus wouldn’t buy a Starbucks coffee, but then again neither can the average American paycheck).  Other EU members, some very reluctantly, will agree to making Greece temporarily solvent.  The immediate future favors Greece.

Greece’s long term outlook is slightly less optimistic than Oedipus’ eyesight (though their mutual hindsight will be very good).

The bailout stabilizes the patient.  However, it does not cure the disease.  Greece has agreed to enact a series of steps designed to bring their spending slightly closer to their income, weak medicine for a highly infected body politic.  This includes:

* Freezing government pay, which is comical because public paychecks have risen 30% in the last four years (and if this sounds familiar to Californians, then know you are next in government bankruptcy court).

* Annual bonuses equaling two extra months of pay will be scrapped for some government workers.

* Private companies can now lay off more than 2% of their personnel (yep, the Greek government mandates the maximum flexibility a corporation has in managing their payrolls) to a whopping 4%.

* Taxes will rise, with VAT climbing to 23% along with some direct taxes on booze and cigarettes.

* There are also a collection of promises that will never be kept, including cracking down on tax evaders, changing retirement age and privatizing government operations.  Being a socialist nation, the odds of any of these events occurring is as remote as Crete is to Compton.

Already evidence has erupted that Greeks won’t accept even minor adjustments.  Riots resulting in death have vented like Santorini with more being planned by pestilent pinheads.  Like children with billy clubs, it has proven unwise to yank the lollypop from their gobs.  Though politicians will talk tough and lecture the Greek masses on austerity, they will soften the scheme as soon as any sign of EU watchfulness eases or economic revival is evident.

The whole cycle will start anew.

What makes this a long-term looser is the effect on the EU.  I predict that Greece will be escorted out the Union once Greek fiscal efficacy evaporates.  Proportionately speaking, this would be like the United States telling Maryland adios (and given the influx of Latin Americans into the United States, adios may become a permanent part of the American vocabulary).  If the EU’s investment in Greece is lost, they have only two options:  to keep pumping money into a member country that cannot manage its affairs, or cut them loose like a reprobate child who can’t keep a job.

Germans are unlikely to nurture malcontented miscreants.

So, what happens when Greece is cast adrift like Danae and Perseus?  Nothing instantly.  But succession has never boded well for a union – ask any man served with divorce papers.  Selective unions are merely friendships whereas committed unions are marriages.  A good spouse will do everything in their power to keep their mates happy and the marriage intact.  Money, comfort, spare kidneys – nothing is beyond question.  But this commitment dies when the marriage does, and most marital unions die from infidelity.

Likewise with the EU and the fiscally philandering Greeks.

Once Greece betrays the trust of other EU members by failing to enforce austerity and by demanding more EU lucre, trust ceases to exist and the EU will jettison Greece to an economic Hades.  Germany, ill content to be the financial backstop, may contemplate leaving themselves, learning from America that generosity more often than not buys ingratitude.  This or more bankruptcies will break the Euro currency.  Other EU countries may accelerate the process by attempting to stay in the union while reverting back to their own currency, following Brittan’s example.

In short, the Euro will likely become a historical footnote and the belabored EU constitution shipped to an impoverished Greece for toilet paper purposes.

Yes, this is all very speculative and is flexible due to far-future fancy.  But the tell is that Greeks now riot over accepting responsibility for their own mismanagement.  Like children tossing tantrums for the milk they spilt, the Greeks are setting their own towns ablaze protesting that government largess will be trimmed ever so slightly.  This mentality last as long as the food does, and in a bankrupt country, that does not last long.

UPDATE: Hours after posting this the EU created $1T (pretty much out of thin air) to buy-up bad debt, namely Greek bonds and other waste paper.  No word on how they intend to unroll this bigger debt bomb, which is 1/16th of the entire EU GDP. But this does not bode well for the EU over a longer-term.

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Nero should have been as thorough.

History has witnessed numerous despots fiddle while empires burnt.  Barack Obama, aided by a legislature filled with Caligula’s elected descendants, is moving America steadily in the direction of the Zimbabwean empire.  The parallels between Obama and Zimbabwe’s loco dictator Robert Mugabe stop only at their body mass index (the latter being a pro-ranked porker, and the former a chain smoking string bean).  Both men – and I use the word “men” very loosely – are self-important, functionally clueless, imbued with messianic visions and able to drive entire nations into insolvency solo.

Anyone have a stack of Zimbabwean currency?  I need to hit the head.

Nobody with brains blames Obama for the pre-existing national debt.  America has run in the red for most of its modern existence.  However, aside from times of war (like the last nine years) there has been some semblance of sanity and approximate alignment between federal spending and revenue.  Obama is following in Mugabe’s footsteps by printing money at a rate that requires buying more printing presses.  Compounding the elaborate theft that was the 2008 bailout of failed businesses (AIG, et al) is Obama’s even more elaborate theft, done with enough audacity to double down and double the deficit.  His nearly trillion dollar stimulus spending spree only stimulated Chris Matthews’ leg, but did send the Bureau of Engraving and Printing into overdrive.

Now Barack is ready to spend even more.  (Note to the graduating class of 2010:  RUN! Barak’s bill has your name on it.)

This week Obama pimps a $3.8T budget that increases government spending beyond where he has already elevated it.

• · Another 6% for education and civilian research.
• · A cool $25B for states that misspent as effectively as the Feds (this money is, no doubt, reserved for blue states like perpetually insolvent California).
• · A “freeze” that locks-in last years hyper spending, yet excludes the most expensive and fastest growing parts of the federal monster – Medicare, Medicaid, Social Security, national security, and the VA.

Investing in Zimbabwean dollars suddenly sounds sane compared to buying U.S. bonds.  Before Mugabe gave in, a Zimbabwean $100 billion banknote could buy three eggs, clearly demonstrating the effects of the hyperinflation soon to rock America, which still produces a quarter of the globe’s GDP.  In other words, America will indirectly export its economic mess. You thought $4 a gallon gas was tough … just wait a couple of years and try buying three eggs.

The Congressional Budget Office, an operation with relative sanctity inside the beltway, estimates that even without Obama’s further fiscal indiscretions:

• · The federal deficit next year will be $1.3T – on top of this year’s $1.4T.
• · The total national debt will be 95% of GDP, and 100% within a decade (imagine owing your credit card company as much as you made last year … assuming you had a job last year).
• · Over the next 10-years the interest costs alone will tally $4.8T, a service load more than triple the debt itself.

That is the good news.

If you haven’t grabbed your bottle of Jack Daniels yet, best do so now, even if you are still eating breakfast.  You’re going to need a belt.  All these budget numbers do not take into account off-the-book liabilities the feds willfully adopted.  According to a federal inspector general, the government is the insurer of record for 90% of all home mortgages.  Perverse legislation granted Fannie Mae and Freddie Mac the ability to over-leverage their assets (a staggering 70:1 ratio), higher than any commercial bank, while congressional clowns (Barney Frank by name) encouraged Mae and Mac to buy subprime loans, which in the end accounted for 20% of their portfolios.  Uncle Sugar assumed all that risk and added it to mortgages protected by the Federal Home Loan Association.  If for any reason we enter economic decline – you know, like Zimbabwe – then all that mortgage debt will be paid for by you.

The tally thus far (yes … there is more) is that we are running huge deficits, getting ready to spend even more, pumping up our interest expense, and have a moat full of mortgage paper to insure.  Despite this, Barack boosts spending.  In his Keynesian  hallucination Obama begs for change Americans do not want, much like his health insurance hijack.

So, taxing in your IRA and 401K should not surprise you.  No, even your congress critter isn’t insane enough to renege on the promise of tax reduced/free retirement income … yet … though whispers of taxing retirement account capital gains are circulating within I-495.  What Obama and his cohorts in Congress are cooking is to tax all banks (including yours) to recapture TARP money (even if your bank didn’t want or take TARP cash).  This will result in raised bank fees, including the management fees on your IRA and 401K.  As noted in paragraphs above, the epicenter of the current economic emergency was the inane objectives of the Federal government.  But since Obama believes government is “cool” (his words, not mine) there is no way he can blame the mess on his own kind.  Thus Obama inappropriately harangues all banks in order to compensate for the federal mistake of bailing out a few banks … which was caused by the federal mistake of rigging the mortgage market.

These bank taxes will be passed along to you.  Of course, if you lost your job and have no money in the bank, then you may not feel the pinch.

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Google is evil.

Sorry Sergey, Lawrence. You know as well as I that your manta of “don’t be evil” is transparent, and that like any powerful entity – be it corporate or government – it succumbs to sins of opportunity and convenience.

How has Google gone evil? Let me compute the ways.

First and foremost are multiple modes of censorship. A recent spate of reports showed Google playing religious games by censoring insults to Islam (note to Brin and Page – that is actually an insult to your customers). When one typed into Google’s search engine a phrase such as “Christianity is” or “Judaism is”, Google most helpfully filled in the top suggestions from its vast database, most of which were derogatory. Yet when the search phrase began “Islam is”, Google was oddly silent.

Some PR flack at Google suggested it is was programming bug, which this former hacker knows is not. Data queries operate on four simple models, and no others can exist. A search dumps nothing, dumps everything (obviously not the case here), allows a defined subset of information out (the general Google operation based on keywords) or dumps everything but disallows certain data to escape.

That last mode is the system that filtered insults to Islam but not to any other religion. This is not caused by a bug, it is caused by a configuration decision. Ipso facto, someone in Google took specific and premeditated action to avoid displaying what people think about Islam, yet leaving uncensored what people think of other faiths. I have my suspicions that Google was prostrating itself before yet another brutal government.

Evil.

It should not surprise us then that Sergey and Lawrence unevenly endorse censorship and other forms of evil. Google’s relationship with one of the most evil entities in the known world – the tank rolling, protestor squashing, summary executing, labor camping and (yes) censoring government of mainland China. With better than a billion head and a growing middle class, China is an obvious place for advertising companies (like Google) to make a dime. Thus, Google bent over forwards for their PRC puppeteers, willfully excluding information for consumption by the average Chinese netitizen. Searching for “tiananmen square massacre” in google.cn produces a highly redacted set of responses than for google.com.

Evil.

Yet Brin and Page threw a harmonized hissy fit when the same source of evil (the Chinese government, not Google, though it is increasing difficult to decide which is more ruthless) hacked into Google’s systems to troll for dissident data – emails to and from human rights activists. Google stomped its corporate feet and threatened to exit the Chinese market, where unlike the rest of the world, Google is not the market leader.

To summarize, it is OK for Google to unilaterally (Islam) and collaboratively (China) perform evil acts on the world at large, but it is not OK for evil to be committed against Google.

But Google won’t leave China. Instead, Google is ‘discussing’ with tyrants what can be done to accommodate freedom, which is nothing. As evidence, China issued a most interesting quote about the incident, saying “Properly guiding Internet opinion is a major measure for protecting Internet information security.” In the end Google will accept their 35% share of 1.3 billion people because that’s real money, something more important to Silicon Valley than right and wrong.

Evil.

Google’s grotesqueness is greater than just its major non-movements. They have taken lessons from other organization and engineered recurring forms of minor mass thievery. After all, most of Google’s wealth comes from advertisers, and numerically most of their advertisers are small operations. The past year brought light to a tiny Google scam where by Sergey and Lawrence recruited new advertisers with a teaser of 100 free pay-per-click dollars. Readily available coupons allow new account owners to start running Google ads everywhere. Just give Google your credit card number (in case you go over your $100) and everything is set in motion.

The problem is that the usage and click rates are initially not shown in the new user’s account, leaving them to think that their ads ineffective. Newbies continue to tweak their ads, and many stop tracking performance daily. They are delighted somewhat later when click-through begin to appear. Nuevo advertisers are equally undelighted when they get a hefty bill from Google. The oddly silent initial ineffectualness of Google’s ads cause new users to believe that subsequent clicks are billed against the free $100. In fact, that gift has been spent on the unreported clicks, and the surge of activity seen by Google’s new users is billed to their credit cards. Since the initial $100 basically costs Google nothing, it is an elaborate scam to suck money from otherwise attentive people who previously had no interest in advertising via Google.

Evil.

I myself encountered an odd issue with Google advertising. Having decided to pimp my book AFTERLIFE in multiple ways, I ran some Google display ads. The campaign’s end occurred at the start of the Christmas holiday travel season, and I disabled all campaigns before boarding the whisperjet. Naturally I was somewhat surprised to receive a bill from Google for advertising that ran during the holidays, and to discover that one of my campaigns had been reactivated without my permission.

Evil.

I can suffer this minor economic rear-ender. What cannot be suffered is a witch in corporate clothing. Google’s transgressions – petty theft, mass censorships of the masses – are sins against the common man. Powerful as Brin and Page may be, they cannot abuse governments because governments have the off switch for data routers. But the caustic indifference to Google shown by governments is the same indifference Google shows to people, the ones that directly and indirectly made Sergey and Lawrence wealthy and powerful. Until they quit being evil, it is up to the people to quit aiding said evil. Maybe we need to ping Bing.

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