Stop! Don't Pass That Bail-Out!

"A trillion here, a trillion there and next thing you know, you're talking real money."

Time is short. Congress is getting set to act, possibly this week. We need to stop them.

First, do we want to have this crash now or later? One way or another, we will have it.

Our choice is to have this financial crash now, or to postpone the very same crash until later. Having it later will be even more painful. That is because the pain will be extended over a long time. Either way, the system must work its way through taking the losses it must take, now or later. A bail-out just moves part of the business losses to us, the taxpayers. The down-turn will continue until until the transferred losses are hammered out of tax-payers. Then the economy can move into recovery.

Which is better, now or later? Having it now would make a sharp "V-shaped" downturn. Having it later would lengthen it into an "L-shaped" downturn. A "V" goes sharply down, then sharply up afterward. An "L" goes sharply down, then stays near the bottom a long time, until all the losses are finally taken and out of the system, than goes into recovery. Whether it is V or L depends on how fast we take our losses. We need to "bottom out" as fast as possible, to recover as fast as possible.

Banking-system crashes have come to both Japan and to West Asia. In the West Asian case, they took their losses on the chin, fast, not trying to save anybody. Recovery was swift - a "V."

Japan, on the other hand, bailed out every financial company at risk. It's downturn lasted at least 10 years before recovery began. It was a long, long recession.

It's our choice. Same pain. Fast? Or Extended?

We also have not grasped how big this is. In the last few weeks, the federal government has already bailed out one outfit after another. Even before Congress acts on the current bail-out, we have already spent something over $2 trillion in a few weeks. (Yes, trillion. Are we talking real money yet??) Now Congress has a $700 billion bill on its plate. If it is its old self, it could raise that $700 billion to another $1 trillion before they pass it.

Probably no taxpayers, anywhere, realize how much that will mean in new taxes.

Probably we are already on the hook for the $2 trillion already handed out. Do we want to add another $1 trillion to that, for a total of $3 trillion? Over and above our regular budget?

Second: There's more. Even worse downturns are ahead. Postponing this one could make it overlap with the next one. Even the next two.

In this downturn, there are at least some physical assets underneath the bad loans: buildings. They are worth something more than zero. That money can be re-couped sometime, somehow, at least in part. There are no such assets behind the next two downturns.

One downturn will come from Social Security/pension plans. There are no physical assets there. Still, there is at least a very inadequate income stream from payroll taxes.

The other downturn will come if or when we decide to have socialized medicine, more or less. There are no physical assets there, and no significant income stream, so the impact will be even greater.

Boomers started to retire this year. They are a huge generation. They did not replace themselves with a generation at least their size. So there will not be enough workers to support them. (Had they lived, the 40 million aborted kids would have made the number of supporting workers come out a lot better for Boomers.) The retirement problem is also aggravated by our longer life spans. The worldwide problem of declining birthrates combined with longer life spans for elders.is generally worse than ours, and will further aggravate the U.S. retirement problem.

The cost to taxpayers will be huge, from increases in both taxes and inflation, just from Social Security. Adding the costs of more or less socialized medicine could cost even more than Social Security. Taxes to support both would be toxic for non-retirees and for the economy. (Inflation is one way to reduce the tax burden paid by workers to support elders. Elders will have mostly fixed incomes. Workers will not.)

Do we waht to add another huge tax increase from this present financial crash to those new taxes that are also coming? We need to get this present crisis one over with, now! Take our losses now, and hopefully have a breather before the next crises hit. This present crisis is the only one where we even have that choice.

(For more, see Spengler at http://www.atimes.com/atimes/Global_Economy/JI23Dj06.html)

Root of Financial Meltdown - Misguided Compassion

What a mess - the 2nd biggest financial meltdown ever! It is as if the accelerator in Switzerland started a black hole after all, and most of the globe was getting sucked into it. How did it begin?

It started with very good intentions. About 30 years ago in the most powerful economy in the world - the U.S - it started as a way to fight racism, and then poverty too.

Some banks would not lend for mortgages in very poor areas. This was called "red-lining." These areas had such poor credit ratings and high default rates on mortgages that banks had to avoid them. But many such areas were not only poor, but also largely African-American or Hispanic. So it also could have been racial discrimination. So activists attacked red-lining as disguised but real racial discrimination.

In many ways, they were right. There was racial discrimination and prejudice then on a much larger scale than now. There was a great need to end it. So it was a good cause, and compassionate people got on board to end red-lining.

The problem started when the government got involved, with good intentions and its power to enforce. Soon banks were forced to make housing loans in red-lined areas. Then a "quota" system evolved. Banks had to show that they had an "adequate" number of loans in red-lined areas.

Politics being what it is, the new government agencies began to grow enormously. In election after election, more goodies were promised to be added onto the mission of these agencies. More people were to be included. Then more next time. Then more the next election. Politicians also began to use these agencies to hire their favorites.

Meanwhile the banks, making more and more bad loans, needed help. So credit to banks was made easier to get. and apparently guaranteed by new government agencies. These new agencies grew so much that after awhile, almost every housing loan in the country was backed by them. The guaranty might not have been clearly spelled out, but it was believed that the "faith and credit" of the entire U.S. government stood behind these loans.

Interest rates were also made low, so that "everybody could be a home-owner."

The business community took advantage. So did most U.S. families. As usual, when investments seem low-risk, people risk more on them. Real estate, both residential and commercial, became more of a low-risk investment.

When interest rates were kept low, people borrowed more. They borrowed more than they needed for mortgages and got consumer loans too. They got bigger, more expensive houses than they would if they paid higher interest. They bought more cars, TVs, furniture, vacations and everything else. Since borrowing was so cheap and easy, they even saved less. This made a bubble. And bubbles always burst.

But that's only part. Since borrowing was so low-risk, business began to take higher and higher risks - especially in the financial sector. There, leveraging began to rule, at ever-growing rates. A huge boom was built on it.

Leveraging is necessary. The economy could not function without it. But financial institutions and investors began to develop new kinds of leveraging instruments, not only options and trading on margin, but newer kinds of derivatives, based on even more "borrowing." Fortunes were built, all over the world. Not only individuals, not only financial institutions benefited from them, but also pension funds, colleges, charities, and the 40% or so of Americans who invest. The fact is, we all benefited, one way or another.

Most of all, political parties and politicians benefited from them. But that is another story.

Sadly, it was a bubble. That was because, with the piled-on leveraging instruments, you could eventually buy $100 or sometimes $1000 of financial paper instruments with only $1 of actual investment. Apparent guarantees of almost any mortgage, plus very low interest rates, eventually made such "investing" inevitable. And we have known for a long time that such activity must cause a bubble. That booms built on such unwarranted risk-taking must collapse. If they are big enough, they can take out a whole economy. If such booms are international enough - as they are more and more - they can take out every economy in the world.

All from unwise, misguided and politically-abused good intentions in one country.

What about next time? Deal with it. Boom/bust is part of the capitalist system. Capitalism is, after all, a terrible system. But everything else is worse! Any kind of tampering with it makes it move toward socialism, facism or mercantilism. Mercantilism - trying to change the free market-decisions of capitalism to favor any producer or group or consumer - is the danger for democracies. It is what we are struggling against in the U.S.

_
There is a fine line between mercantilism and needed regulation. The bursting of bubbles may require new regulation, but that should be temporary. The ordinary regulation needed for capitalism to work is to enforce contracts, protect property, penalize fraud and punish infractions. Good militaries, courts and police are needed to prevent looting, theft, intimidation and violence. Beyond that border, mercantilism begins and the benefits of capitalist begin to be lost.

But where does our compassion come in? Is the brutal working out of competition to rule instead? Absolutely not! Capitalism may be the biggest part of having true compassion, since does more for the poor and afflicted than any other system. But the government is a poor, deceptive, counter-productive way to help them, eventually causing the problem to become even worse.

Charities work better. We all can inform ourselves, give and volunteer. If we had tackled "red-lining" through charities 30 years ago instead of using the government, it would have worked better in the net.

Look what would not have happened. Our government and country would not have spent so enormously more than it should have. We would not have tempted so many politicians and so distorted our politics and government institutions. We would not have caused thie huge bubble. It would not have burst, with all the loss that will bring. And we would not have caused all this harm to the very people we were trying to help, who were likely among the first to lose their houses.

Whatever we would have achieved by charity would have been a net benefit to those we wanted so much to help. It would not have caused such great harm and loss as using the government. Long run, charities would have done more true good and less harm. Governments cannot do that in compassionate matters..
________________________________________

Also see these sources:

Excellent - includes demographic and international issues. Lehman and the End of the Era of Leverage by Spengler, at http://www.atimes.com/atimes/Global_Economy/JI16Dj08.html and also http://www.atimes.com/atimes/Global_Economy/JG01Dj07.html

Excellent - Ticking Time Bomb Explodes: Public is Shocked, at http://www.independent.org/blog/?p=186

Whose Bailout Is It? at http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=306545173352598

The Real Culprits In This Meltdown, at http://www.ibdeditorials.com/IBDArticles.aspx?id=306370789279709

Mud-Flap Manor, at http://www.nypost.com/seven/09152008/news/nationalnews/mudd_flap_manor_129159.htm

About the best ways to help the poor, see Up and Out: A Guide to True Compassion for the Poor" at www.upandout.us.

Sorry - Financial Crisis Worse Than I First Thought

Going to dentist right now, but will try to get back to this later. Meanwhile, these urgent suggestions:

1. Pay off your debts
2. Cut back on spending
3. Save money like crazy, and hang on to it
4. Do not put your money at risk - invest extremely carefully
5. Finance your own retirement.
6. Tithe! (You should want the blessing, if nothing else.)

These two links will give a good running start on assessing this and future crises:
Spengler at http://www.atimes.com/atimes/others/spengler.html
Robert Higgs at http://www.independent.org/blog/?p=186

The Titanic Is Not Sinking

Is the stock market plummeting? Yes. Could it go lower - a lot lower? Yes. Will some businesses close? Yes. Will some jobs be lost? Yes.

Then - is this a real economic crisis? Not exactly. It is a financial crisis, limited so far to the financial sector of the economy. But not an "economic" crisis, not for the whole economy. For example, the transportation, energy, utility, manufacturing and other sectors are not in crisis. Will they be affected? Yes. But not in the same way or as much.

How do we know the rest of the economy is "sound?" Not by guessing or by wishful thinking (nor by making hasty electioneering points), but because the numbers tell us so. Unemployment may be up, but it is still low historically. Productivity - a prime indicator of economic soundness - is at a new peak. Are we in recession? No. Growth in the last quarter was 3.3% - very healthy.

Is this time like the Great Depression? Not even remotely! Rather, this is most like 1987, when another housing bubble burst and there was "Black Monday" when the stock market lost 25% of its value in one day. What were the results?

The financial sector was restructured. Some businesses survived, some didn't. Some government regulations were changed. Some parts of the country were strongly affected, other areas barely affected. The economy as a whole slowed some, but was in recovery within months.

Is that what will happen this time? Not exactly. But what will happen should be closer to 1987 than other scenarios out there right now.

In short, it's time for repairs and adjustments, probably some belt-tightening - but not panic. This ship is not going down. It would take much more than this financial crisis to do that. After we learn some needed lessons, better days will be back. This present crisis will be a fading memory.

60% of U.S. Is Conservative, Year After Year

From "The Biggest Missing Story in Politics", Bruce Walker, American Thinker, 8-25-08, at http://www.americanthinker.com/2008/08/the_biggest_missing_story_in_p.html

The Battleground Poll, the most respected and thorough of all public opinion polls, released its latest results on August 20th.

Walker says, "I always zip past the first 15 pages and go straight to Question D3, which... proclaims the biggest missing story in American politics. It is the only story, in the long run, that really matters."

What is he talking about? Americans respond more consistently to this question than any other question in those polls.

"They may change their opinions dramatically about Iraq or President Bush or drilling for oil, but not their answer to Question D3."

The Battleground Poll is different. It is bipartisan..No other polling organization asks the same questions year after year, none that reveal the internals of their poll results so completely, and none ask anything like Question D3 in every survey.

What is Question D3 and what were the results to it in the August 20, 2008 Battleground Poll? It is this: "When thinking about politics and government, do you consider yourself to be:

Very conservative

Somewhat conservative

MODERATE

Somewhat liberal

Very liberal

UNSURE/REFUSED"

In August 2008, Americans answered this way:

Very Conservative - 20%

Somewhat Conservative - 40%

MODERATE - 2%

Somewhat Liberal - 27%

Very Liberal - 9%

This is astounding. For decades the mostly-liberal media and academia have assumed - or alleged - that the country is about 40% conservative, 20% moderate and 40% liberal. That would be a mostly-balanced electorate, with the large moderate minority deciding most elections. They have never admited or publicized that the country is, and has long been, conservative by a huge majority, consistently around 60%.

"Could these poll results come from people not understanding the categories in the Battleground Poll? No."

The question specifically provides an out to people who are not sure about their ideology; it provides an out to people who want to be considered "moderate." They overwhelmingly define themselves as "conservative."

This is a huge political story! But it is not "new." In the 13 Battleground Poll results over the last 6 years, here are the percentages of Americans who call themselves "conservative" since June 2002:

59% - 6/02

59% - 9/03

61% - 4/04

59% - 6/04

61% - 10/05

59% - 3/06

61% - 10/06

59% - 1/07

63% - 7/07

58% - 12/07

63% - 5/08

60^ - 8/08

The percentage of people defining themselves as "liberal" has always been puny - never over 38% in the last 13 polls.

If conservative presidential candidates simply got all the conservative votes...then conservative candidates would win a landslide bigger than Ronald Reagan in 1988. Have you ever wondered why liberals like Obama never call themselves liberals? Maybe their advisers have read the Battleground Poll internals.

Why then, do other polls show Americans so different from conservatives?

The short answer is that other polls are scrupulously constructed to hide the tsunami of conservative opinion in America...All of these polls showing Americans equally divided were crafted by people and ...groups intent upon presenting a false impression of how Americans felt...

Like everything that the Left does, from entertainment to higher education, the structure, the format and the revealed results of information is conformed to present an image in which conservatives and their values are as invisible as blacks in the Antebellum South. Even Leftists themserlves believe this false picture.

Reagan, for example, was not only not an extremist, but "comfortably in the middle of a huge American majority."

Conservatives are like those proverbial sailors becalmed off the coast of Brazil, dying of thirst...

When another ship passed and asked the...ship if its crew needed help, the urgent call was for fresh water. The passing ship replied "Let down your buckets into the sea. You are in the mouth of the Amazon River." Fresh water was everywhere around the dehydrated men; they just did not know it.

"Conservatives are not just a majority of Americans, but an overwhelming majority. As soon as they grasp this...government and politics in America will be transformed."

Bruce Walker is the author of Sinisterism: Secular Religion of the Lie, and the recently published book, The Swastika against the Cross: The Nazi War on Christianity.

Abortion Is Like Draft-Dodging

If you come from only a natural point of view, and speak only of what nature requires for species to survive, what is paramount is first, reproduction and second, defense against predators and raiders. Species that abort are at a reproductive disadvantage. So are species where the males, physically more powerful and faster than females, will not do battle to protect themselves, their mates or offspring. Ergo, abortion and draft-dodging are against nature and against the survival of species that practice them substantially.

Current example: Europe, presently nearly incapable, physically and mentally, of making war, and whose long decline in birthrates is increasingly injuring their economies. Another cautionary example is Russia, with perhaps the highest abortion rates in the world. Some demographers believe the Russian population to be past the point of no return, where the number of fertile women is too small to make the population grow again. The Russian population is expected to shrink by around 50% in the next 25 years.

This argument leaves out every moral consideration, which is an unrealistic, fatal flaw. Nevertheless, simply on the purely natural and secular grounds used by women who refuse to have at least three children* and by men who will not risk their own lives to protect country, women and children, they are wrong.

Such men and women at best would preserve only themselves, regardless of the effect on their species. Nature would never tolerate the survival of such a suicidal species. No wonder some of them look forward to a future world cleansed of the human race they so profoundly disdain.

Both aborters and draft-dodgers are roughly equal in their effects on their species. And a generation that produced so many of both has much to answer for.

_________________________
* (2.1 children per woman are required for mere replacement of the population. Since having 0.1 children is impossible biologically, 3 would be the target number.)

Michelle's Bootcamps for Radicals

This is from an editorial in the Investor's Business Daily, 9-4-08 at http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=305420655186700.

Democrats' reintroduction of militant Michelle Obama in Denver was supposed to show her softer side. But it only highlighted a radical part of her resume: Public Allies.

Barack Obama was a founding member of the board of Public Allies in 1992, resigning before his wife became executive director of the Chicago chapter of Public Allies in 1993. Obama plans to use the nonprofit group, which he features on his campaign Web site, as the model for a national service corps. He calls his Orwellian program, "Universal Voluntary Public Service."

Big Brother had nothing on the Obamas. They plan to herd American youth into government-funded reeducation camps where they'll be brainwashed into thinking America is a racist, oppressive place in need of "social change."

The pitch Public Allies makes on its Web site doesn't seem all that radical. It promises to place young adults (18-30) in paid one-year "community leadership" positions with nonprofit or government agencies. They'll also be required to attend weekly training workshops and three retreats.

In exchange, they'll get a monthly stipend of up to $1,800, plus paid health and child care. They also get a post-service education award of $4,725 that can be used to pay off past student loans or fund future education.

But its real mission is to radicalize American youth and use them to bring about "social change" through threats, pressure, tension and confrontation — the tactics used by the father of community organizing, Saul "The Red" Alinsky.

"Our alumni are more than twice as likely as 18-34 year olds to . . . engage in protest activities," Public Allies boasts in a document found with its tax filings. It has already deployed an army of 2,200 community organizers like Obama to agitate for "justice" and "equality" in his hometown of Chicago and other U.S. cities, including Cincinnati, Los Angeles, Milwaukee, New York, Phoenix, Pittsburgh and Washington. "I get to practice being an activist," and get paid for it, gushed Cincinnati recruit Amy Vincent.

Public Allies promotes "diversity and inclusion," a program paper says. More than 70% of its recruits are "people of color." When they're not protesting, they're staffing AIDS clinics, handing out condoms, bailing criminals out of jail and helping illegal aliens and the homeless obtain food stamps and other welfare.

Public Allies brags that more than 80% of graduates have continued working in nonprofit or government jobs. It's training the "next generation of nonprofit leaders" — future "social entrepreneurs."

The Obamas discourage work in the private sector. "Don't go into corporate America," Michelle has exhorted youth. "Work for the community. Be social workers." Shun the "money culture," Barack added. "Individual salvation depends on collective salvation."

"If you commit to serving your community," he pledged in his Denver acceptance speech, "we will make sure you can afford a college education." So, go through government to go to college, and then go back into government.

Many of today's youth find the pitch attractive. "I may spend the rest of my life trying to create social movement," said Brian Coovert of the Cincinnati chapter. "There is always going to be work to do. Until we have a perfect country, I'll have a job."

Not all the recruits appreciate the PC indoctrination. "It was too touchy-feely," said Nelly Nieblas, 29, of the 2005 Los Angeles class. "It's a lot of talk about race, a lot of talk about sexism, a lot of talk about homophobia, talk about -isms and phobias."

One of those -isms is "heterosexism," which a Public Allies training seminar in Chicago describes as a negative byproduct of "capitalism, white supremacy, patriarchy and male-dominated privilege."

The government now funds about half of Public Allies' expenses through Clinton's AmeriCorps. Obama wants to fully fund it and expand it into a national program that some see costing $500 billion. "We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded" as the military, he said. (Emphasis added.)

The gall of it: The Obamas want to create a boot camp for radicals who hate the military — and stick American taxpayers with the bill.

Part of the IBD Series: The Audacity Of Socialism, at http://www.ibdeditorials.com/series8.aspx.

Palin's Strategic Importance for National Security

Palin's good looks almost get in the way of taking her seriously. But much more is at stake in this election than simply an election. Investor's Business Daily outlines here the importance of Palin in our national security.

Security: The impact of prolonged high oil prices is moving well beyond economics. Russia now takes license to assault Georgia, and intends worse. John McCain's Alaska running mate has the only weapon.

When Alaska governor Sarah Palin was chosen for the McCain vice presidential ticket, most attention was on her beauty-queen past and down-home North Woods family life. In reality, she's the powerful governor of Alaska, the most pivotal state in the union for energy.

They write of John McCain's understanding of the stretegic importance of Alaska. It has to do not only with the high price of oil, but also increasing threats from hostile oil-producing nations enpowered by high oil prices

Palin's leadership has done much to develop Alaska's energy resources, but the state is still stonewalled by Congress.

Palin's strong Alaskan presence in Washington will change that.

It's got to because America is nearly helpless in the face of a resurgent Russia intent on reclaiming its czarist empire, an Iran hellbent on acquiring nuclear weapons, a China making common cause with dictators to acquire energy and a menacing Venezuela aligning with Russia and Cuba to control sea lanes in the Caribbean, where 64% of all U.S.-bound tanker traffic passes.

These are all emerging threats. That's why Alaska has never been more critical to U.S. security interests.

But Alaska oil peaked in 1988 and has been declining since. New drilling is needed, to tap the 31 billion barrels in official reserves, including ANWAR. Alaska's pipeline is being used at only 1/3 capacity, because of declining oil.

No one has fought to bring Alaska front and center like Palin. She has called on Congress to remove restrictions on drilling in ANWAR. And she's also asked for something Congress could do right now --

.— remove restrictions on drilling for 30 billion barrels in the Chukchi Sea and all the natural gas of Beaufort Sea in Alaska's offshore. As governor, she's already gotten the environmental impact work out of the way so shipments to the Lower 48 can start in as little as a year or two. "Congress can do that for us right now," she told IBD. (Emphasis added.)

Palin knows energy, says IBD.

She's already figured out how to deliver energy to the U.S. without Congress — by championing state legislation to create a 1,712-mile natural gas pipeline across Canada to the U.S.

It was a major feat, negotiating with the Canadian government, educating lawmakers and getting the public behind her. In a decade, the $30 billion project will ship 4.5 million cubic feet of gas a day from the North Slope to Houston's air conditioners, Iowa's farm machines and Boston's winter furnaces.

This is the kind of leadership the U.S. needs, says IBDs editorial board.

Not only will getting serious about Alaska help the economy, it will also help our allies in Europe and the Far East whose economies are severely battered by high energy prices and who are seeing some of the most direct threats from the petro-tyrants.

Choosing Palin shows John McCain is serious about energy, says IBD.

Congress mustn't ignore Alaska any longer. Petro-tyranny is moving beyond economics and becoming a national security issue. Alaska is a big part of the answer.