Our country is mired to the axles in the mud of a recession the likes of which has not been seen in decades. It was triggered by good intentions on the part of Congress, wanting to increase the number of home owners in the country. Thus, they mandated lower standards for mortgage loans, but did not think it through.
At the same time, the investment bankers of Wall Street begin to "securitize" batches of mortgages, wrapping them in large packages and selling them to institutional investors as high quality securities. It was to create a cataclysmic convergence of government policy (perhaps misguided) and the usual high octane greed of Wall Street, which sold its new mortgage packages furiously. But guess what? The Wall Street types did not think it through either.
Lower standards on mortgage lending inevitably increased home sales; they boomed all across the high-growth, go-go areas of the country. Prices on housing soared; speculators begin to flip houses, making quick profits. Everybody thought they were rich! The balloon was inflating.
But then renewals rolled up, and houses wouldn’t flip; people who had stretched to qualify for mortgages found they could not meet the payment schedules … and they got in trouble. The over-heated new home market begin to cool very quickly. Prices trended down …
In short the bubble burst. Homeowners suddenly discovered their homes were worth less than what they owed, so they were upside down; they defaulted and abandoned homes. Mortgage security owners discovered their high quality instruments were worth indeterminate amounts, for nobody could tell which of the mortgages in the package were in trouble, but only that some were. Thus bank investors could not mark to market as regulations required them to do. This triggered huge charge-offs.
The whole mortgage industry was rolling toward the edge of a deep chasm and it was going to catapult into the depths, taking the nation’s economy with it!
Only massive and immediate intervention by the Federal Reserve banks headed off the crash.
But the credibility of the upper management of the finance industry was trashed; they indeed had not thought it through, for they had invented a security instrument that could not be valued! The Bright Boys of Wall Street turned out to be duller than a stubby tent stake!
Such events always have fall-out. It seems to me the business community destroyed decades of careful work by its predecessors who had slowly built up national confidence in their judgment. But not after the mortgage crisis! The public lost confidence in the whole bunch.
And recent voting trends reflect it; they tossed the Republicans out of Congress in droves … and they elected a new, semi-socialistic, anti-business presidential administration that is now campaigning for another term in office. The Democratic-controlled Congress worked quickly, tossing together an immense stimulus package for the economy – and passed their long-sought massive expansion of government-sponsored health care for almost all Americans.
The public was not sure they done the right thing after those events – and they gave control of the House of Representatives back to the Republicans in 2010, and so our national government went back into gridlock. But all actions have consequences!
We are now heading for another chasm, a massive mandated cut in government spending set up to take effect automatically in January 2013, bringing large layoffs for sure: Expiration of tax rate cuts passed some 10 years ago in the early Bush Administration in January 2013, meaning taxes are going up for most Americans next year.
So 2013 looks grim: greatly increased costs for most businesses, higher taxes for most Americans.
And our economy is dragging high center again! Employment growth is anemic; investment is down; prospects for growth are meager. Large corporations continue to build up their cash reserves, neither planning or building, and thus not generating expanded employment.
In short, folks, it is getting WORSE! Not BETTER!
So what are the candidates for president talking about? Blah-blah-blah. As far as I am concerned, both of them are 180 degrees off the mark!
What should our country be talking about? Let’s talk about how to FIX our economy! A vigorous debate on economic policies, tax reform, and government spending control that will lead to balanced budgets. Deal with the bloated federal expenditures. And, find policies that will encourage sound economic growth thus generating additional quality jobs for our millions of job-needers. New and moderate government policies that tax the economic resources of our business corporations lightly, both large and small, leaving room for positive growth for investors and entrepreneurs, and, yes, for salary and wages of the staff and employees of these companies.
That is how recessions are fixed. That is how economic wounds are healed.
We need to solve problems … not play politics.
Saturday, July 21, 2012
Tuesday, July 17, 2012
Kicking the can down the road
The small hill city on the Italian peninsula called Rome grew to be the first great enduring world empire because it was exceptional in many ways from other cities around it. About 500 BC the city broke away from Etruscan rule and formed a unique system of governing itself, centered on a senate formed from the semi-aristocratic, oligarchic families and an assembly of the free citizens of lesser means. Counsels, two in number, were chosen for one-year terms and given the powers of an autocrat – but only for a year, when another set was chosen. This spread the political power, even while making the government functional; this system would survive for more than four centuries (with occasional modifications) and serve the Romans well. Nobody else had such a system.
All male citizens were required to serve in the Roman militias, which became a very capable army over the next several centuries. Rome began to conquer adjacent city states, parts of the same ethnic and language group but once again departed from the prevailing practice of the time: Rome did not require annual payments of monetary tribute from these little states, which was the habit of all aggrandizing powers of the day. Roman logic ran something like this: We have adequate revenues to support our city and our army, and we expect our citizens to be productive and make their own way. But superior numbers of well-trained and disciplined troops on the battlefield make the critical difference.
So Rome required military support from her subsidiary city-states when she called for it. Conquered cities could live peacefully under a Roman "umbrella" of security, managing their own affairs, provided they sent soldiers to fight alongside the Roman legions and under Roman commanders when called. Of course, credible effort was required of these allied troops. And slowly over the years Roman citizenship was extended to these subsidiary states.
This proved to be winning policy; Rome soon could put overwhelming numbers into the field during the summer military campaigning season. It conquered the Etruscans and more Latin city-states and in a century and a half dominated the central Italian peninsula. Citizen soldiers farmed in the fall and spring seasons, then marched to fight in the summers; counsels became decent generals for the most part, and the city grew and grew.
But the expanding empire of Rome came into conflict with the Phoenician residents of the Carthaginian city-state empire, the city of Carthage on the coast of what we know as Libya. The two countries – both were in control of large areas of the western Mediterranean region – fought three all-out battles throughout a century, with the Romans literally fighting for their lives against Hannibal, the brilliant Carthaginian general who inflicted huge losses on a series of Roman armies in Italy with his smaller army (notably at the Battle of Cannae, when he virtually wiped out a 50,000 man army). Rome learned a painful lesson: Full-time professional troops in lesser numbers, well-drilled and commanded by professional officers, could fight better and more successfully than her citizen armies.
While Rome won the Second Punic War, it changed army policy. Citizen-soldiers could not operate their farms and serve successfully in the army as well. So she began to develop a full-time professional army, not from citizen-farmers but landless men who enlisted for 20 years or more. And a critical disconnect came: Roman citizenship and military service ceased to be paired any more. The new professional Roman armies fought more for the reward of land that came to them upon retirement – a financial motive – than for "civitas," or service to their country – the patriotic motive that had led their armies for centuries. In short, the Roman armies became dependent on professional, mercenary soldiers rather than proud, patriotic Latin citizen soldiers that had built the Empire (incidentally, mercenary is from the Latin word "mercenarius," meaning hireling or reward.)
By the first century BC these armies of mercenaries became intensely loyal to their generals, rather than to the Republic of Rome. And eventually these armies would march on Rome itself and the generals would take political control of the empire. Thus the core complexion of the Roman Empire would change. The Republic was gone; the Empire was the thing.
I have thought about all this recently after spending time with my son who has served in the U.S. Coast Guard for a number of years, originally as a search and rescue pilot and, later, as an air operations manager. Upon completing his active duty requirement, he initiated a career as an airline pilot, only to have that interrupted – as did so many of our military reservists and guardsmen – by the 9/11 events. Called up, he then served more than four years on active duty. When released, he was unable to easily renew his airline career (that industry was in chaos), and he begin to work for a major defense contractor. But he was called up three more times in the next five years, interrupting his service with the company. Twice were for natural disasters (hurricanes) and once for industrial disaster (Deepwater Horizon).
He is quick to point out his military duty was nowhere as onerous as our army and national guard personnel, some of whom have served repetitive combat tours in Iraq and Afghanistan, and have done so at very high levels of personal sacrifice. But the impact of being a reservist in any of our military services and being called to duty over and over again points up an Achilles heel in our current military defense policy. These soldiers, sailors, airmen and guardsmen have their civilian lives fractured over and over again by call-ups; both their work lives and personal lives virtually are suspended for the convenience and necessity of the nation; it can be very challenging for these men and women to rebuild their lives upon return to civilian status.
Thus, we are burning up a very small number of our citizenry for the benefit and protection of all. That is the reality of the current U.S. defense establishment policy. The original concept behind the "volunteer army" to which the nation converted after the Vietnam events was a small professional group of the military would form the first line of defense, able to quickly and capably respond to any need in the short term, then the nation could re-activate the draft, expand the armed forces and meet any military threat. Any conflict that lasts 10 years ought to have a large base of soldiers and airmen on which to draw … but we don’t! The same small number of active duty and reserve personnel are called on, over and over.
Good theory, bad politics! The Beltway Boys – on both sides of the aisle – don’t have the political courage to execute the plan Congress adopted 30-some years ago! One more time, our leadership fails us! Congress and the administration can’t bring themselves to "call up" a civilian army, which they certainly should do when they lead us into a war that lasts 10 years or more (like the current one). They know it would be a political disaster, so they kick the can down the road and postpone the decision. "Let someone else pay the political price." What a bunch of wimps! But what a fallible, dangerous habit on the part of our national leaders.
They need to pay attention to the history of Rome ... It is instructive. Policy often has unintended consequences.
All male citizens were required to serve in the Roman militias, which became a very capable army over the next several centuries. Rome began to conquer adjacent city states, parts of the same ethnic and language group but once again departed from the prevailing practice of the time: Rome did not require annual payments of monetary tribute from these little states, which was the habit of all aggrandizing powers of the day. Roman logic ran something like this: We have adequate revenues to support our city and our army, and we expect our citizens to be productive and make their own way. But superior numbers of well-trained and disciplined troops on the battlefield make the critical difference.
So Rome required military support from her subsidiary city-states when she called for it. Conquered cities could live peacefully under a Roman "umbrella" of security, managing their own affairs, provided they sent soldiers to fight alongside the Roman legions and under Roman commanders when called. Of course, credible effort was required of these allied troops. And slowly over the years Roman citizenship was extended to these subsidiary states.
This proved to be winning policy; Rome soon could put overwhelming numbers into the field during the summer military campaigning season. It conquered the Etruscans and more Latin city-states and in a century and a half dominated the central Italian peninsula. Citizen soldiers farmed in the fall and spring seasons, then marched to fight in the summers; counsels became decent generals for the most part, and the city grew and grew.
But the expanding empire of Rome came into conflict with the Phoenician residents of the Carthaginian city-state empire, the city of Carthage on the coast of what we know as Libya. The two countries – both were in control of large areas of the western Mediterranean region – fought three all-out battles throughout a century, with the Romans literally fighting for their lives against Hannibal, the brilliant Carthaginian general who inflicted huge losses on a series of Roman armies in Italy with his smaller army (notably at the Battle of Cannae, when he virtually wiped out a 50,000 man army). Rome learned a painful lesson: Full-time professional troops in lesser numbers, well-drilled and commanded by professional officers, could fight better and more successfully than her citizen armies.
While Rome won the Second Punic War, it changed army policy. Citizen-soldiers could not operate their farms and serve successfully in the army as well. So she began to develop a full-time professional army, not from citizen-farmers but landless men who enlisted for 20 years or more. And a critical disconnect came: Roman citizenship and military service ceased to be paired any more. The new professional Roman armies fought more for the reward of land that came to them upon retirement – a financial motive – than for "civitas," or service to their country – the patriotic motive that had led their armies for centuries. In short, the Roman armies became dependent on professional, mercenary soldiers rather than proud, patriotic Latin citizen soldiers that had built the Empire (incidentally, mercenary is from the Latin word "mercenarius," meaning hireling or reward.)
By the first century BC these armies of mercenaries became intensely loyal to their generals, rather than to the Republic of Rome. And eventually these armies would march on Rome itself and the generals would take political control of the empire. Thus the core complexion of the Roman Empire would change. The Republic was gone; the Empire was the thing.
I have thought about all this recently after spending time with my son who has served in the U.S. Coast Guard for a number of years, originally as a search and rescue pilot and, later, as an air operations manager. Upon completing his active duty requirement, he initiated a career as an airline pilot, only to have that interrupted – as did so many of our military reservists and guardsmen – by the 9/11 events. Called up, he then served more than four years on active duty. When released, he was unable to easily renew his airline career (that industry was in chaos), and he begin to work for a major defense contractor. But he was called up three more times in the next five years, interrupting his service with the company. Twice were for natural disasters (hurricanes) and once for industrial disaster (Deepwater Horizon).
He is quick to point out his military duty was nowhere as onerous as our army and national guard personnel, some of whom have served repetitive combat tours in Iraq and Afghanistan, and have done so at very high levels of personal sacrifice. But the impact of being a reservist in any of our military services and being called to duty over and over again points up an Achilles heel in our current military defense policy. These soldiers, sailors, airmen and guardsmen have their civilian lives fractured over and over again by call-ups; both their work lives and personal lives virtually are suspended for the convenience and necessity of the nation; it can be very challenging for these men and women to rebuild their lives upon return to civilian status.
Thus, we are burning up a very small number of our citizenry for the benefit and protection of all. That is the reality of the current U.S. defense establishment policy. The original concept behind the "volunteer army" to which the nation converted after the Vietnam events was a small professional group of the military would form the first line of defense, able to quickly and capably respond to any need in the short term, then the nation could re-activate the draft, expand the armed forces and meet any military threat. Any conflict that lasts 10 years ought to have a large base of soldiers and airmen on which to draw … but we don’t! The same small number of active duty and reserve personnel are called on, over and over.
Good theory, bad politics! The Beltway Boys – on both sides of the aisle – don’t have the political courage to execute the plan Congress adopted 30-some years ago! One more time, our leadership fails us! Congress and the administration can’t bring themselves to "call up" a civilian army, which they certainly should do when they lead us into a war that lasts 10 years or more (like the current one). They know it would be a political disaster, so they kick the can down the road and postpone the decision. "Let someone else pay the political price." What a bunch of wimps! But what a fallible, dangerous habit on the part of our national leaders.
They need to pay attention to the history of Rome ... It is instructive. Policy often has unintended consequences.
Thursday, July 5, 2012
Global warming … hysterical advocacy … and practical response
Fracking is a reliable tool for energy, says scientist there from the beginning of environmental movement
It is very hard in our world to wade through all the data on any topic one cares to name; we are simply deluged by data! Jillions of gigabytes of the stuff!
So how find a little core knowledge about ... global warming, for instance?
How do you find someone who speaks about it with clarity? It is easy to find the hysterical ones; they advocate a total "return to nature," home gardens, walking everywhere, horses hauling loads. No use of any kind of fuels. The Greens obviously are "round the bend" about this, in my book.
So I discount the Greens categorically.
One of my buddies who thinks like I do sent me a little news article about an interview granted by British environmental scientist James Lovelock; Professor Lovelock is 92 years old, a world-renown scientist and an inventor. He invented the technology called "electron capture detector" in 1957. This device enabled science to gather the data and ultimately figure out that CFCs were polluting our atmosphere. This was a cornerstone for the early environmental movement. So he was there at the beginning and, in fact, enabled the scientific work. He has been active in the environmental movement that he now admits at times went "too far," but he is having some clarifying thoughts these days.
He just recently retired but seems long past caring to prove anything to anybody – and, so, he speaks his mind clearly. (My kind of guy!) So I googled him and found The Guardian’s interview with him last week:
Listen to his wisdom:
On shale gas and fracking:
"Gas is almost a give-away in the U.S. at this moment. They’ve gone for fracking in a big way. This is what makes me very cross with the greens for trying to knock it: the amount of CO2 produced by burning gas in a good turbine gives you 60% efficiency. In a coal-fired power station, it is 30% per unit of fuel. So you get a two-to-one gain straightaway. The next two-to-one gain you get is that methane has only got half of its energy in the carbon. The other half is in the hydrogen, so there’s a four-to-one (reduction) in CO2 output for the same amount of electricity by burning methane.”
(So go for the gas! Forget the coal – which is exactly what is happening in the United States; our utilities are moving away from their coal-fired plants rapidly.)
But there is more:
"It is very obvious in America that fracking took almost no time at all to get going. It happened without any debate whatsoever. Suddenly you found there was this abundant fuel source …”
We know a lot about shale gas production in Oklahoma. We have several of the very best companies doing the exploration headquartered in our state (Devon, Chesapeake, Sandridge, etc) And we have had long-term, abundant – and benign – experience with hydraulic fracturing. After all, our oil fields in northwest Oklahoma have been possible because of the fracturing process; we have hundreds (thousands?) of fractured wells within a 50-mile radius of Enid, where fracturing has been going on since the '50s. (Mostly no problem: Perhaps some minor spills from time-to-time, promptly cleaned up, but certainly no catastrophic events). So I am amused at the hysteria about it on the East Coast; opportunistic environmental activists have done their best to shut down development of shale gas by fracturing, but currently it looks as if common sense is prevailing – and fracturing will be allowed in Ohio, Pennsylvania and New York.
How important is this? Very important: Current estimates by the U.S. Geological Survey estimate we have reserves of natural gas – remember it is four times cleaner than coal! – for over a century, most of this developed in the last decade or so.
Lovelock points out that natural gas can "bridge" us to renewable, non-polluting energy sources over the next few decades. And it can do so at affordable costs.
It is very hard in our world to wade through all the data on any topic one cares to name; we are simply deluged by data! Jillions of gigabytes of the stuff!
So how find a little core knowledge about ... global warming, for instance?
How do you find someone who speaks about it with clarity? It is easy to find the hysterical ones; they advocate a total "return to nature," home gardens, walking everywhere, horses hauling loads. No use of any kind of fuels. The Greens obviously are "round the bend" about this, in my book.
So I discount the Greens categorically.
One of my buddies who thinks like I do sent me a little news article about an interview granted by British environmental scientist James Lovelock; Professor Lovelock is 92 years old, a world-renown scientist and an inventor. He invented the technology called "electron capture detector" in 1957. This device enabled science to gather the data and ultimately figure out that CFCs were polluting our atmosphere. This was a cornerstone for the early environmental movement. So he was there at the beginning and, in fact, enabled the scientific work. He has been active in the environmental movement that he now admits at times went "too far," but he is having some clarifying thoughts these days.
He just recently retired but seems long past caring to prove anything to anybody – and, so, he speaks his mind clearly. (My kind of guy!) So I googled him and found The Guardian’s interview with him last week:
Listen to his wisdom:
On shale gas and fracking:
"Gas is almost a give-away in the U.S. at this moment. They’ve gone for fracking in a big way. This is what makes me very cross with the greens for trying to knock it: the amount of CO2 produced by burning gas in a good turbine gives you 60% efficiency. In a coal-fired power station, it is 30% per unit of fuel. So you get a two-to-one gain straightaway. The next two-to-one gain you get is that methane has only got half of its energy in the carbon. The other half is in the hydrogen, so there’s a four-to-one (reduction) in CO2 output for the same amount of electricity by burning methane.”
(So go for the gas! Forget the coal – which is exactly what is happening in the United States; our utilities are moving away from their coal-fired plants rapidly.)
But there is more:
"It is very obvious in America that fracking took almost no time at all to get going. It happened without any debate whatsoever. Suddenly you found there was this abundant fuel source …”
We know a lot about shale gas production in Oklahoma. We have several of the very best companies doing the exploration headquartered in our state (Devon, Chesapeake, Sandridge, etc) And we have had long-term, abundant – and benign – experience with hydraulic fracturing. After all, our oil fields in northwest Oklahoma have been possible because of the fracturing process; we have hundreds (thousands?) of fractured wells within a 50-mile radius of Enid, where fracturing has been going on since the '50s. (Mostly no problem: Perhaps some minor spills from time-to-time, promptly cleaned up, but certainly no catastrophic events). So I am amused at the hysteria about it on the East Coast; opportunistic environmental activists have done their best to shut down development of shale gas by fracturing, but currently it looks as if common sense is prevailing – and fracturing will be allowed in Ohio, Pennsylvania and New York.
How important is this? Very important: Current estimates by the U.S. Geological Survey estimate we have reserves of natural gas – remember it is four times cleaner than coal! – for over a century, most of this developed in the last decade or so.
Lovelock points out that natural gas can "bridge" us to renewable, non-polluting energy sources over the next few decades. And it can do so at affordable costs.
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