Irresponsible Risk

"No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk." Timothy Geithner

So, now the government thinks it should decide how much risk banks and other businesses take? As the banks retrench and take less risk, Geithner is trying to get them to take MORE risk! -- "While this crisis was caused by banks taking too much risk, the danger now is that they will take too little." Geithner.

Ah yes. Because Geithner is now a government employee he knows just how much risk banks should take. And we call this a free market system???

Is Geithner asking the taxpayer to take less risk? No! He is asking the taxpayer to finance toxic assets the banks cannot sell. How irresponsible is that? The taxpayer does not have any choice. The shareholders of the original bank risks did have a choice. They could choose not to own stocks and bonds of the banks. The taxpayer must submit because the government only operates by using force. The government will force the taxpayer to take unnecessary risks. That's why I keep calling the government a mob.

But here is the hidden agenda, more government control. "But as we fight the current crisis, we must also start the process of ensuring a crisis like this never happens again. As President Obama has said, we can no longer sustain 21st century markets with 20th century regulations. Our nation deserves better choices than, on one hand, accepting the catastrophic damage caused by a failure like Lehman Brothers, or on the other hand being forced to pour billions of taxpayer dollars into an institution like AIG to protect the economy against that scale of damage. The lack of an appropriate and modern regulatory regime and resolution authority helped cause this crisis, and it will continue to constrain our capacity to address future crises until we put in place fundamental reforms." Geithner

In a previous post titled "The economy will blossom" I wrote, "House prices are falling as rents increase. The renters will find house bargains that are too good to resist and will start buying houses."

To confirm my prediction Bloomberg reports--"U.S. Sales of previously owned homes unexpectedly climbed in February as record foreclosures brought bargain hunters into the market to take advantage of lower prices. Purchases increased 5.1 percent to an annual rate of 4.72 million from 4.49million in January, the National Association of Realtors said today in Washington. The median price slumped 15.5 percent from a year ago, the
second-biggest drop on record, and distressed properties accounted for 45 percent of all sales."

None of the trillions of dollars of government meddling is necessary. The free market will work. Now if we could just see one in operation, somewhere, anywhere.

"Start with the idea that you can't repeal the laws of economics. Even if they are inconvenient." Larry Summers


Charles Tolleson

The economy will Blossom

The U.S. economy will do a normal recovery and the government mob will take credit for great planning.

Yet President Obama has even one more trillion dollar plan, a plan to buy toxic assets from banks. If these were "assets" the banks could sell them. Only the government will buy or loan money for something that is so worthless the private sector will not buy it.

The consumers are deleveraging, as they always do, after going on a spending binge for years. They have increased their savings rate to 5%, the highest in 5 years. When they pay off more debt and increase their savings to about 7%, the historical average, they will start spending again. As people save, banks' balance sheets will improve and the banks will have more money to lend. The credit crisis is not a crisis.

House prices are falling as rents increase. The renters will find house bargains that are too good to resist and will start buying houses.

For 2009 the unemployment rate will increase. However there will still be over 160 million people employed in the U.S. These 160 million workers will start buying again, as soon as they pay off some debt. The U.S. will still be the world's largest GDP economy. The U.S. per capita GDP is almost $48,000 per year! https://www.cia.gov/library/publications/the-world-factbook/geos/us.html

Even as the unemployment rate for 2009 increases there will be millions of retired people who have incomes with cost of living increases in their Social Security checks. Millions of government retirees have cost of living increases in their retirement checks. These millions of retirees will see many bargains in the market place as retailers of products and services lower their prices. These retirees will start to spend. The economy will bloom.

Though state and local governments may reduce employment, the federal government is increasing the number of federal workers.

It is amazing to see state teachers protesting job cuts to balance state budgets. It is as if government employees think they are entitled to a job. They think the government mob is entitled to confiscate even more money from the producers to keep the government employees working. No such options for private sector employees.

The many people who have not been employed but have lives on welfare will continue to receive those benefits, with a cost of living increase. Millions of people on the Women, Infants and Children (WIC) program will continue to receive monthly checks and will spend the same amount they spent before. Millions of people receive food stamps and they will continue to buy.

The economy will recover and blossom in time for the 2012 election year. The incumbent president will take all the credit for the economic recovery, a recovery that would have happened without any government stimulus (political rewards).

The government mob always takes credit for good things and blames the private sector for bad things.

"Governments don't control things. A government can't control the economy without controlling people." Ronald Reagan

Charles Tolleson

Another Government PLAN

Central planning is a placebo for the masses and steroids for the central planners.

President Obama just announced a PLAN to help small businesses get credit. He is offering 17 billion for an industry that supplies 70% of the jobs in the U.S. AIG, one company, got ten times that amount.

I suspect this is a way for small businesses to pay the extra taxes in a recent tax PLAN by the government to raise taxes on upper income earners.

I also suspect the new PLAN is to help small businesses pay for the extra labor cost in the new proposed PLAN (EFCA) that makes it easier for labor unions to recruit new members for the Democratic Party. A few hundred more union members in each congressional district will go to the democratic candidate in a close election. That's a good PLAN for the democrats

The government last week announced a new education PLAN that would send billions of dollars to local school districts.

The government is going to announce a new PLAN for your health care.

The government's stimulus includes a PLAN for you to develop alternative energies.

The government PLANS for marriage, divorce, child support, forests, watershed, environment, parks, wildlife, etc., etc. My local government even PLANS a place for you to walk your dog.

The U.S. government has a PLAN for the Taliban, Iraq, Iran, and most of the whole world.

How do you like being treated as a child, having some other person planning your life?

Have you ever noticed the debates between individuals are about the government PLANS that run our lives. Some individuals like the PLANS and some don't. If there were no government PLANS there would be fewer arguments between individuals.

Unfortunately, too many individuals want some government employee to PLAN our lives. Those government employees are very happy to comply because it creates work and power for them.

To the government mob I say, -"I own my life, let me live it. Stop making PLANS for me."

"Government is an unnecessary evil. Human beings, when accustomed to taking responsibility for their own behavior, can cooperate on a basis of mutual trust and helpfulness." Fred Woodworth

Charles Tolleson

Increase in non belivers in U.S.

"Fifteen percent of respondents said they had no religion, an increase from 14.2 percent in 2001 and 8.2 percent in 1990, according to the American Religious Identification Survey."

The reason for the rise in non believers I believe is a result of the Internet.

People used to believe in God and the family for salvation and substance. Now they believe in the government god for those same benefits.

On the Internet, when one posts a belief, that belief may be questioned, critiqued, and challenged.

Another reason for the decline in believers is some moderate Christians have seen the dangers of radical religion in Islam.

Books like Sam Harris' "The End of Faith", "The God Delusion" by Richard Dawkins and "God is Not Great" by Christopher Hitchens are books that changed some weak believers. None of these books would likely have been published as recently as 1950.

I have said before, the same things that curtailed the religious passions of the west will also curtail the religious passions of Islam.

The UN announced the other day that 4 billion people now have cell phones. Internet users have increased by 330% during the past 8 years to 1.6 billion. Globalization and international trade have cracked open the cultural oppression of Islam and young people now are acting defiantly against cultural traditions, as young generations usually act.

There is no need for the U.S. military to be in the Middle East. Things will change for the better if our military comes home and acts as a defense of our borders and coastlines from whomever would be silly enough to try and invade us.

"To me, it seems a dreadful indignity to have a soul controlled by geography." George Santayana

Charles Tolleson

Why is the Federal Government involved in local education?

The new stimulus bill, (there are so many I have lost count) will make sure the House and Senate will get increase funding, though their membership has not increased. The producers will have to produce more for their keeper, and keep less for themselves. Who is watching the guardians?

"Under the bill, the budget for the House will increase by 10 percent while funding for Senate operations will grow by 8 percent."

I have often wondered why the federal government is involved in teaching children at the local level how to read, write, and calculate. This certainly could be done, as in the past, without federal dollars, or even without state dollars. The most efficient way is with online and private education.

"Obama's huge economic stimulus package provides $41 billion in grants to local school districts. He also plans to send $79 billion in relief to states to prevent cuts in state aid, and another $21 billion for school modernization. The stimulus package also provides more than $35 billion aimed at building schools and training teachers."

One reason the federal government is involved is money. The federal government, which does not have to balance its budget, can print money. The states and school districts have to balance their budgets. The logical approach then is for the 4 million teachers in America to go to the trough of the federal government for money. It is much easier for the union to lobby one congressional committee chair than 50 individual states.

How this got started is from the fear factor. In 1957 the Russians beat America into space with their lunch of the Sputnik satellite. Americans were afraid the Russians were smarter so in 1958 the federal government passed the National 'Defense' Education Act. Education for defense sounds so safe. But, when government gets its tentacles into something it never lets go.

"The State acquires power... and because of its insatiable lust for power it is incapable of giving up any of it. The State never abdicates". – Frank Chodorov

Charles Tolleson

Paramedics for a price

(Santa Rosa Fire Department crews respond to an average of 33 medical emergency calls every day of the year -- all without directly charging those they help. But the cash-strapped city may give households and businesses a choice: either an insurance-like monthly fee or face a $350 service charge when city paramedics show up at the door to save a life.)

The Santa Rosa Fire Department has 10 fire stations for a population of about 158,000. This means each station responds to 3.3 emergency calls each 24 hours, or slightly more than 1 per 8 hours. That hardly seems like a strain on a bunch of guys sitting in a fire house cooking, watching TV, working out with weights, etc. What do those guys do?

The city of Santa Rosa wants to charge $350 for each emergency medical response. I thought they already were charging with a form of taxes. With the new pay proposal will the city residents get a reduction in their taxes? No! The $350 fee is a hidden tax, a way to raise revenue for the city's employees' pay and benefits, which are already better than the citizens who are forced, that's right, forced to pay for the services. It's not like a voluntary contract between a private business and their customers, which is more human. The forced contracts between the firefighters and their customers are inhuman.

The firefighters are already paid while sitting around the firehouse. Are the residents now going to have to pay twice when a firefighter actually provides a service? Why not charge a fee to respond to someone who actually has a fire!

And of course, the poor will not have to pay the $350 fee. Other citizens will be forced to pay for the services to the poor. The hidden tax is a progressive tax. This will mean the poor will continue to use the system for minor emergencies.

When the government provides a free service it becomes community property and the members of the community will eventually abuse the community property. Just the other day an elderly neighbor tripped and fell, breaking her glasses and scratching her face. She called 9/11, which was completely unnecessary. Another similar incident a few years ago by another neighbor. Neither required help, but since it was 'free', why not call.

In 2007 the Santa Rosa Fire Department received 12,128 calls of which only 714, or less than 6%, were fire related.

Fire departments used to be made up of volunteers. With cell phones and residents disbursed throughout the city, fire extinguishers, smoke detectors, anti flammable building materials, it's time to eliminate the expensive government monopoly of the firefighter unions and bring back the volunteer fire fighters.

By providing 'free' paramedic services for the elderly, and latch key kids, the government encourages poor people to live alone, and parents to leave their children alone. If poor people had to pay for these services they would live in a co op, or have a room mate. My elderly neighbor, who called the paramedics when she fell, lives alone in a 3 bedroom condo.

Since the government is going to charge $350 for a paramedic call, the city should offer competing bids by private companies. Private companies could provide emergency services that are more efficient than the government services.

Unfortunately the private companies cannot compete with the government monopoly. Private companies can be sued; they must pay property taxes and income taxes. The government monopoly does not have any of these constraints. The government monopoly employees even get to elect the city council members who will approve the pay and lavish benefits of the government mob employees. Still, it would be nice if a resident could opt out of paying the forced taxes for paramedic services and elect to have private care, like some elect Triple A for automobile care.

Charles Tolleson

American Malaise

Former President Jimmy Carter's 1979 speech was labeled the malaise speech, though Carter did not use the word in his speech.

A malaise speech would be appropriate today. Americans have become more and more dependent on government than their own self reliance.

It is primitive instinct for humans and other animals to look for the best way to survive and insure their genes are reproduced. Nature works that way.

Humans will try to avoid pain. They seek safety over liberty. Self reliance, liberty, and responsibility can be painful. If there is a less painful alternative we will take the least painful. This is why governments become too big and too complex to be efficient at providing the basic functions of government, that is, protection of life and property.

Sermonizing by government officials with their promises of a life free of pain and safety is irresistible by the fearful. People know liberty can be risky and unsafe. Who wants to be judged by their choices if their choices prove to everyone that you are weak and stupid. Liberty has a way of exposing one's weaknesses, thus making it more difficult for us to find a mate. Past experiments with communes had an alluring enticement, one that meant each member of the commune would have equal sex, thus ensuring a basis need, to procreate. The communes failed because some people found their mate and did not want to share, so they left the commune. Others simply did not want to produce and share with non producers. Communes have never been successful against a society that has private property rights.

Even well to do humanitarians have pain. They have mental pain caused by their conscience for the downtrodden. They think the pain caused by their conscience will go away if only the downtrodden are cared for. The humanitarians however will never be satisfied, no matter how much the government does. Thus they will always be in pain.

The humanitarians will not be satisfied even if the standard of living for each person is doubled. If each person could have twice the size of house they have now and live twice as good as they live now, the humanitarians would still be miserable because there would still be inequality. The rich people would still have more than the poor people, even as the poor people live twice as well off as before. A humanitarian's envy and the desire to rule is never satisfied.

The current government actions will only cause more malaise. People will not have to worry about food, shelter, health care, or mortgage payments. Longer unemployment benefits means an unemployed person will not be required to start a small business with long hours of work and a high risk of failure.

The malaise will continue to grow. People will feel secure as an individual while the society around them stagnates and then deteriorates.

As the government provides more, gluttony will absorb the citizens. Their gluttony will do more harm than the plague.

This has been true throughout humanity. Great creators in the ancient Arab world could have created great societies if governments had not taken the path of trying to eliminate pain and do good. The Arab world would have become great if Mohammad had not created a society that made group promises no one could keep.

China, the Incas, the Aztecs, all could have been great societies that lasted and prospered if those governments had not been so centralized with top to bottom authority.

“That body of people certainly is the strongest and the happiest in which each person is thinking for himself, is independent, and self-respecting, self-confident, self-controlled, and self-mastered.” J. Laurence Laughlin
The Elements of Political Economy (1887)

Charles Tolleson