Sunday, December 14, 2008

When Did It All Change?

When Did It All Change? posted: Dec 14, 2008

This question is posted across several blogs because it applies to all the subjects of those blogs. It's All Tuna begs the answer to when did everything become Tuna and why? The Principle of Imminent Collapse has presented many examples of the principle in action, but why is it that we repeatedly fail to do anything about it? Is THAT another of the characteristics of the PIC? And the Vulnerable Geometry is only vulnerable because we construct it that way. Why?

This post seeks to elicit examples of when it all began and what evidence, albeit in retrospect, can be seen that has led us from the Before to the Now. An example of this question and answer is thus: People driving on the road today are so rude, ignorant and aggressive that they endanger everyone around them and sometimes commit murder over simple things. When did this start and what caused it to happen?

With that in mind, what is the answer to these:

When and why did it become more important to make a profit than to make a product or service that made life better for people?

When and why has sex replaced love? Songs in the 1950s and earlier were all about love and relationships. The 1960s saw some transition. The 1970s and on it is sheer sex and show.

We used to see starving children and mobilize efforts to save Biafrans. Rock stars sang and did benefit concerts. We had Farm Aid. We had Feed the Children. Now we hardly even know the place called Darfur. What has happened?

If the answers were simple, we would have solved our problems already. But identifying the causes and the time line is an essential step in getting to that goal.

Vulnerable Geometry at Blogspot

Sustainable Geometry at Blogspot

It's All Tuna! at Blogspot

Principle of Imminent Collapse at Blogspot

Sunday, November 23, 2008

Sacking the Treasury

Sacking the Treasury

It’s a form of Tuna, too. After the fall of Saddam Hussein’s government in Iraq, people went wild. They broke into every government building and the numerous Presidential Palaces and ransacked each one of them. The 24-hour News Stations aired footage of men carrying away filing cabinets and swivel office chairs and desks. Framed pictures, computers and copy machines were prized loot while the Capitol burned and the frenzy of liberation from one despotic regime to another took hold and the light of reason failed to illuminate the minds and hearts of men. No one was around to stop them or protect the assets of the once powerful totalitarian government. Somewhere around $600 billion in US currency likewise disappeared in the mêlée that went on for days until the elation ran out of steam and an uneasy quietness enveloped the country.

Years later the American financial architecture suffered a catastrophic failure that resembled the aftermath of carpet bombing from high overhead with munitions that targeted only the infrastructure while leaving the shocked and disoriented population largely intact and wondering exactly what had happened and when it would all be over. The zombie-like inhabitants of the nation wondered around in the metaphorical wasteland landscape looking for loved ones or serviceable objects to dust off and try to put to some further use. They ambled aimlessly around in the rubble of their once great nation with all cogent thoughts suitable shaken out of their heads. Others sat around their television and computer screens straining to hear some news that was good or to glean from millions of webpages some insights as to what was going to happen next.

While the shell-shocked people remained static, the predators moved in to clean out the accounts of the now ruined financial houses and banks that still had a mission to fulfill and a semblance of momentum to keep going. Government promised help in the form of taxpayer provided bailout funds and the predators kept draining the accounts. Men and women who specialized in economics and accounting principles and practices looked at the sinking financial companies and knew that there was money that was going to waste and it should be theirs. They placed Sell Orders in the still functioning stock markets for stocks that they did not own. Then as the prices continued to fall they repurchased those stocks and kept the difference in the two prices as their reward for being observant and capable of making such a deal work.

Each time the short-selling and the buying-to-cover transaction took place, the stock was worth less that it was before. Big corporate investors sold out early as the news of bailouts bolstered the prices for a few more days. The small investors who had their money in mutual funds that had bought into the failing institutions when they were doing quite well, sat in shocked inactivity not know whether it was good to sell their mutual fund shares or ride out the roller coaster trip and wait for a brighter day. Meanwhile the Short-sellers were looting the funds that held the life savings of millions of Americans who heeded the admonition to save for their retirements.

Short-sellers rationalize their plundering as a part of economic natural selection of survival of the fittest. They proclaim that they make the system more efficient by knocking down corporate stocks that are overvalued. They are only “right-sizing” the companies that they target. But for every dollar that the short-seller extracts as the stock prices falls from high prices of $60 to $100 per share down to sub-dollar and “penny-stock” status, some small investor who planned to retire on that money loses it. It would not be so bad if it was one mutual fund manager was shorting a stock to make income for his small investors, but in general, it is extremely wealthy investors who can chance investing in such schemes. The small conservative, risk-adverse, near-to-retirement investor simply cannot take the chance on such investments.

Somewhere in the vicinity of $2.7 Trillion worth of stock value evaporated between the November 4 National election and November 23, 2008. Mutual fund balances lost that value, as did the day traders and other serious investors who wanted to build an account balance. Not all of it, but it is fair to expect that a sizable share of that “lost value” was “found” by short-sellers who knew that the prices were going to continue to fall and did not want to “waste” that loss.

The Dow index bounces as the cycles continue to move through time. Each time the level reaches a new crest it is a lower number than the crest that preceded it. New lows are registered at the time the bounce begins and recovery could be imminent. Then just when the floor seems found, the bottom fall out once more. At or near the crest of these cycles the price is ripe for yet another round of short-selling that sucks a few more billion dollars from the accounts of hopeful investors.

This whole scenario is an example of it all being Tuna! The predatory investors are providing nothing of value to the economy, to the investors they prey upon, to the companies they target. All they are doing is deriving a profit from the misfortune of prior investors who cannot move swiftly to protect their funds.

In a well functioning economy with thousands of well performing companies, a few short sales here and there may indeed do what the short-sellers say their activities do, but while the entire global economy is in free-fall, all they are doing is looting the treasury and making the results exceedingly worse.

Saturday, November 15, 2008

So It's All Tuna! Now What?

Now What?

The global economy has been sinking into a quagmire allegedly created by the magnitude of crappy mortgages that turned into foreclosures in the seminal year of 2008. Everything seemed to be going along reasonably well until something happened. People went to work and earned their paychecks. Mothers shopped for groceries and toted the children from one after school activity to another. Consumers bought new cars, flatscreen TVs, cell-phones and iPods. Cable and satellite content delivery utilities put every conceivable sports event on screens in millions of American homes. Beer and a multitude of fried potato and corn products ran aplenty. Tens of millions of Americans earned a paycheck, received a pension payment, got a public assistance check of one kind or another, and dutifully spent all of it on the consumables, commodities and utilities and medical bills. All seemed right with the world.

But lurking just beneath the surface was a condition so insidious that it would bring down the global economy in a way that the most diabolical arch-villain criminal mind could not even imagine. On top of that, it was not especially dastardly in its character. One could not point to the evil doers and single them out for punishment.

The decline of the global economy was not a single event nor was it caused by a single cause. We need a single day to represent the transition from The Before and The After. This date will be September 13, 2008, the day that Lehman Brothers filed for bankruptcy. On the morning after the protracted crash there was exactly the same number of people willing and able to work like they did the day before. They all had the same amount of income to spend for all their necessities and discretionary purchases. So what happened?

A couple of things happened that culminated in what professional Economists call a Meltdown. The biggest trigger was the resetting of variable interest rates on millions of mortgages that people had taken out on their homes, to buy homes and vacation spots, and refinance existing debts. Suddenly there was the equivalent of a huge tax that upset millions of household budgets. House prices started to fall making it difficult or impossible for people who needed to sell for one reason or another to realize the anticipated equity for their future goals. Some of them wanted to move to a smaller place, a retirement village, an assisted living location, etc. For them the selling price of the house was their retirement investment.

Other people who were fully entrenched in mortgage debt found themselves in the upside-down position where the payoff balance of the mortgage was higher than the new lower market price. For them to liquidate their home investment, it would cost them additional money just to get out. As other dire economic circumstances, such as the loss of a job or the resetting of an ARM, their ability to maintain timely payments diminished.

If everyone is ready to work and make things, provide services, and such, why is the economy still collapsing? The banking system of the world has two essential functions: move people's money around as payment for goods and services and to make loans for operating capital and to allow present growth through equipment and facilities acquisition. The present failing of the system is that the banks are not making those loans. Even more importantly, consumers are finding it difficult to borrow the money to buy all the stuff that the economy needs them to buy.
Right now, millions of consumers are waiting to see if they have a job next month or next week before committing themselves to spending more money that they have not yet earned. At the same time the lenders are wary of putting out the funds for consumers to use because they do not want to increase their loss exposure when the credit card payments fall behind and many customers will choose bankruptcy to settle their accounts. There is a bottom line fact at play in all of this. That fact is that all the income (earned or otherwise received) of all the employees in America does not add up to enough money to buy all the stuff that the manufacturers and service providers need to buy in order to keep the economy vibrant.

Consumers are not making discretionary purchases because they are using their remaining incomes to pay for necessities and they are a bit wiser about using credit to finance their lifestyles. Real buying power of the aggregate population of the US declined over the years as the total outstanding credit levels increased. While the US population grew by a few more millions, hundreds of thousands of well paying jobs evaporated as the manufacturing sector relocated to more conducive lands with hungry workers who could live on a lower pay level. Some of those jobs were replaced with the low wage variety where immigrant labor, unskilled citizens and those who are new to the labor market could earn enough to be considered employed but not so much as to be able to pay for everything that is necessary for quality life in the United States. Hence some in some families two wage earners holding three distinct jobs were necessary to supplement their TANF, Food Stamps and WIC payments to make ends meet.

These families were not typically the ones who were mortgaging their dwellings for a few more dollars now in anticipation of future earnings.

Part of the dynamics of the free market economy is that some people do not have to provide their labor for their incomes. Instead they derive a few cents on other people’s money transactions. They receive interest on the mortgages, interest on the balances carried by credit cards. They buy and sell paper that represents natural gas, coal and electricity that the families buy to heat their homes. They buy and sell paper that represents crude oil that is refined into gasoline so people can drive to work, the grocery stores, the doctor’s office and everywhere else. Every dollar that is derived from those activities was paid by someone who earned far less. While this process is a natural and necessary one, when too many people get into the same game the benign character of the game becomes malignant. At some point the consumers of the commodities suffer to keep up with and pay the costs while the providers recline in comfort.

ExxonMobil earned record profits of tens of billions in the year ending Oct 2008, those profits computed to a 15% return on the stock price of $75.00 per share. Everyone who owns any mutual fund would like to have such an annual return on his or her investments. The reality though is that many of the stockholders in ExxonMobil paid $10.00 or less for their original investments many years ago. At $10.00 per share the $2.83 quarterly dividend makes a 113% return on investment. The billions of dollars in annual profits directly relate to cold families in the winter months.

With our markets measuring its performance in shareholder profits, its efficiency in keeping production costs as low as possible, there is too much room for suffering out of sight of the board room where financial decisions are made.

Monday, October 13, 2008

Tuna To The Rescue!

Tuna To The Rescue!

Several screenplays have been written where the arch-villain conspires to use all his resources to manipulate the global financial markets to either hold the world hostage or to walk away with unimaginable wealth.

Ian Fleming's, Goldfinger is one of the most comical films where the diabolical plot is planned to perfection only to be spoiled by James Bond. The comedy was not part of the script, nor is it funny when viewed in the context of 1962. In 1962 it was indeed diabolical. To conceive of irradiating the US national gold reserve to render it useless with what today would be called a 'dirty bomb' was the work of a masterly criminal mind. But the time and reality has a way of rendering the most ingenious ploys trivial and indeed laughable. Let's review the essential facts.

Auric Goldfinger owns $10m in gold. He has a fixation on the shiny stuff. He spends some unspecified sum to obtain a nuclear bomb and to hire and train a commando unit which will put the bomb inside Fort Knox. His plan is to destroy America's gold deposits and the other nations' piles so that his gold will increase in value by a factor of 10. A tidy profit for his industrious plan. The plan fails. Auric dies. Bond sleeps with Honor Blackman.

In the years that followed, Congress, armed only with rhetoric and a pen, deregulated the price of gold and the cost of an ounce went from $36 to over $700. Mr. Goldfinger turned in his grave (if they ever found his body.) For those who are quick with a calculator or can do the math in their heads, this was an increase of 20 times, twice as much as Auric planned for. And all he had to do was form a PAC and contribute to a strategic number of elected officials. Actually he did not need to anything at all but be patient and continue to cheat at gin rummy.

Now of course we are talking about 1962 Dollars. Inflation has eaten up a lot of the value that would have been created by the destruction of the Fort Knox gold piles. In the intervening years, the price of a gallon of gasoline has from less than 20¢ to over $4.00. The crude price went from less than $10 a barrel to over $140 a barrel. That is 1400%. Mr. Goldfinger should have built huge storage tanks and stockpiled oil to be sold much later. He would have done much better.

How mundane this all must seem to any present-day American who can read or watch the 24-hour cable news. We have a trillion dollar financial debacle to remedy and a man with a pen and an excess of rhetoric who says we must move quickly and trust him to sign only the most earnest legislation that will save the planet from imminent financial collapse and the destruction of the American way of life.

There is an ominous vapor in the air that smells like something that Latin Americans have smelled for several decades. It is the acrid-sweet smell of ozone from the electric sparks of our shock therapy. Naomi Klein, in her book, Shock Doctrine, illuminates the dark history of free-market, laissez-faire economics perpetuated by Milton Friedman and the 'Chicago Boys' who first advised Ronald Reagan to develop the 'trickle down' economic model that creates a unencumbered playing field for multi-national corporations. The model required three things: cutting taxes, raising prices and curtailing social spending. If this all seems familiar, it is no wonder. All you have to do is listen to any Neo-conservative member of Congress or the Senate, any member of the Bush Administration, and 500 of the economists on John McCain's list of supporters.

In Latin America, "neoconservative" is still referred to as "neoliberal" because down there they haven't repackaged and rebranded the economic politics in order to sound like they are against a "new" way of doing things. The resistance to the free-market economic landscape are left-leaning in their collateral politics, too. This is unfortunate in that when Americans hear the word "leftist" they think of Karl Marx, Lennon, Trotsky, and other communist-socialist leaders of the part century. They picture Castro and Chavez and immediately discount EVERYTHING they stood for. What most Americans do not realize it that when it comes to the interests of Board of Directors of any multibillion dollars corporation, they are mere peasants, Tuna to be bought and sold.

Read the following quote while not thinking about the fact that South American countries are named and just put Arkansas, Ohio, Pennsylvania, or Florida in its place. Then form your opinion. "The combined and closely related processes of military dictatorship and the application of neoliberal [neocon] models acted together to yield an extreme regression in the balance of power between social classes. It would have been impossible to implement the wholesale sell-offs of national industrial resources that unfolded most drastically in Chile, Uruguay and Argentina without first crushing the people's ability to defend their interests. These three countries had been remarkable for their achievements, possessing advanced systems of social protection under states that assumed a regulatory capacity and a role in expanding the domestic market, guaranteeing the social welfare of the population, and providing public services. The most brutal repression they had ever known was needed to clear the way for neoliberal [neocon] policies that privatized state functions-in the case of Argentina, transferring virtually all public resources into the hands of private capital-and abolished hard-won social rights. In short, three of the most enlightened states on the continent found themselves completely dismantled."

Kevin Phillips, whose book Bad Money guides the reader through the financial landscape also recognizes that playing fast and loose with the US economy has led to the present "urgent need to prevent collapse" The 300 million Americans, not to mention the billion or so other people who are vested in the American economy through buying financial products invented to export US debt as a means to make a profit are directly impacted by the failure of oversight by the government. This lack of oversight is itself not an oversight but a conscious decision to not oversee the process so that the financial institutions could play fast and loose with all our resources. The Wrecking Crew: How Conservatives Rule by Thomas Frank delineates the overt plans that have been being implemented domestically even as those same principles are being rejected with bloodshed in Latin America.

America is being dismantled part by part like some leveraged buyout from the 1980s. As our domestic manufacturing capacity is being stripped away and tens of thousands of workers are marginalized, the goods we need are supplied to us by foreign labor employed by multi-national enterprises that respect neither nations nor any group of people. In Latin America, as well as all the other places where the Friedman model of free-market economics, one of the hallmarks was the incapacitation of the workforce and massive import of nearly everything that people needed. This method of supply made the population completely dependent upon the businesses that supplied their commodities.

Then as the resources were sold off to private interests, there was a need to refinance the national debt to stem the rise of hyper-inflation. In steps the World Bank with loans to save the day. Along with the loans came the requirements of opening the country to even more imports, and the opportunity for foreign investors to buy even more of the national resources. That was then, and that was way far south of the USA.

The same people who orchestrated the "opening" of the markets in South America, Eastern Europe and Asia are the ones who are in the present Administration. The names will sound familiar: Dick Cheney, Donald Rumsfeld, John Ashcroft, George H.W. Bush. But they did not act alone. There were (are) many elected Congressmen and Senators who steadfastly hold to the theory that small government is better government and if you can't do away with the remnants, at least you can outsource their functions to the private sector. So today in every administration of the federal government there are the contracted employees who officially work for a private corporation who work along side the actual civil service employees.

Tens of billions of dollars are channeled through private defense contractors, homeland security and the euphemistic "War On Terror." Tens of billions are appropriated for the two fronts in Iraq and Afghanistan, all without any appreciable monetary benefit to the people of the United States. We couldn't get the funds to assure that everyone can get adequate health care. We couldn't get the funds to make sure that Social Security remains solvent. We couldn't get funds to buy down our national debt. But we can get $150B for the next year of war. And now we are getting $700B to save us from imminent financial collapse.

The statement that 'we are getting funds' for such spending purposes is actually a misnomer. We are getting nothing but more national debt. Since the spending of the Federal government is already in deficit mode, anything more we spend, we must borrow. So what is really happening is each American is being encumbered with $23,000 of debt to pay off the debt of the companies that each of us is in debt to. Those companies got into trouble mostly because they were making mortgages for people who could not afford to pay back the loan. A family of four will owe $92,000 just for that rescue of the finance institutions. Who of those taxpayers has the collateral today to get a loan from any bank right now? It looks like the Administration is just using credit card to pay off another. This will the biggest Sub-prime No Doc mortgage in the history of money.

Munchausen's syndrome by Tuna

Munchausen's syndrome by Tuna

Munchausen's Syndrome by Proxy is a strange malady indeed. In the strict sense of what it is, a person creates illness in him/herself in order to illicit attention from the medical profession. In contrast to hypochondria, Munchausen’s illnesses are real. The person actively seeks out an illness in order to get the 'benefits' of treatment.

In a more perverse form of the disorder, the person actively makes someone else sick in order to help them, or get treatment for the victim. In a number of cases, mothers make their child sick so that they can take the child to the doctor and derive social comfort from being the stoic and selfless parent of a sick child.

The psychological term stems from the fictitious Baron Von Munchausen who was a weaver of tall tales. These were tales of his grand accomplishments against incredible odds. According to Wikipedia, 'Originally, this term was used for all factitious disorders. Now, however, there is considered to be a wide range of factitious disorders, and the diagnosis of "Munchausen syndrome" is reserved for the most severe form, where the simulation of disease is the central activity of the affected person's life.' It is not the intent of this article to explain all aspects of the medical/psychological of this syndrome but to show it as an analogue for the free-market financial malady that this country and the whole world is now suffering.

Since psychiatric imbalances are never rational, one can exhibit contradicting symptoms which only serve to strengthen the claim of ailment. The financial industry knew that they were making bad loans to people who did not have the ability to repay them. The Administration knew that their financial arms, Freddie and Sallie were buying those bad loans because that is exactly what they were supposed to do. The explicit intent of those two massive mortgage institutions was to make it possible for less than qualified border-line middle-class people to buy a house and move solidly into the middle-class. These people, presumably deserving to do so, needed cash to buy all the stuff they would need in order to make good on their upwardly mobile lifestyles. They needed cash to send their children to college even as the college financing dollars were getting more scarce and students were notoriously deficient in repaying those loans. They needed cash to fund their retirements since Social Security could not keep up with the demands of the economy.

All the while that the neoconservatives were decrying the government interference in the free market, the waste of public funds on public education and the inefficient management of Social Security, excessive regulations that made US companies uncompetitive in a global market, the financial institutions were racking up huge profits for their executives and preferred investors right up to the point when the first rumblings came up from deep in the foundation of the cardhouse.

Up until the week of September 15, 2008, the industry was just not feeling well. A sort of malaise set in accompanied by non-descript symptoms. The patient had some kind of distress but nobody was paying attention to the pain it was suffering. In fact the patient was suffering indigestion from eating too rich a diet. It was bloated on easy profits from tainted Tuna! But the patient was not yet sick enough to present definitive symptoms that would require a huge transfusion of money from taxpayers to the inflamed veins of the market.

The sick children of the Administration cried out to their parents and got their attention. They were rushed to the ICU (Immediate Currency Unit) for an examination. Before the illness was diagnosed, the President, Secretary of the Treasury, and the Chairman of the Federal Reserve demanded that the doctors begin experimental treatment and save the children. They were in such dire straits that waiting even a day could spell doom for the sickly offspring. No one should question the parents’ motives, veracity or competence to suggest and lobby for the specific treatment. They demanded an unencumbered infusion of $700 Billion to resuscitate and stabilize the patients. Never mind what the final bill might be. The children were too precious to put at risk.

The neoconservative movement has sought for years to emasculate the government and turn over the power to private corporations who could 'do a better job and even make a profit.' Although this rescue (see the parallels in that too?) - the poor corporations need to be rescued like some Pauline from Snidely Whiplash - constitutes the largest intrusion of government into private businesses, the rationality of doing it is lost in the urgency of the pleas for help. Then right on cue, the nickel and dime bait and switch ploy was added. It is not just mortgage bonds that are in distress, all forms of distressed assets should be eligible for the rescue, says the industry. And what about the Lehman Brothers who flinched first and filed the bankruptcy. Maybe that patient is only in a coma and not really dead. Maybe is was just a bad dream and Bobby Ewing is not really dead. A jolt of $50B might bring that one around and Lazarus may indeed rise again. George Bush has a lot of faith, maybe if we all hold our breath and wish really hard...

Let’s put this bailout on a performance measure basis. If my 401 (k) funds recover to the balances of September of 2007, then I will call the $700B an investment. If it doesn't I will call it a huge rip-off.
A bit more if you are interested - The Urge To Surge
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Author's Note: The book cover images in the side margins of this blog are my own publications of eBooks available at both Amazon and B&N. Please take a moment and go to the sites and read about them. Then if you like it, buy one or two.

Monday, September 29, 2008

Buying Rotten Tuna

Buying Rotten Tuna

The idea of engaging in buying and selling is to invest some capital and end up with more when you are done. You buy low and sell high. Or as in the hedge funds, sell high and buy it back low. Both ways make money for the investor.

This nation undertook to make it possible for low-income people to purchase homes and begin to build wealth through ownership of that property. Owning ones dwelling afford the owner several things that renting a property does not. First, the interest on the mortgage is a tax deductible expense as is the real estate tax. When the occupant is a renter, they end up paying those expenses as part of the rent, but cannot gain the advantage of the deduction. The property owner gets that advantage.

Second, the property may increase in value over time. One is not able to take advantage of that increased value if they rent. The landlord is able to sell the property and reap the increased equity. The landlord can mortgage that equity without concern for the renter.

That brings us to the third item. The owner of the property can refinance the property and take advantage of the equity of the property without selling it or having to move elsewhere. It is a ready source of cash for a multitude of uses.

Fourth, a house is an inheritable asset. One can pass ownership down the generations so that each new generation doesn't have to start at square one each time.

People who have ample resources of education, employment, family wealth, and personal savings have an easy time of choosing and buying the house of their choice. People in that position start out discovering how much house they can afford and are able to close on the purchase of their house with little or no interference. Mortgage lenders are always happy to see them in their waiting areas.

Then there are those people who do not have those ample resources. They may be new to this country; they may have been displaced when a big local employer relocated elsewhere; they may have lived for generations in rented housing; they may not have had the opportunity to save a 10 to 20% down payment. They may have been categorized on the BASIC (Black, Asian, Spanish, Indian, Caucasian) scale as some lending institutions so cryptically embedded in their credit applications. They may have been trying to buy in neighborhoods that were Redlined as undesirable collateral. For people who were part of that population the Federal government created such institutions as FHA, HUD, and loan programs that relaxed the requirements for borrowing.

Two of the mega-mortgage institutions created were Fannie Mae and Freddie Mac. They were formed by congress and funded with public money to make it possible for people to work their way out of a dependent culture of public housing. The Federal government had a vested interest in Americans becoming tax paying home owners. Throughout the years, home mortgage legislation and funding for numerous housing Acts has made it possible for many people to realize the dream of home ownership.

Along the way, the original missions of these finance institutions became perverted to the purpose of being a money mill for shareholders. Even though the explicit purpose of the corporations was to become weaned off the federal budget and taxpayer, and eventually be self-sustaining in its ability to raise capital. To do that they needed to be responsive to investors by declaring dividends on their stock.

Fannie Mae was created in 1938 by the Roosevelt Administration as a way to assure adequate credit for a growing nation and was especially useful right after WWII. The perversion was in part orchestrated by the subsequent appointments of corporate leadership by subsequent Administrations. Most recently during the Reagan Administration economic factions loyal to the Chicago School of Economics philosophy of Laissez-faire were woven in to all sectors of the Federal government. The design was to emasculate the government in favor of private business which would take over in the created voids and be able to generate profits for the investors who would provide the capital voluntarily and with a reasonable rate of return. Taxation was not necessary in that model.

If the important functions of government were funded by private investment, having no levied taxes would make more funding available. If the economy expanded enough to pay the dividends of that investment, there was no need to ever repay the initial and continued investments. All unimportant functions of the federal government needed to be eliminated as inefficient and wasteful. Such "unimportant" functions were spending on social programs, like public education, welfare, Medicaid.

Private decisions for investment and engaging in financial transactions have historically been transacted between and among amicable willing trade partners, parties which have a mutual need, and between and among parties for whom the commerce was forced. Trade partners could pick and choose with whom they would and would not trade. Private arrangements, conspiracies and exclusionary practices were employed to the advantage of the trade partners and to the disadvantage of the others. It required a government to break down those trade barriers and to assure that everyone had the chance to engage at some level of commerce.

When investors who control the bulk of the monetary assets become spooked by current events, social upheavals and wars, they tend to clam up and protect their principle by removing it from the market. When they do this everything begins to slow down. Fear can overtake the otherwise rational decisions and collapse begins.

The Federal government acted to counteract such freeze ups during the Depression by creating the Federal National Mortgage Association - Fannie Mae. "Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America. [from the Fannie Mae website]"

It made sure that homeowners did not suffer wholesale foreclosures due to investors being unwilling or unable to maintain their commitments to lending the money to the home owners.

In the 1970s, the Federal Home Loan Mortgage Corporation Act fashioned Freddie Mac to draw off mortgage obligations and return the funds faster to the economy for continued growth. "Our mission forms the framework for our business lines, shapes the products we bring to market and drives the services we provide to the nation's housing and mortgage industry. Everything we do comes back to making America's mortgage markets liquid and stable and increasing opportunities for homeownership and affordable rental housing across the nation. [from the Freddie Mac website]"

Once upon a time, there was regulatory oversight of these corporations and Fannie Mae actually did pay back all of its initial 'seed money' that was provided by the American taxpayers. That was a time when actual tax revenues were able to pay for such endeavors. Today all the funds used in such programs is first borrowed from people who have it, then it is lent to intermediary banks which use it to pay off the people who invested in the previous round of investing. Surprisingly that actually that does work but only so long as the full faith and power of the US is behind the investment, i.e. the American taxpayers' ability to make good on the promise.

In times of growing markets and lucrative investing opportunities people with wealth want the government to stay out of their affairs. They want to decide when, when and how much to invest in whatever they decide is best. This would be dead normal for a human to desire. It would also be reasonable if humans were not so susceptible to emotional reactions to events that occur around the world and would not get into a frenzy when easy money seems to be floating in the water. One must remember that unless an investment actually produces something of value like a new computer chip, or a million tons of wheat, or a productive oil well, then the profits from buying and selling are derived from some other investor who sustains a loss on the same investments.

This is where that businessman in Nahant back in 1978 was so extremely prophetic. He was doing well investing in tuna boats and the catch that pulled value from the sea. He was doing quite well for himself until his business hit a glitch. With his delivery schedule interrupted, he was faced with a total loss of his investment if the tuna he owned was not sold immediately. He knew that someone who did not really understand the tuna trade could be encouraged to buy-in so he could sell-out. Ultimately he sold all of his marginal tuna and walked away without ever having to bring it in to port.

Jump ahead to the Present in 2008. President Bush, Treasury Secretary Paulson, and Fed Chairman Bernanke are out stumping to find buyers for a whole lot of Rotting Tuna. The people of the United States are being asked to buy the Tuna with the promise that they will possibly make a profit. The real outcome however, is that Americans are being asked to buy the tuna because the current owner is such a nice guy and is too important a character to have to sustain a huge loss on his tuna investments. He knew that the tuna was for buying and selling, not eating. He knew that it was a perishable item with a limited shelf life.

In the case of the real tuna on the real boat, the buyers of the tuna were doing it voluntarily even if ill advisedly. In the case of the Troubled Assets Relief Program (TARP) being batted around the committee rooms of the US Congress, the American people are being roped in and squeezed for funds to buy the rotten tuna. And since most Americans do not have the $2,300 each to chip in, they are having their futures refinanced for them and the tuna will forcibly be sold to them.

On September 29, 2008 with the Liassez-faire Republican President poised on the brink on the end of his 8-year administration, proposed the biggest intrusion by the Federal government into the private business sector. His $700 billion proposal was only conservative in that it probably was a conservative estimate of the actual sum that would ultimately be appropriated to curtail the precipitous fall of mortgaged backed securities and everyone else who had any investments that were in any way related to those mortgages. It was so big and intrusive a proposal that two-thirds of the GOP legislators voted against it. The language of the proposal was such that the Federal government would have a significant say in the workings of the financial sector. One should wonder if they who voted against the proposal did do because of the dollar amount of because of the amount of control it prescribed. That debate is for another day.

At the end of the day (September 29, 2008) the taxpayer did not buy the rotten tuna!

Sunday, September 14, 2008

The Shocking Secret of Tuna!

The Shocking Secret of Tuna!

Food from the sea - it is something mankind has taken for granted for thousands of years. He has set out in small boats to cast nets into the cold deep waters of the Atlantic, Pacific and Indian Oceans; into the Caspian, Black and Red Seas and countless other named bodies of salt water. Men have stood on sandy shores spreading nets in tidal surf hoping to drag protein out into the atmosphere where it could be dried in the sun's rays and sold or eaten directly to sustain human civilization.

Large boats troll the deep waters of the North Atlantic Ocean and Mediterranean Sea pulling tuna and other species of aquatic life out of its biosphere into ours. Even as the populations of fish decline in consequence to extensive fishing, changing water chemistry and additional heat from the sun, massive factory ships continue their mechanized reaping of the sea. Men begrudge the limits placed upon them by international regulation that cause them a loss of livelihood. They cannot fathom the reality of voluntarily not earning their living in order to allow what remaining fish populations to recover. This is especially when the recovery period may be longer than their remaining lifetimes and maybe a whole next generation, if ever.

Tuna is but one species of fish to represent all fish species. It is but one link in the network of who eats whom. No population of fish nor population of Man exists in isolation. So goes one population, so goes the others. We need to find the equilibrium. Over fishing is not just a commercial imperative, it is a biological imperative. Existing populations of Man need to eat. It is not like we are stockpiling fish bodies for the future. Fish is a highly degradable commodity that must be consumed quickly. Likewise it must be bought and sold quickly if losses are not to be incurred. This is where Tuna! as a metaphor arises.

Tuna is not merely a species of fish, nor is it merely a fictional town in Pennsylvania, Greater Tuna, where seriously goofy people live. Tuna is the metaphor for how we buy and sell everything without consideration of its intrinsic value nor any of the negative consequences the commerce brings. "It's All Tuna!" is the book title that describes this metaphorical nature of tuna.

People want and need drugs to stabilize their health and live happier. In the beginning, chemists sought to take on the maladies of human disease and find cures to make it possible. Ingenuous men mixed beneficial and toxic substances it hopes of finding that elusive cure to soothe the human spirit and heal its body. On the beneficial side he discovered anesthesia that made life saving surgeries possible. Somewhere along the development line he discovered that he did not need to cure the patient if he could merely soothe the symptoms. Somewhere along that development line he discovered that making a daily dose that sells for $1.00 would generate $1B a year if only 2.75 million people would take it. And if 27.5 million people took the daily dose, they would make $10B per year. A lot or people benefit from buying and selling the drugs not using them.

Crime must be punished. But must the act be a crime? We incarcerate 2 millions people in the United States. Although that amounts to only 0.67% of the population it costs over $40 billion to house them each year. Many jurisdictions have moved to privatize this function making it a profit-motivated enterprise. Now add it the interdiction functions, the prosecution, the judgeship and the defense lawyers and you have a hugely profitable enterprise.

The Governor runs on a platform of being tough of crime. The Legislature measures its performance with laws that make the streets safe for our wives 1 and children. They together create the raw materials for their enterprises - a crop of perpetrators who need to be caged. They make sure that certain activities remain illegal and highly profitable. The they buy and sell the human cargo that they hooked and yanked out of the metaphorical sea to be harvested and warehoused until they no longer create income for the system.

There are many other example of how this economy makes tuna. The shocking secret of tuna is that WE are the tuna. Humans and human needs are bought and sold on the open market so that merchants can make a profit on us. No investor ever put up his money so you or anyone else could borrow it to buy a house and make a home for the comfort of his/her family. He did it to make a few percentage points on the principle. Then he sells the mortgage to someone else so both of them can make their profits. No fisherman ever figured that the tuna or the sword or the pike or the cod needed to live on in a happy existence. It was there for the buying and selling.

1 Could equally be a husband or significant other just as well.

Tuesday, September 9, 2008

Right to Life Tuna!

Right to Life Tuna

The supporters of the Right to Life doctrine have a very valid principle to guide them. The supporters of the Pro-Choice doctrine also have a valid platform on which to stand to defend their point of view.

Terminating a life under any circumstances in our society is a painful and difficult decision to make, whether it be the developing body of a human being in the womb, a criminal suspect by a police officer, the removal of life support by a relative or of a convicted heinous criminal by a judge. Each of us has varying degrees of compunction, or the lack of it, in each example cited. Our pureness of heart and greatest of intentions to protect one or other's rights is soon co-opted by factions that have an agenda to promote and not to fully and singly support the original goals.

Whereas, when the pursuit was to save the lives of unborn humans and only to save those lives, the movement was pure. Seeing a good thing, like seeing a stock price beginning to rise or seeing the widening of the currency exchange rate gap, political investors entered the market. Each Senatorial and Congressional candidate up for re-election or attempting to unseat the incumbent has to align him or her self with that single issue in order to establish the "side" he is on. The candidate buys his committed constituency by buying the abortion issue on one side or the other. The voters choose their candidate on that issue alone. While not every voter is a one issue voter, most are. The problem with choosing the candidate on one issue, in this case abortion, is that the voter has to accept all the other positions that the candidate holds without examining them. Few people are capable of learning about all the positions their candidate takes and defers to the most volatile one.

The Pro-life candidate may also support NAFTA, CAFTA, selling of Social Security to the private investment interests, and degrading the environment in favor of corporate interests. Although those positions are not related, the emphasis is always placed on the most volatile issue.

Corporate interests that want to influence the legislature to write laws that benefit their bottom line, can easily identify the proper candidate based on one or two of his primary stances. The corporate support provides the capital to mount the campaigns and the voters align themselves on their pet issue. In this way, the individual voter plays the corporations' game by actually casting his vote in favor of the business interest. The outcome of the abortion controversy is less important than all of the ancillary business that is generated in the process. In the retail trade, it is called a "loss leader." They sell one or more highly demanded items at a loss just to entice customers into the store where they purchase other items while they are there. It is also called "bundling" as with software packages that have one main attractive installation to buy but with it comes all the other applications that cannot be sold separately. The bundled items typically are the Lite versions that either expire or are missing important functions that can of course be accessed, if the upgrade is purchased.

Far more candidates have reached or maintained office by declaring him or herself a Pro-life Candidate than have human lives been spared the fate of an abortion. The political parties in this Democracy (a Republic actually) have marginalized the human lives they pretend to protect by opposing abortion by using abortion as the platform on which they stand to enter office and pursue all their other agenda items.

Eliminating legal abortions in this country will only accomplish two things. It will increase the number of illegal abortions, and "accidental miscarriages" that were in fact induced by the reluctant mother. Secondly, it will increase the frequency of infanticide. When viewed from a global perspective, the number of infant deaths increases in direct relation to the number of live births. This is hardly surprising when one considers that infant mortality is primarily a function of economics rather than of the availability of medical services.

Where the infant mortality rate is very high as in sub-Saharan Africa so is mal-nutrition and starvation. The number of children a woman has determines how well fed those children will be. Family wealth is inversely related to family size. Female children are considered a liability. They are not as economically valuable as males and they are yet another source of more children. In the Capitalist West, children of both genders are important to maintain the growth of population. Elsewhere in the world too many children create an overloading of the available resources. In the West we have the luxury of being able to support all the children that are conceived. We have such resources to support children that we import them from poor countries that cannot afford to feed and clothe them. We insist that abortions are immoral while also insisting that developing countries slow their population growths.

Infant mortality rate statistics around the world do not differentiate between intentional and unintentional deaths. Not surprisingly, neither do we in the West. A total of 22 out of 24 nations with infant mortality rates above 90 per 1000 live births are on the African continent.

For some reason, the ratio of men to women range from 1.22 up to 1.89 in the most affluent Middle Eastern nations. From a statistical genetic standpoint the numbers should be closer to 1.00 until the higher age brackets are counted alone and the number of women should begin to be higher than for men.

Sunday, April 20, 2008

Prisons As A Cost Center

Read more about Tuna!

In the American criminal justice system, people are Currency to be passed around the business circle as fast as possible, like that Twenty dollar bill mentioned before.

Prison inmates create a revenue stream even though it is tax money that funds the system. As long as the total expenditures remain only a small fraction of the total governmental budget, it remains a very good part of the economy. Just a few of the economic benefits are:

1. Contractors who build prisons are paid
2. Guards are paid their salaries
3. There is the prison food service
4. There is laundry, uniforms and facility upkeep.
5. There are bail bonds to be bought

Just recently in California (1999) it was disclosed that MCI had a contract with the county detention facilities to provide all its prisoner phone call services. Prisoners were allowed to only make collect calls at premium prices. The government received a 44% commission on the proceeds that were charged to inmate families. A $3.00 per call surcharge was collected in additional to the highest per minute rates charges to any customers. The funds were paid into the state general fund to the tune of about $16 million annually.

In the United States we have about 2,000,000 annual inmates. Being housed at $20,000 per year generate a $40 billion revenue stream that fuels the economy. Some of the convicts are violent and dangerous people who have murdered, raped, molested children and other such heinous crimes. There are those who got caught up in the minimum sentencing laws for less than worthy reasons. All of these people have been made into revenue generating cost centers at the expense of their freedoms. They are part of the $40 billion penitentiary enterprise that has become a growth industry in US. We seek to incarcerate everyone who disagrees with a legislative majority opinion of what is okay and what is not. Although there is no single company or jurisdiction to whom the benefits of this industry accrue, a great many people build their lives around holding and housing inmates irrespective of what it is that landed them in a cell in the first place. They, like the Economy, do not care. A person is committed and it is the penal system's job to hold that person as long as specified. They, like the Executioner, are not judging the condemned. They are merely doing their job.

Police officers also benefit from the petty crimes committed to pay high prices for smuggled narcotics that result in those addicts being incarcerated for their drug addictions. With only 1 million police officers and a salary of $20,000 the benefit to the mindless emotionless economy is $20 billion annually.

Every large business enterprise lobbies Congress to pass legislation that will benefit that business. Loggers lobby for access to National Forests. Oil companies lobby for access to artic wildlife preserves. Pharmaceutical companies lobby to get their drugs on the market and to limit the liabilities of undesirable effects of those drugs. Even insurance companies want relief from huge damage awards or having to cover high risk or merely overly frequent occurrences of loss. So the beneficiary enterprises that earn revenues from the high levels of crime also lobby to create a "better environment" for their goods and services, too.

What better way to garner support for their industries than to whip up a frenzy of negative public sentiment against Crime! and Criminals! Without regard to who they are or what they have done? Now remember, whether we spend our millions of tax dollars on warehousing people or on fixing the problems that create the need for warehousing, the economy benefits by the total dollars spent, not on what it was spent on or who received the money. The only variables are, which people get a paycheck - the social worker or the prison guard, the drug clinic doctor or the warden.

In Baltimore, MD, alone there are an estimated 60,000 heroin and cocaine addicts either using the white powdered type or the rock version called Crack. Minorities and urban dwellers are more likely to be addicted to the Crack version while the Caucasian and suburban dwellers are more likely to be addicted to the powder. Penalties for possessing or selling the Crack version holds prison terms that are two to ten times longer than for the powdered stuff.

A typical daily consumption costs $100 per addict. That becomes $6,000,000 per day in total consumption. Let us assign half of that cost to the people who can still hold gainful employment and pay for their habits with legally obtained funds. The other $3,000,000 per day has to be raised through crime. At 10 cents on the dollar for fencing stolen goods and pawn shop loans, the amount of stolen property is $30,000,000 per day. Annualizing that number it becomes $10.95 Billion to support the habits of Baltimore's cocaine addicts. Now apply that number to the 50 largest cities in America and that's $547.5 Billion annually.

If I were a retailer selling electronic devices and other portable things like watches, rings and gold chains, I would love the trade that drug addicts create for my business. If I were a manufacturer of such things, I would likewise appreciate the market that the drugs create for me. In neither case would I have to have any connection to the production, transport, import, sale or buying of controlled substances in order to realize this benefit.

Saturday, April 12, 2008

Tuna! Why is it Tuna?

It's All Tuna!

In 1978, while visiting in Nahant, MA, I heard a story from a friend and successful businessman about a shipload of tuna sitting in a North Sea harbor waiting to be unloaded. The owner of the cargo received a phone call telling him that the ship was being denied access to the port by government authorities. He desperately needed a way to unload the tuna anyway he could. He promptly located a buyer to take it off of his hands by selling the tuna before it rotted at a fraction of its retail price to minimize his losses. "I have a great deal for you, Bill. You can buy this tuna that is sitting in the harbor and resell it at a profit. You can make a fortune." Bill bought it and saved
the owner from total ruin on the shipment.

Bill called on a friend of his to be a buyer for his tuna. Bill said to the buyer, "I have a great deal for you. You buy this tuna from me. I'll make a profit. You sell it and you can make a profit, too. The price to you is still way below the market price."

So John bought the tuna, making a profit for Bill. John knew a man who owned a supermarket chain and offered the tuna to him at a profit. Kevin bought the bill of lading and arranged to have the ship eventually unload. After a few days of dealing, the ship was unloaded and the tuna was distributed and stocked in the stores.

It was only a few days later that the reports started to come in. People were being made ill by the tuna. Kevin called John to complain. John made a hasty call to Bill and Bill called the original owner. He was more than a little bit perturbed. The original owner blew his stack, "Hey, it's not my fault. I thought you understood that the tuna was not for eating - it was for buying and selling."
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Author's Note: The book cover images in the side margins of this blog are my own publications of eBooks available at both Amazon and B&N. Please take a moment and go to the sites and read about them. Then if you like it, buy one or two.

Political Concepts Of Wealth And Taxation

Political Concepts Of Wealth And Taxation

· The Republican concept of taxation and wealth building is based on the supposition that an educated few well capitalized people and corporations know best how to run a nation and conduct business. It is based on taxing the vast middle class to pay for the needs of the lower class population. If the monetary needs of the government cannot be met by middle class taxation, then vast borrowing is in order. This process provides a two-way benefit to the wealthiest of citizens. First their taxes are lessened giving them more funds "to invest." Then they invest in such things as 30-year Treasury Bills that accrue interest to the investor and must be paid with funds raised from taxes on the middle class. The only people and businesses that can invest in a 30 year instrument is someone who has ample funds for all their immediate needs and will be investing only to benefit its second and third generation descendants.

· The Democrat concept of taxation and wealth building is based on the supposition that many people will benefit from having a personal stake in the future by having the ability to build wealth while taking care of the less fortunate population who needs financial supports. Taxation should be based on the ability to pay and the concept that individuals who concentrate vast wealth do it on the labors of the middle and lower classes that struggle to make a living wage. Further beliefs are that the wealthy will not put their funds where the masses need it but rather where it will concentrate the most additional wealth for themselves.

· The Royal concept of taxation and wealth building is based on the supposition that taxpayers are superfluous in an economy that is awash in wealth that can be pumped out of the ground and sold for whatever minimum price the ruling family members choose among themselves. The price can go up from that base depending upon the market forces, i.e. how badly the users want it and how much they are willing to pay all the intermediaries along the way. Wealth accrues to the ruling family and the people merely get in the way. Oil production is a form of mining that indeed builds wealth.


I have a difficult time distinguishing honorable intentions to help humanity and the profit motive to make a big score doing something that just looks like helping humanity. You can see it in the books that tell you that every illness is treatable with the right combinations of foods and herbs, that you can only learn about if you buy my book and read it. You can’t borrow the book or listen to someone tell you the truth. You can only reap the benefits if you buy the book. What else don’t I know? That is what will hurt me.

Every drug on the market, no matter how beneficial it is, generates huge profits for the pharmaceutical company that developed it. And, yes, there are side effects that can be worse than the illness it treats. But if you really want relief from your tri-literal malady, you’ll be willing to ask your doctor about this new wonder drug.

Every day researchers and marketers discover a new ailment with three or four letters that, only coincidentally, has a recently discovered treatment. It’s never a cure. There’s no future in cures. The book lists the cures, though. What might have been a great intention at the start has become perverted into a profit center and a way for investors to get a piece of the action for nothing more than lodging some money in a brokerage account.

US medical science is first and foremost a for profit business. Companies must make money and a return for its investors. The companies must protect their assets, i.e. the drugs, with patents that assure that they have total control over the most important drugs that humanity needs. Not only do they need to cover the costs of R&D they must make Billions off the sales of each preparation in the US market while Europe and other foreign regions are able to buy the same drugs at far better prices.


Wheaty Oaty Ricey Tuna 

Although food and beverage manufacturers all try to keep the cost of their products low, they never endeavor to get them to the lowest level possible. What's the use of going too far below the competition? As long as the dominant companies have their comfortable market share, there is little need to go to extra ordinary lengths to make the product less expensive. Actually in many instances, the cost of the product is small compared to the cost of putting that product in a six color pressboard box or in 16oz plastic bottles. Often the packaging cost is greater than the value of the food it contains. In short, the consumer is paying the manufacturers for colorful enticements to buy the brand named item rather than for the nourishment that product provides. And when one considers the prolific numbers of snack food items on the shelves at $2.49 to $3.99 per bag, one can see that the heavy emphasis is on the impulse and mindless consumption part of our diet.

The highest markup can be made chipping and dipping a 30 cent potato and packaging it in a shiny metallic plastic bag for $3.00. After all that bag isn't cheap. Twelve ounces of Wheaty Oaty Ricey flakes in the box costs twice that of a one pound loaf of bread in a simple plastic bag. But if the manufacturer would forego to the colorful packaging and be able to charge the single dollar the food is worth, then the store that makes only a 2% markup would only make 2 cents. Now that is hardly worth stocking on the shelf.

A lot of people and a lot of companies piggy-back on the sales of 'hot items.' Remember the Cola advertising competition that draws a billion dollar annual budget. There are a lot of people behind those costs who derive their livings from the consumer who wants a cold sweet or salty drink and a crunchy potato treat. If the welfare of the consumer were important, we would sell our products without all the hype and pass the saving on to them. But then a lot of people would not be able to earn their livings.

The epidemic of obesity in this nation is part and parcel of the lack of concern that the economy has for the people who consume the goods and cycle money through the GDP. Our companies pound the airwaves with inducements to eat, eat, drink and eat some more. They produce foods and snacks that contain sugars, salts, fats and carbohydrates and bombard the eyes and ears of everyone with the message to consume it. And we consume it.

We consume it to the point where soon an economy airline seat will be obsolete. Our children have reached the point that even the most rigorous exercise regimen cannot offset the calories they consume. Just one teaspoon of sugar daily equals 16 pounds of body weight when consumed in excess of the caloric needs of the person and his/her activity level. One regular 12 oz. soda per day is approximately the same as that raw sugar. But carbonated sodas and salty carb and fat snacks constitute a multi-billion dollar segment of the GDP. So eat it up. Our corporate sponsors need the revenue.
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Author's Note: The book cover images in the side margins of this blog are my own publications of eBooks available at both Amazon and B&N. Please take a moment and go to the sites and read about them. Then if you like it, buy one or two.