Tag Archives: money

Socialized Heathcare… Do we want this?

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First Step: Watch this video on Canadian Healthcare

Did you watch the video?  I would embed it so you can watch it here, but it seems that due to technological limitations (or decisions) that isn’t going to happen.  And no I’ve decided against figuring out how to circumvent such actions.  So, click the link already.  It is only 20 minutes out of your life to watch a humorous yet somewhat painful video on the realization of socialized health care.  Don’t believe me then click the link.

Obama Plan: How do we pay for it?

You may be wondering what my take on the Obama plan is.  Well, firstly I want to know how we are going to pay for it.  Really, Social Security is going in the red, and so is Medicare.  Last I check in the red means that it isn’t profitable, and also means that there is no money to fund it.  Tax reciepts are down significantly, not to mention State Tax receipts.

So, the “income” that the Federal Governement receives is down.  Remember that the government doesn’t actually make or produce anything and is soley funded by us the taxpayer.  So, to pay for this we are going to go further in the red.  We already have a trillion plus deficit for 2009, which means borrowing or printing substantial sums of money.

While Univeral Health Care sounds wonderful, but again to pay for it we have to get the money from somewhere.  That somewhere is from the “rich”.  Maybe you feel entitled to health care, maybe not.  Essentially what is going to happen is that money will be siphoned from those with high incomes to subsidize the plans.  This is a blatant transfer of wealth, which is what the government does.

At what point do high income earners decide that enough is enough and decide to earn less?  If I were taxed at say 60%, which means I get to keep 40% of my income my incentive to earn more declines.

Rationing: Supply and Demand

Here is where socialized health care gets interesting.  Let’s say there is $100 billion dollars allocated to public health care per year.  For the moment don’t worry about the exact sums of money as this is an example.

With that $100b services can be provided up to that point.  Once that point is reached or even if we start to near that point where if anything else is spent then the program is in the red.  How might the administrators prevent that from happening?

1) You have to wait in line for your turn… these lines could get really long

2) Deny you service… bummer looks like you don’t get that MRI

3) Rationing, where there is a limited number of services available

So, in a perfect world we would all be healthy, and have 100% health care.  As much as I’d like that to be a reality we have to be realistic.  The only thing we get for free is the air we breath.  Anything else requires work, which then can be exchanged for a good or service.  I’m not saying our present system is perfect, by no means, but I don’t think this is the way.

Overextended…

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… is exactly where the market was back in March when the S&P 500 hit 666.  Everyone thought the world was coming unhinged, and well it was and still is.  However, not everything comes tumbling down instantly.

With every play there are acts, and at some point the climax.  Without the climax how can we have resolution?  They are conditions dependant upon eachother unless we are speaking of the experimental genre.  With our money supply and government expendatures into the stratosphere we may be in the experimental, however let’s stick to the traditional for our discussion.

As this drama plays out I think we will have the main plot divided by smaller and yet smaller sub-plots each with their own climax and resolution.

While the market tops and is due for a correction we are jumping for joy at watching green shoots emerge from the abyss.  The media and figureheads talk about these shoots sprouting from here and there, but I don’t seem them.  Withered shoots perhaps.

Let’s introduce the buildup to the climax, and considering the climax euphoric the buildup sets the stage for euphoria.  In our case hope.  Beyond oversold conditions that we reaached in March we also had hit a stage of dénouement (catastrophy). However, this was only a subplot as if it had been the true bottom we would not have seen a short rebound in prices that have taken us up over 35%.  We needed complete disgust with the markets and an unwillingness to jump back in, which we didn’t see.

Instead will we go from Climax (the present) to catastrophe and back again I imagine a few more times before this is over.  We are fairily resiliant beings and can stand being pushed, pulled, and battered a bit before we completely throw in the towel.

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We are now starting a push into anxiety as the green shoot euphoria wears off.

Where are we going?
If the past is able to predicate the future, and if we are playing out subplots within the overall plot that leaves us with a theme of euphoria, despondency, optimisim and so on.  With despondency we will need to see disguist, lack of conviction in the government, and a swearing off the the financial markets. We aren’t even close.
Meanwhile as we go through these girations, while the Alt-A mortgages readjust, and commercial real estate weakens I’m expecting to see price fluxuations, and gyrations that flow with human emotion.  After all with so many players the markets are more emotion driven than anything else.

If the markets weren’t emotion driven then how can we explain people buying equities when the P/E ratio of the S&P500 is over 100, or how technical traders use patterns to profit?  After all we humans tend to do the same thing over and over again.  History repeats whether we like it or not.  The Romans clipped gold coins to fund increasing government expenditures, and in the modern era we print. Nothing has changed except the means in which it is accomplished with the same outcome.

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Short-Term:
A recovery in the dollar based on nothing more than everyone else is hurting perhaps worse than us, and it is very oversold.  Bernake and co might pull-in some liquidity to lessen foreigner’s fear of a devaluing dollar to support our debt markets.  This however, will undoubetly cause a collapse in the equity markets, commodities, and precious metals, while the dollar will rally as will bonds.

Winners: The US Dollar, Bonds
Losers: Everything else — Note: I’m cautious in shorting commodities due to when the next scenario will hit.

Intermediate-Term:
As liquidity is reduced Bernake will realize if he hasn’t already that there is no way out and that we will never be able to repay our debt.  The only way out will be a default via inflation, but that will prove futile once inflation hits 20%.  Wages will not rise and people will protest.  A depression will follow.

Winners: Precious Metals, Raw Commodities, Real Estate
Losers: Everything else

Longer-Term:
We will survive, and I hope we will change our ways to more responsible Americans.  The case for responsibility is huge as it has gone by the way side.  Instead of takeing care of ourselves, we look to others to make our decisions, pay for our health-care, take care of us in retirement, and essentially wipe our asses.  Fiscal responsibility needs… needs to happen.  No longer can we live off of debt that has we have no way of repaying.  I’m sorry, but a hummer purchased via your HELOC adds no value to your income.  Hence it is a poor investment and you must increase your earnings in other areas (no, housing doesn’t go up forever).
And here is our reset.  The New American emerging from the ashes. This is a ways out in time so we will revisit it as the cycle ticks on.

Airline in Crisis…

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I wrote this post last week while traveling on Delta, but let it sit a bit.  For all my grumblings, my return trip was nothing like my departure from SEA.  Therefore I’m going to conclude that either this is an isolated issue with SEA or perhaps larger airports.  Anyways, here is a bit about my adventures on Delta.

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I arrived at Sea-Tac, which is Seattle’s main airport for commercial flights. If I were flying private then there would be no need for this post. As per my usual routine I park my car and goto check-in. Generally this is a fairly pain free process, and can take from no time to a long time depending on the number of departing flights. Ironically this isn’t a complaint about security and the TSA.

I checked-in online to “save” time. If you aren’t checking a bag then perhaps this is a time saver, but if you are don’t bother. There is a redundancy in the system where it all has to be done again at the airport <at least the was SEA has things setup at the moment>.

Delta forces you to check-in again at the kiosk so your baggage check label is printed. From there your name should be called. In theory just like communism this sounds great, however we know what happened to Russia.

I happen to check the special bag field, which told me to see an agent. Okay so is my bag label being printed or no? I waited for a bit, while becoming quite frustrated. The system is broken when a random person goes and checks in ahead of the others who are waiting for their name to be called. My name wasn’t being called… after having an agent ask me if I used the kiosk… my name still wasn’t being called, and as I said random people were jumping ahead of the kiosk users.  Efficient right?

In Europe this might work because lines don’t seem as prevalent and they are able to find order in a chaotic mass while waiting. We United Statizens don’t do so well and get frustrated and confused.

What happens when someone comes along and needs to talk to an agent? They have to wade through a mass of people who are also waiting, but nobody really knows who is first second etc….

I’m going to leave the absurdity of the system at that, but it doesn’t work. Nobody knows they have to goto the kiosk to be put in the queue for their name to be called. There were so many frustrated agents and customers…. Not good for business Delta.

On other airlines I’ve seen every agent helping to get the job done, but there were the First Class agents and some further down who were not helping to expedite the process.

Yes, I was frustrated. To continue to be isn’t worth the energy, but I will now think again about flying Delta until they figure out their customer service situation. This is a first for this kind of problem with Delta and me.

At times there are problems at check-in. I can deal with that and I’m patient, but this confusion at the beginning of the flying process is going to lead to greater problems in the entire supply chain.

When a customer enters the airline they expect or at least hope for a certain level of service. There is no arguing that air travel is more difficult and anxiety ridden than in the past. Now we are searched, scanned, herded, and made to feel as though we are guilty of something.

The airline’s first physical contact with its customers happens either at check-in or perhaps at curb side. In an already hostile environment the step one of check-in needs to have the sense that the airline is taking care of you the customer.

Granted the airlines are losing money, they are adding service fees to stay afloat, and trying to trim every possible cost. The one area they need to invest is in service and starting their customers off on a happy flight. That will make the jobs of the flight attendants, airport staff, TSA, and every person their customer comes in contact with that much faster and efficient.

So we pay for checked baggage, we pay for food, and I’m sure there is another fee around the corner. The airlines really need to make sure this is the correct approach. As we moved from full service gas station to self-serve kiosks we have lost a large portion of service we once used to receive. For more we now get less.

Let’s say on average half the flight checks a bag and the other half only carries on bags. Instead of implementing a per bag fee, which annoys people and slows down check-in, add a fee to everyone’s ticket. Yes, those not checking bags will be paying for a portion of those checking bags, but I would imagine over time it would all even out. Sometimes I check a bag and sometimes I don’t.

In regards to food in-flight. What is with the crappy snack packages? They are junk food and ought not be considered a meal. Why not have people pay for food at the time of ticket purchase. If you want a meal you pay for it ahead of time and know you will have a decent meal versus being left stranded with crap. Airlines would be able to plan ahead the required number of meals and avoid throwing out excess.

In an industry where margins are thin, and competition fierce what will make an airline standout from another? Customer service!

I don’t want angry or frustrated agents helping me. Forcing people to use self-serve check-in only slows down the process because they don’t know what they are doing. Give them the option, but make sure to have agents available that people can wait in line for.

If an agent has to handhold many people’s hands at a kiosk then there is a problem. The idea of the kiosk is to enable people to check-in without agent assistance. On most airlines I like being able to check-in online, get my seats, select how many bags and then proceed to a bag drop where I show my ID and boarding pass. Simple and fast for the most part.

I don’t know what happened at the Seattle Delta ticket counter, but they are going to have continued problems until they modify the layout and process. Having frustrated people isn’t good for anyone all the way down the food chain.

On a bright note there isn’t anyone sitting next to me, and I have an exit seat!!

A bond bubble… Really?

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Bonds, bonds, bonds…  United States Government bonds ARE the safest investment in the world besides cash.  Right?  They are aren’t they?  I mean they are backed by the taxing power of the United States Government so they have to be.  Well, sure you will get your money back at a measly 2.x% these days.  Isn’t that below the rate of inflation you ask…  why yes it is.  T-bills are paying tenths of a percentage so you choose.  Besides stocks and commodites have cost many a small fortune so investing in bonds is a wise decision.  Right?

There is much talk about a bond bubble, and I’ve been watching bond prices and their rates take off recently and also have a nice correction.   Generally I watch $TNX, which is the 10-year government bond yield.  Remember bond yields move inversley to their prices.  So, if yields go down then prices go up and vice versa.

So, we have seen equity and commodity prices collapse, housing prices, and while that was occuring treasury bond prices have taken off.  This MUST be a bubble right?  Perhaps, but you have to take into account who buys and sells bonds.  We have the individual investor, which makes up a small group.  The major purchasers of bonds are large institutions and governments.  For institutions let’s look at the money market industry.  They must hold a number of bonds based on their funds requirements.  For governments they buy and sell bonds all the time.  They sell them to raise money and other governments or institutions buy them for a “safe” return.

As a last resort the Federal Reserve will purchase bonds directly, thus monetizing debt (PRINTING MONEY), thus keeping bond prices high and yields low. Therefore bonds aren’t really controlled by investors as we like to think, but much larger fish in the sea.

So, what might we see when the world loses faith in the bond markets?  Auctions will be devoid of foreign buyers signaling that foreign demand has dried up.  This will spark the necesitated increase in interst rate as an incentive for others to borrow.  Simultaneously we might see a flee from bonds as investors are concerned about their future safety.

If you look at the news you will see exports are way down from exporting countries, which means that importing coutries aren’t importing anywhere near previous levels.  Welcome to a major recession, yes there are grumblings of this being a depresssion.  I supose it depends on your viewpoint.  Now what happens when these net exporting countries decide to stop buying our debt because they have their own problems at home and have to use their saving?  They will no longer be purchasing our debt, which will make it more and more difficult for the USA to spend, and service existing debt.  Being that most of our debt is short term as the interest rate rises so do the debt servicing costs.  As these costs rise, tax income decreases then we are stuck with either printing more money (the short and easy “solution”), we cut back on gov’t services, or a combination of both.

Watch out for rising interest rates and a falling dollar.  So far we have neither, but once we do this will signal a shift from the US Dollar as secure to the US dollar as a high risk.  Expect other currencies in better situtations than us to see their currencies gain value, while the major winners will be commodities and gold.

Congressional Budget Outlook :: CBO

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Hold your hats folks as here are some of the forecasts for 2009 (link):

  • GDP falling by 2.2%
  • Slow recovery in 2010
  • > 9% unemployment by 2010
  • Decline in inflation (hmmmm… if monetary policy says anything this will reverse or at least eventually destroy the dollar)
  • Continued decline in housing prices
  • Decline in real consumption of more than 1%
  • Indeterminate on the financial system

And the best of all

$1.2 trillion dollar budget deficit for 2009*

*That doesn’t include the proposed stimulus package
*That amounts to 8.3% of GDP

So, we have an economy in decline, and digging a deeper and deeper hole to climb out of.  What I really want to know is how are we going to pay for 1) a 1.2T dollar deficit, and 2) a large fiscal stimulus package of a indeterminate size.

Let’s see our foreign friends have been purchasing our debt, which enabled us to essentially live off of their productive labor.  China for example is seeing a marjor reduction in exports, its economy is contracting, and eventually it is going to have to decide if it is worth supporting the American lifestyle at their own expense.  Presently, everyone is so intertwined I think there is a fear that if one jumps the house of cards falls down and we all lose.  However, is it possible for say China to pull out of the house of cards with minimal damage?  Is there a way they can reduce their exposure to US debt, and not have their savings collapse?  This is something I’d really like to know.

Seems to me that if they slowly shift some of their dollar reserves into commodities and other currencies SLOWLY, especially when there is increased demand they will be able to lessen their exposure.  The US import market is tanking, and has been tanking.  With unemployment increasing Bloomberg people are going to have a smaller income and will be forces to save thus hurting exporting countries.  This isn’t a US phenomena alone as Europe and frankly the rest of the world is contracting simultaneously, while being fed a mouthful of credit from central banks to re-inflate the bubble.  Last I checked it is very difficult to inflate a popped bubble.

Let’s take the latest number from Taiwan Bloomberg.  Their exports dropped by a record 41.9%.  We all know that Taiwan exports electronics, which have been a major boon ever since the technological revolution, which also saw a major hiccuup in 2000-2003.  So, this is confirmation of a major exporting taking a major hit.  There will be ramifications for the Taiwanese economy.

I can’t imagine that after the dust settles the world’s economies will look the same.  The sea of money will shift to where is sees the most opportunity and in its movement will tear apart the economies of many.

Here are a few more headlines on Bloomberg alone that tell a um telling story:

Fed Revives Discussion of Inflation Target to Counter Risk of Price Slide

ECB Expanded Balance Sheet by 36 Percent Last Year to Revive Bank Lending

Apartment Rents Fall, Vacancies Rise to Four-Year High on U.S. Job Losses

Shopping Center Vacancies in U.S. Approach 10-Year High as Stores Fail

Procter & Gamble Fights to Refinance as U.S. Borrowings Reach $2 Trillion

U.S. Banks Will Need to Raise More Cash in 2009, Meredith Whitney Writes

I’ll leave it at that, but what I’m seeing is RECESSION coupled with the Fed trying to stave it off through any means necessary, which is now including outright purchases of securities on the open markets.  Again we have no savings and are either monetizing debt or borrowing it from somewhere.  To do this will be disastrous to the dollar and our reputation as a solid financial center of the world.  Sure there are plenty of other economies in dire situations, but in the end who will come out with the heads up high and who will come out still in the sand?

Withdrawal Symptoms

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If my emotional barometer is any indication of where people’s minds are at the moment then I can only label it as coming down or recovering from a major hangover. It is the Sunday afternoon after a big night out sipping on your bloody mary to ease the pain.

We have been living on credit and tons of it.  At some point it becomes unsustainable and the house of cards tumbles down.  

Getting back to my analogy, think of drinking a ton of alcohol or coffee.  You keep wanting more and more when you finally get to a point where your body is completely dependent.  Any reduction in the drug will cause mild to severe withdrawal symptoms, any increase doesn’t do anything. 

This is what happens with credit expansion.  Too much and everyone goes on a spending spree with all the cheap money.  Take away the cheap money and people stop spending, jobs vanish, incomes decrease, and the previously incurred debt can’t be paid off.

So, instead of going through withdrawal you decide to take a lesser amount of the drug to make your hangover go away or slightly abate. However, you are still hungover. This pattern will continue until either you are completely free of the drug or your tolerance is now much lower enabling you to start increasing the amount as it now has a new profound effect as it did when you first started.  

It seems to me that we are in the post-crash hangover stage, but we aren’t completely free from the addiction.  We have taken a bit of the drug to ease the suffering.  The more of the drug we took the more likely we are to repeat the cycle.  We still need the drug to continue, otherwise we are going to feel like crap.  Hence, we still have a ways to go before we can recover.

If all goes as planned we will have a new President tomorrow and no longer will have to listen to the political banter at least for a while.  One piece of the uncertainty puzzle will be put into place, and we can focus on other issues.

In a NY Times article:

“We don’t know if it’s the end of the bear market yet, but it looks as though the bear has taken a nap,” said Sam Stovall, chief investment strategist at Standard & Poor’s equity research. “So investors are thinking, let’s enjoy a bit of a relief, both from the market’s lows and from the endless pre-election rhetoric.”

Other factors seemed to be playing into the rally as well, including a continuing round of coordinated interest rate cuts worldwide, the ongoing thaw in the credit markets, and the increasing resiliency of the markets to the daily drumbeat of bad economic news. The extreme volatility of recent weeks has calmed in recent days, though trading volume remained light.

Yes, the bear is taking a nap, but we are still very hungover and have taken a bit of the drug to help relieve the pain.  People haven’t completely capitulated and given up on equities.  They are hesitant yes, but still hopeful that things will turn around.

There is a major bear lurking around the corner and it isn’t just in the US.  They are giving birth around the world and China is no exception.  In a Financial Times article:

Wen Jiabao, China’s prime minister, warned that high growth was needed to maintain social stability as fresh evidence emerged on Monday that China’s economy was slowing quickly.

…

“We must be crystal-clear that without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development . . . and factors damaging social stability will grow,” he wrote in the magazine, Seeking Truth.

So, while equity markets recover mildly on noticeably low volume, bears are growling from afar.  Manufacturing is way down, consumer’s aren’t spending, banks still are reluctant to loan, major exporters are slowing.  I’d call this a worldwide slowdown of massive proportion.  We still have credit cards right?

What lies ahead…?

Recession, higher interest rates, massive inflation, higher commodity prices, continued decrease in housing, rising unemployment, and eventual devaluation of the United States dollar.  When will all of these things play out?  

My crystal ball has a few cracks, but for inflation to take hold we have to complete the current phase of de-leveraging and disinflation (which is bringing down prices).  Once this phase is complete all the newly created money will directly cause inflated prices.

Purgatory….

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Ever watched a sci-fi movie where the crew goes into stasis while they travel from one end of the galaxy to the other?  Ever contemplated Purgatory where heaven and hell meet?  

I feel as though this is a period of semi-consciousness awaiting judgement…  Last night I was catching up on some news online when I was watching the futures markets turning deeper and deeper shades of red.  The morning was locked limit down and then we had an immediate spike — DOWN.  However, the day is turning out to be mild in comparison to what may have happened.  

The reason I label this as purgatory is because I think we are either going to swiftly swing in one direction or the other.  Emotion is in control at the moment and perhaps irrational.  Once the herd stampedes watch out.  If people want cash watch out markets.  As I said in a earlier post we haven’t really seen an exodus or pure panic yet.  

The news from around the world is to be expected given the size of the credit contraction.  

I think we may see a rally, perhaps not today, but maybe next week as people see bargains.  News will continue to be increasingly gloomy, spreading a shadow around the world.  The contraction will not abate and people in a moment of fear and panic will sell.  Hedge funds will continue to implode sending equity prices down further.  Mutual funds will have to begin liquidating.  The dollar will roar ahead.  

Only problem is that we have never seen such a huge monetary expansion. Once banks decide to start lending again that money they are now hoarding and using to purchase other banks will flow into the system.  Bam!!@! huge credit expansion at a completely unsustainable rate, and thus hyperinflation.  Equities may rebound, but given the recession they will probably be somewhat stagnant as the new capital investment will take time to be realized.  Meanwhile, gold, oil, and food will goto the moon as the dollar plummets.  Interest rates will also soar as the reality of our debt burden takes hold alongside major inflation.  People will want to be compensated for holding a worthless and bankrupt currency.  

My only real complaint with this prognostication is strength in the dollar.  I’m having a hard time comprehending or even believing that this dollar rally will continue.  It is a flawed currency, and has no basis for strength.  Then again what fiat currency really has any value?

 

my2cents

Banks are lending — NOT

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The theory was beautiful (well in the abstract)…

Give troubled banks more credit and they will lend it out and the economy will stop its free-fall.  Now, that sounds like utopia to me.  Create credit and we will all be saved for unemployement, slowing production, decreased consumer spending, and rising interest rates.

HOLD ON… let’s put a toe back on the plane of reality…

Banks aren’t lending much more than before eventhough they are being handed gobs of cash.  Why wouldn’t banks lend out free money?

What if…

  1. there aren’t any borrowers worthy of getting loans? — Let’s say during a recession!  Oh right the economy slows WAY… DOWN.
  2. there are more troubled banks and unknowns on banks balance sheets.
  3. banks are holding the cash knowing full well that there is another storm on the horizon

I didn’t pull this out of thin air like the Fed does with money.  An article in the NY Times starts with

The banks aren’t lending. And despite what you have heard, they probably won’t start just yet.

Sorry Paulson your plan isn’t working.

“Our purpose is to increase confidence in our banks and increase the confidence of our banks, so that they will deploy, not hoard, their capital,” Mr. Paulson said in a statement Monday. “And we expect them to do so, as increased confidence will lead to increased lending. This increased lending will benefit the U.S. economy and the American people.

Of course, with a $250 billion injection into America’s biggest banks — not all of which were troubled — Mr. Paulson has a political sales job to do. And no requirements to lend were attached to the money. (Some banks may use the money to buy others.)

But Mr. Paulson is making a big assumption about confidence, because until the real economy recovers — which could take more than a year — lending to Main Street is unlikely to return rapidly to normal levels.

“It doesn’t matter how much Hank Paulson gives us,” said an influential senior official at a big bank that received money from the government, “no one is going to lend a nickel until the economy turns.” The official added: “Who are we going to lend money to?” before repeating an old saw about banking: “Only people who don’t need it.”

Again banks don’t want to lend into a very uncertain future.  They want confidence in the economy — there isn’t any and the opposite is occurring.  People are spending less as they become more concerned about the safety of their jobs.  Most Americans have no savings cushion to fall back on.

Roger Bootle and Jonathan Loynes of Capital Economics in London wrote a sobering note on Monday about the cash infusions into European banks that may apply here as well. “We expect rising loan defaults and further asset write-offs over the next couple of years to practically wipe out the governments’ capital injections, leaving banks back at square one,” they said. “Given that banks will need to increase their capital in order to expand their lending book, these measures on their own are unlikely to prevent bank lending from stagnating.”

Wait a minute… all that money being put into the system to restore confidence and spur lending may just vanish?  So at the end of the day more banks fail, the economy continues to contract, available credit continues to contract, unemployment rises, and interest rates eventually rise.  This isn’t what Paulson sold to us with his bailout plan.  Were we duped?

Nah, the individuals responsible for the government’s actions are always in need of votes and making a horrible situation look not so bad or at least feasible to fix.  At the end of the day our failed bailouts will have a disastrous effect.  The consequences are a HUGE debt burden, a larger interest payment on that debt, the world losing confidence in the value of the dollar, and a prolonged recession probably followed by major inflation.  I’ve been singing this song for a while and it will take time to play out, but as you can see this is a VERY rocky road.

Look both ways before crossing the street

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I received an email from a friend and here is my response.  You ought to be able to decipher what the questions were about.  These are my opinions of the present situation, and are by no means recommendations.  

—-
1) Voting for McCain…

I really don’t think voting for A or B is going to matter.  I’m voting for Ron Paul because I believe that change has to come from going against the herd.  I refuse to be partially responsible for either of them being in office.

The odds are in favor of the democrats getting into office and taking over Congress.  I’m actually a bit frightened by this, but either situation is grim. Hopefully it will be better than the last 8 years.

2) Deflation / Inflation
This is tricky and something I’ve been trying to better understand.  There are many many many factors at work here.  We are headed into a MAJOR recession… thus your cutting spending was a wonderful idea.  A recession is a drag on the stock market.  Many think that after a brief rally it is going to drop much further.  I know you are invested at the moment.  One way to hedge against a drop is to invest in a inverse ETF fund such as SDS, QID, DXD, or TWM (these are leveraged 2x FYI).  These ETFs have saved me much pain.  The overall trend in the market is down.  Bear market rallies tend to be severe and swift to the upside, while the markets overall continue to decline.

As for Deflation and Inflation what this means is a decrease or increase in the money supply.  Generally during inflation when the Fed is creating money prices of everything goes up because there is a surplus of money that has to go somewhere.  When the money supply contracts either by the Fed reducing the money supply or debt is paid off.  Then prices decrease.  However, under a fiat monetary system credit and continued inflation are essential to keep it up.  At the moment with the Fed creating TONS of money we are looking at the potential for hyperinflation in the future, which nobody wants.  So, the Fed is walking a tightrope between deflation and inflation.  I imagine they will lean towards inflation over deflation ultimately.  At the moment we are primarily seeing deflation as prices are coming down everywhere (commodities, housing, stocks).

During deflation the market will come down as will all prices.  I think that regardless the markets will continue their descent due to the upcoming recession, decrease in consumer spending, decrease in imports and exports, and increase in unemployment.  Once the recession takes hold and the effects of the monetary inflation occurring now start to be felt we will probably start to see increases in commodity prices across the board.b  With companies facing difficult times I don’t foresee the created money moving into equity markets.

3) War with Iran
The conflict between Iran and Israel is heating up.  I received a report that said Israel won’t be doing anything until after the election, but who knows.  In this case we would see the value of gold skyrocket, oil go through the roof, and the dollar go through the floor.  This is slowly moving from a remote to more plausible reality.  I hope this doesn’t happen as the US can’t afford to be involved in another conflict.  We are already spread so thin.  Because of this and the enormous debt load the US government (its citizens) now carries I fear for the support and longevity of the dollar.  At this point I think it important to own some gold and have some money invested in foreign currencies.  <Thank you Gary North and Chris Martenson>  These are for the long-term and may lose significantly in the short term.  There are many uncertainties at the moment.

Oh and least I forget… At this juncture in the Republicans and Democrats are but different sides of the same coin.

Another bailout, more credit… when will we learn?

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It seems that the tune to march to these days is credit o credit we need more credit.  Somehow somewhere we forgot quite quickly that credit got us into this mess.  If credit is expanding much faster than real economic growth the outcome will be instability in the economy.  That is like an individual taking on more debt while their income stays steady or worse is in decline.  At some point in the future the debt will become unmanageable.  Once debt is too great a burden that individual is going to have to either sell assets to pay off the debt, declare bankruptcy, increase their income, or default.  The one thing that makes the government lucky or so it seems is that they can increase “income” through inflating the money supply event hough it is really illusionary.  All they have done is take money from every taxpayer to service the ever growing debt burden.

I find it distressing that Bernake and Co. are talking about further fiscal stimulus to the tune of $150 billion dollars and Democrats want double that.  We are already over $1 trillion in debt for this year.  Where o where are we to find this money?  Perhaps a leprechaun will appear beneath the rainbow and we will be saved.  If the politicians and bureaucrats have their way this is exactly what will happen.  

American’s have no or very little savings to invest in capital goods.  We are laden in debt and attempting to service that debt.  If unemployment rises substantially then servicing that debt will become even more burdensome.  Another stimulus package will probably be used to payoff existing debt, which does nothing for stimulating growth.

So, what do we do…  Many have proposed various solutions.  

Why not reduce the size of the government for one. 
– Yes, people will lose their jobs.  However, with time they will find other jobs as that money can now be used for other things.

Reduce taxes, and the size of the tax code.
 —  Our tax code is way to complicated and confusing.  I would love to know the cumulative hours wasted on tax returns every year by companies and individuals.  Imagine if we had a flat tax of 10-15%…  get rid of tax incentives, credits, exemptions, etc…  Not everyone is going to be happy about it, but a reduction in the tax burden in actual numbers and time would enable people to use their money elsewhere and as they choose versus having someone decide for them where to best put it to use.   

Return our currency to one backed by a physical commodity — GOLD and SILVER
 — The government would hate this, but it would eliminate the major booms and busts and enable constant growth.  Money would again have a true value versus the value instilled by the gov’t.  Money’s value would be returned to the people and taken away from the money printers, and confiscators of our savings.

Bring our troops home
 — We don’t need to be the world’s police.  Occupying over 140 countries is absurd and very costly.  I agree that we need to have an army to defend the country, but it needs to be defensive and not offensive.  Our paws are in too many honey jars.  We are bound to piss off the bees, which we are continually doing and then blame them for getting upset at us.  Ironic don’t you think.

Remove all subsidies and tariffs
 — All they do is distort the market place and what people produce.  For example why do we have corn syrup in our soda, but in the rest of the world they use sugar?  Corn is highly subsidized, while sugar has many tariffs on it.  Corn Syrup is cheaper due to government policy.  Corn farmers love this, while it hurts all of us.  We pay for those subsidies, and also pay high sugar prices.

I’m going to leave it at that, but there are plenty more options.  People say that ignorance is bliss.  NO it isn’t bliss it is being LAZY.  Will you get out of a parking ticket or a speeding ticket if you claim ignorance?  Not unless you are really smooth with words.  

What happened to being responsible? If you take on too much debt then you have a problem.  American’s have a virus, and it is contagious.  We live beyond our means, and then when we get in trouble someone bails us out at the cost of everyone.  The one’s who really pay are the responsible ones who are living within their means.