Update from the Heartland
No.516
31.10.11 – 6.11.11
Blog version: http://heartlandupdate.blogspot.com/
To all,
On the upside, we spent the weekend with our local grandchildren while their parents enjoyed the big city and the Seattle Seahawks vs. Dallas Cowboys. While the parents had some fun, we went bowling, played dominoes, and watched movies, although Aspen Shae had a babysitting assignment Saturday night. Grandchildren are such a treasure. To top it off, the Cowboys won.
I was awakened out of a dead sleep at 22:53 [S] CDT, Saturday, 5.November.2011, by a low rumble that swayed the entire house modestly and rattled loose objects. My mind raced through various possibilities, eliminating the threats first, and quickly settled on an earthquake – very rare for Kansas. I quickly checked on the grandkids and the house; all good, no harm done . . . well, other than a few exterior cracks that I photographed the following day and will need to have inspected. We turned on the local TV news that reported on a 5.6 magnitude earthquake with an epicenter near Sparks, Oklahoma – a little Saturday night excitement for us.
The time has come. This is the last Update prior to my surgical procedure. Thank you all for your generous words and well-wishes. I certainly expect the next Update will be published on time, and will recount a successful operation and the preliminary results. However, if I miss next week’s Update, please be patient. I shall return.
As if that was not enough, our CEO announced that economic and market conditions have not recovered from the Great Recession thanks in no small part to our beloved politicians repeatedly vilifying the general and business aviation industry. As a consequence, we face another major Reduction In Force (RIF) and a significant restructuring next week. The hits just keep coming. In this instance, I shall ask for best wishes to weather the storm.
The follow-up news items:
-- I recognize and acknowledge that most folks do not concern themselves with aircraft accidents and especially the modified racer, Galloping Ghost, Reno accident [509/510]. I am awaiting the NTSB report. Until then, I suggest the following video essay forwarded by a friend, colleague, classmate and contributor.
“After this, nothing more needs to be said about the Reno crash:
http://www.youtube.com/watch?v=jCBbosq9-RI ”
I had not considered that freedom was involved in an aircraft accident, yet Bill Whittle makes a valid and relevant comment worthy of everyone’s attention.
-- Aslan Soobzokov sent another update in his quest for justice on behalf of his family and his assassinated father (1985), Tscherim Soobzokov [474, 480, 496, 507].
“Dear Cap:
“Enclosed please find the appellate brief that was filed in word format and the appendix printed in pdf format. The appendix contains exhibits, which you should see.
“Please review the appellate brief.
“May you and your family be healthy and happy upon receipt of this communication and always.
“May God bless.
“Aslan”
With three (3) attachments:
alfofpetitionerAslanSoobzokovx3rdcourtofappealson10.1.11.doc [brief]
briefandappendixvol.I.pdf [appeal brief submittal]
AppendixVolumeII.pdf [exhibits in support]
The key for me in Aslan’s case rests in two sentences from his briefing to the 3rd Circuit Court of Appeals. “In light of the extensive history by the [Government] in their attempt to prosecute Soobzokov, their subsequent supposed investigation of his murder was suspect and continuous to be suspect.” It is important to note that two federal grand juries refused to bring an indictment against Tscherim Soobzokov, and several additional immigration investigations also failed. He went on to note, “It cannot be disputed that the underlying reasons for Soobzokov’s death stemmed from false and unfounded allegations of Soobzokov being a Nazi war criminal.” The sad, ney tragic, reality in the Tscherim Soobzokov case is, no one has submitted any public evidence of any criminal activity in his life, let alone war crimes. The government’s foolish action of making the Soobzokov investigation public, based on not much more than emotional, circumstantial, indirect information (not even evidence) resulted in the inflammation of retributive, vigilante murder. Aslan sought remedy from both the executive and legislative branches without relief, and as a consequence, he “has no recourse but to file the petition for a Writ of Mandamus.” The Soobzokov family deserves justice. They have yet to receive it.
I offer the following essay to help us understand what happened, leading up to the 2008 mortgage collapse and banking crisis:
“Gambling with Other People’s Money – How Perverted Incentives Caused the Financial Crisis”
by Russell Roberts
Mercatus Center – George Mason University
Published: May 2010 (28.April.2010)
http://mercatus.org/publication/gambling-other-peoples-money
I strongly recommend the Roberts essay for anyone who still seeks to understand why. It is the best explanation of the root cause of the situation we have all endured and continue to pay for with our taxes and lost net worth. I had a few questions and chose to write the author for answers.
Russell,
A friend and contributor to my Blog sent me a copy of your May 2010 essay, “Gambling with Other People’s Money.” As acknowledged in this week’s edition, you offered the best explanation of the banking-mortgage crisis I’ve read to date. For that, thank you very much for taking the time.
I have a couple of questions.
1. On page 20, you stated, “The act even allowed the capital gains on a second home to be tax-free . . . .” I have searched the Taxpayer Relief Act of 1997 (TRA97) [PL 105-034; 111 Stat. 788] to find that provision in the law without success. Would you be so kind to offer a few clues regarding the basis of your statement? Clearly, such a provision in the law adds fuel to the emotional fire of your argument.
2. Given the topic and content of your essay, I wondered why you did not include the banking deregulation provided in the Financial Services Modernization Act of 1999 (FSMA) [PL 106-102; 113 Stat. 1338], as a contributor to the mortgage bubble and the apparent sense of invulnerability in the mortgage lending and derivative business?
Again, thank you for sharing your insight.
Cheers,
Cap
. . . I received a prompt reply:
“If you Google "taxpayer relief act 1997 second home" you will find many examples. Here is one description from a research paper out of the Federal Reserve:
“‘TRA97 was signed into law on August 5, 1997. Effective for sales after May 6, 1997, it fundamentally altered the tax treatment of housing capital gains. First, TRA97 eliminated the roll-over rule. After 1997, the tax treatment of housing capital gains no longer depended on whether a home seller bought a replacement home or the value of the replacement home. Second, it eliminated the age-55 rule. Older home sellers now face the same tax treatment as their younger counterparts. Third, it allowed home sellers to exclude $500,000 (or $250,000 for single filers) in housing capital gains if they have owned and lived in their homes for at least two years during the past five. There is no limit on how many times one can claim such exclusions during one’s lifetime, and the required two years of ownership and use during the five-year period ending on the date of the sale do not have to be continuous. In fact, one can even claim the capital gain exclusion on a second home, as long as the ownership and use tests are met.’
“On FSMA I refer to it in passing saying:
“‘Though other factors—the repeal of the Glass-Steagall Act, predatory lending, fraud, changes in capital requirements, and so on—made things worse, I focus on creditor rescue, housing policy, tax policy, and monetary policy because without these policies and their interaction, the crisis would not have occurred at all. And among causes, I focus on creditor rescue and housing policy because they are the most misunderstood.
Russ
. . . my gratitude:
Russ,
Thank you for your prompt reply. Please accept my apologies for failing to make the connections in both questions. Again, thank you for your illuminating essay.
Cheers,
Cap
News from the economic front:
-- The Federal Reserve’s Open Market Committee voted 9-1 to leave their credit policies unchanged for the first time since August, citing an economy that remains a concern over the next two years, although they did express some modest optimism about the recovery. Chicago Fed President Charles Evans dissented as he sought more action to ease credit further.
-- The G20 economic summit occurred this week and was dominated by the Greek debt situation, namely the Greek prime minister’s decision to put the European Union’s rescue plan to a public referendum [515]. Europe's leaders, making plain that they've reached the end of their patience with Greece, demanded that the beleaguered nation declare whether it wanted to remain in the euro currency union—or risk going it alone in a dramatic secession. German Chancellor Angela Merkel said, “Does Greece want to remain part of the euro zone or not, that is the question the Greek people must now answer.” Under what had to be extraordinary pressure, Prime Minister Papandreou backed off, after imparting enormously more uncertainty in the market.
-- The European Central Bank (ECB) reduced its prime interest rate to 1.25% from 1.5% amid a deepening sovereign-debt crisis and signs of a slowdown in the euro zone's economy. The move comes as Mario Draghi replaces Jean-Claude Trichet as ECB President.
-- The Labor Department reported the U.S. economy created 80,000 jobs in October, with the private sector adding 104,000 positions, as all levels of government continued to trim their payrolls. The unemployment rate edged downward to 9.0% last month from 9.1% in September. Payroll data for the previous two months were adjusted upward by a total of 102,000 to show 158,000 jobs were added in September and 104,000 jobs in August.
Comments and contributions from Update no.514:
“Had to do some reading on that surgery technique. Doesn't seem like you can get any more high tech than that!...minimally invasive, quicker recovery time, and much better success rate with regard to avoiding the possible adverse long term side effects of a prostatectomy via other surgical methods. It is so fortunate that you are able to benefit from this technology and surgical advancement. Our sincerest best wishes for the best outcome and we will anxiously await your first post-surgery update. possible, and for your next "50 years" to be cancer free. Our thoughts and prayers will be with you on the 9th.”
. . . my reply:
Always comforting to have good cover.
On the upside, we spent the weekend with our local grandchildren while their parents enjoyed the big city and the Seattle Seahawks vs. Dallas Cowboys. While the parents had some fun, we went bowling, played dominoes, and watched movies, although Aspen Shae had a babysitting assignment Saturday night. Grandchildren are such a treasure. To top it off, the Cowboys won.
I was awakened out of a dead sleep at 22:53 [S] CDT, Saturday, 5.November.2011, by a low rumble that swayed the entire house modestly and rattled loose objects. My mind raced through various possibilities, eliminating the threats first, and quickly settled on an earthquake – very rare for Kansas. I quickly checked on the grandkids and the house; all good, no harm done . . . well, other than a few exterior cracks that I photographed the following day and will need to have inspected. We turned on the local TV news that reported on a 5.6 magnitude earthquake with an epicenter near Sparks, Oklahoma – a little Saturday night excitement for us.
The time has come. This is the last Update prior to my surgical procedure. Thank you all for your generous words and well-wishes. I certainly expect the next Update will be published on time, and will recount a successful operation and the preliminary results. However, if I miss next week’s Update, please be patient. I shall return.
As if that was not enough, our CEO announced that economic and market conditions have not recovered from the Great Recession thanks in no small part to our beloved politicians repeatedly vilifying the general and business aviation industry. As a consequence, we face another major Reduction In Force (RIF) and a significant restructuring next week. The hits just keep coming. In this instance, I shall ask for best wishes to weather the storm.
The follow-up news items:
-- I recognize and acknowledge that most folks do not concern themselves with aircraft accidents and especially the modified racer, Galloping Ghost, Reno accident [509/510]. I am awaiting the NTSB report. Until then, I suggest the following video essay forwarded by a friend, colleague, classmate and contributor.
“After this, nothing more needs to be said about the Reno crash:
http://www.youtube.com/watch?v=jCBbosq9-RI ”
I had not considered that freedom was involved in an aircraft accident, yet Bill Whittle makes a valid and relevant comment worthy of everyone’s attention.
-- Aslan Soobzokov sent another update in his quest for justice on behalf of his family and his assassinated father (1985), Tscherim Soobzokov [474, 480, 496, 507].
“Dear Cap:
“Enclosed please find the appellate brief that was filed in word format and the appendix printed in pdf format. The appendix contains exhibits, which you should see.
“Please review the appellate brief.
“May you and your family be healthy and happy upon receipt of this communication and always.
“May God bless.
“Aslan”
With three (3) attachments:
alfofpetitionerAslanSoobzokovx3rdcourtofappealson10.1.11.doc [brief]
briefandappendixvol.I.pdf [appeal brief submittal]
AppendixVolumeII.pdf [exhibits in support]
The key for me in Aslan’s case rests in two sentences from his briefing to the 3rd Circuit Court of Appeals. “In light of the extensive history by the [Government] in their attempt to prosecute Soobzokov, their subsequent supposed investigation of his murder was suspect and continuous to be suspect.” It is important to note that two federal grand juries refused to bring an indictment against Tscherim Soobzokov, and several additional immigration investigations also failed. He went on to note, “It cannot be disputed that the underlying reasons for Soobzokov’s death stemmed from false and unfounded allegations of Soobzokov being a Nazi war criminal.” The sad, ney tragic, reality in the Tscherim Soobzokov case is, no one has submitted any public evidence of any criminal activity in his life, let alone war crimes. The government’s foolish action of making the Soobzokov investigation public, based on not much more than emotional, circumstantial, indirect information (not even evidence) resulted in the inflammation of retributive, vigilante murder. Aslan sought remedy from both the executive and legislative branches without relief, and as a consequence, he “has no recourse but to file the petition for a Writ of Mandamus.” The Soobzokov family deserves justice. They have yet to receive it.
I offer the following essay to help us understand what happened, leading up to the 2008 mortgage collapse and banking crisis:
“Gambling with Other People’s Money – How Perverted Incentives Caused the Financial Crisis”
by Russell Roberts
Mercatus Center – George Mason University
Published: May 2010 (28.April.2010)
http://mercatus.org/publication/gambling-other-peoples-money
I strongly recommend the Roberts essay for anyone who still seeks to understand why. It is the best explanation of the root cause of the situation we have all endured and continue to pay for with our taxes and lost net worth. I had a few questions and chose to write the author for answers.
Russell,
A friend and contributor to my Blog sent me a copy of your May 2010 essay, “Gambling with Other People’s Money.” As acknowledged in this week’s edition, you offered the best explanation of the banking-mortgage crisis I’ve read to date. For that, thank you very much for taking the time.
I have a couple of questions.
1. On page 20, you stated, “The act even allowed the capital gains on a second home to be tax-free . . . .” I have searched the Taxpayer Relief Act of 1997 (TRA97) [PL 105-034; 111 Stat. 788] to find that provision in the law without success. Would you be so kind to offer a few clues regarding the basis of your statement? Clearly, such a provision in the law adds fuel to the emotional fire of your argument.
2. Given the topic and content of your essay, I wondered why you did not include the banking deregulation provided in the Financial Services Modernization Act of 1999 (FSMA) [PL 106-102; 113 Stat. 1338], as a contributor to the mortgage bubble and the apparent sense of invulnerability in the mortgage lending and derivative business?
Again, thank you for sharing your insight.
Cheers,
Cap
. . . I received a prompt reply:
“If you Google "taxpayer relief act 1997 second home" you will find many examples. Here is one description from a research paper out of the Federal Reserve:
“‘TRA97 was signed into law on August 5, 1997. Effective for sales after May 6, 1997, it fundamentally altered the tax treatment of housing capital gains. First, TRA97 eliminated the roll-over rule. After 1997, the tax treatment of housing capital gains no longer depended on whether a home seller bought a replacement home or the value of the replacement home. Second, it eliminated the age-55 rule. Older home sellers now face the same tax treatment as their younger counterparts. Third, it allowed home sellers to exclude $500,000 (or $250,000 for single filers) in housing capital gains if they have owned and lived in their homes for at least two years during the past five. There is no limit on how many times one can claim such exclusions during one’s lifetime, and the required two years of ownership and use during the five-year period ending on the date of the sale do not have to be continuous. In fact, one can even claim the capital gain exclusion on a second home, as long as the ownership and use tests are met.’
“On FSMA I refer to it in passing saying:
“‘Though other factors—the repeal of the Glass-Steagall Act, predatory lending, fraud, changes in capital requirements, and so on—made things worse, I focus on creditor rescue, housing policy, tax policy, and monetary policy because without these policies and their interaction, the crisis would not have occurred at all. And among causes, I focus on creditor rescue and housing policy because they are the most misunderstood.
Russ
. . . my gratitude:
Russ,
Thank you for your prompt reply. Please accept my apologies for failing to make the connections in both questions. Again, thank you for your illuminating essay.
Cheers,
Cap
News from the economic front:
-- The Federal Reserve’s Open Market Committee voted 9-1 to leave their credit policies unchanged for the first time since August, citing an economy that remains a concern over the next two years, although they did express some modest optimism about the recovery. Chicago Fed President Charles Evans dissented as he sought more action to ease credit further.
-- The G20 economic summit occurred this week and was dominated by the Greek debt situation, namely the Greek prime minister’s decision to put the European Union’s rescue plan to a public referendum [515]. Europe's leaders, making plain that they've reached the end of their patience with Greece, demanded that the beleaguered nation declare whether it wanted to remain in the euro currency union—or risk going it alone in a dramatic secession. German Chancellor Angela Merkel said, “Does Greece want to remain part of the euro zone or not, that is the question the Greek people must now answer.” Under what had to be extraordinary pressure, Prime Minister Papandreou backed off, after imparting enormously more uncertainty in the market.
-- The European Central Bank (ECB) reduced its prime interest rate to 1.25% from 1.5% amid a deepening sovereign-debt crisis and signs of a slowdown in the euro zone's economy. The move comes as Mario Draghi replaces Jean-Claude Trichet as ECB President.
-- The Labor Department reported the U.S. economy created 80,000 jobs in October, with the private sector adding 104,000 positions, as all levels of government continued to trim their payrolls. The unemployment rate edged downward to 9.0% last month from 9.1% in September. Payroll data for the previous two months were adjusted upward by a total of 102,000 to show 158,000 jobs were added in September and 104,000 jobs in August.
Comments and contributions from Update no.514:
“Had to do some reading on that surgery technique. Doesn't seem like you can get any more high tech than that!...minimally invasive, quicker recovery time, and much better success rate with regard to avoiding the possible adverse long term side effects of a prostatectomy via other surgical methods. It is so fortunate that you are able to benefit from this technology and surgical advancement. Our sincerest best wishes for the best outcome and we will anxiously await your first post-surgery update. possible, and for your next "50 years" to be cancer free. Our thoughts and prayers will be with you on the 9th.”
. . . my reply:
Always comforting to have good cover.
Yes, I am fortunate in that context. I recognize that not all outcomes are positive with any technique; however, the RALP has the best results to date. Also, the urologist/surgeon has a very good track record and great referrals with the machine and this procedure. I am eager to get ‘er done. I want that crap out of my body.
I’ll definitely let you know when I’m out the other side.
Comments and contributions from Update no.515:
“The prohibition by any government of private behavior that does not infringe upon the rights of others is unacceptable. The repeal of prohibition is a foundation of the freedom to choose, including the teaching of admirable values for all, but not enslaving people to obey. The loss of freedom is perhaps the most immoral state of all.”
. . . my response:
Absolutely. Now, we only need to convince 320 million other citizens, and direct our representatives to repeal or amend the law, to get the government out of our private affairs.
The issue of “no injury to others (person or property)” is essential to freedom and respect for the choices of others. The first hurdle is amending the law to recognize an individual’s freedom of choice for his particular pursuit of Happiness. The second hurdle will be the definition of injury. The moral projectionists among us cannot fathom anyone choosing to be a sex worker, i.e., prostitute, thus they must be doing so under duress; when in fact, there are plenty of women and men who prefer it, enjoy it, and make a good living doing it, providing a service in public demand. As long as both customer and provider are doing so of their free will and are not transmitting any diseases, then I respectfully submit there is no injury. Further, both customer & provider are protected.
Comment to the Blog:
“I have only seen parts of Ken Burns’ Prohibition; the parts that I have seen are excellent. I will be watching the whole thing courtesy of my local library once this accursed college process ends. In the meantime, I want to state how much I agree that we can substitute “anything” that is seen as sinful for alcohol and repeat the painful process of Prohibition as we are already doing with drugs and prostitution.
“I do want to stipulate, however, that actions affecting others can and should be regulated. My best example of this is allowing banks to become “too big to fail,” thus requiring government bailouts (your tax dollars and mine) when they make insanely risky loans and investments.
“I will quarrel with one point of your analysis of the Greek situation. You attribute this situation partly to the Greeks’ “socialism.” Before you do that, you might want to look at the governance of the sounder economies in Europe, especially Germany and the Scandinavian countries. The root cause of the Greek mess, as in the United States, is banks (not just Greek ones) making huge, risky loans that eventually require government bailouts. The good news in the Greek situation is that the banks are taking a 50% loss on those loans. The bad news, really bad, is that the EU has increased its bailout fund. I recommend reading 13 Bankers by Simon Johnson for a clearer view of this. This book minimizes and clarifies the technical economics involved in the situation.
“That Iran still has a mobile phone provider is unfortunate but unsurprising. Someone will always provide a service for which others will pay, whether that provider is a Chinese telecomm giant or the girl on the corner. That a government (any government) is paranoid enough to track as many of its citizens as thoroughly as it can seems like old news to me.
“I’m glad the economy is beginning to show signs of life. Perhaps it will sit up and begin functioning soon. I hope so. I’m about to graduate college with a very large student loan debt.”
. . . my reply to the Blog:
I am certain you will enjoy Prohibition and find it enlightening; now, if we can only learn and apply that lesson.
Yes, indeedie. Freedom of choice does not entail any right whatsoever to cause injury (person or property) to another citizen. Banks “too big to fail” is another excellent example; they caused injury to a lot of people.
Good point. I was wrong to vilify socialism in general. After all, Sweden is perhaps one of the most socialist countries, and they remain stable. So, the culprit is not socialism by itself, no more so than capitalism is the root of all evil. Like most ideology, it is the application by flawed men that causes most of the problems. In the case of Greece, we add in a healthy dose of corruption and nepotism to the mix. When people expect something for nothing, the foul brew has begun to ferment. Private investors are taking the 50% cut, which is simply a different way for everyone else to pay for Greece’s insane spending. Even with the 50% cut, the debt to GDP ratio is still 120% -- incredible! I cannot imagine any sane person can see such debt as sustainable. Perhaps it was a cold-calculation that they could spend like crazy, knowing their EU membership would pay the bill . . . sovereign extortion, if you will.
OK, so the PRC-IRI connection is not disturbing.
We all want the economy stable and growing again. We still have some crevasses to cross ahead before I start to breathe easy again.
. . . a follow-up comment:
“I cannot resist pointing out the past tense you used in saying the ‘too big to fail’ banks ‘caused’ injury. They have not gone away or been made smaller. The only hope I can see of that is the move to take accounts out of those banks over the fee fiasco, and that probably will not come near the change we need.
“On a related note, I tend to think that at least part of the cold calculation you mention is on the part of the biggest banks. They can borrow more cheaply than sounder institutions based on the perception that they will be bailed out of their undue risk when the economy collapses again where smaller banks will fail as so many have. That's the same in the EU as in the US, and nobody is putting a stop to it.”
. . . my follow-up reply:
Good point; I agree. Any bank that was too big to fail in 2008 should be broken up into smaller units that can and should suffer the consequences of unreasonable risk. It seems to me the Sherman Antitrust Act [PL 51-190; 26 Stat. 209 (1890)] remains relevant and applicable in this instance. The Dodd-Frank Wall Street Reform and Consumer Protection Act [PL 111-203; 124 Stat. 1376 (2010)] [468] did not go far enough to reform the banking and investment industries. Bankers apparently want all the benefit without any of the risk. You are of course spot on . . . the bankers are right back to business as usual. We may have missed the opportunity.
My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
I’ll definitely let you know when I’m out the other side.
Comments and contributions from Update no.515:
“The prohibition by any government of private behavior that does not infringe upon the rights of others is unacceptable. The repeal of prohibition is a foundation of the freedom to choose, including the teaching of admirable values for all, but not enslaving people to obey. The loss of freedom is perhaps the most immoral state of all.”
. . . my response:
Absolutely. Now, we only need to convince 320 million other citizens, and direct our representatives to repeal or amend the law, to get the government out of our private affairs.
The issue of “no injury to others (person or property)” is essential to freedom and respect for the choices of others. The first hurdle is amending the law to recognize an individual’s freedom of choice for his particular pursuit of Happiness. The second hurdle will be the definition of injury. The moral projectionists among us cannot fathom anyone choosing to be a sex worker, i.e., prostitute, thus they must be doing so under duress; when in fact, there are plenty of women and men who prefer it, enjoy it, and make a good living doing it, providing a service in public demand. As long as both customer and provider are doing so of their free will and are not transmitting any diseases, then I respectfully submit there is no injury. Further, both customer & provider are protected.
Comment to the Blog:
“I have only seen parts of Ken Burns’ Prohibition; the parts that I have seen are excellent. I will be watching the whole thing courtesy of my local library once this accursed college process ends. In the meantime, I want to state how much I agree that we can substitute “anything” that is seen as sinful for alcohol and repeat the painful process of Prohibition as we are already doing with drugs and prostitution.
“I do want to stipulate, however, that actions affecting others can and should be regulated. My best example of this is allowing banks to become “too big to fail,” thus requiring government bailouts (your tax dollars and mine) when they make insanely risky loans and investments.
“I will quarrel with one point of your analysis of the Greek situation. You attribute this situation partly to the Greeks’ “socialism.” Before you do that, you might want to look at the governance of the sounder economies in Europe, especially Germany and the Scandinavian countries. The root cause of the Greek mess, as in the United States, is banks (not just Greek ones) making huge, risky loans that eventually require government bailouts. The good news in the Greek situation is that the banks are taking a 50% loss on those loans. The bad news, really bad, is that the EU has increased its bailout fund. I recommend reading 13 Bankers by Simon Johnson for a clearer view of this. This book minimizes and clarifies the technical economics involved in the situation.
“That Iran still has a mobile phone provider is unfortunate but unsurprising. Someone will always provide a service for which others will pay, whether that provider is a Chinese telecomm giant or the girl on the corner. That a government (any government) is paranoid enough to track as many of its citizens as thoroughly as it can seems like old news to me.
“I’m glad the economy is beginning to show signs of life. Perhaps it will sit up and begin functioning soon. I hope so. I’m about to graduate college with a very large student loan debt.”
. . . my reply to the Blog:
I am certain you will enjoy Prohibition and find it enlightening; now, if we can only learn and apply that lesson.
Yes, indeedie. Freedom of choice does not entail any right whatsoever to cause injury (person or property) to another citizen. Banks “too big to fail” is another excellent example; they caused injury to a lot of people.
Good point. I was wrong to vilify socialism in general. After all, Sweden is perhaps one of the most socialist countries, and they remain stable. So, the culprit is not socialism by itself, no more so than capitalism is the root of all evil. Like most ideology, it is the application by flawed men that causes most of the problems. In the case of Greece, we add in a healthy dose of corruption and nepotism to the mix. When people expect something for nothing, the foul brew has begun to ferment. Private investors are taking the 50% cut, which is simply a different way for everyone else to pay for Greece’s insane spending. Even with the 50% cut, the debt to GDP ratio is still 120% -- incredible! I cannot imagine any sane person can see such debt as sustainable. Perhaps it was a cold-calculation that they could spend like crazy, knowing their EU membership would pay the bill . . . sovereign extortion, if you will.
OK, so the PRC-IRI connection is not disturbing.
We all want the economy stable and growing again. We still have some crevasses to cross ahead before I start to breathe easy again.
. . . a follow-up comment:
“I cannot resist pointing out the past tense you used in saying the ‘too big to fail’ banks ‘caused’ injury. They have not gone away or been made smaller. The only hope I can see of that is the move to take accounts out of those banks over the fee fiasco, and that probably will not come near the change we need.
“On a related note, I tend to think that at least part of the cold calculation you mention is on the part of the biggest banks. They can borrow more cheaply than sounder institutions based on the perception that they will be bailed out of their undue risk when the economy collapses again where smaller banks will fail as so many have. That's the same in the EU as in the US, and nobody is putting a stop to it.”
. . . my follow-up reply:
Good point; I agree. Any bank that was too big to fail in 2008 should be broken up into smaller units that can and should suffer the consequences of unreasonable risk. It seems to me the Sherman Antitrust Act [PL 51-190; 26 Stat. 209 (1890)] remains relevant and applicable in this instance. The Dodd-Frank Wall Street Reform and Consumer Protection Act [PL 111-203; 124 Stat. 1376 (2010)] [468] did not go far enough to reform the banking and investment industries. Bankers apparently want all the benefit without any of the risk. You are of course spot on . . . the bankers are right back to business as usual. We may have missed the opportunity.
My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
2 comments:
Your earthquake story is interesting. I have already seen an article questioning whether “fracking” (hydraulic fracturing) has caused earthquakes in Britain. There’s certainly logic to that; the process is designed to fracture rock layers. Also, in a TV story here in Columbus last night (11/6/2011), the Oklahoma earthquake was described as being on the New Madrid fault. Past earthquakes on that fault have been felt as far away as Boston; the past quakes have centered on New Madrid, Missouri, which is between Memphis, Tennessee, and Saint Louis, Missouri. Any way it develops, an increase in earthquakes matters a great deal to many people.
I mostly want to encourage you to take good care of yourself. Between having surgery and your company’s changes, you will have plenty to do. Please take care of your high-priority business first; we’ll be here when you get back.
Also, I hope Mr. Soobzokov can get some level of justice. He has had a very long road.
Calvin,
I do not believe the New Madrid fault line runs through Oklahoma, which makes the earthquake all the more puzzling. I do not know whether they have fracking operations in Oklahoma either. They certainly have conventional oil wells. Perhaps it was a collapsed, empty, oil dome. Who knows? Hopefully, the USGS will figure it out.
Thank you for your words of encouragement. I am optimistic. In a few more days, we should have the preliminary results.
I know Aslan Soobzokov will also appreciate all the support he can gather. He and his family deserve justice.
Thank you for your contributions.
Cheers,
Cap
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