Robyn E. Blumner
By Robyn E. Blumner
St. Petersburg Times Columnist
In Edna Ferber’s 1925 Pulitzer Prize-winning novel So Big, a cultured woman spends her life doing hard physical labor on a rural Illinois farm so that her son can go to college and land in a fulfilling profession.
But when her son abandons a career in architecture due to its low pay and joins the soulless but lucrative world of bond trading, his mother asks with disappointment and contempt: “What is this you sell in that mahogany office of yours?”
This could be the question for America. What have we been selling for the last 30 years?
We’ve built trillion-dollar enterprises on nothing more than huckstering newer and more esoteric financial products. Ephemera as it turned out. Beyond that we don’t make much anymore.
There are a multitude of reasons for this, including the one that everyone instantly points to: globalization. But as Chicago labor lawyer Thomas Geoghegan writes in the April Harper’s magazine, there is one factor that has rarely been mentioned but looms larger than most of the others: the legalization of usury.
In 1978, a U.S. Supreme Court ruling effectively released banks from state interest rate caps. In Marquette National Bank vs. First of Omaha Service Corp., the court said that Minnesota could not enforce its usury law against a credit card issued by a Nebraska bank. The National Banking Act of 1864, the court said, allowed banks to lend at interest rates set by the state where the bank is chartered, not where the loan is made.
This meant those reasonable state limits of 9 percent or thereabouts went out the window as states repealed and loosened usury laws in order to give their banks competitive advantages. Interest rates on credit cards soon spiked.
As profits for these companies soared there was a corresponding shift in the way capital flowed. Manufacturing with its modest returns was thrown over for the more robust returns of the financial sector. MORE
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This column was first published in the St. Petersburg Times on March 19, 2009
Posted March 23, 2009 at 4:34 pm, in From the News
March 25th, 2009 at 5:04 pm
Negative Foreign Trade Balance: Our basic economic trade balance deficit problem causes our gold, dollars, currency, title to our real estate, factories, and etc. to leave this country in order to purchase the things manufactured in foreign countries that we consume at a greater rate than we sell things manufactured in the USA to other countries in exchange for their gold and currency. We have created a situation that US gold and title to US assets is leaving this country rather in amounts that are greater than they would be if we were manufacturing the things that we consume and/or an excess of products that foreigners would want to buy from us with their foreign currency sent to the USA. When we just buy more paper and print more US currency based upon the full faith and credit of the USA, this causes the value of our dollar to diminish. No matter what we do, we must change this situation or we will become a post WWI Germany economically, and maybe overnight.
How did China and other foreign countries get our currency, dollars, T-Bills, Bonds, and other government securities? The USA importers and distributors (WalMart, Home Depot, NTB, GM, Ford, GE, Chrysler, and etc.) paid them with US currency to manufacture the things that imported and sold to the US consumers.
How can the USA get the Gold and the US dollars back from these foreign countries? We would somehow need to export more than we import. We could re-industrialize and re-start manufacturing the things that we consume in order to stop the need to print more paper currencies to pay for our imports. We could manufacture products for sale and export to foreign countries in exchange for foreign Gold and foreign currency that can be exchanged for US dollars.
What is preventing the USA from re-industrializing? The US citizens do not want to work for the extremely low wages that are paid in foreign countries to manufacture the things that we consume. This is the main reason why the US manufacturers have closed their US factories. As an example, the US tire manufacturing companies closed their plants, sold the tire manufacturing equipment to Foreign Citizens who relocated this equipment to their foreign countries where labor costs are very low compared to US labor costs. These foreigners re-constructed and re-started these plants using workers that are paid only a fraction of the pay that US citizens would accept. As a result, these foreign companies now manufacture most of the tires consumed in the USA. The USA inporters ands distribuitors pay the foreign manufacturers in US currency for these products, and these foreign countries do not buy very much if anything from the USA because our products are much more expensive than foreign made products.
What could the USA do to re-industrialize and also pay decent wages to US citizens to manufacture the things that we consume? We could provide extremely high import tariffs on products that we desire to begin manufacturing in the USA. This would allow the US manufacturer to employ US citizens at some pay scale higher than foreign country citizens would accept.
Is there anything made in the USA anymore? When you go to anywhere in the USA to buy anything, look to see where is it made? Nothing is made in the USA anymore. When you buy $1,000.00 tools, parts, materials, etc at Home Depot, they send money, maybe $500.00 in cash, to probably China to purchase these products from the people who actually worked to manufacture these items. Our payments to foreign oil and foreign raw material suppliers are handled in essentially this same manner. This is how the US dollars leave the US economy, and essentially never return.
The USA only makes a few things that people in other countries want to buy in order for the US to earn some of the US currency back into the US economy and banking system, but off hand, I cannot think of one single thing.
US Dollar Value and/or buying power: The buying power or value of the US dollar is partly about psychology since it is now backed by the “full faith and credit of the US government” rather than gold. This is almost the same as my definition of “Junk Bonds”. The US government does not go to banks to borrow money. The US government just buys a lot of paper and cranks up the presses to create more dollar bills, T-Bills, Government Bonds, etc. and deposits these items into banks (actually the government federal reserve auctions these securities for sale to anyone with dollars) to pay for the checks that they give out to pay for their government payrolls, pork barrel projects, negative balance of trade balances, bailouts, entitlements, operations, social schemes, wars, new infrastructure, wealth re-distribution, mental health, imported consumer goods and etc. The buying power of any paper currency determines its value or exchange rate. What will be the buying power of the dollar when we have nothing left that the foreigners want to exchange for redemption of the US currency that they earned by manufacturing the things that we imported and consumed? This accelerated printing will cause massive inflation to the point that it will take a whole day’s wages to buy one loaf of bread. We are selling of our children’s legacy to foreign owners, and the US government calls it “Investing in America”. Foreigners know that we are racing to sell title to everything in the USA in order to keep from working. This is sort-of like selling our body parts to keep from working!
The US Government no longer redeems US currency for gold from our gold reserves at Fort Knox. The dollars paid to foreign manufacturers were redeemed for Gold until 1972. Now we ask the foreigners to accept freshly printed US T-Bills, US Bonds, dollars, and other government securities for the dollars that they got from Home Depot, WalMart, and other importers for the foreign made products the USA distribuitors imported and sold to the US citizens. The foreign governments and foreign manufacturers are now exchanging these dollars, US T-Bills, US Bonds, and other government securities for title to real estate, forests, industries, breweries, hotels, factories, casinos, financial institutions, businesses, and other assets located in the USA. We also ask that foreigner governments hold the interest bearing US T-Bills, US Bonds, dollars, and other government securities instead of cashing them in for title to US assets. Some government sources estimate that the title to 25% of our property, businesses and other assets with recorded titles are now listed ae foreign owned (http://www.economyincrisis.org/content/ownership). The foreigners know that the US currencies that they earn and hold will buy less and less each day that they do not spend them due to the falling value of the US dollar.
I really do believe that we should preserve the economic miracle that has given our US citizens one of the highest living standards in the world. This standard of living was created by the Agricultural and Industrial Base that produced the food, goods, services and other items that we consumed, plus an excess of these goods & services that were produced and then sold to other foreign countries in order to accumulate the US gold reserves at Fort Kkox through a positive balance of trade surplus payments. This economic miracle was not created by Wall Street financial manipulations, innovative “financial products”, but by the agriculture and manufacturing sectors of our economy during and after World War II. In the last few decades we have purposefully destroyed the industrial base that won WWII and gave us today’s bountiful way of life. Paying people to pave roads, build infrastructure, plant trees, dig holes then refill the same holes, rake leaves, write poems, paint pictures, environmental cleanup, etc. will not be useful or contribute anything to correcting the US economic problem.
Many of my (college educated) friends tell me that this modern economy needs the consumers who do not produce anything that they (consumers) consume. This is like saying that a slave needs an owner to sit idle and consume the things that the slave works hard and produces for the owner’s consumption.
Just print more money: Why should Americans have to work to make the things that we consume when we can just print more paper currency to pay people in foreign countries to manufacture the things that we import and then consume? I thought that we were special, and did not have to work.
Why not just print more paper currency to pay for our government expenses, government payrolls, expenses, welfare, social security, wars, failed business bailouts, and cash bonuses to the Wall Street forgers of SEC documents, free medical services, Las Vegas corporate junkets, mortgages for big spenders with bad credit, military jets with USAF pilots for the personal use congressmen and congresswomen, new multi-million dollar French manufactured corporate jets, expensive vacations, etc. and anything else that we want to spend the money for as long as someone in some other people in some other country will buy the T-Bills, Bonds, and other things that we print in exchange for the dollars that they earned.
On a recent Saturday (14MAR09) Chinese Premier Wen Jiabao stated that “Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried.” Wen said at a news conference Friday after the closing of China’s annual legislative session. “I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.” This message is unlikely to be misunderstood at the White House. The USA government is counting on Beijing to help pay for our TARP and economic stimulus packages by buying our U.S. bonds (at close to face value) with the currency that they earned from us by manufacturing the things that we imported and then consumed.
China already is the USA’s biggest foreign creditor, with China owning estimated $1 trillion in U.S. government debt consisting of freshly printed US T-Bills, US bonds, and other US securities. If China wants Gold instead of printed-paper currency, a weaker dollar will result. If China wants to only pay pennies on the dollar for any of our future freshly printed paper T-Bills, Bonds, Securities, currencies, etc., this will cause great inflation in the USA, and/or also cause great reduction of the buying power of the US dollar. If the Foreigners will only pay 10 cents on the dollar, then the USA will have to print up ten times as much paper money, and the inflation would then be 1000%.
When and if foreign governments stop buying our paper currency at face value, and/or buy it at a few pennies on the dollar, the government pork barrel project checks, social security checks, government payroll checks, and private paychecks will not buy very much food or anything else that we consume. Your life savings might only sustain you for a couple of months. We are committing economic suicide.
Other countries view us as printing and spending huge amounts of money with the careless abandon of a drunken sailor on shore leave, and this is very disturbing to those vforeigners that we hope will buy our freshly printed currencies, at not too much of a discount. Many countries are losing confidence in the use of the dollar as the benchmark for world trade and currency value. Other currencies are now being talked about as a replacement for the US Dollar as the benchmark for international currency values.
Riots and insurrection are predictable, ala the French Revolution, when the people find their situations economically hopeless. Future nationalization of foreign owned assets, ala Mexico, Venezuela, etc., is another discussion topic for another day.
The only thing that will save, preserve or restore the buying power of the dollar is reversing the trade deficit and then re-building our gold reserves. Only a positive balance of trade will restore the value of the dollar, and we must accomplish this by any means possible, or accept third world poverty on a large-scale basis. The only way to do this is to produce export more (dollar value of) things than we import. The only way that we can accomplish exporting is to re-industrialize and make these products with US materials & Labor. The only way that our products will be sold abroad is if these products are either technologically superior, or cheaper.
US Economic Stimulation Plan: The current US government economic stimulation plan is to print up a bunch of new paper currencies, T-Bills, Bonds, and other similar paper securities for bank deposit (actually the Federal Reserve) to cover checks issued to US contractors to re-build and expand the US infrastructure (Pork Barrel Projects) in order to reduce unemployment and also pay cash bonuses to the Wall Street forgers of SEC documents, welfare queens, Las Vegas Corporate Junkets, mortgages for big spenders with bad credit, etc. This money will probably be spent on imported earth-moving machinery, imported materials (Steel, Equipment, Pipe & Wire), new imported private jet airplanes, illegal alien labor, outsourced engineering, outsourced CAD drafting, etc., and the US workers will still be mostly unemployed? Any Economic Stimulus Spending should also prohibit any imported products (even if we no longer manufacture those products) from being purchased with these funds, and also prohibit all outsourcing of the Labor Required. This is a short term solution that will only economically benefit foreign manufacturers of industrial and consumer goods, salesmen of foreign manufactured equipment, materials, etc., and the other people working in the distribution of imported things for our consumption, but the balance of trade will still be sending US dollars overseas to pay for the things that we import, and these dollars that we pay to foreigners for our imports are then spent to purchase title to our finitely limited US assets that are now becoming foreign owned. This stimulus spending will cause massive inflation to the point that it will soon take a whole day’s wages to buy one loaf of bread.
Spencer’s Alternative to the current US Economic Stimulation Plan: Instead of just passing out free money to the incompetent financial wizards at various inept and possibility criminal wall street organizations and hope that some of this free money will trickle down, maybe the US government should build manufacturing plants to make consumer products like refrigerators, Washing Machines, Clothing, TV’s, Tires, Auto Parts, and eventually all of the consumer goods that we import with that money. We should impose import taxes high enough on these products so that US made products are competitive in price with imported goods. Without High Tariffs, US workers must compete with foreign workers at foreign wage scales. These plants should periodically and/or constantly be for sale based upon periodic open public competitive bidding, but at a minimum sale price at least equal to as much as the government investment, and with terms of cash only. There should not be any leveraged creative financing by the government. The Management should know about making the products, not creative financing. Maybe anyone with a MBA degree should be disqualified from employment where federal funding is used. The money passed out to the financial industries does nothing to create jobs or eliminate the problems with the US economy. Maybe it helps pay for the commissions of the US salesmen of the expensive new French manufactured private Jet Airplanes. The French people making these (Dasault Falcon 20-25) airplanes are probably very thankful for the US government’s generosity.
Economic Future: Our political and economic leaders seem to believe that we can continue our economic miracle by becoming a service oriented society cooking hamburgers for each other using imported beef, imported vegetables, etc., selling insurance & junk bonds to each other, and suing each other, but definitely not manufacturing or creating anything that we consume. The only way that we can reverse this trend is to re-start making the things that we consume. Both major political parties apparently listen to (academic?) economic experts who believe that is possible for us to remain de-industrialized.
It is not the foreign manufacturer’s fault that this economic condition exists: We created this condition ourselves. We purposefully destroyed most of our industries and fired all of the employees that were located in the US for various reasons. We decided that we could get people in other countries to work to make these things for our consumption if we paid them with freshly printed-paper currencies and other types of freshly printed-paper securities (Junk Bonds). Our Stupid Legislators of both political parties, Importing Companies, Ignorant Government Employees, Self Serving Corporate Managers, Greedy Unions, Wall Street Financial Genius Criminals, Enron and Arthur Anderson type Master Criminals, NAFTA, EPA, WTO, OSHA, and the buying public just to name a few, have created this situation.
Re-Industrialize Now: How can we ever possibility restart our industries (re-industrialize) to generate a positive balance of trade that will restore our economy? Most of the people who knew how to operate the US basic industries and factories were fired 30 years ago and are maybe now long dead. There are no books that completely tell everything about how to do most of the things that we knew how to do years ago when we created the industries that won WWII and then gave us this bountiful way of life. We need more science-oriented citizens to create new innovative products and services that we can exchange for foreign currency. We need to import foreign owned US dollars and foreign owned gold for the products that we export, not export our dollars and gold to pay for imported products. When the time comes that people in foreign nations no longer accept our freshly printed paper dollars to pay for our imported products (and our government activities), we will be in deep trouble with no quick way out. We must act now while we can still buy foreign made materials and foreign made equipment for the re-industrialization of the USA with the remaining purchasing power of the dollar before we have redeemed all of the exported currency for title to the remaining existing US assets. The buying power of the dollar will become nil when there is nothing left for the foreigners to buy with the dollars that they earned by making our consumer goods.
I do not have confidence that the USA citizens still have the knowledge and education to re-create our factories for manufacturing, innovating and designing new products for export as required to reverse our trade balance and restore the value of the dollar.
We need high Import Tariffs: After the American revolution, the USA instituted high import tariffs to encourage the industrialization of the USA, and It was successful in establishing a positive balance of trade, accumulating Gold reserves, creating a manufacturing base, and making the USA independent from England. One way or another we must stop the selling of title to everything of value America to pay for what we consume. We must create a positive balance of trade by any means possible. If not we will destroy the purchasing power of the US dollar. Without import tariffs, most all products will be purchased for less money if they are manufactured where labor costs are minimized. The US labor force has no future without high import tariffs to prohibit foreign imported products. Without high import tariffs, US workers must compete with foreign workers at foreign wage scales for employment. Most USA citizens do not want to work for wages that the same job in a foreign country would pay. Until we re-industrialize and correct our foreign trade imbalance, we cannot afford to have free trade because it will destroy the US Economy.
Free Trade: Free trade of products and commodities means that we must compete internationally based upon price, and labor costs is the greatest cost component of most products and commodities. The country with the lowest labor cost then gets the product sales. Free Trade only benefits the importers and distribuitors of foreign made products for US average citizen consumption.
Successful Foreign Trade – Scientists and Engineers are needed: If we are to be competetive internationally, we will desperately need to create many more scientists and engineers who must become better educated, more intelligent and otherwise much superior to foreign scientists and engineers in order to design, create, innovate, and produce new products that foreigners do not have, so that they will then buy the new products from us, and we can export these products in return for their foreign payment (gold) to the USA. We also need to export scientific and engineering services to foreign nations in return for their currency and gold in order to improve our balance of trade. This has to be provided by scientists and engineers who are superior to any foreign educated scientists and engineers, or the foreigners will not buy the services of US scientists and engineers. We need to stop the H1B import of low paid scientific and engineering talent, in order to create a demand and provide more financial incentive for our students to major in the technical and scientific subjects that are needed to re-industrialize the USA. We need to return to scientific and technical excellence in our education systems because we can only export technology if our products and technology services available for export are superior to those available anywhere else in the world, and/or at least superior to the services available in that particular foreign country. According to the National Science Foundation and the National Society of Professional Engineers, only about 5% of the current college students in the USA studying for a degree in science, medicine, mathematics or engineering are US citizens. In the Asia the vast majority of the college students are majoring in science or engineering. We need to increase the percentage of USA citizen college students studying science and engineering from 5% to more than 60%, in order to emulate the economic successes of the Asian countries. We can no longer afford to support or educate any more artists, actors, theologians, musicians, philosophers, psychologists, historians, poets, novelists, political scientists, MBAs, etc. This will first require that our students study science instead of other subjects in our entire education system begining in elementry school and continuing through graduate school in order to create the technology bases that are necessary before re-industrialization can occur. We must emulate China, India, Pakistan, or die economically
Our computer programming technology and expertise (ala Microsoft etc.) has helped our balance of payments considerably in the past, but the lack of technical education in this country today has reduced and will soon totally destroy this export capability. The foreign countries have become better than the USA at creating new computer software programs, since the USA has chosen to de-emphasize technical and scientific education in our universities.
Visit the Texas Medical Center (MD Anderson) and witness the percentage of women wearing Burkas to get a clue as to the percentage of foreign medical service income is received at the Texas Medical Center, and this foreign money paid to our US Medical Doctors improves our foreign trade balance. Foreigners believe that US Medical Doctors are superior to their in-country Doctors. I do not believe that these women wearing Burkas are US citizens.
Engineers who are working in Foreign Countries and sending (most of) their dollars home to the USA improves our balance of trade. In the past, foreigners believed that US educated and trained Engineers were superior to their in-country educated Engineers. This advantage has almost disappeared since the USA has stopped emphasizing technical education in our Universities.
Education Option: The option to placing emphasis on technical and scientific education is for US citizens to work for cheaper wages than the foreigners in other countries will accept for their labor. It is going to take several decades to re-create the US technical and industrial bases that we destroyed over the past few decades.
I have been the engineer of record for construction projects in Asia, Europe, Middle East, Caribbean, and South America. US citizens are unaware of the lifestyle that we are accustomed to and take for granted. If our economy collapses, we can become a third world country overnight.
Engineering and Science Educations: I believe that there is very little economic future for students majoring in the science or engineering fields. This needs to change for the benefit of the US economy. I believe that most students today (including both of my children who started in Mechanical Engineering but changed majors to easier courses after talking to their classmates about the economic benefits of other degree paths) want to study business and/or economics to become one of the wealthy Wall Street master criminals of today. No person in his or her right mind would major in science or engineering since the pay scale has eroded so much in the last several decades. This economic reward erosion is partially due to the import of foreign engineers who will work for just slightly above minimum wages and a Green Card. The Foreign Engineers might be much less as productive as US educated engineers, but they are willing to work for such a small fraction of the pay that US educated engineers are paid (or used to be paid) then it is much more economically effective to employ foreign educated engineers when compared to the total cost of employing U.S. educated engineers, except for the additional legal liability of their design failures.
Our Student loan program that gives student loans to students that want to become artists, poets, historians, political scientists, plus all sorts of other degrees that generally do not contribute anything to our balance of trade should be totallty eliminated until we correct out economy. Student loans should be available for only those fields such as science, engineering, education, accounting, and medicine that do contribute to our industrial base and will help our international trade balance by re-creating our technical knowledge base necxessary for re-industrialization. Student loans should not be available for prospective historians, social engineers, artists, poets, theologians, actors, MBA’s or any other activities that do not contribute to our industrial base or improve our balance of trade situation. Let the people that enjoy art, poetry, gambling, playing stocks, religion, and etc. pay to support those activities. (I am a Patron of the Theater in Houston, but do not believe that taxpayer money should be spent for entertainment)
Support Services Required for US Agriculture and US Re-Industrialization: Civilized nations have always taxed the productive (agricultural and industrial) population to pay for providing National Security, Crime Prevention, Education, Fire Prevention, and other similar items that are necessary to assist and protect the agricultural and industrial production bases. Our Productive Industrial Base could not exist with foreign invasion, rampant crime, protection rackets, corruption, sabotage, etc., so a portion of the money earned by this producing base has always been taken by taxation by all civilizations to pay for federal, state, and local governments to prevent these occurrences. Maybe we can no longer afford to spend our hard earned taxes on National Service, social entitlements, welfare, environmental clean-up, pork barrel projects, free education, free medicine, subsidized housing, humanities, art, writing poems, make-work schemes, entertainment, digging holes then re-filling the same hole, etc. until we re-establish our economic base.
Financial Institution Bailouts: These inept Wall Street financial genius failures are spending the TARP bailout money so that they can continue their reckless behavior without any penalty for any of their failures. The federal government TARP economic bailout money is currently being spent to pay for the golden parachutes, private parties, expensive vacations, new jet airplanes and bonuses to these same highly paid incompetent and maybe criminal executives that caused these problems. These incompetent, arrogant, stupid, and selfish executives took so much money from the financial markets that they caused the systems to fail. The lowly paid US citizens is paying his hard earned taxes to them to continue their bad, inept, stupid, and maybe criminal business policies that caused this crisis? Should taxpayer money pay off the bank loans that occurred when these financial geniuses borrowed money to pay stock dividends, in order to artificially drive up the stock prices, which personally enriched themselves through their stock option plans? How can we get rid of these financial geniuses that caused these problems without costing the taxpayer any more of his/her hard-earned tax money? They are still on the job when they should be unemployed and living under a bridge.
The financially successful Arthur Anderson/Enron group here in Houston, with Jeff Skilling, Ken Lay, and Fastow as their leaders swore to false financial statements, perjured themselves when testifying about facts, and generally lied about almost everything that they filed with the SEC. They have suffered very little penalty when they finally did get caught and subsequently convicted. They all need to rot in prison until they die as a deterrent to other prospective Financial Geniuses. Their prison sentences should be somehow proportionate to the amount of money stolen and the number of lives wrecked. I am sure that these Enron and Arthur Anderson type Master Criminals are studied and emulated by the current crop of Wall Street Financial Geniuses who studied their successes, how they got caught, and how to avoid themselves getting caught.
The AIG management is apparently the inept and stupid, not the brightest and the best. They should mostly be fired, especially Mr. Liddy their CEO leader. This bailout is rewarding these incompetent managers with continued employment and even cash bonuses. Why should these managers work hard to investigate anything to do with their financial decisions and/or investments if Uncle Sam will pay for their mistakes? Did their friends get commissions for selling these bad investments to AIG? Were there any kickbacks to AIG employees who approved these transactions? Why are the AIG personnel that made these bad decisions still employed at AIG? Why is it necessary for AIG not to become bankrupt? Why does the taxpayer have to pay for these bad judgments and stupid actions? If they went bankrupt and all of these managers were out of work, it would be an incentive for managers of other companies and other future managers (and individual investors) to become more cautious of what they buy in the way of mortgages, securities, bonds and other investments.
It should not have mattered how many dollars in political contributions AIG and others gave to either and/or to both political parties, TARP and other bailouts using taxpayer money should not have ever been paid to anybody.
None of the other Wall Street financial firms should have ever gotten any of the free taxpayer bailout TARP money. We rewarded their irresponsible, stupid, inept, careless, and maybe criminal actions with free money. A financial failure and loss of investment would be an incentive for these and other future investors to become more cautious of what they buy in the way of mortgages and other investments. A financial failure would cause the investors to become more skeptical concerning anything that the financial experts have to say (usually lies). We need for this financial penalty to happen. A financial failure would cause investors to be wary of and question anything that any stockbroker or any other financial genius has to say. They are spending the TARP bailout money on bonuses for themselves and new larger private jet airplanes so that they can continue their reckless behavior without any penalty for failure.
The Stock Markets are just gambling Venues for the public to make gambling wagers (investments) in ownership of publicly traded companies, securities, loans, and other investment vehicles. Investors just lost some of value of their investments, and there is nothing wrong with this loss since the value was speculation over and above the Balance sheet value of the companies. The investors should not have believed anything that their brokers told them about those or any other investments. If you review almost any of the SEC filings (on the EDGAR database) you will find almost all of the sworn information filed with the SEC is extremely false, most especially when you get away from the “Blue Chip” stocks.
We need to legislation to make one single individual (President, CEO, Chairman) be criminally responsible for any false or misleading company financial statements that are filed with the SEC. This person needs to go to jail if there are any intentional or unintential false statements sworn to as a part of any SEC filing. Many more crooked CEOs need to be in prison for long periods of time. I am a CEO of a very small (engineering) corporation.
This country does not need more Enron Type Master Criminals and Arthur Anderson type criminal accounting firms that will submit more perjured SEC filings and then create more criminal economic miracles.
Why does the US Accounting standards allow “Goodwill & other Intangibles” to be placed onto a financial balance sheet. These are almost as bad as listing Enron (un-audited LLP’s) as assets when a CPA is supposedly stating the financial value of a company. Maybe a company whose customers tattoo company logos onto their bodies (Harley-Davidson) could claim some Goodwill, but I cannot think of any other situation where goodwill has any value at all. (well maybe Coca Cola, Tide, and a couple of others).
The Glass-Steagall Act (GSA) was enacted during the Great Depression in 1933. It protected bank depositors from the additional risks associated with security transactions. The act was repealed in 1999 by congress and President Clinton. Consequently, the distinction between commercial banks and brokerage firms has blurred; many banks own brokerage firms and provide investment services to their customers. Gramm-Leach-Bliley Act, which eliminated the GSA restrictions against affiliations between commercial and investment banks. Furthermore, the Gramm-Leach-Bliley Act allows banking institutions to provide a broader range of services, including underwriting and other dealing activities.
General Motors Bailout: I just heard on the radio that GM will go ahead and go bankrupt! I guess that GM will not give back any of the money that the US Government took from me and gave to GM. At least if they go bankrupt, then they cannot take any more money from me. Is there anything of value going to be left after the auto industry executives and the auto union members have bled their companies to death (bankruptcy)? The banks probably have mortgage lien on the title to most of the remaining assets anyway. If they are allowed to the public feed trough again this time, they will surely return on a regular basis. Should we continue Auto Industry bad behavior and outright theft of company money with taxpayer funds? Who is going to buy a vehicle from a bankrupt auto manufacturer when the bankruptcy court will allow the manufacturer out of their warranty contracts with the vehicle purchaser? It is too late for Chapter 11 reorganization. Any Taxpayer funds given to the US Auto Industry will only encourage the continuation of the arrogant, stupid, and selfish bad business policies of both the US Auto Industry executives and the UAW members. Do not let these same highly paid incompetent executives and the overpaid union workers continue their featherbed deals, job banks, perks, private jet airplanes, stupid business decisions, and etc. with taxpayer money. These are the same selfish people that are responsible and should be fired, unless they know something about making cars instead of finance. Let them go bankrupt so other parties can buy their assembly plants and re-start these plants. Maybe we have to let the Big 3 Executives disappear with the large amounts of money that they took from the US Auto Industry, but do not let them have any Taxpayer Funding to continue their bad business practices and personal thievery. The big 3 automakers are already in debt up to their ears. Let them all disappear, especially as a lesson to all of the other financial geniuses that caused these problems. If these financial geniuses that caused these problems disappear then the UAW feather beds that they created will also disappear with them. Are these Taxpayer Billions for the Auto Industry going to fund the golden parachutes and bonuses of the auto industry executives that caused the crisis? Should taxpayer money pay off the bank loans that occurred when these financial geniuses borrowed money to pay stock dividends, in order to artificially drive up the stock prices, which personally enriched themselves through their stock option plans? How can we get rid of these financial geniuses and the UAW feather beds that caused these problems without costing the taxpayer some of his/her hard earned tax money? The US Auto industry is going bankrupt, and this bailout just postpones the dates of the formal bankruptcies. Are there any more Lee Iacocca type people in that industry that could revive these sick Auto Manufacturing companies from their impending deaths? They do not need any more Financial Genius Master Type Criminals to manage their affairs.
Home Mortgages: Many people got loans for houses they could not afford, and these people should lose their houses in foreclosure. The Federal Government might have pressured the Mortgage Markets to give mortgages to people with bad credit histories. Financial Managers combined multiple numbers of these low quality loans into packages (of low quality loans) and sold them to investors at (almost) face value. These Financial Managers got multi-million dollar (non-refundable) bonuses for their efforts. As more and more of these sub-prime non-credit worthy mortgagees defaulted, the value of these packages of multiple mortgages diminished drastically. The Taxpayer is now being asked to pay for these financial mistakes.
The California real estate values will plummet to a fraction of their present sales prices. The $500,000.00 South LA crack house with a $495,000.00 mortgage, roof leaks, no air conditioning, and no plumbing owned by an unemployed person (i.e. crack cocaine supplier) might now sale for $5,000.00 and that might be closer to the actual retail sale value. No more “Flipping Houses”. No more real estate financial geniuses. No more get-rich-quick real estate seminars.
Post Industrial Society: Some economic experts think that we can become a “post-industrial” society of “knowledge workers” consisting of software developers, data analysts, technicians, editors, scientists, lab technicians, teachers, doctors, nurses, architects, accountants, engineers, inventors, lawyers, etc, and still somehow continue to pay foreigners to manufacture the things that we consume. How can we get foreigners to pay for (buy) the services of these “knowledge workers” so that we can stop the foreign flow of dollars and title to US properties out of this country and then earn enough money to pay for the import of the products that we consume.
Our “knowledge workers” would have to be much better and much more knowledgeable than foreign “knowledge workers” in other countries or the foreigners would hire their home grown “knowledge workers”. Maybe in the future we could produce better “knowledge workers”, but only if we totally overhauled and changed our educational system to emphasize technical education instead of the unproductive degree majors that most of the students study today. It does not matter how we reverse the balance of trade as long as we stop the flow of gold, dollars, T-bills, Government Bonds, title to US located property, and other US assets from this country to other countries in payment for our foreign trade deficit.
Our Future: We have met the enemy and it is us. There is nothing more saddening or devastating than mass unemployment such as exists in countries such as Mexico or India. I have visited Asia many times on Business. Crime, family abandonment, divorce, selling your 12 year old (and younger) daughters to brothels, selling your 12 year old sons to rug weavers, and other bad things increase during these periods of unemployment. Our basic industries such as steel, computer chip manufacturing, petrochemical refining, appliance manufacturing, tire manufacturing, automobile parts manufacturing, aircraft manufacturing, textiles, and etc. have been decimated and/or totally eliminated from this country by government edict. The North American Free Trade Agreement has almost eliminated the remainder of the basic industrial manufacturing jobs from the USA. The USA must re-industrialize. Even if we started to re-industrialize today, it would take many years to re-create the manufacturing and industrial production bases that they destroyed. New jobs created by the EPA are nice, but they are about as economically useful to our balance of payments and our industrial base as paying people for raking leaves, digging holes and re-filling the same holes, since they do not produce anything economically useful that we can consume or export. The foreigners know that the US dollars that they earn will buy less and less each day that they do not spend them or redeem them for gold.
If we do not act immediately, the USA population will soon become employees; possibility indentured servants; or maybe even beg to become slaves owned by the foreign countries and foreign individuals that will own everything of value in the USA in the near future if US citizens want to feed their families. Our children and grandchildren might also have to change to the religion of the business owner if they want a job, or to become his slave in order not to starve.
The arts are less important than food & shelter. Art is less important than security (Army & Police). Art is less important that the balance of trade that affects our value of our dollars. Art is less important than manufacturing products for export that will improve our balance of trade position. The Arts and humanities must take a back seat to necessities. We must set our spending priorities upon the basis of what is necessary, not what is nice to have.
Trickle Down and Free Trade economic policies have never worked anyway, except to enrich the importers, distributors and retailers of foreign produced imported products. The taxpayer money bailouts to date will not help the economy, since they do not address the problem.
I have never participated in journalism, except for an occasional letter to the editor. I am concerned that the political leaders of both (maybe all) political parties are leading this country to become a third world economy, if action is not taken rapidly. Journalists must learn about economic principals and then become the saviors of this nation by publicizing, educating and/or preaching sound economic principals to the general public. Who else has the capability to disseminate this information to the general public? Our political leaders are talking as if they never studied or read anything about economics. It is not that complicated. It is only interlocked with understandable causes and affects of various economic actions.
I am a 70 year old engineer still working because engineering is fun. I have always been interested in Economics since Texas A&M required this course for engineers, along with business law and accounting in the 1950′s. These courses benefited me greatly in by career. I also cashed in my investments last spring and avoided the loss of assets that most folks endured when they listened to their financial advisor experts.
Selecting our political leaders: I remember a guy named Ross Perot that looked like Alfred E Newman from Mad Magazine and talked through his nose. He ran as a third party candidate against President Bush 41 and president Bill Clinton, I think it was 1992. He had the right message but he was the wrong messenger. He was not attractive, and I believe that a lot of the American people vote based upon looks more than intelligence or policy. He had a lot of graphs and charts to indicate his points. I remember him saying that “NAFTA will suck the jobs out of the USA”. He might have been the last chance to preserve the USA economy. I remember presidential candidate McCain stating something to the effect that he was not interested in economics during the first part of the campaign after he was nominated, so I voted for you.
Both political parties are responsible for the foreign trade deficit, for the Wall Street criminal portion of our economic mess, and for the unfunded entitlements. Neither political party understands the problem, and the answers are so simple.
Sincerely Yours,
Gerald R. Spencer, P.E.
President
Spencer Engineers, Inc.
4635 Southwest Freeway – Suite 900
Houston, Texas 77027-7139
http://www.spencerae.com
gspencer@spencerae.com
1-800-383-9685
713-621-2482