The Difference is One of the Problems
Perhaps you’ve seen all the articles online and in business rags about “Main Street versus Wall Street”, or how “Main Street” has finally become fed up with corruption on Wall Street and is rejecting the greed that has fueled the system, or how blah blah blah. That Fortune article even goes as far as to refer to this as a “class fury”. Only on Wall Street can widespread yet logical objection to a massive bailout plan be called “class fury”. Maybe, probably not in my or my child’s lifetime, there will be a true revolution in the way we deal with massive corruption and greed. Until then, I will be buying the most extravagant version of Iron Man on DVD tomorrow.
Nonetheless. Not to put too fine a point on it, but since when are these two groups so different? Actually, they are not - as this NY Times article sums it up quite nicely. Denial about how you are pulling money out of your ass is universal; whether it be buying a new TV on high-interest credit, or borrowing money from a loan that ceased to exist in 1956.
OK, but I have an even more specific example: Jack Welch is one of the wealthiest, most successful businessmen on the planet. White, older than dirt, married to a woman 25 years his junior - he fits the profile of Wall Street fatcat. Anywhoo, in a recent BusinessWeek column he was asked his opinion of the obscene income of business leaders, and why it irritates many investors. Mr. Welch was unapolgetic. His response is that there is a “difference in philosophies” between investors and the business leaders. This struck me as funny, because investors are just that - the money source of the businesses. If there is a difference of philospophies, you tell me who should prevail.
MoMajic Mo Money
I was speaking with Mo the other day regarding the state of the economy and he told me a ton of things but one really stuck out: “If I was anyone in this country right now I’d pull no less than 20% of my money out of my bank in cash and find a nice place to hide it.” Turns out he actually did that.
Let’s examine the nature of that statement. At the tail end of last week Washington Mutual (WaMu for short), the largest commercial bank in the USA went under. If not for JPMorgan-Chase (who by the way is near the top of the evil list to me, right next to Hitler, Satan and Ho-Hos) buying up the company at a nice cheap rate the company and all her little friends would be totally dead. Today we find out another commercial bank is about to topple as well - Wachovia. So by the “HOLY CRAP BANKS ARE FAILING” score - Mo is totally correct.
Economists would argue that his suggestion is a bad one as there exists this concept that banks fold when all their customers actuall want their money back. The process is called a “Run on the Bank” as all the customers are running to the doors to see if they can get any of their cash back. If you have seen “It’s a Beautiful Life” then you have witnessed this happen in a film - and even in a film the entire action wasn’t pretty with people throwing stuff, yelling epitaphs etc.
So what happens when there is a run on a bank for roughly 20% of all the cash in the bank? About the same thing. As I indicated in a previous post about Banking, banks are strenuosly strapped for their actual value - meaning they have lent out loads of cash and expect people to not actually ask for any of it back, at least not in droves. You may have encountered a bank not wanting to give you your money back before if you went in and ask for a large sum of money - yeah I don’t have any either but I have heard rumor that people do try to do this and are often rebuked.
Given that GlazedNConfused always thinks I write rubbish with no point, here is the point - crap I don’t have one. I am all for pulling my money out of the bank, in fact my wife and I are discussing doing so, but I also realize that if everyone does this then, well, we may actually help close more banks.
What to do? What to do?
Endgame - No Comment
Watch for yourself.
1 min 17 seconds
Wikileaks - HOLY CRAP WHAT A SITE!!
Ok so this Palin email hack thing is exploding quickly. I guess the story was broken on Wikileaks.org. GlazedNConfused and I have been discussing this topic and the site for the last few hours and are wondering just how legal the site is and how much potential trouble these folks could be in, if ever caught. Either way, call me impressed.
How Does Banking Work?
Watch this entire series. Even though it will terrify you, after watching it you will completely understand how the market is crashing.
Liquidity is Confidence.
So like every other morning, today I was listening to NPR on the way to work - sorry gang they are the closest thing to real news on the radio. Anywoot, they had this expert financial buff on there who was talking about the state of the economy, GLOBALLY. Here are a few things he had to say:
- Nobody trusts anybody anymore, primarily because all of the CEOs and companies they work for can’t get their balance sheets straight. (In other words they are liars.)
- Financial Institutions have invested some times as much as 30 times their actual worth! (In other words when their investments go belly up and there is something akin to a Margin Call, said company goes belly up as well.)
- The American Dollar value is soaring. (There is nothing to invest in so people are just sending their money to the USA)
- There is 6 Trillion Dollars sitting in accounts right now looking for something to do - and nobdy has anything. (If you are looking for a time to find investors STRIKE NOW!)
- The USA is looking to purchase up 700 billion dollars worth of bad mortgages. (coughSOCIALISMcough.)
GlazedNConfused always jumps on me about my articles not having a point. “Great information Thraxxus - Whats the F’n Point?” Well according the the expert dude on NPR “The economy is FAR FROM F’N OK!”
There is your F’n point mister!
Capital Gains Tax, Heal Thy Country!
In case you’ve been living on Saturn for the last six months and this is the only BB post you read when you came back, bad news: our financial system is going to hell in a handbasket. This handbasket has been carried by very wealthy individuals who put their philosophy first before everyone else. This philosophy was “Make as much money as God before everyone finds out how reckless we’ve been”. So now that the market has crumbled, crumbled, everyone has ideas how to fix it. To paraphrase a criminally underrated metal band, if there’s a new way then I’ll be the first in line. But it had better work this time.
Well, this one’s for you, Mr. Mustaine. My very simple suggestion: tax the holy hell out of the rich. Not just a few percentage points here and there like Obama is suggesting. I’m proposing taxes of Canadian proportions. How does the range of 40-50% grab you? If you are making more than, let’s say $10mil annually, it grabs you by the teabags. Why that number? I have no idea. But the number is not important. What’s critical is what it symbolizes - that wild excess is no longer celebrated in America. The problem with most of the solutions, which include increased accountability and regulations, is the simple fact that the people in charge of fixing the system are owned by the people with the most to lose. If Thraxxus’ socialistic rantings haven’t been clear enough, let me simplify: big business and the our government are so intimate, they are on their way to Macy’s right now to pick out a china pattern.
However, the IRS doesn’t dick around. If you change the tax laws, and make them crystal clear, all you have to do is stand back. No matter what those cheesy late-night commercials say, the IRS can not be reasoned with. They will get you eventually, and you will pay interest and penalties. Release the hounds!
Ok, I can hear the arguments. Hell, I can Google the arguments. “You are taking money that people have earned” they say. I would argue that no one person in the world actually earns that much money. Professional ballplayers are basically playing a game. Investors are playing a game, and not even with their own money. Corporate executives, if you haven’t noticed, have zero accountability. They don’t deserve what they are earning. The newly retired Bill Gates? Two words - “Windows Vista”. Steve Jobs? The Pixar guys? OK - maybe. But if a few worthy leaders and innovators get thrown under the bus, then that’s a small price to pay.
Another argument is that this type of taxation is “unAmerican”. For you fourteen readers, I have tackled the herculean task of ranking the top one thousand most “American” things you can do as an American. Due to space restrictions, here’s only a sample:
1. Dick Cheney cupcheck, at every opportunity
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17. Proudly display classic 1970s Farah Faucett poster
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34. Sarah Palin cupcheck, at every opportunity
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457. Wear a flag pin
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809. Make more than $10million in a year, while paying less taxes than a Harlem schoolteacher that’s had a knife pulled on her six times
Furthermore, consider the side-effects of cranking up taxes on the rich - there are none! If you start taxing the hell out of the poor, the results are glaring. You come home and your television has been jacked. Live news riot footage pre-empts “Dancing with the Stars”. Who needs that drama? I’m not sure what rich people do when impotency is thrust upon them, but my guess is its pretty passive. They probably just sit there behind their antique desks made of ivory and walnut, seething. Maybe they strangle their high-priced escorts out of frustration. If TMZ is to believed, they just go shopping. Another boost to the economy! We need to face facts. The money for this new trend of American Fascist World Domination has to come from somewhere. You tell me which is more entertaining:
- Listening to single mothers whine that they can’t afford their baby’s insulin or
- Reading in business magazines about an anonymous hedge fund manager muttering under his breath that he’ll have to settle for a Ferrari F430 instead of a 599 this year.
So you ask, how is such a brutal, discriminative tax law going to be passed by the very people it will cornhole most? Here’s the only way: first, Obama gets elected. His enthnicity is key, plus his Veep choice is the second-poorest Congressman. Second, a group of lobbyists, oil execs, southern state congressmen, or various Good-Old-Boy Club members get caught on cellphone video calling our president the N-Word. You just know it’s going to happen. They’ll be sitting in a bar, four cocktails into two-hour lunch paid for by you, and someone will slip. Something like “Can you believe a n—– got elected as president?”, and everyone will somberly nod. Obama’s response would be swift: “N—–?! I’ll show you rich c*cksuckers a n—–!!!” and that will be that. Rooting for naked prejudice - a sacrifice that I’m willing to make for my country. It’s #140 on my list.
Some things to ponder.
Here are some quotes on Socialism.
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” - Winston Churchhill.
“Democracy and socialism have nothing in common but one word, equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.” - Alexis de Tocqueville
“The assumption that spending more of the taxpayer’s money will make things better has survived all kinds of evidence that it has made things worse.” - Thomas Sowell
““All socialism involves slavery” - Herbert Spencer
And now for Capitalism
“In the Soviet Union, capitalism triumphed over communism. In this country, capitalism triumphed over democracy.” - Fran Lebowitz
“Capitalism without bankruptcy is like Christianity without hell.” - Frank Borman
“Capitalism has destroyed our belief in any effective power but that of self interest backed by force.” - George Bernard Shaw
“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” - John Maynard Keynes
So why do I bring these up? The United States of America, a Federal Republic - not a Democracy (most people don’t get that), is a country that toutes itself to be a Capitalistic society. In fact much of the Cold War rhetoric was based on how the USa is capitalist and the Soviets are Socialist, or Communist - really depended on who was talking.
So what is Capitalism then?
Two definitions by dictionary.com
1) an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.
2) An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.
Note that both indicate that the PRIVATE sector handles their own investments, their own growth, their own development, and thus their owns losses. The moment that government steps in you no longer have capitalism. Folks, the sad truth is this: For Capitalism to truly work you must allow those who would fall, to fall. Using the resources of the people that those companies made their money off of to prop them up is Socialism, period.
ADDITION:
Apparently the top of this article was vague and off topic, or rather, I didn’t really say the topic. GlazedNConfused made fun of my mother for a while and then pointed out that he didn’t understand the point of it. So without further ado - The Point:
OUR GOVERNMENT IS SPENDING YOUR TAX DOLLARS TO BAIL OUT COMPANIES THAT SHOULD FAIL AS A RESULT OF BEING BOTH PART OF A CAPITALISTIC SOCIETY AND SUCKING AT WHAT THEY DID! THE ACT OF DOING SO IS SOCIALISM.
Some flashback for my 80s friends.
Sit back and enjoy.
Midnight Oil
Living Colour
