Concerning the recent news about the federal government and General Motors, I’ve heard president Obama say the following : « Let me be clear: The United States government has no interest in running GM; we have no intention in running GM. » Oh? Every time I hear Obama start a sentence with the phrase “Let me be clear” (or something similar), warning bells start going off. In this case he says that we (Obama and his administration) will not “run” GM. Yes, I guess that they will not make the hundreds and hundreds of important decisions that would have to be made by top executives when they “run” or manage an automobile company. On the other hand, it is perfectly clear that Obama and his administration will make some important decisions for the car company General Motors. For example, they have already obtained the resignation of the CEO. What ? Are we to believe that that is not a part of “running” the company? As another example, Obama will expect to see concrete plans from GM for producing “green” and energy-efficient cars, with insufficient attention given to the consumers; that is, will consumers want and buy enough of them to at least cover the costs? Also, I have little doubt that Obama will require only a very few “give backs” from the automobile union. If the new top executives at GM ask for more union give backs, Obama will probably override those and insist on fewer union give backs. As mentioned in one news article, it is now obvious that the administration will be taking its largest role yet in the operations of the automakers, a role that “dwarfs that of any other company receiving U.S. aid.” But despite all that I am now to believe that Obama and his administration ‘have no intention in running GM”. Does Obama take us for fools?
I’m sure that many people who love Obama will say that he and his administration will only make a small handful of decisions for GM; the top GM auto executives will make all of the rest, and there will be hundreds of these. Yeh, right, except that the decisions that Obama and his administration will make will be very important ones! They have already made a few, such as to fire the existing CEO and to appoint a new one.
There must be a word or phrase which describes this type of action on the part of Obama – he says one thing, (making it “perfectly clear”), and yet his very actions belie his words.
Archive for March, 2009
Is Obama misleading us? Again?
Monday, March 30th, 2009Celebrate Human Achievement Hour
Saturday, March 28th, 2009Leave the lights on between 8:30pm and 9:30pm and watch this video with your friends and family!
Yes, let us celebrate human achievement. As to those who instead wish to “celebrate” the “environmental movement” with something called “Earth Hour”, by turning off all lights for one hour, I say bullcrap. Enough of this nonsense about “saving the planet”. Instead “save” yourself, your family and friends, and do so by doing effective work, work in which you use not only physical labor but also the power of your mind to produce modern goods and services. In fact, your work may even increase productivity, and thus further improve the welfare of your family and friends. Heck, in so doing, you can also improve the welfare of many people who are not even friends, let alone members of your family.
He was right – Investment
Thursday, March 26th, 2009I almost never watch politicians give speeches, and that includes the President of the United States. On Tuesday evening, March 24, President Obama gave a widely-televised press conference. I did not watch it. However, a few minutes before the press conference started I turned on my television and tuned to a Fox news channel. An announcer on the program was talking about the coming press conference, and he had a few guests. One of the guests was Charles Krauthammer, and he was asked what he thought Obama would say. I do not remember everything that Charles Krauthammer had to say, but he did not say very much. However, one thing that he did say stuck with me. He predicted that when Obama wants to talk about government spending that Obama will often use the word “invest” (and/or “investment”). In other words, so Krauthammer was saying, Obama knew that his proposed budget called for spending a lot of government (taxpayer) money, and that at least some people would believe all that spending to be excessive and even irresponsable. However, by using the word “invest” instead of “spend”, Obama would try to mitigate the perceived “harshness” of the word “spend” by using the word “invest” in its place. (I am paraphrasing here since I do not remember Krauthammer’s exact words.) At that time I agreed with Krauthammer, but then I had to turn off the television since the press conference was just about to start.
Today I found a web site with the complete transcript of that press conference. Krauthammer was right on the money. Obama started the press conference with a speech, and in that speech he soon said these words:
The budget I submitted to Congress will build our economic recovery on a stronger foundation so that we don’t face another crisis like this 10 or 20 years from now. We invest in the renewable sources of energy that will lead to new jobs, new businesses and less dependence on foreign oil. We invest in our schools and our teachers, so that our children have the skills they need to compete with any workers in the world. We invest in reform that will bring down the cost of health care for families, businesses and our government.
There you have it – the word “invest” is used three times, and it is used to cover the now famous three sectors of our economy in which Obama wants the government to be heavily involved – energy, education and health care. (That should not be surprising.) The remainder of the press conference consisted of questions from reporters and Obama’s responses to them. In all of these he used the words “invest” and “investment” several times. I did a quick count and found 15 times when he used those words in place of the words “spend” or “spending program”. In nearly all cases it was clear from the context that Obama was talking about spending government (taxpayer) money when he used those words. For example, part of one of his answers to a question was:
And what we have to do is invest in those things that will allow the Americans’ capacity for ingenuity and innovation, their ability to take risks, but make sure that those risks are grounded in good products and good services that they believe they can market to the rest of the country, that those models of economic growth are what we’re promoting, and that’s what I think our budget does.
Another of Obama’s sentences is this simple one : « And — and that’s why our budget focuses on the investments we need to make that happen » . This next quote from one of Obama’s answers to a question touches on one of his three main economic sectors in which he wants much government spending and involvement – health care :
And so what we’ve said is, look, let’s invest in health information technologies. Let’s invest in preventive care. Let’s invest in mechanisms that look at who’s doing a better job controlling costs while producing good quality outcomes in various states and let’s reimburse on the basis of improved quality, as opposed to simply how many procedures you’re doing.
So Obama uses the word “invest” three times in that quote, in place of the words “spend money”. Oops! Obama also used the word “investment” not far from the end of the press conference when he said, “I have, I have no investment in causing controversy. Clearly he was not talking about government spending in that sentence. Instead he was letting us know that he has no intention to cause controversy and that he knows that controversy will be of no benefit to him. Thank heavens for that !
Well, in any case, it is nice to know that our taxpayer money will be invested and not just spent. I’m sure that Obama and his administration know best how to invest this money (taxpayer money) for the best results. Most of us citizens do not know how to invest wisely, and when Wall Street invests they usually waste much of it and keep most of the rest for themselves. Heck, some of them even steal it, like Bernie Madoff! But Obama is intelligent and honest and he will take good care of us.
Is this one light at the end of the tunnel?
Sunday, March 22nd, 2009I just now read an article with the title Administration Seeks Increase in Oversight of Executive Pay. This title is somewhat misleading, since the subject of “executive pay” takes up only a small part of the article. In the beginning of the article, a proposed plan to overhaul financial regulation by the government is said to exist, and that it will be revealed later this week. To me the most important parts of the article are found in these lines:
Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system. It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the [financial] crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules. The administration has been considering increased oversight of executive pay for some time, but the issue was heightened in recent days as public fury over bonuses spilled into the regulatory effort.
Now I don’t much care for this business of “increased oversight of executive pay” since, without any details, it could possibly mean eventual laws and/or government regulations which restrict the pay of executives in companies that have not received any government “bailout” money at all. If that is the case, then that will not be good. On the other hand, I note that the proposed plan will supposedly add and/or tighten regulations for what are sometimes called “exotic financial instruments”. Many of these latter, such as some types of collaterized debt obligations, credit/default swaps and so on, did not even exist 25 years ago (as best I know). Yet during just the past five to ten years the amount of such financial instruments has exploded, with little or no regulation, as best as I can determine. In my opinion, it has been the existence of these relatively new “exotic” financial instruments that has contributed heavily to the existing financial crisis. I don’t think that they started the crisis, but they sure helped it grow and then expand across the globe. Of course it remains to be seen just what kind of regulations are to be proposed. Certainly it should be possible to have some good regulations on these financial instruments. I just hope that they do not turn out to be bad ones, ones which may make the problem worse, or perhaps solve one problem while then creating others.
Another article which discusses the same proposed plan does contain wording which disturbs me:
One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals. The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving U.S. government bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.
Now if I read that correctly, that means that regulations could be imposed on executive pay, even for companies in the financial sector who did not receive any government bailout money. Furthermore, it seems to be saying that some executive pay regulations might even be imposed on companies that are not even in the financial sector, but which happen to be publicly traded companies – that is, companies with common stock which is open for trade to the public on various stock exchanges. Now that I find frightening. From what I currently know about Obama and his administration, which is admittedly not a great deal at this moment, I would not put that past them. If that is the case, then Heaven help us !
So is this one light at the end of the tunnel? I do not know, but I am afraid that it might only be the flame which attracts a moth to the candle. In the meantime, nothing to do but to wait and see.
Note: It is my reasoned opinion that regulations are needed for all kinds of “financial” institutions. These should be either good and new regulations where they do not now exist, or a re-working of regulations where they now do exist. In any case, these regulations should be carefully selected and crafted so as to help protect the entire financial system; they should not be regulations which specifically restrict the pay of executives.
Where is our country going?
Friday, March 20th, 2009I have been very disturbed by the actions of our federal government with respect to the economy, especially over the past year, starting with president Bush and continuing with president Obama. The absolutely astounding amounts of money that the government has spent, and proposes to spend in the next year or two, I find extremely disturbing. President Obama and his administration are clearly on a path to not only spend huge amounts of government (taxpayer) money, but also to influence large parts of our economy in ways which they think proper. Well, I certainly disagree.
I just read an article which describes very well the current situation in the United States, especially as it relates to politics. I myself could not write so well about these matters, which is why I have provided the link to that article. Perhaps the best comments in this article are the following:
As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America? Probably not, if only because there are good reasons for optimism. The U.S. economy has pulled out of self-destructive political spirals in the past, spurred on by its business class and corporate leaders, the profit-making and market-creating people who rose above the political turmoil to once again lift the world out of financial crisis. It’s happened many times before, except for once, when it took 20 years to rise out of the Great Depression.
Past success, however, is no guarantee of future recovery, especially now when there are daily disasters and new indicators of political breakdown. All developments are not disasters in themselves. The AIG bonus firestorm is a diversion from real issues , but it puts the ghastly political classes who make U.S. law on display for what they are: ageing self-serving demagogues who have spent decades warping the U.S. political system for their own ends. We see the system up close, law-making that is riddled with slapdash, incompetence and gamesmanship.
I could not have said it better. The most you can say against this article is that sometimes it appears to use a bit of mockery and hyperbole. But that is no big deal. Those who ardently support most government actions, and who wish for even more, often use mockery and hyperbole in an attempt to further their ends.
Printing Money
Wednesday, March 18th, 2009It is often said that the federal government can just “print money” when it has need of money. To many people, that seems to mean using the printing presses to print dollar bills, ten-dollar bills, twenty-dollar bills, and even hundred dollar bills. Well, that’s not the way it is done. The paper money that is actually printed is done only in response to requests from banks and federal reserve banks. These banks already have “money” on their books – in their accounts. When they request actual paper money, when they are given freshly-printed paper money the amount is deducted from their accounts or “books”. So that is not the way that the government really “prints money” when the government needs it. (Banks sometimes return old, worn-out and torn paper monry to the Federal Reserve; when they do that, their “books” or their “accounts” are credited with the amount of old paper money that they turned in. They can then use those “credits” to order new paper money, if they desire.)
When the government needs money, it gets it either by borrowing it – by selling treasury bills, notes and bonds, OR by getting it from taxpayers – income tax, excise taxes, tariffs, etc. Money is actually “printed” when it is essentially created out of nothing, and that happens whenever the Federal Reserve System buys government debt, such as Treasury bills, notes and bonds. Today the Federal Reserve System announced plans to buy about 1.2 trillion dollars worth of US Treasury bonds. THAT is how the government really “prihts” money. That kind of activity usually results in inflation.
The Future of our economy
Sunday, March 15th, 2009What is going to be the future of our economy in the short term? Well, I do not know, although I think it will be poor. Warren Buffett does not know either. In his recent letter to Berkshire Hathaway shareholders, he said, “Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects…one likely consequence is an onslaught of inflation.” But though Buffett is less hopeful for a recovery this year and has worries about government intervention in the private sector, he remains a long-term believer: “Though the path has not been smooth, our economic system has worked extraordinarily well over time,” Buffett writes. And maintaining his long-term optimism, he emphasized that “five years from now, I can guarantee you that the economic machine will be running fine.” Well, if he is right, I hope that I am still alive and kicking five years from now.
During the presidential campaign, Barack Obama was reported to have used Warren Buffett for economic advice. Despite saying last week that the country is in an “economic war,” Warren Buffet just recently reaffirmed his support for Obama, but he then said the administration also has to stop blaming the Bush administration. He suggested such finger-pointing would be like blaming the Navy for Pearl Harbor. Buffett, in calling the crisis an “economic war,” said Democrats have an obligation to stop exploiting that to push through agenda items and Republicans have an obligation to support those policies that are designed to fight the war. So I have to conclude that Warren Buffet definitely thinks that Obama is calling for much too much government spending, both for the “stimulus” and for the proposed budget.
Big brother is watching out for us
Saturday, March 14th, 2009Thank heavens that President Obama, our new “big brother”, continues to watch out for us. His latest proposal, announced in his weekly radio address, is one in which he promises to reorganize the government’s food-safety system, calling inadequate food inspections “a hazard to the public health.” One quote from his speech was, “In the end, food safety is something I take seriously, not just as your president, but as a parent”.
Well, I am very skeptical. Starting over 100 years ago, the federal government has slowly but surely passed more laws, created more government programs and government agencies, and promulgated more and more regulations, all with the stated intent to improve the safety of our food. Taking Obama’s words at face value, all of this has not worked all that well. In fact, I have referred to this in previous posts of mine, as in this one and in this one. (In the latter blog post, which is a long piece, the comments about food safety are found roughly in the middle of the post.)
Given the existing government programs and agencies which have “looked after” our food safety for years and years, and given the apparent fact that they have had faults (to which Obama alludes), am I now to believe that changes will (again) be made to one or more of these programs and agencies, changes which will this time really be effective? Well, of course! This time our “big brother” is President Obama, and we all should recognize that we finally have a president who is very intelligent and who truly knows what is best for us. And given his dedication and honesty, he will in fact do what is best for us. (Yeh, right.)
Well, at the very least, Obama’s proposals, if defined and then carried out, will create a few more government jobs. Obama can certainly ask for thousands of new government workers in order to increase the number of inspectors to inspect food-processing plants. And we do need new jobs. These kinds of jobs won’t make our food any less expensive. In fact some taxes will go up very, very slightly in order to pay for these new workers. Well anyway, at least a few less people will die each year from food poisoning, and perhaps as many as one thousand will avoid getting sick altogether. (Naturally some people will still die, and thousands more will still get sick, but that will only be caused by the consumer who does not properly refrigerate food, cook it properly, or clean it properly. You can’t blame that on government inaction. Although come to think of it, since better “education” is one of Obama’s goals, perhaps instructions on food safety habits can be made mandatory in high schools.)
A lesson in economics
Monday, March 9th, 2009A recent article on a Wall Street Journal Web Site, written by a Laura Tyson, is entitled “In Defense of Obamanomics”. This woman agrees with nearly all of Obama’s plans and proposals which will affect the economy. In fact, she is a member of President Obama’s Economic Recovery Advisory Board. In this post I will give one small lesson in economics which touches upon one statement written by Ms. Tyson. Laura Tyson wrote:
Critics of a cap-and-trade system are correct when they claim it will raise the prices of goods and services whose production and use emit carbon. That’s exactly the point: Higher prices are necessary to encourage energy efficiency and the development of renewable energy, to discourage carbon emissions, and to reduce the societal costs of global warming.
Well Ms. Tyson, in a free-market system (a capitalist system), higher prices, when they occur, are exactly the point ! These prices serve as very good signals to both producers and consumers that adjustments are needed. Furthermore, (and of most importance), the adjustments that are made are usually those which are the most economically effective for both the producers and the consumers! On the other hand, the higher prices that are set by government action, such as those for the cap-and-trade tax system, are seldom economically effective. Instead they are often ineffective because they are set by politicians and the politically-connected; therefore they reflect the wants and needs of these politicians and those who are politically-connected. In nearly all cases, the wants and needs of these people do not accurately reflect the wants and needs of the general public, so the general public suffers. At the very least, the general public does not benefit as much as they would if the prices had instead been set by the free-market doing its “invisible hand” work. (Yes, this “invisible hand” never works with 100 percent efficiency, and at times it’s work falls short. But compared to the strong hand or “mailed fist” of the government, the former is almost always much better.)
Laura Tyson has both a Bachelor’s degree and a Doctor’s degree in Economics. Therefore I am sure she understands the mechanism by which prices are set in a truly free market. I strongly suspect, however, that she believes that the “general public” does not always know what is really good for them. Therefore she prefers that the pricing mechanism of the free market, which economically maximizes benefits to both producers and consumers, be at least occasionally replaced by a different mechanism. This latter is one in which those who “know better” – the knowledgeable “elite” such as Ms. Tyson and Obama – heavily influence prices by laws, regulations and taxes. I think it worth noting that Ms. Tyson makes some of her money from governments.
I am not lazy. I’m just old and feeble
Sunday, March 8th, 2009This morning I noticed that a very few of my clocks were not reading the correct time. I soon found out that we had changed to daylight savings time last night. I had not prepared for that.
Well, it turns out that I did not need to do much. You see, when we went off daylight savings time a few months ago I did not change most of my clocks. Why? Was I lazy? Not at all. First of all, two of my clocks are analog wall clocks. In order to change them I would have to climb up on the very top step of a step stool, and that is a dangerous thing for an old man to do. It would be too easy for me to fall off and break a leg or hip. So I did not. Secondly, the rest of my clocks, being digital, require some elaborate button-pushing in order to change their time; but since my mind is now a bit feeble I am therefore “technically challenged”. Too often I have tried to do something with an appliance or electronic device and just messed things up instead. So I did not change those digital clocks, except for the one on my night table next to my bed, and one on a video cassette recorder. Yes, it took me several careful minutes to change the time on that video cassette recorder.