Due to a lot of public pressure especially from the constituents of the Republican senators, those senators rightly bending to their PAC and elector pressure have threatened to filibuster as in not allow to pass the massive bailout of the auto industry. Both sides have a case and if one really looks at the case fairly, it seems that it is really due to the intransigence of the unions not to give in to some realistic compromises in order to receive the money that has put paid to the bill.
One must realize that the auto industry in the US must seriously reform itself as the Japanese car makers in the US making cumulatively as much as the big three are doing it with less than half the labor force and costing about two thirds of a big three worker, in total payroll costs. While some of this cost is due to the high retiree pension and health benefits, that is not the whole answer. We are not denying that they work hard, but in order that their jobs be saved, they must accept some reduction in their benefits as sacrifices need to be made in industries that are struggling or are not competitive in the market today.
I do accept the argument that a bailout will cost the government far less than the bankruptcy of the auto industry. However if bankruptcy is what will take to reform it then so be it. Once bankrupt, individual car marks can be sold to investors who will build cars with less cost and half the labor force, and so the unions would have got their comeuppance. The union’s purpose is to safeguard the long term interest of their members and I do not believe they are doing it at present, and are willing to play poker with the government to obtain what they want and if they fail they are toast with no one else to blame.
I suspect the President elect at the back of his mind will be pleased with the sequence of events as he can reform the industry, something he would have found hard to do if just called upon just to save the big three who continue with their same old habits. Unions must realize what the times are telling them. Namely, if they are to survive they have to be flexible, as the whole world is changing and in order to survive the upheaval there has to be a lot more give than take if one is to preserver the jobs of one’s members. In the rough and tumble world of playing poker with politics this time the unions unquestionably lost badly to common sense and reason. So instead of blaming the Republicans, thank them for making Obama’s job easier.
Tuesday, December 16, 2008
the hedge fund scandal of December 2008
I was recently informed of the Ponzi scheme involving a hedge fund that has no assets and therefore the details I have are sketchy and could be factually incorrect, however the point of the essay nevertheless is valid.
Echoing the recent Sakvithi scandal where a person of supposed repute defrauded untold number of investors of their life savings and skipped town, I understand a hedge fund manager in the US has just been arrested, and it has been exposed that the fund does not have any assets, and instead investments by new people were used for redemptions until as we know redemptions in the wake of the financial crisis now exceed new investments and the fund was unable to pay out due to no funds in the kitty. This is almost equivalent to the Sakvithi fraud referred to above where the same method was used to cover withdrawals.
The fund was run by a reputable person known within hedge funds and is also similar to the above. This alone makes people lose their sense of care when making investments based only a person’s reputation. I know better now than to invest with any person however reputable they may be.
It is no surprise that due to the lack of careful oversight this has come about. I fear this is the tip of the iceberg and there are many more like this to surface as they always do when times are tough and the charade can no longer be played. The sad result of all this is that people’s money is at stake with no recourse and therefore permanent loss with the resultant consequences of hardship and in some cases suicide when people with means suddenly become destitute and are then unable to cope.
There is a body of people I hold responsible as they are expected to report on these scandals and they are auditors, the only people from outside allowed in to inspect the records of these companies. Just as in the fall of the banks, the auditors have been conspicuous by their absence as they fear for their survival. I firmly believe they should also bear some of the responsibility as their systems fail to detect such mega fraud and that is not acceptable.
I have left the field of accounting due in part to my belief that they defraud investors money by not performing a satisfactory inspection, and we have the current financial scandal begun by the secondary mortgage crisis as an example of their failure. It should have been brought to light in a good audit.
Echoing the recent Sakvithi scandal where a person of supposed repute defrauded untold number of investors of their life savings and skipped town, I understand a hedge fund manager in the US has just been arrested, and it has been exposed that the fund does not have any assets, and instead investments by new people were used for redemptions until as we know redemptions in the wake of the financial crisis now exceed new investments and the fund was unable to pay out due to no funds in the kitty. This is almost equivalent to the Sakvithi fraud referred to above where the same method was used to cover withdrawals.
The fund was run by a reputable person known within hedge funds and is also similar to the above. This alone makes people lose their sense of care when making investments based only a person’s reputation. I know better now than to invest with any person however reputable they may be.
It is no surprise that due to the lack of careful oversight this has come about. I fear this is the tip of the iceberg and there are many more like this to surface as they always do when times are tough and the charade can no longer be played. The sad result of all this is that people’s money is at stake with no recourse and therefore permanent loss with the resultant consequences of hardship and in some cases suicide when people with means suddenly become destitute and are then unable to cope.
There is a body of people I hold responsible as they are expected to report on these scandals and they are auditors, the only people from outside allowed in to inspect the records of these companies. Just as in the fall of the banks, the auditors have been conspicuous by their absence as they fear for their survival. I firmly believe they should also bear some of the responsibility as their systems fail to detect such mega fraud and that is not acceptable.
I have left the field of accounting due in part to my belief that they defraud investors money by not performing a satisfactory inspection, and we have the current financial scandal begun by the secondary mortgage crisis as an example of their failure. It should have been brought to light in a good audit.
Friday, December 5, 2008
the methodical way the new appointments are announced
I am very impressed at the way the new administration, of Barak Obama is announcing the key positions and who will be in place. If I am not mistaken, it is unprecedented, namely the thought and careful planning that appears to be going into each appointment along with the rational being discussed as to the whys and wherefores of each appointment.
This start bodes well for how the problems of the day will be handled and delegated, especially as the policy will be set by the new president and senior people will be responsible for carrying out the policy, even though it is likely that they may not agree with some of the methods of achieving the objectives.
I would like to be a fly on the wall to witness the debate amongst the intellectuals putting forward their individual points of view being moderated by the President and then decisions finally made by the President who will be eventually responsible for the outcome, and accept blame where they fail, as indeed many will just as a matter of course.
I am also interested in seeing the order of play, to determine what issues will be tackled first along with the economic crisis which seems to get worse as each day goes by. Come inauguration day the economic mess will be so great, people will wonder why we are spending money on the inauguration when there are more important areas to concentrate on. I hope the celebrations will be muted just for that reason.
We haven't seen nothing yet, as far as the economic crisis is concerned. We are heading for a 1930s style depression which will scar a whole generation, just as it did that past generation. My ancestors suffered directly as a result of the Great Depression, and I expect many of my contemporaries and relatives as well as myself to suffer now. How much we suffer and for how long is something I cannot predict, but suffer we will.
It is therefore important that a disciplined way is adopted in dealing with the crisis at hand. I therefore am glad that the signs are good. With an unflappable President I am sure we will confront the crisis with the best person at the helm, as we will sink, and he will guide us in the water to safety, but not before we actually sink. So don't blame him for the sinking ship, as the holes had already been made before he took charge as captain and he is doing his best to plug these holes. In this process, we may delay the speed with which we will sink and the boat may not capsize and we will have to thank him for saving the boat from capsizing, not blame him for sinking!!
Those who are fortunate to read this blog will know I am seeing the picture ahead much clearer than most people who are not inclined to believe my opinion on the severity of the recession, which is likely to become a depression. We just seem to be escapists and are currently unwilling to accept that this is a possibility. A student of history would however point to the sure signs of depression and as there are few students of history and those who do not believe that history will repeat itself will be living in total denial until it actually happens.
I am not at all being alarmist, I am just being a realist as this has to happen, as there is no concerted effort to avoid this problem. The bandaid that is being applied is just not enough to prevent the bleeding, and the stitches that are eventually required will take a longer time to heal as we are not ready to accept the inevitable.
The point to realize is that there is more to life than economics. We just need just enough to live and everything else is just icing on the top. So we can survive this onslaught when we get a grip of our lives and decide what is really most important to us. Materialism is not the answer, so we go back to spirituality and family and friends.
Saturday, November 29, 2008
Intelligence briefings the President receives daily are counterproductive
The new president must as a priority change the thought process of intelligence gathering. While it would be too controversial to scrap the current system, he must set up a small but focused team to gather information using an alternative strategy to counter global terrorism, and especially the type inspired by the Islamic world’s anti US ideology. This can run in parallel with the existing set-up so comparisons can be made.
In order for the fox to enter the chicken coop, the cocks should be recruited from within the coop, as no doubt has already been tried. However the recruitment method must change from that of money to ideology, to match the same recruitment methods of the terror groups.
The US indirectly funds the terror groups as a result of the way money circulates, and the way the terror groups use blackmail to fund themselves. The Saudis by paying protection money to the terror cells get surety that they will not be harmed. Their money comes from the oil that they sell to the US etc. It is therefore important that this same route is used to identify and infiltrate the masterminds and recruit committed Moslems even with an anti US bias to carry out US intelligence work and not use the current but dated techniques of vetting their intelligence recruits. This method eliminates the possibility of getting the best sources to your side at the lowest cost.
Additionally, the bureaucracy within the intelligence community dissuades the highest caliber of operatives, due to hierarchical interests. All this can be broken down if a team is set up with direct reporting access to the President, bypassing the traditional routes and even the Director of the CIA who by definition has to toe the line to run his behemoth.
I am absolutely sure we can then get to the bottom of some of the real culprits engaged in planning and executing terror, much more accurately and speedily, preventing the sort of mayhem that occurred recently in Mumbai. I am sure Obama must be mad that US intelligence yet again missed the boat on informing him in advance of the distinct possibility of this and therefore now is an opportune moment to set up this top secret mission.
Those entrusted to protect the Nation are the very same people who sometimes unwittingly assist in doing just the opposite. Lets immediately set up this new approach, before it is too late. There is just no alternative.
In order for the fox to enter the chicken coop, the cocks should be recruited from within the coop, as no doubt has already been tried. However the recruitment method must change from that of money to ideology, to match the same recruitment methods of the terror groups.
The US indirectly funds the terror groups as a result of the way money circulates, and the way the terror groups use blackmail to fund themselves. The Saudis by paying protection money to the terror cells get surety that they will not be harmed. Their money comes from the oil that they sell to the US etc. It is therefore important that this same route is used to identify and infiltrate the masterminds and recruit committed Moslems even with an anti US bias to carry out US intelligence work and not use the current but dated techniques of vetting their intelligence recruits. This method eliminates the possibility of getting the best sources to your side at the lowest cost.
Additionally, the bureaucracy within the intelligence community dissuades the highest caliber of operatives, due to hierarchical interests. All this can be broken down if a team is set up with direct reporting access to the President, bypassing the traditional routes and even the Director of the CIA who by definition has to toe the line to run his behemoth.
I am absolutely sure we can then get to the bottom of some of the real culprits engaged in planning and executing terror, much more accurately and speedily, preventing the sort of mayhem that occurred recently in Mumbai. I am sure Obama must be mad that US intelligence yet again missed the boat on informing him in advance of the distinct possibility of this and therefore now is an opportune moment to set up this top secret mission.
Those entrusted to protect the Nation are the very same people who sometimes unwittingly assist in doing just the opposite. Lets immediately set up this new approach, before it is too late. There is just no alternative.
The bailout of the auto industry
Lets first try and understand the logic. In this time of recession, if the auto industry, by which we just mean the big three are not bailed out they could actually go bust and the repercussions with all the suppliers is that hundreds of thousands of jobs would be lost. Lets not forget that the Japanese brands that manufacture in the US make more vehicles than the big three and are have not asked for help.
The package while helping to save jobs must have some purpose, as well as a potential upside to the government who is funding the bailout. Lets not forget that the government is the people. So along with the funds, an equity stake with a lot of upside potential is a must as is a restructuring that levels the playing fields. It is no secret that the Japanese automakers have been successful because they have not been hidebound by the very expensive benefits especially with regard to the health benefits of retirees that the big three have to pay out. The new companies did not have old retirees, which the current profits had to fund, neither did they get saddled with the most expensive healthcare plans. So this has to be reformed along with any bailout.
It is also very important that some synergy be instituted to ensure the industry is more productive, and produce recyclable and more energy efficient vehicles. If the government has an equity interest they will be able to more easily impose conditions that will be beneficial in the nation’s interest. It is important at the same vein to realize that they should not pander to the vote base by giving concession to the unions, which will then become counterproductive.
One must also be aware of being fair towards the companies that are efficient and which have not asked for help. So an agreement that will not upset them needs to be made, so discounting due to government subsidy does not become an issue.
It is important that a well considered plan be set up that not only covers the short term need for job retention but for the long term interests of achieving goals that are beneficial to all. There is no free lunch for the management or the unions, and so there will have to be a price paid for this help, which will accrue to the state. This will therefore ensure that the people at large feel this is no subsidy for inefficiency but an investment for the future.
The package while helping to save jobs must have some purpose, as well as a potential upside to the government who is funding the bailout. Lets not forget that the government is the people. So along with the funds, an equity stake with a lot of upside potential is a must as is a restructuring that levels the playing fields. It is no secret that the Japanese automakers have been successful because they have not been hidebound by the very expensive benefits especially with regard to the health benefits of retirees that the big three have to pay out. The new companies did not have old retirees, which the current profits had to fund, neither did they get saddled with the most expensive healthcare plans. So this has to be reformed along with any bailout.
It is also very important that some synergy be instituted to ensure the industry is more productive, and produce recyclable and more energy efficient vehicles. If the government has an equity interest they will be able to more easily impose conditions that will be beneficial in the nation’s interest. It is important at the same vein to realize that they should not pander to the vote base by giving concession to the unions, which will then become counterproductive.
One must also be aware of being fair towards the companies that are efficient and which have not asked for help. So an agreement that will not upset them needs to be made, so discounting due to government subsidy does not become an issue.
It is important that a well considered plan be set up that not only covers the short term need for job retention but for the long term interests of achieving goals that are beneficial to all. There is no free lunch for the management or the unions, and so there will have to be a price paid for this help, which will accrue to the state. This will therefore ensure that the people at large feel this is no subsidy for inefficiency but an investment for the future.
Thursday, November 27, 2008
Financial Crisis
A possible way to resolve the financial crisis in the United States
I propose we home in our focus on the individuals directly affected by the fallout of the current crisis. We then analyze how they can be fairly assisted without penalizing those who have not contributed to the crisis. Therefore those primarily affected most seriously are those who are likely to foreclose on their homes, those who are likely to lose their jobs, and the retired and those about to retire in the next two years, whose pension funds have fallen in value drastically.
On home foreclosure, the initial proposal for a 90day moratorium on repossessions is a good one. Then I propose a revaluation be done on all homes and where outstanding mortgages are more than the revised value, the banks be assisted by way of a debt to the government of the difference. The homeowner is thus given a revised mortgage (at 100% of valuation) to repay at a now revised rate of interest. The homeowner then has the chance to walk away or accept the revised mortgage. No tax will be assessed on the difference in loan amounts. For those likely to lose their jobs, one can extend unemployment benefits for a further 6 months, but also give a subsidy to the employers for worker retention, so that unemployment benefits are not needed when a job is saved. This would only extend to some industries such as autos, where it is decided in the nation’s interest to protect them. In construction, where this cannot be done, these workers to be offered alternative employment in public works projects, if they so wish, that are much needed, such as schools and road building, repair and renovation. For retirees and immediate retirees, some sort of income supplement for a few years, to ensure they are above the poverty line, would be an adequate method to cover this sensitive section of the population.
The crucial point here is that all these proposals will directly put money in peoples pockets or prevent them losing consumption funds. This will go directly to stimulate consumption, which is in danger of falling, with the attendant job cuts in sectors such as retail and restaurant services. This will be politically acceptable, and will be a real stimulus package. Of course tax cuts for the middle classes will also help in this consumption led recovery.
It is also as projected a good time to begin giving aid to industries in the so called Green Job sector so that a structural change can take place to prepare the economy for environmentally sound and sustainable, renewable energy.
I propose we home in our focus on the individuals directly affected by the fallout of the current crisis. We then analyze how they can be fairly assisted without penalizing those who have not contributed to the crisis. Therefore those primarily affected most seriously are those who are likely to foreclose on their homes, those who are likely to lose their jobs, and the retired and those about to retire in the next two years, whose pension funds have fallen in value drastically.
On home foreclosure, the initial proposal for a 90day moratorium on repossessions is a good one. Then I propose a revaluation be done on all homes and where outstanding mortgages are more than the revised value, the banks be assisted by way of a debt to the government of the difference. The homeowner is thus given a revised mortgage (at 100% of valuation) to repay at a now revised rate of interest. The homeowner then has the chance to walk away or accept the revised mortgage. No tax will be assessed on the difference in loan amounts. For those likely to lose their jobs, one can extend unemployment benefits for a further 6 months, but also give a subsidy to the employers for worker retention, so that unemployment benefits are not needed when a job is saved. This would only extend to some industries such as autos, where it is decided in the nation’s interest to protect them. In construction, where this cannot be done, these workers to be offered alternative employment in public works projects, if they so wish, that are much needed, such as schools and road building, repair and renovation. For retirees and immediate retirees, some sort of income supplement for a few years, to ensure they are above the poverty line, would be an adequate method to cover this sensitive section of the population.
The crucial point here is that all these proposals will directly put money in peoples pockets or prevent them losing consumption funds. This will go directly to stimulate consumption, which is in danger of falling, with the attendant job cuts in sectors such as retail and restaurant services. This will be politically acceptable, and will be a real stimulus package. Of course tax cuts for the middle classes will also help in this consumption led recovery.
It is also as projected a good time to begin giving aid to industries in the so called Green Job sector so that a structural change can take place to prepare the economy for environmentally sound and sustainable, renewable energy.
Thanksgiving
November 27, 2008 Thanksgiving Day a unique American Holiday
Today is the Thanksgiving Holiday, celebrating the arrival of all immigrants to this country, a capitalist bastion, and defender of democracy, where equality of opportunity is afforded to all citizens, no matter whence they came and what beliefs they adhere to or what race they claim to belong to.
I can finally say that after the election of Barrack Obama as the 44th President of the United States, that this statement finally can be verified by action and not by mere words. In more senses than one it is historical, that is both Obama’s election, and today’s Thanksgiving. It is also very important not to forget what lies in store for most Americans in the coming two years.
Though they may not know it, they are in for a rude shock of having to go without things they have taken for granted, and will finally bring some sense into a materialistic world that it is not just money and things money can buy as well as having a job that can give one satisfaction and happiness.
Let us also not forget this day, that one person’s Thanksgiving is another person’s eviction. Whether barren lands were purchased, acquired by force, or colonized, the Native Indians were annihilated and there possessions taken or burnt, so that only a handful of them remain albeit now of mixed blood, many in Reservations, overcome by alcoholism and social problems which the rest of America does not appear to want to face and solve. It is more than slavery, America’s still festering sore that must be healed if can call ourselves truly free of guilt and forgiven for our ancestors sins.
I say this being more American in some senses than most Americans, having traveled to more of the country than 95% of those who live in it and being more aware of the conditions of the rich and poor with solutions to solve most of their ills than most people who live there.
I therefore on this Thanksgiving day have decided to dedicate this blog solely to address issues that directly relate to the American people, and how they can solve some of their real problems without prejudice so that they can regain that pioneering spirit and sense of moral authority that has been lost. Most people who live in the US just like those who live in any other country cannot fluently and eloquently provide the answers to their pressing problems, as they like the rest of the world are engaged in the act of living and prefer to spend their earned leisure in relaxation than in contemplation.
Today is the Thanksgiving Holiday, celebrating the arrival of all immigrants to this country, a capitalist bastion, and defender of democracy, where equality of opportunity is afforded to all citizens, no matter whence they came and what beliefs they adhere to or what race they claim to belong to.
I can finally say that after the election of Barrack Obama as the 44th President of the United States, that this statement finally can be verified by action and not by mere words. In more senses than one it is historical, that is both Obama’s election, and today’s Thanksgiving. It is also very important not to forget what lies in store for most Americans in the coming two years.
Though they may not know it, they are in for a rude shock of having to go without things they have taken for granted, and will finally bring some sense into a materialistic world that it is not just money and things money can buy as well as having a job that can give one satisfaction and happiness.
Let us also not forget this day, that one person’s Thanksgiving is another person’s eviction. Whether barren lands were purchased, acquired by force, or colonized, the Native Indians were annihilated and there possessions taken or burnt, so that only a handful of them remain albeit now of mixed blood, many in Reservations, overcome by alcoholism and social problems which the rest of America does not appear to want to face and solve. It is more than slavery, America’s still festering sore that must be healed if can call ourselves truly free of guilt and forgiven for our ancestors sins.
I say this being more American in some senses than most Americans, having traveled to more of the country than 95% of those who live in it and being more aware of the conditions of the rich and poor with solutions to solve most of their ills than most people who live there.
I therefore on this Thanksgiving day have decided to dedicate this blog solely to address issues that directly relate to the American people, and how they can solve some of their real problems without prejudice so that they can regain that pioneering spirit and sense of moral authority that has been lost. Most people who live in the US just like those who live in any other country cannot fluently and eloquently provide the answers to their pressing problems, as they like the rest of the world are engaged in the act of living and prefer to spend their earned leisure in relaxation than in contemplation.
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