Musings on the USA

The latest furor about Race, the US being banded a nation of cowards!

2009-02-19T16:55:00.001-08:00

One could argue the toss about whether it was the place of the Attorney General, the chief law enforcement officer to make this comment in his department at a function commemorating ‘Black History Month’.

No matter what was said and why, let us just go back to some real truths which need to be addressed and gradually resolved in time. The election of Barrack Obama should make it easier to address the hush topic of race in the open without fear, as sometimes is the case for fear of offence.

Having lived in the US for nearly 15 years and having traveled the length and breadth of the country, I can speak with an element of first hand knowledge as well. People of all races work fairly harmoniously together, and socialize after work, however they go back to their segregated neighborhoods. I believe it is a matter of comfort for them to live side by side with people of the same race, be it Italian American or African American. I have lived in neighborhoods that are new in the Western US where if the area is less than 20 years old, and all the homes are new, they tend to have a racial mix that is representative of the area, and in that sense no ghettoes are created. Of course in luxury neighborhoods, the Indian and Chinese Americans are more represented than even White, as compared with the area’s racial mix.

In a similar vein, watching kids in schools that are in old neighborhoods racially segregated, it also seems to have a system of apartheid, which despite years of trying to integrate, have not actually happened. In college students tend to lunch and therefore socialize in racial groups, and only where some races are totally underrepresented like Indian Americans, they kind of get an honorary white acceptance.

These examples illustrate the need still for their to be a debate, and for whites and blacks to make a conscious effort to integrate more, so that fear of a black family next door does not arise. It is easier said than done, and we have to make an effort. In that respect the word coward, which can be interpreted in many ways, is one that is apt. We are not confrontational enough to call a spade a spade and in that sense we are cowards. Lets therefore not get bogged down in the words used, but just accept the reality and address this issue in a way that will promote racial harmony. We have to first accept there is a problem if we are to find a solution.

Lets try and break the deadlock

2009-02-12T08:08:00.000-08:00

In a functioning democracy with free speach, and now the internet and blogs, we are all able to say our piece whether we agree with a point of view or not. Additionally we all have our personal gripes and favorites and express them in no uncertain terms in all forms of media. Additionally the level of knowledge and ability to communicate them also varies vastly from person to person as can be seen from the various blogs and letters that one reads as well as the comments on these blogs. The prejudices of a lot of people are also aired pretty openly so that one can get a feel of the mood of the writer.

Then there are all the personal hardluck stories, where some shout louder than others over the personal tragedies which we all face in some form or another and handle with different levels of forebearance and fortitude. Even in this area it is common knowledge that in crises the really hard up cases are not heard nor are they found and so do not even receive the levels of basic attention they are entitled to in some cases of tragedy.

In all these how do we find common ground from which we can begin to solve the country's seemingly insurmountable problems. Even in the Houses of Congress it is apparent that politics plays a role as the constituents feelings are sometimes expressed by the congressmen which differ markedly from the party line. In coming to a compromise, there has to be a give and take from both sides and how much one gives is the key and not how much one takes.

In these heady days where there are urgent matters to be settled and compromise has to be reached hastily, certain party line differences need to be ignored and a consensus building process entered into. In the case of the new President he is able to with the goodwill generated from his election and the post election expectations to break the deadlock and come up with some unanimous proposals, so that there are no doubting thomases in the 'I told you so mold'. Even if the proposal when enacted does not work it was not for want of trying, as there are no fixed solutions to these problems and only ones that are hoped will change the status quo.

I believe we really have to come together in these tough times and build confidence which is lacking and which will not be forthcoming without unanimous support.So I request those who are fortunate enough to have the power to change our lives, that they do so with haste before matters get worse and do it effectively, decisively and unanimously.

The only immediate answer to the crisis everyone is grappling with

2009-02-12T04:49:00.000-08:00

Sometimes the answers to the serious problems are so simple, it takes one far removed from the daily brainstorming sessions inside the FED to find a simple solution, which will go along way to reducing the length of the recession and add a stimulus faster than any other proposal currently put forward.

Mark to market value all loans on first homes. The write down will be matched by Fed Funds on the balance sheet as a no interest promissory note. In accounting terms, Credit the Loan Assets, by reducing their value, and Debit Loan writedown loss in the Profit and Loss account. A book entry for capital adequacy issues to be made by Crediting the same amount in a Balance Sheet account called Interest free promissory note from the FED and Debiting a Balance sheet account called current account with the FED.

There will be an immediate reduction in Foreclosures, immediate reduction in mortgage payments on the lower principal, and some kind of amortized capital repayment of say 2% per annum of reduced loan value to satisfy those who feel they are getting a free lunch for being highly leveraged. 75% of the gain on sale of the home, should be clawed back and the whole debt reduction amount will be with the person for life, much like Student Loans.

This will mean those ready to foreclose and declare bankruptcy will think twice as this will be an effective renegotiation of their loan. Those who have already paid off debt or have reduced debt, who are usually the older people and likely to vote in elections will not be mad as these debt reductions are not write-offs, just delayed for the future.

In effect what this will do is immediately release a lot of funds, arising out of lower interest payments direct to the economy by people who are most likely to spend it on immediate consumption, and not pay down debt. This will give an immediate boost to the economy, more immediate than any of the current plans. This will not be inflationary, as the same amount of money is still in circulation, just that instead of interest payments, it will be used to buy consumer goods. The Housing crisis will immediately come down to manageable proportions and the once off hit of even 5 trillion in write-downs will not really have a negative impact as this money will not be released, just an accounting entry to change its format on the balance sheet.

SO LETS DO IT WITHOUT FURTHER ADO BEFORE ITS TOO LATE

This is the ONLY SOLUTION to the present crisis

2009-02-12T03:59:00.000-08:00

It appears that the Gnomes in the US government are grappling with a crisis they know not how their actions will solve!! The example below characterizes one primary reason that the stimulus will anger more people than will create demand. If I were a hard working honest person, who suddenly sees the value of my main asset, my home and my retirement savings account lose 50% in value in a matter of months, how can I continue to pay a mortgage off that is much more than the value of my home?

Arguably, they are worse off than those who have lost their jobs, home, and are on unemployment benefit, which has now been extended for over a year. The latter have no debt burden. The former are drowning in debt. Everyone is therefore in crisis and there is no relief at hand for those still in work!!

This scenario of those in work and those out of work both in a deep depression, no amount of tax reductions, tax credits are going to increase their spending, as they now draw down on credit card debt as well. In many ways those out of work who have declared bankruptcy, and have all their debt wiped clean excluding student loans, are the best off. They have no worries, as they sit at home in a rental drawing unemployment benefit not having to pay off any borrowing. Those with the mortgage, credit card debt, home equity lines, and car loans, are those who will not recover for a decade, having to work to pay off this debt, and so will NOT spend however much you give them even with no strings attached.

The answer is simple and one had better do this now and not later after the recession has gone on for a long time with people wondering why it has not ended. Just the first mortgage only must be reduced to the value of the property or collateral. Then there will be less foreclosure, less delinquency, and a greater likelihood of having disposable income to create instant demand, by those very people who are more likely to spend this mortgage reduction on consumer durables and disposables. Needless to say any future capital gain on the sale of the property can be clawed back by the bank/govt. and so no perceived long-term benefit will result. In a future bankruptcy their lower reduced debt will be with them for life not being extinguishable.

So Mr. President heed this advice as being the surest, quickest and only way to stimulate the economy, and not let the housing crisis overhang any possibility of recovery in the foreseeable future.

The very real crisis in the neighborhood- enough to turn the stomach

2009-02-12T03:56:00.000-08:00

The economic crisis is really having a social upheaval between oneself and ones neighbors to an extent it did not before. Given the collapse in the housing market, I illustrate by way of an example to make the point about the changed economic circumstances arising out of changed expenditure.

Mr X and Y are neighbours, living next to each other on a new housing development to which they moved two years ago, each paying US$1M for their lovely home with all mod cons. Mr X worked for a mortgage brokerage, earning US$100K gross, and Mr Y worked for the Government also earning the same. They both put down 10% on the house and borrowed the rest from the same lender, paying the same monthly interest on the mortgage of $4,500 a month. This took a chunk out of their monthly income. When the recession hit and the bottom fell out of the mortgage brokering business, Mr X lost his job, and went on unemployment benefit, being forced to foreclose on his home and walk away leaving the property with the lender. Mr Z bought this property at auction for US$500,000 with a down payment of US$100,000. His monthly mortgage payment is $2,000 and his income is US$50,000. The annual property taxes that Mr Y pays is US$10,000. It is based on the price paid at 1% and so Mr Z pays US$5,000. Due to the deductions and lower income Mr Z pays no taxes, while Mr Y pays US$5,000. Mr Y net annual income after mortgage interest and taxes is $31,000, while, Mr Z who earns half that has $21,000. A difference of $800 a month.

So Mr Y who sees his neighbor doing a job that pays less than half his, living next door, having paid half of what he did for the house a few years later, saddled with a mortgage that exceeds the value is in a negative equity position to add to his woes, while the lower income neighbor has a positive equity of the $100,000 down payment. What is Mr Y to do? Does he walk away in bankruptcy, that could jeopardize his job? And with no money to put on another home, will have to be a renter in a place of similar value but with a much lower rental than his current mortgage freeing some disposable income.

These are some of the real choices people will have to make, and with the temptation to walk away being so great, could exacerbate the mortgage crisis further, even by those who still have jobs, but are appalled at having to pay interest and capital on a borrowing that far exceeds the value of the home.

The Bonuses to be paid of US$18B and the Pork Barrel in the Stimulus

2009-01-29T20:28:00.000-08:00

The above are two current topics from yesterday’s happenings in Washington and New York, both having the theme ‘business as usual’.

It is unconscionable and Obama reiterated this, that banks, which continue to accept Federal bailout money, pay huge bonuses to staff based on their performance last year. Why should effectively, tax-payers who lose their jobs, subsidize well-paid executives just because it was drawn into their contract of employment. If the bank had gone bust these executives would not have received this bonus and so it is fair that if the govt. saved the bank from foreclosure, the bonuses should be pared to a reasonable figure of not more than $500,000 at the top and pro rata down to the others. Needless to say that if there was no bailout money for a bank they should be free to pay out what it wants to whom it wants as long as its shareholders are in majority agreement to the payment.

On the other matter, where the House of Representatives split completely on party lines, the Democrats should know better than to insert ludicrous spending into this bill which will only inflame right thinking voters, into believing that Congress live in a different world to them. It must be remembered that the pork barrel will help certain communities with money on projects that are nevertheless questionable, however it is the principal of the practice that is at stake. The President promised that there will be change and it will not be business as usual. So in order for him to have credibility he must pare this down significantly in the Senate version and when it therefore returns to the House at least 50 Republican Congressmen could be persuaded to support the final version, by so doing.

These are all examples of good governance that should be applied from the commencement of the new administration. We will soon be confronted with a few other similar ideas, and the other contentious issue is the buy American plan to help the US economy. It should however not be mandatory, as it would inflame the exporters to the US and thereby prevent them from buying US goods, an altogether silly idea. Of course subtle encouragement is OK in any country and why shouldn’t the US also engage in helping their domestic industry. We must be sensible and think when we make rash and hurtful comments, as they come back to haunt us. This issue is also one in the same light and a similar judgment call should be made.

Martin Luther King Day, January 19th 2009

2009-01-19T12:13:00.000-08:00

Today is Martin Luther King National Holiday in the USA. Tomorrow is Barak Obama’s Inauguration on Capitol Hill. The recent poll amongst US blacks resulted in them overwhelmingly agree that Dr Martin Luther King’s I have a dream speech delivered on the base of the Lincoln Memorial, has finally become reality.

In essence the speech was that he believed one day all Americans, Black and White will be equal and live without the bondage created by race. I need not say how apt the inauguration of the new US President, the first African American, follows the MLK holiday which is the reason why the African Americans finally feel empowered to even state this fact.

As an immigrant American, I get misty eyed at the significance of this symbolism and wish I had the time to watch the inauguration. Sadly I have to work and will miss the news and TV coverage of this momentous event. My thoughts and prayers are with the event and the new President, and I hope that he will be able to achieve some of the expectations the whole world has on his Presidency. We cannot predict the future, but having optimism that events will improve is worth holding on to.

The crisis the world is facing this year is unprecedented and occurs once in anyone’s lifetime. In some cases this is number two for some people like my father who was born in 1928 and so lived through the crash of 1929 and the depression of the 1930s where his grandfather who had so much went bankrupt. Even then the world crisis affected the world not just a country. This time too no matter what one says it has affected everyone in one way or another. The solution to this crisis needs someone with charisma, hope and optimism to be in charge and I believe we could not have hoped for a better person to take the helm. The saying goes that God works in mysterious ways when the heart is right!! HE SURE DOES.

It is therefore apt that with the fulfillment of the dream, the new challenge of the century is now handed to the man who takes up this mantle. I wish I were able to see a video of the whole “I have a dream” speech as one needs to listen to this again today to understand more fully the whole significance of the day and how it seamlessly relates to the events of tomorrow. I pray that all young people in the world are taught this story of courage to give them an overview of history and of how important an event tomorrow is.

The United States indifference to the Palestinian Cause

2009-01-10T17:12:00.000-08:00

As an American with more international exposure than 99% of the population I see the situation in the Middle East with completely different eyes. In essence the United States Government, which supports the will of its people be it right or wrong, permits Israel to carry out anything and everything it does to defend itself from its hostile neighbors. This is because the US public firmly believe that the use of any force as also happened in Iraq and Afghanistan, to get its objective is justifiable.

This is because the American public have no idea of the history of the setting up of the State of Israel from what was Palestine and how it has survived to date. If they knew the truth their attitude would be very different, and the lobby that backs Israel has the power not to let the people know the facts. The position shown to public is that Israel is a Jewish state anointed by God and not challenged by the Christians in the US who are more pro Jewish than pro Arab. An Arab in the view of the average American is an enemy and the Jew is an ally. This is the crux of the problem.

In the current Gaza crisis the Israelis know that they will never get rid of Hamas or the rockets they send over to Israel periodically. They may believe they can reduce the capability of Hamas by bombing Gaza out of existence, which has currently happened. The reality is that the intensity of destruction is directly proportional to the sympathy for Hamas, so I fail to see anything other than punishment and revenge by a powerful force against hapless people who are nevertheless sympathetic to anything and anyone wanting to harm Israel. Why does Israel continue to do this?

My interpretation is that by showing how powerful and destructive they are they will galvanize the world to action, and force a settlement politically on the Palestinians. The Palestinians will be forced to accept even though they may not like it if they are to be prevented from extinction. Israel knows they always will only have one ally in the form of the US and no other. They know no matter what they do they cannot change that fact, so they don’t care for world opinion and therefore just carry on as they know no one can stop them. The power of their army is no match for their enemies and they also have the ultimate capability of nuclear weapons.

As long as they are oppressed and have no escape the Palestinians will become more extreme and Hamas eventually will become the government.

The great debate on what is best to stimulate the economy

2009-01-10T02:25:00.000-08:00

There is considerable input from all quarters on what is needed to avoid a catastrophic recession or even a depression. The opinions are as diverse as the number of advisors. If one goes back to basics, one can find the solution that works, not being tainted with labels for the economic theories propounded. What is needed is an amalgamation of right and left leaning theories into one that actually works. This is not a capitalist socialist thing either, as China is suffering as much as the US. The out of work Chinese have to go back to their home villages, giving up their yuppy lifestyle.

So how do we use existing productive capacity to good use that will immediately stimulate the economy? There is both the supply side and the demand side to contend with and so there is no use manufacturing cars with the existing productive capacity if there is no one to buy them.

It has been said that the US boom was fuelled by the increase in consumer spending which came out of increased confidence, job security, increased income, and increase in wealth from increasing home values and stock values. People then felt wealthier and so did not hesitate on borrowing on credit cards and home equity lines to spend on cars, second homes, flat screen TVs and exotic vacations. Now all these are in reverse and hence the contraction in every area of demand leading to unemployment.

Companies cannot afford to lose money even though the government can and so the layoffs are in the private sector while those in government jobs are secure for the time being. It is therefore very sad that the risk taking entrepreneur and his hard working employees lose their jobs through no fault of their own, many of them gearing up their business to meet demand which has suddenly dried up unexpectedly almost like a tornado.

It is for this economic tornado, just like for the real thing, that low interest federal money must be given. How it is to be equitably distributed is the question. When it is distributed will it have the impact bearing in mind the changed circumstances. This is the unknown. If I am a business man and I have laid off or about to lay off workers when I see a fall in demand for my products, will the $5,000 or whatever figure is given to me, prevent a layoff or encourage me to hire? That is the $64,000 question. In essence we must find the fix that will immediately have an effect in boosting demand and therefore reduce the need to layoff to put it simply.
There is a natural reticence to spend when one is out of a job, or about to lose one. Even if one has savings, one is less likely to spend fearing the length of the layoff. So unwittingly economics turns to psychology of confidence as the only practical solution. No matter how much tax rebates I receive, I will not go and spend it. I may spend a little of it, but for the bailout money to be effective I must spend all of it. Then should I spend it on imported goods or goods produced at home. That is not something that I could be compelled to do and is just a personal choice depending on what is available in the market along with the price and quality as I see it, along with my sense of patriotism. All these cannot be measured in figures.

It is therefore important that obstacles to confidence boosts such as the Gaza crisis are resolved so the economic crisis can be short lived. One cannot wait to resolve the economic crisis before the Israel problem is resolved, or shall we call the Palestinian problem is the US media have there say. There in lies the nub because the US just does not see the gravity of the Middle East crisis as emanating from the need for a few million Israelis insisting on living amongst a permanently hostile Arab neighborhood, supported exclusively by US aid and arms supplies to brutally suppress all who attack their land.

A holistic approach to the world is therefore needed, as all the large economies, of US, China, Russia, India, Japan, EU and Brazil are in crisis due to the intertwined and interdependant relationships they have with each other. We cannot go back to isolationism, which is now advocated by many, so this issue does not arise. I say it will, if we let greed get the better of common sense. It does not matter what ism we subscribe to.

The root causes of the current recession can take its time to be debated, and we should fix the current crisis as soon as possible before we sink to an even lower level of confidence in the future, when the worst of human qualities will be set free to add death and destruction to the already troubled psyche.

In a novel approach if the government was efficient, I would make the government the spender of last resort buying consumer goods and capital goods and then giving it to the users with some kind of interest free IOU rather than give money which will end up in a savings account, or used to draw down debt and pay of liabilities and credit cards. The effective way of doing this is giving people low interest credit if they purchase from a range of items that will be specifically identified as being the quickest to stimulate employment!!! So if I buy a car the government through the banks will lend!

Sanjay Gupta as Surgeon General of the US

2009-01-06T21:50:00.000-08:00

If nominated my Obama and confirmed by the Senate, I personally believe this is an inspired choice for the position, as it is largely ceremonial and in the public eye where he can make pronouncements in the interests of Public Health in the United States.

Appointing a person in the media spotlight allows both name recognition and familiarity. He has not made any faux pas in his job reporting from hotspots all over the world and is generally aware of most of the public health issues worldwide. He is a neuro-surgeon by training and is therefore competent and no pushover.

Having a position of authority Dr. Gupta can impose his own stamp on matters and knowing how to maximize public exposure, through selective use of media, will be more effectively able to communicate his message to the mass audience. This is most critical to get the message to the masses.

Obesity the leading public health issue can be more purposefully dealt with by a young looking, slender operator, expounding the virtues of healthy eating, in order to reduce as much as possible the preventable diseases of the day. He can expound the truths and myths of smoking, alcohol consumption, and drug abuse as well as sexually transmitted diseases and AIDS without getting stuck into politically sensitive areas of abortion and women’s reproductive rights.

I was so surprised when I heard of this choice that I thought it was a joke, but the more I thought about it I believe his appointment is one of the most inspiring of the administration, and one where a permanent stamp can be made on this position with future SGs finding it exceedingly difficult to emulate. I am confident that he will perform his function to the best of his ability. We can expect some novel approaches to improving the general health of the population that is increasingly dependent on drugs to live at an enormous cost to themselves, and their productivity in whatever they do.

In conclusion, I wish him well and hope he can by his position influence the world public opinion, which is not his brief. He is in a position together with the WHO to use the power of the USA and wealth of the Bill Gates Foundation to do some lasting good in eliminating and minimizing scourges around the world, especially as it pertains to the young and innocent children who are sick or may be at risk of developing preventable illnesses.

The crisis on the Gaza strip January 2009

2009-01-03T18:49:00.000-08:00

Lets go back to basics with a little bit of history and as you know even that is interpreted in a different light depending on the angle you come from.

Palestine was the land of the Palestinians, before Jewish immigrants arrived and gradually bought property in Palestine, first through legitimate means and later by coercion, and still later by devious and surreptitious means before the Palestinians who previously welcomed these people realized what was happening around them. Finally in 1948, the immigrants set up the state of Israel and those Palestinians who refused to live as second-class citizens in the Jewish state had no option but to live as immigrants in Jordan, Lebanon, and the Gaza Strip. This strip is a barren tiny space less than half the size of Manhattan Island in New York.

The Palestinian leadership since 1948 ingrained on the refugees that they would one day return to their homes, which were now in the state of Israel. So when a democratically elected government, lead by the militant Hamas party pledging the eventual destruction of the state of Israel came into power it seemed that Israel had a sworn enemy on its borders.

To cut a long story short, the hardcore Hamas militants, have kept up a barrage of rockets to Israel, usually of low intensity and strength, but latterly with a longer range. The ammunition, has been smuggled through porous borders with Egypt. Israel using the policy of maximum force has decided to target Hamas, and bomb from the air, from land and from sea using the latest technology, bought and given by the US and some developed by Israel.

While Iran and some Arab states or individuals, support Hamas with money and equipment, the US supplies Israel. So there is a proxy war going on where the Arabs can only see the US pounding the hapless Palestinians!!

It is therefore a US problem as they are the only friends in the world Israel has, and as they have this feeling of being surrounded by enemies, they are carrying out what their electorate believes is the only way to go. Remember there is an election in Israel in the offing. Palestinian deaths will only increase the electoral assets of the perpetrator. This is the background of the crisis.

This is one area the UN has been impotent in, as all UN resolutions have been ignored by Israel, and as they have a veto power in the form of the US to defend their interests they act with impunity in ignoring all resolutions.

The innocent Palestinians are the most affected as there will be a further 1000+ deaths of innocents and they are still refugees in their own land, and if one goes to Gaza, you will realize it is the last place on earth you can convince anyone to live in as their home. In short this largest refugee camp on earth will remain like this until something more acceptable is made available.

With so many Jewish people both in Israel and the US believe it is a god given right that Israel is the land of the Jews, in essence Zionism, this is not accepted by the rest of the world. Let me also put my two cents into this argument. Any God will never allow any country to be taken over in his name. So no one has a right to a country by way of religion. Over the years people have settled all over the world and once borders were closed and passports issued post 1900 one was hemmed in and only permitted to enter anyone else’s country through the laws of the acceptor.

There is no possibility of a solution to this crisis until an acceptable solution is given to the Palestinian people to live in dignity in their homeland, however that is defined. In fact an impartial observer will say it is Israel that has to give more land concessions than the beleaguered Palestinians. They need contiguous land, airports, sea-ports and infrastructure to be a state. Nothing short of a return to the 1967 borders will allow this to happen. The world will have a Mideast Crisis till this is achieved. No one other than the innocent Palestinian people are really affected, so this will not be done as they just don’t have the political capital from anywhere for that objective.

It therefore takes a statesman with a lot of guts to solve this crisis once and for all, and at present I do not see one on the horizon. President Obama is the only one with the moral authority to do something, but his utterances and obeiscense to the Jewish lobby who helped him financially to get elected are anything by supportive of the Zionist cause. He can of course take a volte face in the interests of world peace and take a stand and impose a settlement.

The Palestinians have been let down by their own leaders pursuing personal agendas, UN playing international games, and by Israel playing big bully, using a sledgehammer to crack a nut. Only God can help them, so help them.

the republican promise to filibuster the auto industry bailout

2008-12-16T03:53:00.001-08:00

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.

the hedge fund scandal of December 2008

2008-12-16T03:50:00.000-08:00

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.

the methodical way the new appointments are announced

2008-12-05T03:17:00.000-08:00

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.

Intelligence briefings the President receives daily are counterproductive

2008-11-29T06:37:00.000-08:00

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.

The bailout of the auto industry

2008-11-29T06:34:00.000-08:00

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.

Financial Crisis

2008-11-27T07:48:00.001-08:00

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.

Thanksgiving

2008-11-27T07:45:00.000-08:00

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.