Sunday, July 17, 2011
The government borrows 40% of what it spends. One solution to living off of credit is to raise the credit limit while another is to not spend as much. The former is characterized as the reasonable thing to do to avoid an unthinkable outcome. The latter is a bomb throwing step toward economic calamity. Now that we have identified who to blame it only remains to implement the reasonable, moral and caring solution. Raise the debt ceiling for everyone: people with too much credit card debt – raise their borrowing limit; people who bought homes they could never afford – refinance and give them more cash to spend; national debt – borrow and spend. What could go wrong?
A Newsday article notes that prices will go down 10-20 cents when the government imposed gas formulas expire for the season. Add the state/federal taxes that account for about another $.50 and the Federal printing press that is making the dollar sink and over 25% of the current price of gas is due entirely to the government. Government policy to discouraging the domestic production that could increase supply and lower the market price doesn't help much either. The price of gas is a dollar before an oil company produces a single gallon of gas, pays any of their hundreds of thousands of employees, or the small business guy who owns the station makes a nickel. The government's cut is the stable part of the price. Exxon does not make a dolooar profit on each gallon but the government does. There plenty of reasons why the price of gas is high but our government is the main one.
Debbie and Frank are really in debt trouble and go to two counselors. The smooth talking counselor’s plan has multiple parts: increase their credit line; get money from a few strangers who have more money than they do; over the next 10 years they will have to spend less than they had planned to – more than they are spending now but less than they had planned on. Debbie and Frank are excited about this new way of saving and promise to plan on spending even more so when they cut back a little the savings are even greater. With this savings plan and the counselor’s optimistic projections about their future income growth, they will be in great shape in about 10 years if all the assumptions work out. The other counselor is not as popular with all their friends, seems be less optimistic and his plan is harder. He does not want them to increase their credit line. He wants them to stop spending more than they take in. He notes that their spending has gone way up in the last few years but their income has not – he wants them to go back to that spending level. And he doesn’t think that a slower rate of increased spending is the same as savings.
The information clog might be breaking up. An editorial applauds the decreased Fannie Mae/Freddie Mac lending and concludes that we would be better off without the government in the mortgage guarantee business. An article describes the Dodd-Frank requirements for down payment and borrowing limitations related to income and other indebtedness. Ironically, these are the same lending criteria that existed for decades and were discarded by Fannie Mae and Freddie Mac in order to make it easier for everyone to own a home. Follow the trail. These agencies guaranteed the mortgages that met their non-criteria and called them sub-prime. The agencies were guaranteeing them so banks responded by making these absolutely secure, guaranteed by the US government loans. The agencies then bought the loans packaged them and sold the resulting securities that were based upon these absolutely secure, guaranteed by the US Government loans. As we are all so painfully aware, making loans with no credit criteria leads to defaults. As the loans defaulted, the securities plummeted in value and so did the derivatives which were based upon the government guaranteed securities. Increasingly, the finger is being pointed at the government’s involvement and attempt at social engineering. A new book on the financial crisis co-authored by a New York Times columnist/business and financial editor (!!!???), blames the central role played by Fannie Mae and Freddie Mac, as well as government policy that pressured banks into relaxing lending standards so that the "under represented" could buy homes they could not afford.
What is going on?
What is going on?
Friday, July 1, 2011
The head of the teachers union has written Newsday to express opposition to any changes to the current system of teacher evaluation. There are no suggestions for correcting an evaluation system which is clearly not working; only that the changes are bad. In support, he refers to unspecified “educationally sound measures” and the “best educational research” that have been the basis of the system for years. We are now living with the results. There is lip service to having the best teachers but his union, like all unions, is congenitally opposed to rewarding better performance. Finally, at the head of his list of things that will suffer if there are any changes are “impromptu discussions of world events”. More discussions of world events would be a good thing but could these teacher led classroom discussions possibly involve promoting any world events such as the union’s positions on school budgets, pension reform, political candidates and the like?