The bigger the lie: US Military expenditures

Listening to NPR this morning, I got to hear a discussion of the US Debt and how it related to the military- which causes a lot of the debt.

They had a local expert, who spewed the ne0-con line:

We do face a rising China, a resurgent Russia and a nuclear North Korea. But there’s no clear and present danger the way there was, say, in the World War II or Korea or Vietnam War buildups. On the other hand, we have the smallest number of deployable U.S. Navy ships since World War II, an Air Force tanker fleet and B-52 bombers that are more than half a century old and the last major-weapons buy for the Army in the 1970s and 1980s.

Peter Mansoor, a retired U.S. Army colonel and now a professor of military history at The Ohio State University.

Source: The Tax Bill And The Military : NPR

As to the smallest number of US Navy ships since WWII- what does that mean? In WWII we had ships by the ship-ton, to land troops on beaches, to ferry troops around the world, and naval surface warfare was still a legitimate thing.

It sounds horrible- yet, since the Falklands war, any ship that’s got a profile above water is pretty easy prey to some very inexpensive missiles. Never mind, satellites make it really easy to keep track of every ship on the seas. Throw in the fact that a single destroyer now has the firepower of an entire battle fleet- and what this “expert” is saying is like comparing the Golden State Warriors to the rest of the world- which consists of 5th grade girls teams.

Our Navy has all the ships we could possibly need- and then some.

As to bombers for the Air Force- ever since the ICBM, there really hasn’t been a need for manned long range bombers other than to give the underachieving AF academy grads something to pilot (the superstars all fly fighters).

The reality is the US spends more on defense than the rest of the world combined, and it’s unsustainable. That is, unless we keep creating wars to fight with poor people.

It’s time to tell these neo-cons to go to hell. Cut the defense budget. Stop the wars. Stop fighting last centuries wars.

The Russian’s didn’t need a single bomber or aircraft carrier to help subvert our political process and elect the man most likely to blow us all to bits did they?

The future, it’s not in plastics, or weapons, it’s in information technology. In war, going back to the days of the Romans, those who had the best information, usually won.

When are we going to have leaders that understand that our growing debt, puts us at more risk than anything else these days?

Pay attention people.

Go see ’The Big Short’ now

There is a good argument against democracy- that people aren’t smart enough to select their leaders.

The fact that Bernie Sanders has an editorial in the N.Y. Times today talking about how to reel in the Fed- while other candidates are talking about the terrorist threat, should be a clear message to the voting public that one of the candidates knows what your greatest danger is- and it’s not a jihadist.

The reason most of us make less, work harder, and had our net worth knocked to the ground was because government failed to stop a threat to the global financial markets- and let a bunch of jerks manufacture play money- and put a lot of it in their pockets. Our answer- to make more play money- and pay off their mess- all the while stealing it from you. I know- you don’t believe me. I’m just a perennial candidate who loses elections and writes a blog.

So- let me make it easy for you. Go see “The Big Short” in the movie houses right now. The book of the same name was written by Michael Lewis who also wrote “Moneyball” and “The Blind Side” -so he must know just a little bit about telling a story. In the movie- they’ll explain the house of cards the Wizards of Wall Street built- and blew up- in a way anyone can understand.

This movie should be required watching for every person in America- so you can start to understand who the real threat to National Security and Global Stability is- and it ain’t an Arab with an assault rifle or even a dirty bomb.

But- after posting the Bernie story on Facebook- one of those overly bright U.S. Voters said the following (I’m leaving his name out to protect the stupid):

It was a horrible idea to start bailing out private industry. Just leave them alone. Don’t regulate them and don’t bail them out. Someone else will take over the market.

“Not regulating them is what caused the problem, genius,” was my response- to which he said-

People choose to get into the stock market and to invest in business and the like. No one forces them into it and no regulations are needed. Buyer beware. The only thing that needs regulated by government is unwanted force upon those who don’t want it. And that mess you talk about made many people rich so it wasn’t a mess to them. Now the folks who had their money forcibly taken from them and given to others as a bailout were horribly screwed. And in addition I don’t trust the government with the ability to regulate very much. They are generally fools just looking for a paycheck.
This is the ignorance of how Wall Street is tied to Main Street. And while the movie doesn’t make the ties clear- it does explain pretty clearly how much of a fantasy the market is- with its imaginary valuations and total disregard for the mechanics of a functional economy.
Here is the part that most don’t get.
Most people do not invest in the stock market- they don’t have the money to spare. They don’t think the market is connected to their well being- but, in fact, this small subset of our economy is tied to everything. You buy insurance- that money is “invested” in the market by the insurance companies- who then “manage risk” and “protect” you from financial ruin in a catastrophe. The movie talks about how buying insurance against the market misbehaving was monetized- and a few people made a boatload of money betting against the people of the United States.
Those very same people, who paid to fix the mess.
But, insurance is only one part of it. The markets also control your credit scores, your interest rates, your credit worthiness- and also those of your employer. Your pension, if you are lucky enough to have one, is also “in the market.” And while the media and discussion focus on the big businesses, who get access to the best rates- no matter what- the majority of us, work for small business- which has the deck stacked against it a million different ways.
As to the government- we used to protect the people from being preyed upon by the FIRE (finance, insurance and real estate companies), in fact, the guaranteeing of home mortgages was a response to the last financial debacle when banking was allowed to self-regulate.
Go watch the movie. You’ll better understand what happened- even as you watch more people get insanely rich off the most rigged casino on the planet.
And here I’m going to defer to a friend, Daniel Greene- who added the following to the conversation- because some people actually do learn from history.
“If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.”

– James Madison, Federalist Paper #51

Those who advocate getting rid of government regulation are asking to return to an economic Darwinian state of nature where only the strong, super-rich survive, and everyone else gets thrown out on the street.

And, if you need evidence of what getting thrown out on the street looks like- go take a drive through some of Dayton’s neighborhoods- and look at all the vacant homes.
What’s worse- Madison wrote that statement in 1778, and men still aren’t angels.
But, we still believe that our government has been protecting us- despite it being bought and sold like a commodity. Go watch the movie and report back here in comments.


How to stimulate the right part of the economy by saving the government money

With all the fuss about the Fed raising interest rates- which is going to go straight to the banks’ bottom line, it’s time to take a look at a commonsense approach to handing some money back to the people at the bottom of the economic ladder- and save the government money at the same time:

A new report shows the cost to produce a penny was 1.7 cents in the 2014 fiscal year. That’s down from 2.4 cents in 2011 but still more than face value.

And that won’t change.

“There are no alternative metal compositions that reduce the manufacturing unit cost of the penny below its face value,” the biennial report to Congress said.

The nickel, too, is dead weight for taxpayers. Production costs stood at 8 cents last year, down from 11 cents. The lower cost per coin is largely a result of rising production and reduced metal costs.

Other coins turn a profit. A dime costs 3.9 cents to make, and a quarter 9 cents. All together, the Mint made $289.1 million on seigniorage–the difference between the value of the coin and the cost to make it–despite a $90.5 million drag from the penny and nickel.

Congress in 2010 told the Mint to examine ways to save money on coin production, a mandate that so far has led to detailed testing of alternative metals and production methods, including the use of a laser to produce coin blanks.

The Mint estimates that switching up the metallic content of coins could save taxpayers $5 million to $57 million a year, though vending, amusement, laundry and other groups with coin-operated machines warn that it could cost them billions to reconfigure machinery and make other adjustments needed to accept altered specie, the Mint said.

Source: Just How Much Does It Cost to Make a Penny?

So, how do we do this? You know that pile of pennies you have, sitting around the house? In kids piggy banks, and on top of the washing machine? Buy them back at more than a penny.

Have a day set where you can bring in 100 pennies and get a dollar bill and a dime back. Making the effective cost of putting a penny back into the Fed’s coffers .0011 cent. You could even spiff people who brought in 1,000 pennies and give them back $11.25 etc.

If the cost to make the nickel is that high and the Mint needs more- simple, buy them back too.

Since the super rich probably won’t waste the time running their spare change to the banks for the buyback- this will put a bunch of extra dollars into the hands of those who’ve been penny pinchers for a good reason. Pay the banks a small premium for handling the cash, but stop the stupidity of minting new coins that cost so much. Economic stimulus made easy.

Dr. Yellen are you listening?



Stop subsidizing the super rich: alternatives to the Fed rate hike

Today is the day when the mystical magic of economics is played with by people in an echo chamber.

And while the actions of Dr. Janet Yellen and the Fed are being anxiously awaited by the Wall Street Wizards, the pawns of the economy are hoping that the price of gas doesn’t jump up 20 cents.

No matter what economists and financial wizards think- Wall Street is so disconnected from Main Street (and reality for that matter) that the amount of attention paid to their fortunes is as disproportionate as the media coverage between Donald Trump and Bernie Sanders in the presidential race- despite one having substantially more donors, followers and potential votes.

Part of today’s action is boosting the interest paid on deposits big banks hold with the fed. This is supposed to “tighten” money up a wee bit- making lending slow down. This is giving more money to the people who crashed our entire economy- does that sound like rewarding bad behavior to me? Sure does.

So here are some alternatives – some of which could be enacted by Congress- which would do the same thing, and actually impact Main Street more positively than Wall Street:

  • Cap credit card interest rates at 20%. Any interest rates approaching 25% have been proven to be loans that are inescapable. In Ohio we saw toothless laws against payday lenders try to reel in these sharks, while the big banks are back to their old tricks- with bundling and reselling this high yield debt.
  • The 2009 bailout is still sending shock waves through the real estate market. We allowed millions of people to lose their homes, and even when we stepped in to “help” homeowners- the only people who benefited were the banks who all were made whole- even if the valuations were all wonky to begin with. There are still many people who asked for assistance- or even received it- that are still paying interest rates on home loans several points over what a loan is now. Offering 100% tax credits on any interest paid  last year over 5% on homes owned before 2009- would put money back in the hands of the people who have managed to struggle through the storm- while making sure not to hurt the precious bankers bottom line.
  • Enact caps on pay for companies that subsist on the public dollar. There is no reason to keep feeding campaign coffers with federal money. Here’s what I mean: hospital revenues can be divided by federal funded and insurance company funded. With the new mandate that everyone has health insurance- this basically comes down to health care is funded 100% with money from tax dollars. Yet, while the President of the United States makes a mere $400,000 a year- the average hospital CEO makes at least 3 times that. Defense contractors- make even more. Either cap salaries- or have special tax rates approaching 90% on all revenue above $400,000 a year for federally funded work- and, btw, ban them from donating to political campaigns and hiring lobbyists. No need for that circular flow of money to be subsidized.
  • And last but not least- companies that have more than 100 employees that have people on the payroll who are getting public assistance- be it section 8 housing, medicare, food stamps- etc- that money needs to be charged back to the employer. Call this the WalMart rule, call it being fair to families, but there is no reason to continue this subsidy of the rich at the expense of the poor.

Changing the federal funds rate is easy. Making real substantive changes to the real economy outside the Wall Street bubble is hard.

And one last thing- if we really were talking about stabilizing the economy, there should be a 24 hour moratorium on Wall Street trading starting an hour before the announcement. Of course, if we really wanted to start making economic policy that made sense, we’d eliminate flash trading, require stock purchases to be held a reasonable amount of time to be considered a true investment other than a day at a casino… but, that’s really wishful thinking.

Banking inequity

I have a contract sitting around somewhere for a home equity loan with Gem Savings from around 1990. It was one page, letter sized, in large type- and was all I needed to sign to get an equity loan on my house.

Now that document would run 8 pages of micro-type and include things like an arbitration clause, denying me the right to use the justice system to settle any grievances.

Later I signed one of those really long contracts to refinance my house with a bank. They changed the terms at the last minute, after jerking me around for weeks. Then, promptly sold the loan off to some mortgage servicing company, and then it’s been transferred time and time again- all without proper recording of title and lien transfer at the County Building.

If you or I sold a property and didn’t record the transaction, it wouldn’t be considered valid.

My small business, a sole proprietorship, recently teamed with another small business to do a large deal- $130,000, with a very small margin. When I went to deposit $90K, they wanted to hold my money for a week- despite being told well in advance this deal was coming. The banker even tried to warn me that this could be fraud. I had promised the vendor I’d pay by wire transfer- and was told by the bank it’d be $25 to wire money out. They didn’t tell me there was a $13 fee to have it wired into my account.

I’ve even had them putting holds on rent checks that are certified. Apparently, “Certified checks are easy to forge” which is why the hold according to my bank. WTF good is a certified check then? I do work for a credit union- which pays with certified checks- even those get a hold.

It’s getting harder and harder to run a small business, and banks behaving badly is just one more obstacle for small business to overcome. When I was a youngster in business school, you were advised to have counsel of a lawyer, accountant and a banker. Since the deregulation/consolidation of banking in this country, I’d say you’d be hard pressed to find any banker with actual lending authority anymore.

The last one I encountered was at Eaton National Bank- which once it got absorbed by LCNB ceased to be what it was. I’m experimenting with Wright Patt Credit Union now- which is one of the few credit unions that can do business lending. It’s becoming apparent that small business really is better off with a credit union instead of a bank, but I’m not sure if this applies to start-ups (I’ve been in business for 25 years).

One of the problems is that small business can’t buy the politicians’ ears the way big business can. When was the last time you heard of a tax break for small businesses? A program to help small businesses grow- that wasn’t driven by big business financial tricks (like quick write-offs of capital expenses)?

What could change if small businesses were given tax credits rewarding them for each full-time employee, length of employment, and growth in payroll that were redeemable for low-interest loans and access to working capital? What incentives could we offer to encourage the big banks to take small business seriously?

Small business powers most of our job growth, but, there are no small banks left to work with them. It’s time to solve this problem.