Friday, December 21, 2007

Why I love the government

by Jimmy

Because mothers are too STUPID to properly care for their children. Because doctors are too STUPID to know how and what medicines to prescribe for their patients. Because parents are too STUPID to know what car seat or toy is safe for their kids. Because we're too STUPID to know how to handle a firearm. Because we're too STUPID to plan for our own retirement. Because parents are too STUPID to know what school to send their kids to. Because we are too STUPID to know what kind of food to eat. Because we are too STUPID to think about our own health care, Because we are so STUPID that we continue driving cars that use too much gas. We're so STUPID that we need a label on an iron warning us not to use it on clothes that we are currently wearing. And we're too STUPID to pay for good art and culture. Quite simply we are too STUPID to take care of ourselves, our parents, our children, our future and our environment.

However, as STUPID as we are, we are able to elect all knowing, all seeing, all caring geniuses who will guide us through the minefield of life on our way to Nirvanatopia. These are the same savants who have saddled us with an ever increasing debt of over $30,000 for every man, woman and child (even those yet unborn) here in the United States. They build bridges to nowhere. They have managed the dollar so well that it is worth about 5% of what it was 80 years ago. The penny postcard now costs 26¢. They have lost the war on poverty, the war on drugs and the Vietnam war. They have made it a felony for a 10 year old to even draw a picture of a gun. They can secretly open all mail, listen in on all conversations and examine all our records for our own protection. They send hordes of petty bureaucrats into our homes and businesses to pester us with a never ending array of rules and regulations, and whose response to any question is a robotic, "I'm just doin' my job." And if you don't like it, they will send an armored SWAT team to your house, bust down your fucking door, tear out your windows and blast your STUPID ass away. You STUPID motherfucker.

Sunday, December 16, 2007

The Banking "crisis"

On Dec 14, 2007, at 6:35 PM, Curtis wrote to Jimmy:
What' with this big WW banking bailout that's happening right now to the tune of 40 billion/month?
Jimmy replies:
I think they mean a one time charge or infusion of $40 billion. Not every month. $40 billion per month is about 1/2 trillion dollars each year. That doesn't sound right.

Normally, in a truly free market, this would work itself out (self correct) in a matter of months. The problem is that the U.S. gov has decided to wade in and try to forestall the correction.

The banks made some bad loans and they are having to take some write downs on their assets (the collateral behind those loans was not worth what they loaned). Some of the loans had escalator clauses that kicked in after the "teaser" period was up. It's like those credit card checks you get in the mail that say 0% for 6 months and then the rate goes up to the usual 14% to 24%. Ideally on the CC loans, you pay them off before the 6 months are up. Unfortunately a bunch of folks don't.

The same with the housing mortgages. The banks offered 100% financing at a teaser rate of, say, 4% for the first 3 years, and then the rate would go to 6.9% or whatever. Two things happened. #1, here were a bunch of folks who bought a house, not for themselves, but to resell. Call them speculators, call them investors. It doesn't matter. They got the 100% low interest rate mortgage figuring that they could make a profit by selling the house within the 3 year time span. The problem is that too many people decided to do the same thing, and suddenly (#2) there was a housing glut with too many sellers and not enough buyers. Prices dropped. Now these "investors" are owning a house which is not only not worth the financed amount, but they are also looking at a huge rise in their monthly payment. Can't sell and can't pay. It's the "can't pay" that's a problem.

Naturally some legitimate homebuyers/owners with less than sterling credit got scooped up in the net. These are the hard luck stories that Congress is attempting to address. They will fail. They will only prolong the pain as they did during the depression of the 30's.

A possible larger problem is that real investors do not like uncertainty. They are not looking for capital appreciation. Only a reasonable, steady, predictable return. Foreign governments hold over $2 trillion of U.S. Treasury debt on the presumption that the dollar will pretty much hold its value relative to their own currencies. If they see massive volatility in the U.S. markets, they may just decide to dump their dollar reserves. In the past three (maybe 4) years the dollar has gone from .88 per Euro to $1.44 per Euro. That's a 75% increase. Gold has increased about a third. This is not good news in such a short time. When you dump dollars, you can only do it by buying something else that you perceive as more stable. The price of those things will rise relative to the dollar as more and more people jump the dollar ship.

For every seller of dollars there must be a buyer, so how do you get the seller to part with his non dollar asset in exchange for dollars. Why, you offer him more, of course. This is called a price increase, or, if the Fed has expanded the money supply, (it has) then it's called inflation. People will deal with gradual, sneaky inflation. They will panic when it's obvious and rapid.

Jimmy is buying gold on Monday.

Saturday, August 25, 2007

My Sister Loved "Sicko"

Dear Edith,

Thanks for the stuff on "Sicko."

I have not yet seen the movie, but I did go to the website to check out his remedy which is a complete government take over of the health system. As noted in the Clarence Page opinion piece, everybody knows that the current state of health care in America is a disaster for many people. What's interesting is that the proposed solutions can only result in more misery. "There is no problem so severe that the government cannot make it worse." (Quote by jimmydoane, 2006)

Here is MM's 3 step "solution."

1. "Every resident of the United States must have free, universal health care for life."
As P J O'rourke once noted, "If you think health care is expensive now, just wait until it's free." Of course it won't be free; it will be at no charge to the recipient at that moment. Big difference.

2. "All health insurance companies must be abolished."
There is only one way government can ever "succeed" at anything, and that is by outlawing the competition. Take gambling. The only reason anybody plays the state lottery is that you would be arrested and thrown in jail if you tried to set up your own competing enterprise. Even when the government tries to "crowd out" the competition by providing a service at no charge, some private entities survive and prosper. For instance, private schools and private parks.

3. "Pharmaceutical companies must be strictly regulated like a public utility."
Who will regulate the regulators? Regulation by another name is price control. Price controls have never, in the entire course of recorded human history, ever worked.

Health care is what economists call "a scarce resource." It's should be obvious on its face that not everybody can get all the health care wanted or even needed. I mean that if healthcare was like air, you wouldn't need any program, government or otherwise, for its distribution. There are only a limited number of hearts, livers and lungs available for transplant. There are "orphan" diseases that affect only a few, but require millions of dollars for treatment. There are very expensive "end of life" procedures that simply don't make sense for the last day, week or even month of existence. So rationing must and will occur.
Rationing can occur in one of two ways: price or availability. With a government run health system, price is thrown out the window. That leaves availability. Who decides who gets what? You can bet that there will be lengthy, tedious procedures to determine who is worthy, emphasis on lengthy. Just as "Justice delayed is justice denied," health care delayed is even worse. It's often a death sentence. Furthermore you can bet that the politically well connected will not be in the same line as the rest of us.
Here is Jimmy Doane's rule of government malfunction: "Where there is a line or a waiting list, you will find government intervention and failure."
What is stunning about MM's proposed "solution" is that it is the precise opposite of a free market solution which would work faster, better and be fairer. It's as if in order to stop a burglary problem, you outlawed private gun ownership and gave everybody a special number to call in the event of a break in. Oh, wait. We already do that.

Your Loving Brother