Archive for category Economy
If It Ain’t Broke, Don’t Fix It
The current economic situation, was manufactured by Washington politicians and the media. Granted, I doubt any of them wanted the end result to turn out the way it did, but the reality is, that it was manufactured.
Here’s what I mean. During the 1990’s, liberal politicians and the media created the problem of “unaffordable housing”. They used bizarre statistics, saying that minorities were turned down for mortgages more often than whites, and that they also had lower levels of home ownership than whites. Both of which were probably true.
One has to ask then, why was this true? Was it because all mortgage lenders were racist? Or was it because in general whites were more credit-worthy than other minority groups? And just because minorities had lower levels of home ownership, did that mean that they were living on the street, rather than in a home that they owned? Or did minorities rent more than they owned?
Washington’s solution: more restrictions and quotas placed on banks to increase lending to low-income and minority families. This caused banks to loosen their lending policies, and issue more risky loans.
In the short term, this appeared to work in the benefit of lower income families, as they were finally able to get approved for a loan to buy a home. Now, however, we’re seeing massive foreclosures, and a collapsing economy due to tightening credit markets, and bankrupt financial institutions.
During the 1990’s, there wasn’t a problem with unaffordable housing, as everyone, in general, was living within their means. People who couldn’t afford a home, rented, and those who could afford to buy a home did just that. Politicians trying to fix a problem that didn’t exist created exactly the problem that they were trying to solve. People can’t afford to live in the homes they bought, and are now being forced to foreclose.
What’s next? If minorities are foreclosing more than whites, does that mean that there are unfair foreclosure practices in place? Are we going to keep banks from foreclosing on delinquent loans if the loan is to a minority?
Let’s hope Washington has more sense than that.
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Is the US Responsible for Mexico’s Problems?
Posted by Scott in Economy, Foreign Affairs, Guns on April 17th, 2009
President Obama recently visited Mexico to discuss, among other things, the escalating violence in the country, which stems from the growing drug trade.
In his visit, Obama acknowledged that the US shares a piece of the responsibility for the violence in Mexico because of the guns that get smuggled into Mexico from the US. To his credit, President Obama said he would rather concentrate his efforts on anti-smuggling laws rather than on more restrictive laws on sales of guns in the US. Although he did admit that the Clintonian Assault Weapons Ban “made sense”, but that “none of us is under the illusion that reinstating that ban would be easy, and so what we’ve focused on is how we can improve our enforcement of existing laws.” I’m reading that as a positive for now, but stay tuned I’m sure there will be more developments on that front.
Back to my original point, regarding how the US shares the responsibility for the escilating violence in Mexico. Is it our fault that the Mexican economy is in such bad shape that their people have to resort to illegal means to bring money into the country? Is it our fault that the best way for Mexicans to make an “honest” dollar is by crossing the border in to the US and working illegally? Either that or they could team up with a drug cartel and add to the already out of hand violence.
I’m failing to see how the US has caused any of this. True, many of the guns used by the drug cartels were purchased in the US and smuggled across the border. To that same logic though, couldn’t one reason that Mexico is to blame for the US drug problem?
Each country has their own unique social and economic issues, which should be addressed. It doesn’t help either situation though when blame is incorrectly placed on the wrong party. It especially doesn’t help when it’s our President blaming us for other countries problems.
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Remedy for a Bad Economy
It seems these days that everyone is on the Government bailout bandwagon. Not just in the United States, but all over the world, people are crying out to their governments to bailout failing companies. What’s worse is, it’s happening.
I question these people who say that a government bailout is the only way a troubled economy will right itself. I question why these people think that the government will be able to effectively run the nations largest banks, insurance companies and automakers. What has the government ever done that was efficient, or well run?
The perception that the government is the cure-all solution for our economy, goes back to the “woe is me” philosophy that is plaguing society. “I can’t get a job…government please support me”, “I can’t get a loan…government please fund me”, “A hurricane wiped out my neighborhood…government give me a place to live”, “I can’t keep my company afloat…government please bail me out”. These situations all have one thing in common. Someone is taking taxpayer money while doing literally nothing to earn it.
Businesses and their executives are being barraged by negative media to look inept. Government is being viewed as the knight in shining armor, who will slay the evil “Wall Street Dragon”.
Companies who take government bailout funds (and individuals who take handouts for that matter) are only placing a band-aid over a severed limb. It gives the appearance of trying to stop the bleeding, but without serious attention, the patient is going to bleed out.
The companies who are going to come out on top of this whole mess are the ones who anticipate where the shortfalls in the economy will be, and adjust their business strategies to take full advantage.
The companies who are going to fail are the ones who think that they can get by with a band-aid to weather the storm.
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France Limits Exec Pay
According to the Wall Street Journal, “The French government, trying to quell public anger over executive pay, banned companies that get state funding from issuing stock options to top managers and limited some other forms of compensation.”
Let’s hope it doesn’t get to that in the US, but with the reception the Obama’s are getting on the current stop in Europe, I’m sure it’s not out of the realm of possibility.
The bottom line is, that private companies should be left to run privately. They shouldn’t get bailed out with taxpayer dollars, and they shouldn’t have to answer to the government for their daily operational activities, such as paying their executives.
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AIG Outrage
President Obama lashed out against the plan of AIG to pay roughly $165 million in bonuses after accepting about $170 billion in bailout money. He was quoted saying that the bonuses were an “outrage”, violating “fundamental values”, which underscore the need for financial regulatory reform.
I’m curious. Which fundamental values is President Obama referring to?
It couldn’t be the fundamental values of a capitalistic society. If he was, AIG shouldn’t have gotten a dime from the government in the first place. After all, we are still a capitalistic society aren’t we?
Come to think of it, if that was what he was referring to, there wouldn’t be a “need for overall financial regulatory reform” either. The free market would be left to allow bad companies to fail and good companies to prevail.
The fundamental values of a free market shouldn’t allow the government to interfere – that’s why it’s called a free market.
To add insult to injury, Treasury Secretary Geithner said the administration will require the top banks receiving federal aid to include small-business loans in their monthly reports. “We need you to put that assistance to work for the American economy,” he said. Not only do these companies have to recover from one of the worst economic times they probably have ever faced, but now they’re going to be pressured to make small business loans with the bailout money they received.
So what happens once these small businesses go under? Is AIG going to be left holding even more bad loans? Are we going to have to pump even more money into AIG if they start making loans to struggling businesses who ultimately will never be able to pay the loans back?
Businesses come and go. The strong ones just stick around a little longer. If AIG was destined to fail in 2008, we should have let it fail. The same goes for GM, Ford, and any other business that was determined to be “too big to fail”.
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Anti-Bush Kooks Think They Can Slow the Economy
Tomorrow President Bush will be inaugurated for the second time. This is the first post-9/11 inauguration, and obviously security is a hot topic with everyone in Washington. But not everyone is quite as concerned with security as they are with protesting the inauguration.Some leftists are calling tomorrow “Black Thursday”. They are telling people to call out of work, not buy anything, turn off their cable TV, not make long-distance phone calls and an infinite number of other things to slow the economy for the day. They feel that the Bush administration and their corporate supporters will only respond to the voice of the almighty dollar. They want as few tax dollars to go to the government, and as few dollars as possible in revenue to go to corporations tomorrow, in hopes that they can change the world.
What they don’t realize is that what they forego buying tomorrow, they will have to buy eventually. Think about this from a corporation’s point of view. Let’s say a typical month brings in $1 million in sales, or $33,333 per day. Say these people are so successful that they get half the country to not buy anything from this company tomorrow. That would mean that the company would only make $16,667. Now, come Friday when these people find that they need whatever this company sells they’re going to go out and buy it. Basically all they’re doing is waiting a day to buy something. When the company looks at it’s monthly sales reports they won’t even notice this “boycott”, because by the end of the month these nut jobs will likely have already purchased what they didn’t get on “Black Thursday”. As far as the government is concerned, this one day will have no impact on tax revenue, for the same reason. These people will end up buying what they did not buy on Thursday and the tax revenue will still end up in Uncle Sam’s pockets.
Just to prove how little thought actually went into this whole scheme, one website promoting this idea said people should not watch cable tv. Now I don’t know about you, but I’ve never heard of a usage based cable bill. Isn’t it usually a flat monthly rate? If you watch tv tomorrow or not makes no difference on how much your monthly cable bill will actually be. I can see the argument for not watching pay-per-view movies tomorrow, but even with that if they want to watch that movie, they’ll probably end up staying in on Friday night to watch it.
Then there are the other protestors who say that Bush should donate all the private money used to hold all the inaugural events to help the tsunami victims, or some other charitable cause. Why should he though? This is his time to shine. When I graduated college, should my class have not had a graduation ceremony so that the saved money could be donated to some charity? No, we worked hard and we deserved the ceremony we got. Should Hollywood celebrities have canceled the Golden Globes so that the saved money could be donated? No, once again they worked hard and they deserved to be recognized. You may not always agree with what these celebrities have to say, but this is still their “graduation”, or their “inauguration”. The President, like graduates and Hollywood celebrities deserves his moment of celebration.
The bottom line is, one day of this nonsense won’t change the country, or even disrupt the economy. This is simply another misleading, emotion based response from this country’s liberal left.
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Hurricane Markups – Sleazy, or not?
Over the past six weeks, Florida, and much of the Southeastern United States have been pummeled by hurricanes. Many lives were lost, and billions of dollars of property was damaged. Many people returned from shelters to find their homes in ruins. They were the lucky ones who escaped the hurricane with their lives. But now they’re faced with another problem. They’ve got nowhere to live and they need to rebuild.If this were truly a free society, where there was limited government interference in our lives, we would notice that prices on pretty much everything in Florida would increase. Is this a bad thing? I would argue that it’s not.
Think about the case of a hotel that usually charges $40/night, that started charging $160/night after the first hurricane came through. They were accused of “price gouging”. Many retail stores were accused of the same. What people don’t realize though, is that there is a good reason for increasing prices – other than padding the big bad business man’s pockets.
Think about a hypothetical hotel, with 50 rooms, in a town that was destroyed by the hurricane. Now let’s say that the town has only 50 families. If the hotel’s normal price is $40/night, some of those families may not have much of a problem with occupying two or more rooms. Do you see the problem here? If any one family occupies more than one room, there will be another family that won’t have a place to stay. So, if the hotel owner decides to increase their prices to $160/night, some of those families may think twice about renting out more than one room. They’ll manage to all stay in the same room, just so they won’t have to pay so much. They might not be quite as comfortable as they would be, had they rented out two rooms, but they still have a place to stay. Basically, what the hotel owner is doing is adjusting the price accordingly to the increase in demand for a place to stay. It’s not sleazy; it’s basic supply and demand. It makes sense doesn’t it? I mean if the demand for something goes up, the price people are willing to pay for it should go up with that demand.
Now I’m not saying that businesses should increase their prices so much that people won’t be able to afford the things they need, like food, shelter, water, etc. I just think that the price should increase enough so people are only buying what they need to buy. Enough so that when you walk into the store to buy 20 gallons of water, at the regular price, you’ll think twice and only buy the 2-3 gallons that you may really need – leaving the other 17-18 gallons for someone else to buy.
Think about it. The more valuable a product or service is, the more money people should be willing to pay for that product or service, to equal the demand for it. It’s not sleazy, its just basic economics.
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