Monday, February 23, 2009

Eight Ideas that would work right now to get America into the 21st Century….

If I were King here are a few things I’d do to revive the U.S. economy and propel it into the future. Of course as King I’d need no consensus, no votes, no Congress, just my own very good judgment and the love of the people or a large group of thugs to enforce my will…. . Here they are, without any particular order:
1) Energy. We are tapped-out. Proof lies in the fact that every year there are brown and black-outs across the country. Hydro has been maxed-out; most rivers have been harnessed; cheap and easy oil is gone; alternative energy is a cruel hoax. There is no such thing as alternative energy. Energy and its use is subject to the Laws of Thermo Dynamics. Any power source, other than that provided nearly free by the planet, in other words, fossil fuel, requires more energy to get and produces less efficient energy in return than that obtained by just using oil directly. Ethanol, hydrogen, wind and solar are all costly fuels, in terms of energy in versus energy out. The only truly viable source of energy left is nuclear. Vast amounts of nuclear energy, providing relatively clean power is ours for the developing. We need it, unless we plan on eliminating a lot of people. Let’s put tens of thousands of highly skilled folks to work building Nuclear Power Plants. And hundreds of thousands more building the stuff that goes into those plants from valves to distribution networks.
2) Transportation. Airplane travel is relatively inefficient, whereas trains are very efficient. Modern high speed trains are an almost off-the-shelf ready to run technology now in use in Japan and Europe. We know how to make them, we know how to make them better. Their use is non existent in America. A system of Hub-To-Hub high speed trains is a must. Under my Kingship, nonstop routes would be built connecting the Airline Hubs already scattered about the country. I believe there are 35 or 40 of these airline hubs operating right now in the USA and Canada. The Airline Hubs are used less and less as Airlines consolidate and shrink. These hubs are ready right now to accept high speed rail lines. These existing hubs have facilities already in place to service large numbers of travelers: auto rental fleets, hotels, restaurants, freeway access, etc. Currently there are many unused terminals at many of these hubs. These terminals are ready now to receive and redistribute millions of travelers. Another beauty of train transport is that travelers could take their RVs and autos with them at relatively low cost. These trains should be powered by either nuclear engines such as those currently used on ships or by electricity. Plentiful electricity would be available from #1 above.
3) Banking. Not enough cash you say? Take the caps off of FDIC. Money would flow out of treasuries and into banks. Banks have to lend out money to make money. Currently CDs are insured to $250,000 and that higher number expires at the end of this year. This no way of inspiring trust or stability in the banking system. It does not allow long range planning by savers and investors. Get the money back into the banks now. Apparently the Federal government wants to inspire trust in banks... or why else are they forcing consolidation, flooding these banks with cash and forestalling bankruptcy? This being the case it's time to tell depositors that their cash is safe. All bank deposits, from checking accounts to CDs would be covered all the way limits.
4) Education. In my Kingdom, High Schools as we know them would stop at the end of the ninth grade. At that point students would have to choose an education that shapes their future in a more positive manner. High schools are essentially large baby sitting institutions housing people not yet ready for the adult world, not fully mentally developed but near fully physically developed. Sex is topic number one on most of their minds and only the truly studious serious students have much to learn beyond the ninth grade. The learning is marginal in any case. A better system would allow students to choose either a trade school or professional and academic schooling for the 10th, 11th , and 12th grades. High schools have become giant baby sitting institutions, a place to warehouse vast numbers of young people not yet ready to become productive members of an advanced society. Our society has no established apprenticeship system as was in effect in the pre-industrial world, but there is a need to train individuals in all the trades our society currently needs. It’s time to bring back “Shop.”
5) Service to America. Upon graduation from “New” high school, every able bodied graduate would be required to serve this country for minimally two years. This service can be in virtually any field from the likes of the Peace Corp, Job Corp, Military Service or to new services to be devised. This would allow those “graduates” time to develop their skills and to prepare for adulthood. It would give these people a chance to contribute to the country they live in, to have a stake, or equity in the country.
6) A New GI Bill. After a stint of say at least 2 years service to America an equal amount of free schooling toward a specific advanced trade or degree would be made available. At the conclusion of this period of training the New GI Bill would make home ownership available through low fixed interest rate long term loans.
7) Water. Tax it and distribute it. Right now water is still taken for granted. We all see water running down the gutters, misuse is widespread. I’d not punish those who wish to use it as a broom or to flood their gardens, but the price of this behavior would be enough to push one to conserve it. This goes for areas of the country that have plenty of it too. A Federal tax collected on water would be used to develop and distribute this precious resource to areas less blessed. Desalination plants, powered by nuclear energy would immediately be built in areas where saltwater is available and fresh water is in short supply.
8) Transportation Fuel. Since we do not have the electricity to power the long awaited electric vehicle of the future, CNG as a transportation fuel, would be immediately developed. Natural gas is widely available and current technology is available right now to convert our truck and automotive fleet to its use with minimal expense. With currently available hardware one could even fill-up at home in areas that supply natural gas to homes. This one is a no-brainer.
That’s it. This plan could be implemented quickly and comprehensively. It covers many areas of immediate and future concern. Let’s go, let’s build a new America, not with dole programs, not with make-work jobs, but with real solutions to real problems. All it requires is a Great King Mel!

Thursday, February 19, 2009

Our Future

This comment is from my brother Jerry. I think his analysis is accurate.

This rant is not about politics, it is about prudence. Please try and read this, it may make a huge difference in our lives and that of our families.
This government bailout/ stimulus plan is an unmitigated disaster. One of two things is going to happen. We're going to become a doomed-to-fail socialist nation or we're going into some economic out-of-body experience that will result in mind boggling stagflation (sluggish economic growth coupled with a high rate of inflation and unemployment).
I don't know about you but everyone that pays taxes and is prudent with their money, and that represents more than 60% of homeowners and most likely 75% of renters, should be livid with outrage. This administration and Congress is asking this group of people - you and me - to pay the freight for all of these irresponsible people. Right now, it shouldn't matter what your politics are (unless you truly believe that socialism is the path for the USA), you should simply say enough! We have a process, it's called foreclosure and bankruptcy. When the market forces clear out those individuals that should never have been homeowners the ridiculous run-up in house prices will be reversed and many of the more responsible non-owners may now opt to buy those vacated properties at prices and terms that they can responsibly manage. It's ridiculous to think that this problem was caused by unemployment & a poor business environment. The situation is just the opposite... too many people got caught up in the frenzy to get a home because "everyone was doing it" and the lenders & regulators had gone crazy. You cannot confuse wants with needs. People need housing, a place to live... they want a house. Hey, I need a vacation, I want to go to Europe, but a trip to Lake Tahoe will do for now. That's responsible, even though my credit card company says I can go to Europe right now... and pay later and later and later. Did you go crazy and get yourself jammed up this way? If not, why should you shoulder the consequences? And, no, it's not the American way. America is a capitalistic free market society. Should we track down the scoundrels, crooks and bad actors that perpetrated this fraud on those that were legitimately duped or conned? Absolutely! Should we take pity on all those that took a gamble (bought at sky high prices with unrealistic loans) that turned out to be a loser? This event is not without precedent. For the uninitiated I refer you to the "tulip mania" of the Dutch in 1636-1637 Close to 400 years ago people got caught up in the chase for gains by speculating on a flower. Crazy!
Regarding these bailout plans, I can draw a counter analogy that the average person would most likely call outrageous on its face: How about have the government compensate every stockholder (including their IRA and 401 accounts) for the sharp losses they have suffered as a consequence of these irresponsible "home buyers, lenders, and regulators? This group has actually lost REAL money, upwards of 50% is common, whereas these underwater homeowners in most cases never had ANY equity in these houses. These "home occupiers didn't lose anything other the the title of "homeowner." What a cruel joke. Many of these delinquent mortgages were for 100% - 125% of the absurd bogus appraised sale value. Let's not forget, many of these failing homeowners refinanced their homes (some multiple times) as the prices skyrocketed. They actually took money out of their house and spent it. Remember my want of a European vacation? Some fools actually did it. The banks actually loaned them more money than the house was worth!! The lenders that made these loans should be allowed to go out of business. The government can stand behind newly formed and well capitalized banks and we can get back to doing business in the US and around the world. You cannot REWARD bad behavior. There is one rule that governs all of life, not just business... Behavior that gets rewarded get repeated!

If you want America to get back on its feet and get the economy rolling, I suggest that you contact every elected official you can and tell them to stop this insane solution and let the losers go. It's good for you and your responsible friends. And forward this to like minded individuals.

Jerry Shapiro

Tuesday, February 10, 2009

A Fix That Isn't

No doubt we have a problem, but is the Government plan the one to fix it? The idea that cheap money, via sharp reductions in interest rates, and flooding failing banks and brokerage houses with capital will fix the problem is plain wrong. Here's why: In this steep economic decline, who wants to borrow money? Who wants to take a gamble on a new idea, a business expansion or a new large purchase? Especially in a recession that President Obama says puts the country, or the world, on the brink of catastrophe? At any interest rate! Only the desperate want this money, and we all know that the desperate don't get loans.... unless it's from their local pawnshop. The problem is not one of "credit liquidity" as we hear repeatedly. Cheaper interest rates will play a role, but that role is still down stream. Easy credit was part of the problem that got us here and is not a good policy to continue.

The problem is lack of money; money in the hands of consumers. The problem is fear. Fear of losing a job, fear of losing a business. In short, there is no confidence in the governments ability to deal with a problem they have incorrectly identified. The solution lies in getting money in the hands of consumers. A cessation of the payroll tax would be a step in the right direction. Stopping the payroll tax gives an immediate pay raise of approximately 7.5% to every worker... overnight. A cessation of payroll taxes gives every business a "raise" of the the same size... overnight. With a pay raise a worker "feels" better, feels wealthier, and has an immediate increase in confidence. With a lower cost of doing business, an employer is less likely to lay-off an employee and more likely to improve operating efficiencies with new capital investment. With a pay raise in every worker's pocket, every worker has an instantaneous improvement in credit scores, and more spendable dollars at the end of everyday. This is the moment that lower interest rates plays its part, this is when large purchases and plant expansions and the introduction of greater efficiencies become feasible. And here's the best part: The plan can be put into effect without long drawn-out congressional hearings and studies. This plan can be put into effect with the stroke of a pen, and without the creation of a single new bureaucracy.

This leads one to ask why this is not done? Certainly its been thought of. As Rahm Emmanuel said, this economic disaster is really an "opportunity" for social "change." If the problem gets deep enough the government will have free hand in introducing sociatial change, and this was President Obama's singular promise... "Change."

Until institutions that have gone astray are allowed to fail and their assets are bought by those that have not, or newly formed ones taking advantage of liquidation prices, until homeowners, who should have never purchased a home on poor, or nonexistent, credit have lost their homes through foreclosure thus allowing a new buyer to acquire that asset at a favorable and affordable price, we will never know the true value of those assets or the depth of the problem. Putting ones finger in the hole in the dike will work only so long. The dike is going to break, it's just a question of when. When the "fix" of a finger in the dike takes place it simply allows the water behind the dike to rise higher. When it gets to the next hole the problem starts again, only this time there is even more pressure behind the dike; when the pressure gets too great the dike will burst. Are we nearing the bursting point or just reaching with another finger?