Propaganda versus Reality

Given much of the junk floating around the internet, and even more dangerously, published on the pages of supposedly respectable newspapers and magazines, it has become impossible to believe anything you read anymore.  Each side of the political spectrum publishes propaganda extolling the virtues of their candidates for public office and condemning the wickedness of their opponents.  Neither side has a monopoly on veracity, and a lot of what is said, published or broadcast is distorted, misleading, inaccurate and often outright lies.  Unfortunately, a lot of people do believe the biased propaganda without question.  Which makes it all the more interesting that so many ignore the information that is indisputable.

Most American political leaders over the years have believed in the values and goals established by our founding fathers.  Of course many of the politicians have been corrupt charlatans focused on their own self-interest rather than the interests of those who elected them.  But generally they understood and believed in the American legacy of individual liberty, personal responsibility, free enterprise and democracy.  Today that is no longer true.  One party seems to believe in none of those things.

We now have a president whose formative years were spent associating with and under the tutelage of radical and subversive Marxist mentors.  Barack Obama has always identified with and been influenced by anti-American radicals.  These include Bill Ayers, a co-founder of the Weather Underground, a self-described communist revolutionary group that bombed several public buildings in the 60's and 70's; Rev. Jeremiah Wright, a pastor who preached condemnation and hatred of white Americans; leftist agitator Franklin Davis Marshall; and many others whose goals are to destroy the traditional economic system and society that gave America freedom, justice, prosperity and equal opportunity.  Obama's relationships with these people is indisputable, and nearly every action he has taken as president has advanced their goals of rejecting our economic system and traditional social values.  But of course in this campaign season it is off limits to question those relationships.

Throughout our history Americans have always been able to improve our aggregate standard of living through individual initiative and taking advantage of opportunities that exist provided by the incentives of private enterprise and limited government interference.  That is what has driven progress and created widespread affluence.  But this president and his supporters believe big government is the solution to every aspect of our existence, with government bureaucrats dictating the proper way to conduct our lives.  They prescribe what is best for everyone, eliminating freedom of choice.  They think that providing subsidies and grants encouraging their agenda and a politically correct education for the young will produce the ideal society.  But they are wrong.

Government determined industrial policy and generous welfare programs destroy progress and living standards.  Already we are near the inflection point where the majority of the population has become dependent on government to sustain their current lifestyle, and a government directed economy cannot possibly do that.  A government subsidized college education is worthless when there are no jobs for the younger generation to fill.  Those with the ability and ambition to better their lives through personal achievement will find they do not have the opportunity to do so.  They will not enjoy the lives their parents did because the government will determine what opportunities they have, and they will be limited. 

All one has to do is observe how such policies have worked out elsewhere around the globe whenever they have been tried.  One can observe the limited choices of low quality merchandise available to buy and the depressing tenements that are prevalent in socialist countries to see that dependency on government cannot possibly improve their lives.  One can look to Europe today to see the result of decades of policies that support people from cradle to grave.  Greece is on fire as the citizens riot in the streets demanding the lifestyle that can no longer be provided.  Other European countries are next unless they pull their heads out and confront reality.  Those countries are Obama's vision for us as he strives to implement the same policies here that have brought 'progressive' countries to their knees.  The historical record of inevitable failure of socialist policies is indisputable.  Those who vote for Obama this fall may get lucky and die before the most serious consequences of that mistake arrive in America.  But they will have doomed our children.

The Real Fairness Issue

Barack Obama likes to talk about fairness.  He continually vilifies Republicans as being against fairness while at the same time supporting the public employee unions against any reform of their compensation and benefit packages that are better than the average non-government worker performing similar jobs.  An April 11, 2012 Wall Street Journal editorial reported that a Bureau of Labor Statistics study published in the Winter 2012 Journal of Economic Perspectives found that state and local government employees receive salaries 10% higher and current benefits 21% higher on average than private sector employees.  Similarly, a recent Congressional Budget Office report found that federal employees retirement packages of pensions plus health care benefits were 3.5 times more generous than those in the private sector.

How fair is that given that the private sector workers are the very people paying the salaries of those government employees?  Maybe it would be a good idea for Republicans to make that a fairness issue and campaign for reform of the overly generous government compensation deals.  I suppose it is possible that reducing the pay of government employees might cause minor disruptions in the provision of some government services.  Therefore the changes could be gradual but on a specific schedule in order to get the bloated ship of state turned around and heading in a more fair and rational direction.

Perhaps we need something like what the airlines have gone through, basically abandoning the old operating methods through attrition and starting over with a lower cost structure with new employees.  Freezing salaries for some period of time may be all that is needed regarding current payroll outlays.  But changes definitely need to be made in retirement and health care benefits.  Even though most private sector employers have changed to the more rational defined contribution pension plans, most government employees still enjoy unaffordable defined benefit retirement plans.  Defined benefit plans assuming 8% returns in a 3% world is unsustainable, and these funds will run out of money to maintain benefits much sooner than most expect unless we mandate that our children and grandchildren sacrifice their living standards to support us.  Are people today really that selfish as to not care about what legacy we leave our children?

Over the last two decades the salaries and benefits for public employees have grown much faster than they have for those in the private sector.  That disparity has to be addressed whether the public unions like it or not, or we will be in the same situation Europe finds itself in with bankrupt governments, high unemployment, no growth and civil unrest.  That is clearly the direction we are heading.  European countries must make across the board cuts in public sector salaries and benefits in order to reduce their government debt and reposition their economies for future growth.  That will take time and be very painful, but they really have no choice.  It would be much better for our country to undertake those actions now before we get into the same chaotic situation as Europe.  Why is that reality so hard for Congress and public employee union leaders to understand?

A Day In The Life

A day in the life of our beloved leader.  This is President Barack Obama's schedule every day of the year, Sunday through Saturday -


8:00 a.m. - Check in with my PR Department at the New York Times and the Networks and tell them to step up the propaganda and invent more denigrating bullshit, better yet some criminal charges, against my opponents and their supporters.

8:15 a.m. - Call up Genachowski at the FCC and tell him to step up the effort to get Limbaugh and Hannity off the air.

8:30 a.m. - Press Conference.  Remember to -
1. Blame Bush for something bad that happened.
2. Take credit for something good that happened.

9:30 a.m. - Give campaign speech to impressionable college students who think I'm a rock star.  Make sure to include:
1. Slandering of Republicans and the Supreme Court.
2. Promise to give free health care, abortions, birth control, food, and money for all other necessities such as big screen HD TV's, iPhones, bling, tats and recreational drugs of their choice to everyone who votes for me.  Oh, yeah, and also student loans they don't have to pay back.
3. Lie about how much these freebies will cost and say we can pay for it by taking money from the rich.

11:30 a.m. - Ride on Air Force One.

1:00 p.m. - Play golf.

4:30 p.m. - Touch base with my homies Dmitri, Vlad, Cristina and Hugo.  If Hugo croaks before I make the call, check with the other three to pick a suitable successor.  Remind them all I will have more flexibility after my next election.

4:45 p.m. - Call Bill Ayers and Rev. Wright and tell them to say something outrageous about the unfairness and greed of America and capitalism.

5:00 p.m. - Call Eric at the Justice Department and have him locate something that occurred somewhere in the country and have our inhouse PR people blow it up into a hate crime that demands justice for whichever side is the minority - doesn't matter which was the perp and which was the victim.  If both are minorities, prosecute the one that is the lightest color.

5:15 p.m. - Tell Jack (Jack Lew, Chief of Staff) to spend whatever it takes to keep Michelle and the kids on vacation.

7:30 p.m. - Party with my entourage.  Invite some Wall Street and union backers.

The Left's Big Opportunity

People's Socialist Workers of the World Unite -

The Progressives (i.e., communists) of the world are outraged.  This blatant crime against humanity must be avenged at the very top (does anyone remember what the crime was?).  Left wingers in the UK Parliament have gone into full scale attack mode as they see an opportunity to rid the world of all capitalist and conservative news sources by declaring war on News Corp.  The socialist backbenchers have determined that Rupert Murdoch is unfit to lead a major international company, and naturally the liberal press around the globe has gone ballistic in reporting the news.

Did one British tabloid (News of the World), one small component of a company that owns over 300 separate entities throughout the world (see below), do something wrong?  Certainly.  Was Rupert Murdoch intimately involved in the wrongdoing?  Almost certainly not.  Does the crime deserve the attention it is getting?  Of course not, but that doesn't matter.  The vast majority of the global media is liberal, and they will go for the throat when they see a chance to kill off the dominant opposing voice.  And the world's Marxist politicians will most assuredly go all out to help them do it.

It makes one wonder which category of media outlet is more legitimate, the traditionally creative sensationalist tabloids found at the grocery store checkout counters or the formerly respectable but newly creative sensationalist rag sheets of the mainstream press?  When it comes to newspapers it might be most informative to stick to the sports pages.

A sample of News Corporations global holdings -

Publishing -
     More than 150 newspapers, including:
     The Wall Street Journal
     The New York Post
     Barron's
     The London Times
     The Sun
     The Australian
     Dozens of books and magazines, including:
     HarperCollins Books
     Zondervan Christian Books

Cable Programming -
     Fox News Channel
     Fox Sports Network
     Fox Movie Channel
     FX
     Fox College Sports
     Big 10 Network
     National Geographic Channel

Filmed Entertainment -
     20th Century Fox
     20th Century Fox TV
     Fox Filmed Entertainment
    
Television -
     Fox Broadcasting Company
    
Satellite TV -
     BSkyB

And countless more business entities, including probably just for the hell of it, 15% of the Colorado Rockies baseball team.  Rupert Murdoch would have to be one hell of a multi-tasker to know what is going on in all of these organizations.

Understanding Politics

Politics is really quite simple.  The first thing that should be understood is there are plenty of corrupt politicians in both parties more than willing to sell themselves to the special interests that help them get elected and remain in office.  Those folks are really all the same no matter what the party label.  So the best way to differentiate between the two parties is to identify who they generally represent.  Republicans represent the productive.  Democrats represent the parasites.

Democrats understand it is basic human nature that the have nots will always want what the haves have.  That is why they always make elections all about the politics of envy.  As usual for Democrats, Barack Obama's reelection strategy is to promise to give the have nots what they want without having to work for it by taking it from the haves.  This is the strategy of class warfare, and it states that the have nots deserve to be given what they didn't earn because the haves are evil, selfish beings who must be punished for their greed.

In other words, Democrats claim they are the party of compassion for the underprivileged and that Republicans are cold-hearted monsters who conspire to gain and keep all the wealth for themselves.  That is a crock of shit, but people who vote for Democrats apparently believe the lie.  The truth is that conservatives agree that society certainly has a responsibility to provide a safety net for those who truly need it.  But that safety net must be designed to encourage recipients of public support to work towards escaping that status by seeking opportunities to do so rather than spending their lives at the bottom of the barrel.

Unfortunately, the safety net in America today is so generous that it encourages recipients to remain dependent on government support rather than providing strong incentives for self-improvement.  Democrats win votes by promising to maintain and expand the current structure of government support by extorting those who pay for it with even higher taxes.  Hence, their appeal to the parasites.  It does not matter one bit that biting the hand that feeds you is a prescription for running out of food, nor that no matter how high taxes are raised on the productive the amount of money available for government programs will never be enough.

A government that encourages the productive creates an environment of innovation, sustained progress, rising living standards and widely diffused affluence, often referred to as a rising tide that lifts all boats.  It results in a system that expands the economic pie to everyone's benefit.  It is also a system that leads to relatively high levels of income inequality.  There is no doubt that many people who have attained great wealth do not deserve it.  Wall Street bankers should feel guilty, but I am sure they don't.  But that is not the real issue.  The real issue is the improvement in living standards that productive enterprise creates for everyone, including those at the very bottom of the social and income ladder.  The poor in America today, with big screen HD TV's, the latest cell phones and access to food stamps and health care live much better than they did fifty years ago, and better than most people in the rest of the world.

On the other hand, a government that panders to the parasites leads to an economy that produces nothing but widespread destitution, chaos and anarchy, leading to dictatorship, subjugation and oppression.  This is a system that sinks all the boats and where everyone has to desperately fight for a piece of the shrinking pie.  Reelection of Barack Obama, the most blatant parasite panderer this country has ever seen, will turn America into the Titanic and leave nothing but crumbs from the devoured pie.  We are at the inflection point where nearly half the people in this country pay no taxes, and therefore are parasites receiving public services and support that others pay for.  Four more years of Obama would send us over the edge.  Everyone needs to think long and hard before they vote this November.

It Is Time!

The firestorm created by the shooting of Trayvon Martin in Florida by a neighborhood watch volunteer is a prime example of the difficulties we face as a coherent, unified nation.  The politically correct politicians and journalists created a hysterical reaction to the event before the facts were even known.  They have committed a great disservice to the country by creating a racial conflagration that is not justified no matter what really happened.  It is time for journalists and politicians to stop fanning the flames of polarization.

It is time for everyone in America to think for themselves, wake up and smell the coffee.  It is time for Latinos to realize they are in the United States of America, not Northern Mexico, and to stop supporting those who come to this country illegally and consume our resources.  They need to get more involved in politics, and adapt to the American culture, laws, language and educational system.  Most of those who have been here for several generations have already done so, and their influence is growing as it should.  They must help the newer legal arrivals to integrate into our society as well.

It is time for Asian-Americans to come out of their familial rabbit holes and intermingle with the rest of the American people.  Asians don't seem to hate anybody even though they remain on the fringes of society by their own choice, focusing on making sure their children excel in academics.  Promoting intellectual achievement is certainly a good thing, but it wouldn't hurt for them to get out and hang out with the rest of us a bit more.

It is past time for African-Americans to stop their ingrained hatred of whites.  They need to throw off the yoke of low expectations and dependency, blame themselves now and then for the crime, victimization and welfare centric attitudes rampant in their community, stop listening to the pandering of politicians who never improve their situation, and reach out to take advantage of the opportunities America offers to all its citizens.  A great many African-Americans have already taken advantage of those opportunities and become great leaders in business, politics, education, medicine and military endeavors.  They should be the ones serving as role models to young blacks, not rappers, gangbangers or Jesse Jackson and Al Sharpton.

Multiculturalism is a wonderful thing as long as it does not dominate the over-riding national culture.  We are all Americans and we are in this together.  The intermingling of the different races has progressed exponentially over the last several decades, but obviously there is still a ways to go.  There will always be a very small minority of dimwitted bigots running around, but the fact is the vast majority of white people have evolved to a post-racial, inclusive society.  Despite the tired old rhetoric of the Jesse Jackson's and Al Sharpton's, there is really nothing more white folks can do to change anyone's mind about that.  If black people still don't believe it, then they never will no matter how accomodative white's become.

But let's all be honest rather than politically correct.  A majority of black people still hate all of the other racial groups in America, particularly the whites.  Black's believe they are being racially oppressed, think they are owed something by white America, and refuse to acknowledge any evidence to the contrary.  They believe this because the media and liberal politicians continually tell them so.  Liberal political policies encourage that sense of entitlement, leaving them dependent on government programs and holding them back from joining and participating in the more affluent world.  That is the real oppression, and it is inflicted upon them by the politicians they support.

Of course now I will be called a racist by the knee-jerk reactionaries who don't ever want to hear anything that challenges the politically correct narrative.  Certainly the comments I have made here are all generalizations, as many folks from each community have already worked hard and moved up in the world.  But there is also a lot of truth to what has been written, and most people know it even if they are afraid to say it.  Unfortunately, our society will never become truly integrated until we all recognize those basic truths.  It is time for politicians and journalists to dispose of their politically correct attitudes of moral superiority and recognize the real world the rest of us live in.

Bankers Are Not Rock Stars

Personally, I don't understand why anyone thinks any of the types of derivatives that have been created and traded over the last twenty years by Wall Street masterminds are vital to the financial system or markets. The country got along just fine without them for a very long time. Their only reason for being today is to allow traders to make outrageous amounts of money while destroying a nation's financial system.

The root of the problem is that bankers wanted to make rock star, professional athlete and hedge fund manager type money even though conventional banking is the easiest business there is. A traditional bankers job is to lend money to creditworthy entities at higher rates than they pay depositors on checking and savings accounts. Not too tough if one applies a little credit analysis to the borrowers.

But bankers wanted to be able to take higher risks so they could make more money, which is why they lobbied to repeal the Glass-Steagall Act legislated during the Depression of the 1930's. They wanted to be in the same businesses as Merrill Lynch, Goldman Sachs, Morgan Stanley, Lehman Brothers and Bear Stearns. Remember that less than five years ago none of those firms were banks. The bankers also wanted to engage in the even higher risk, higher potential return game of proprietary trading of derivatives and other lucrative but pointless securities. They succeeded with the enactment of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999.

Sure enough, less than ten years later the whole system collapsed. Lehman Brothers went bankrupt, Merrill Lynch was acquired by Bank of America, and Bear Stearns was acquired by JPMorgan Chase. Goldman Sachs and Morgan Stanley changed their charters in 2008 to become bank holding companies, primarily so they could participate in the bailout cash being handed out by the government.

My first job after graduation from college in 1971 was in a bank, one that stuck to the basics of attracting deposits, making personal, commercial and industrial loans, and providing trust services. Only the CEO made as much money then as the average bank employee does today. It was not a high paying profession because it didn't need to be.

Banks provide a vital service in the functioning of the financial system, one that must be conducted conservatively. They don't need to be in the investment banking, securities brokerage, insurance or proprietary trading businesses. The Volcker Bill now being debated in Congress would preclude banks from conducting those higher risk businesses, and must be passed so we can all live happily ever after - except maybe the bankers who may not make the six and seven figure compensation packages they ludicrously believe they deserve. If someone's primary goal in life is to make the big bucks playing mindless trading games, then they should seek employment with firms operating in the high risk businesses, not banks. Banks are too important to the efficient operation of the financial system to be gambling with depositors, shareholders, and unfortunately today, taxpayers money.

Obama's Ace In The Hole

Be prepared for Barack Obama to pull out what he believes will be his ace in the hole sometime this summer or fall when he will argue that the stock market has done much better since he became president. He was inaugurated on January 20, 2009, and the Standard and Poor's 500 Index did bottom at 667 seven weeks later. To a very large segment of the voting public he would seem to have a point. But as one who spent 33 years managing stock portfolios for mutual funds and pension funds, I would not be one to give Obama the credit for that occurrence. In fact, I would argue the reason the market plunged as far as it did from October, 2008, to March of 2009 was because of Barack Obama.

Basic investment management textbooks teach those who pursue a career in professional money management that the stock market is what is known as a discounting mechanism. That means it discounts the future, traditionally anticipating the economic and market environment nine to eighteen months out. In other words, the market today reflects what aggregate investor expectations are for corporate operating conditions approximately a year ahead.

Following the Bush tax cuts of 2001, the stock market as represented by the Standard and Poor's 500 Index of large company stocks doubled over the five years from the summer of 2002 through the fall of 2007, peaking in October at 1565. From October 2007 into September 2008 the market underwent a typical consolidation following an extended advance, dropping nearly 20% as the bull market aged and details of the magnitude of the housing bubble, related mortgage debt derivatives activities and their impact on the financial system began to become known. Then the proverbial shit hit the fan. The Bush administration decided it was necessary to rescue Fannie Mae and Freddie Mac, Lehman went bankrupt and the Fed bailed out AIG. Reasonable people can disagree on who bears the burden for what happened next, but over the next seven months the market plunged another 46%, finally bottoming in March of 2009 at 667 for a total decline of 57% from the October 2007 peak, the worst stock market collapse since the 1930's.

I know that some folks would contend otherwise, particularly those with a vested interest in getting bailed out from their high risk speculation gone bad, but in my mind there is no question that the Bush Administration's response to the financial system's liquidity crisis was the wrong thing to do. There was no need for bailouts. Financial institutions that suffered trading losses should have suffered the consequences. Bankruptcy laws are on the books to deal with the situation, and the failed banks should have been reorganized and operated by the FDIC as stipulated by law. Few depositors would have lost any money, but greedy speculators in high risk fixed income securities and derivatives would have suffered the substantial losses they should have sustained for making irresponsible bets.

But I would argue that wasn't the primary reason for the stock market debacle. In September of 2008 the presidential election polls swung sharply in favor of Barack Obama over John McCain following months of a near dead heat. The stock market promptly accelerated its plunge when it became clear Obama was going to win the election. This was a man who had very little experience legislating or managing anything. He had no noticeable accomplishments other than winning elections. He rose meteorically through the most corrupt political system in America. He associated with many questionable and contemptible personalities over the years, and he had the most liberal voting record in Congress when he actually did take the time to show up to vote. Plus, he certainly had a vested interest in making the financial system turmoil look worse than it really was so he could claim credit for an eventual 'miraculous' recovery from the brink of epic disaster. Unfortunately, we will never truly know what would have happened without the bailouts.

Furthermore, during his campaign Obama had made many promises that scared the hell out of businessmen and investors. He said he was going to raise taxes by letting the Bush tax cuts expire. He said he would institute Universal Health Care, driving up costs of insurance for both consumers and businesses. He promised to enact windfall profit taxes on oil companies. He vowed to pass the Employer Free Choice Act, an ironic euphemism for legislation to make it easier for productivity killing labor unions to force unionization of business enterprises. In essence, he promised to mandate into government policy the dominant themes of the Democratic Party - environmentalism, income redistribution, more government support programs and stronger regulation of commerce and industry.

Once he was elected he proceeded to pursue implementation of those promises while undertaking an exponential expansion of the questionable financial system bailouts. Under Obama the US government became much more involved in the private sector of the economy than ever before with the help of Democratic Party control of both houses of Congress. They ignored public opinion and enacted Universal Health Care. They engineered a take-over of General Motors accompanied by abrogation of legal contracts to give more power and ownership interest to labor unions. And they created new regulatory agencies and hundreds of new rules and regulations to bog down and straightjacket private enterprise.

As I said at the beginning, the stock market is a discounting mechanism, anticipating the economic and market environment approximately a year into the future. Sure enough, the two years ending in December 2009 saw corporate earnings for the Index of large companies drop 31%. For smaller companies the decline was worse - 35% for the mid-size companies and 60% for the Small Cap Index. The market anticipated the environment quite well. Today, March 2012, the large company index has recovered to 1365, only 8% above the level of September 2008 when the second stage of the market decline began and still down 13% from the peak in 2007. This poor performance relative to other recoveries can be attributed to the anti-capitalist policies Obama has pursued since his election which have resulted in the slowest economic recovery since the 1930's, the only other time these big government policies and extensive interference in private enterprise have been conducted. They didn't work then and they are not working now. Official unemployment is still in the neighborhood of 8%, with actual unemployment much higher counting those who have stopped looking for work, and economic growth remains below average.

Obama will certainly argue that he saved the American economy from the incompetence of George Bush and that he now has the economy back on track and moving up. That is more misleading propaganda. His policies are responsible for keeping economic growth well below what it should be. All he has truly done is doom us to painfully sub-standard growth, high unemployment and progress killing stagflation into the foreseeable future. That is the credit he deserves.

All that still leaves one question unanswered. Why is the stock market going up despite the growing concerns of market strategists about valuations and falling earnings estimates? I would argue there are several reasons. One is that you can't keep capitalism down for long no matter how hard you try. Business is improving slowly because people cannot postpone their need for a new car, new clothes or a new computer forever. Pent-up demand is being unleashed. Another reason is that the Fed's unprecedented easy money policies, keeping interest rates historically low by buying up nearly all of the new government debt being issued to fund massive deficit spending, is causing some of the money being created to leak into equities. And of course, the stock market could be enjoying a boost from the anticipation of an end to the four year nightmare of Obama in the Oval Office.

Perhaps the most powerful and sustainable reason the market is in an uptrend is due to what one might call the pendulum effect. Financial markets over time swing back and forth between asset classes, just like a pendulum. Over the last decade fixed income investments have grown as the investment of choice for institutional investors, the folks who dominate the markets. So much money has gone out of stocks and into bonds, collateralized debt obligations and their derivatives over the last several years that the total size of the stock market has shrunk considerably. For example, IPO's (Initial Public Offerings) in the United States have declined to around 100 a year from 360 a decade ago, and listings on American stock exchanges have dropped to under 5000 from 8,800 fifteen years ago. The pendulum has swung so far to fixed income that bonds are now in a speculative bubble while stocks have been ignored.

When the fixed income and derivatives bubble collapses, the rush out of those asset classes back into stocks could fuel a bull market of substantial proportions. It won't necessarily be about the economy, corporate earnings or market valuation. It will be about supply and demand. We are just at the beginning of the pendulum beginning to swing back towards the equilibrium and on up the other side. As interest rates start to rise investors won't be able to get out of bonds fast enough. Bonds have been in a bull market for 30 years. The pendulum swinging back into stocks may not last that long or provide the 15% annualized annual returns stocks achieved during the 18 years from 1982 through 2000, but the gains should be more than satisfactory.

Finally, Barack Obama is proving that in order to become a successful politician one must master the ethically and morally dubious arts of self-righteous condemnation, artificial indignation, sanctimonious condescension, character assassination, contrived passion and choreographed press conferences, all while taking credit for the good things that you had nothing to do with and proclaiming oneself a virtuous steward for the public good. In other words, one must have the ability to convince folks of things that aren't true - to take credit when credit is not due and deny responsibility when it is. Barack Obama may be the best we have ever seen at that game.

Why Not The Best?

Why not the best and the brightest?

America is fast approaching perhaps the most important election crossroads of its 236 year existence.  Will we remain the world's beacon of liberty and the engine of global prosperity or will we sink into the doldrums of apathy and dependence, or even worse, the abyss of oppression and destitution.  It is time to elect real leaders instead of settling for the best of poor choices.  Mitt Romney, Rick Santorum, Newt Gingrich and Ron Paul each have excessive baggage that is likely to prove fatal in the general election unless Barack Obama does something really stupid.  It is time for Republicans to reboot and offer candidates with proven ability, integrity and substance to the voters.  Now would be as good a time as any to start replacing the professional politicians who dominate our nation's government.

David Petraeus is an experienced, recognized leader with a long term record of success in the world's most challenging and vitally important arena's.  No one in America has an impressive resume' as he does.  He has shown all Americans that he is an intelligent, hard-working, decisive, strong patriot who is in love with his country, not himself.  Thomas Sowell has been rendering wise, rational, pragmatic opinions on social and economic policies for nearly four decades.  O.K., he is 81 years old, which rather than being a liability means to me he has seen it all.  He would be the perfect choice to be responsible for giving enlightened advice to a chief executive who knows how to get things done.

Neither of these men have displayed the desire to run for the top political offices in the country, which in my opinion is a huge plus factor.  Anyone who really wants the presidency so badly as to run the gauntlet of a political campaign is on a power trip, and probably should be among the last people on earth to have the job.  I think it is time to appeal to General Petraeus and Mr. Sowell to lead the Republican ticket to get America back on track to regain the principles and policies established by our founders that made America great.

Of course neither man might want the job.  Who could blame them?  But there have to be other men and women in America whose experience, qualifications and character would make them much better choices than the ones we have.  We must find them.  With people such as a David Petraeus in the White House and a Thomas Sowell as Vice-President, we would have an excellent chance of restoring our country to its traditional greatness and leave a United States of America to our children and grandchildren that continues a legacy of freedom and economic strength instead of a ruined hulk of once what was.

State of the Union?

No one asked for it, but here it is anyway - my take on the president's state of his re-election speech disguised as the State of the Union address.

The president said he wanted to address America's growing income gap. Doesn't everybody? The problem is that the gap effecting most Americans exists primarily between the private sector and government employees. The secret is now out that public sector employees have higher incomes, significantly better benefits and more job security than those who work in private enterprise. Personally, I don't think the president plans on closing the gap by cutting or even restraining the growth in government employees compensation packages.

The president said he wants to restore an economy where everyone enjoys prosperity, not just a few. Really! What a concept! I guess he thinks he is the only person in America with that objective. Be that as it may, he unfortunately believes socialism, income redistribution and placing shackles on free enterprise is the way to do that. Apparently he has little knowledge of history. He additionally said he wants an economic system where everyone plays by the same rules, again as if that is a singular desire on his part alone. He then proceeds to announce new programs and subsidized benefits available only to targeted interest groups. So much for everyone playing by the same rules.

In America we have always envied those who have more than we do. We haven't hated them. Until now. For generations immigrants came to America because they knew capitalism and free markets offered them the opportunity to build better lives for themselves and their families through hard work. Until now. That has been the change produced by our current president and his political party.

An American making $343,000 a year qualifies to be in the top one percent of earners, and $36,000 a year to qualify as a member of the middle class. Globally those numbers are $34,000 and $1,225 a year, respectively, as reported by CNN. This staggering difference in relative affluence was not created by socialist economic and political policies. It was created by capitalism and free enterprise.

The president always says he is willing to compromise and work with Republicans. Unfortunately, his idea of compromise is for Republicans to bend over while he shoves his agenda up their ass. But of course claiming this false willingness to compromise certainly goes down well with the fawning 'words speak louder than actions' crowd who worship every cliche he reads off his teleprompter.

Regarding specific issues, the president wants to eliminate all oil and gas subsidies. That prompts the question, what oil and gas subsidies? Does he mean the depreciation and amortization allowances on capital expenditures and intangible assets available to every business in America? Wouldn't denying those allowances to oil and gas companies be a contradiction of his equal playing field objectives? Or is he talking about depletion allowances for natural resources, without which there would be little incentive to spend money exploring for new reserves? Wouldn't that contradict and impede his stated goals of achieving energy independence for America? Gee, I don't know, maybe he doesn't let those kind of details bother him. After all, they don't seem to bother the folks who vote for him.

Another subject is national security, which he claims to be in favor of. That is good to know. The president announced he will cut the number of troops in the Army and focus on drones and small special operations units to defend against our adversaries. That is a good idea given the nature of the immediate threats we face today. In fact, that strategy is what my book "The Paladin Principle" is all about. But cutting vital next generation weapons systems is a very bad idea. Potential opponents are always improving their capabilities, so it is imperative that we always stay a step or two ahead. Over his three years in office Obama has cancelled vital programs such as the F-22 Air Superiority Strealth Fighter, and made substantial cuts in others such as the F-35 Joint Strike Fighter, our ballistic missile defense shield, and the CGX Next Generation Cruiser - all programs geared towards protecting the country from the more sophisticated threats we may encounter in the future.

Yes, high tech weapons do reduce the need for ground troops. But today's weapons of mass destruction can destroy whole cities and eliminate massive numbers of military personnel in an instant. In order to prevent that from happening to our cities and our soldiers our super weapons must be better than our opponents super weapons. We do not get to choose where our next threat will come from. If it comes from non-government sponsored terrorist organizations or Middle Eastern nations who are not as strong as they think they are we will most likely prevail. But if it comes from an increasingly belligerent world power, then we will be the ones who are defenseless. Perhaps the president thinks we can just whip advanced weapons systems out whenever we might need them in response to aggressive moves by the Russians, the Chinese, the Iranians or the North Koreans. But that is not a plan to provide for the common defense. That is a plan for extinction.

And then of course there are taxes. He wants everybody to pay their fair share. Again he appears to believe that is a concept no one else has thought of. Or maybe his inspiration is that he gets to decide what is fair. Contrary to his rhetoric, there is a majority of people on both sides of the ideological spectrum that agree America needs serious tax reform. But the president is not advocating tax reform. He just wants to raise tax rates on his definition of the wealthy. Not that I object to that, but it is kind of like using a child's sand shovel to dig the Panama Canal. There aren't enough rich people to make a dent in bringing down the nuclear bomb of a budget deficit he has created over the last three years. Furthermore, is it really fair for 50% of Americans to pay no income taxes at all while 10% bear 70% of the load?

It is past time to blow up the current tax system and start all over. There are lots of good ideas floating around about a tax system that truly is more fair for every American, and doesn't rely on just raising income tax rates on the rich and, if the Democrats were honest, the middle class. A flat tax, a value added tax, maybe even a wealth tax should be considered. For starters there should be the elimination of all tax preferences, which are nothing more than unfair subsidies benefitting special interest groups. Real fairness will be difficult to achieve without upsetting a lot of folks who have grown accustomed to their cherished credits and deductions. But if we are talking about real reform, that is the place to start.

The president continues to blame all of America's woes on George Bush and the Republicans in Congress, conveniently ignoring the fact his party controlled both houses of Congress his first two years and the Senate last year. He is trying to convince the nation that our economic sluggishness couldn't possibly be due to his enlightened vision of progressive leadership. Fortunately for him, capitalism has an inherent propensity to generate growth even when shackled with the burdens of unnecessary regulations and restraints. But too many of those restraints keep the economy from growing at a rate strong enough to maintain a society's standard of living. That is where this president's leadership now has us trapped. But of course he will never admit his ideology does not work.

Perhaps one of the biggest problems we face today as a nation is that the majority of voters do not understand economics. They seem to believe left wing politicians' bullshit that the government will provide for them by taking money from those who have more of it, as if that is fair. Another major problem is that elections are nothing more than popularity contests, not a rational process of learning about and electing qualified, knowledgeable, capable leaders. That is why every so often we end up with unqualified, dishonest egomaniacs who promise unattainable, fantasyland Utopias. A government run by deceitful, corrupt socialists and their like-minded supporters results in a self-righteous aristocracy dominating a moribund society that cannot produce enough to sustain itself.

It is almost expected these days that politicians are dishonest, devious and corrupt. Our president takes these undesirable attributes to new levels. He has been president for more than three years, but everything bad is always someone else's fault. He tries to tell us our problems couldn't possibly be caused by the discredited anti-growth Keynesian economic and illogical socialist policies he resurrected from the trash dump of history. But the fact is that no country's economic and social problems have ever been solved by printing money, redistributing income and adding to already bloated government bureaucracies.

If Republicans were smart they would agree with Obama's stated objectives, and then strongly argue why their solutions would provide more success in meeting those objectives. All the rational arguments are in their favor. But they probably won't. Republicans have never been good at public relations. In fact they are currently engaging in exercises that may achieve nothing but self-destruction. Sometimes you almost think they want to lose. It would almost be humorous if the stakes weren't so critical to the future of our country.

A Golden Opportunity

Apparently Mitt Romney will be the Republican candidate for president next fall. Consequently, it was inevitable that his career as head of a private equity firm would become an issue he would have to deal with as he runs for president. Over the last two decades many of these deal-makers have grown fabulously wealthy by acquiring struggling companies and restructuring them in order to improve their value and sell them for a profit. In the process many jobs were lost. Of course many jobs were also created if the firms were eventually successful. But some have used the loss of any jobs as an indictment of capitalism, and it is far better the debate regarding capitalism and private equity comes to the forefront now rather than next fall. Barack Obama will certainly press the issue hard in attempting to demonize his opponent, but at least now it will be out in the open and hopefully the arguments well known.

Many folks regard private equity investors as the epitome of the kind of rapacious bandits that represent the unrestrained greed and reckless behavior that has destroyed the global financial system and brought the Western economies to their knees. That is a bit of a stretch, since private equity firms generally did not indulge in the leveraged trading orgy of collateralized mortgage obligations and credit default swaps carried on by the too big to fail banking institutions at the epicenter of the financial collapse.

But the critics do have a few legitimate arguments. Some private equity firms are guilty of buying struggling companies solely for the purpose of leveraging them up with debt, paying themselves huge dividends from the borrowed money that oftentimes exceeded their investment (providing an instant profit), arbitrarily laying off large numbers of people to reduce expenses, then selling the over-leveraged carcass off to go bankrupt a couple years down the road. That is called looting and it is inexcusable, irresponsible and immoral. It should also have been illegal. The private equity executives that engaged in this behavior should be in jail and required to forfeit all of their earnings from the activity.

However, not all private equity firms operated in this despicable fashion. Private equity, when conducted in a responsible manner, may be the purest form of capitalism and one of the most beneficial when companies that would have gone bankrupt without outside intervention and restructuring manage to regain profitability and grow. Instead of everyone losing their job, the company can retain a significant portion of its people while replacing those at the top with more effective managers. The company may even become a substantial new job generator as profitable operations resume. To date I have seen no credible evidence that Bain and Company pursued the looting strategy rather than the objective of corporate regeneration for the benefit of all. If evidence that I am mistaken comes to light, then Romney is toast, as he should be.

Unfortunately, it appears that many Republicans are not doing the Party a favor by disparaging capitalism and accusing Romney in particular, and private equity investors in general, of plundering and pillaging. Either they do not really understand capitalism or they are political opportunists who desire to tap into the voters concern over the unfortunate growth of income inequality in America. In order to combat these perceptions, Romney must produce a verifiable report that proves Bain and Company did not engage in looting and that the firm was responsible for creating far more jobs than were lost by their investment and restructuring operations. If he doesn't, Obama will tear him to pieces with this issue next fall.

Certainly income inequality and Wall Street excess needs to be rationally addressed and reversed, but the redistribution of income policies of the current administration will not get it done. There ain't enough rich folks for that to succeed. 'Tax the rich, feed the poor til there are no rich no more' may have been a great line in an early 70's counterculture song (Alvin Lee, Ten Years After, 1971), but it is not a viable long term policy. Europe is the living proof. Only the economic growth generating attributes inherent in capitalism have the potential ability to raise living standards for all rather than for a privileged few.

Actually, all of this creates a tremendous, and critical, opportunity for Mitt Romney and our country. Romney must make a strong case for the job creation and abundant affluence that has been the legacy of capitalism in America versus the inevitable decline of living standards resulting from government control of the economy. Again, the ace in the hole for making this case is Europe. Unfortunately, with nearly half of Americans today receiving more from the government than they pay in, the majority of voters may not be listening. Something for nothing always appeals to people, particularly when it is legitimized by society. That has to change.

Democracy made America free. Capitalism made it great. Like it or not, Mitt Romney has perhaps been chosen by fate to be the man to lead America back from the precipice, to restore the United States back to its basic principles of individual liberty, equal opportunity, impartial justice, limited government and free enterprise. To regenerate an industrious work ethic in Americans we must be able to gain rewards from our efforts. That message must be eloquently and convincingly delivered. It would help if Romney would lose his patrician mannerisms as quickly as Obama acquired his. Regardless, Mitt Romney may be our last chance. He may not be up to it. Let's pray that he is.

The Audacity of Blaming Everyone Else

Republicans really suck at public relations. Americans are protesting on Wall Street and at Federal Reserve Banks around the country about the weak economy, high unemployment, and the huge disparity in wealth distribution. Republicans would be better off supporting these protests rather than criticizing them. The protests are justified.

Wall Streeters and executives at the big banks are guilty of stuffing obscene amounts of money in their own pockets while destroying the financial markets. They did this by mindlessly leveraging trades of pointless debt based derivatives and collateralized debt obligations backed by worthless mortgages rather than performing their real duties of providing capital to growth generating private enterprise.

The Federal Reserve and Treasury Department is guilty of bailing out bankers and bondholders (the wealthy) with low interest rates and more borrowed money at the expense of wiping out shareholders of stocks, which formed the basis of most retirement funds and middle class investments. The real question is why have this president and the financial authorities forgotten (or ignored) the fact that capitalism is based on equity ownership, not debt? And how could they expect consumers to spend money when they have destroyed their life savings?

But what I really don't understand is why people are not protesting the other guilty party of the economic quagmire we find ourselves in. There should be protests in front of the White House, the Capitol Building, the U.S. Treasury and Fannie Mae headquarters as well since this president, this Congress and the financial regulatory agencies encouraged the high risk behavior in the first place and subsequently have done nothing but make the situation worse. Could this be Comrade B.O.'s expertise as a community organizer at work? Are these protests being organized by the Demo-rats to deflect blame from themselves? After all, that is the only thing they are good at.

Demo-rats love to feed and exploit the misconception that all rich people are Republicans. If that is true, then how does Obama attract substantially more campaign contributions than the Republicans do? According to the Center for Responsive Politics based on analysis of Federal Election Commission data, individuals working in finance, insurance and real estate markets were among Obama's largest campaign contributors. And executives from Goldman Sachs were his biggest backers. Obama talks tough about Wall Street and then bails them out. They laugh all the way to the bank while B.O. remains comfortably seated in the oval office. Talk is cheap, and when it comes from left wing politicians it is usually a lie to deceive and mislead the voting public.

Furthermore, governors of the Federal Reserve Bank are appointed by the president. The Chairman of the Fed, Ben Bernanke, was first nominated by George Bush. He was then renominated by Obama in 2009 and confirmed by the Senate, which happens to be controlled by Demo-rats. It all makes you wonder how stupid Americans can be to always blame our economic troubles on the Republicans.

As usual Obama is demaguoging and chastising straw men he creates to demonize conservatives. It is typical Obama. His policies kill millions of American jobs and he blames everyone else. It is quite clear that Obama and his politburo believe the only real jobs are government jobs. Look at his "jobs bill", which is designed to fund almost exclusively more public sector jobs for public labor union employees.

Kinky Friedman recently said that Charlie Sheen would be a better president than the current imposter in the White House. He is right. Charlie Sheen would be drunk, stoned and partying all the time. He would do no damage at all to our economy because doing nothing is better than pursuing the wrong policies as our current president does.

The End of Capitalism?

Is capitalism over in America? The markets seem to think so. And one can make a pretty strong argument that it is. Personally, I was shocked by the headlines in today's Wall Street Journal following the U.S. government debt downgrade. Evidently nearly every market player wants the government and the Fed to again come to the rescue. There is no understanding among those who should understand that that is the problem, not the solution.

We no longer have an economy based on capitalism, where private investors invest in and participate in the profits of the organizations engaged in the production and distribution of products and services. The economy is now based on an entirely new concept - leveraged debt mania. For nearly a decade the debt markets and their derivative byproducts have been where the action is, and they have become testosterone filled high-risk crap games and juvenile games of chicken to see who bails first. And when the gamblers lose they expect the Fed to bail them out. Consequently, the debt markets have grown to dwarf the equity markets over that time.

The financial market is now a debt-drugged junkie, addicted to government debt. But trading debt and its derivatives is not capitalism. After all, what do collateralized debt obligations and credit default swaps, which insure against the default of debt that should never have been issued in the first place, have to do with capitalism? All that CDO's and derivatives do is encourage traders to take on too much risk in investment vehicles that have nothing to do with the private ownership of commercial and industrial enterprises.

The Wall Street institutions, meaning all the big banks, brokers and money managers, no longer serve their traditional functions. They used to be the financial intermediaries that provided for the efficient allocation of capital between investors and corporations in the marketplace. Now they are the marketplace. They have become too big to fail creators and traders of junk debt and ambiguous derivatives, demanding that the Federal Reserve keep interest rates near zero to facilitate their high-risk activities. Who does that help? How can private investors provide capital to business to create jobs and expand when they earn nothing on their savings?

Capitalism is the private ownership of the common stocks of corporate enterprises, small closely held businesses and partnership interests. It has nothing to do with collateralized debt obligations, credit default swaps or other debt derived contrivances created by Wall Street to generate fees and commissions. All of the innovative companies that grew over time to power American economic growth started by issuing stock to investors who took the risk in order to profit if the company became successful. Equity ownership is capitalism, and it is now only a small part of the financial markets in the U.S.A.

America today has a debt problem. That debt is downgraded and investors are dealing with the problem by selling stocks and buying more of the debt. Is that rational? After all, what makes more sense -

#1. Investing in the stock of a reasonably valued quality company with negligible debt, consistently strong profit margins, market leading products with a secure dividend yielding 3 to 4% and little chance of future insolvency, or

#2. A note or bond yielding less than 3% from an issuer with 536 polarized bosses that can do nothing to prevent it from becoming insolvent.

Apparently, either capitalism is dead or we are living in the twilight zone, a time warp or an alternate parallel universe. In today's market investors are choosing #2.

Uncharted Territory

An Associated Press article today based on census figures reported that in 2010 the number of American women with advanced college degrees passed the number of men. Today, among adults 25 and older, 10.6 million women have master's degrees or higher versus 10.5 million men. Women passed men in number of bachelor's degrees more than a decade ago, with 20.1 million women and 18.7 million men now holding bachelor's degrees. Women now make up 50% of the work force, with an unemployment rate more than a percent lower than men. Women complain they don't make as much money as men, but that is no longer true in urban areas for those under the age of 30. The over-all average for women is lower because they have not been in the executive offices as long as men, but that won't be the case much longer.

Face it, fella's, it's over. We lost and now we are doomed. I suggest investing in sperm banks and dildo manufacturers. Male children today are good for nothing but cannon fodder. We are useless, and our days are probably numbered.

America has just undergone the most significant social change in human history and it is flying under the radar. How did it happen? Are men just stupid and lazy and addicted to video games, as it appears many women seem to think. Did men do this to themselves, or did public policy and intentional social engineering encourage this feminization of America?

Apparently everyone in America except white heterosexual men is classified as a minority in today's politically correct culture. Is it possible that affirmative action, elementary and secondary school curriculums, college admission standards, scholarships and grants favored the so-called minorities, particularly women? Did this same politically correct attitude influence post-graduate job opportunities by favoring women and non-whites? I'm just asking.

What does it all mean? Is it good or bad for America's future? Who the hell knows? But it will have consequences. Many women throughout the world have risen to the top of their governments and their professions, and have done an admirable job of leadership, especially those with balls like Margaret Thatcher, Golda Meir and evidently today's Angela Merkel of Germany. But I know of no country where they are the most educated and control the majority of politically powerful positions, which seems to be where we are headed. And if it occurred sometime in the past it must not have lasted very long. I wonder if there is a reason for that? Again, just asking?

Capitalism With A Conscience

It should be clear to any serious student of economics that socialism doesn't work. Of course every society and economic system has intelligent and energetic people who rise to the top of industry, commerce and politics. But the opportunities in a socialist system to do so are very limited. For the vast majority the lack of incentives for extra effort stifles creativity, innovation, productivity and work ethic, inevitably resulting in economic stagnation. Unfortunately, a moribund economy is typically accompanied by political oppression as government assumes the allocation and rationing of scarce resources, and many politicians seem to like it that way.

But it is also becoming apparent that capitalism has its shortcomings as well in a modern technology and service oriented economy. The pursuit of wealth in a wide-open marketplace has regrettably led to unhealthy levels of income inequality with vast chasms between the haves and the have nots. Capitalism's success in generating new technology and operating efficiencies has created rising structural unemployment as this technology replaces labor in the production and distribution process. The problem is that capitalism has been too successful. It has allowed Americans to reach a far higher standard of living with fewer people involved in making it happen.

Consequently, like it or not, we will have to maintain a safety net far into the future for the unlucky among us cast adrift by capitalism's success. Certainly the support systems must be designed to encourage work, not sustain welfare. How to structure that safety net to provide adequate support while discouraging permanent unemployment and encouraging the displaced to actively seek meaningful work is another issue altogether, and a subject for another day.

In addition to structural unemployment, another consequence of capitalism is that the prospect of the enormous rewards it offers has encouraged business executives, particularly those in the financial industry, to incur extraordinary risks that result in catastrophic economic and financial disasters when the high risk activities inevitably implode. The problem is not that we need to mandate more regulations and create more federal oversight agencies to restrain our free market system. We already have in place rules, laws and regulatory authorities designed to maintain a fair and healthy business environment. The problem is that the regulatory authorities have not done their jobs of enforcing the rules and regulations. Wall Street could not have engaged in the mindless creation of excessive debt leverage in the financial system if the regulators had been paying attention and not allowed those they were supposed to regulate do anything they want.

What can be done to restore our system of capitalism to its intended purpose of prudently generating economic growth for the benefit of all members of society rather than just those at the top of the wealth pyramid? The most obvious first step would be for the regulatory agencies that already exist to enforce their regulations rather than maintain their incestuous relationships with those they regulate. Another would be to ensure that those making imprudent high risk bets with borrowed money suffer the consequences of their reckless activities instead of bailing them out with taxpayer money. But there are more.

One partial solution that would deter excessive risk taking and diminish the enormous wealth gap between the haves and the have nots would be to impose higher taxes on the super-incomes. The standard argument goes that raising taxes on the rich is against the principles of capitalism and free markets, taking away the incentives to invest, innovate and generate economic growth. Personally, I don't believe that is true if the higher tax rates are implemented starting with incomes of over one million dollars a year.

Conservatives, of which I am one when it comes to economic issues, rightfully argue that the top percentiles of income earners already pay the majority of taxes in the United States and therefore are already over-taxed. Furthermore, taxing the rich at higher rates would do very little to help reduce our outrageous budget deficit. That may be true, but it is irrelevant. To me this is more of a social issue to defuse the unhealthy polarization that exists in America than it is a balancing the budget issue, although it certainly wouldn't hurt that goal either. After all, the superwealthy are the only people in America that have excess income. Who else can afford to pay higher taxes?

Also implicit in the argument that taxes should not be raised on super-incomes is the assertion that they have earned this money by adding value to the economy and society by creating jobs and producing goods and services that consumers want. Some of them certainly do. But many of them don't. Top management arguments that they have to pay top dollar to acquire or maintain executive 'talent' is a bunch of crap, and they know it. It is just a convenient excuse to ratchet up their own pay. After all, these are the same geniuses that bring us financial meltdowns and corporate disasters, i.e., the Enron's, Worldcom's, AIG's, Countrywide Financial's and Fannie Mae's. It is not that tough to make money in a strong economic expansion. But when the economy and markets weaken, many of those geniuses are fired to bring in the next genius at even higher pay. It doesn't take exceptional 'talent' to play that game.

Lots of people on Wall Street and the corner offices of law firms get mega-rich through activities that not only do not add value but are destructive to our economy and society. Trading leveraged derivatives of high risk debt of barely solvent borrowers that implode at the slightest hint of economic slowdown does not benefit anyone but the traders. Fraudulent product liability, malpractice, workmen's comp and personal injury lawsuits sap the life out of private enterprise, causing businesses to close and jobs to be lost. Hucksters selling useless garbage and worthless investments over the phone or through internet scams swindle the public out of billions of dollars. These people should be punished, not rewarded. Raising taxes on the country's parasites may not end their damaging pursuits, but limiting their reward may impart some justice.

Maybe we should ask ourselves what the underlying objectives of capitalism truly are. Is the goal of capitalism to build wealth any way possible, even if it becomes concentrated in the hands of the few at the expense of the many? Or is it to generate wealth that benefits all by stimulating growth in the aggregate standard of living? I would argue the answer to that question is to reward those who add value to the economy by working to create and produce goods and services that cultivate sustainable economic growth. If that is the purpose, then why should those playing high risk financial games with borrowed money, games that are peripheral to the production of goods and services, be rewarded with outrageous pay packages when the game is hot and be bailed out by the rest of us when the crap finally hits the fan. They do not add value, they destroy it for everyone but themselves.

One way to prevent the lucrative for a few but calamitous for many speculative, hazardous and totally unnecessary securities transactions is to tax them heavily, and tax the money that is borrowed to speculate in them. Credit default swaps and other creative securities encourage reckless and irresponsible risk taking that serves no useful purpose other than to make big financial players superwealthy before they collapse and cause untold misery to the general public that pays the price. Tax them heavily and the players may decide they are not worth it.

I would also argue that the road to wealth in a capitalist economy should be based more on investing in the common stock of business enterprises than outrageous cash compensation packages awarded for short term performance. Bonuses should be paid in stock, not cash, to give employees more incentive to continue to work hard in improving the company's value over the long term. In fact, CEO's who are awarded the seven and eight figure pay packages are actually incentivized to maximize short term performance at the expense of the longer term, a course of action that is usually destructive to the future of the company, its employees and shareholders. Those types of compensation packages need to be restructured.

In addition to tax increases on the super income earners and high risk, superfluous financial transactions, there is much more that can be done to restructure the tax system that would benefit our capitalist system. Reducing or even eliminating corporate taxes would allow American companies to be more competitive in global markets and allow more money to flow through to investors to spend or re-invest. Simplifying individual taxes with fewer tax rates and the elimination of all preferences (deductions, credits, loopholes), including the home mortgage deduction, would increase fairness for all taxpayers and improve compliance. It would also encourage productive and efficient capital allocation throughout the economy by allowing free markets and competition to stimulate consumer spending rather than using government tax based policies to funnel money to politically favored economic activities and social programs.

Out of control government spending and massive budget deficits are critical issues America faces that must be addressed. But a potentially bigger one is the vast disparity between those at the top of the economic pyramid and those at the base. I have never seen any proof that compensation packages for top corporate executives of 250 or more times the lowest paid employee encourages or is responsible for any company's superiority in creating innovation, efficiency or productivity. There is no proof that pay packages of only 50x would reduce those measures of performance. Creativity and outstanding individual contributions would still be rewarded, and could be enhanced with awards of stock to increase an employees incentive to help the company grow, encourage team effort and produce personal satisfaction.

There is certainly nothing wrong with a goal of creating personal wealth. That is still the American dream, and America is still the best place on earth to find the opportunities to succeed. But gaining wealth should be earned by adding value to society. Working hard to get an education and creating products or providing services that people want and need should be rewarded. Those opportunities and rewards still exist and many prosperous and worthy people take advantage of them. The entrepreneurial, innovative and diligent will always endeavor to implement their ideas and succeed at their chosen vocation, regardless of whether that last dollar is taxed at a higher marginal rate.

An enlightened management team that significantly narrows the gap between the highest and lowest paid employees might find that such a policy would improve morale, generate loyalty and create a more cohesive, cooperative environment that would enhance corporate objectives. Why would any CEO or top executive want to make 250 times more than their co-workers for any reason other than to selfishly satisfy their ego. If some of them think its just all about the money, then maybe they do not really have the company's interests at heart.

One good definition of Capitalism is an economic system based on private ownership of the means of production and distribution of goods and services, characterized by a free competitive market and motivation of profit. That works best when everyone is working together for the benefit of the company. Perhaps a leveling of the gap between compensation at the top and the bottom, enhanced with awards of company stock for the most productive, would create such a stimulating environment. The best sports teams are usually those where the players all like and support each other, and help each other maximize their strengths and minimize their weaknesses. They all know who the stars are and the stars know they need their teammates. Why would it be any different in a corporate environment.

The problems America faces have moved beyond minor adjustments to current policies. It is time to consider major changes to our capitalist economic structure. We cannot just sit on our butts and ignore the math, nor ignore the warning signs and blindly drive down the road to ruin. There has to be more to our capitalist society than greed and egomania. Government leaders who reward the reckless and irrational while punishing the prudent destroy the fundamental fabric of a free society. Taxes can be raised on the ultra high incomes without extinguishing the obvious benefits of capitalism and free enterprise. Incentives to innovate and produce can be maintained while narrowing the income disparities that are growing ever wider.

The haves cannot ignore the have nots forever. Sooner or later, unless these disparities are addressed, we may end up like the rebellious revolutionaries in other parts of the world that are tired of putting up with the avarice and self-indulgence of the rich and powerful. If we really want this great country to continue to endure with freedom and justice for all, then perhaps we all need to show a little less self-interest and a lot more compassion for our fellow citizens.

Zombies

It seems to me that today's economic environment in the United States has all the characteristics of a zombie. It isn't dead, but it isn't alive either. It is flatlining. And it is likely to stay that way for awhile.

Much the same can be said about Democrats. It is election time again and they always restore to life the same old dead strategy - everything wrong with the world was caused by Republicans. Revising history is again front and center in this year's political campaigns. With the usual assistance from the self-righteous psychopaths of the mainstream mass media, Democrats from the president on down blame the current economic doldrums on George Bush and the Republicans.

Certainly the Republicans deserve a good portion of the blame. When they controlled Congress they forgot why they were elected and spent too much money the government didn't have. That was undeniably contemptible and they deserved to have their butts kicked in 2006. But anyone who thought Democrats would spend less or reduce the size of government will have to plead temporary insanity.

Regardless, lets review the primary reasons the economy is in the commode.

1. Why did the economy roll over into a recession?

Answer - Because of the collapse of the financial markets and resultant disappearance of bank lending.

2. Why did the financial markets collapse?

Answer - The mortgage market grew out of control stimulated by the Democrats support of Fannie Mae and Freddie Mac and their political mandate to give home mortgages to people who couldn't possibly repay.

3. Who tried to impose restraint on Fannie and Freddie?

Answer - The Republicans in Congress, primarily with the Federal Housing Enterprise Regulatory Reform Act of 2006, Senate Bill 190 sponsored by Charles Hagel, John McCain, Elizabeth Dole and John Sununu - all Republicans. The Democrats in the Senate unanimously rejected it. Many other attempts were made by Republicans, including George W. Bush, to draw attention to and restrain the out of control mortgage lending of the quasi-federal agencies, but the Democrats continually blocked any action.

4. What was the result of the unrestrained explosion of high risk mortgage lending?

Answer - Massive growth of toxic subprime mortgages, prompting Wall Street to do its thing, which was to package these toxic loans into high risk securities to sell to pension funds and other investors. From there they developed highly leveraged derivatives of these securities to trade among themselves along with credit default swaps to play both sides of the trade, all resulting in unprecedented risk and inevitable implosion.

The current economic environment was manufactured in Washington by Democrats and escalated exponentially by Wall Street, whose big players support both sides of the political spectrum. And both Washington and Wall Street were bailed out. In fact, the Democrats in Washington even had the audacity to name the Financial Reform Bill of 2010 after the two biggest contributors to the debacle, Barney Frank and Chris Dodd.

Every political party or ideological movement has its share of crackpots, morons, corrupt sleazeballs and arrogant, insufferable assholes. It is just that the Democrats have more than their share. More hypocrites, too. It is interesting that so many of those so-called liberals (or socialists, progressives, Democrats, whatever) in positions of power who advocate equality of outcomes through government programs are already part of the affluent elite who have no intention whatsoever of giving anything up themselves.

The Corruption Of The Golden Rule

As the mid-term elections approach our president is shoving the gas pedal to the floor to convince voters the Democrats are doing something about the economy. Just after Labor Day he proposed spending $50 billion in 2011 on infrastructure projects such as highways, railways, airports and a new air navigation system. This is what should have been done on a larger scale two years ago as America's infrastructure certainly does need upgrading. And it would put people to work productively. But it is too little too late.

At the same time Obama proposed legislation to allow immediate 100% tax write-offs in 2011 for business investments on new plant and equipment, projected to cut business taxes by $200 billion. He also proposed to extend $100 billion in tax credits for business spending on research and development. But what the American economy needs is for consumers to start spending, not just business. American companies have lots of money to spend, and capital spending has been one of the few sources of growth in the last year. If consumers don't start consuming there is no reason for businesses to continue to spend money on production capacity that will not be used.

Of course Obama's latest proposals are on top of the misguided, ineffective three trillion dollars already spent to bail out the financial and housing industries and stimulate the economy. These initiatives were precisely the wrong things to do. Most folks forget the U.S. stock market dropped 20% from its peak in October 2007 to September 2008, a not unusual reaction to a deteriorating economy. In early September 2008 the federal government announced plans to use taxpayer money to bail out FNMA and AIG. Over the next six months, accompanied by a multitude of more bailout and stimulus billions, the market plunged 45% for a total decline of 56% from the 2007 high. In my humble opinion, the announcement of government bailouts and stimulus programs accelerated the decline and made it much worse than it would have been.

And what did all this government spending accomplish? Basically, it destroyed the non-financial private sector of the American economy while saving the fortunes of Wall Street financiers. The most interesting aspect of all this is that it was a bi-partisan effort. Democrats controlled Congress at the time, but federal regulators started the bailouts under George Bush and then exponentially escalated them under Barack Obama. The government poured gasoline on the fire. One can only assume that the leading decision makers of both parties are either totally clueless or grossly corrupt. Given that they created massive amounts of new debt for American taxpayers to pay off in order to bail out the mega-rich guys who were responsible for the debacle leads one to conclude the latter.

The wealthy folks at the top of the financial food chain had been making ever riskier, ever more reckless, ever more financially irresponsible trades with other people's money for years, making billions of dollars for themselves in the process. They were doing deals buying junk bonds, junk mortgages and junk companies to package together, leverage up and sell to those responsible for the conservative oversight of working Americans' retirement assets. Perhaps most destructive of all, they were trading esoteric, unintelligible derivative securities that no one understood. And they were doing it all with massive amounts of borrowed money to exponentially multiply their return on the minimal amount of their own money invested. Regulators were either asleep at the wheel or partners in the insanity. On top of that you had chairmen of congressional oversight committees encouraging government agencies to fuel and facilitate the escalating catastrophe (see Fannie Mae and Freddie Mac).

Despite what the perps now say, most experienced investors knew that a debacle was coming and avoided the toxic garbage these guys were trading back and forth among their elite club of co-conspirators. Inevitably, in 2008 the crap hit the fan as the economy slowed. That was to be expected, and prudent investors figured to weather the market downturn as they had done countless times before. And finally the gluttonous, over-leveraged nine and ten figure net worth geniuses playing the securities of mass destruction games would suffer the consequences of their mindless greed. Wrong!!!

Instead, the architects of disaster who made billions buying and selling worthless paper get bailed out by their bought and paid for congressional and regulatory friends in Washington, DC. Rather than suffering the consequences they come out whole. Has anyone ever explained why the government committed $180 billion to AIG so Goldman Sachs could recover 100% of their exposure to worthless credit default swaps underwritten by AIG. Obviously, if you are a top dog at any of the elite banking, insurance or money management institutions you are untouchable and can get away with anything you want. The Golden Rule is alive and well in America. "Those who have the gold make the rules", and they have the gold.

The Beltway Bandits in Washington clearly dance on strings pulled by the privileged few at the "too big to fail" financial institutions. We knew that our government does not represent the American people. But we just found out how little they care about us. Politicians' only loyalty is to the mega-rich folks who keep them in office. And I am sorry to have to inform the liberals, but it ain't just the Republicans. Only the totally clueless and certifiably brain dead could believe the Democrats' bullshit about standing up for the common man.

One of the reasons I quit managing money in 2004 after 33 years in the business was because the markets no longer functioned for traditional investors. The markets became dominated by giant banks and trading firms playing video games with extraordinary amounts of money, pocketing outrageous commissions and fees in the process. And they weren't too worried because if the market finally did tank they had a network of Ivy League fraternity brothers, former and future business partners, high society social connections as well as golfing and yachting buddies in charge at the important agencies in Washington that would look after their interests. Let the individual investors and pension funds take the hit. A few scapegoats would be offered and some minimal fines might have to be paid, but nothing serious for those at the top of the pyramid.

In my professional career I naively believed that those who did their jobs diligently, conscientously and prudently would come out ahead in the end. I believed those who were responsible for managing other people's money had a fiduciary duty to invest the life savings and retirement funds conservatively with a primary goal of capital preservation. I believed the careless, reckless and greedy would eventually suffer the consequences of their imprudence. But I was wrong. I never imagined that a bunch of avaricious, self-centered assholes would come along and screw up capitalism by acting irresponsibly destructive while collecting millions of dollars, and then get bailed out by our government. That just ain't right. One can only conclude that the government of the United States can be bought, making it as corrupt as any third world dictatorship on the planet. We have some very serious problems.

What Hath Obama Wrought?

In less than two years Comrade Obama and his compliant congressional politburo have turned America upside down. Income redistribution. Government intrusion into the free markets. Massive new government spending programs. Ignoring public opinion to pass legislation the people don't want. Government policies today are the opposite of what made this country great. King Barack and his enablers are rapidly dismantling our whole way of life.

The United States is now burdened with -

1. A communist dictatorship form of government. Is that characterization over the top? They rammed health care reform down our throats. They took over the financial industry. They reward labor unions and punish corporate shareholders. They eliminate thousands of jobs to please their Greenie supporters by shutting down the offshore oil industry. They brazenly do anything they want. That is not democracy. It is a socialist, redistributive economic system and entrenched welfare state that preserves and enhances the wealth and power of those at the top while confiscating the property and rights of the middle class.

2. Amoral injustice, as the prudent and responsible are punished while the imprudent and irresponsible are bailed out and rewarded. Case in point: the mega-rich partners of Goldman Sachs, who maintain an incestuous relationship with the Treasury Department, Federal Reserve and other government regulators, receive 100% payoff on their high risk, speculative credit default swap investments purchased from AIG. The rest of us eat our losses on our more conservative traditional investments and watch our retirement savings disappear.

3. Unilateral disarmament that is rendering America defenseless against global threats. The suicidal START Treaty, evisceration of our ballistic missile defense systems, and cancellation of our most advanced weapons systems are prime evidence.

4. A destructive cultural revolution combining open door immigration and multi-culturalism that is destroying traditional American ethics and mores. This has created a vast underclass of illegal immigrants that don't assimilate into our society as immigrants traditionally have done. Yet they freely use our educational, health care and other support systems without paying for them.

5. The decline of private enterprise and free markets as government imposes more regulation and controls on finance, commerce and industry. Government industrial engineering results in increased inefficiencies, misallocation of capital and production of goods and services that lack demand. Worst of all, it diminishes incentive based creativity, innovation and entrepreneurial energy that stimulates productivity and growth.

6. An economic system based on debt rather than equity ownership, with financial markets dominated by large institutions using high risk leverage and rapid fire, computer based trading of baskets of mortgages, treasury debt and artificial derivative securities instead of investing in shares of real companies producing real products. That is not capitalism. It is gambling. An economic system based on gambling is a house of cards waiting to fall.

7. Foreign policies that alienate our traditional friends and appease our enemies, including protectionist trade policies that kill private sector jobs while rewarding the politically powerful labor unions.

8. Deteriorating K-12 educational system that turns out illiterate graduates with few skills who become dependent on government support.

9. Major media organizations and universities that indoctrinate the younger generations with the concept America is the source of evil in the world, ignoring the profound deeds of creativity, productivity, progress, inspiration, global assistance and defense of freedom and democracy that comprises our true historical legacy.

10. Unprecedented monetary expansion and massive government debt explosion exposing our country to hyperinflation and economic collapse.

Although Ayatollah Obama did not start some of these trends, he certainly has accelerated them. Unless these policies are reversed soon, America faces at best a future outlook of -

1. Bankruptcy of our national, state and local governments.

2. Permanent higher income tax rates plus imposition of an ever increasing Value Added Tax on consumption. These taxes will kill our traditional prosperity by ensuring prolonged economic weakness and producing sustained high unemployment.

3. Polarization of society between the growing number dependent on government support and the diminishing number of providers, leading to civil chaos.

4. Loss of global leadership and declining standards of living relative to other countries. America is on the road to becoming an economic has been at best, and potentially a third world country.

5. Gradual loss of liberty, justice, and democracy as the collective agenda of the politically correct redistributionists and environmentalists trump free choice and dictate how we live our lives.

6. Potential military defeat at the hands of a foreign adversary, resulting in the loss of American independence and sovereignty.

The American public must wake up to this reality before it is too late. Our freedom, prosperity and security are at risk. We are in the process of destroying America's future. These trends must be stopped or we will become nothing more than a footnote in the future history of the world.

The New Kleptocracy

Several months ago the news media reported that GM Financial Services petitioned King Barack's Pay Czar for the authority to pay their 25 top employees an average of $3 million this year. Bank of America proposed a $7 million average for its top guys, and Citicorp wanted an average of $10 million. It was also reported that it took less than a year after receiving government bailout funds for Goldman Sachs to hike the average base salary for its employees back up to over $600,000 annually. That wasn't for the top 25, that was the average for all employees, before any bonuses. Welcome to the Twilight Zone.

Most people probably know that the only thing these privileged folks really have to pay for are their homes. Automobiles, travel, entertainment, club memberships, expensive food and drinks are typically covered by their companies (i.e., shareholders) as business expenses. Obviously, those who played the highly lucrative but high risk games that resulted in the biggest loss of jobs in 70 years, foreclosures on thousands of homes and the meltdown of the value of personal savings and pension funds are not having to suffer too much.

The big financial institutions say they need to pay mega-million dollar compensation packages to their executives to attract and keep talent. But can any of them explain what these executives do, what they accomplish and what talents they have that require the outrageous compensation packages? Not rationally. And what kind of product do these people produce that benefits society? None. In fact, the products they play their games with eventually lead to economic disaster. We have already seen it happen once. Basically, in the financial services industry, these overpaid bloodsuckers are those who kissed the most butts, flung the most bullshit or took the most risks with other peoples money to reach the top of the pyramid. That kind of talent America cannot afford at any price.

Now we read in the first month of 2010 that banks have already re-engaged in lending to hedge funds and private equity firms back to levels not seen since prior to the financial market collapse, with leverage ratios of the borrowers again expanding to imprudent percentages. Meanwhile, the banks are ignoring the borrowing needs of American businesses that produce real goods and services that generate economic growth. If that doesn't make you throw up, then you must be employed by Goldman Sachs.

To reiterate, the bailed out banks are supposed to be making loans to commercial and industrial enterprises to get the economy moving again. Instead they are providing money to the same jerks to do the same shit that caused the meltdown in the first place. And all these moneychangers do with the money is use the borrowed money to buy derivatives (artificial pieces of paper) based on government and agency debt, including packages of underwater mortgage backed securities, to magnify the returns on their miniscule amount of invested money. The government continues to issue the massive amounts of new debt because it needs the money to pay for its unprecedented spending spree. The banks and big money managers are accomodating them because they know they will be rescued by the federal government (i.e., taxpayers) if the loans go bad, and because their regulatory overseers encourage them to. That is the result of the newly established precedent of bailouts.

The financial system is supposed to exist to facilitate the efficient functioning of economic activity - trade, commerce, industrial production, innovation and the provision of valuable services. The financial system in America today does not do that. Right now it is an exclusive, closed game played by greedy, mega-rich financial industry larcenists and associated federal regulatory co-conspirators creating more wealth for themselves while ignoring and restraining the productive sectors that are the foundation of real economic activity.

Economists tell us an economic recovery is underway. I suppose it is if you work in the financial or government sector, where most of the economists are employed. But so far it appears the mega-wealthy get wealthier and public employees do just fine while the real economy remains in the toilet bowl. It makes you wonder if everyone in Washington and on Wall Street is a crook. The truth is they are stealing from taxpaying Americans, and they belong in jail. In capitalism there is no such thing as bailouts, 'too big to fail' or government directed allocation of capital. Consequently, America is no longer a capitalist country that benefits all. America has now become a kleptocracy that benefits a privileged few.