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Friday, July 31, 2009

Monday Morning Smile

(via JWT) Judy Wallman, a professional genealogy researcher in southern California, was doing some personal work on her own family tree. She discovered that Harry (senator (D) from Nevada ) Reid's great-great uncle, Remus Reid, was hanged for horse stealing and train robbery in Montana in 1889. Both Judy and Harry Reid share this common ancestor.

The only known photograph of Remus shows him standing on the gallows in Montana territory.

On the back of the picture Judy obtained during her research is this inscription:
Remus Reid, horse thief, sent to Montana Territorial Prison 1885, escaped 1887, robbed the Montana Flyer six times. Caught by Pinkerton detectives, convicted and hanged in 1889.
So Judy recently e-mailed Senator Harry Reid for information about their mutual great-great uncle.

Believe it or not, Harry Reid's staff sent back the following biographical sketch for her genealogy research:
Remus Reid was a famous cowboy in the Montana Territory. His business empire grew to include acquisition of valuable equestrian assets and intimate dealings with the Montana railroad. Beginning in 1883, he devoted several years of his life to government service, finally taking leave to resume his dealings with the railroad. In 1887, he was a key player in a vital investigation run by the renowned Pinkerton Detective Agency. In 1889, Remus passed away during an important civic function held in his honor when the platform upon which he was standing collapsed.
That's real POLITICAL SPIN!!! That's how it's done folks!

Outrageous Behavior

Nine banks took part in the TARP bank bailout last year. Those banks that filled up at the public trough paid 5,000 of their employees bonuses of more than $1,000,000 each, on top of their regular salaries!

Goldman Sachs alone paid 953 traders more than a MILLION DOLLARS in bonuses. That is almost a fifth of all the high paid bankers.

All told, in 2008, those nine banks paid bail out money bonuses of $32.6 Billion at exactly the same time that they LOST $81 Billion.

What we have done is reward the people who brought on The Great Recession with stunning amounts of money!!!!

Thursday, July 30, 2009

Is The Recession Over?

Some wishful thinking government people are now saying that the recession is over. Don't believe it! There are currently 15 million unemployed Americans and the recession won't be over until that number shrinks considerably. Here's why.

Normally, about two-thirds of the U.S. economy is driven by consumer spending and one-third by industrial spending. Recently, that share exceeded 75% as consumers dipped into their home equity, and did some other borrowing, but that is another story for another day.

What concerns us here is that U.S. consumers have cut back sharply on their spending and have resumed saving some of their income. All of this behavior is good, but the economy cannot begin to grow again until consumers regain their confidence about the future and start spending again. So with 15 million unemployed and, maybe, twice that number seriously worried about losing their jobs, we have about 45 million households making sharp cutbacks in their spending. Since companies watch consumer expenditures closely, they won't start producing products and services to sell to consumers until they see increased spending.

Since there are about 117 million households, in total, in the U.S. roughly 40% of all U.S. households are severely limiting their expenditures. The recession cannot end, and the next expansion cannot begin, until more households begin to spend again. Period.

Watch unemployment numbers and pay no attention to talking heads in Washington. You have a very good indicator of what is going to happen to the economy, and it is better than anything that is coming from Washington.

Wednesday, July 29, 2009

Wall Street Banks Strike Again

As you are well aware, almost everybody in the U.S. is outraged at the bonus paychecks that went to the Wall Street Bankers whose behavior led directly to the current recession. And those bonus checks just keep rolling out. Every one of Goldman Sachs 30,000 employees are on track to receive average annual bonuses of $777,000.

Congress is aware of the outrage and is in the process of passing legislation to reign in those out of control bonuses. The guts of the law is that shareholders would have an annual vote on salaries and bonuses of top employees.

Now that is spineless enough, but here is the kicker. The vote would be NON-BINDING, which means that the managers are completely free to ignore the vote. Hence, business as usual!!

The subtext of our book, The Great Recession Conspiracy, is that there is a cabal of Wall Street banks that actually run the U.S. Treasury Department, and do so only in their own interest. And it looks like no one in Congress is willing to take this cabal apart. So we are laying the ground work for our next recession even before we recover from this one.

Monday, July 27, 2009

Anti-Dismal: The Great Recession of 2008-9

Anti-Dismal: The Great Recession of 2008-9 You will find updates on The Great Recession Conspiracy there and you can vent all you wish. You can find the book at It is also a Kindle book.

Enjoy. It is a short read.

James W. Taylor

Friday, July 24, 2009

Health Care in the USA

Today, $18 out of every $100 of our Gross National Product (the pie we all have to share) is spent on health care, and it is headed for $30 in five years, if current trends continue. Those dollars crowd out investments in education, highways, defense and other important uses because the size of the "slice" is growing faster than the "pie".

This might be defensible if we were getting good value for this money, but the truth is that our health is not as good as most other developed countries on almost every measurement.

The President has made controlling health care expenditures the hall mark of his administration, and he made a quite good speech about it the other day. But he ducked the real issue.

We can make some improvements in making medical records more widely and easily available and that can reduce some costs. Since a stunning 30% of all Americans are clinically obese, there are some significant cost reductions associated with achieving a healthier life style.

But the only real source of cost control is the R word, rationing. Estimates vary depending on assumptions, but 80% or 50% of all health care dollars are spent on the last two months or two years, of life. So there is no question that the real source of cost containment lies in some very, very difficult questions and their answers.

Fortunately, the subject is being gingerly introduced for public discussion. On July 20, 2009, the Los Angeles Times ran an editorial entitled, "The reality of rationing". A couple of weeks ago, the President raised the topic in a meeting with doctors and other health care professionals. He used a personal example to make the point. His grandmother was diagnosed with terminal cancer and given nine months to live. Some months later, she fell and broke her hip. Should she have received an artificial hip, with its months of recovery time, at government expense?

The more you think about that little story, the more you realize just how difficult making such decisions will be. But before you get to discouraged, remember that insurance companies have been making exactly these decisions for a long time now, but they have been making them out of sight.

Thursday, July 23, 2009

Good News, Bad News; You decide

Goldman Sachs has set aside $11.4 Billion for employee bonuses in the first six months of this year. Note that the bonuses are on top of already handsome salaries. At this rate, all of Goldman Sachs 30,000 employees are on track to receive 2009 annual bonuses of about $773,000. That is double last year's number and exceeds the 2007 bonuses of $700,000.

The reason that Goldman Sachs can pay these bonuses is that you lent them a lot of money last year. However, Goldman Sachs has now paid that money back and the U.S. Treasury seems to have made a profit $318 Million on that loan.

You do the math. And remember that everyone of those 30,000 employees will pay exactly $6,621.60 into the Social Security account.

So who gets the last laugh here?

Wednesday, July 22, 2009

Loan Modification Programs

Yesterday, the Federal Reserve Bank of Boston released a very interesting report on how the government's Home Affordable Modification is working. The program offers lenders $1,000 for each mortgage they modify, and another $1,000 for each modified mortgage still performing after three years. The modified loan must not exceed 31% of the home owner's income.

Over 1 million homes have faced new foreclosure proceedings in the past four months, but only 350,000 borrowers have even been offered modified loans.

Here is why the Bank says the program is not working very well. First thing is that roughly 30% of the borrowers will eventually pay off their mortgages anyway, but nobody knows which loans fall in that 30% so banks are reluctant to offer modifications to anyone.

The second thing is some borrowers default on modified loans later and the declining house values make later foreclosures even more expensive for the bank. However, the Fed doesn't mention that the majority of the modified loans have higher monthly payments than before because the banks have loaded the loans with fees, late payment fines, etc. etc.

So another pie in the sky government program crashes when it comes face to face with the real world. But then the people who devise these programs are millionaires and they have no concept of meeting monthly bills and mortgage payments. What did you expect?

More really bad news. Neil Barofsky is the special inspector general for TARP (remember he called for an accounting of how the TARP money was spent and got slapped down by the Treasury Department) and I think one of the few people involved with economics in this government that you can trust.

Anyway, he released a report yesterday that says the commitments made by the U.S. government in all its various bailout programs could cost as much as $23.7 Trillion!!
(For perspective, the total U.S. government debt today is about $10 Trillion.) The Treasury Department immediately went ballistic trying to discredit him.

Yesterday, Bill O'Reilly, the buffoon of Fox News, said that he thinks the U.S. is headed for bankruptcy. When Bill O'Reilly and I agree on something, you should be afraid, very afraid!

Tuesday, July 21, 2009

How Much Power Can One Person Have?

One sole human being decided that there was no systemic risk-the world financial system would collapse-if Lehman Brothers went bankrupt. However, he then decided that such a risk existed if Goldman Sachs were allowed to fail. The most momentous economic decision of this century was basically made by a single, unelected bureaucrat!

There is no evidence that I can find that indicates any consideration was given to the idea that the market-and the country-had the capacity to heal itself (as it is doing now) without the staggering sum of bailout money Hank Paulson removed from the public purse (for the benefit of Paulson's former firm, Goldman Sachs).

Think about it. It is your money!

Monday, July 20, 2009

The U.S. Treasury Follies Continue

The Special Inspector General Neil Barofsky wants the Treasury Department to publish regular, detailed reports on how the banks that got your dollars used that money. Remember, after the first objective for TARP funds-buying "toxic" mortgages failed-the TARP was re-tooled to increase lending by banks. It is now nine months into this boondoggle and lending by those banks has actually DECREASED!

But here is today's beauty story. The U.S. Treasury Department flatly refuses to report on how the money was actually used!! Their reason is that money is fungible, which means one dollar looks pretty much like any other dollar. As of today, the score is Stupidity 100 and Transparency 0!

You also receive and spend fungible money, but you have no trouble knowing how much you spent for food, gas, taxes, etc., etc. Sure, you can do what the U.S. Treasury Department cannot do. Amazing!

Is it just possible that the Treasury Department simply does not want you to know how much of your money went directly to Goldman Sachs to fund their record breaking profits and incredible bonuses? Naw..........what government would allow that to happen?

Saturday, July 18, 2009

Larry Summers Lies Again

On Friday, Larry Summers spoke to the Peterson Institute for International Economics, a Washington think tank. He said the government's $787 Billion stimulus plan was on track and doing just fine. Which is the best evidence that I can think of to prove that Summers either has no idea what is actually happening, or does not care as long as Goldman Sachs continues to get rich.

There are two outstanding characteristics of the Business Cycle when a Contraction begins. The first is rising job losses and the one that closely follows is tightening credit. Both of those characteristics are running rampant in the economy today and nothing the government has done to date shows any sign of changing that fact.

The jobless rate is currently 9.5% and shows every indication of continuing to go up. The core business of banking-lending money-is in the tank as defaults on existing loans continue to rise and banks respond by tightening loan standards.

But wait, it gets worse. Summers also said the obscene profits recorded by the major banks this year (profits that were made possible by tax payers money), "...were a positive sign for the economy".

Now, by all accounts, Summers is a very bright guy so he has to know he is lying and trying to put a good face on the enormous amount of your money that has been transferred to Goldman Sachs.

The U.S. Treasury Department is out of control and being run by Goldman Sachs. That is not in your best interests. Be afraid, very afraid!

Friday, July 17, 2009

The Question of the Day!!

Congress is now looking at what has happened in the past nine months and it apparently does not much like what it sees. Yesterday, Congress was interviewing Hank Paulson and Congressman Stephen Lynch asked Ol Hank this question; "If you had to come up here with Mr. Bernanke and said, 'I've got a plan to take $700 billion in taxpayer money. I want to give it to my pals in the nine biggest banks in America', how many votes do you think you would have got up here?"

Apparently Mr. Lynch has begun to figure out what happened, and that is a good thing.

However, the really important issue is somewhat different. Ken Lewis, president of Bank of America, has testified that Hank said that if B of A backed out of rescuing Merrill Lynch after Lewis discovered how deeply in debt Merrill Lynch was actually, he would get Lewis, his top management and all of the board of directors fired. If the government can fire the entire management of a perfectly legal, profitable American company, what comes next?

If you want a cogent examination of this issue, you can find it in our book, The Great Recession Conspiracy. The book is published online at It is also available as a Kindle book.

Thursday, July 16, 2009

U. S. Homes in Foreclosure

Right now, today, there 1.5 million U.S. homes in foreclosure. That means a big bump up in homeless families is coming.

Is there anybody who still thinks the government's policies for dealing with this Contraction (Recession) are working??

Wednesday, July 15, 2009

The Really Great Recession Conspiracy

15 Million people unemployed today.
500,000 bankruptcies so far this year.
33 bank failures so far this year.

But Goldman Sachs has record profits for the second quarter of this year; $3.44 Billion, a record in the company's history. Goldman Sachs is on track to pay each of its 30,000 employees annual bonuses of $770,000!!

This is the SAME Goldman Sachs that last year led the line to get money from the U.S. Treasury. The SAME Goldman Sachs that received the most money from the AIG bailout.

The traders at Goldman Sachs are doing exactly the same things that caused the recession in the first place. Why isn't the U.S. government screaming its head off? Because Goldman Sachs own the U.S. Treasury and Obama's economic advisors. Even Dick Durbin, the senor senator from Illinois says that is true.

You can read the awful story at It is also available as a Kindle book. Wall Street bankers are on track to bankupt the United States of American, and nobody seems much interested in doing any thing about it!!

Tuesday, July 14, 2009

Jeeezzzzz........ Will it never end??

Today, the government's Mr. Outside in running GM, Steve Rattner, was forced to resign due to an ongoing investigation by the New York State Attorney General into his role in bribing a pension fund with $122 Billion to give management of their funds to selected companies.

His replacement is another former Wall Street banker named Ron Bloom. Although Bloom has no experience running a manufacturing company, he is already full of promises about how he is going to run things at GM.

This is a perfect example of two really scaring trends we discussed in our book, The Great Recession Conspiracy. One is the steady stream of Wall Street bankers through the Treasury Department, and the other is the rapidly growing incursion of the U.S. government into running the private sector.

Are France yet??

Monday, July 13, 2009

The Absolute Wrong Priorities

Yesterday, CNN released a current summary of how the government is spending your money.

The largest amount, 220.9 Billion were spent on stimulating the economy, but since there is no transparency or accountability, it is impossible to evaluate this expenditure. However, the rest of expenditures are easier to understand.

GM & Chrysler bail out $93 Billion
Prevent foreclosures $37.7 Billion
Bail out other companies $17.7 Billion
Credit easing $ 8 Billion
Extending unemployment $ 8 Billion

It is hard to imagine a more perverse order of priorities. While there is no way we can evaluate absolute expenditure levels without the better information (which the government continues to fail to provide), we certainly know what the rank order should be.

#1) Extending unemployment insurance and extending medical care policies
#2) Credit easing to make the reduction in the housing inventory easier
#3) Preventing foreclosures is a very good idea, but the numbers of dollars don't come close to matching the number of foreclosures taking place.

But the $110.7 Billion spent bailing out companies is a complete waste. Notice that the $110 Billion that is wasted, is twice the amount spent where it should be spent.

The government's economic team has no idea whatsoever about how to deal with this contraction in the economy (except, of course, to enrich Goldman Sachs).

Sunday, July 12, 2009

LA Times "President Urges Public Patience on Recovery

On July 11, 2009, President Obama said, "As a result of the swift and aggressive action we took in the first few months of this year, we've been able to pull our financial system and our economy back from the brink". That's crap!! The only substantial thing this administration has accomplished is to finish the task begun by the Bush administration, and that is to transfer obscene amounts (Billions) of our money to a few Wall Street banks. Almost nothing has reached places or people where it could really do some good.

He now says that his plan was intended to work not in a few months, but over two years. This is absolute evidence that his administration has no idea what they are doing!!

The first sign of a contracting economy (a recession) is job losses. Accordingly, the first government actions should be to deal with this fact. That begins with enemployment insurance and extended medical insurance. The government has made some minor efforts in this direction.

The second task should be to create jobs for those who have become recently unemployed. We have a huge infrastructure repair job that could produce millions of useful jobs immediately, but for all practical purposes, the government has ignored this task. first, they have dedicated too little money to the purpose and second, they have given it to state governors to allocate. That made the use of the money immediately political. They should have given the money to mayors who know what their cities need and know how to get it done fast.

While job losses are tragic from the perspective of the newly unemployed, it is monumentally tragic for the whole economy. With 14.5 million people unemployed now, that means that 580 man/woman hours of valuable work are lost to the economy every WEEK!

There is nothing wrong with creating green jobs, or improving mass transit, or digitizing medical records, or finding alternitive energy sources, or any of the admirable projects that the Presidentis touting. What is dreadfully wrong is confusing the need for those long term projects with the immediate need to put people back to work. This government is frightening in its lackof understanding of basic human and economic behavior. What is equally frightening is all of the economic advisors with direct connections to Goldman Sachs!

Saturday, July 11, 2009

The Overwhelming Failure of Economists

Robert Samuelson writes in the Washington Post as follows;

"One intriguing subplot of the economic crisis is the failure of most economists to predict it. Here we have the most spectacular economic and financial crisis in decades--possibly since the Great Depression--and the one group that spends most of its waking hours analyzing the economy basically missed it."

And the basic explanation is that the economics profession has been hijacked by theoretical mathematical economists who have no understanding of history or human behavior David Zetland and I explain what really happened to the economy in our new book, The Great Recession Conspiracy. We explain in simple terms how history and psychology explain everything.

Impossible to Get Mortgages

Today's New York Times reports on a dentist with a six figure income, a good credit score, and a hefty down payment. Since she only recently graduated from dental school, she can't supply two years worth of tax returns, so she can't get a mortgage.

In Dover, NH, a real estate investor who owns a gas station tried to buy a $301,000 house for his family with 10% down. He can't get a loan because he is self employed.

The Home Affordable Refinance Program was designed to help non-delinquent borrowers refinance mortgages held by Fannie Mae or Freddie Mac, and it was supposed to benefit 4 to 5 million families. To date, only 13,000 refinancing have taken place.

This is what happens when you try and run the entire economy and country from Washington.

The arrogance, and ignorance, in Washington continues to be amazing!!

Friday, July 10, 2009

Spending the Stimulus Money

Two thirds of all Americans live in metropolitan areas, and they live with traffic jams, pot holed roads and unsafe bridges. Nevertheless, the New York Times reports that the 100 largest metro areas have received less than half of the stimulus money awarded to date. The reason is simple. Congress gave STATE GOVERNMENTS the right to allocate how the money is spent and state governments are notorious for favoring rural constituencies over metropolitan voters.

In our book, The Great Recession Conspiracy, we described how to get the fastest results from the stimulus money, and that is to give it to MAYORS! Every mayor knows what is needed in his/her city, knows how to spend the money to get the best, fastest results. And they are on record that they would be happy to provide detailed accounts of how they spent the money.

But it seems it is politics as usual in Washington and that means your money is getting wasted and there is precious little to show for it!

Talk about reducing our dependence on foreign oil? The Texas Transportation Institute estimates that we wasted 2.8 Billion gallons of gas waiting in traffic jams last year.

Politics as usual and Change You Can Believe In is fast disappearing.

Thursday, July 9, 2009

One of the absolutely frustrating things that comes out of Washington policies is the realization that the pampered millionaires who advise Obama on financial policies have absolutely no knowledge of how real Americans live. The cash for clunkers law is today's perfect example.

Here is the basic deal; from August 1, 2009 until November 1, 2009 the U.S. government will pay auto dealers $3,500 to $4,500 to buy cars that get less than 18mph in an effort to remove cars that get less than 18mph from the road.

Here is real life where us non-millionaires live:

1) The majority of cars on the road that get less than 18mph are Hummers, Cadillac Escalades, Land Rovers, and the like. You cannot touch one of them, even an old one for $3,500 so the law is useless in accomplishing its major objective.

2) According to, for $3,500 you can buy a 1994 Chevrolet Astro Van, or a 1988 Ford Bronco. For people who drive cars like these, the $3,500 is effectivley a down payment on a more expensive car which, undoubtedly, will be financed. Encouraging people with very limited economic resources to take on more debt right now is stupid beyond comprehension.

3) For a program scheduled to last three months, Congress has funded enough money to buy 250,000 cars. To put that in perspective, 250,000 cars is about one week's sales in this really depressed market.

4) Most cars on the road today get better than 18mph so none of them qualify.

So the net result of this completely unrealistic law is to waste taxpayer's money (that's you) without doing anything serious to reduce our dependence on imported oil.

With apoligies to Kurt Vonnegut, "So it goes".

Wednesday, July 8, 2009

The Congressional Budget Office (CBO), a reliable non-partisan government office today forecast that the Federal Debt will reach $12 Trillion by September 2009 and $13 Trillion by September 2010. That means that each and every U.S. citizen owes (somebody has to pay) about $200,000. No point in shrugging your shoulders and expecting someone else to pay your share. Ain't gonna happen!

This has many, many hidden costs. For example, just paying the interest on the Federal debt costs us $565 Billion dollars! Think about how many schools that could build, or how many good teachers in could train, or how many really smart kids could get scholarships. If education is not your interest, think about how many decrepit portions of the U.S. highway system could be repaired with that money, or how many bridges could be retrofitted to keep from killing you one day as one of them did in Minneapolis not long ago.

The big problem is that this government is simply not addressing the real problems in the economy. In "The Great Recession Conspiracy", we explain why the government is wrong footed in its economic policies and what should be done. You can read it for yourself at or on a Kindle book reader. Read it and then tell us what you think.

Tuesday, July 7, 2009

In our new book, "The Great Recession Conspiracy" (available at, David Zetland and I warned that the U.S. Government has become an owner (and manager) of a wide variety of private organizations, i.e., General Motors, AIG, Chrysler, Citibank, Freddie and Fannie, and a clutch of other banks. We also pointed out that the government has a proven track record of being a lousy manager primarily because there is endless political interference.

This rapid spread of government control over private enterprise is happening with breath taking speed. Here is a current example. Lots of companies lend money to their customers to allow them to buy the company's products. General Electric and Wal-Mart good examples of companies who have such a finance function. Now the government wants to re-classify these companies as banks, and to extend government regulation, and over-sight, of their operations. GE and Wal-Mart are two of the world's best managed companies and neither one of them had anything to do with the looting of the U.S. Treasury. That was the work of a small group of Wall Street bankers and you can read the details in"The Great Recession Conspiracy".

How long to you think GE and Wal-Mart will remain well managed companies if politicians and beaucrats start calling the shots from Washington? Just one example; what if Congress starts deciding where Wal-Mart can buy their products, or where GE can locate manufacturing plants? Are we France yet?

And if you think that is bad enough, the government would also be managing, among many others, Harley Davidson since they also lend their customers money to buy their HOGS. Can you imagine Congress designing Harleys? Good Grief!!

Monday, July 6, 2009

There are an increasing number of columnists exploring the ideas we raised in" The Great Recession Conspiracy". Robert Samuelson wrote a piece in today's (July 5, 2009) Washington Post entitled "Economists Out To Lunch". Yesterday's New York Times carried a piece by Frank Rich entitled "Bernie Madoff Is No John Dillinger", and Matt Taibbi wrote a long piece in Rolling Stone which he called "The Great American Bubble Machine".

More and more people are beginning to understand that just a few Wall Street bankers are running the U.S. Treasury Department, and that they are not running it for your benefit!