Debt in Bankruptcy Rules are Important to Everyone

I am repeating this unfortunate account because America still has not grasped its true meaning.

It isn’t often when you see the White House make one decision that can truly impact the financial direction of the country, without any legislation by Congress or by benefit of full, extensive national debate. That happened when President Obama forced a settlement on senior debt holders of Chrysler.

The result was the gift of major equity positions to the current Administration’s favored United Auto Workers Union, followed by a decision to hand Fiat control of operations, at the expense of investors who previously had been asked by the government to aid in Chrysler’s bailout, all in return for that senior position.

Normal bankruptcy proceedings would have recognized proper legalities but the President simply brushed them aside.

Still, debt in bankruptcy rules are important to everyone. Break them and nothing can be sacred under law, and under Executive Order.

The U.S. Pay Czar

We have a pay Czar in Washington, to go with all the other so-called pleasant changes we will have to get accustomed to. He will see that companies that took bailout money from the government are not paying executives too much salary and bonuses.

After all, it is taxpayer money. Why should those millionaires be making even more millions? Right?

So, this gentleman is actually renegotiating employee contracts already signed in good faith because they have worked out too well for the executives.

I have a suggestion. Every ball club these days with a stadium is directly or indirectly subsidized by taxpayers, many with federal stimulus money. Ball players make millions. Most never produce as intended when signed. Why not have this gentlemen renegotiate their contracts?

I do think ball players are overpaid. I also think that should be a question for those who pay them and those who attend games. Not a Washington politician and his or her appointed lackey.

Capitalism and the Current Recession

Capitalism and the Current Recession

We keep hearing about the role of capitalism in the onslaught of the economic downturn of 2008/2009. The media parrot the voices of the Left which has succeeded as a result, in making political gains.

But the facts show otherwise. Capitalism does not cause recessions or depressions. It never does. Adjustments in the economy are not a failing of capitalism. In fact, when they occur under socialism, capitalistic methods are always undertaken for adjustments under that system.

The economic problems we have had are caused by our regulators, such as the Treasury and Federal Reserve, whose policies in attempting to control the economy often, if not always, do the actual damage. Currently, it can be the easy money policy that created the mortgage bubble and then the ill-planned bailouts that followed what would have been recoveries from normal economic down-cycles.

Long-term Chrysler Takeover Results

Long-term Chrysler Takeover Results

2009 Probably will leave a bad proverbial taste in the mouth of capitalism for a very long time because of the Chrysler bankruptcy.

That’s when the White House and not a bankruptcy judge decided to reverse the seniority position of creditors. Senior debt position was made subservient to a lesser position. And to boot, the president took it upon himself to castigate the senior creditors for being obstinate for trying to protect their contractual position.

It was the first time the Chief Executive established a precedent that may well become the standard for America’s business future.

Health Insurance for All Americans?

Health insurance for all Americans?

Is it true that 45 million Americans have no health insurance? There is lots of doubt about this figure. Many claim, with reasonable authority, that this includes illegals, those in between jobs that offer insurance, and folks who are not interested and wish to self-insure.

If that number is considered, that is only about 15% of the population. In truth, we are looking at true need in only about 5% of the population.

Questions:

One: Are they getting medical help now? Yes, they do, when they go to ERs.

Two: In dealing with this small group , should we tinker with the entire health insurance system?

That could have everything collapse: What we like today, with what we would like corrected. Including independent use of doctors and medical treatment, when we want it and when we need it.

How about giving the poor uninsured a free membership card for private insurance of their choice?

Stimulus Folly

Stimulus Folly

Stimulus attempts by bureaucrats most often are a folly. The antics that failed in the past always seem to be forgotten by academics despite the previous results. So they rehash them, as we see these days.

It is about time we make sure academics are not relied on so much, in the control of our destiny. How do we do this? Stop listening to the “geniuses” in the Treasury and the Federal Reserve trying to micromanage our government bailouts.

Notice that these folks all go to the same Ivy League schools? Schools which never give students bad marks? Schools which turn out famous students we hear about and see on TV? Which, as a result, hire fellow alumni at the drop of a hat because they are pretty much like-minded.

I can go on about their financial and business flubs but space is short. More in future comments.

Government Pump-Priming Never Works

Government pump-priming never works.

Liberals always refer to the opinion of John Maynard Keynes but he was not decisive as to methods of producing prosperity, as are those who claim to be his followers.

Some examples of the left's misuse of his admonitions:

..Prosperity depends on investment in industry. That produces jobs and income.
..Lower interest rates do not help as the Great Depression showed in the 1930s.
..Lots of bank reserves and deposits don’t help if the banks are afraid to make loans so industry can invest.
..Large public works do not create meaningful jobs.

To elaborate on a portion of our recent emphasis on billions in certain areas as a depression stimulus: A pick and shovel job is meaningless to women and skilled workers who make up such a large part of the work force. This did not help in the 1930’s. It certainly is of no use today.

And government jobs are a crutch which create poor psychology. It does just the opposite if we must overcome fear and gloom to get over a recession or a depression.

Chrysler, The Government and The Constitution

Chrysler, The Government and The Constitution

It is always worthwhile repeating, so we never forget:

The Contracts Clause of Article V of the Constitution, a commercial right, dates from 1787 and is fundamental. This prohibits states from interfering with paying debts.

The Bankruptcy Clause of Article 1, Section 8. delegates to the federal government the authority to enact uniform laws on the subject of bankruptcy.

However, the Administration has used heavy-handed political machinations in the Chrysler bankruptcy, thereby playing havoc with our Constitution, by changing the terms of bond debt terms, in order to suit the Administration’s political aims.

By giving bond holders much less than they were entitled to, and the auto union far more, the Constitution was merely set aside. And there were not enough votes in Congress to raise a peep. The Administration can keep the incident from going to the Supreme Court for adjudication.

The breach in the Constitution is irreparable.

Health Practices and Health Costs

Health Practices and Health Costs

According to a recent report from the Harvard School of Public Health, about 12 health style abuses account for over one million American deaths each year. Cut down those statistics and you have remedied the health care problem which has become so politicized.

It’s been estimated also that smoking costs about 467,000 American lives a year. High blood pressure from unhealthy lifestyles causes about 395,000 lives per year. There is some overlapping as bad health habits are the cause of multiple afflictions.

An emphasis on such changes can save the American economy an enormous amount of money, while keeping its capital infrastructure intact. But that may be too simple for many of our grandstanding politicos.

We Could Have Solved the Residential Real Estate Debacle in One Fell Swoop

We Could Have Solved the Residential Real Estate Debacle in One Fell Swoop

There could have been a rather quick solution to the financial meltdown on Wall Street. It was suggested by some but was overlooked by “government experts” and the Federal Reserve.

Simply, the government could have bought up all the excess empty tract developments in California, Nevada, Arizona and Florida and knocked them down. They would be off the market. No excess. No surplus real estate to undermine other property values. At lower bailout costs.

There would have been a stop to the psychological real estate contagion that spread to all the other states. The law of supply/demand would have applied. Much smaller bank assistance would then be needed to clean up the banking books.

We would have had a normal recession, not what looks like a depression and what has become an excuse for foistering government-meddling on America. At a cost that will entangle the economic and social lives of future generations of Americans.

Burdening Small Business with Calorie Counts

Burdening Small Business with Calorie Counts

Leave it to politicians to impose calorie counts on small business. Why not? It’s the way politicians operate in their never-ending quest for publicity.

It’s lousy science. It’s rotten for business, especially in a deep recession. But it helps show the politicos are earning their keep.

It’s tough enough to place the calorie-count burden on Big Business but the effort goes too far with the little guys. The whole program is a farce because It’s simply unscientific.

To do the test the sample must be weighed very precisely. But the portions cannot always be accurate. The tests themselves are not accurate on a small scale. So the numbers you get are always off.

Every idiot knows a hamburger with lots of fatty meat, topped with fatty cheese has too much calories. That skim milk has less fat and calories than 4% full milk. Look up charts for your menu at home. But why bother small business people to keep track of what is impossible to do.

Looming Government Control of Radio Programming

Looming Government Control of Radio Programming

Instead of a ban on individual talk show commentators, which would be too flagrantly unconstitutional, be aware the Congress and Administration may have something else up its sleeve to stymie critique and flak that it may get from irate citizens.

Advisory boards are already being suggested to help promote radio content. These are to be made up of groups of advocacy representatives, business owners, and community leaders, and so-called “underserved community representatives.”

You can draw your own conclusion as to the mischief this assortment will create, why so, and against whom.

Print and TV media control are not the objects of this pressure, as yet. So you see how this legislation is for a specific gag that leading members of Congress and the Administration do not like.

Pressure will be severe, naturally, at renewal time for the valuable radio station licenses. That’s another objective. After all, those eyeing licenses will be seeking arguments to present in order to take over stations from present owners.

Corporation Raiders a Help??

Corporation Raiders a Help??

Lots of damage is done by corporate raiders who ostensibly are doing good for stockholders. By trying to take hold of a corporation and thus offering higher prices over the short term, the financial media most often is elated. Why not? It’s a temporary stimulus that gives them what to write or talk about.

But it’s a bonanza only for short term investors, at the expense of longer term investors. That is, for those with horizons over a couple of months. What’s more. experience shows it often may not work out well for the company itself.

Public Pension Funds and Phantom-Style Bookkeeping

Public Pension Funds and Phantom-Style Bookkeeping

Great pensions were always the carrot for those in the past who were willing to accept below-market salaries to work for government. Then the labor unions came along, easily got in the door and rectified the salary imbalance.

At the same time they asked for and got liberal pensions as well. Why not? Politicians had the taxpayers to help out with the funds and times were good.

So government salaries are now on a par or are better than in private industry and pensions are often treble industry’s average and sometimes higher.

It is obvious, however, that many public pension funds are not properly financed. The union heads have known it for years. Pension obligations go far beyond what can be eventually paid.

And so phantom-style bookkeeping has often taken over. Such as anticipating impossible future earnings to increase decreasing reserves. But chances of getting earnings of that size will be impossible in the economy we can reasonably expect.

Phantom-style bookkeeping creates phantom pension payments.

The Government’s Definition of Rich

The Government’s Definition of Rich

The Administration’s s definition of who is rich is a laugh. It bases its argument for taxation on outmoded figures when families depended on only one of its heads working.

That may have been the norm twenty years ago. Today, women have careers, especially after their children are grown. When both husband and wife, and sometimes single youngsters add to household income, family total income may reach what this Administration calls “rich” and get taxed accordingly.

The Proposed Health Care Tax on Small Business

The Proposed Health Care Tax on Small Business

Politicians often think that anyone dumb enough to vote them into office will accept dumb tax legislation, as long as voters think the tax will be against the employer, and not them.

Congress has just proposed paying, in part, for universal health care, by forcing every employer to insure its employees. Those with as little as $400,000 annual payroll who don’t, will pay an 8% penalty. The penalty will be 4% for payrolls between $250,000 to $400,000. As I note, this is just a proposal.

Labor is a major cost for most small, non-manufacturing businesses, The net, bottom line often does not exceed 5% or 10%. I know because I operated them. With an added health tax, many entrepreneurs who would love to insure employees when they want to attract them in a booming economy, simply will not be able to afford them.

Is this legislation for a recessionary economy in need of a GENUINE stimulus?

If The Government Can Operate Health Insurance Cheaply, Why Not Supermarkets?

If The Government Can Operate Health Insurance Cheaply, Why Not Supermarkets?

The argument this Administration has been using for its proposed public option for health insurance, is that this choice will force the 1500 or so private health insurance companies to become more competitive.

The fact that 1500 health insurance companies compete is not competitive enough, in the Administration’s view, is a problem I guess.

But if the government presence will make health insurance more competitive, why not a government supermarket chain? That ought to cut prices. Or a government clothing chain? It seems we now have autos from Uncle Sam, don’t we? Why not more of government from this Administration?

But as I recall, that is what the Russians enjoyed under the Soviet Union? They really had a ball as consumers of goods and services, didn’t they?

Critique of Wall Street Income Compared to Ball Player Income

Critique of Wall Street Income Compared to Ball Player Income

The next time you hear that pampered Wall Street or industry pays too much to executives, look or listen for any comments about ballplayers who make millions upon millions each year playing their kids’ games with your money. And often do an equally disappointing job.

This comment is a repeat for those who always forget that all ballparks and arenas these days get public subsidies from taxpayers. Usually indirectly as construction bonds or government guarantees.

That help comes indirectly from Washington stimulus money, so we are all on the hook for enormous amounts of taxpayer outlays, being paid to stumblebumbs and worse without taxpayer permission or even knowledge.

Remember: Money is fungible. That means what government gets for one pocket can easily be transferred to another allocation for disbursements.

Using Target Funds for Retirement

Using Target Funds for Retirement


Much is being said about target funds and how poorly they have done in the recent market meltdown.

Target funds are generally composed of a mixture of stocks and bonds of varying types and investment entities. The percentage of holdings of each also vary, as the fund investors grow older toward their retirement.

That is where the name of the investment comes from. The investor targets a certain retirement date. The ratio of stocks and bonds within the investment portfolio changes with approaching investor retirement age. The amount of stocks grows smaller, and the bond percentage increases.
The arrangement also provides diversification which is supposed to reduce risk.

But this did not work out well during the recent financial meltdown, Both stocks and bonds took a market beating at the same time. And the financial media is taking potshots at the concept.

However, this problem is not one that will repeat itself that frequently.

But there is a problem with target funds, most critics have not been addressing. Most people are not going to retire as early as they plan for, if at all. So the target dates they set are far too low. Their planning ought to anticipate a retirement ten or more years beyond what target funds generally list. Most percentage ratios used are therefore extremely impractical.

Health Insurance and Drug Manipulation

Health Insurance and Drug Manipulation

The government sponsors of public health insurance always claim they can set standards as to how doctors ought to treat patients. This is to be somewhat similar to what is being done to reduce costs under government-sponsored programs in England and Canada, for example.

But what you are not told, for example with drugs, is that the cheaper items suggested and dispensed are often the older versions. They are the older generics, whereas the newer, more costly branded versions are not suggested and dispensed. That saves money for the government health system.

However, in many instances, older drugs,while they are certainly cheaper, are not better. In fact, they may not do as good a job as the newer branded drugs. But the patient is not given the option. The government certainly saves money at the expense of the patient’s health or life.