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>How Bush Joined The Socialist Party

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Spending Stimulus Plans Fail, Dummkopfs

By Don White

What does President Bush have in common with John McCain, Barry Obama and Congressional Democrats? Regarding the U.S. economy, they’re all ignoramuses, Nichtswisser, unwisenders, and outright dummkopfs.

It should be against the law to run for national office without passing an economics test. They also should be required to pass an idiot tests. Well, they did pass, but somewhere along the line they thought they had to be idiots to run the country and we got the dregs from the bottom of the pot.

None of them know enough to stop spending. Even Bush, who ran on a conservative platform, does not know that when you try to bail out someone or something you merely redistribute wealth. Hey, that isn’t even an original idea. Democrats like Obama have run on that one for years. If Obama has his way the rich will give to the poor and we’ll have a “leveling” of wealth take place in America–something that will deal a death blow to democracy and capitalism.

Bush should know better. He comes from wealthy parents who know how money is made. Come on, Barb and Dad Bush, start talking to your errant son. Didn’t you teach him nothin? If not, let me give you the economic scoop, too:

George W. Bush doesn’t understand enough to even balance his bank statement, let alone guide a county away from insolvency. The country is wondering if he is using drugs again. Isn’t it terrible, all three of the presidents from Clinton down were drug users, and we expect there is no permanent damage?

Bush is so sick that all he wants to do is sign bills this awful Treasury Secretary, Hank Paulson, pushes before him, assuring the soon to be out of office Texan that it’s the only ways America can avoid a depression. Nothing could be further from the truth. Doesn’t Bush have a mind of his own?

The biggest crisis of 2008 wasn’t the financial meltdown, it was when the Democratic Congress and the president signed the bill authorizing Secretary Paulson to deliver $700 billion in handouts to banks, Fannie and Fredie and similar defunct and unstable private institutions, all without controls and supervision.

Government stimulus bills are based on the idea that feeding “new money” into the economy will increase demand, and thus boost production.

Brian Ridel believes that the best measure of a policy’s impact on economic growth is through productivity rates. Lower marginal tax rates encourage working, saving and investment, all of which increase productivity (as opposed to tax rebates, which are grants that require no additional productive efforts). Reforming — rather than merely throwing money at — education and infrastructure will raise future productivity. These necessary improvements would take time and shouldn’t be considered short-term “stimulus.”

In an OP ED article he said: It’s time for lawmakers to stop futilely trying to wave the magic wand of short-term “stimulus” spending, which threatens to push the deficit above $1 trillion. Focusing on productivity will build a stronger economy over the long run and leave America better prepared to handle future economic downturns.

Mr. Riedl is a fellow at the Heritage Foundation.

Government doesn’t have any money, unless they beg, borrow or tax for it. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. That’s where these financial geniuses go wrong. They think when the treasury prints new money it’s manna from heaven. In reality it has to eventually come from somewhere. That somewhere is you and me, the taxpayer.

Eventually we’re stuck, we’re on the line to pay it back–or in this case it might be our grandchildren and their children, and it isn’t fair. I would have let all the banks and the AIGs fail. Well, people say the entire U.S. society would come tumbling down since companies don’t have money and must borrow. And if the banks don’t have money to lend, business owners can’t get the money and, therefore, they must fire all the employees and stop making and selling widgets. That was the line we were fed.

But when we give money to banks, insurance companies, auto makers or investment bankers–or to anyone–it’s merely redistributed from one group of people to another.Of course, advocates of stimulus respond that redistributing money from “savers” to “spenders” will lead to additional spending. That assumes that savers store spare cash in their mattresses, thereby removing it from the economy. In reality, nearly all Americans either invest their savings (where it finances business investment) or deposit it in banks (which quickly lend it to others to spend). The money gets spent whether it is initially consumed or saved.

Governments don’t create new purchasing power out of thin air. If Congress funds new spending with taxes, it is redistributing existing income. If the money is borrowed from American investors, those investors will have that much less to invest or to spend in the private economy. If the money is borrowed from foreigners, the balance of payments must still balance. That means reducing net exports through exchange-rate adjustments, thereby leaving net spending on the economy unchanged.

Congressional Democrats just squandered another $15 billion on GM and Chrysler. The prepared red hen, /Ford Motors, had saved its money and merely said keep our share for later. But that’s small change for the Democrats. Now they are considering another large economic stimulus package to “inject” as much as $300 billion into the economy. The package will fail — just like last year’s $333 billion in emergency spending and $150 billion in tax rebates failed. There’s a simple reason why. It’s because that money hasn’t created anything, hasn’t changed raw materials into something valuable. It’s just money setting there to be handed out. We presume the banks will loan out the $300 billion and small businesses will make more widgets, but we can’t even be sure of that. Many of these banks will merely put that money into its reserves and won’t loan it out, and that’s part of the problem..

Congress will soon borrow $300 billion from one group of people and then give it to another group of people and tell us we’re all wealthier for it. We’re not. It’s a shell game. Money is just pushed around on the table, but you still have the same amount in the economy. You didn’t just happen to have this money sitting around doing nothing, you took it from one group and gave it to another. In my book that’s socialism of the worst kind. Bush is doing exactly what Obama said he wanted to do, level the economic status of all Americans, and I understand Obama is angry that Bush had to go and steal his thunder.

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>Why Taxpayers Should Bail Out Wall Street

>One stormy morning, Obama leads by nine points in the polls. Here we are, 41 days from election and the tall guy starts sprinting down the track and opens up a 9 point lead over the short, old guy. How long can the young “empty suit” go this fast is anyone’s guess. But unless something is done–and the debates start Friday–the old, stout guy is done. That, despite predictions to the contrary by other pollsters and experts.

Unfortunately, neither the fast “empty suit” or the old, slow guy knows what to do about the proposed Wall Street bailout. The young guy can only read scripts and his handlers are puzzled. Was the old guy right, should we not bail out Wall Street? I think he will say whatever will supercharge his election campaign. We’ll see on Friday. Meanwhile, read on and you decide.
By the way, I don’t believe in polls.

I did enjoy a Washington Post story by Robert Samuelson this morning that said Paulson and Bernanke are rewriting the text books and running scared–“panic” was the operative word. “Paulson’s Panic” was the headline.

I commented that what Americans need most at this time is a better understanding of the markets. Most people think this bailout is just to help the rich guys. Actually, it is meant to protect the people more than help the once rich and fat.

Think of the stock market as a mother. Mothers have kids and they nourish them until they can eat, walk, speak, and blunder on their own. Our markets are our mothers. They are the source of capital for all business in America, so they are the mothers or the source. If we don’t help the moms out, there will be no milk or cash for the kids, the many businesses that are capitalized will fail.

To capitalized means to issue stock that is sold on Wall Street that produces the money needed to move the trucks, pay the workers, and produce the goods–it’s the money that gets main street and rural business going and makes them viable manufacturers, transporters, farmers, and everything else that qualifies for an American business.

There’s a big bully called stupidity, greed, and bad judgment stalking our moms. They will go under if we don’t help. Actually they have “Mom” in a strangle hold. She’s ready to expire. If she does, there won’t be any mother’s milk or financial support for all the kids who have these businesses. If that happens, everyone goes to bed hungry at night because jobs dry up and there aren’t paychecks or money to buy groceries; no money to buy gas or to pay for the heat and lights. That’s called DEPRESSION.

Then government must jump in and create jobs–make work projects like they had in the great depression. My dad was only 24 years old and he had one of those jobs. He made a dollar a day building “a road to nowhere” and our family of five barely survived. No one wants that, so instead of waiting for the big GONG to sound in the sky or depression to hit, we help out Wall Street now instead of bailing out the public later. “Pay me now or pay me later?”

Here’s what I wrote in the Washington Post “comment” slot today. Then I’ll follow with a smart guy’s comments. He explains stuff that may be over all our heads, except those who work in the markets. And I’m not sure how his comments help educate us to the point where we can decide if Congress should do a bailout or not. That’s for you to decide. As you may know, Congress is stymied, almost in a state of rigor mortis. It’s brain damaged and in permanent shock and awe and delay. Of course most of them were that way when they came to Washington, so what else is new?

http://dusanotes@yahoo.com (me):For we the taxpayer, Washington should do something to educate us. Unfortunately, no one in government, the economists, or market gurus really know what’s going on in this financial crisis, much less know how to solve it. I doubt Paulson, Bernanke, or any of the economists advising Congress know what to do and this is creating delay and panic in some quarters including the halls of Congress. No one wants to make a mistake that worsens the problem.

Is it really true that delay is bad for America? Along with others including McCain, initially I argued that the government should not bail out anyone. It is basically against the free enterprise notion that companies live and fail on their own. Then comes along Bernanke and Paulson who are running scared, telling us action today or the crisis will create a depression. What are these two–some kind of socialists? What–we own all the companies in America? I don’t think so…

None of the above does the taxpayer understand, much less believe. Government should not expect support for it’s programs without first telling the public what the **$$!! are the options. We’re smart. We can figure things out. We just need some help re-explaining Free Enterprise 101 and how all this “hurry-up and bail-out ” stuff is germaine to anything.
Don White
PoliticalDisconnect.blogspot.com

Here’s the smart guy’s comments:

DCX2 wrote:
It all starts with bad mortgages that are pooled into Mortgage Backed Securities (MBS) and expands from there. The MBSs are used to create fake capital that can be used for a wide variety of purposes when you don’t have enough money, increasing your leverage.

The first avenue of exploit was structured finance; over-the-counter derivatives that are unregulated. MBSs are collected and sliced into different tranches as part of a Collateralized Debt Obligation (CDO). The upper tranches are low-risk low-yield (they get money back first), and the lower tranches are high-risk high-yield (they get money back last). Knowing that these subprime loans will eventually default, they rig the game so they can skim off the good money with “super senior” tranches and then sell the rest of the junk that won’t ever be paid back in junior tranches. Ta-da, they keep real money and you get imaginary money.

But they didn’t plan on recursion. Sometimes a bunch of CDO slices are combined to create a CDO squared (and, further, CDO cubed, and so on). This is how imaginary money can get a good rating and be sold to institutions who normally only buy real money.

Even further, Fannie Mae and Freddie Mac enjoyed access to a special interest rate discount window. They would take out loans from the discount window, and then buy up MBSs and CDOs that had a better rate of return, and take advantage of the interest rate gap (Alan Greenspan called it a “Big Fat Gap” of profit). Then they would use their profits to lobby Congress and ensure that the Office of Federal Housing Enterprise Oversight (OFHEO) was practically neutered, thus minimizing regulation and oversight.

Finally, we have the Credit Default Swap (CDS) market. Someone (like UBS) would buy a bunch of bad debt (like $1.3b in CDOs) and then would seek insurance from a hedge fund (like Paramax) for an annual premium (like $2m). Since the CDS market is unregulated, there are no capital requirements, so Paramax is ensuring $1.3b with $4.6m. Paramax is now ultra-leveraged and a lot of the money involved is imaginary (both Paramax’s lack of capital to insure the CDO, and the subprime borrowers’ inability to fulfill their obligation)

This gigantic web of financial foolishness created an intense hunger on Wall Street for more MBSs. In order to get more CDOs to tranche up and sell to Fannie/Freddie/UBS/Citibank/Bear Stearns/etc, they need more MBSs, so some lenders lower lending standards so they can feed Wall Street’s hunger. Lenders who don’t lower standards might get knocked off by those who do, so everyone feels compelled to be evil. And with more CDOs out there, there are more hedge funds and insurance companies who can make easy cash off of the insurance scam with nearly zero collateral.

Regulation at any point – keeping sane lending standards, regulating the maximum leverage, monitoring the real risk of CDOs, stopping Fannie/Freddie from exploiting the Big Fat Gap, regulating CDSs to at least require significant capital – could have minimized or even eliminated this problem.

And the solution, contrary to Paulson’s plan, is to make sure people keep paying their mortgages, and to try to sell the foreclosed homes. Then the money will start flowing again, CDOs won’t default, CDSs won’t need to be paid out, and life will return to normal.

9/24/2008 12:57:34 PM

Do you understand more now than you did five minutes ago about what Congress should do with the Bush-Paulson plea for $700 billion?

Read Robert Samuelson’s report in the Washington Post

>Inaction by NATO and The EU Caused The Georgian War?

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War in Georgia: What’s Happening?

One blog said, during the Russian-Georgian War that it was :”a little difficult to figure out precisely what’s happening in Georgia.”

Before the war Lili Di Puppo failed to get all the straight scoop from a Georgian official, but she got enough of it and drew the right conclusion as evidenced by her headline:“What is Happening in Georgia Is A Clear Attempt By Russia to Redesign Eastern Europe”

It’s not difficult to blog there, The Caucaz europenews. Before the war she conducted an interview with Temur Iakobashvili, Georgia’s State Minister for Issues of Reintegration which we will reprint:

You declared in Brussels that the risk of war with Russia is close. Was this declaration intended as a wake-up call for the European Union or is the Georgian government genuinely considering military action?

I made a longer statement and in this longer version I provided rationale to explain why I think we are close to war. The information I gave was that we know Russia’s behaviour very well. We are enormously alarmed when we see quite intensive anti-Georgian propaganda in the Russian media, when we see not only talk, but also very active actions from the Russian side such as illegally moving troops to Georgian territory and violating all sorts of agreements. For example, I do not know since when paratroopers are considered peacekeepers…

Russians refer to an agreement allowing them to have a certain number of peacekeepers on Abkhaz territory…

Yes, it is true that they have an opportunity to increase the number of peacekeeping troops to 3,000, but the first question is what sort of troops. Second, there is a procedure on how this troop increase should happen. Third, the equipment Russians can have is limited and none of the documents talk about having artillery. When we see Russian offense forces entering Georgian territory, it is a violation of all possible agreements. We see anti-Georgian propaganda in media, we see that these troops were deployed based on false information such as Georgia having increased its troops in the Kodori valley. It is not true and this information has been verified by the UN agencies. Of course, it is very alarming.

Is the Georgian government considering military action in response to these moves?

No, the Georgian government is not considering military action as a response to these Russian deeds. We showed our restraint, we will continue to show our restraint and we still have a lot of opportunities to avert war. In this regard, important steps should be taken not only in Georgia, but also outside of Georgia, particularly by Europe.

What were the outcomes of your discussions in Brussels? What concrete steps does Georgia expect from the EU?

These steps are under discussion. Generally, the most important thing now is to avert war and second to think about new forms of negotiations and new formats for negotiations. The EU has already endorsed President Saakashvili’s new peace plan, but we have to see more concrete developments. We believe that it would be very important to deploy another type of ground operation other than Russian peacekeepers. We have several ideas. All of them are under discussion and we will see which ones prevail.

Why do you think it is in the EU’s interest to support Georgia?

It is the EU’s job to support Georgia because we are talking about the European Neighbourhood Policy, the European Energy Security Policy and all other policies that are important for the EU. In this regard, what is happening in Georgia is a clear attempt by Russia to redesign Eastern Europe. This is why I think the EU cannot remain neutral on the sidelines.

At the same time because of energy interests, the EU refrains from adopting a confrontational position towards Russia…

They do not have to confront Russia. They just have to avert Russia’s irresponsible actions.

Do you see a link between Russian actions in Abkhazia and the fact that Georgia was not granted a NATO Membership Action Plan at the Bucharest Summit?

It is a combination of different factors. The question was not only concerning Georgia’s NATO membership, but also Kosovo, domestic Russian policy and definitely issues related to Georgia’s realistic peace plans with regards to South Ossetia and Abkhazia. The combination of these factors is bringing about the Russian behaviour we are facing today.

Do you see the new Saakashvili peace plan as a good basis for negotiations even if the Abkhaz side does not see it this way?

I do not think the Abkhaz side does not see it this way, I think the peace plan has elements that were elaborated together with the Abkhaz side over the past eight years at least. So there is an Abkhaz ownership there and in these circumstances we have to find other negotiating formats besides the UN’s Group of Friends, where the Abkhaz can and should participate.

Since the war, here’s where we stand:

Frederick Kagan has been posting regular updates here In his update yesterday afternoon, he offered the following analysis:

• Russia has announced a unilateral ceasefire because its operations have achieved their aims.

• Medvedev and Sarkozy have drafted a document that encapsulates all of Russia’s demands in return for a ceasefire—but not a final settlement, which must still be negotiated [The so-called “final settlement” has not been drafted, but a settlement was signed by both Medvedev and Saakashveli which Russia has already broken. They are masters of deceit and should be thrown in jail.] Sarkozy is discussing that deal with Saakashvili right now.[As we know France’s Sarkozy did broker a deal, and Condi Rice of the U.S. participated and convinced Saakashvili to sign it. The deal requires all parties to go back to the positions they had before the war, which Russia has violated. In addition, Russia has voted to recognize Abkahzia and South Ossetia as independent countries, which is an illegal move. Russian troops, not peacekeepers, are stationed in those provinces which are legally still part of Georgia. In addition, Russia has brought in missiles and aimed them at Tblisi].

• So the situation on the ground now legally is that there are two unilateral ceasefires, although the Georgians claim that Russian forces continue their attacks, and the Russian military has laid the predicate for those and further attacks in public statements today [i.e., Tuesday]. The Russian military has also made plain that if a formal ceasefire agreement is not reached, then Russian forces will not withdraw from Ossetia or Abkhazia.

• The Russian military has clearly stated that the objective of its operations was to reduce Georgia’s overall military capability so that Georgia could not again conduct an operation similar to the one it launched in South Ossetia, and for that reason has been attacking targets throughout Georgia.

• Russian leaders repeatedly say that they will not deal with Saakashvili.[He doesn’t need to, as Georgia has severed all diplomatic ties to Russia and is dealing with Russia through a third party intermediary, which Russia reportedly disdains]

• The Russian Attorney General has announced that Russian law permits the trial of Saakashvili for crimes under the Russian Federation Criminal Code.[Yet it is Russia that invaded a soverergn nation, killing innocent people, displacing 160,000 Georgians from their homes. Georgians who had lived for centuries in South Ossetia were evicted from their homes, their homes and property confiscated by the Ossetians with big brother backing them up.]

• The Russian Foreign Minister has called for an investigation of Georgian war crimes and the punishment of those ultimately responsible by international tribunals, and has said that Russian citizens victimized by Georgians will be bringing individual actions in appropriate European human rights courts.

• The Russian aim is to force Saakashvili from power, preferably using international legal maneuvers (a la Milosevic), but possibly using Russian law instead or in addition.

• The Russians are maintaining their excessive forces in South Ossetia, and continuing to control Georgia’s airspace and conduct periodic attacks in a flagrant effort to compel an immediate Georgian agreement to their armistice terms, conveyed by Sarkozy.

Russia will not permit South Ossetia and Abkhazia to return to Georgian control, and will move one way or the other to have their independence recognized, and probably soon.

Meanwhile, the U.S., NATO, the EU and the United Nations sit on their hands doing nothing. (The reason NATO does nothing is clear–they refused Georgia membership and, thus, they feel no responsibility. In the UN Russia holds veto power.

In the EU, Russia also holds veto power though they aren’t a member. It is in the form of oil. If the EU isn’t careful, their winter oil from Russia could be shut down. This is one of the tragedies of this war. That the superpower is doing little to marshal forces behind the tiny 7.5-million-people nation of Georgia (of which 2.5 million are Russian). If this is how we in the West deal with these kinds of Russian-caused crises, we are sending a message to Moscow–a green light, to go ahead and try the same in the Ukraine, where the dynamics are much different. There you have a NATO country of 60 million.

When will someone stand up and shout, STOP! Will it be after Russia has taken the tiny independent Baltic states of Estonia, Latvia and Lithuania?