September 20, 2008

What Happened to Financial Prudence

When I was young my grandfather instilled in me the idea that a penny saved was a penny earned. Reading articles today about America's economy started me thinking of this idea and several others along the same line. What happened to frugality, to being able to afford something and saving up until you could pay for something.

Immediate satisfaction and debt seem to go hand in hand. I love this idea that if the government buys all of the bad debt these banks are holding that the market will stabilize and miraculously people will start buying houses again. Did it ever occur to anyone that maybe this is not the wisest course of action over the long term. Sure it sounds good and definitely answers those immediate concerns of people losing homes and banks failing, but does it provide a real solution, or another band aid. It occurs to me that putting a band aid over an infected wound simply leads to a greater infection, gangrene, and either amputation or death. First we must address the infection.

The infection in this economic crisis is debt and leverage. Unreasonable debt by homeowners in trying to afford a house they truly can't; in trying to satiate a desire for "nice things" they can't afford. Unreasonable debt and leverage by banks chasing smaller and smaller spreads using greater and greater leverage. It isn't exciting to make small profits and work hard doing good sound underwriting and due diligence; it is much easier and quicker to go with someone's stated income and hand people money knowing you can get it quick and cheap. These are the problems in our economy and these problems won't go away with a 700 billion dollar bail out.

I hope the government, in rushing to save wall street and keep all Americans in homes, jobs, and investments, enacting this "new" government oversight, addresses the infection and legislates something along the lines of how much debt individuals are allowed to take on and how much debt companies and banks are allowed to take on.

It is obvious that the bail out is more likely to make banks more reckless in the future knowing that they will always be bailed out because they are "too big to fail." This being the case, it seems reasonable to require a certain maximum indebtedness and leverage level that these unwise and imprudent banks are not otherwise likely to adopt if they know they will be rescued.

As far as consumers go my guess is that once you regulate banks they are likely to pass the regulation on to the consumer and hopefully you will mitigate a large amount of the problem. It probably wouldn't hurt to specify a "maximum indebtedness" consumers could take on based on ordinary income levels, and for a person to exceed this, either the bank advancing a loan or the SBA would have to sign off specifically that they approve the exception.

It is unfortunate that this type of regulation seems to be required and I am typically totally against government intervention, but in light of the massive amount of political pressure on both sides of the aisle and the seemingly unavoidable regulation that is about to take place I would like to point out that to treat the symptoms of the disease and not the disease is simply to delay the inevitable. The government must do the hard work of slapping Americans up side the head and unfortunately regulate indebtedness and leverage.

September 17, 2008

Taxes Taxes Taxes

I'm tired of the politicians who basically mislead America and say they are going to cut taxes. They must think all of America is stupid. I would love one of them to explain to me how we are going to cut taxes when we just got done in 2008, which isn't over, bailing out Bear Stearns 4-6 Billion, Fannie and Freddie 200 Billion on the conservative side, and now AIG 85 Billion. Not to mention our deficit of 900 Billion a current account deficit of 210 Billion and Morgan Stanley, Goldman, and the auto industry all needing money.

Add it up. Where are we getting the money to cover the debts. In times past we were buying Chinese, Indian, Japanese, Korean, Taiwanese, German, English, Australian, Canadian, Etc Etc. Goods and services. What happens when the average American can't afford to spend like in times past and bet on the come. What happens when our buying of these countries goods goes down, will they still have money to loan America on a daily basis to finance our massive debt? Likely no, moreover, what incentive will they have. The off chance that Americans are smarter and more innovative and thus most likely to recover quickly from an economic downturn is simply not well thought through.

Here is the problem with Smarts and innovation. We absolutely owned these items in times past, but because of the abysmal state of our primary and secondary educational systems fewer and fewer students are qualified to go to college. I'm not saying that fewer students are getting in, I'm saying that fewer people are truly smart enough to be there. It is the great dumming down of the American Student. And in turn we are seeing increasing levels of foreign students taking advantage of our higher educational system, specifically our best schools. The foreigners come in, get a great education, and return to their homes better off and more qualified. This is not to rip foreigners I'm glad they are smart and able to take advantage of a good thing. It is to say that we no longer own innovation and smarts.

The idea that the next Microsoft, eBay, Novell, Google etc. will come from an American is simply overstated. It could, but anymore because of globalization, it could come from anywhere, the next powerhouse could be hatching in India or China or Germany etc. Education was always one of our large competitive advantages and likewise our "smarts account" was always flush, now it is over drawn.

So how do we get out of these deficits and problems. Three solutions as I see it. Turn on the printing presses and print the dollar causing massive inflation, ratchet up interest rates to try to keep foreign investment high, or Tax Tax Tax. It seems to me that the latter is the most likely, inflation is not an option because once unleashed it is difficult to keep in check. Raising interest rates is possible but with so much unemployment and reduced spending that would catapult us into further economic contractions and pain, thus we will have to tax tax tax.

I foresee tax rates getting back to where they were decades ago 50-70% and all of us paying a significantly higher tax increase to finance us out of this mess. Unfortunately it could last for decades and likely will. Time will tell and of course I hope I'm wrong, wake up tomorrow and everything is good and our debts have been magically paid.

September 01, 2008

Mexican Pork Tenderloin

This is a nice quick Pork dish that is great with rice, beans and tortillas.

2 pork tenderloins

1/4 cup olive oil
2 cloves crushed garlic
1 tsp orange peel
1 lemon juiced
1/2 tsp dried cilantro
1/2 tsp oregano
1/2 tsp cumin
1 tsp salt
1/2 tsp fresh ground pepper
1/2 tsp paprika
1 tsp chile powder

Mix marinade up and toss tenderloins in the marinade coating well. Let sit 6-8 hours or vacuum seal for 1 hour with the Tilia Food Saver

Take out of Marinade and Fry in frying pan on high with a little oil searing each side.
Put into a baking pan and bake in an oven for 1 hour or until the internal temperature is 155 degrees. Take out let rest 5-10 minutes slice and serve.

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