Up to this date nothing has changed in solving the fiscal mess before the end of the year. Nothing.
The only indirect 'beneficiary' of this Congressional inaction is, again, the Federal Reserve Bank.
Today, Ben Bernanke announced that the Fed will extend its powers and buy even more treasury bonds. So, the Fed continues to build its massive power under the careless eyes of the US Congress.
Just read this article and prepare to be amazed as the Fed has officially become the most powerful American institution. They own, after all, most of the US debt and they claim that they ask for nothing in return. Can you believe that?
Wednesday, December 12, 2012
Sunday, December 9, 2012
The nature of credit (I)
The nature of credit is such that people who save money (by not spending more than what they make) make it available to people who need it for starting or running a business and to people who are impatient and want to own 'stuff' beyond their means.
It is pretty simple: you have extra money and deposit it at a bank. You trust the bank to use your money wisely. If the bank grants loans to people/companies that pay it back on time, plus interest, then all is dandy and good. If banks cannot get their money back from borrowers -and this is persistent- then we have a problem.
When banks and individuals collude on asset perception and think simultaneously that the assets' values they endorse are 'stable' at unrealistic levels then everybody suffers the consequences. All banks lose money at the same time and this cannot be sustained over long periods of time.
When you bring the government and the central bank into this equation then entire nations and even the world economy suffer. The central banks interject in the value of credit equations by totally arbitrarily asserting that the magnitude of risk components in credit is almost zero. How can risks decrease when asset prices decline? Yet central banks want us to believe that the cost of credit should actually be very low as the risks are very low and/or returns should be very constant (i.e. low). Really?
The stock market and individuals' earnings disagree. Wages are expected to grow as companies are expected to make profits at some historical rates greater than 3-8%. So, how can the Fed rationalize holding the interest rates at 0.25%/year? It makes no sense, as the ratio of bad performing credit to performing is about 10%.
Under these conflicting conditions, credit cannot be cheap when uncertainty on taxation is at historical levels. The consequence is that the economy remains paralyzed. Business, individuals, and asset traders are not sure about who is right in this economy. The central bank cannot be right as they have a poor record. Private banks and financial institutions have had a poor record too. The government has had a very poor record as well.
Individuals cannot all be wrong in insular cases but they can be wrong in groups.
Credit should be expensive and tax rates should be high and neither is true. How can this be conducive to real economic growth? We are in a check-mate situation, with the government and central bankers holding most of the high value cards. Individuals and business need to chip away at getting out of the current state on their own. The government and the banking system cannot be trusted and the value of credit has been usurped. I will get back to this topic, no doubt.
It is pretty simple: you have extra money and deposit it at a bank. You trust the bank to use your money wisely. If the bank grants loans to people/companies that pay it back on time, plus interest, then all is dandy and good. If banks cannot get their money back from borrowers -and this is persistent- then we have a problem.
When banks and individuals collude on asset perception and think simultaneously that the assets' values they endorse are 'stable' at unrealistic levels then everybody suffers the consequences. All banks lose money at the same time and this cannot be sustained over long periods of time.
When you bring the government and the central bank into this equation then entire nations and even the world economy suffer. The central banks interject in the value of credit equations by totally arbitrarily asserting that the magnitude of risk components in credit is almost zero. How can risks decrease when asset prices decline? Yet central banks want us to believe that the cost of credit should actually be very low as the risks are very low and/or returns should be very constant (i.e. low). Really?
The stock market and individuals' earnings disagree. Wages are expected to grow as companies are expected to make profits at some historical rates greater than 3-8%. So, how can the Fed rationalize holding the interest rates at 0.25%/year? It makes no sense, as the ratio of bad performing credit to performing is about 10%.
Under these conflicting conditions, credit cannot be cheap when uncertainty on taxation is at historical levels. The consequence is that the economy remains paralyzed. Business, individuals, and asset traders are not sure about who is right in this economy. The central bank cannot be right as they have a poor record. Private banks and financial institutions have had a poor record too. The government has had a very poor record as well.
Individuals cannot all be wrong in insular cases but they can be wrong in groups.
Credit should be expensive and tax rates should be high and neither is true. How can this be conducive to real economic growth? We are in a check-mate situation, with the government and central bankers holding most of the high value cards. Individuals and business need to chip away at getting out of the current state on their own. The government and the banking system cannot be trusted and the value of credit has been usurped. I will get back to this topic, no doubt.
Summit Saga IPA (great beer)
If you have a chance, this winter, try the IPA from Summit Breweries.
It is an amazingly tasty and optimistic beer. It has an uplifting undertone and it makes me dream of exotic places, such as Caledonia or Fiji. The beer complements heavy dishes, like chicken parmigiano and even Philly cheese steaks.
It is an amazingly tasty and optimistic beer. It has an uplifting undertone and it makes me dream of exotic places, such as Caledonia or Fiji. The beer complements heavy dishes, like chicken parmigiano and even Philly cheese steaks.
Tuesday, December 4, 2012
I Hate Cox Communications
Cox Communications (CC) is my cable and satellite provider. For cable TV (+digital receiver) and internet I pay -with taxes and all- about $157/mo. For internet alone I pay about $55/mo.
A few days ago Cox sent the following message to me.
It has the subject line 'Important Notice Regarding Your Cox Email'.
Needless to say, this is infuriating. I am paying Cox for access to an email account that is not public. In addition to restricting the size of my e-mail box to 2 GB now Cox has decided that I cannot keep messages for more than 150 days.
Many e-mail providers are totally free and you get to have at least 10 GB of space but a company that I pay money for this basic service cannot fulfill its obligations. To add salt to injury they pretend in their communication that it is not even their fault.
I contacted Cox customer service to try to have my e-mail box restored and they told me that there is nothing they can do to recover my messages. Amazing. This is one of the reasons I thoroughly hate Cox Communications.
Cox Communications is arrogant, behaves like a de-facto monopoly, and restricts -via monopoly pricing- the free flow of information in this country.
A few days ago Cox sent the following message to me.
It has the subject line 'Important Notice Regarding Your Cox Email'.
|
Needless to say, this is infuriating. I am paying Cox for access to an email account that is not public. In addition to restricting the size of my e-mail box to 2 GB now Cox has decided that I cannot keep messages for more than 150 days.
Many e-mail providers are totally free and you get to have at least 10 GB of space but a company that I pay money for this basic service cannot fulfill its obligations. To add salt to injury they pretend in their communication that it is not even their fault.
I contacted Cox customer service to try to have my e-mail box restored and they told me that there is nothing they can do to recover my messages. Amazing. This is one of the reasons I thoroughly hate Cox Communications.
Cox Communications is arrogant, behaves like a de-facto monopoly, and restricts -via monopoly pricing- the free flow of information in this country.
Sunday, December 2, 2012
Shock Top - Belgian White (forget about it)
Whatever you do, do not buy Shock Top (Belgian White) beer.
It is supposed to be a Belgian style beer with citrus peels and coriander. It is not. In my mental catalog, it will be registered as 'just a beer' and claims to the contrary are pure marketing and shrewdness.
Shock Top is a washed-out beer without consistent and clear flavors. I chilled a six pack overnight and was expecting a beer with mystery and weight. It is a beer with a strong sour after taste and with very few detectable flavors of either citrus peels or coriander.
Believe it or not, I would drink Stella Artois over Shock Top (Belgian White) any day of the week.
It is supposed to be a Belgian style beer with citrus peels and coriander. It is not. In my mental catalog, it will be registered as 'just a beer' and claims to the contrary are pure marketing and shrewdness.
Shock Top is a washed-out beer without consistent and clear flavors. I chilled a six pack overnight and was expecting a beer with mystery and weight. It is a beer with a strong sour after taste and with very few detectable flavors of either citrus peels or coriander.
Believe it or not, I would drink Stella Artois over Shock Top (Belgian White) any day of the week.
Friday, November 30, 2012
GOP has no more credibility
Once again, I have to write about the insanity of the GOP's position in regards to the fiscal cliff.
The GOP has no logical choice but to let the tax cuts for the top 2% of income distribution expire. It is as clear as day as if they do not then taxes go up for everybody and, in addition, they have to deal with sequestration.
If the GOP does nothing they lose 2 battles (spending cuts for the military will be enacted and the taxes for the top 2% will go up) while the Democrats lose only 1 (taxes for 98% of income earners). What are the GOP strategists thinking?
What are the reasons the GOP keeps fighting a losing battle? If they keep fighting for nothing will the GOP continue to be considered a viable national political partner?
I would think not, but the GOP has an agenda that eludes me. Completely.
The GOP has no logical choice but to let the tax cuts for the top 2% of income distribution expire. It is as clear as day as if they do not then taxes go up for everybody and, in addition, they have to deal with sequestration.
If the GOP does nothing they lose 2 battles (spending cuts for the military will be enacted and the taxes for the top 2% will go up) while the Democrats lose only 1 (taxes for 98% of income earners). What are the GOP strategists thinking?
What are the reasons the GOP keeps fighting a losing battle? If they keep fighting for nothing will the GOP continue to be considered a viable national political partner?
I would think not, but the GOP has an agenda that eludes me. Completely.
Thinking of Romania on its National Day
It is somehow bizarre for me to write about Romania and its National Holiday, but here I am.
Romania celebrates its National Holiday on December 1st, to remember 1918 when it became geographically great. Actually the greatest it has ever been.
After December 1st, 1918, Romania reached its largest borders in modern history after the reunification with Transylvania. However, after WW II Romania lost territories to the Soviets and Bulgarians but it has managed to remain within the current borders ever since, which is a miracle, given 1989.
Sometimes I am wondering if Romania will ever be as large as it was on December 1st, 1918.
Today -and not only now- Romania seems a lost cause. It appears that it has been -almost always- at the mercy of other nations and has not shown to be capable of adapting to the needs of modern societies but sporadically and inconsistently.
From what I know, Romanians crave a society that has attributes such as openness, good infrastructure, social mobility, tolerance, appetite for education, secularism, access to good healthcare, fair taxation, opportunities for all, economic freedom, and justice. All these are sore topics for almost all Romanians who care just a little bit about the grand ideals of the Great Romania of 1918.
Spiritually and linguistically speaking Romania has always been great. However, spirituality requires infrastructure and economic backbones which Romania has not managed to build and maintain with consistency and efficiency.
Many Romanians have left Romania to seek coalescing backbones able to support and sustain their spirituality. I am proud to be of Romanian descent and would love to be able to welcome Romania to the family of great nations of Europe.
Today I cannot say that I have many reasons be too proud of Romania's status in Europe but I am more hopeful than ever that Romania will somehow manage to pull itself up by the bootstraps and gain front door ascendance to the family of the great countries of Europe. One step at a time and one individual at a time, whether in Romania or abroad.
Happy National Day, Romania!
Romania celebrates its National Holiday on December 1st, to remember 1918 when it became geographically great. Actually the greatest it has ever been.
After December 1st, 1918, Romania reached its largest borders in modern history after the reunification with Transylvania. However, after WW II Romania lost territories to the Soviets and Bulgarians but it has managed to remain within the current borders ever since, which is a miracle, given 1989.
Sometimes I am wondering if Romania will ever be as large as it was on December 1st, 1918.
Today -and not only now- Romania seems a lost cause. It appears that it has been -almost always- at the mercy of other nations and has not shown to be capable of adapting to the needs of modern societies but sporadically and inconsistently.
From what I know, Romanians crave a society that has attributes such as openness, good infrastructure, social mobility, tolerance, appetite for education, secularism, access to good healthcare, fair taxation, opportunities for all, economic freedom, and justice. All these are sore topics for almost all Romanians who care just a little bit about the grand ideals of the Great Romania of 1918.
Spiritually and linguistically speaking Romania has always been great. However, spirituality requires infrastructure and economic backbones which Romania has not managed to build and maintain with consistency and efficiency.
Many Romanians have left Romania to seek coalescing backbones able to support and sustain their spirituality. I am proud to be of Romanian descent and would love to be able to welcome Romania to the family of great nations of Europe.
Today I cannot say that I have many reasons be too proud of Romania's status in Europe but I am more hopeful than ever that Romania will somehow manage to pull itself up by the bootstraps and gain front door ascendance to the family of the great countries of Europe. One step at a time and one individual at a time, whether in Romania or abroad.
Happy National Day, Romania!
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