Monthly Archives: March 2010

It’s Official – America Now Enforces Capital Controls

Read the full story here:

It’s Official – America Now Enforces Capital Controls

On the Multiple Death Threats I Have Received – by Robert Wenzel

Dear Congresswoman Louise Slaughter,

I note media reports that you have received a death threat from an anonymous caller.  It is unclear whether this whack job has the capability or desire to actually carry out the threat. I hope not. But, nevertheless, I can empathize. I have also recently been the subject of multiple death threats.

The threats have come not from anonymous callers, but from identifiable people here in  the United States who have put their threats in writing, to be carried out by their minions. I believe these people are delusional. They actually think they have a right to kill me, “for my own good”. I am hoping you can provide some guidance on what precautions I should take to protect me from these people.

Here is the situation.

You see, I pretty much mind my own business.. Yet, these people some how think they should interfere in my life and force me to do things their way. Get this. They say they are going to force me to do things their way based on the Constitution. From what I understand, they have a tortured view of the commerce clause, which they think it gives them the right to interfere in my life and ultimately kill me.

Basically, these people have designed a medical system that has pushed medical prices out of control. Medical prices are going up much faster than the rate of inflation. They think they are going to fix this problem by forcing me  to buy a new kind of medical insurance they have invented. I know it sounds insane. I know the best way to keep prices low is to have many competitors, with many different options. But they have so road blocked the system that their are few competitors. And now they are limiting my options even more by forcing me to buy insurance from one of the insurance companies they have designated.  And, get this, I know it will be hard to believe, but in addition to forcing me to buy insurance from these companies, they are going to tell these insurance companies what can and can’t be in the coverage. This means there won’t even be competition on the types of coverage offered.

Now, I know the common sense advice would be to just ignore such crazed people, but they have IN WRITING stated that they will throw me in jail if I don’t pay up. I’m thinking of just staying in my house, but I have heard these people will come with something they call SWAT teams, breakdown my door and come after me. My friends tell me that, when the SWAT teams come, it could get very dangerous and I could get killed. He says it has happened before and he told me that they will consider me dangerous because I refuse to go to jail as a result of my not wanting their medical insurance. He told me to think Waco and Ruby Ridge. See how insane this is getting? And, honest, I did not provoke these people nor do I want to have anything to do with them. So I guess you can see my predicament. If I refuse them at any step of the way, there is no question they will use force and kill me if they think it is necessary.

Now, I’m thinking maybe I should just go along and buy the insurance from them, afterall, who needs such a death dagger hanging over ones head? But, these people really don’t stop. I mean they are obsessed with interfering in my life every step of the way.

I started looking at the insurance policies they offer, and get this, there are all kinds of restrictions on what doctors can earn and how much medicines can cost, which I guess most insurance plans have to a degree, but not this degree. Further,  they want to stop, or make it very difficult, for anyone in the entire United States from paying more to health care professionals .  This, I know, will limit incentives for doctors and other medical personnel from coming up with new drugs and treatments, so I am hoping that if I get ill in the future that I come down with something they already have a cure for, since innovation under their plans, I can tell, are going to be down tremendously. It will be another death sentence, a death threat carried out.

I know all this sounds terrible, but there is more.

I realize that even if there already is a treatment available for some diseases under their plans, they may disallow the treatment if they think the price is too high. They may even put price controls on treatments, that will severely limit the number of providers. So this could also limit the length of my life, even where known treatments exist. It’s another death threat.

I know all this sounds crazy that in a country where unregulated markets have developed everything from microwaves, iPods, flying planes, baseball and color television, that these people actually think it would be a better place if we throw away the creative free markets and replace it by decisions made by them and then they will kill us if we don’t listen, and maybe even if we do. I know it sounds crazy, but I swear it is true.

Since, you have been the victim of a death threat, you know how I feel.

I know I am not in your voting district, but you seem like a decent person, so I am hoping you can give me some advice on how to deal with these people who I SWEAR  are very serious about their threats, probably even more so than the person that threatened you.

Sincerely,

Robert Wenzel
Economic Policy Journal

Pro-Freedom Bumper Sticker or T-Shirt Ideas

“I do not wish to tell you how to run your life.  That is why I do not vote.”

“Majority Vote = Mob Rule”

Do you have any ideas?  Post them in the Comments section below.

Unintended Consequences of Obamcare

Bob Wenzel observes in his blog:

Under the new bill, most Americans without insurance would face an annual penalty, starting in 2014 at $95 – the same as in the Senate bill. But in following years, the penalties in the reconciliation bill are slightly different. Those without insurance in 2016, for example, would pay the greater of two alternatives: a flat fee of $695, down from the Senate’s $750, or 2.5 percent of their income, up from 2 percent in the Senate bill, reports Kaiser Health News.

In reality, the penalties for freedom will climb and climb.

to which few readers added:

Nicholas J. Kaster said…

Therefore, a healthy 25 year old will have the “choice” of paying $695 or, say $500 a month for an insurance policy (the bill also mandates the kind of policy he would be forced to buy). I rather suspect a lot of people in that position will opt to pay the cheaper penalty and keep going without insurance. Since insurance companies will now be forbidden to deny coverage to those with pre-existing conditions, such an individual could wait until being diagnosed with an illness, and then apply for coverage. Of course, this completely destroys the concept of insurance, but such are the unintended consequences of this legislation.

and

Brian Shelley said…

As an Actuary, this is the fatal flaw of the Obama bill. Why will anyone sign up for a $6,000 personal insurance product when not signing up costs them $95, and they are guaranteed issue whenever they get sick. Beyond vehicle accidents, which are usually covered by car insurance, few illnesses strike someone so fast that they can’t wait to sign up for insurance. Oh, I have cancer, let me sign up for insurance now. Oh, I have MS, I have HIV, I’m pregnant, let me sign up now that I know. Premiums will soar, and only the sick, the very risk averse or high income people will sign up for insurance. It’s awful.

And to all of this we add:

Why look to governments to solve your problems?  Why continue to support this foolishness?  Consider voting with your dollars and keep them at home instead of sending them to Washington.

Politicians Smother Cities – by John Stossel

Politicians Smother Cities
How to bring life back to great American cities

John Stossel | March 18, 2010

I like my hometown, but I must admit that New York has problems: high taxes, noise, traffic. Forbes magazine just ranked my city the 16th most miserable in America. Ouch! Of course, that makes me wonder: What’s America’s most miserable city?

Cleveland, says Forbes. People call it “the Mistake by the Lake. ” Cleveland, once America’s sixth-largest city, has been going downhill for decades.

Why do some cities thrive while others decay? One reason is that some politicians smother their cities with the unintended consequences of their grand visions, while others have the good sense to limit government power.

In a state that already taxes its citizens heavily, Cleveland’s politicians drown businesses in taxes.

One result: Since 2000, 50,000 people have left the city. Half of Cleveland’s population has left since 1950.

But the politicians haven’t learned. They still think government is the key to revitalization. While Indianapolis privatized services, Cleveland prefers state capitalism. It owns and operates a big grocery store, the West Side Market. Typical of government, it’s open only four days a week, and two of those days it closes at 4 p.m. The city doesn’t maintain the market very well. Despite those cost savings, the city manages to lose money running the market. It also loses money running golf courses—$400,000 last year.

Another way that cities like Cleveland cause their own decline is through regulations that make building anything a long drawn-out affair. Cleveland has 22 different zoning designations and 673 pages of zoning guidelines.

By contrast, Houston has almost no zoning. This permits a mix of uses and styles that gives the city vitality. And the paperwork in Houston is so light that a business can get going in a single afternoon. In Cleveland, one politician bragged that he helped a business get though the red tape in “just 18 months.”

Randall O’Toole, author of The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future, says Houston does have rules, but they are more flexible and responsive to citizens’ needs because they are set by neighborhood associations based on protective covenants written by developers.

Politicians’ rules rarely change because the politicians don’t have their own money on the line. Cleveland’s managers thought that funding gleaming new sports stadiums (which subsidize wealthy team owners) and other prestigious attractions like the Rock and Roll Hall of Fame would revitalize their city.

Urban policy expert Joel Kotkin says, “This whole tendency to put what are scarce public funds into conventions centers and … ephemeral projects is delusional.”

But politicians claim that stadiums increase the number of jobs.

Not so, says J.C. Bradbury, author of The Baseball Economist: The Real Game Exposed. “There’s a huge consensus among economists that there is no economic development benefit to having these stadiums,” he says.

The stadiums do create jobs for construction workers and some vendors. But “it’s a case of the seen and the unseen,” Bradbury says, alluding to the 19th-century French economist Frederic Bastiat. “It’s very easy to see a new stadium going up. … But what you don’t see is that something else didn’t get built across town. … It’s just transferring from one place to the other.

“People don’t bury their entertainment dollars in a coffee can in their backyard and then dig it up when a baseball team comes to town. They switch it from something else.”

Stadiums are among the more foolish of politicians’ boondoggles. There are only 81 home baseball games a year and 41 basketball games. How does that sustain a neighborhood economy?

But the arrogance of city planners knows no end. Now Cleveland is spending taxpayers’ money on a medical convention center that they say will turn Cleveland into a “Disney World” for doctors. Well, Chicago’s $1 billion expansion of the country’s biggest convention center—McCormick Place—was unable to prevent an annual drop in conventions, and analysts say America already has 40 percent more convention space than it needs.

Politicians would be better stewards of their cities if they set simple rules and then just got out of the way. I won’t hold my breath.

John Stossel is host of Stossel on the Fox Business Network. He’s the author of Give Me a Break and of Myth, Lies, and Downright Stupidity. To find out more about John Stossel, visit his site at johnstossel.com.

COPYRIGHT 2010 BY JFS PRODUCTIONS, INC.
DISTRIBUTED BY CREATORS.COM

Paul Krugman Versus Reality – by Peter Schiff

Paul Krugman Versus Reality

By: Peter Schiff, Euro Pacific Capital, Inc.

— Posted Thursday, 18 March 2010 | Source: GoldSeek.com

In his latest weekly New York Times column, Nobel Prize-winning economist Paul Krugman put forward arguments that were so nonsensical that the award committee should ask for its medal back.

Recent rhetoric from Washington has put the economic relationship between the U.S. and China squarely on the front burner, and Krugman is demanding that we crank up the flame. This week 130 members of Congress sent a letter to Treasury Secretary Timothy Geithner demanding that the Obama administration designate China as a “currency manipulator”. Following that, a bipartisan group of senators introduced a bill that looks to force the Obama administration’s hand. For its own part, Beijing invites criticism by continuing to deny its utterly obvious currency agenda.

As these tensions escalate, most economists urge Washington to tread lightly because of the negative fallout for America if China were to begin selling its enormous cache of U.S. Treasury bonds. Krugman pushes back, asserting that the U.S. risks little by playing hardball, and that China has more to lose. He asserts that a Chinese decision to end its purchases of U.S. Treasury debt would make only a marginal impact on long-term interest rates. Did you hear that Stockholm?

According to Krugman, our secret weapon of economic invincibility is the Fed’s ability to print dollars endlessly. If China were to foolishly decide to attack us by selling our debt, the Fed could simply step in and buy the excess with newly printed greenbacks. (In other words, Krugman sees no difference between funding the debt and monetizing it. See my latest video blog on the subject.). For Krugman, China would gain little from such an attack, but would lose the ability to export to its best customer and suffer severe losses in the value of its dollar holdings. Krugman’s worldview is reassuring – but it has absolutely nothing to do with reality.

There is a huge difference between selling your debt to another and “selling” it to yourself. When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of U.S. Treasuries, the Fed would have to expand our money supply by a corresponding amount. Even Krugman acknowledges that this would cause the dollar to lose value; however, he feels that a weaker dollar is good for America and bad for China.

Krugman does not believe that a tanking dollar will translate into higher interest rates or higher consumer prices at home. No matter how many dollars the Fed creates, or how much value those dollars lose relative to other currencies, he is confident that as long as unemployment remains high, rates will stay low and inflation will remain under control. This is absurd.

If the dollar were to nosedive, the Fed would normally look to protect the currency by raising interest rates, thereby increasing foreign demand for the currency. But with an economy currently on crutches, the Fed will ignore a weakening dollar and continue to try to boost employment with near-zero rates.

But keeping the Fed Funds rate low only holds rates down for U.S. government debt. If the dollar weakens substantially, other rates offered to other borrowers will rise as investors demand greater returns to compensate for inflation. To keep rates low for homeowners, credit card borrowers, corporations, municipalities, and state governments, the Fed would be forced to buy, or guarantee, all forms of dollar-denominated debt. The Fed would become the lender of only resort.

Once the Fed shows that its commitment to low rates is limitless (the value of the dollar be damned), private creditors will quit the game. Even average Americans would hit the Fed’s bid. It would be a race for the exits, with no one wanting to be left holding a bag of worthless paper dollars.

Most economists, Krugman included, see cheap money as a panacea for all ills. And while it’s true that a falling dollar, by lowering the real value of U.S. wages, would help make U.S. goods more competitive, it would also lead to skyrocketing consumer prices, rapidly rising interest rates, and a collapse in American living standards. Make no mistake: this is the end game of Krugman’s “get tough on China” policy.

This apocalyptic scenario can only be avoided if Washington jealously guards the status quo, avoiding confrontation with China at all costs. Yet, even that is an outcome that no one can rationally expect. Given exploding U.S. government deficits and the inability of U.S. citizens and corporations to repair their balance sheets, the United States faces financing needs that even China’s gargantuan savings stockpile will be unable to cover.

Krugman is right about one thing – China’s currency peg is destabilizing the global economy and must end. But he fails utterly to understand the implications for the U.S. and China. If China were to reverse its role in the U.S. Treasury market, both economies would be destabilized in the short-term. But in the medium- and long-term, China would clearly emerge as the winner.

Absent Treasury-bond purchases, the value of the Chinese currency would rise sharply, causing goods prices to tumble in China. This long-delayed increase in purchasing power for everyday Chinese will unleash pent-up demand in what is already the largest middle class in the world. Chinese factories would retool in order to produce goods for their own citizens to consume. In RMB terms, commodity prices would plunge, making it easier for China to produce all kinds of stuff, such as automobiles, while also making it cheaper for the Chinese to buy gas. Millions will trade in bikes for cars, and Chinese oil imports will swell.

The opposite would occur in America, where an artificial, consumer-based economy, supported by Chinese lending, will come tumbling down. Without the ability to import cheap goods from overseas, Americans will pay more and get less. While gas and food become cheaper for the Chinese, they will simultaneously become much more expensive for Americans – so too will automobiles, consumer electronics, furniture, and just about every other product we want or need (even those few we still make ourselves).

Washington’s best option is to recognize that the current relationship is unsustainable and to plan, as best as possible, for a more viable future. We Americans also must be honest with ourselves and recognize that we have been living beyond our means and that our lifestyle has been largely financed by austerity in China. We must conceive of a plan that weans us from this dependence without provoking China to pull the rug out from under us before we have a firm footing. To construct a policy around Krugman’s ridiculous assumption that we benefit China more than they benefit us is to invite catastrophe on an unimaginable scale.

— Posted Thursday, 18 March 2010  Source: GoldSeek.com

More homeowners are opting for ‘strategic defaults’

From the Los Angeles Times

More homeowners are opting for ‘strategic defaults’
Underwater on their mortgages and angry at banks, more borrowers are choosing to hand over the keys, even if they can afford the payments.

By Alana Semuels

March 17, 2010

Wynn Bloch has always dutifully paid her bills and socked away money for retirement. But in December she defaulted on the mortgage on her Palm Desert home, even though she could afford the payments.

Bloch paid $385,000 for the two-bedroom in 2006, when prices were still surging. Comparable homes are now selling in the low-$200,000s. At 66, the retired psychologist doubted she’d see her investment rebound in her lifetime. Plus, she said she was duped into an expensive loan.

The way she sees it, big banks that helped fuel the mess all got bailouts while small fry like her are left holding the bag. No more.

“There was not a chance that house was ever going to be worth anywhere near what my mortgage was,” said Bloch, who is now renting a few miles away after defaulting on the $310,000 loan. “I haven’t cheated or stolen.”

Time was when Americans would do almost anything to hang on to their homes. But that commitment appears to be fraying as more people fall behind on their loans while watching the banks and lenders that helped trigger the financial crisis return to prosperity.

Nearly one-quarter of U.S. mortgages, or about 11 million loans, are “underwater,” i.e. the houses are worth less than the balance of their loans. While home values are regaining ground — median prices rose 10% in Southern California last month to $275,000 compared with a year earlier — they remain far below the July 2007 peak of $505,000.

Many homeowners are just coming to grips with the idea that prices will take years to reach the pre-crash peak: as long as 14 years in California, according to economist Chris Thornberg.

Stuck with properties whose negative equity won’t recover for years, and feeling betrayed by financial institutions that bankrolled the frenzy, some homeowners are concluding it’s smarter to walk away than to stick it out.

“There is a growing sense of anger, a growing recognition that there is a double standard if it’s OK for financial institutions to look after themselves but not OK for homeowners,” said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject.

Just how many are walking away isn’t clear. But some researchers are convinced that the numbers are growing. So-called strategic defaults accounted for about 35% of defaults by U.S. homeowners in December 2009, up from 23% in March of 2009, according to Luigi Zingales, a professor at the University of Chicago’s Booth School of Business.

He and colleagues at Northwestern University’s Kellogg School of Management reached that conclusion by surveying homeowners about their attitudes and experiences with loan defaults.

They found that borrowers were more willing to walk away if someone they knew had done it, and that the greater a homeowner’s negative equity the more likely he or she was to default, even if the monthly payment was affordable.

An analysis released last year by credit bureau Experian and consulting firm Oliver Wyman estimated that nearly 1 in 5 homeowners who were seriously delinquent on their mortgages in the last three months of 2008 were walkaways.

“The fact that people are strategically defaulting — there is no question,” Zingales said. “The risk that the number of people doing this might explode is significant.”

A flood of walkaways could damage the nation’s fledgling housing recovery by swamping the market with foreclosed properties. Still, some experts are dubious that millions of underwater homeowners will pull the plug as Bloch did. Homeownership remains the cornerstone of the American dream. Moving is a hassle. And the stigma associated with a foreclosure is likely to keep many hanging on for a recovery.

The biggest surprise is that so many underwater homeowners continue to pay, said White, the Arizona law professor. He’s convinced that personal shame, as well as moral suasion by the government and financial institutions, has kept many homeowners from walking away, even when they’d be better off financially by dumping their homes.

But real estate veterans said old taboos were eroding fast. Jon Maddux, a former real estate investor who in 2007 founded You Walk Away, a for-profit company that guides homeowners through the process of default, said his earliest customers struggled with emotional ties to their homes as well as remorse about reneging on an obligation. That’s changed as more homeowners have concluded that the housing market isn’t going to rebound quickly and they’d be better off cutting their losses.

“Now, it’s more of a business decision — it’s people who could afford their house but it’s an inconvenience,” Maddux said.

He and other experts said average Americans are fed up with hearing how they’re supposed to honor their debts while businesses operate by another set of rules.

Case in point: Maguire Properties Inc., one of the largest commercial landlords in California, walked away from seven prime office buildings in Los Angeles and Orange counties last year, defaulting on loans worth more than $1 billion.

Consumers typically begin to think about walking away once the value of the property has fallen to 25% less than the value of the debt, according to research conducted by Sam Khater, senior economist at real estate research firm First American CoreLogic. About 5 million people nationwide are in that situation, he said.

Some purchased their homes at the peak of the market only to see the value drop precipitously when the bubble burst. Others bought low but couldn’t resist borrowing against their rising equity to make home improvements and pay off other bills. When home values fell, they too found themselves underwater.

Ken Henrich purchased his Marysville, Calif., home for $187,000 in 2004. He and his wife later refinanced the property, tapping their increased equity to pay off credit cards. They now owe around $300,000 on a place that’s worth about $132,000. They let the four-bedroom residence slip into foreclosure and are waiting for it to be sold at auction. They’re planning on renting for a few years until they can perhaps buy again.

“We can more than make the payment,” the 54-year-old sales rep said. “The way we look at it, our credit would still be perfect years from now but we’d still owe tons more than it’s worth.”

There are consequences to walking away. A default will knock down a credit score by at least 100 points, said Craig Watts, a spokesman for FICO, the company that developed credit scores. That could make it tough to borrow money, rent an apartment or get a job because many employers now routinely check the credit histories of potential hires.

To some homeowners those consequences are a small price to pay to gain a measure of revenge against the financial institutions whose loose money helped fuel the crisis.

Joseph Shull, a 68-year-old marketing professor, said he’s planning to walk away from the town house he bought in Moorpark in June 2006.

“I’m angry, and there are a lot of people like me who are angry,” he said.

He purchased the home for $410,000 and spent $30,000 renovating. Now the house is worth around $225,000.

Shull admits he overpaid for his property. But he said it fell in value in part because of “regulatory mismanagement.”

“The bank stabbed me, but at least I got in a pinprick back,” he said. “This is the new economy. The old rules don’t apply any more.”

alana.semuels @latimes.com

Copyright © 2010, The Los Angeles Times