Regulatory solutions for CDS:* A company cannot be covered more than 80% by CDS (as opposed to 500%)* Full disclosure for all publicly traded companies to investors (and the CEO)* If a CDS is not used as legitimate insurance to hedge against failure (i.e. a naked CDS), it cannot be bought using leveraged assets by a FDIC insured entity. It's the government's money you're risking.* If any ratings AAA for a company which is gambling on naked CDS, have the SEC prosecute
Now why 80%? It's worth noting this dilemma existed before the stock market. A boxer might be paid $100 to win a fight, but $500 by bookies to throw a fight. So actually, the boxer is better off losing and collecting the bets!
80% is about the limit to make sure it is at least better not to fail. We do have to balance between stopping ridiculous 500% coverages (i.e 5 fire insurances on one house, where it's better to burn down the house), with the legitimate uses of a CDS as insurance (how novel!). In any case, this kills the vast majority of the problem because there is a huge gap between the risks of 80% and 500%.
Background info on CDSWith a credit default swap you can own insurance on someone else's property. More significantly, you can take out multiple insurances on the same property. So you can have five parties all hoping for your house to burn down, because they will be paid on that gamble!
Traditional insurance is legitimate - health insurance for example pays out plenty when you get real sick, and everybody pays into the premium to cover the one person who is unlucky enough to need hospitalization. CDS on the other hand are pure gambles on someone else's fortunes. Several people are betting on (and hoping for) one individual to get sick.
Someone else had an excellent explanation using a Fantasy Football analogy:It's like a fantasy football league or fantasy finance. For every MBS, there was a CDS that bet on that security. Instead of there only being one Peyton Manning allowed, there could be as many as you could sell.That's why the US RMBS market is 10 trillion, but the CDS market tied to it is 28 trillion. There are 18 trillion fantasy CDS out there that aren't tied to the performance of a real mortgage. It's just paper. That's why the banks, pension funds, states, insurance companies and everyone else are failing. And the Federal government doesn't have enough money to plug the hole and they have yet to even admit the problem.
So you see, everybody could be betting on Peyton Manning, even though there is only one in real life. And for that reason, a market can be filled with trillions of dollars of bets by companies who don't have that much money to begin with. These are "naked bets" as some would say.
The only legitimate use of a CDS is to insure yourself. Or, perhaps to gamble with your own money.
Lax regulations allowed companies to hide these liabilities from even their own CEOs and investors.
Excerpts:"Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government""a reversal from GM's position late last year, when it sought a federal bailout.""the disclosure Thursday that GM's auditor has raised substantial doubt about the car maker's ability to keep going" (and recommended chaper 11 just like myself)"A bankruptcy of any sort could be far more effective than the type of out-of-court restructuring GM is undergoing" (no duh, politicians are incompetent at these decisions)"[bankruptcy] could circumvent state franchise laws that have long protected its dealers from GM's restructuring knife"Other points paraphrased* GM's executives conceded their primary objections to bankruptcy as unfounded, after "months of research"* Bankruptcy is one effective way to reduce GM's debt by effectively forgiving some of it in bankruptcy court (all using existing laws)* GM is still hoping for prepackaged bankruptcy (dictated mainly by GM), than chapter 11 (dictated by a judge). The reason is GM is still not willing to make certain tough decisions.Let's review three of the options GM has. First, GM can go through out-of-court restructuring, which is what they're still holding out hope for. While this could easily work for a healthier distressed company like Toyota or Ford, or a company willing to make deeper consessions, it will fail for GM. The basic reason why it will fail for GM is that it is cutting costs far slower than it is losing income, and this gap is widening at a staggering rate every month. They admitted today that they are about to go bankrupt again without another bailout. Of course, it doesn't help that they were already teetering before the credit crisis, and did nothing about it for years unlike Ford.Even GM's auditor's agree with me that GM should file chapter 11 bankruptcy. Why is that? First, the cost of bailing out GM at the current rate is at least $60 Billion a year, even assuming they make all the cuts they legally can. This is a generous estimate assuming GM's own financial statements haven't been cooked. Now all of the cuts GM is making come at a cost to GM's revenue, its employees, and business partners. Its investors may choose to write down some debt, but only voluntarily in a mutual agreement of compromise.By comparison, bankruptcy opens up the possiblility of seriously writing down debt and charging the costs to investors. Unlike all the other proposals that have been made by politicians, this is already the law. It's established and legitimate, and isn't theft (imagine that!). We don't invent some new law for one company or change the rules. The rules have always been that if you invest in a company that fails, you take a loss. If that company goes into bankruptcy, you will lose some or all of it. That's the risk and reward of investment and most importantly investors knew about bankruptcy when they invested so it doesn't shake market confidence. A judge decides this through due process with the utmost attention to legality and fairness.Now a compromise form of bankruptcy is prepackaged bankruptcy. GM has allowed that they may have to take that route, because they've finally conceded that out-of-court will probably fail. What a surprise. Now prepackaged bankruptcy might work for GM, but I'm highly skeptical because the one requirement is that GM and all parties agree to deep and realistic concessions. So far GM has lied, mismanaged, and outright cooked their financial forecasts to show they need far less concessions than they really need. It's not even close, and the proof is they're asking for another bailout and a new plan months after their first. Some of the other parties are even less realistic in what they think they need to concede.For those reason alone, prepackaged bankruptcy might do some good, but will lead to a second bankruptcy. When you think of it that way, maybe that's a great idea. Then GM and their parties can blame everybody else for their second failure, except themselves. Nobody leaves feeling guilty and we can all have a good laugh together five years later. Unfortunately, the main cost in that scenario is all the money GM will burn in the interim, and the fact that the second bankruptcy will shrink GM to the smallest size possible under all scenarios and end up cost more tax dollars than every other plan.Why are politicians afraid of chapter 11? The short answer is we have an election every 2 years, so short term solutions of delaying the problem are highly valued. Compared to prepackaged bankruptcy, chapter 11 will in the very short term cost more in the form of loans and court costs. The main reason for that is because prepackaged bankruptcy defers and hides true losses until later, which are always going to exceed chapter 11 by definition of containing fewer real concessions. And since prepackaged bankruptcy is a wishful thinking form of compromise, it won't solve half the deep problems possible with chapter 11. This is because Chapter 11 is the only action which keeps GM alive at the same time that it forces GM to be profitable, and it forces debt holders to write down as much as necessary! Prepackaged bankruptcy actually won't - concessions are voluntary and it will simply delay until a second failure.By analogy, it's worth noting that chapter 11 may cost more jobs in the very short term, and save a lot more jobs in the long term. The Unions won't like that, because their duty is not to save jobs in the long term. Their duty is to look busy like they're saving jobs, which always means saving jobs in the short term. I get it.The auditors also had their say, and they agree chapter 11 is the best and possibly only eventual route. It's worth noting the auditors are the only third party which is objective, has access to all of GM's inner data, and is professional trained to make this very assessment.Bottom line, chapter 11 is short term pain for longterm gain. Prepackaged bankruptcy is a first bankruptcy, followed by another. And even GM concedes out-of-court restructuring isn't working, and they have a conflict of interest in what route we take. Listen to the auditors and the experts, bankruptcy is necessary and the longer you wait the harder the cuts will be.
Now in the case that we're going to throw billions at them again, at least make them agree in writing that this is the last time and it's up to them or they've failed. Then next time, Obama can pretend to be real sorry and say to GM, Chrysler, and everyone else (AIG cough): "Aw shucks, I know you guys have it bad and I'd love to help but like we agreed last time we've bailed you out twice and it has to be up to you to turn yourself around." With it in writing, this won't even have to be a "tough decision".
If saving the industry was our priority, the best course is Chapter 11 bankruptcy. GM and Chrysler would stay in business and actually be more likely to survive from that point on compared to now. The longer they wait for bankruptcy, the harder it will be to turn them around through any means.
It's worth noting that GM and Chrysler's decline is accelerating.
Right now, the two are bleeding money and idling, unable to make necessary changes that would be trivially easy under Chapter 11. For example GM is bleeding money because of too many dealerships (i.e. salesmen) but can't scale them back for a number of reasons including state franchising laws. Chrysler is in worse shape than GM, and it's either bankruptcy or disappearing off the face of this earth. I prefer the former.
Of course, politicians and people who aren't familiar with bankruptcy hate the B word, especially because it means GM and Chrysler can more easily close unprofitable businesses (i.e. some job losses) and cut through red tape in state laws (i.e. some loss of state income). There's plenty of other objections hardcore Democrats will have too. Of course, the biggest factor stopping chapter 11 is we have to admit GM and Chrysler have failed - the same dilemma with Iraq!
But that's okay since it will happen anyways. The only thing politicians might influence is whether GM and Chrysler go bankrupt now, or later when it may be too late. So far they've been influencing for the latter.
Now about the stimulus, even Obama knows 3 million is not accurate accounting. This is a marketing slogan that tries to count almost everyone who gets paid anything as a job saved. Every President does this, and I understand where he's coming from.
For that same reason, 1 million jobs are not being saved by the auto bailout. In fact, jobs are being permanently lost because we're letting GM and Chrysler bleed money and ambition rather than save them through bankruptcy. We're only holding out for the false hope that they won't need bankruptcy at all. That's the only scenario where even a single job would be saved by periodic bailouts.
Now chapter 11 does cost billions of dollars in backing, but it's ironically cheaper than bailouts every three to six months. I predicted at the end of last year that GM and Chrysler would be back every three to six months for more money, and so far that's been true. Over the years if we keep handing them money, the bill will come out to at least $100 Billion because of their massive debt and money burn.
Now the fact that we may have to go chapter 11 is certainly awful. But a lot better than the notion of handing out money until it runs out and these two companies are beyond hope.
This is a "tough decision", but what would you choose? Without bankruptcy these two companies are not going to survive the Obama administration anyways.
This is a graph of the current bear market vs. the First Great Depression, 73 oil crash, Dot-Com crash:
http://dshort.com/charts/bears/four-bears-large.gif
As we currently stand, we are at the same level as the First Great Depression was 16 1/2 months into its crash - a drop of 55%. Notice how at exactly this time during the FGD, the stock market rallied by 10% (5% relative to peak). Then it continued to crash for the the next 17 months, making it a 34 month stock market crash. These peaks are known as false rallies and don't change the final result.
People have plenty of money to invest. They are choosing to uninvest and there is nothing anyone can do about it because this is a bubble pop. What the government could do, is burn money trying. Good luck!
Speaking of burning money, I noted just before the election last year that AIG, GM, and Chrysler will be back for billions more. To update that, I repeat that prediction for 3-6 months from now if the government follows through with their demands. They'll be asking for money a third time. That is why I urge Obama not to follow through, because with two handouts he'll end up looking worse than Bush and have no excuse next time. I'm hopeful but doubtful.
Another easy prediction is that Citi and Bank of America will be exposed as insolvent within the next few months. They'll either get new infusions turning them into zombie banks (insolvent banks with de facto government backing), be seized by the FDIC, or be bought up by another bank in a government brokered transaction. BAC's biggest mistake was buying Countrywide, which was worth at least negative $30 Billion. Notice that Bank of America's market cap is $18 Billion and dropping about $3 Billion a day.
All I ask is that Obama give Warren Buffet a call and get his opinion on the future. He'll simply tell Obama exactly what he already wrote in his recent address, because the longterm solutions are pretty clear. You cannot spend your way out of this mess, and the worst thing you can do is get failed banks addicted to bailouts.
The original graphs are not meant to predict the S&P future. Rather, they refute the significance of a 2% rally like today, or even a 10% or 20% rally next month. The comparison to the FGD is only to emphasize the severity of declines for those who aren't aware.
You may not be aware, but last week billions in Citi preferred share were converted into common shares at a steep discount. That makes it a bailout. When you give someone a multi-billion dollar loan and then forgive most of it months later, that's free money. This is now a realized loss, not a paper loss or a loan we might recoup. I know this is a recent development, so I understand many people may not be aware of this.
AIG is insolvent, and their chance of further default exceeds the yield we've charged them. That's also a bailout, though at a smaller margin. Recent developments show they will default about every three to six months without a new infusion of cash.
Telling banks they will be nationalized if they don't turn around isn't a threat. That's like saying if you don't pay your rent we'll replace your landlord.
TARP is a reward for failure as Buffet's letter spelled out. More significantly, if used longterm (as opposed to short term), it undermines the economy by making all other businesses less profitable or unprofitable. You may disagree with Buffet's conventional wisdom, but this is plainly obvious to fiscal conservatives. What matters is if this is a one time short term solution, or long term policy. Bush was lucky he didn't have to stick around for that test.
For a laymen example, right before Wamu failed they were offering CDs at 5% when everyone else offered 4% and under. They knew FDIC would bail them out if they spent their way to death, so they weren't even risking their own money anymore. As a result, they could outcompete all other banks for a brief period of time. That was just a 1% spread over a few months on one narrow market. Imagine a 2% or higher spread over years by several mega banks against the rest of the economy. They're borrowing at about .5% right now, can you compete with that?
Bottom line, the solution is simple. To save face, Obama can pretend to be real sorry and say to AIG, GM, Chrysler "Aw shucks, I know you guys have it bad and I'd love to help but like we agreed last time we've bailed you out twice and it has to be up to you to turn yourself around." If we're going to throw billions at them again, at least make them agree in writing that this is the last time and it's up to them or they've failed. But Obama has shown he's not yet ready to make "tough decisions", maybe later. I can't blame him.
Obama has done so much right in so little time. The economy however is a giant elephant we're still working on, until the day we make "tough decisions". I'm sure over time Obama will recognize what isn't working, and that's why we voted for him instead of "stay the course" McCain.
Full letter from Buffet here: http://www.berkshirehathaway.com/letters/2008ltr.pdf Quoted from page 10:Why the housing bubble happenedBuffet: At that time, much of the [mortgage] industry employed sales practices that were atrocious. Writing about the period somewhat later, I described it as involving “borrowers who shouldn’t have borrowed being financed by lenders who shouldn’t have lent.” To begin with, the need for meaningful down payments was frequently ignored. Sometimes fakery was involved. (“That certainly looks like a $2,000 cat to me” says the salesman who will receive a $3,000 commission if the loan goes through.) Moreover, impossible-to-meet monthly payments were being agreed to by borrowers who signed up because they had nothing to lose. The resulting mortgages were usually packaged (“securitized”) and sold by Wall Street firms to unsuspecting investors. This chain of folly had to end badly, and it did.
The government is rewarding bad banks and punishing honest businessHere Buffettalks about Clayton, a subsidiary of Berkshire: Buffet: [Berkshire]..though not damaged by the performance of its borrowers, is nevertheless threatened by an element of the credit crisis. Funders that have access to any sort of government guarantee – banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella – have money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.
This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’tenjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.” That is why companies are rushing to convert to bank holding companies, not a course feasible for Berkshire.
Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.
ConclusionBottom line, legacy Bush and Fed policies are putting honest businesses out of business and replacing them with hand picked government backed banks - the very ones who caused this mess. I know this is a big ship to turn, but this is the wrong course to continue.
Finally, Buffet also emphasizes the need to eventually wean the economy from dependence on subsidies, and that the problem comes down to bad decisions by banks and borrowers who put 0% down or lied on their loans. The solution is to help everybody else, not throw tax money at deadbeats and their banks. The problem with handouts is they're going to demand more money every 3 months and that's where we're at.
Buffet and a number of economists are calling for reason and a sensible way forward. We've done the bailouts, and from this point on we need to be scaling that back to alternative ways forward.
http://money.cnn.com/2008/10/27/real_estate/Hope_Now_rises_in_September/index.htm?cnn=yes http://www.latimes.com/business/la-fi-countrywide24-2008oct24,0,2554852.story?track=rss http://www.bubbleinfo.com/2008/10/hope-for-homeowners/ http://banking.senate.gov/public/_files/HousingandEconomicRecoveryActSummary.pdf
“The Federal Housing Authority will guarantee refinanced loans if lenders agree to write down the mortgage balances to 90% of a home’s market value.”
This is the latest bailout data we're discussing in housing blogs, and it's already in progress. Already the government is giving underwater homeowners instant 10% equity on an unaffordable house, if you simply default on your mortgage. The less down payment you made, the bigger your bailout. The higher in the bubble you bought, the bigger your bailout. The more inflated your house purchase, the bigger your bailout. For example, if you bought a house for $500K for 0% down and it is now worth $400K, the government will arrange to give you the house at $360K with 10% down, a gift of $140K! That's a a 28% instant house payment in this example, plus refinancing to a guaranteed low 30-year fixed loan.
It’s worth noting that vast majority of people who made the right decisions are totally out of luck. Millions of Americans are actually now worse off for honestly paying their mortgage than to default and qualify! In fact, the more equity or down payment you put into your home the more loss you will eat. Your down payment is potentially wiped out by this cramdown. You should have put as little down as possible and bought a bigger house, and now you’ve learned your lesson.
Now that the FHA will guarantee this mortgage, the lenders have no incentive to care if the new mortgage will ever be paid back. Taxpayers foot the bill on defaults, while lenders just collect the profits risk free without future hassle. The more fraudulent the lender, the more of their loans will qualify. A win for Countrywide, and a big slap in the face to honest lenders who ironically didn’t dabble in sub-prime in the first place. This is welfare for banks!
The numbers are staggering. The FHA have by their own admission prevented 2.5 million honest Americans from buying homes that would have ended up on the market. Half of these homes got loan modifications, the other half got repayment plans. Only deadbeats got relief, and the bigger the deadbeat the bigger the instant payout. And unlike the Depression bailout which was far better thought through, this plan will lose massive amounts of taxpayer money and turn the US Treasury into another failed bank.
IndyMac also has a plan to “reduce mortgage payments to 38% of pre-tax income for troubled borrowers who qualify.” What this means is you really should have bought the most expensive and biggest house possible! With one stroke of the pen they’ve upgraded the most irresponsible speculation into a guaranteed investment for the newly minted rich. Redistribution of wealth indeed!
These are the lessons George Bush and Congress want you to remember:* Always put 0% down. The government will give you 10% equity if your house goes down in value.* Buy the most expensive and biggest house possible. You keep unlimited profits if it goes up, you gain 10% payout if it goes down and the government will cover all losses on top.* There is no such thing as a house you can't afford anymore. 2.5 million contract interventions are proof of that, provided you default like a deadbeat first.* The purpose of the government is to help you steal from your neighbors, and that has the power of law.
Wow, a program like this would really have helped my coworker who had to sell his Mercedes because he couldn’t afford the payments. Let’s just lower his car payments until he can afford it again. And lately, I’ve had to stop eating out at nice restaurants, but I’d definitely go back if they’d adjust the prices for each person’s level of affordability. Everybody could use a discount on gasoline, how about we price it at your Income / 20,000 (ex. make $50K, pay $2.50 a gallon). At this rate, we won’t even need money anymore. Our economy could be based on only paying what you can afford, rather than owning only what you can afford. What’s that kind of system called again?
McCain's latest gimmick is that he deserves to be President simply to prevent a Democrat from taking office. Go ahead and vote Republicans out of Congress, but please he's begging you to let him be President anyways.
Let's ask ourselves. Do we really want to given McCain control of 2 out of 3 branches of government, and continue the status quo of Bush for another 4 years? Is that what we want for America that 80% say is on the wrong course? Let's all remember that McCain goes even further than Bush on Iraq, doesn't comprehend Diplomacy or the Economy, is a pathological liar and proud of it, and has proven himself a turn-key anti-choice partisan. His recent letters are proof that he doesn't even want your vote unless you're a die-hard Republican. And that is why voting for McCain is calling for America to continue the wrong course and remain pro-war, pro-Bush, fascist, anti-Diplomacy, anti-choice, anti-Constitution, anti-American under McCain. Add those issues to the Economy which is subjective, and let's not forget what this election is really about. As practical as the Constitution can be, it does nothing to prevent legalized corruption. That's exactly what we have under Bush and McCain's mute complicity for the last 8 years. Prosecutors are being rejected based on whether they're Republican or Democrat alone, and even the Attorney General is a liar and corrupt lawbreaker as Gonzales demonstrated before his resignation. Bush and Cheney's friends are being personally enriched through conflicts of interest at best, and wars are being fought on personal whim. From day one before even 9-11, we've seen how the CIA's purpose is no longer to find out the truth, it's to fabricate the truth at the President's will. It's simply laughable that McCain finally realized how thoroughly evil Bush's administration has been, suddenly in the last 3 months of an Election Year. But I can't help remembering the thorough backstabbing he gave real mavericks when he leaped to Bush's side on a misguided and mismanaged war, and continued to back Bush on every single war crime save outright torture (thankfully). And what about the Supreme court? Do we want to add one more right wing activist to all the 4-5 and 5-4 decisions we've seen under Bush? We already have 4 turn-key extremists in the Supreme Court, busy every day trying to set 4-5 and 5-4 precedents on abortion to war crimes. What's damning is that most of these justices are more loyal to their personal political ideology than to the Constitution itself. Only voters can hold the government accountable, and that starts at the Executive branch where we need real Leadership. The extreme danger most Americans are talking about is George W Bush and his morally bankrupt ideology, which McCain has embraced for 8 years with few exceptions. These men only believe in "their America", and they're simply out of touch with reality. They can't even explain their own unrepentant positions on anything from Iraq to the Economy other than willfully ignorant wishful thinking. That's not Leadership.
This is an explanation I gave in email discussions about progressive taxes and Joe the Plumber.
It's always better to make more moneyBoth Obama and McCain would agree that the tax system rewards you for making more money. They only disagree on how much the taxes should ramp up as you start making more. The confusion comes because politicians use a lot of rhetoric to exaggerate the benefits of their approach. For the vast majority of Americans, the tax system works in brackets. The "first $65,100" of income gets taxed exactly the same whether you make less, equal, or more than $65,100. It's the "extra" money above that which gets taxed at a higher rate (starting at 25% and up). Income Taxes work in Brackets, Capital Gains are capped at 15% under BushYou can find the federal tax rate for 2008 at http://www.invest-2win.com/Brackets.html. Bottom line, all things equal a person making $66,000 will always take home more than someone making $64,000 because both people pay the same tax on the "first $64,000". You can separate the "extra $2,000" and tax that at the appropriate rate (in this case, it crosses the bracket and gets split in two). Joe the Plumber's issue is with long-term capital gains taxes (for property held more than 1 year). Because it was capped at a very low rate of 15% under Bush, this is how a billionaire like Buffet paid only a 17.7% tax rate on billions of dollars of income. Buffet even offered cash to anyone who could provide a counter-example. I think 25% capital gains is reasonable, and I believe it was 28% under Clinton. Bush reduced it from 28% to 20%, then to 15%. Everything worked as planned - Billionaires on Wall Street now pay a lower tax percent than the middle class. As Buffet pointed out, people worked just as hard back when capital gains were 40% as when they are at 15% now. And as Buffet also repeatedly pointed out he pays a ridiculously low tax rate - less than the middle class. Tax policy is about fairness and keeping the government running The question only comes down to fairness and how to pay for things we've promised. It would be unfair for the rich to give up almost all their extra earnings, as well as devastating to capitalism and a healthy economy (as under a crazy liberal government). On the other extreme, it's also unfair as well as impractical to tax the rich at a lower percentage rate than even the middle class (as under a crazy Bush government). Obama is neither extreme, whereas McCain is actually crazier than Bush and would go even further to balloon our national debt. Obama made a good point that Joe the Plumber needs a healthy economy and lower taxes for the middle class so people can buy from him. McCain makes the confused point that you always have to give tax cuts to "everybody" when in fact hiding that practically all of it is for the rich. Give the poor a .2% tax cut (as McCain proposed) and lie to Americans using a token $19. The fact is we should make taxes as reasonable as possible. On taxes, the Clinton years were far more reasonable than the Bush years. The problem in politics is there are two powerful extremes controlling the two major parties. There are the "rob the middle and lower class Republicans", and the "rob the middle and upper class Democrats". Notice they both agree on one thing - rob the middle class. The Democrats do this by labeling the middle class as rich, and scapegoating them as lazy. Their real intent is theft, and justifying theft. The Republicans do this through innocent sounding tax schemes, cutting taxes for "everyone" but in actuality practically all for the rich. They use bad math and accounting which always leads to a massive deficit and debt. On top of that, they're deficit-loving big government spenders a la the military.
Bush and Republicans actually claimed that tax cuts would "pay for themselves". They actually kept telling me we'd see the results soon, since the year 2000. Instead, we've doubled the deficit. Bush ran off and left America holding the bill Bush's idea of financial responsibility is to run away from dinner at a restaurant so everyone else can pay. He can now say that he earned a free dinner, just like he can say we all earned tax cuts - thanks to our children who will pay back this loan plus interest.
Bush has essentially charged the nation's credit card by trillions, and the balance has already passed $10 trillion with $11.2 trillion budgeted in. This is so Bush can now say that we've cut taxes from 2000 to 2008, and we must blame anyone after him for using taxes to pay for Bush's unmitigated spending spree called Iraq. In other words, blame the bill payers, not Bush the deadbeat. Bottom line, most of our yearly deficit (i.e. increase in debt) is composed of interest payments. Bush has mortgaged America using a pay-option ARM loan, and has allowed it to balloon. Bush is the perfect analogy of the biggest speculators of the housing bubble.
I have the debate running in the background, and it's just so hard to take McCain seriously anymore.
I understand that McCain wants to contrast himself from Obama and Bush, but he's just trying too hard. He's using every tangent to bring up random attacks, and he can't even deliver his own lines right. And the whole time McCain's attacking or making a new claim, he either has this wide grin on his face or has to avert his eyes from Obama. McCain still can't speak with a straight face, and nothing's changed other than McCain has now had too much caffeine.It says a lot when rather than explain your own position in detail, you spend half your time spinning your opponent's position the way you see it. We know McCain and Obama disagree, what we want to know is simply what each man stands for and has to say about his own policies. Not this automatic heckling after every statement you make.
What's sad is McCain had some valid points, but failed to look in the mirror first. He sees all these flaws in Obama's imperfect plans, but seems oblivious to the shallowness of his own ghastly gimmicks. And he talks about people that support Obama, without bothering to ask himself who his own corrupt top advisors and terrorist supporters are. This election is just a funny game to McCain, and he doesn't even have the competence to form simple coherent sentences about how his ideas are any better than mediocre.
McCain should have rehearsed more, and in front of a test group of Independents. He just comes off as a snarky smart ass. And while that would be fine for a Senator or even an average voter, it just isn't Presidential. What we want is some optimism and honest effort, not this phony "my friends" sales pitch.
McCain is a two faced liar, and we need to keep calling him on it. John can't even look Obama in the eye when he makes his absurd claims, but sadly his own campaign thinks it has no choice left but to be dishonest.On Ayers, Palin herself can only cite a New York Times article which itself debunks her claim on friendship. She has no basis other than wishful thinking and intentional dishonesty. In any case, Palin has no credibility after lying during the ethics investigation until confronted with tape recorded evidence, lying about the bridge to nowhere, and now lying about what she read in a newspaper. A recent report unanimously concludes she abused her power. Palin's latest outbursts have long been discredited by the Washington Post, Time magazine, the Chicago Sun-Times, The New Yorker and The National Review. But as McCain noted, it's standard Nazi practice to repeat lies as often as possible.This is why even people who want to vote for McCain do so with disgust or plan to stay home. Most of his core supporters have essentially bought into a cult where they suspend common sense and individual thought. Both sides have been guilty of this in the past, but not since George Bush have so many ordinary Americans drunk the kool aid.McCain ran out of any credibility long ago, and he's in try-anything mode now. Attacking him is easy, but every attack needs to be followed up by talking about the issues. It needs to be pointed out that McCain is now running his entire campaign on lies, and weak ones at that.
Try as he might, McCain just can't help being Bush.
The Nikkei is down 50% from 1 year ago. S&P is down 40% from 1 year ago. If you take the Euro's recent devaluation into account, they're down by even more in dollar terms. It's going to get worse before it gets better, because these problems have been over 5 years in the making. There's plenty of blame to go around, but the bottom line is we need real leadership and honest solutions. Not petty gimmicks and reckless promises. Here's a quick review of our economic status:* 1 in 6 homeowners have zero or negative equity on their homes due to buying into a bubble, buying with little down payment, or taking out a HELOC to extract "dead equity": http://www.msnbc.msn.com/id/27089919/* Warren Buffet points out that with 45 day bonds approaching almost 0% interest, the free market is saying flat out that you are best off putting money under your mattress as an investor. Buffet notes that the market believes a 0% interest deposit will outperform the stock market - in fact it has and will. This is why I keep telling my friends to invest in gauranteed CDs at 3.5-4.0% (FDIC insured to $250K). * Paulson is offering a new radical plan every week. Right now, we're simply following the UK's plan after all, as many bailout opponents originally proposed. This is a tacit acknowledgement from Paulson that his original plan to buy $700 Billion in toxic assets at above market rates was a money losing scam disguising a subsidy for fraud. I'm against both ideas, but Paulson's is just plain worse. This just proves how directionless the Fed is with their massive gambles using our money.
* Paulson has already tossed more than a trillion at failed businesses, throwing good money after bad. That doesn't include the paltry $700 Billion bailout just passed. Just with the bailouts so far, every American will owe $38,000 in their share of national debt, mostly to foreign powers. This is a failure in leadership, pure and simple. Even when Greenspan was wrong, at least he had the professionalism to choose his words carefully rather than instill panic by worsening the crisis like Paulson has. America would have been better served by a mute sock puppet than Hank Paulson. Bush is just calling it in and counting the months left before it's someone else's problem - he's happily charging the nation's credit card on his way out.
Rather than go on about the problems with unemployment and worldwide recession, what we need now is leadership and a recognition of the issues with the will to tackle them. Even my Republican friends are talking with bitterness about how much more a fiscal conservative Bill Clinton was compared to Bush and McCain. These are people who actually voted for Bush both times, and against Clinton both times. They all hate McCain almost as much as I do, enough to either not vote at all or vote against McCain. The $300 Billion gimmick by McCain during the debate was just the last straw. McCain has zero leadership, and zero solutions beyond throw-money-at-it shortsighted gimmicks. Most Democrats won't ever understand why we think this way, and fiscal conservatives don't expect them to. But the bottom line is anyone who considers themself a real fiscal conservative would never vote for McCain. McCain doesn't know how to balance a budget, pay for what we spend, or even recognize that Bush tax cuts are a failure that won't "pay for themselves" as promised. We're all for tax cuts as long as they're paid for by reduced spending, not $5 Trillion throw money out the window gimmicks that Bush and McCain are adamant about. It's revealing how McCain supporters are largely the same pretend Republicans who've turned their party into the pro-deficit, pro-war, anti-American, and anti-Constitution party it is today. Today I just filled out my absentee ballot and mailed it off. The debates won't change anything for 85% of Americans, and McCain's $300 Billion comment is just an embarassment.I hated Romney too, but I'm wondering now if he would actually have been a better nominee. Huckabee or Ron Paul would have been a much lesser evil than McCain, but it was clear from day one it just wasn't going to happen. That's because Bush Republicans simply hate fiscal conservatives with a passion, a hatred surpassed only by their hatred for communists, liberals, and communist liberals. That's Bush's real legacy. This is the fascist, anti-American, and throw-money-at-a-hole leadership Bush and Paulson have repeatedly demonstrated. It simply transcends party lines. Obama, Bill Clinton, and Ronald Reagan are in a whole other league compared to these frauds, and McCain is simply costing himself more votes at this point.
These are the most critical swing states in this election, grouped by tiers. Winning just 1 state of Tier 1 wins the election, and winning any combination of Tier 2 states also wins the election: Tier 1: Ohio, Florida Tier 2: Missouri, Wisconsin, Virginia, Colorado Tier 3: New Hampshire, Nevada Specifically, Obama will win the election if he wins any of the following three scenarios: 1 of 2 in this list: Ohio, Florida 2 of 4 in this list: Missouri, Wisconsin, Virginia, Colorado 3 of 3 in this list: New Hampshire, Nevada, and any Tier 2 except Colorado The "upset" states that may be taken in a landslide scenario are North Carolina and Georgia. If either are won, any of the 8 swing states would seal victory. I've based these conclusions on 3 months of tracking the electoral college and factoring in recent events and trends. There are dozens of sites that do electoral analysis, and most of them are unanimous in agreement with the above conclusions as of recent weeks. Here's CNN's which is interactive: http://www.cnn.com/ELECTION/2008/calculator/ Ways to Win Obama won't win unless one of the three above scenarios happen. McCain's scenarios are more complex and difficult, but are reduced to preventing all three of the above scenarios. Based on polling, it's clear to me that Obama has a solid advantage in winning at least 1 if not all 3 above scenarios. However a McCain victory is still possible if his supporters show up in large numbers and Obama's does not, or there is very unlikely and long series of major blunders by Obama. In any case, the above three scenarios still hold. Random examples for illustration: Simply winning Ohio wins the election for Obama. Winning Missouri and Wisconsin wins the election for Obama. Winning New Hampshire, Nevada, and Wisconsin wins the election for Obama.
Only One Way for McCain to WinMcCain can only win by winning BOTH Ohio and Florida AND three of the following 6 states: Missouri, Wisconsin, Virginia, Colorado, New Hampshire, Nevada. However, those three states cannot be exactly Colorado, New Hampshire, and Nevada. This scenario I've just described is mathematically equivalent to the 3 scenario rule I've listed for Obama. Margin of Victory This is a "bare minimum" analysis of course, because it's very possible Obama will win all 8 in the event of a McCain collapse. It's also possible for Obama to win only 1 of 8 (New Hampshire) in the event of a catastrophic Obama collapse (i.e. 2004 Kerry excepting Iowa and New Mexico). If either upset state of Georgia or North Carolina goes for Obama (unlikely), chances are that Obama would win by a landslide anyways. The fight over upset states is more to avoid a complete McCain humiliation and local election effects. However, a victory is the same whether by a small margin or large margin. That's why my analysis focuses on the bare minimum analysis. And by various estimates, Obama must pick up 15 to 19 swing state votes to barely win, while McCain must pick up about 81 to barely win. If Obama picks up 19 swing votes under some unlikely scenarios, it'll be a 269-269 tie that he'll win because of a Democratic Congress (see explanation below). Example Polls This is a mix of some random recent polls of Obama vs. McCain: OH 47%-51% vs. 42%-48% (Oct 6th Rasmussen, Oct 5th Columbus Dispatch, Oct 3rd ABC News/Wash Post) FL 52% vs. 45% (Oct 6th Rasmussen for FOX), 49%-51% vs. 46%-43% (Oct 1st Insider Advantage, CNN/Time) VA: 51%-53% vs. 39%-43% (Oct 6th, Suffolk/Survey USA), 45% vs. 48% (Oct 2nd Mason) CO: 44% vs. 44% (Oct 5th, Mason) NH: 53% vs. 40% (Oct 6th, Survey USA) This collection is not scientific or accurate (just recent), and gives just a rough idea of how close the numbers are in all of my swing states excepting NH. Most polls put Obama ahead of McCain in Ohio and Florida this week, but that lead can still disappear through changes in general sentiment or voter turnout. I.e. A change in sentiment in one state will correlate to some degree with a change in many others. An Obama-Palin Presidency is possible under 269-269 tie This scenario is very unlikely but possible. For an Obama-Palin Presidency after a 269-269 tie, it would require Lieberman to vote for McCain (likely) and for no Republican or Democrat defecting, with Dick Cheney breaking that 50-50 tie. That would result in an Obama-Palin Presidency, which would be quite shocking. But a win for Obama in any case, as the VP only has power outside the Senate through the President. Gambling Odds My estimate for an Obama win is about 70% and rising due to momentum. A lot of the 30% is the result of a big uncertainty on who will actually show up to vote, as well as the accuracy of polls which can be consistently skewed in certain national elections. But if Obama doesn't make a series of major mistakes, his probability lead will solidify and grow until election day. The unreliability of polls and voter turnout projections prevents that number from ever nearing the 90's. Put in gambling terms, if I were to bet money on the Presidency, I would take any odds 60% or below (currently they're about 55%-60%) but not above 80%. And I predict gambling odds will never cross 85% to approach the 90s. One reason I supported Obama from day one was I saw his chance at nomination to be 60-70% from day one, whereas Ron Paul at 0%-10% (plus he's just too extreme). Conclusion Regardless of the election outcome, the scenarios listed above are very likely to hold. I.e. an Obama victory will 95%+ contain one of the 3 scenarios, and a McCain victory will 95% eliminate all 3 scenarios. This is because all the other 42 states are leaning by such a degree that they are very unlikely to flip without one of two of the other 8 swing states conforming to the 3 scenario rules. Obviously, it goes without saying that most of the 50 states and hundreds of districts have local elections that are tight and critical for your future. This is going to be a big election swing state or not, and this analysis is merely focused on the Presidential race by itself. So what does this analysis tell us? In my opinion, ther is one very subtle lesson: this election will simply be decided by the economy alone, whether it's jobs, the housing bubble, or the financial crisis. The swing states are going to demand answers on the economy and are looking for real solutions, not distractions. And that's what both Obama and McCain are going to have to focus on, regardless of what their campaigns may feel.
Palin's half hearted attempt to link Obama to terrorists fails at the source itself. Palin's comments are based on a newspaper article in the New York times, which in itself says the two men aren't close - they worked on the same charity. This grossly exaggerated claim has been widely discredited by the Washington Post, Time magazine, the Chicago Sun-Times, The New Yorker and The National Review. Not to mention the very article Palin cites.
McCain and Palin have demonstrated the same use of dishonest and gross exaggerations used by Bush to sell Iraq. That's what liars do.
Their strategy isn't to persuade anybody, but rather to cast what doubt they can on undecided Independents to stay home and not vote at all. However, it backfires because Palin is such an uninformed and disingenuous wind up doll that it again exposes her as more malicious than uninformed. For most Independents, this just makes us want to vote against McCain more, not less.
http://www.msnbc.msn.com/id/27018572/Excerpt:WASHINGTON - Sen. John McCain and his Republican allies are readying a newly aggressive assault on Sen. Barack Obama's character, believing that to win in November they must shift the conversation back to questions about the Democrat's judgment, honesty and personal associations, several top Republicans said."We're going to get a little tougher," a senior Republican operative said, indicating that a fresh batch of television ads is coming. "We've got to question this guy's associations. Very soon. There's no question that we have to change the subject here,"---McCain is conceding the economy debate because he has not once denied that his plan will explode the deficit and add trillions to national debt. His only comment was that he "hopes" it won't. The same wishful thinking Bush applied to these tax cuts that exploded our debt past $10 Trillion. This is a complete lack of judgement and connection to reality on McCain's part. He knows he's lost as far as the economic debate goes, and will go back to his same old dirty politics tactics Bush used on McCain in 2000. Here's what I think we should do:1) Preempt McCain by painting him as out of touch with the economy, without real solutions, and desperate to change the subject to dirty politics at the last minute. 2) Remind America the broad scope of serious domestic issues we're facing - the economy and jobs, education, the Supreme Court and respect for the Constitution, an Executive Branch that is at times above the law, our energy dependence, and the financial crisis. Remind America of McCain's poor judgement on invasion, the WMD threat, the cost and purpose of our war, and our priorities in Afghanistan. And McCain's lack of honest or realistic solutions on everything else. 3) Remind people that McCain's "new" attacks are really variations of his old attacks, and that McCain should simply look to his left and right if he's concerned about associations. He has yet to explain his lies denying payouts his campaign manager took from Fannie Mae. If McCain is so bent on changing the subject from what the next President should do for America, he's free to start cleaning house in his own campaign first: http://www.americablog.com/2008/09/newsweek-mccains-campaign-manager-paid.htmlFor me, the worst idea McCain has ever come up with are Bush cuts for the rich on steroids. I'm all for lower taxes on everybody, but not if it's going to add another $5 Trillion to the national debt as third parties estimate. It's already been tried by Bush, and now we're paying $300 Billion a year in interest payments alone - more than the first installment of bailouts! Interest payments are profit that goes straight to fiscally disciplined countries like China, when they should instead be invested here at home. Please, let's bring awareness to the fact that the debt will soon be over $11.2 Trillion due to the new cieling, which is $36,800 debt per American. That's $36,800 plus interest you will eventually be paying for through taxes for decades. This is not free money, and the interest rate isn't going to stay as low as it has: http://bubbletracking.blogspot.com/2008/09/i-pledge-allegiance-to-debt-of-united.htmlThe real crisis is the economy, not tabloid tripe. The crisis is not who knows who, or who got a bigger donation. And it goes without saying that convicted felons and corrupt businesses have donated to both parties. The real question is who is more trustworthy and capable of real change. Who has real solutions, and is actually focused on them.
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Update - looks like it's already started:http://www.cnn.com/2008/POLITICS/10/04/palin.obama/index.htmlPalin accused Obama of being friends with terrorists, in particular Bill Ayers. Her only evidence cited is a New York times article she read. That same article says "the two men do not appear to have been close. Nor has Mr. Obama ever expressed sympathy for the radical views and actions of Mr. Ayers, whom he has called 'somebody who engaged in detestable acts 40 years ago, when I was 8."As the CNN article notes, this rumor has been widely discredited including by the Washington Post, Time magazine, the Chicago Sun-Times, The New Yorker and The National Review. If Palin and McCain are willing to cite such shoddy evidence to accuse people of terrorist sympathies, it just reflects the same lack of judgement they'll apply on all Americans who get in their way. Make no mistake, Palin and McCain are just foot soldiers in the war on America. Radicals who have siezed the Republican party away from its roots will stop at nothing to advance their shameful pro-war, pro-deficit, and anti-Constitution platforms.
