We have come accustomed to instant response in our American society today.  Let's face it, we hate to wait for anything.  I can still remember waiting in line at college to submit my punch-cards to try my Fortan program on the college computer system.  The long wait was actually good in that it forced you to slow down and go over every line of code to make sure it would compile and run correctly.  Sometimes you would have to wait 2 or 3 hours to get the results back.   I noticed that after they opened the microcomputer lab containing Apple-II computers and we no longer had to wait (you could compile and run your program in seconds), that my level of patience decreased and my programming style went from "cautious, detailed, check every line"  to "just try this and see if it works or not".  

   Today we have the same view with our economy.  We are pressured to "act now" rather than "let's slow down and think this all through".  We want to fix our problems in a day and get on with living.  But that is not how things really work.  I grow tired of people looking at Wall-Street as a grand voting group on whether or not we are doing the right thing or not.   Too often we have an "American Idol" attitude towards government involvement in the economy.  Just as American Idol where contestants perform one night and the next night we get to see the results of the people voting; we look at government changes (stimulus packages, new laws etc.) as some sort of "performance" and the next day we get to see the "results" played out on Wall-Street.  Did they like it or did they hate it?  If they liked it we think, "Oh I guess Bill-XYZ was good!" 

   But we need to see that these changes will take months and maybe even years to play out.   What will happen when all the stimulus programs (such as bridge and road building) are done and those workers are layed off again.   What happens when businesses try to get going again, but all the credit has been swallowed up by Obama and his big spending programs?   What will happen when our dollar becomes devalued overseas and we pay MORE for our appetite for imported goods?   What will happen when our national debt grows even more as we pay for these loans with 3 year bonds (we used to fund our debt with longer term securities such as 30 year bonds), and the interest rates from other countries goes through the roof to get some of the money they lost back.  

    We need to urge our government to slow down and let nature take its course.  We need to see that every "fix" we try only makes things worse later on.  Obama is no smarter than you or me (and the same goes for his henchman, Timothy Geithner) and Wall-Street does not have the final say on what is a good idea or a bad idea.   Instead, we ultimately have the final say.

I was talking with a friend of mine the other day about the issue I wrote about with how Congress lies to us about inflation.  As we were talking about how it factored into the whole mess of the economy, I came up with an analogy on why they are to blame.

Lets say there is a city law that says all bar owners must have their customers take a breath-a-lizer test before they are served and their level must be under 0.08%.   A bar owner looks at this new law and knows it will impact his business tremendously, so he rigs a breath-a-lizer to give a false reading that is 2 to 3 times lower than fact.  For months, everything goes well.  He is doing wonderful business compared to the bars across the street and everyone is having a great time.  Then one night 5 people leave his bar and get into 5 horrible traffic accidents and they kill a total of 30 other people.  The city looks into it and they find these people had levels of 0.15%.  Everyone says, "How can they be so sauced?".  The bar owner points to his bartendar and waitresses and claims that THEY are to blame.  Its their fault.  They were irresponsible and were not properly testing them as they were supposed to and kept serving them drinks.   He also blames the patrons and says they also should have been more responsible as well.

Today, congress points the finger at Wall-Street claiming they are at fault, when instead its Congress that is at fault.  Had they reported REAL inflation numbers, the Fed would have put the brakes on the economy a long time ago by raising interest rates.  But Congress didn't want the party to end.   They make more money when the party continues, as more money flowing equals more revenues.  Now I don't want to entirely put Wall-Street off the hook (they are somewhat to blame, just as the bartender could see that patrons were getting sauced) its our governments fault to lying to us in the first place.

Now today, Congress is trying to keep the party going even longer with huge spending plans while other countries are telling us to shut the bar down.  In the end, WE are the ones who are going to get hurt in this awful traffic accident of an economy.

    As the old commercial went,  "How do you spell RELIEF.... ROLAIDS!"   A few days ago the Dow-Jones went up by steeply by over 400 points in a single day.  I even heard some talking-heads say it was good news for the American people and a "sign" that maybe we have hit bottom and were making a rebound.

    Yeah right! (add sarcasm)

   To me looking at the DJIA as some sort of "barometer" is completely ridiculous.  That's like checking the oil level to see if I need to add more gas to the car.   It's the wrong measurement altogether, yet we look at it constantly.   Yes, if the DJIA were to go up on a fairly regular clip for a long period of time (say 6 months to a year) we might be able to say we have come out of the slump.   But the real measurement of how good an economy is doing is too look at your own wallet.  Are you will to spend more or less than you did last month.  Is your company telling you to hire or fire today?   Are the prices around you going up or down.  Those are the things you need to pay attention to tell yourselves if we are out of the mess yet.  

   We especially cannot trust the government to tell us we are out of the recession (or depression) yet, for they can't tell themselves either.  The numbers they quote us are often ficticious and have no real facts behind them.  Take for example: inflation.   Every 3 months, the commerce department rolls out their numbers of: Employment, GDP, Imports vs Exports and CPI (Consumer Price Index).  It's the CPI that tells us whether prices are going up or down for the "average" American.      The measure of inflation is an important figure.  It tells us if our pay is allowing us to keep up with the Jones's or falling behind.  For the past several years we have been told that inflation has been kept "in check" and is between 3% and 4% annually.  We like gullible schmucks accept this value as gospel and go on our pathetic lives.  I also used to believe it myself, but now I don't anymore.    Mostly because I recently compared how much we paid for things in our home budget for basic things like water,  gas, electricity, cable,  insurance and other services.  I found that we were paying on average 10.3% more for these things.   So how could the government say inflation was 3.4%?     After some research I found out some interesting facts about how the CPI is computed. 

List? .... What list?  We don't need no stinking list!
   You would think that the list of goods and services on the CPI would be a fixed list of basic living essentials for the average American.  But inflact the list is much more "fluid" han one would think.   Essentially the government can change the list when it feels it needs to.  For example, in the 70's when housing costs were going through the roof do to the high interest rates, housing was taken off the CPI list.   But  how in God's green earth, does one go about living in this great country of ours without housing.   The idea here is that the government goes into its calculation already with a figure in their minds as to what they want inflation to be.  Then based on that number, they massage the list to back their assertion up.  Of course they can't be too low from the actual value, but who is going to prove them wrong?  We all live in our own separate little worlds and just think that its just us that's paying more for everything and everyone else is paying less.

But it's better than what it was before!
   In the 1990's, under the Clinton administration, the government found a new way of tweaking the numbers by not changing the list at all.  They added a new feature that allowed the commerce department to "adjust" the costs and to to take into account improvements of quality.  For example, let's say you pay $20 per month for basic cable with 50 stations.  The next year, your selection gets moved up as "Basic-Plus" and you are now paying $30 per month for 100 stations.  The government could discount your cost of $30 by 50% since now you are getting twice the number of channels (so in effect you are paying $15).  Also, if the cable station now offers a "Basic" cable package of 20 stations (which nobody wants) for $21, the government could use THAT number for the cost of cable and say it only went up by 5% when infact it went up by 50% for you.
  
How much do you use?
   Finally another factor comes into play when factoring the CPI. Its called: Average Consumption.  For example, when gas prices were going over $4.00 per gallon this past year.  One would think the inflation of gas would surely have caused inflation to jump sky high.  But infact it did not.  The reason for this is the government discounted the cost of gas based on some fudge-factors of how much the average American uses.  When prices jumped up, newer cars came on the market such as the Toyote Prius which claims 60mpg.  So if the average American car was said to get 20mpg and now with the Prius we can get 60mpg, the average use of gas goes down by a 1/3 making it appear that we are paying less at the pump and not more.

   All of these factors play into CPI calculation and make it a totally meaningless number.

   But why would the government lie to us?  (I laught at even writing this).  2 reasons:

Keeps the cost of current government programs artificially low.
Since most federal programs have built into them Cost-of-Living-Adjustments (COLA's), they can keep programs such as Welfare, Medicare, Medicaid and such from needing increases in spending.  Also, it keeps most federal employees from needing pay raises since most of them also benefit from COLA's as well.  Now some would say: "I thought government liked to spend more money?"   The answer to that is: No, only like to spend more money if more power comes with it.  Its not about having a bigger budget, its about having more programs and more government minians under you doing your bidding.  By keeping the current programs spending in check, they can argue that all the new money coming in can be spent on NEW programs.   If inflation were allowed to be calculated accurately, the COLA's would suck in all the new money and leave Congress with zero money to play with.

Keeps interest rates low and more money being fed to the government.
   The only lever the Federal Reserve has to lower inflation is to RAISE the Prime-Interest-Rate. The PIR is the rate at with the FR loans money to bank.   To cool the economy and bring down inflation, the FR raises the rate, slowing the economy and in the end keeps inflation in check.  But less money flowing in the economy means less money for the Federal government.  Everytime money is transacted, our government gets a peice of it.  Slowing the economy is the last thing they want too see done as it hurts THEM more than it hurts US. No one hates a recession more than Congress does but not for the same reasons as we do.  For them, it's less money to play with and less power.  For us, it's less food on the table and less gas in our cars.  We need to realize that government had a BIG hand in this latest bubble.  By keeping the economy "humming" ("grinding" would be a better word) they could expand government programs to unbelievable levels and keep their government jobs.  

    So the next time someone (especially if it's a congressmen) tells you inflation is 3 or 4%, just laugh hysterically.  Then when they ask you why you are laughing you can tell them.  Maybe then we will start getting some truth from our goverment.

   A few days ago the Dow-Jones went up by steeply by over 400 points in a single day.  I even heard some talking-heads say it was good news for the American people and a "sign" that maybe we have hit bottom and were making a rebound.

    Yeah right! (add sarcasm)

   To me looking at the DJIA as some sort of "barometer" is completely ridiculous.  That's like checking the oil level to see if I need to add more gas to the car.   It's the wrong measurement altogether, yet we look at it constantly.   Yes, if the DJIA were to go up on a fairly regular clip for a long period of time (say 6 months to a year) we might be able to say we have come out of the slump.   But the real measurement of how good an economy is doing is too look at your own wallet.  Are you will to spend more or less than you did last month.  Is your company telling you to hire or fire today?   Are the prices around you going up or down.  Those are the things you need to pay attention to tell yourselves if we are out of the mess yet.  

   We especially cannot trust the government to tell us we are out of the recession (or depression) yet, for they can't tell themselves either.  The numbers they quote us are often ficticious and have no real facts behind them.  Take for example: inflation.   Every 3 months, the commerce department rolls out their numbers of: Employment, GDP, Imports vs Exports and CPI (Consumer Price Index).  It's the CPI that tells us whether prices are going up or down for the "average" American.      The measure of inflation is an important figure.  It tells us if our pay is allowing us to keep up with the Jones's or falling behind.  For the past several years we have been told that inflation has been kept "in check" and is between 3% and 4% annually.  We like gullible schmucks accept this value as gospel and go on our pathetic lives.  I also used to believe it myself, but now I don't anymore.    Mostly because I recently compared how much we paid for things in our home budget for basic things like water,  gas, electricity, cable,  insurance and other services.  I found that we were paying on average 10.3% more for these things.   So how could the government say inflation was 3.4%?     After some research I found out some interesting facts about how the CPI is computed. 

List? .... What list?  We don't need no stinking list!
   You would think that the list of goods and services on the CPI would be a fixed list of basic living essentials for the average American.  But inflact the list is much more "fluid" han one would think.   Essentially the government can change the list when it feels it needs to.  For example, in the 70's when housing costs were going through the roof do to the high interest rates, housing was taken off the CPI list.   But  how in God's green earth, does one go about living in this great country of ours without housing.   The idea here is that the government goes into its calculation already with a figure in their minds as to what they want inflation to be.  Then based on that number, they massage the list to back their assertion up.  Of course they can't be too low from the actual value, but who is going to prove them wrong?  We all live in our own separate little worlds and just think that its just us that's paying more for everything and everyone else is paying less.

But it's better than what it was before!
   In the 1990's, under the Clinton administration, the government found a new way of tweaking the numbers by not changing the list at all.  They added a new feature that allowed the commerce department to "adjust" the costs and to to take into account improvements of quality.  For example, let's say you pay $20 per month for basic cable with 50 stations.  The next year, your selection gets moved up as "Basic-Plus" and you are now paying $30 per month for 100 stations.  The government could discount your cost of $30 by 50% since now you are getting twice the number of channels (so in effect you are paying $15).  Also, if the cable station now offers a "Basic" cable package of 20 stations (which nobody wants) for $21, the government could use THAT number for the cost of cable and say it only went up by 5% when infact it went up by 50% for you.
  
How much do you use?
   Finally another factor comes into play when factoring the CPI. Its called: Average Consumption.  For example, when gas prices were going over $4.00 per gallon this past year.  One would think the inflation of gas would surely have caused inflation to jump sky high.  But infact it did not.  The reason for this is the government discounted the cost of gas based on some fudge-factors of how much the average American uses.  When prices jumped up, newer cars came on the market such as the Toyote Prius which claims 60mpg.  So if the average American car was said to get 20mpg and now with the Prius we can get 60mpg, the average use of gas goes down by a 1/3 making it appear that we are paying less at the pump and not more.

   All of these factors play into CPI calculation and make it a totally meaningless number.

   But why would the government lie to us?  (I laught at even writing this).  2 reasons:

Keeps the cost of current government programs artificially low.
Since most federal programs have built into them Cost-of-Living-Adjustments (COLA's), they can keep programs such as Welfare, Medicare, Medicaid and such from needing increases in spending.  Also, it keeps most federal employees from needing pay raises since most of them also benefit from COLA's as well.  Now some would say: "I thought government liked to spend more money?"   The answer to that is: No, only like to spend more money if more power comes with it.  Its not about having a bigger budget, its about having more programs and more government minians under you doing your bidding.  By keeping the current programs spending in check, they can argue that all the new money coming in can be spent on NEW programs.   If inflation were allowed to be calculated accurately, the COLA's would suck in all the new money and leave Congress with zero money to play with.

Keeps interest rates low and more money being fed to the government.
   The only lever the Federal Reserve has to lower inflation is to RAISE the Prime-Interest-Rate. The PIR is the rate at with the FR loans money to bank.   To cool the economy and bring down inflation, the FR raises the rate, slowing the economy and in the end keeps inflation in check.  But less money flowing in the economy means less money for the Federal government.  Everytime money is transacted, our government gets a peice of it.  Slowing the economy is the last thing they want too see done as it hurts THEM more than it hurts US. No one hates a recession more than Congress does but not for the same reasons as we do.  For them, it's less money to play with and less power.  For us, it's less food on the table and less gas in our cars.  We need to realize that government had a BIG hand in this latest bubble.  By keeping the economy "humming" ("grinding" would be a better word) they could expand government programs to unbelievable levels and keep their government jobs.  

    So the next time someone (especially if it's a congressmen) tells you inflation is 3 or 4%, just laugh hysterically.  Then when they ask you why you are laughing you can tell them.  Maybe then we will start getting some truth from our goverment.

    I think we need to have all of our Senators and Congressmen take a Constitution refresher course at a local Junior College because it seems to me they need it.   With congress's recent passing of the bill to tax the AIG management with a 90% AMT (Alternative Minimum Tax... if you are an AIG upper management working between the dates of January 22nd and today who got a bonus of greater than $100K).  We need to tell congress to back off and admit that THEY were the ones who made the mistake of passing the stimulus bill in record time without reading it (the Constitution is another piece of legislation they have no time to read either apparently).  Now they are essentially having "Buyer's Remorse" and want to take back the money.   That is the only reason they are doing this.  They want to be able to say at their next election that they did the most they could to get the money back.  But I believe they will be digging themselves into a deeper hole due to the un-constitutionality of the bill (it specifically says that no law passed by Congress can target a specific person or group).   If they can go after this group, what is to stop them from going after CEO's from any corporation? 

   Now I am not saying that I like these so-called retention bonuses.  To me, they seem ridiculous.  But that is life in the real world.  Most likely now that it has come to light, corporations will feel public pressure to get rid of these kinds of contracts.  But that pressure should not be coming from our elected officials as they are just as "Arrogant Incompetent Greedy" as the people they are trying to regulate. 

     A famous line from the movie, "The Wizard of Oz" is near the end when Toto the dog is pulling back the curtain and exposing the fraudulent "wizard" and the Oz informs the others "Don't pay attention to the man behind the curtain".   That is what is happening to us today.  As Obama's poll numbers fall with the economy, the media is now telling us to focus on things like:

    - Obama's choices for the NCAA tournament
    - Obama's appearance with Jay Leno
    - Obama's bad selection of words (special olympics)

    These things are only distractions from the real question we want to know the answer to:  "Who took out the provision to stop AIG from giving bailout money as bonuses?".  

    The American people need to know the answer.  We were promised "transparency" in the White House, but that is not we are being given.  So until someone falls on their sword, we all need to assume it came from Obama himself and an investigation is fully deserved.  But as usual, all of Washington is acting dumb (some say they are not "acting") and pretending it just mysteriously vanished from the bill.  I, for one, am not going to stop writing my congressman and senators until we get an answer and I hope you will too.

    First let me give credit where credit is due.  I was listening to Glenn Beck this morning on the web and heard him discuss the whole mess with the AIG contracts and bonuses.   I found his view to enlightening in a way I never thought about before.   Essentially we as Americans are being used by our politicians to form an "angry mob" against the rich and powerful (if there is one thing our rich and powerful politicians hate more is having to share the stage with rich and powerful business people).  While I may be angry at my tax dollars going to pay so-called "retention" bonuses to people "leaving" these companies, I must take a step back and look at the bigger picture here.  The fact is that these companies had "contracts" with these employees that must be honored no matter how ridiculous it might seem.  Contracts by themselves are nothing more than paper by which 2 parties have made an agreement.  It is the job of our government to make sure that ALL contracts are honored and enforced otherwise they are completely meaningless.  Glenn goes on later to show another example where law must trump our feelings.  He uses the analogy of double-jeopardy which prevents a person from being tried over and over again for the same crime.  Even though we may find out later a person was indeed guilty, we cannot let our anger trump the rule of law otherwise we are all doomed.  

    What our politicians are really doing here is using the mob as pawns to do their biddening.  Do you think for a moment they are REALLY angry at these AIG heads getting bonuses for doing a lousy job?  Our politicians do a lousy job all the time and they get paid for it as well (along with all the perks that goes with the job like jumkets to France and Sweden).  Absolutely not!  They are merely using the situation (that they were fully aware of when the passed the stimulus bill) to increase their power to further trample the Constitution under foot.  Contract laws? What's that?   Double-jeopardy?  What's that?   Habeas-Corpus?  What's that?   Freedom of the Press? What's that?   Freedom of Religion?  What's that?

    We need to wake up and realize we are being suckered into this.  We need to focus our outrage at our politicians who wrote up and passed the stimulus plan.   They are the real scoundrals in this morality play and not AIG.

      Lately I have been feeling a bit like "Neo" in the movie "The Matrix".  If you have seen this movie you will understand what I mean by waking up and realizing the fake reality I have been living and not knowing.  For those of you who have not seen the movie I highly recommend watching it (even though it can be violent at times). In the movie, the main character Neo (played by Keanu Reeves) is enlightened by Morpheus about the Matrix. Neo always felt something was not right about the world he was living in and soon he finds out that he and millions of other people are living out their lives in a computer-generated-reality run by machines who only want them for the electricity their brains generate.

     Last week I was blown away by some videos on You-Tube by an economist by the name of Peter Schiff. Peter was the first in 2006 to predict the huge downturn in the economy and the implosion of the housing bubble. He was laughed at by many of the talking-heads on the cable news stations (including Neil Cavuto of Fox News who said that he must also believe in Santa Claus). Well look who is laughing now. In watching his videos, he explains how the "global economy" works and how we are set up for disaster since we contribute ZERO to his economy except for our IOU's (and our large appetite for goods and services). Peter discusses how our government is misleading us into thinking everything thing is okay when in actuality it's not. Take for example the Consumer Prices Index which is supposed to measure how much prices are inflating in our country. One would assume that the list of goods and services on that list would be fixed. But in "reality" they are not. The government continually puts things on the list and takes things off the list to "adjust" the inflation amount. For example, housing was taken off the list in the late 70's because it was going up too high and made the inflation value (whic has already double digits at the time) too high. This past year, they took the price of gas off the list since it was seen as "over priced". His assessment is that inflation may be 2 to 3 times what they report to us, but we like dupes just take whatever value they quote as the gospel truth. They also misquote the unemployment figures by only counting those who are actually looking for a job (many give up and just collect welfare). They also overlook a large number of self-employed people since they are technically not "laid-off" by anyone.

    Peter also brings to light that the "consumer economy" (an economy where we import more and more and export less and less) is NOT sustainable. He uses the analogy of 5 men stranded on a deserted island (1 American and 4 asians) would not stand for long where the American only "eats" and the other 4 hunt, fish and gather food. As China gets stronger and stronger, their need for us will get less and less. Their need for our "dollars" will grow smaller and smaller and therefore our dollars worth will become weaker and weaker. This will only cause us to spend more for our imports from China and cause rapid inflation. So much inflation, that our government will no longer be able to cover it up (just as Madoff could no longer cover up his Ponzi-scheme).

     Just as Neo woke up and found himself and millions of others being used by the matrix, we need to wake up from this government-induced "virtual-economy" and realize the government just wants us for our taxes (and our votes). We need to get our government , our laws, out factories, our schools and our standard-of-living "reset" to make us competitive with other countries. Yes there will be pain involved. Yes the government will try to disuade us and enlighten us with ideas that the "consumer-economy" is real and sustainable. They will tell us that its "patriotic to pay taxes" (Joe Biden has already said that). But we need resist the temptation to believe them and see the world as it really is.

    Let's face it.  The stimulus plan is just an excuse by our government to print some more money.  It's no better reason than "It's Monday!".  Our leaders really don't care HOW, WHY or BY WHOM it's spent, just that it IS spent.  By increasing the amount of money that's out there they can better cover their pet projects and the political supporters.   The real problem with our government spending is that we are spending this money on things that  have 0% return on investment.  Last time I looked, there were no "Stock and Bridge Mutual Funds" out there on Wall Street.  That is because these things only depreciate and deteriorate over time.  We can't export these to China to help pay off our debt, They only serve US and no one else. They will stimulate the economy for a very short period of time (like a shot of heroin) but in the long run they will only make our economy worse.

    I think that Obama or Geithner understand the real implications of all this spending down the road, but they are more interested in doing the expedient thing rather than the right thing.   Something other nations do understand.  Recently we tried to get Europe to increase their stimulus plans as well (I guess the idea here is that if we all jump up at once, gravity will cease to exist and we free ourselves from its ugly grasp.... NOT!)   They didn't buy into our plan and told us we need to get our economy back on firmer footing instead.

   The problem is, we don't have an TRUE economy.  We export 800 Billion dollars every year to other nations and have stopped being a producer-economy.  We have convinced ourselves that this "consumer" economy is sustainable, when in fact it cannot.  Eventually the other countries will grow tired of funding our lavish lifestyles and our high-standard-of-living while they live in poverty.  They will stop lending us money to fund our bad loans which will force us to print more money that is not backed.  This will only cause our dollar to drop in value on the world market and cause us to pay MUCH MUCH more for our imports and cause massive inflation.  Then our government will have to stop lying to us as they will not be able to cover up its fraudulent reporting of inflation, just as Madoff could not cover up his Ponzi-scheme anymore.

   Imagine for yourselves 2 companies A and C (I will let you guess what "C" stands for).  Lets say the A and C do business and C sells a lot more goods to A than A does to C.  Company A needs money and convinces C to invest in it.  So C sends a TRILLION dollars to A and A goes to Las Vegas and bets it all at the craps table (and loses).  The money isn't gone. Its somewhere out there in the economy, but it cannot be repaid back to C.  Now A comes back later and asks for another loan from C.  C is no fool and so does 2 things to insure they get there money back

1) Charges a HIGHER interest rate for their money (causing A's total debt to go through the roof)
2) Charges more money for every product it sells to A (devalues its dollar).

     That is exactly what is going to happen here in our country.  We wasted TRILLIONS of dollars that we are never going to repay.  That means we have more dollars floating around in our economy than what we are good for.  These extra dollars are going to cause us to pay more everything we import from other countries and lead to massive inflation.  Also because we don't save as Americans, we will have to rely on higher interest rates from abroad forcing our economy to sink even lower.

   Until we change our ways and become a producing economy again we are going to lose.  We will need to lower our standard of living to be more inline with other countries.   We are going to have to overhaul our education systems, our factories, our laws and our government.  We will need to re-invent ourselves as a nation.   Maybe it wll take another Great Depression to wake this sleeping giant from its credit-induced-stuper.

   We are burning through cash faster than a California forest fire burns through homes.   Every time we turn on the TV we see companies crying like little babies asking for more bailout money and we like idiotic teenage parents give them whatever they want just to shut them up.   When will this all end?  

    I just got done viewing some interesting videos on YouTube showing Peter Shiff ( President of Euro Pacific Group) predicting this mess back in 2006!  (and even earlier video in 2000 has him saying almost the same things).  His assessment is astounding and frightening at the same time.  He shows that our current mess is only going to get worse as this "phony economy"  (his words... not mine) will eventually implode as other countries begin to realize that our money is no good any more since we don't produce anything anymore to back it up.  That is the real problem with our CONSUMER based economy.  We don't PRODUCE anything anymore.   We just take the money and spend on lavish lifestyles and we don't build factories and produce products anymore.  

   We need to wise up and listen to what this guy is saying because he was 100% correct several years ago.   We need to allow this recession to do its work and bring us back down to reality and allow a REAL economy to immerge.   But apparently all the "smart" people in Washington (our president included) think that they can SPEND their way out of this mess, which is exactly what got us here in the first place.   It was as I wrote several months ago, that recessions are needed and natural and trying to avoid them is bad. They are needed because they weed out the bad companies, bad CEO's, bad investments and overall bad ideas from our society and allow the good ones to flourish just as nature does.

   Well I haven't done my taxes yet this year (it's a little later than usual for me).  Not that I am worried about needing to send more money to the feds this year (I adjusted my W4 last year so I should be OK), it's just the whole process that pains me.  Getting out all the documents, installing the software (TurboTax) and spending 3-4 hours in front of my computer agonizing over every question asked by the writers of tool.   Then when its all done, agonize over whether I had done everything correct and did my submission actually get recorded at the IRS.  UGH!  Just thinking about it makes my blood pressure go up!  

   This past election, a lot of attention was given to the whole issue of paying taxes.  Whose rich and whose not.  Who pays what and who pays nothing.   A lot of statistics where presented to the voters for our consideration.   For example, the top 5% of earners in America pay 50% of ALL the taxes to the IRS and 40% of all working Americans pay NOTHING.   WOW! Those are some glaring statistics I had never heard of before.  What it means is that 5% of all Americans have a large stake in their government and 40% have no stake whatsoever (its all free money to them).   To me this is nothing more than class warfare at its worst.  On one side we say, "Try as hard as you can to be a success", but then when you become a success its "How dare you be a success! You must have stepped on a lot of little people to get here!  Time to pay up!"

    Another statistic I found interesting was that the current tax code is 16,000 pages of small type.  Too many of us think the tax code is the 100 page 1040 Form document we get around January in the mail.  But in reality that is only represents about  0.01% of the actual code.    The rest of the tax code is full of "special interest exceptions" and "loop-holes" and other sections only a tax lawyer would come to love. Isn't it time to rid ourselves of this "shackle" of our society?   Isn't it time for a FAIR tax?   A tax that cannot be "loop-holed"?   A tax that gives everyone in America a stake in their government?    A tax that will make our businesses more competitive and more efficient?   I say it is!  

   I know I am not the first to suggest a 1% Federal Sales Tax and I know I will not be the last.  But we need to keep up the dialogue on this idea until we get heard for there are so MANY benefits to this change.  Let me discuss a few of them here

Makes EVERYONE have a stake in their government
    Like I mentioned earlier, 40% pay no tax to the IRS.   To them, government waste is a non-issue. Why should they care?  It's not their money.  They didn't pay anything to the Feds.   We often talk about the apathy in our voters and the low voter turnout every November.  To me that is only a symptom of the real disease that plagues our nation.  40% feel its not their government and what happens in Washington does not impact them very much.  That leaves the other 5% who have a LOT a stake in the government and because they have such a large stake pay MILLIONS in dollars to lobbyists and political-action-committees to insure that if they are going to be plunking down BILLIONS in taxes, they better get their money's worth!    

Frees up business (especially small business)
    Its been said that our country is built on small business as they employ the largest percentage of our country.  These business all spend a larger percentage of their revenue to make sure they are paying as little in taxes to the IRS by paying very expensive tax lawyers and accountants to find every deduction and exception possible.   Not that I have anything against lawyers, I would rather employ 10 real workers and than 1 over paid , white-collar criminal (I mean lawyer).  Having a federal sales tax would free up businesses from these oppressive opportunistic leeches.  How much do I pay to government?  Simple.  1% of all sales you made.  Move the decimal point 2 places to the left and pay that amount.  No more keeping track of depreciation, time spent traveling, mileage, etc.. etc.. etc..  Just think of how much money across our country that will be saved and freed up to spend on hiring more workers or purchase more goods.  We can even start taxing internet businesses (why should they be exempt?) and bring in money from abroad as well (after all, we invented the Internet, shouldn't we reap its benefits as well?)   Also, by not having to over-pay our workers to cover their taxes to the IRS, businesses can actually pay less for their workers and be more competitive with other countries.  
 
Frees up everyday Americans to invest.
    Ask your average American why (besides risk) they don't invest in the stock market and they answer will undoubtedly be "I don't need the extra stress of figuring out my taxes on April 15th!"    I am not lying when I say this is MY biggest problem  with investments.  Unlike CD's, Money Markets where I get a simple 1099-INT at that end of the year, stocks and bonds require me to keep track of a lot more information than I care to.  When did I buy?  When did I sell?  What price did I buy?  What price did I sell?  Was it a tax-exempt-bond?  Also, I have to then pay quarterly taxes to insure that the government gets its money ASAP!   UGH!   Who needs it!   It explains also the explosion in tax-shelters that have come about in recent years.  IRS's, Roth-IRA"s, Education-IRA's,  VUL's, 529's, 401K, 403B's etc. etc..   Just more accounts the government allows us to have, all of which were lobbied heavily by investment houses like Merryll-Lynch
With the 1% Fed Sales Tax, all this goes away over night.  There is no need for it!  Who cares if the government takes 1% of my earnings?  If my investments earn a return of 10% before tax, then after tax they have still earned 9.99%.   The taxes can also be collected by the investment houses themselves thereby simplifying our lives even more.  No records to keep.  No Tax accountants to pay. 

Government can still use the tax to encourage societal change.
    One concern people have with such a simple tax, that government will no longer have the ability to encourage society to be in ways they perceive as beneficial to all of us.  Whether its the environment or giving to charities we see these as things we want to promote. But the sales tax can still be used by the government to encourage people in our country to act in certain ways.  For example, if they want to encourage people to use electric vehicles, they can give that company a No-Sales-Tax exemption card that would allow them to sell their product with no sales tax.  If congress wants to help the extreme poor or charities, they can still handout "rebates" or "exemption cards".  They can also make sure that things like food and other necessities are not taxed just like the states do already.  They can also "sin-tax" certain activities more such as smoking or maybe even certain kinds of non-productive investments such as "short-selling-stocks".  

Fair to all
    What angers me most about paying my taxes is know that somewhere out there, there is someone who is NOT paying their fair share.  Either by using loop-holes or just plain not paying them.  Who was not angered this past month as the President paraded appointment after appointment for White House positions that did not pay all of their taxes to the Feds.  Had they not been nominated, they would have gotten away with 100's of thousands of dollars of fraud to the IRS.  Do we really think the IRS is their reviewing every 1040 sent their way?  Get real here!   We all know they can only check a fraction of a percent our returns and many play the game of  Catch-Me-If-You-Can.   With the Fed Sales tax NO ONE GETS AWAY WITH ANYTHING.   Buy a yacht?  Pay the tax.  Buy a new Mercedes?  Pay the tax.   Buy second home? Pay the tax.  Make a killing on the stock market? Pay the tax.  No exceptions!  No rule breakers!  No cheats!  

Frees up our government to do what its supposed to do.... Govern!
    Instead of spending weeks, months, years endlessly arguing over where to put the line of who is rich and who is not.   Instead of wasting time re-writing outdated tax code to keep it "current",   our lawmakers can spend their time with more important matters such as how to improve our schools, hospitals or inner-cities.   

Free the Workers of America!
    Can you imagine the psychological impact across our great country when the sales tax is initiated and the income-tax is removed?  Can you imagine as people across the nation have 20,30,40% more in their bank accounts every week?   It would have the same impact as the Emancipation Proclamation had on the slaves in the 1860's !!!   Freed from the tirrany of their oppressors they would be enabled to live as truly free people.  To spend, save, invest as THEY want and not as the GOVERNMENT wants!!   It moves the government to the back of the line instead of the front of the line.  It insures that our leaders don't get a penny more from us and our economy unless our economy is actually PRODUCING something (an issue I know drives most of our congressman no nothing about!).     

  

   
    Obama recently told the press that he plans to cut the deficit by reducing our military.  I guess this is what he meant when he mentioned in his acceptance speech to the Democratic National Convention, that we was going to go through the federal budget "line by line and cut those programs which do not work anymore".  So in Obama's eyes since the military is an out-dated and unnecessary part of the federal government (we can negotiate any problems we have with other countries), then it should be the first to go.   But does that make sense in economy we are trying so desperately to stimulate?  We are essentially "laying-off" hundreds of thousands of federal employees and people who depend on the the military when we cut the military spending.  These cuts affect:

1. The soldiers we lay off (they now beccome part of the un-employed ranks)
2. Companies like: Boeing, GM, Ford, Raytheon that supply equipment for our forces
3. Communities that depend on military bases and selling goods and services to our military personnel.

    All of these will be adversely affected by these cuts and further hurt an already damaged economy.  At the same time we as a country will be left weaker in the world and unable to address the problems that are sure to come when this "Global Economy" goes belly up.  What will we do when Mexico falls apart (note. I didn't say IF, but I say WHEN because it is a certainty).   Who will be there to protect our border states from the sudden influx of people flowing over in large waves?   Who will protect us when the Mexican drug cartels start moving over here to run their business from our side of the border (and they will).   Who will protect us when Iran finally gets their "bomb" and lays plans to use it?   Who will protect ou interests in the pacific when China decides its time to "annex" a few more countries?  Who will be there to stop Russia from re-aquainting itself with Eastern Europe? WHO!

   To me this idea is completely absurd and without 5 minutes of thought.  It shows a nieve president who is utterly unprepared for the job.  President Obama should leave his "Oh what a wonderful world it would be if..." ideology with the Harvard professor types that sit in the leather chairs and who do not live in the real world.  The real world needs a strong military and we don't get one by cutting our spending on them.

   Let's, for  a moment, pretend that the FDR New-Deal actually helped America get out of the Great Depression when in fact most economists will tell you it actually prolonged the depression by depriving the private sector of the one resource they all need: MONEY! Now here we are trying to re-create the FDR New-Deal again in 2009 to prevent our country from entering another depression.  The main problem that I see in using the same 1930's solution  here in 2009 is just that this is NOT 1930 America (which interesting enough Obama chides his opponents about using old outdated answers to the problems we face today) .   We are not the same country we were back then.  I believe our country has changed so much that using a New-Deal like approach will be largely ineffectual. 

    Back in the 1930's, America was still mostly a rural nation.  A nation of hardworking farmers and store owners.  It was a nation that still had a strong religious and work-minded view of the world.  You could count on money being used wisely and only if you needed it.  I remember watching the movie "Cinderella Man" in which the main character, Ray Bradock gives back money to the welfare department when he gets back on his fighting feet.  Would we see this same attitude today?  I really doubt it.  The people of the 30's were accustomed to standing on their own feet and they took pride in doing that.  Today however the scene has changed much.  Today we have a generation of "what's in it for me" and "what can government do for me?".   We have become a lazy nation, waiting for our next handout.
 
    Now with the stimulus plan looking to drop nearly a TRILLION dollars of money in the publics lap, do you think it will be used efficiently and wisely?  And what about the money Obama is pledging to allow people to keep THEIR homes (actually its not THEIR home, its the banks).    Do you think that only people who really need it will be lining up for the bailout? No.  Instead, we will see person after person getting money who does not deserve it.  We will see executives giving themselves outrageous bonus and payoffs.  Money will be wasted left and right and we will be left poorer and poorer, paying for this program for years to come.

Have you seen the commercial that says: "If firemen ran the government" and it shows them efficiently going through a budget vote in a matter of seconds using their walkie-talkies?  They quickly get things done and the leader says basically, "What an easy job".  With that thought in mind...

Below is a list of companies have laid off in recent days
Microsoft - 5,000
Intel - 5,000
Time-Warner - 800
Disney - 600
Harley-Davidson -1,100
Deere & Co. - 662
Boeing - 5,300
General Electric -1,000
Motorola -4,000
Merrill Lynch.Charles Schwab,Berkshire Hathaway, Bank of America - 35,000 jobs cut! 
Procter & Gamble, 3M, Dow Chemical, Caterpillar - 11,000 jobs cut!
Johnson Controls, Alcoa - 13,500 jobs cut!
United States Steel - 4, 225
Walgreens / Eaton - 5, 609
Hertz Global Holdings - 4,000

All of these companies have seen serious drops in revenues in recent days and to keep themselves solvent they have done the only thing they CAN do and that is CUT their expenses.  They could have gone out and tried to procure loans to keep afloat, but that would hurt their future earnings because they would be crippled with interest payments.  Companies like these are always ready with a list of where they can cut and not effect their operations to much.  Projects that were borderline are now below budget and are cut.  Groups that were helpful but not necessary are reduced.   Expansion that is in the works is halted (the company I work for has a huge slab of concrete outside where our next building was supposed to be built but never was.  It has been there for about 8 years now).  That's how it works in the real world.

Now compare that with how things have functioned with our California state legislature.  Due to the bad economy the state is running a 42 Billion dollar deficit.  We have gone MONTHS without a budget being passed.  The democrats (who rule the state) can only see one way out of it.... increase taxes.  Well today they finally got what they wanted.  Now every person in the state will be paying 1% more for their items that they purchase.  They will also be increasing other fees in the state such as automobile registration.  (note: I just paid for my fishing license this year and its 41.00 instead of 35 it was last year).   The leader of the Senate said we should be PROUD we passed this budget and didn't have to layoff a single state employee (270,000 in total). 

Proud? Proud of what?

1. Proud that our leaders have no guts to make the necessary cuts?  
   
2. Proud that we have kept a bloated and dysfunctional state afloat?  
   
3. Proud that we are giving people more reason to move away from here? 
   
4. Proud that we are making our state one of the most costly to set up business in?  
   
5. Proud that you just sacked everyone in the state, including the unemployed, with more taxes? 
   
6. Proud that you our leaders kissed their union leaders A--es and did nothing?
   

Our legislature seems to think we have unlimited budgets like they do.  They think that by raising the sales tax that it will automatically increase their revenues.  Well if we did have unlimited income it would.  The problem is... we don't.   You tax us more, we spend less.  Its that simple.  Then were does your revenue come from?  (note: there is an alternative to spending less... its called buying online!)  And in our consumer-driven-economy, is that really what you want to do?  You want us to spend LESS?  That will only make things worse in the end and turn our recession into a depression.   You cannot tax your way out of a mess like this anymore than companies like Motorola or Intel or Caterpillar can get out of their problems by raising the cost of their products. 

If you (the state legislature) want to be PROUD.  Then be proud that you:

1. Stood up to your special interest bosses and told them to go to HELL
2. Stood up to your state workers (who work for you) and told them we don't need programs X, Y and Z
3. Didn't hurt the poor by laying on them more taxes (if you really did care about the poor)

Then you can say you can be PROUD!

    If you live in California (I have lived here for almost 20 years), you know how horrible the political system has become.  Our state government has become dis-functional at its most core level.  Here we are 2 months into 2009 and we are still trying to pass a 2008 budget.  We have a 42 Billion deficit and all most of our representatives want to do is raise taxes.  They want to raise our sales tax from 7.75% to 8.75% and raise our gas-tax by another 13 cents (we already have the highest gas in the country).  Our Governator, is doing little (if anything) to fight for the taxpayers and the labor unions are essentially running the government through the "puppets" which we elect to office. 

   Now they are complaining because they cannot convince ONE Republican to come over and vote for the budget and push it through.  All I can say is "ITS ABOUT TIME!"   It reminds me of the single Chinese man in 1989 who stood up to the tanks rolling down the streets of Beijing to put down the protestors in Tiananmen Square.  Who can forget that scene.   One man standing alone against those massive machines.  Moving to the left and to the right to stop their progression to the square and showing all of us that one person can make a difference.  Today, our Republican leaders are being pressured to push through another bad budget, which barely scratches the surface of cuts that need to be made.  The other side is well armed with money from special interest groups and unions and threatening to flatten our politicians in the elections if they dare get in their way.  And they should be scared, because the road to Sacramento is littered with the bodies of those in the past who have tried.  But we must not be moved.  We need to make a stand here and now! We need to show them that the voters matter more than money.  We cannot be scared into passing a budget.  The world will not end if we do not pass this budget.  Yes we may have to layoff some state workers.  Yes some agencies may have to close several days a month.  But the people of this state will continue to live and work as they have in the past (I frankly think they are more afraid of us finding out how LITTLE we need them and how very UNIMPORTANT they are). 

For now all I can say is...

THANK GOD FOR THAT ONE REPUBLICAN!!