12/30/07
A commercial that has been playing frequently on the radio of late is illustrative, as much advertising is, of where our country and national character is headed—straight into the toilet.
This particular annoying ad, for a drug company, features a man saying that he has “acid reflux.” His wife corrects him, telling he has “acid reflux (something or other) DISEASE.” Then the two of them yammer on about a particular drug’s copay’s being no higher than those of generics or other name brand drugs under their insurance plan.
I’m no doctor, and I make it a point to see one as rarely as possible. However, I am aware that what is now called “acid reflux” was for years called “heartburn.” It was not a DISEASE, as the shrewish wife featured on the commercial insists, but a minor inconvenience treated by, in increasing degrees of intensity, ignoring it until it went away, watching one’s diet, or taking Pepto-Bismol, Bromo-Seltzer, or, my favorite, Brisochi.
Why did we treat our heartburn with over the counter remedies, if we treated it at all, rather than calling our heartburn a “disease” and treating it with expensive drugs? I can think of several reasons. First, we had good sense. Second, we weren’t in the habit of being led around by the nose by advertising. Third, we didn’t have prepaid health plans that are laughingly called health “insurance.” But things have changed. Now, like the couple in the baleful radio commercial, we cower in fear at imagined “diseases” and whine like children at the mere prospect of having to interrupt our lascivious spending on trendy piffles in order to actually pay for some of our health care out of our own pocket.
This all serves the interests of the big government/big business cabal that has increasingly taken over our culture and our nation, turning the former into an open sewer and striving mightily, with much success, to turn national character into jelly. The drug companies obviously do very well selling us expensive drugs for which someone else pays. The insurance companies expand their business from traditional “insurance” into being a prepayer, at a big markup, for every necessity of life. The corporations in general think this is fine because they have a hook, health “insurance,” that keeps people in their jobs as corporate automatons rather than starting troublesome competing small businesses. And the citizenry becomes nice and pliable, begging “Please, don’t take my health ‘insurance’ away from me, or force me to make some of my own decisions. And whatever you do, don’t make me endure the unutterable sacrifice of not buying that latest bauble from China in order to actually meet some of my own responsibilities without passing them off to ‘someone else.’”
One can learn a lot from an inane commercial.
Sunday, December 30, 2007
ANOTHER ANNOYING AD
12/30/07
During the holidays, Visa or MasterCard (I can’t remember which; one might attribute my inability to recall to the ineffectiveness of the ad, but, given my failure to notice things, that probably is not the case.) incessantly ran an ad in which legions of young faux-prosperous people proceed, as if directed by some sort of guiding power, to various “cash” registers and present their form of payment, the ubiquitous piece of plastic that has, since it has found its way into many of the wrong hands, helped transform our society into the addle-brained consumption giant that it is. In the ad, some miscreant interrupts the process by actually paying in (Are you sitting down?) cash! Oh, the temerity! The whole process winds down; everyone frowns or otherwise expresses their disapproval of the rube who pays cash. What a fool!
When my brother-in-law, who has an attitude toward saving and spending that is much like mine, first pointed this ad, and how much he hated the message it delivers, out to me, I had a hard time sharing his outrage. Why? Because, initially, the ad was for a debit card, and stressed that it was for a debit card. I have no problem with debit cards (I also have no problems with credit cards as long as a balance is NEVER carried, but that is another issue.); using a debit card is far preferable to holding up a long line by writing a check in a busy store. Whenever this happens, I feel like telling the check writer “This is why they invented debit cards!”, but, like most people, I don’t. Perhaps there is a new year’s resolution here. But I digress.
The commercial then, some might say subtly, but not really, changed. The ad was no longer for a debit card, but for a MasterCARD or a Visa CARD. The “debit” was somehow dropped. So now I share my brother-in-law’s outrage, but not his surprise. The message of the newly debit-less ad is now clear: If you pay cash, you’re a chump. Put it on the card (Borrow from the Chinese, they may as well say, but I digress again, at least this time parenthetically.), get what you want, don’t even think of saving for it. Buy it now…pay, or, more likely, refinance your credit card balance, later. Delay gratification? Why do you hate America? Spend, spend, spend! Even, perhaps especially, when you can’t afford what you’re buying. Why, it’s the new America’s role in the world!
Great insight can be gained from a specious commercial.
During the holidays, Visa or MasterCard (I can’t remember which; one might attribute my inability to recall to the ineffectiveness of the ad, but, given my failure to notice things, that probably is not the case.) incessantly ran an ad in which legions of young faux-prosperous people proceed, as if directed by some sort of guiding power, to various “cash” registers and present their form of payment, the ubiquitous piece of plastic that has, since it has found its way into many of the wrong hands, helped transform our society into the addle-brained consumption giant that it is. In the ad, some miscreant interrupts the process by actually paying in (Are you sitting down?) cash! Oh, the temerity! The whole process winds down; everyone frowns or otherwise expresses their disapproval of the rube who pays cash. What a fool!
When my brother-in-law, who has an attitude toward saving and spending that is much like mine, first pointed this ad, and how much he hated the message it delivers, out to me, I had a hard time sharing his outrage. Why? Because, initially, the ad was for a debit card, and stressed that it was for a debit card. I have no problem with debit cards (I also have no problems with credit cards as long as a balance is NEVER carried, but that is another issue.); using a debit card is far preferable to holding up a long line by writing a check in a busy store. Whenever this happens, I feel like telling the check writer “This is why they invented debit cards!”, but, like most people, I don’t. Perhaps there is a new year’s resolution here. But I digress.
The commercial then, some might say subtly, but not really, changed. The ad was no longer for a debit card, but for a MasterCARD or a Visa CARD. The “debit” was somehow dropped. So now I share my brother-in-law’s outrage, but not his surprise. The message of the newly debit-less ad is now clear: If you pay cash, you’re a chump. Put it on the card (Borrow from the Chinese, they may as well say, but I digress again, at least this time parenthetically.), get what you want, don’t even think of saving for it. Buy it now…pay, or, more likely, refinance your credit card balance, later. Delay gratification? Why do you hate America? Spend, spend, spend! Even, perhaps especially, when you can’t afford what you’re buying. Why, it’s the new America’s role in the world!
Great insight can be gained from a specious commercial.
Saturday, December 29, 2007
TIDINGS OF COMFORT AND JOY
12/29/07
The Quinns spent the night of Christmas Eve in a Hyatt hotel. We normally wouldn’t stay at such a swanky place, but we got a great deal and the local Hampton Inn doesn’t have a pool. As is our Christmas morning tradition, we took a swim with the kids. In order to leave the pool, we had to walk through an adjoining workout facility.
I noticed a small sign in the workout facility telling fitness aficionados that Garmin Forerunner navigational devices were available at the front desk for guests who wished to take a run around the neighborhood. Hmm…
Here we were in a Hyatt, the type of place frequented by upscale, Wall Street types. That Hyatt was offering a navigational device to their guests who spent time in the fitness facility and who liked it run, a place and an activity also favored by young Wall Street wunderkinds. The first thought that came to my mind was that the Wall Street geniuses who revolutionized the mortgage market by carefully calibrating and controlling the risks of every tranche in the CDOs they created could not find their way back to their hotel (the most prominent building within long eyeshot, by the way) when jogging without the aid of a navigational device.
This “mortgage crisis” could turn out to be worse than even I thought!
The Quinns spent the night of Christmas Eve in a Hyatt hotel. We normally wouldn’t stay at such a swanky place, but we got a great deal and the local Hampton Inn doesn’t have a pool. As is our Christmas morning tradition, we took a swim with the kids. In order to leave the pool, we had to walk through an adjoining workout facility.
I noticed a small sign in the workout facility telling fitness aficionados that Garmin Forerunner navigational devices were available at the front desk for guests who wished to take a run around the neighborhood. Hmm…
Here we were in a Hyatt, the type of place frequented by upscale, Wall Street types. That Hyatt was offering a navigational device to their guests who spent time in the fitness facility and who liked it run, a place and an activity also favored by young Wall Street wunderkinds. The first thought that came to my mind was that the Wall Street geniuses who revolutionized the mortgage market by carefully calibrating and controlling the risks of every tranche in the CDOs they created could not find their way back to their hotel (the most prominent building within long eyeshot, by the way) when jogging without the aid of a navigational device.
This “mortgage crisis” could turn out to be worse than even I thought!
Friday, December 21, 2007
KEEP ON DANCIN’
12/21/07
The Commerce Department reported this morning that consumer spending was up 1.1% in November, much more than expected, while consumer income was up 0.4%, a little less than expected. The market loved this news; at this writing, the Dow is up over 200 points.
One can make nothing out of either one statistic (or a conjoined pair of statistics) or one day’s trading, but this news, and the markets’ seeming reaction to it, provides an opportunity to consider broader issues.
What is described as the sub-prime problem (or the sub-prime “crisis” by those who lack the senses of proportion, decorum, or perspective) is, as I have pointed out for a long time, just part of a larger debt problem that has at its root the self-destructive American pastime of spending more than one can afford, indeed, more than one makes or has. So why is news that we continue to spend more than we make (Note that spending exceeded income by a factor of almost three.) such good news?
The “experts” (i.e., the same people who told us this “mortgage blip” was well under control, really not a problem at all; they had talked to the guys at the big Street firms about this, you know) tell us that this spending news will enable us to avoid recession, at least for awhile. Oh, boy!
November’s spending binge reminds one of one last gasp before the party comes to an end. It’s as if a couple guys went out at 2:00 AM with the last few bucks everyone could scrape together and bought a couple cases of Meister Brau to keep things going long after everyone should have gone home. The consequences are at best predictable and at worst fatal.
So party away, everyone…people continue to spend beyond their means! Hey, and Bernanke will show up in the morning with plenty of Bromo-Seltzer, Pepto-Bismol, vitamins and other placeboes that we really think can make us feel better.
And the hole gets deeper and deeper.
The Commerce Department reported this morning that consumer spending was up 1.1% in November, much more than expected, while consumer income was up 0.4%, a little less than expected. The market loved this news; at this writing, the Dow is up over 200 points.
One can make nothing out of either one statistic (or a conjoined pair of statistics) or one day’s trading, but this news, and the markets’ seeming reaction to it, provides an opportunity to consider broader issues.
What is described as the sub-prime problem (or the sub-prime “crisis” by those who lack the senses of proportion, decorum, or perspective) is, as I have pointed out for a long time, just part of a larger debt problem that has at its root the self-destructive American pastime of spending more than one can afford, indeed, more than one makes or has. So why is news that we continue to spend more than we make (Note that spending exceeded income by a factor of almost three.) such good news?
The “experts” (i.e., the same people who told us this “mortgage blip” was well under control, really not a problem at all; they had talked to the guys at the big Street firms about this, you know) tell us that this spending news will enable us to avoid recession, at least for awhile. Oh, boy!
November’s spending binge reminds one of one last gasp before the party comes to an end. It’s as if a couple guys went out at 2:00 AM with the last few bucks everyone could scrape together and bought a couple cases of Meister Brau to keep things going long after everyone should have gone home. The consequences are at best predictable and at worst fatal.
So party away, everyone…people continue to spend beyond their means! Hey, and Bernanke will show up in the morning with plenty of Bromo-Seltzer, Pepto-Bismol, vitamins and other placeboes that we really think can make us feel better.
And the hole gets deeper and deeper.
Thursday, December 20, 2007
THE FRENCH ARE MAKING US LOOK LIKE SLACKERS!!!
12/20/07
Yesterday, ECB President Jean-Claude Trichet dismissed calls for rate cuts in Euroland, stating “We have to do our job, and our job is to deliver price stability.” At least one central bank president has a clear sense of what he was hired to do.
Meanwhile, back in this country, Obsequious Ben has rolled out stimulus plan after stimulus plan, testifying to his willingness, indeed his eagerness, to fan the fires of inflation and tank the dollar in order to get into the good graces of Wall Street. When none of those schemes worked, earlier in the week he trotted out some half-hindquartered regulatory regimen designed to make it more difficult to make sub-prime loans. This action is, of course, completely extraneous: how many people are out there right now hustling sub-prime loans? The market has at least begun to address this problem. But this latest regulatory abomination does serve Obsequious Ben’s purposes well: it shows that he is “doing something” for his pals on Wall Street while having little impact on whatever designs the financial finaglers might have on the sub-prime market.
Obsequious Ben’s latest actions also serve another purpose: Any of you who harbored the ingenuous notion that we have a free market Fed Chairman ought to be completely disabused of such an idea by now.
While the President must be born in the United States, the Constitution says nothing about the birthplace of the Fed chairman. The Constitution also says nothing about the Fed—how about that? But that is another conversation. We as a nation have also shown a tremendous acuity for importing great talent, whether in engineering, finance, entertainment, medicine, or athletics. Do you suppose we could somehow lure a diligent Frenchman over here to run our central bank?
Yesterday, ECB President Jean-Claude Trichet dismissed calls for rate cuts in Euroland, stating “We have to do our job, and our job is to deliver price stability.” At least one central bank president has a clear sense of what he was hired to do.
Meanwhile, back in this country, Obsequious Ben has rolled out stimulus plan after stimulus plan, testifying to his willingness, indeed his eagerness, to fan the fires of inflation and tank the dollar in order to get into the good graces of Wall Street. When none of those schemes worked, earlier in the week he trotted out some half-hindquartered regulatory regimen designed to make it more difficult to make sub-prime loans. This action is, of course, completely extraneous: how many people are out there right now hustling sub-prime loans? The market has at least begun to address this problem. But this latest regulatory abomination does serve Obsequious Ben’s purposes well: it shows that he is “doing something” for his pals on Wall Street while having little impact on whatever designs the financial finaglers might have on the sub-prime market.
Obsequious Ben’s latest actions also serve another purpose: Any of you who harbored the ingenuous notion that we have a free market Fed Chairman ought to be completely disabused of such an idea by now.
While the President must be born in the United States, the Constitution says nothing about the birthplace of the Fed chairman. The Constitution also says nothing about the Fed—how about that? But that is another conversation. We as a nation have also shown a tremendous acuity for importing great talent, whether in engineering, finance, entertainment, medicine, or athletics. Do you suppose we could somehow lure a diligent Frenchman over here to run our central bank?
Sunday, December 16, 2007
MAYBE IT WASN’T SUCH A BAD BET AFTER ALL
12/16/07
I sent the following letter to Steve Chapman of the Chicago Tribune in response to his 12/16/07 column on various Democratic schemes to bail lenders out of mortgage loans they can no longer afford. As I have said in the past, Steve is, in my opinion, one of the best, if not the best, political/economic columnist in the country today. Not only does he share my libertarian outlook, he also writes effectively, argues cogently, and defies predictability:
Steve Chapman
Chicago Tribune
435 N. Michigan Avenue
Chicago, IL 60611
schapman@tribune.com
12/16/07
Steve,
You argue in your 12/16/07 column that the Democrats are “having a rollicking good time…doing noble deeds with other people’s money” by cooking ups schemes to fleece the lenders in order to bail out irresponsible lenders. Your description of the situation is deficient only in that it fails to capture the entire scope and audacity of this latest effort by politicians to use other people’s money in order to aid a favored constituency or to be perceived as “doing something.”
The Center for American Progress, a liberal think tank, has proposed creating a new government agency, the Family Foreclosure Rescue Corp., that would buy mortgage backed securities and issue new fixed rate loans for those facing foreclosure. The American Enterprise Institute, a supposedly “free market” think tank, has proposed a rehash of the Home Owners’ Loan Corp. of the 30s, a government agency that bought mortgages and refinanced them on easier terms for borrowers. On Friday, the Senate passed by a vote of 93-1 legislation increasing the amount of loans the FHA can insure to $417,000 from $362,790 so that taxpayers will now be put on the hook for insuring that the comfortably middle class can stay in homes the vast majority of Americans could not dream of affording. The Democratic candidates are proposing that the FHA guarantee loans extended to refinance people who will be unable to make their payments once they adjust to reflect the (contractually stipulated) higher interest rate after the teaser period. Republicans are proposing expanding the conforming limit for loans purchased by Fannie Mae and Freddie Mac beyond $417,000 to at least $600,000. No sense, I guess, letting the free market principles for which the GOP says it stands get in the way of using other people’s money to help out its wealthy constituency.
All these plans have in common putting the taxpayers on the hook to save those who bought more house than they could afford, or who used their homes as piggybanks to finance the purchase of things they couldn’t afford, and to bail out the foolish investors who lent to them.
One can very plausibly argue that the borrowers are at fault here; they simply borrowed more than they could repay and/or bet the wrong way on the real estate market. One can also plausibly argue that the investors are at fault; they bought paper that was riskier than they supposed and were paid far too little for the risk they assumed, relying on now clearly faulty assumptions and risk mitigation schemes promulgated by Wall Street wunderkinds who thought a surfeit of numbers and formulae could compensate for a woeful lack of investment experience and common sense. One can somewhat less plausibly argue that those who originated the loans are at fault because they duped borrowers into loans they couldn’t afford. But as the old saying goes, you only fall for lies and stories when you really want to. In order for one to blame the originator, one has to adhere to the new American motto “It’s not my fault,” to the idea that no one should ever be held responsible for his decisions, unless they turn out wells for him.
No one can plausibly argue, however, that the taxpayers, or at least the financially responsible taxpayers, are somehow at fault for the current mortgage mess. Yet all of the above plans, embraced by politicians across the political spectrum seek to use to coercive power of government to force the financially responsible to bail out the financially irresponsible and fiscally reckless.
As you point out, “a lot of people took a calculated gamble on interest rates and home prices” and lost. That is bad news. But it would be truly tragic if a lot of people instead took a calculated gamble that government would be there to bail them out of their financial idiocy and won.
I sent the following letter to Steve Chapman of the Chicago Tribune in response to his 12/16/07 column on various Democratic schemes to bail lenders out of mortgage loans they can no longer afford. As I have said in the past, Steve is, in my opinion, one of the best, if not the best, political/economic columnist in the country today. Not only does he share my libertarian outlook, he also writes effectively, argues cogently, and defies predictability:
Steve Chapman
Chicago Tribune
435 N. Michigan Avenue
Chicago, IL 60611
schapman@tribune.com
12/16/07
Steve,
You argue in your 12/16/07 column that the Democrats are “having a rollicking good time…doing noble deeds with other people’s money” by cooking ups schemes to fleece the lenders in order to bail out irresponsible lenders. Your description of the situation is deficient only in that it fails to capture the entire scope and audacity of this latest effort by politicians to use other people’s money in order to aid a favored constituency or to be perceived as “doing something.”
The Center for American Progress, a liberal think tank, has proposed creating a new government agency, the Family Foreclosure Rescue Corp., that would buy mortgage backed securities and issue new fixed rate loans for those facing foreclosure. The American Enterprise Institute, a supposedly “free market” think tank, has proposed a rehash of the Home Owners’ Loan Corp. of the 30s, a government agency that bought mortgages and refinanced them on easier terms for borrowers. On Friday, the Senate passed by a vote of 93-1 legislation increasing the amount of loans the FHA can insure to $417,000 from $362,790 so that taxpayers will now be put on the hook for insuring that the comfortably middle class can stay in homes the vast majority of Americans could not dream of affording. The Democratic candidates are proposing that the FHA guarantee loans extended to refinance people who will be unable to make their payments once they adjust to reflect the (contractually stipulated) higher interest rate after the teaser period. Republicans are proposing expanding the conforming limit for loans purchased by Fannie Mae and Freddie Mac beyond $417,000 to at least $600,000. No sense, I guess, letting the free market principles for which the GOP says it stands get in the way of using other people’s money to help out its wealthy constituency.
All these plans have in common putting the taxpayers on the hook to save those who bought more house than they could afford, or who used their homes as piggybanks to finance the purchase of things they couldn’t afford, and to bail out the foolish investors who lent to them.
One can very plausibly argue that the borrowers are at fault here; they simply borrowed more than they could repay and/or bet the wrong way on the real estate market. One can also plausibly argue that the investors are at fault; they bought paper that was riskier than they supposed and were paid far too little for the risk they assumed, relying on now clearly faulty assumptions and risk mitigation schemes promulgated by Wall Street wunderkinds who thought a surfeit of numbers and formulae could compensate for a woeful lack of investment experience and common sense. One can somewhat less plausibly argue that those who originated the loans are at fault because they duped borrowers into loans they couldn’t afford. But as the old saying goes, you only fall for lies and stories when you really want to. In order for one to blame the originator, one has to adhere to the new American motto “It’s not my fault,” to the idea that no one should ever be held responsible for his decisions, unless they turn out wells for him.
No one can plausibly argue, however, that the taxpayers, or at least the financially responsible taxpayers, are somehow at fault for the current mortgage mess. Yet all of the above plans, embraced by politicians across the political spectrum seek to use to coercive power of government to force the financially responsible to bail out the financially irresponsible and fiscally reckless.
As you point out, “a lot of people took a calculated gamble on interest rates and home prices” and lost. That is bad news. But it would be truly tragic if a lot of people instead took a calculated gamble that government would be there to bail them out of their financial idiocy and won.
Saturday, December 15, 2007
“SHINE YOUR SHOES, MR. STREET?”
12/15/07
Now that Ben Bernanke’s Rube Goldberg funds auction, liquidity facility scheme failed to provide sufficient succor to the free marketeer tough guys on Wall Street, look for Obsequious Ben to come up with another hasty, ill-conceived, and ultimately ill-fated scheme to attempt to get back into the good graces of the Wall Street self-styled swashbucklers.
Inflation? Who cares? It’s only energy, and that only matters to average people, not the types of people with whom Ben seeks to ingratiate himself. The dollar? Hell, foreigners still take it, so what does Obsequious Ben care? The boys on Wall Street are unhappy with Ben, and he can’t live with that disapproval. Like the sycophantic servant boy who lives to please his master, Ben Bernanke simply cannot tolerate even the slightest hint of unhappiness from Wall Street.
Incidentally, there was an outstanding piece on the Opinion page (in this case, A21) of Friday’s (i.e., 12/14’s) Wall Street Journal concerning the relative flaccidity of the Fed, any Fed, in the face of the current worldwide financial problems. The article “The Global Money Machine,” by David Roche is well worth reading. Mr. Roche’s analysis of the situation is especially cogent, and his last paragraph, the point of which is obvious to those of us with a clear view of the world but that will come as a shock to the “See No Evil” crowd, comfortable in the assumption that “a strong overseas economy will see us through,” is especially chilling. (See the 10/30/07 entry in the Insightful Pontificator. “THE STREET VS. THE VOLCANO.”)
Now that Ben Bernanke’s Rube Goldberg funds auction, liquidity facility scheme failed to provide sufficient succor to the free marketeer tough guys on Wall Street, look for Obsequious Ben to come up with another hasty, ill-conceived, and ultimately ill-fated scheme to attempt to get back into the good graces of the Wall Street self-styled swashbucklers.
Inflation? Who cares? It’s only energy, and that only matters to average people, not the types of people with whom Ben seeks to ingratiate himself. The dollar? Hell, foreigners still take it, so what does Obsequious Ben care? The boys on Wall Street are unhappy with Ben, and he can’t live with that disapproval. Like the sycophantic servant boy who lives to please his master, Ben Bernanke simply cannot tolerate even the slightest hint of unhappiness from Wall Street.
Incidentally, there was an outstanding piece on the Opinion page (in this case, A21) of Friday’s (i.e., 12/14’s) Wall Street Journal concerning the relative flaccidity of the Fed, any Fed, in the face of the current worldwide financial problems. The article “The Global Money Machine,” by David Roche is well worth reading. Mr. Roche’s analysis of the situation is especially cogent, and his last paragraph, the point of which is obvious to those of us with a clear view of the world but that will come as a shock to the “See No Evil” crowd, comfortable in the assumption that “a strong overseas economy will see us through,” is especially chilling. (See the 10/30/07 entry in the Insightful Pontificator. “THE STREET VS. THE VOLCANO.”)
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