Thursday, June 25, 2009
Chuck Cooper - God's Approach to Evolution
My clarification of the whole evolution debate below was incited by the following fulmination by Lola LeMieux Kindley, upon her discovery that I think evolution is cool. "SO YOU THINK YOU CAN GET SOMETHING FROM NOTHING BY ADDING TIME? And you actually give the time of day to Dawkins and his other cohort, both of them being reduced to hypothesizing aliens planting seeds to account for life on this planet. Cooper, whatever it is you are hooked on, it is certainly not legitimate science. And The Blind Watchmaker is SO last year!"
Clearly, it would not be appropriate for me to apologize for evolution. In fact I would be scared to because God did it. What some do not realize is that ALL religions, including science and those funny 5000 year guys, agree on evolution. You see, God did it. Where you get the appearance of respectful dissent is with the differing opinion about how far back God stood when he kicked off evolution. Was it way back with a piece of RNA maybe, letting everything proceed on its own from there? Now He could have if He wanted to, you betcha! He is that good! OR, did He do hands on all the way up to the species level? Could have, just to make people feel better, not having to feel related to monkeys, or worse, fish! Fish for God's sake. You would have to respect the consideration. Now some even say He stood back only 5000 years ago, and planted a bunch of fossils just to kid around with the science types. Kind of like a divine Easter egg hunt. Who doesn't enjoy those? Now all agree that from whereever God chose to stand at the kick-off, He did expect to help those animals and plants who helped themselves, that is, if you had a better set up for reproduction than the other guy's kit, there was going to be more of you than them. Think about it. Nobody, regardless of their religion, expects God to sit there and decide what color every little bunny's fur is going to be. Much less, some moth hanging out on a tree trunk. So, it is all about where He stood, and like an 800 pound gorilla, He stood exactly where He wanted. So no reason for us to get all jiggy about it. Good for Him!
Footnotes:
Most readers will recognize that my points were extensively debated by Isaac Newton and Gottfried Leibniz, who did get jiggy about it. Their calculus established the extremes of the view. It was before Darwin, and they ignored the 5000 year guys.
Most readers will recognize that my points were extensively debated by Isaac Newton and Gottfried Leibniz, who did get jiggy about it. Their calculus established the extremes of the view. It was before Darwin, and they ignored the 5000 year guys.
Darryl Johnson - Trouble in Thailand
Thais celebrate their traditional New Year on April 13 with solemn ceremonies in the morning followed by a wet and wild festival of water throwing later. The water must be clean and it’s all good fun.
This year the scene was very different, with crowds of red-shirted youths confronting uniformed troops, throwing petrol bombs and sending unmanned busses careening towards buildings and crowds. Fortunately, the number of dead and injured is reportedly small, due to the restraint shown by the troops. The mob attacked the Prime Minister’s car and called on him to resign and call new elections. But the PM, Abhisit Vejjajiva, has shown no intention to step down, having just come to office in December; instead, he declared a state of emergency in Bangkok and five neighboring provinces and ordered the armed forces and the police to restore order. Several of the ringleaders were detained while most of the rest were given free one-way rides back to their homes.
Why this uncharacteristic violence in the streets of Bangkok? First, there is the former Prime Minister, Thaksin Shinawatra, who was overthrown by a military coup in September, 2006, after allegedly using his official position for personal gain. Thaksin was first elected in 2001 on a platform of cheap health care, a revolving credit program for villages, a pause in the collection of land taxes, and a village craft program. Although he was one of the wealthiest people in the country, he reached out to the poorest and they rewarded him with their votes in 2001 and again in his sweeping re-election in 2005. He called himself a “CEO” manager, ruling efficiently if not always cleanly. But Thaksin was not popular in Bangkok because he was seen as an upstart who did not play by the traditional Thai political or social rules, and his policy initiatives were condemned as “populist.” His downfall came after his family conveniently sold their shares in the family-owned telecom company to the Singapore sovereign wealth fund for $1.9 billion, virtually tax free. Now living in exile, he has telephoned his followers in Thailand on several occasions, most recently last weekend when he called for “revolution.” Needless to say, this call did not get a warm reception with the current government.
Prime Minister Abhisit, a British-born and British-educated lawyer, is the latest in a string of successors to Thaksin, the first two of whom were seen as proxies for Thaksin, and served for only a few months before being driven from office by anti-Thaksin demonstrators. Abhisit, by contrast, is the head of the former opposition Democrat Party, and is the very image of a sophisticated leader. But his Democrat Party has had trouble getting votes outside of Bangkok and the near South. His coalition therefore includes local leaders whose loyalty is suspect – some of them previously served under Thaksin. Since he took office in December, Abhisit’s troubles have intensified with almost daily demonstrations by thousands of roving young men who support Thaksin and claim to support democracy. For Abhisit, one big problem is the sagging economy, which has been hurt by the financial crisis in the US and declining trade with most of Thailand’s trade partners, including China. In a major embarrassment for a country that prides itself on its hospitality, Abhisit was forced to cancel the recent meeting of the leaders of the ten countries that make up the Association of Southeast Asian Nations (ASEAN), plus leaders from China, Japan and Korea, and the UN Secretary General. This event was supposed to be a combination of work and play at one of Thailand’s many high-end resorts. But demonstrators broke through the police lines and into the conference site, forcing the delegates to flee for their safety, some by helicopter.
The role of the Palace is also important but opaque. Thais of all political stripes revere their King, who will turn 82 in December. The anti-Thaksin pro-royalist demonstrators have worn yellow shirts because that is the King’s color. Their opponents have worn red shirts and wrapped themselves in the national flag – red, white and blue stripes. Thaksin and some of his followers reportedly believe that the Palace, and some members of the King’s Privy Council, supported the September 2006 coup. But others deny that there was any such collusion. While the King has acted as a peacemaker during previous periods of political tension, notably in 1992, his powers are moral, not political or managerial; he reigns but does not rule.
What are the prospects for Thailand now? In the near-term, order will be restored, by force if necessary. But the military does not want to take power again and will probably support the Abhisit government. They will also make every effort to keep Thaksin out. But the deep divisions in Thai society which have been laid bare by these demonstrations will take considerable time to heal. And the Land of Smiles is not smiling at the start of this New Year.
Darryl N. Johnson served as American Ambassador to Thailand 2001-2004. He is a graduate of the University of Washington and currently teaches part time at the Henry M. Jackson School of International Studies.
This year the scene was very different, with crowds of red-shirted youths confronting uniformed troops, throwing petrol bombs and sending unmanned busses careening towards buildings and crowds. Fortunately, the number of dead and injured is reportedly small, due to the restraint shown by the troops. The mob attacked the Prime Minister’s car and called on him to resign and call new elections. But the PM, Abhisit Vejjajiva, has shown no intention to step down, having just come to office in December; instead, he declared a state of emergency in Bangkok and five neighboring provinces and ordered the armed forces and the police to restore order. Several of the ringleaders were detained while most of the rest were given free one-way rides back to their homes.
Why this uncharacteristic violence in the streets of Bangkok? First, there is the former Prime Minister, Thaksin Shinawatra, who was overthrown by a military coup in September, 2006, after allegedly using his official position for personal gain. Thaksin was first elected in 2001 on a platform of cheap health care, a revolving credit program for villages, a pause in the collection of land taxes, and a village craft program. Although he was one of the wealthiest people in the country, he reached out to the poorest and they rewarded him with their votes in 2001 and again in his sweeping re-election in 2005. He called himself a “CEO” manager, ruling efficiently if not always cleanly. But Thaksin was not popular in Bangkok because he was seen as an upstart who did not play by the traditional Thai political or social rules, and his policy initiatives were condemned as “populist.” His downfall came after his family conveniently sold their shares in the family-owned telecom company to the Singapore sovereign wealth fund for $1.9 billion, virtually tax free. Now living in exile, he has telephoned his followers in Thailand on several occasions, most recently last weekend when he called for “revolution.” Needless to say, this call did not get a warm reception with the current government.
Prime Minister Abhisit, a British-born and British-educated lawyer, is the latest in a string of successors to Thaksin, the first two of whom were seen as proxies for Thaksin, and served for only a few months before being driven from office by anti-Thaksin demonstrators. Abhisit, by contrast, is the head of the former opposition Democrat Party, and is the very image of a sophisticated leader. But his Democrat Party has had trouble getting votes outside of Bangkok and the near South. His coalition therefore includes local leaders whose loyalty is suspect – some of them previously served under Thaksin. Since he took office in December, Abhisit’s troubles have intensified with almost daily demonstrations by thousands of roving young men who support Thaksin and claim to support democracy. For Abhisit, one big problem is the sagging economy, which has been hurt by the financial crisis in the US and declining trade with most of Thailand’s trade partners, including China. In a major embarrassment for a country that prides itself on its hospitality, Abhisit was forced to cancel the recent meeting of the leaders of the ten countries that make up the Association of Southeast Asian Nations (ASEAN), plus leaders from China, Japan and Korea, and the UN Secretary General. This event was supposed to be a combination of work and play at one of Thailand’s many high-end resorts. But demonstrators broke through the police lines and into the conference site, forcing the delegates to flee for their safety, some by helicopter.
The role of the Palace is also important but opaque. Thais of all political stripes revere their King, who will turn 82 in December. The anti-Thaksin pro-royalist demonstrators have worn yellow shirts because that is the King’s color. Their opponents have worn red shirts and wrapped themselves in the national flag – red, white and blue stripes. Thaksin and some of his followers reportedly believe that the Palace, and some members of the King’s Privy Council, supported the September 2006 coup. But others deny that there was any such collusion. While the King has acted as a peacemaker during previous periods of political tension, notably in 1992, his powers are moral, not political or managerial; he reigns but does not rule.
What are the prospects for Thailand now? In the near-term, order will be restored, by force if necessary. But the military does not want to take power again and will probably support the Abhisit government. They will also make every effort to keep Thaksin out. But the deep divisions in Thai society which have been laid bare by these demonstrations will take considerable time to heal. And the Land of Smiles is not smiling at the start of this New Year.
Darryl N. Johnson served as American Ambassador to Thailand 2001-2004. He is a graduate of the University of Washington and currently teaches part time at the Henry M. Jackson School of International Studies.
Wednesday, June 24, 2009
Lola LeMieux Kindley - Importance of Defining Evil
A response I wrote to a friend who had forwarded the article reviewing the speech by Charles Krauthammer.
I remember vividly, in fact it was one of the defining moments of my life, listening to the uprising in Hungary, mostly from students. They had finally fallen back to a broadcasting station as their last refuge and were broadcasting desperate requests to the world to help in their fight for freedom. And then the voices went silent.
In Prague, I noticed lots of little niches in buildings mostly in the Old Town and across the Vltava in Lesser Town, with candles burning. I couldn't understand the language, but it soon became clear that they were memorials to people who died facing the Soviet tanks in 1968, when they, too, thought they could grasp freedom. Almost all of the birth-death dates indicated teenagers to young twenties.
I am sickened by the response to those courageous voices in Iran. They already know what the authorities do to dissidents, but they are in the streets, nevertheless. Today I also received an email with a summary of a speech by Charles Krauthammer, measured, objective and analytical, but the person who heard him quoted him as saying that Obama is not only narcissistic, he also sees himself as the global leader of opinion and policy, rather than merely as president of the U.S. That's how it seems to me. So with the North Korean ship steaming illegally to Burma/Myanmar and the people dying in the streets of Iran, he equivocates over whether or not he still invites Iranian diplomatic personnel to U.S. embassies to celebrate the Fourth of July, for heaven's sake! I remember a trip to Vermont when a person from the plant spoke, as if he had witnessed it himself, of the streams in the fields around us running red with the blood of the colonists fighting for freedom. And this administration wants to welcome these butchers to celebrate the history of freedom and self-rule and human dignity on our national holiday?
Actually, I began comparing Chamberlain first to Carter, then to Clinton, and certainly to Obama.
I remember vividly, in fact it was one of the defining moments of my life, listening to the uprising in Hungary, mostly from students. They had finally fallen back to a broadcasting station as their last refuge and were broadcasting desperate requests to the world to help in their fight for freedom. And then the voices went silent.
In Prague, I noticed lots of little niches in buildings mostly in the Old Town and across the Vltava in Lesser Town, with candles burning. I couldn't understand the language, but it soon became clear that they were memorials to people who died facing the Soviet tanks in 1968, when they, too, thought they could grasp freedom. Almost all of the birth-death dates indicated teenagers to young twenties.
I am sickened by the response to those courageous voices in Iran. They already know what the authorities do to dissidents, but they are in the streets, nevertheless. Today I also received an email with a summary of a speech by Charles Krauthammer, measured, objective and analytical, but the person who heard him quoted him as saying that Obama is not only narcissistic, he also sees himself as the global leader of opinion and policy, rather than merely as president of the U.S. That's how it seems to me. So with the North Korean ship steaming illegally to Burma/Myanmar and the people dying in the streets of Iran, he equivocates over whether or not he still invites Iranian diplomatic personnel to U.S. embassies to celebrate the Fourth of July, for heaven's sake! I remember a trip to Vermont when a person from the plant spoke, as if he had witnessed it himself, of the streams in the fields around us running red with the blood of the colonists fighting for freedom. And this administration wants to welcome these butchers to celebrate the history of freedom and self-rule and human dignity on our national holiday?
Actually, I began comparing Chamberlain first to Carter, then to Clinton, and certainly to Obama.
Friday, March 06, 2009
Chuck Cooper - How to Make a Small Fortune in the Stock Market
You may need this. The answer to the above is of course to start with a large fortune. Gordy is exactly right, as usual, in his investment approach. Now he tells us. And if you are one of those genius types who have been all in cash since the middle of 2007, you don't need any help. Just be sure you spread it around to fully insured accounts, or to money market accounts where "breaking the buck" means you only get back $.99. I could live with that.
But if you have been invested in just about anything, you may be wondering what happened to half of your capital. And what do you do now to a. get back your loses, or b. keep from losing the other half. For the first, my advice is to eat lots of fruits and vegetables, lose weight, no smoking of course, and be sure to take at least one drink of alcohol every day. The goal is to live long enough to see the markets come back. History, if you take a look at my previous post, shows it never takes much over ten years, and could be a lot quicker with all this stimulus package spending. From my lips to God's ears.
So what should you do in the meantime? Most experts advise not to panic and start selling your investments out of fear that they will go lower. No one knows whether we are close to a bottom or not. If it is just the flip of a coin, you might as well avoid the transaction cost. I think of investment shuffling the same way as switching lines in the grocery store, and you know how that works out.
That is not very helpful, so back to those folks that are in cash or near cash, or treasuries. You need to keep the funds safe, but now doesn't seem to be the time to be buying treasuries or anything long term. Interest rates are probably as low as they can get, and normally when agressive fiscal policy puts pile of cash into the system, the pressure is for rates to go up. For one thing, you would think the Chinese are getting tired of funding our deficits at a negative return. You don't have to be an expert to figure that if they ever stop buying, it is Katy bar the door.
Have a nice day.
Gordy Ringoen - So, What’s One To Do?
The first rule of investing is like the first rule of the Hippocratic Oath: First, do no harm!
Or, in investing parlance: First, do not lose your capital!
In these times, preservation of capital is easier said than done. The hardest part may be psychological because it requires a dynamic tension between conflicting risks. There is no simple position to protect against all risks. All positions will not be profitable, but the objective is to not make profits but to protect the lion share of capital.
This discussion has to do with financial capital only. It does relate to real estate, collectibles or operating businesses. It is also from the perspective of someone of my generation who is essentially living off his capital. It would be different for investors in other circumstance.
Ben Bernanke in his college text defines risk as “the possibility that the actual return received on an asset will be substantially different from the expected return.” This is like saying that the risk of walking across the Bayshore Freeway in rush hour is that you may not make it to the other side. No, the risk is that you may never have a chance to ever walk anywhere again. So it is with the financial risk, it is not that you don’t get the expected return, but that you lose your capital and can not invest again.
As a prerequisite to examining investment alternatives, it is important to understand the risks we are trying to protect against. From my view, currently, the following are the risks that exist:
Nominal Risks: Nominal risks are simply the mark to market value of assets. This is the risk that is familiar to all. This is the risk that turned to loss for those that still own AIG or Citi stock selling for less than $1 or worthless Lehman bonds.
However, just looking at price can be misleading. For example, if you are able to buy stocks, as an inflation hedge, and even if they work, you may find it difficult maintain your capital because the inflation appreciation is taxed. The worst case would be inflation appreciation in a retirement account, at death, where the taxes will be able to take up to 75% of the appreciation.
On the other hand, in certain instances, the decline of nominal value can be beneficial. For example, if you have assets that you wish to pass on in an estate, like a house, you might want the nominal value to decline to reduce inheritance tax and to minimize the step up appraised value for property tax purposes.
The point is that capital gains taxes, regular income taxes for higher income brackets, and estate taxes are all going to rise in the years ahead and should be taken into account and not just nominal gains or losses.
However, the major concern today is that stocks and bonds may continue to fall as financial excesses are wrung out of the system and the world economy continues to deteriorate.
2. Currency Risk: This is the risk that the value of $US may be less in the future. You may be able to maintain the nominal value of your portfolio but it may not be worth much or, possibly nothing, in purchasing power because of inflation or government action. It can also occur because other nations handle their economic problems more efficiently and their currencies appreciate against the $US. And, finally the most serious circumstance could arise from the governments inability to reverse the economic fall, and faced between financial collapse and uncontrolled inflation, they effectively declare default on $US financial obligations and establish a new monetary regime. No one knows how that would be effected, but it would likely put all $US obligations in work out mode and a new, “blue money” would be established with built in safeguards to give it credibility. All commerce would be in “blue money” and, over time, our “green money” could be converted to the new money on a greatly discounted basis. Though this scenario would seem to be so remote that it should not be considered, it is instructive to remember that it would have seemed just as outrageous a few months ago that Citi and BofA were insolvent and may require nationalization, Fanny and Freddy would need to be taken over and Lehman would go broke. Until we some economic progress or we can see a semblance of a program that will lead us out of the morass, this possibility should be taken into account.
3. Liquidity Risk: This is the risk that your assets can not be sold, or the risk that you may not be able to buy what you want when you want. For example, during the Katrina disaster, only $US could be used for goods and services. No one would take a check and credit cards were not operational. The boat people from Vietnam could only buy passage with gold. Some security positions deposited at Lehman are still frozen since their bankruptcy. Two NY Yankee baseball players said that they are unable to pay any bills because they are part of the $50 billion money market freeze at Stanford’s bank. Currently, it is extremely difficult to buy gold coins with any currency. During times of financial turmoil, currency withdrawals can be restricted and currency conversion freezes are frequently instituted. On the other hand, you can’t use cash to buy an airplane ticket, some gas stations won’t take cash at night and many businesses will not take a bill larger than $20. Until recently, this was a risk not worthy of much thought. But, “times, they are a changing.”
4. Counter-party Risk: This is the risk that the party you deal with may not be able to meet its obligations to you. In nearly all of the financial assets in your portfolio, someone has promised something. The Lehman bankruptcy illustrated the risk of these promises. Many margin customers stood to lose the equity in their accounts because they became a general creditor to Lehman and had no rights to the securities in their accounts. Some of the products Lehman sold were represented to be secured by underlying assets but were only worthless general creditor promises from Lehman. Adjustable rate preferreds, which were marketed as money market alternatives, by many firms, lost much of their value and became illiquid when the brokerage firms failed to roll the securities. The Madoff swindle illustrates the dangers of a money manager that also acts as their own clearing firm.
Let us look at some asset classes and how they may help us reduce the risks to a portfolio:
1. Nominal Risk:
a. Cash Currency: The perfect protection against nominal loss and has certain advantages and disadvantages. It seems prudent to have some on hand for special circumstances.
b. Treasury Bills: It is near 100% protection for nominal loss.
c. Treasury Bonds: They too, have 100% protection against nominal loss when held to maturity but can suffer nominal mark to market loss if interest rates rise.
d. Bank Deposits: Near 100% protection when covered by FDIC. Although, the FDIC funds will likely be exhausted, it can be assumed that the government will honor their obligations.
e. Money Market Funds: These are a little more problematical. The government seems to indicate that they are going to back them, but to date; their actual promises are very weak. Government Funds are, for the most part, more secure than Commercial or Muni funds. Many of these funds would have immediate problems if the government was not supporting the commercial paper market.
f. Muni Bonds: These are subject to loss with falling interest rates but the even greater concern is their credit quality. Many, are rated highly because they are insured. But now, without government support, the insurance can not be relied upon. Most municipalities are experiencing financial weakening because of the poor economy. It is a market for experts.
g. Sovereign Debt: This is the equivalent of other nations Treasuries. The nominal value is near 100%, but only in their currency. They can have large nominal risk to a $US portfolio because of currency fluctuations.
h. Commercial Bonds: Some risks from both interest rates and credit quality. An asset class for experts.
i. Common Stocks: High volatility and price risk. A speculation. A market for experts.
j. Gold: High volatility and price risk. A speculation. It can be argued that there is not much value in “expertise” in this asset class.
k. Other Commodities: High volatility and price risk.
2. Currency Risk:
a. Cash Currency: No protection.
b. Treasury Bills: No protection.
c. Treasury Bonds: No protection.
d. Bank Deposits: No protection.
e. Money Market Funds: No protection.
f. Muni Bonds: No protection.
g. Sovereign Debt: A range of possibilities from no protection to total protection.
h. Commercial Bonds: No protection.
i. Common Stocks: Fairly good protection except in extreme conditions where there may be no protection.
j. Gold: Likely very good protection.
k. Commodities: Likely very good protection.
3. Liquidity Risk:
a. Cash Currency: Excellent in some circumstances and limited protection in others. May be restricted or difficult to obtain in quantity.
b. Treasury Bills: Excellent liquidity.
c. Treasury Bonds: Excellent liquidity.
d. Bank Deposits: Good liquidity. May be restricted in times of crisis.
e. Money Market funds: Fair to Good liquidity. May be restricted because of financial market problems.
f. Muni Bonds: Fair liquidity. Costly to sell and markets may be very thin or non-existent at times.
g. Sovereign Debt: Highly liquid in developed countries. Purchases may be restricted in stressful times because of currency controls.
h. Commercial Bonds: Fair liquidity. Markets can dry up during times of financial stress.
i. Common Stocks: Liquidity good under most circumstances.
j. Gold: Physical gold usually easy to sell if there are no government restrictions, sometimes, like now, may be difficult to buy. It can be the most liquid medium of exchange during severe financial circumstances. Its ownership or trading frequently is controlled by governments during financial turmoil. Normally, paper gold positions can be taken through ETF’s or Futures Contracts which are usually very liquid.
k. Commodities: Physical positions of commodities are impractical. Positions can be taken in ETF’s and Futures Contracts.
3. Counter Party Risk:
There is severe counter party risk from any financial institution that does not have specific government back up like FDIC. Margin accounts can be of particular risk. All securities possible should be in the “cash account.” Commodity Futures Contracts are at risk but are unlikely to be allowed to fail.
Cash and physical gold have no counter party risk but may be difficult to secure and transport.
Treasuries that are not on margin are very secure.
Absent fraud, stocks and bonds, not on margin, are quite secure.
4. Analysis:
It is clear that many of the portfolio alternatives are in conflict from a reduction of risk perspective. Each has its advantages and disadvantages. The key is to have the proper mix to prevent major loss of capital under any circumstances. The mix should be adjusted as circumstances change.
Based on current circumstances a portfolio might look as follows:
1. A cash currency position sufficient for emergencies only.
2. A physical gold position of 5-15% of the total financial portfolio. It would be a core position that would be kept under all circumstances. It is expensive to trade and can be difficult to accumulate so it is not appropriate for speculation. Once acquired, it has the advantages that no taxes are paid on appreciation until it is sold. It is also the only fungible physical asset for which its existence is not in a computer somewhere. It earns nothing, so it is not part of an earnings portfolio. Its only purpose is for belts and suspenders financial security. Although, it is pretty.
3. Money Market Funds: Sufficient levels to pay bills and satisfy operating needs. It is not a place to park excess capital.
4. Treasuries: The place to put excess capital and can be 40-80% of the portfolio.
5. Sovereign Debt: An amount ranging from 20-60% of the financial portfolio diversified in politically stable countries like Germany, Canada, and Switzerland. The positions are moderately expensive to put on and should be considered core positions. No taxes are due on appreciation until they are converted back to $US. The foreign funds can be transferred out of the country with little difficulty if desired. The positions need to be established in advance of major $US problems because currency controls might be instituted. During strong $US markets, the positions can be hedged by shorting currency futures contracts. During $US weakness, the hedges are removed.
6. Stocks and Bonds: They really don’t have a place in a portfolio with its prime objective of capital preservation during turbulent times such as now.
7. Commodities: Positions in commodities, including metals, oil, agricultural products, and currencies can be established at low cost as conditions warrant with a notational values of from 0-50% of the financial portfolio. They require no portfolio investment if done through futures contracts though they do require collateral which can be Treasury Bills. Or, they can be executed through ETF’s which require an investment.
8. Debt pay off: The most conservative investment is to pay off any outstanding debt. It is risk-less. Further, the interest saved will be greater than the interest earned on risk averse investments.
Or, in investing parlance: First, do not lose your capital!
In these times, preservation of capital is easier said than done. The hardest part may be psychological because it requires a dynamic tension between conflicting risks. There is no simple position to protect against all risks. All positions will not be profitable, but the objective is to not make profits but to protect the lion share of capital.
This discussion has to do with financial capital only. It does relate to real estate, collectibles or operating businesses. It is also from the perspective of someone of my generation who is essentially living off his capital. It would be different for investors in other circumstance.
Ben Bernanke in his college text defines risk as “the possibility that the actual return received on an asset will be substantially different from the expected return.” This is like saying that the risk of walking across the Bayshore Freeway in rush hour is that you may not make it to the other side. No, the risk is that you may never have a chance to ever walk anywhere again. So it is with the financial risk, it is not that you don’t get the expected return, but that you lose your capital and can not invest again.
As a prerequisite to examining investment alternatives, it is important to understand the risks we are trying to protect against. From my view, currently, the following are the risks that exist:
Nominal Risks: Nominal risks are simply the mark to market value of assets. This is the risk that is familiar to all. This is the risk that turned to loss for those that still own AIG or Citi stock selling for less than $1 or worthless Lehman bonds.
However, just looking at price can be misleading. For example, if you are able to buy stocks, as an inflation hedge, and even if they work, you may find it difficult maintain your capital because the inflation appreciation is taxed. The worst case would be inflation appreciation in a retirement account, at death, where the taxes will be able to take up to 75% of the appreciation.
On the other hand, in certain instances, the decline of nominal value can be beneficial. For example, if you have assets that you wish to pass on in an estate, like a house, you might want the nominal value to decline to reduce inheritance tax and to minimize the step up appraised value for property tax purposes.
The point is that capital gains taxes, regular income taxes for higher income brackets, and estate taxes are all going to rise in the years ahead and should be taken into account and not just nominal gains or losses.
However, the major concern today is that stocks and bonds may continue to fall as financial excesses are wrung out of the system and the world economy continues to deteriorate.
2. Currency Risk: This is the risk that the value of $US may be less in the future. You may be able to maintain the nominal value of your portfolio but it may not be worth much or, possibly nothing, in purchasing power because of inflation or government action. It can also occur because other nations handle their economic problems more efficiently and their currencies appreciate against the $US. And, finally the most serious circumstance could arise from the governments inability to reverse the economic fall, and faced between financial collapse and uncontrolled inflation, they effectively declare default on $US financial obligations and establish a new monetary regime. No one knows how that would be effected, but it would likely put all $US obligations in work out mode and a new, “blue money” would be established with built in safeguards to give it credibility. All commerce would be in “blue money” and, over time, our “green money” could be converted to the new money on a greatly discounted basis. Though this scenario would seem to be so remote that it should not be considered, it is instructive to remember that it would have seemed just as outrageous a few months ago that Citi and BofA were insolvent and may require nationalization, Fanny and Freddy would need to be taken over and Lehman would go broke. Until we some economic progress or we can see a semblance of a program that will lead us out of the morass, this possibility should be taken into account.
3. Liquidity Risk: This is the risk that your assets can not be sold, or the risk that you may not be able to buy what you want when you want. For example, during the Katrina disaster, only $US could be used for goods and services. No one would take a check and credit cards were not operational. The boat people from Vietnam could only buy passage with gold. Some security positions deposited at Lehman are still frozen since their bankruptcy. Two NY Yankee baseball players said that they are unable to pay any bills because they are part of the $50 billion money market freeze at Stanford’s bank. Currently, it is extremely difficult to buy gold coins with any currency. During times of financial turmoil, currency withdrawals can be restricted and currency conversion freezes are frequently instituted. On the other hand, you can’t use cash to buy an airplane ticket, some gas stations won’t take cash at night and many businesses will not take a bill larger than $20. Until recently, this was a risk not worthy of much thought. But, “times, they are a changing.”
4. Counter-party Risk: This is the risk that the party you deal with may not be able to meet its obligations to you. In nearly all of the financial assets in your portfolio, someone has promised something. The Lehman bankruptcy illustrated the risk of these promises. Many margin customers stood to lose the equity in their accounts because they became a general creditor to Lehman and had no rights to the securities in their accounts. Some of the products Lehman sold were represented to be secured by underlying assets but were only worthless general creditor promises from Lehman. Adjustable rate preferreds, which were marketed as money market alternatives, by many firms, lost much of their value and became illiquid when the brokerage firms failed to roll the securities. The Madoff swindle illustrates the dangers of a money manager that also acts as their own clearing firm.
Let us look at some asset classes and how they may help us reduce the risks to a portfolio:
1. Nominal Risk:
a. Cash Currency: The perfect protection against nominal loss and has certain advantages and disadvantages. It seems prudent to have some on hand for special circumstances.
b. Treasury Bills: It is near 100% protection for nominal loss.
c. Treasury Bonds: They too, have 100% protection against nominal loss when held to maturity but can suffer nominal mark to market loss if interest rates rise.
d. Bank Deposits: Near 100% protection when covered by FDIC. Although, the FDIC funds will likely be exhausted, it can be assumed that the government will honor their obligations.
e. Money Market Funds: These are a little more problematical. The government seems to indicate that they are going to back them, but to date; their actual promises are very weak. Government Funds are, for the most part, more secure than Commercial or Muni funds. Many of these funds would have immediate problems if the government was not supporting the commercial paper market.
f. Muni Bonds: These are subject to loss with falling interest rates but the even greater concern is their credit quality. Many, are rated highly because they are insured. But now, without government support, the insurance can not be relied upon. Most municipalities are experiencing financial weakening because of the poor economy. It is a market for experts.
g. Sovereign Debt: This is the equivalent of other nations Treasuries. The nominal value is near 100%, but only in their currency. They can have large nominal risk to a $US portfolio because of currency fluctuations.
h. Commercial Bonds: Some risks from both interest rates and credit quality. An asset class for experts.
i. Common Stocks: High volatility and price risk. A speculation. A market for experts.
j. Gold: High volatility and price risk. A speculation. It can be argued that there is not much value in “expertise” in this asset class.
k. Other Commodities: High volatility and price risk.
2. Currency Risk:
a. Cash Currency: No protection.
b. Treasury Bills: No protection.
c. Treasury Bonds: No protection.
d. Bank Deposits: No protection.
e. Money Market Funds: No protection.
f. Muni Bonds: No protection.
g. Sovereign Debt: A range of possibilities from no protection to total protection.
h. Commercial Bonds: No protection.
i. Common Stocks: Fairly good protection except in extreme conditions where there may be no protection.
j. Gold: Likely very good protection.
k. Commodities: Likely very good protection.
3. Liquidity Risk:
a. Cash Currency: Excellent in some circumstances and limited protection in others. May be restricted or difficult to obtain in quantity.
b. Treasury Bills: Excellent liquidity.
c. Treasury Bonds: Excellent liquidity.
d. Bank Deposits: Good liquidity. May be restricted in times of crisis.
e. Money Market funds: Fair to Good liquidity. May be restricted because of financial market problems.
f. Muni Bonds: Fair liquidity. Costly to sell and markets may be very thin or non-existent at times.
g. Sovereign Debt: Highly liquid in developed countries. Purchases may be restricted in stressful times because of currency controls.
h. Commercial Bonds: Fair liquidity. Markets can dry up during times of financial stress.
i. Common Stocks: Liquidity good under most circumstances.
j. Gold: Physical gold usually easy to sell if there are no government restrictions, sometimes, like now, may be difficult to buy. It can be the most liquid medium of exchange during severe financial circumstances. Its ownership or trading frequently is controlled by governments during financial turmoil. Normally, paper gold positions can be taken through ETF’s or Futures Contracts which are usually very liquid.
k. Commodities: Physical positions of commodities are impractical. Positions can be taken in ETF’s and Futures Contracts.
3. Counter Party Risk:
There is severe counter party risk from any financial institution that does not have specific government back up like FDIC. Margin accounts can be of particular risk. All securities possible should be in the “cash account.” Commodity Futures Contracts are at risk but are unlikely to be allowed to fail.
Cash and physical gold have no counter party risk but may be difficult to secure and transport.
Treasuries that are not on margin are very secure.
Absent fraud, stocks and bonds, not on margin, are quite secure.
4. Analysis:
It is clear that many of the portfolio alternatives are in conflict from a reduction of risk perspective. Each has its advantages and disadvantages. The key is to have the proper mix to prevent major loss of capital under any circumstances. The mix should be adjusted as circumstances change.
Based on current circumstances a portfolio might look as follows:
1. A cash currency position sufficient for emergencies only.
2. A physical gold position of 5-15% of the total financial portfolio. It would be a core position that would be kept under all circumstances. It is expensive to trade and can be difficult to accumulate so it is not appropriate for speculation. Once acquired, it has the advantages that no taxes are paid on appreciation until it is sold. It is also the only fungible physical asset for which its existence is not in a computer somewhere. It earns nothing, so it is not part of an earnings portfolio. Its only purpose is for belts and suspenders financial security. Although, it is pretty.
3. Money Market Funds: Sufficient levels to pay bills and satisfy operating needs. It is not a place to park excess capital.
4. Treasuries: The place to put excess capital and can be 40-80% of the portfolio.
5. Sovereign Debt: An amount ranging from 20-60% of the financial portfolio diversified in politically stable countries like Germany, Canada, and Switzerland. The positions are moderately expensive to put on and should be considered core positions. No taxes are due on appreciation until they are converted back to $US. The foreign funds can be transferred out of the country with little difficulty if desired. The positions need to be established in advance of major $US problems because currency controls might be instituted. During strong $US markets, the positions can be hedged by shorting currency futures contracts. During $US weakness, the hedges are removed.
6. Stocks and Bonds: They really don’t have a place in a portfolio with its prime objective of capital preservation during turbulent times such as now.
7. Commodities: Positions in commodities, including metals, oil, agricultural products, and currencies can be established at low cost as conditions warrant with a notational values of from 0-50% of the financial portfolio. They require no portfolio investment if done through futures contracts though they do require collateral which can be Treasury Bills. Or, they can be executed through ETF’s which require an investment.
8. Debt pay off: The most conservative investment is to pay off any outstanding debt. It is risk-less. Further, the interest saved will be greater than the interest earned on risk averse investments.
Friday, February 27, 2009
Chuck Cooper - Dreams of my Father's Depression
Gordy offers an excellent assessment of the situation, prompting me to this thought experiment. Suppose that all of a sudden people stopped buying stuff that they don’t need? The car can run another year or two, the old TV still runs, clothes, well, you get the idea. Life goes on without all that stuff, with no great hit to the pursuit of happiness.
Unfortunately, things aren’t that rosy. You can do without stuff, but not without a job. Consumer demand collapses, businesses lay off workers, and scared people reduce “needs” to the real basics. That is the downward spiral you are reading about now. People aren’t going to start buying what they don’t need until something arrests the spiral. How do we do that?
For the various reasons Gordy lists, this could be the big one. Bigger than 1982. Maybe more like the 1930s. We know what it took to end that one. Or like the panic of 1873, which if you read about it, sounds very familiar. Or the panic of 1893. Over expansion and bubbles. Each of those depressions lasted the better part of a decade, and ended only with events that led to large infusions of capital. Huge farm exports and the Klondike gold rush, respectively, were major factors in turning the corner.
Unfortunately, things aren’t that rosy. You can do without stuff, but not without a job. Consumer demand collapses, businesses lay off workers, and scared people reduce “needs” to the real basics. That is the downward spiral you are reading about now. People aren’t going to start buying what they don’t need until something arrests the spiral. How do we do that?
For the various reasons Gordy lists, this could be the big one. Bigger than 1982. Maybe more like the 1930s. We know what it took to end that one. Or like the panic of 1873, which if you read about it, sounds very familiar. Or the panic of 1893. Over expansion and bubbles. Each of those depressions lasted the better part of a decade, and ended only with events that led to large infusions of capital. Huge farm exports and the Klondike gold rush, respectively, were major factors in turning the corner.
Speaking of WWII, that huge government spending for which ended the great depression, wasn't that producing stuff that was promptly shipped overseas to get destroyed? From a purely economic standpoint, pretty much like digging holes and then filling them back in, only without the pain. It worked. Could all that quibbling about the details of the stimulus package be missing the point?
A little history study might quiet the critics of the massive deficit spending now getting under way. Dreams of our fathers.
Gordy Ringoen - Stimulus, Bailouts and Such
A friend from Canada, who is an astute third party observer, asked me my thoughts regarding Larry Flint’s request for a bail out of the porn industry. My response was it had no chance because the Repubs would filibuster such “wasteful spending.” On the other hand, if it were structured to give credits to red blooded tax payers for internet “special services” and called it a “tax cut” it would have a good chance. I decided to amplify my thoughts beyond this important subject.
Brief History: First there came the sub-prime mortgages losses for financial institutions beginning in early 2008. It resulted in more than $500 billion in bank losses. This translated into more than $3 trillion contraction in loan capacity.
The losses and shrinking loan capacity led to illiquidity in the financial markets. Secretary Paulson asked for “standby” authority which was to give the markets “confidence.” No such luck, the markets began freezing out Fanny and Freddy. To stop their collapse, the government guaranteed $10 trillion of their paper (an amount equal to the total US debt at the time). Next was Bear Stearns which was forced into a shotgun marriage. The Treasury decided it couldn’t save Merrill and Lehman simultaneously. Bye, bye Lehman. Enter AIG, WAMU, Wachovia, Citi, and Bof A- the blackest of holes with more to come.
Paulson got on his knees and begged Nancy Pelosie to save the Union by giving him a discretionary account of $700 billion to buy toxic mortgage loans from failing institutions. He got the first installment of $350 billion. After a couple of weeks he realized this was a nonstarter. He then determined that putting the money into capital of the financial institutions would be more efficient. It could possibly be leveraged up to 10 times in loans by the banks. Nice hypothecation, but the banks merely used the capital to improve their capital structure while continuing to restrict credit.
Meanwhile, the world was also suffering a huge $US liquidity crisis. The LIBOR market, the international lending of $US, became illiquid for a number weeks in the fall of 2008. The Fed opened up its balance sheet for the world's Central Bankers to avert the crisis. The Fed expanded its balance sheet by $2.3 trillion. We don’t know where this money has actually gone because they won’t tell us. They say that if we knew, we might think someone was in trouble. You think?
Meanwhile, the rest of the economy began to catch up with the financial markets by falling off the cliff. More than1.5 million jobs were lost during the last three months of the year while foreclosures exploded. The Government went on holiday for three months waiting for a new administration.
Enter Obama. After haggling with Congress, he will have affected a nearly $800 billion stimulus program to get the economy moving and create 4 million jobs, or so we hope. There is about $600 billion in actual spending stimulus which amounts to less than 1/3 of the economic contraction expected in 2009. It is not nearly enough to jump start the economy, but it is a start. There will be more to come.
Meanwhile, Tim Geithner unveiled the Treasury program which would put $100 billion of capital into financial institutions which might generate $1 trillion in loans. Also, it would purchase $1 trillion of bad loans. Essentially, it is a “Paulson 2” plan, albeit with promised better record keeping and oversight. In any event, what it actually means is still a mystery since so little of the details have been disclosed. We assume that there are details.
The Fed, not to be left out, will increase credit for business and consumers from $200 billion to $1 trillion.
So, now we are caught up. Make sense? Of course not. All we can say for sure is that there is a big problem and we are throwing tons of money at it.
Political Response: There are four basic responses available to the government:
Spending to increase demand in the economy.
Tax cuts to stimulate demand.
Government purchase of bad loans.
Government injection of capital directly into business or guarantee of their debts.
Unfortunately, the responses thus far have been jumbled with only partial disclosure and shockingly little oversight. But, perhaps the most alarming aspect is a lack of coherent objectives and plan.
Economic Stimulus
The fundamental requirements of a sound economic stimulus program would be that the spending of taxpayer money, or cutting taxes, which is financially equivalent, has sound objectives in one of the following ways:
1. Spending would ideally be an investment in our economy. An investment where the principle and a fair return is expected. Investment in education, health care, infrastructure, technology, environment, R&D, and energy independence could all qualify as sound investments.
2. Spending for consumption is more problematical. It may be justified on a social basis. Unemployment insurance, food stamps, and medical care can constitute money well spent. Increases in defense spending and wars may be justified for protection or political reasons but not as an efficient stimulus.
3. Tax cuts are hard to justify on a stimulus basis. Tax cuts for corporations would tend to be the least rewarding. Although it can be argued that our corporate tax rates are higher than most competing countries, the argument is misleading. The net taxes paid by corporations as a percent of government revenues has been declining for decades because of loopholes in the tax system. Though stated rates are high, actual tax payments are low. Further, corporate tax cuts would tend to benefit the largest, established companies which tend to be poor engines for economic growth. For the past 30 years, the Fortune 500 companies have had a net decline in jobs. They have had net capital investment loss when comparing stock buy backs and dividends vs. capital raised. They have traded higher stock prices for shrinking their capital base. Nearly 18% of job creation is from start up companies that make up only about .2% of our total economy. They have minimal tax bills.
A tax cut for individuals from a stimulas standpoint are at best marginal and at worst highly inefficient. Tax cuts for individuals will likely be used to pay down debt or increase consumption. There is nothing in current behavior that suggests that individual tax cuts would be invested for long term economic benefits. A recent report says there has been no net savings since 2000. The loss of revenue would increase long term government debt but would not provide long term economic benefits.
Middle class tax cuts can be argued on a social basis. The working class has been effectively saddled with a 14% social security sur tax and do not benefit from the 15% capital gains taxes. Social justice it may be, but not an efficient stimulus.
In summary, an economic spending stimulus program is pretty straight forward. A prudent program will provide near term economic gains. It will be paid for by increased debt, but will bear economic fruits in the future which will allow for an increase in future taxes.
There is a contingent that thinks that all government spending is bad and all tax cuts are good. As Jon Stewart says, “20% of all dentists say that sugar gum is good for your teeth.”
Bailouts
Bailouts are much more problematic. Bailouts socialize overvalued debt, provide government funded equity for private firms, or simply nationalize businesses.
The reason that bailouts are needed is that the financial claims are not supported by assets or income generating power. In other words, the debt is overvalued. And, there is insufficient confidence in the private sector to make investment. The fundamental question is under what circumstances is a government bailout justified?
It is important to understand the circumstances that created the problem in the first place so that any program will not merely aggravate the situation. There are essentially three fundamental causes;
1. Mal- Investment: There has been excess construction of houses in marginal locations at prices that can not be afforded by the working populace. Probably too much has been invested in such things as leisure industries including resort development, casinos, cruise ships, and sports stadiums. Insufficient or ill-conceived investment in the automobile industry that produces only marginally competitive autos. And, perhaps the greatest distortion of all exists in the finance industry. This industry, before the recent market declines, had profits and market value of more than 20% of the Fortune 500 companies. This is a head scratching tariff to our producing economy for only moving money and credit from A to B.
2. Over Consumption: We essentially consume more than we produce. That is to say that we have no savings and consequentially no domestically generated investment. The net investment we do have has come from abroad. It is economically impossible to consume your way to long term prosperity.
3. Excessive Credit: Before the recent problems, public and private debt totaled more than 360% of our GDP. This compares to 160% in 1929 before the Great Depression. This is an amount that can not be sustained and will not be paid in kind because of a lack of economic capacity and unwillingness to service the debts on the part of the borrowers. This credit explosion triggered the mal-investment and over-consumption as previously mentioned. It also inflated the prices of real estate and financial assets above their economic value.
So, how big is the problem? Nouriel Roubini, of Stern School at NYU, who has been prescient regarding recent economic events, has recently estimated that the losses to financial institutions will be $3.6 trillion. The previous forecast was $1- 2 trillion. Approximately half the loss will be in banks which have only $1.4 trillion in equity leaving them with a negative net worth of $400 billion if he is correct.
To reduce the debt to GDP ratio to 1929 levels would require more than $25 trillion destruction in financial assets. This would result in a horrendous blow to the balance sheets of the 20% of the families with the vast majority of financial assets, but it would be even worse for the workers with no financial back up.
Oh, and lest we forget, there are $55 trillion Credit Default Swaps as part of the $550 trillion derivative market. The derivative market is 10x the total world’s GDP. Alan Greenspan told us in the past that derivatives reduced risk. It would be helpful for him to step forward now and explain how that is so. We could use some risk reduction.
The potential derivative losses may simply crush the financial system if the winners are allowed to pursue their gains. AIG might provide systemic risk to the financial system by itself. The debacle is a direct result of deregulation of financial institutions and non-regulation of the derivative markets.
And, the problems are not only a domestic issue. The Director of National Intelligence recently warned Congress that the world financial collapse poses the greatest risk to US security - replacing terrorism as the primary threat. It is forecast that 50 million jobs will be lost worldwide in 2009 causing much social unrest.
Government Guidelines: The following are things the government must do to improve their programs to alleviate the crisis.
1. Congress needs to take a crash course in economics and address the issues instead of ideology.
2. It must initiate actions that will avert systemic liquidity collapses and bankruptcies that would precipitate a chain reaction throughout the economy.
3. It must provide the necessary finance to ensure that the economy can function while nudging it into more productive ways. Meanwhile, it must protect families from catastrophic hardship for those caught in the maelstrom.
4. It must resist pressures from asset owners to monetize their overvalued financial assets. It has been said that “in a bull markets everyone is a capitalist and everyone becomes a socialist in bear markets.” Former free market advocates in finance have elbowed their way to the front of the bailout line.
Major Government Alternatives
1. Continue the patchwork programs to meet the immediate crisis, while ignoring the fundamental problems in hopes that we can muddle our way through. The first problem with this approach is that it may not work. Circumstances, delayed, or ineffective programs may simply be overwhelmed and the entire financial system collapses. We have been perilously close to this condition since September, 2008 and the overall situation continues to deteriorate. Secondly, without a plan and controls, the largess of spending and guarantees could lead to catastrophic hyper inflation. Thirdly, even if we were to avoid the extremes, it would likely provide a drag on the economy that could last for decades. Japan’s “lost decade,” which is now going on 20 years provides a lesson on muddling through without taking the necessary financial hits to let the economy reset.
2. An even more ominous approach would be for the government to inflate its way out of the problems by simply monetizing the bad debts and spending until the economy restarts. This would undoubtedly destroy the $US and could set off a chain reaction leading to hyperinflation which could threaten our very political system. Though no one would suggest this approach, if government would bailout everyone screaming for help, it could happen in any event. As we remember, Napoleon, Lenin, Hitler, and Mao all sprung from the ashes of hyperinflation.
3. A more thoughtful approach would be to have an objective of deflating the bloated financial claims through the markets while providing the stimulus, guarantees, and restructuring necessary to avoid collapse. This would be a tricky, politically difficult task requiring many and varying measures as required as events unfold. This would require a series of better alternative decisions and not some grand, overriding program. Perhaps, we have the economic minds in Obama, Tim Geithner, Ben Bernanke, Larry Lindsay, and Paul Volker to work us through the problems. And, we hope Obama has the leadership, political skills, and will to put the programs in place. It is encouraging to see that there are initial steps in analyzing the problems of the banking and auto industries rather than simply showing thumbs up or thumbs down on throwing more money at them. At first look, the mortgage rescue program seems well thought out.
4. Recently, there are thoughtful people coming forward with specific approach recommendations. George Soros has made specific recommendations regarding the mortgage system, recapitalization of banks, energy policy, and international financial reform http://www.huffingtonpost.com/george-soros/a-plan-for-economic-recov_b_166518.html . Nouriel Roubini proposes nationalizing the banking system. Paul Krugman continually suggests dramatic, far reaching economic programs including significantly expanding spending stimulus. All of these plans have a high cost and will inflict much economic pain.
According to the Federal Reserve, nearly 23% of “financial wealth” has already disappeared. Much more is to be lost. There will be many more bankruptcies and many more job losses. Much of these losses are necessary to reset the economy. The forecast of economic turnaround later this year is a pipe dream.
Further, we will have large dislocations. Many jobs will never return. There will likely be huge reductions in finance, some manufacturing, and service industries. But, most importantly, it will reset our economy to more productive pursuits and reset the financial system so that it is a support system for the real economy rather than its driver. It will encourage thrift and tend to reverse the unhealthy distribution of wealth which is a requirement in a democracy.
No one knows how this economic situation is going to play out. We are still in the early stages, and things are still very unstable. Unforcastable future events will likely surprise on the downside for a while yet.
From an individual standpoint, it is a time for extreme caution. The safest investment is to pay down outstanding debt. It is the only riskless investment and it will reduce an interest cost that is higher than can be earned from other low risk investments. The volatility and potential downside for stocks and bonds qualify them as high risk at this time. Hedges against the devaluation of the $US are volatile and may be difficult to execute, but should be considered. Or, so I say, which may be wrong.
The economic problems are perhaps the biggest in our history, but we have had greater problems as a nation in the past and have not only survived, but have improved our circumstance through creative destruction. It will be accomplished this time by clear thinking on all of our parts and demanding the same of our leaders.
gordy ringoen 2/19/09
Brief History: First there came the sub-prime mortgages losses for financial institutions beginning in early 2008. It resulted in more than $500 billion in bank losses. This translated into more than $3 trillion contraction in loan capacity.
The losses and shrinking loan capacity led to illiquidity in the financial markets. Secretary Paulson asked for “standby” authority which was to give the markets “confidence.” No such luck, the markets began freezing out Fanny and Freddy. To stop their collapse, the government guaranteed $10 trillion of their paper (an amount equal to the total US debt at the time). Next was Bear Stearns which was forced into a shotgun marriage. The Treasury decided it couldn’t save Merrill and Lehman simultaneously. Bye, bye Lehman. Enter AIG, WAMU, Wachovia, Citi, and Bof A- the blackest of holes with more to come.
Paulson got on his knees and begged Nancy Pelosie to save the Union by giving him a discretionary account of $700 billion to buy toxic mortgage loans from failing institutions. He got the first installment of $350 billion. After a couple of weeks he realized this was a nonstarter. He then determined that putting the money into capital of the financial institutions would be more efficient. It could possibly be leveraged up to 10 times in loans by the banks. Nice hypothecation, but the banks merely used the capital to improve their capital structure while continuing to restrict credit.
Meanwhile, the world was also suffering a huge $US liquidity crisis. The LIBOR market, the international lending of $US, became illiquid for a number weeks in the fall of 2008. The Fed opened up its balance sheet for the world's Central Bankers to avert the crisis. The Fed expanded its balance sheet by $2.3 trillion. We don’t know where this money has actually gone because they won’t tell us. They say that if we knew, we might think someone was in trouble. You think?
Meanwhile, the rest of the economy began to catch up with the financial markets by falling off the cliff. More than1.5 million jobs were lost during the last three months of the year while foreclosures exploded. The Government went on holiday for three months waiting for a new administration.
Enter Obama. After haggling with Congress, he will have affected a nearly $800 billion stimulus program to get the economy moving and create 4 million jobs, or so we hope. There is about $600 billion in actual spending stimulus which amounts to less than 1/3 of the economic contraction expected in 2009. It is not nearly enough to jump start the economy, but it is a start. There will be more to come.
Meanwhile, Tim Geithner unveiled the Treasury program which would put $100 billion of capital into financial institutions which might generate $1 trillion in loans. Also, it would purchase $1 trillion of bad loans. Essentially, it is a “Paulson 2” plan, albeit with promised better record keeping and oversight. In any event, what it actually means is still a mystery since so little of the details have been disclosed. We assume that there are details.
The Fed, not to be left out, will increase credit for business and consumers from $200 billion to $1 trillion.
So, now we are caught up. Make sense? Of course not. All we can say for sure is that there is a big problem and we are throwing tons of money at it.
Political Response: There are four basic responses available to the government:
Spending to increase demand in the economy.
Tax cuts to stimulate demand.
Government purchase of bad loans.
Government injection of capital directly into business or guarantee of their debts.
Unfortunately, the responses thus far have been jumbled with only partial disclosure and shockingly little oversight. But, perhaps the most alarming aspect is a lack of coherent objectives and plan.
Economic Stimulus
The fundamental requirements of a sound economic stimulus program would be that the spending of taxpayer money, or cutting taxes, which is financially equivalent, has sound objectives in one of the following ways:
1. Spending would ideally be an investment in our economy. An investment where the principle and a fair return is expected. Investment in education, health care, infrastructure, technology, environment, R&D, and energy independence could all qualify as sound investments.
2. Spending for consumption is more problematical. It may be justified on a social basis. Unemployment insurance, food stamps, and medical care can constitute money well spent. Increases in defense spending and wars may be justified for protection or political reasons but not as an efficient stimulus.
3. Tax cuts are hard to justify on a stimulus basis. Tax cuts for corporations would tend to be the least rewarding. Although it can be argued that our corporate tax rates are higher than most competing countries, the argument is misleading. The net taxes paid by corporations as a percent of government revenues has been declining for decades because of loopholes in the tax system. Though stated rates are high, actual tax payments are low. Further, corporate tax cuts would tend to benefit the largest, established companies which tend to be poor engines for economic growth. For the past 30 years, the Fortune 500 companies have had a net decline in jobs. They have had net capital investment loss when comparing stock buy backs and dividends vs. capital raised. They have traded higher stock prices for shrinking their capital base. Nearly 18% of job creation is from start up companies that make up only about .2% of our total economy. They have minimal tax bills.
A tax cut for individuals from a stimulas standpoint are at best marginal and at worst highly inefficient. Tax cuts for individuals will likely be used to pay down debt or increase consumption. There is nothing in current behavior that suggests that individual tax cuts would be invested for long term economic benefits. A recent report says there has been no net savings since 2000. The loss of revenue would increase long term government debt but would not provide long term economic benefits.
Middle class tax cuts can be argued on a social basis. The working class has been effectively saddled with a 14% social security sur tax and do not benefit from the 15% capital gains taxes. Social justice it may be, but not an efficient stimulus.
In summary, an economic spending stimulus program is pretty straight forward. A prudent program will provide near term economic gains. It will be paid for by increased debt, but will bear economic fruits in the future which will allow for an increase in future taxes.
There is a contingent that thinks that all government spending is bad and all tax cuts are good. As Jon Stewart says, “20% of all dentists say that sugar gum is good for your teeth.”
Bailouts
Bailouts are much more problematic. Bailouts socialize overvalued debt, provide government funded equity for private firms, or simply nationalize businesses.
The reason that bailouts are needed is that the financial claims are not supported by assets or income generating power. In other words, the debt is overvalued. And, there is insufficient confidence in the private sector to make investment. The fundamental question is under what circumstances is a government bailout justified?
It is important to understand the circumstances that created the problem in the first place so that any program will not merely aggravate the situation. There are essentially three fundamental causes;
1. Mal- Investment: There has been excess construction of houses in marginal locations at prices that can not be afforded by the working populace. Probably too much has been invested in such things as leisure industries including resort development, casinos, cruise ships, and sports stadiums. Insufficient or ill-conceived investment in the automobile industry that produces only marginally competitive autos. And, perhaps the greatest distortion of all exists in the finance industry. This industry, before the recent market declines, had profits and market value of more than 20% of the Fortune 500 companies. This is a head scratching tariff to our producing economy for only moving money and credit from A to B.
2. Over Consumption: We essentially consume more than we produce. That is to say that we have no savings and consequentially no domestically generated investment. The net investment we do have has come from abroad. It is economically impossible to consume your way to long term prosperity.
3. Excessive Credit: Before the recent problems, public and private debt totaled more than 360% of our GDP. This compares to 160% in 1929 before the Great Depression. This is an amount that can not be sustained and will not be paid in kind because of a lack of economic capacity and unwillingness to service the debts on the part of the borrowers. This credit explosion triggered the mal-investment and over-consumption as previously mentioned. It also inflated the prices of real estate and financial assets above their economic value.
So, how big is the problem? Nouriel Roubini, of Stern School at NYU, who has been prescient regarding recent economic events, has recently estimated that the losses to financial institutions will be $3.6 trillion. The previous forecast was $1- 2 trillion. Approximately half the loss will be in banks which have only $1.4 trillion in equity leaving them with a negative net worth of $400 billion if he is correct.
To reduce the debt to GDP ratio to 1929 levels would require more than $25 trillion destruction in financial assets. This would result in a horrendous blow to the balance sheets of the 20% of the families with the vast majority of financial assets, but it would be even worse for the workers with no financial back up.
Oh, and lest we forget, there are $55 trillion Credit Default Swaps as part of the $550 trillion derivative market. The derivative market is 10x the total world’s GDP. Alan Greenspan told us in the past that derivatives reduced risk. It would be helpful for him to step forward now and explain how that is so. We could use some risk reduction.
The potential derivative losses may simply crush the financial system if the winners are allowed to pursue their gains. AIG might provide systemic risk to the financial system by itself. The debacle is a direct result of deregulation of financial institutions and non-regulation of the derivative markets.
And, the problems are not only a domestic issue. The Director of National Intelligence recently warned Congress that the world financial collapse poses the greatest risk to US security - replacing terrorism as the primary threat. It is forecast that 50 million jobs will be lost worldwide in 2009 causing much social unrest.
Government Guidelines: The following are things the government must do to improve their programs to alleviate the crisis.
1. Congress needs to take a crash course in economics and address the issues instead of ideology.
2. It must initiate actions that will avert systemic liquidity collapses and bankruptcies that would precipitate a chain reaction throughout the economy.
3. It must provide the necessary finance to ensure that the economy can function while nudging it into more productive ways. Meanwhile, it must protect families from catastrophic hardship for those caught in the maelstrom.
4. It must resist pressures from asset owners to monetize their overvalued financial assets. It has been said that “in a bull markets everyone is a capitalist and everyone becomes a socialist in bear markets.” Former free market advocates in finance have elbowed their way to the front of the bailout line.
Major Government Alternatives
1. Continue the patchwork programs to meet the immediate crisis, while ignoring the fundamental problems in hopes that we can muddle our way through. The first problem with this approach is that it may not work. Circumstances, delayed, or ineffective programs may simply be overwhelmed and the entire financial system collapses. We have been perilously close to this condition since September, 2008 and the overall situation continues to deteriorate. Secondly, without a plan and controls, the largess of spending and guarantees could lead to catastrophic hyper inflation. Thirdly, even if we were to avoid the extremes, it would likely provide a drag on the economy that could last for decades. Japan’s “lost decade,” which is now going on 20 years provides a lesson on muddling through without taking the necessary financial hits to let the economy reset.
2. An even more ominous approach would be for the government to inflate its way out of the problems by simply monetizing the bad debts and spending until the economy restarts. This would undoubtedly destroy the $US and could set off a chain reaction leading to hyperinflation which could threaten our very political system. Though no one would suggest this approach, if government would bailout everyone screaming for help, it could happen in any event. As we remember, Napoleon, Lenin, Hitler, and Mao all sprung from the ashes of hyperinflation.
3. A more thoughtful approach would be to have an objective of deflating the bloated financial claims through the markets while providing the stimulus, guarantees, and restructuring necessary to avoid collapse. This would be a tricky, politically difficult task requiring many and varying measures as required as events unfold. This would require a series of better alternative decisions and not some grand, overriding program. Perhaps, we have the economic minds in Obama, Tim Geithner, Ben Bernanke, Larry Lindsay, and Paul Volker to work us through the problems. And, we hope Obama has the leadership, political skills, and will to put the programs in place. It is encouraging to see that there are initial steps in analyzing the problems of the banking and auto industries rather than simply showing thumbs up or thumbs down on throwing more money at them. At first look, the mortgage rescue program seems well thought out.
4. Recently, there are thoughtful people coming forward with specific approach recommendations. George Soros has made specific recommendations regarding the mortgage system, recapitalization of banks, energy policy, and international financial reform http://www.huffingtonpost.com/george-soros/a-plan-for-economic-recov_b_166518.html . Nouriel Roubini proposes nationalizing the banking system. Paul Krugman continually suggests dramatic, far reaching economic programs including significantly expanding spending stimulus. All of these plans have a high cost and will inflict much economic pain.
According to the Federal Reserve, nearly 23% of “financial wealth” has already disappeared. Much more is to be lost. There will be many more bankruptcies and many more job losses. Much of these losses are necessary to reset the economy. The forecast of economic turnaround later this year is a pipe dream.
Further, we will have large dislocations. Many jobs will never return. There will likely be huge reductions in finance, some manufacturing, and service industries. But, most importantly, it will reset our economy to more productive pursuits and reset the financial system so that it is a support system for the real economy rather than its driver. It will encourage thrift and tend to reverse the unhealthy distribution of wealth which is a requirement in a democracy.
No one knows how this economic situation is going to play out. We are still in the early stages, and things are still very unstable. Unforcastable future events will likely surprise on the downside for a while yet.
From an individual standpoint, it is a time for extreme caution. The safest investment is to pay down outstanding debt. It is the only riskless investment and it will reduce an interest cost that is higher than can be earned from other low risk investments. The volatility and potential downside for stocks and bonds qualify them as high risk at this time. Hedges against the devaluation of the $US are volatile and may be difficult to execute, but should be considered. Or, so I say, which may be wrong.
The economic problems are perhaps the biggest in our history, but we have had greater problems as a nation in the past and have not only survived, but have improved our circumstance through creative destruction. It will be accomplished this time by clear thinking on all of our parts and demanding the same of our leaders.
gordy ringoen 2/19/09
Saturday, October 11, 2008
Lola LeMieux Kindley - The Bail Out of America
[From a discussion of the proposed Bush administration $700 billion bail out]
I'm with the vast majority of Congressional Republicans and the constituents who are writing in to say Hell, No. My reason is the preservation of the free market, but I'm also astonished to the degree of flabbergastation that the administration would propose a "solution" that puts control of the markets and ergo the economy in the hands of ONE MAN, with, it appears, very little accountability. What! Don't these guys read fairy tales? The Brothers Grimm and Anderson and the global folklore would tell them this is folly.
I heard a great quote from Tocqueville last week: he felt the essence of the American character was two-fold, the demand for freedom and the demand for equality. He perceived that they are mutually self-destructive, and the battle for supremacy between the two values would end with the demand for equality dominant. I think Tocqueville was not only insightful but prescient about the long term outworking of the indicators he was observing, and I think he was right about the conflict between the desires for freedom and equality. Since I am the first person in my father's family to graduate from high school, one would expect that I would come down on the side of equality, but in fact, I find the way this desire manifests itself in the last half of the 20th and the early 21st centuries repugnant. I want the freedom to pursue what I believe I can achieve, on my own merit and with my own effort. I don't want the demeaning, condescending paternalism of fudging the standards and skewing the standards to be the factor that accounts for my achievements. I certainly don't want the implication that I can't measure up, unless standards are lower for me than for those who "can;" I don't want the expectation of whining and protests of "unfair and unjust inequality," if I do not in fact measure up. And I mourn what I perceive as the loss of the boisterous, maybe unsophisticated, can-do attitude that allowed the can't-do rest of the world t laugh at Americans.
I'm with the vast majority of Congressional Republicans and the constituents who are writing in to say Hell, No. My reason is the preservation of the free market, but I'm also astonished to the degree of flabbergastation that the administration would propose a "solution" that puts control of the markets and ergo the economy in the hands of ONE MAN, with, it appears, very little accountability. What! Don't these guys read fairy tales? The Brothers Grimm and Anderson and the global folklore would tell them this is folly.
I heard a great quote from Tocqueville last week: he felt the essence of the American character was two-fold, the demand for freedom and the demand for equality. He perceived that they are mutually self-destructive, and the battle for supremacy between the two values would end with the demand for equality dominant. I think Tocqueville was not only insightful but prescient about the long term outworking of the indicators he was observing, and I think he was right about the conflict between the desires for freedom and equality. Since I am the first person in my father's family to graduate from high school, one would expect that I would come down on the side of equality, but in fact, I find the way this desire manifests itself in the last half of the 20th and the early 21st centuries repugnant. I want the freedom to pursue what I believe I can achieve, on my own merit and with my own effort. I don't want the demeaning, condescending paternalism of fudging the standards and skewing the standards to be the factor that accounts for my achievements. I certainly don't want the implication that I can't measure up, unless standards are lower for me than for those who "can;" I don't want the expectation of whining and protests of "unfair and unjust inequality," if I do not in fact measure up. And I mourn what I perceive as the loss of the boisterous, maybe unsophisticated, can-do attitude that allowed the can't-do rest of the world t laugh at Americans.
Wednesday, September 17, 2008
Darryl Johnson - Service in the Philippines
I served as ambassador in the Philippines for three months in mid-1985, having been called back from retirement to fill in there. We had a terrific time, but the situation is discouraging -- way too many people in too little space, and limited economic opportunities. One niche they do have, however, is a significant number of people who speak good "Murrican English." This was one part of our colonial heritage -- together with excellent golf courses. As a result, one of the top business sectors is call-back centers. They are second only to India is the number of such facilities. And by the way, the biggest one is at what used to be Clark Air Force Base. The base is long gone, partly the result of failed negotiations in the latter part of the Marcos era, but mainly the result of the volcano, Mt. Pinatubo, which destroyed large parts of the base in about 1989(?). We have no bases in the Philippines now, not Clark and not Subic Bay Naval Base, and we have no permanently-stationed troops there at all (although we do have fairly extensive military assistance programs). On other related topics, Tagalog is the official national language, but it is mainly spoken in Luzon, the largest island, where Manila is located. But it is not widely spoken in the more remote islands, including Mindanao, which has been the home of most o f the security problems in recent decades, dating back long before 9/11 and the current Global War on Terror (also known as GWOT). In my three months in the Phils, I went to Mindanao five times, including Davao and Zamboanga. All of these visits were for the dedication of US-Philippine assistance projects -- new schools in remote strongholds of some of the real baddies, or small bridges to help farmers, or community education/training programs, or rural housing and agriculture projects. Most of these areas have had large Muslim minorities, or in some cases majorities, for centuries, and they were never fully assimilated into predominantly Catholic Philippine culture. Which reminds me of a cliche Filippinos say about themselves, and the cultural influences of their two colonial overlords, the Spanish and the Americans: they say they lived in a convent for 300 years, and in Hollywood for 50.
Zamboanga is a pleasant tropical city of about 300,000 located on the far southwest corner of the island of Mindanao, the largest of the Philippine islands (Luzon has a much larger population, and is about the same size). It is close to the farthest reaches of the Philippines, Indonesia and Malaysia, and the small islands west of Zamboanga (Basilan, Jolo and others) have been terrorist havens for decades. The US supports Philippine efforts to build schools and medical clinics and bridges and docks and other infrastructure to encourage loyalty -- or at least passive acceptance -- toward the Manila government, which is a long ways away, literally and figuratively. These efforts have been somewhat effective, in part because the terrorists (the Abu Sayaf Group, the Moro National Liberation Front, Jamma Islamiya) are really brutal, but mainly because people want to be on the winning side. As for scenes from the colonial era in the Philippines that resemble The Ugly American (which was actually set in Thailand, by the way), the impression is accurate up to a point. But it is also true that Filipinos love Americans. One question I got numerous times was, "Why can't we become the 51st state?" The week I arrived, I presided over a movie premier about a daring rescue operation in the latter days of WWII, where Filipino guides helped untrained Americans liberate, with zero casualties, a Japanese POW camp holding 600 Americans and a few Aussies. It's a true story which virtually all Filipinos know. But I had never heard of it. There are examples of shared American and Filipino history all over the place, and MacArthur lives, from Corregidor to Leyte Gulf to the Manila Hotel! Unfortunately for those who have to live with today's realities rather than yesterday's dreams, the population (90 m) is far in excess of the economic or political capacity to support or govern, and the Philippines has gone from being the richest country in East Asia after WWII to being one of the poorest. President Arroyo enjoys very little respect, especially conpared to her movie star predecessor, Erap Estrada, who made little effort to govern, and to his predecessor, Gen. Fidel Ramos, who remains very popular. The society is very hierarchical, with a few hundred people at the top (mostly educated in the US) and millions at the bottom. In sum, it's a fine place to visit, but a somewht uncomfortable place to live.
Zamboanga is a pleasant tropical city of about 300,000 located on the far southwest corner of the island of Mindanao, the largest of the Philippine islands (Luzon has a much larger population, and is about the same size). It is close to the farthest reaches of the Philippines, Indonesia and Malaysia, and the small islands west of Zamboanga (Basilan, Jolo and others) have been terrorist havens for decades. The US supports Philippine efforts to build schools and medical clinics and bridges and docks and other infrastructure to encourage loyalty -- or at least passive acceptance -- toward the Manila government, which is a long ways away, literally and figuratively. These efforts have been somewhat effective, in part because the terrorists (the Abu Sayaf Group, the Moro National Liberation Front, Jamma Islamiya) are really brutal, but mainly because people want to be on the winning side. As for scenes from the colonial era in the Philippines that resemble The Ugly American (which was actually set in Thailand, by the way), the impression is accurate up to a point. But it is also true that Filipinos love Americans. One question I got numerous times was, "Why can't we become the 51st state?" The week I arrived, I presided over a movie premier about a daring rescue operation in the latter days of WWII, where Filipino guides helped untrained Americans liberate, with zero casualties, a Japanese POW camp holding 600 Americans and a few Aussies. It's a true story which virtually all Filipinos know. But I had never heard of it. There are examples of shared American and Filipino history all over the place, and MacArthur lives, from Corregidor to Leyte Gulf to the Manila Hotel! Unfortunately for those who have to live with today's realities rather than yesterday's dreams, the population (90 m) is far in excess of the economic or political capacity to support or govern, and the Philippines has gone from being the richest country in East Asia after WWII to being one of the poorest. President Arroyo enjoys very little respect, especially conpared to her movie star predecessor, Erap Estrada, who made little effort to govern, and to his predecessor, Gen. Fidel Ramos, who remains very popular. The society is very hierarchical, with a few hundred people at the top (mostly educated in the US) and millions at the bottom. In sum, it's a fine place to visit, but a somewht uncomfortable place to live.
Webmaster note: Darryl Johnson is a former U.S. Ambassador to Lithuania, Thailand and the Philippines, and current director of the American Institute of Taiwan.
Friday, September 12, 2008
Chuck Cooper comments to previous post
On Gordy's post:
Excellent, and as expected, I totally agree with the policies implied in your questions. Also about income taxes. I would like to discuss a couple of points. I don’t believe we can foist any of our debt, i.e. excess consumption, onto the next generation. As you point out, we can only consume today’s resources. While it is inherent in your third point about how government “pays” for expenditures, in my view it matters not whether it is printed money or borrowed money. The result is inflation, the least equitable tax of all. As you say, there is no free lunch. You can’t even steal it. If we just “borrowed” from ourselves, the result is clear enough. When we borrow from foreign countries, it gets a bit more complicated. We send them dollars or debt (not sure there is any difference) and they send us goods. Then the trade deficit eats away the value of the dollar. If we can keep that going forever (ignoring the other problems that this creates) we have successfully stolen goods from the foreign countries. You would think that after a while it is going to dawn on them that all those “sales” that keep things humming in their factories are only beneficial if they are paid for. There are indications now that China is catching on.
The Bush tax cuts were irresponsible, and his only excuse is ignorance and demonstrated incompetence. So sad that McCain thinks he has to switch to match the irresponsibility to get elected. Like all the rest of his positions, which used to make him appear to be a valid alternative. However, as long as the voters can be distracted by the fun stuff like lipstick on a pig, I fear it all may work. All you have to do is fool some of the people some of the time. Too bad.
I think I have voted Republican most of the time, but what I don’t understand is these people that will vote Republican all of the time, no matter who is running. There is something bad wrong with them. Particularly this time.
Gordy response:
Thanks for your insightful comments. You hit on a very cogent point. Printing money and and creating credit is all the same. I usually avoid this argument because nearly all economic theory claims that only money matters and credit can be ignored. If you look in the index of any of Milton Friedman's books, "credit" is not to be found. It is not even to be found in Bernanke's textbook which is used by more than 250 college Economic professors.
I think we underestimate the acuity of the Chinese. They have over $1 trillion of our debt which they have accumulated through balance of trade surpluses with us. They know, as we know, that they will not be paid back in equal value. On the other hand, look what they have accomplished. They have built an economic juggernaut while literally obliterating many of our industries, encouraged us to over-consume, thus reducing our investment, contributed greatly to our bloated financial system and have weakened the $US as a reserve currency. Let's say the lose 1/2 of the value. Compare this cost to what we get for the same amount in our middle-east wars. I think they may have made a pretty good investment. Further, they have solved a demographic problem. They had 90 million people added to their workforce in the last 15 years. It gave them something to do. As you noted, it is begining to change. They have their industries, they have our money, and they are going to lose 85 million workers over the next 15 years as their population ages. As a friend, who used to be in the import business told me this week, we had better get used to going barefoot because we have no shoe manufacturers left.
I think the Super Collider is absolutely fascinating. I think they are going to prove my theory about the creation of our universe. It was created by a highschool student as his science project in a universe in a different dimension. He slammed a couple of his or her atoms together and a tiny bit migrated to our 4 dimensional reality. That was the seed for the big bang. From then on its all history.
I haven't reconciled this theory with the NW Indian belief that a raven, picked up a stone, flew too close to the sun, dropped it and it became our earth. But, give me time. It seems to make as much sense as other explanations I have heard.
Excellent, and as expected, I totally agree with the policies implied in your questions. Also about income taxes. I would like to discuss a couple of points. I don’t believe we can foist any of our debt, i.e. excess consumption, onto the next generation. As you point out, we can only consume today’s resources. While it is inherent in your third point about how government “pays” for expenditures, in my view it matters not whether it is printed money or borrowed money. The result is inflation, the least equitable tax of all. As you say, there is no free lunch. You can’t even steal it. If we just “borrowed” from ourselves, the result is clear enough. When we borrow from foreign countries, it gets a bit more complicated. We send them dollars or debt (not sure there is any difference) and they send us goods. Then the trade deficit eats away the value of the dollar. If we can keep that going forever (ignoring the other problems that this creates) we have successfully stolen goods from the foreign countries. You would think that after a while it is going to dawn on them that all those “sales” that keep things humming in their factories are only beneficial if they are paid for. There are indications now that China is catching on.
The Bush tax cuts were irresponsible, and his only excuse is ignorance and demonstrated incompetence. So sad that McCain thinks he has to switch to match the irresponsibility to get elected. Like all the rest of his positions, which used to make him appear to be a valid alternative. However, as long as the voters can be distracted by the fun stuff like lipstick on a pig, I fear it all may work. All you have to do is fool some of the people some of the time. Too bad.
I think I have voted Republican most of the time, but what I don’t understand is these people that will vote Republican all of the time, no matter who is running. There is something bad wrong with them. Particularly this time.
Gordy response:
Thanks for your insightful comments. You hit on a very cogent point. Printing money and and creating credit is all the same. I usually avoid this argument because nearly all economic theory claims that only money matters and credit can be ignored. If you look in the index of any of Milton Friedman's books, "credit" is not to be found. It is not even to be found in Bernanke's textbook which is used by more than 250 college Economic professors.
I think we underestimate the acuity of the Chinese. They have over $1 trillion of our debt which they have accumulated through balance of trade surpluses with us. They know, as we know, that they will not be paid back in equal value. On the other hand, look what they have accomplished. They have built an economic juggernaut while literally obliterating many of our industries, encouraged us to over-consume, thus reducing our investment, contributed greatly to our bloated financial system and have weakened the $US as a reserve currency. Let's say the lose 1/2 of the value. Compare this cost to what we get for the same amount in our middle-east wars. I think they may have made a pretty good investment. Further, they have solved a demographic problem. They had 90 million people added to their workforce in the last 15 years. It gave them something to do. As you noted, it is begining to change. They have their industries, they have our money, and they are going to lose 85 million workers over the next 15 years as their population ages. As a friend, who used to be in the import business told me this week, we had better get used to going barefoot because we have no shoe manufacturers left.
I think the Super Collider is absolutely fascinating. I think they are going to prove my theory about the creation of our universe. It was created by a highschool student as his science project in a universe in a different dimension. He slammed a couple of his or her atoms together and a tiny bit migrated to our 4 dimensional reality. That was the seed for the big bang. From then on its all history.
I haven't reconciled this theory with the NW Indian belief that a raven, picked up a stone, flew too close to the sun, dropped it and it became our earth. But, give me time. It seems to make as much sense as other explanations I have heard.
Gordy Ringoen - Tax Politics
In a few weeks, we will be voting in the most important election in our lifetime. There is much discussion about the relatively inconsequential personal issues of race, gender, and social status. In spite of the noise and spin, there are major issues, including:
Whether we should have an energy policy that includes consumption as well as non petroleum based energy sources or just drill, drill, drill.
Whether we should advance our interests in the world primarily through negotiation or through the threat and actual use of force.
Whether we should expeditiously end the wars in which we are engaged, or should they be continued indefinitely until some sort of victory is defined and accomplished.
Whether we should engage in other pre-emptive wars.
Whether we should have a policy and actions to limit greenhouse gasses.
Whether we support or deny equal pay for equal work and whether women should have the right to choose abortion.
Whether we should teach religious based doctrines such as “creationism” and “abstinence only” in our public schools.
Whether spying on citizens without warrant or probable cause is acceptable.
Whether we accept torture as an interrogation tool.
Whether we support Habeas Corpus for all people under our control.
Whether the Federal Government should contravene state and local government’s laws regarding environmental and social issues such as marijuana restrictions, gay unions, and gun control.
Whether we should support stem-cell research.
Who we wish to fill the vacancies of likely two and, possibly three, of the more liberal Supreme Court judges. A shift to the right would undoubtedly reverse Roe vs. Wade and would likely have impact on Freedom of Speech, Separation of Powers, and Habeas Corpus.
Whether tax cuts and free markets alone will reverse our economic and financial woes.
Whether the solution to immigration is higher fences, more border patrol, and incarcerations or developing polices which take into account our benefits vs. our costs of immigration and addressing the root causes.
Whether we should adopt policies and programs to provide health care for the nearly 50 million that have no medical insurance.
This is not an exhaustive list but does highlight some of the more important issues. They are reasonably easy to understand and everyone can make up their own minds where they stand on these issues.
The one important issue that there seems to be a great deal of misinformation about is taxes. Many of my peers claim that taxes are their number one issue. Obama would raise them while McCain wants to lower them. I suspect some of the people that take that position are really using it as an excuse to justify their vote for McCain while the real reasons lie elsewhere. It would be similar to the Palin nomination which may be an excuse to vote against Obama, but is not a rational reason to vote for Mc Cain.
None-the-less, there are many whose primary issue is taxes which I will discuss.
First, much of the campaign rhetoric can be ignored. McCain says that Obama will raise taxes while he will lower them. Obama says his tax proposal would lower taxes for 95% of the people. The New York Times last week said, after analyzing both positions, that there is little material difference.
McCain infers that tax cuts can be funded by eliminating earmarks. Earmarks are special projects authorized by Congress and approved by the president. They allow Congressmen to show their constituents that they are looking out for their interests in Washington. Some are worthwhile projects, while others, like the “bridge to nowhere,” are not so good. In any event, the people in the receiving districts love them as do the politicians who fight for them. They help them get re-elected. Sarah Palin needn’t apologize for trying to get plums for her constituents, but it is ingenious to claim that she is opposed to earmarks because she switched her support for the “bridge to nowhere” after it was dead in Congress. And, even though she said “no thanks” to the bridge after it was dead, she did not return the money, but rather, used it for other pork barrel projects.
Let’s put earmarks into perspective, they amount to about $18 billion per year or a little more than ½ % of Federal expenditures. They are relatively inconsequential and are not going away. The president has little influence over them and it is not a rational presidential campaign issue. Presidential, “line item veto,” which will not happen, would only further politicize the process.
So let’s finally get down to the meat of the issue, income taxes, higher or lower?
Let’s first look at a macro-economic view. It is forecast that our total goods and services to be produced in the U. S. over the next year will be approximately $15 trillion. Government expenditures, not including wars, will be about 21% of that amount. As you can see, from an economic standpoint, government expenditures are coming out of the economy on a current basis. It doesn’t matter whether it is surgery for a Medicare patient or a bomb that explodes in Iraq. The economic cost is the year in which it is spent or used. The economic cost of a war is the year in which it is fought. That which is spent on a war is production of goods and services that could have presumably been channeled to some other useful purpose either by government or the private sector.
Notice, from an economic standpoint, there is no consideration as to how the Government gets the money to pay for its expenditures.
So, how does the government pay for its expenditures?
It can tax it citizens and corporations.
It can issue IOU’s (Treasuries) to its citizens.
It can issue IOU’s to the Federal Reserve which, in effect, prints money to pay for them.
It can borrow from foreigners.
Those are essentially the only material choices.
The question is what is the best mix of these choices for the long term economic benefit of our country and, for us as and our families individually?
In looking at the list above, there are really two fundamental choices, taxing or deficit financing, as items 2-4 are all related to borrowing. The projected Budget for 2009 is a historic high Federal deficit of $480 billion, not including the cost of our wars which will add another $180 billion or more, plus, the likely elimination of the alternative minimum tax at $60 billion, and the cost of financial bailouts. It amounts to more than $2,000 per person in the U.S.
The projected taxes for the 2009 Budget includes $1,259 billion income taxes, $949 billion in Social Security taxes, and $339 billion in corporate taxes. You will note that Social Security taxes are just government revenues, like any other, and are not set aside for Social Security benefits.
It is fundamental to our tax system that it be equitable and just. Everyone can decide whether, a 13.5% Social Security sur-tax, beyond normal income tax, which falls almost exclusively on workers, is appropriate. Or, that a maximum of 15% capital gains tax which overwhelmingly favors the rich, meets those criteria. An early issue for the next president will be decision to continue the Bush tax cuts beyond their scheduled expiration in 2010. Continuation of the tax cuts will add $1 trillion to our Federal deficits over the ensuing four years. Fifty-two per cent of the tax cuts will go to the top 1% of incomes.
So, if the economic costs of government expenditures are the same, regardless of how they are paid, why not just tax and be done with it? Well, the problem with taxes is that you know specifically who, when, and how the bill is being paid. That is both its advantage and disadvantage.
Paying for Government expenditures with debt gives the immediate impression that no one will have to pay, but the reality is someone will pay, you just don’t know who, how, or when. Most economists complain that future generations are going to have to pay off our debts. Why would we expect that the next generations will become our economic slaves by taxing themselves of their production to pay for Treasuries that we issued to ourselves and foreigners? In other words, they think that our generation can consume everything we produce and then consume what the next generation produces. Not likely. How do our progeny walk away from these obligations? They simply deficit spend and inflate just as we have done. They will do exactly as we have taught them to do. Unfortunately, for the holders of those Treasuries, their purchasing power will fall. Future generations will diminish the value of the Treasuries we have issued through continued inflationary policies.
But, the more urgent problem with the deficits is that it destroys our economy. As the Government increases its share of the economy, individuals increase their debt to maintain their standard of living. The increase in debt in both the private and public sectors without corresponding increases in the real economy causes inflation in asset prices. The increase in prices of securities and real estate gives confidence to borrow and consume even more. This has incredibly spiraled without restrictions to the point where we have a negative economic savings rate and hence negative investment. With negative investment in education, infrastructure, and capital equipment there is continued economic gloom as far as the eye can see.
Further, the asset appreciation we have enjoyed in real estate and securities prices is nothing more than fool’s gold as we have not built the foundation for a strong economy. It is relatively easy to fool ourselves for a while, but it is impossible to change the basic economics of bad policy. Either through inflation or deflation the value of the asset claims on our economy will be diminished in value to the level that the real economy can support them. Sorry, there is no free lunch.
The deficits also lead to the unsustainable and equally dangerous balance of trade deficits which can be visited at another time as well as whether more deficits in the future will stimulate the economy or will be a further drag.
In summary, Federal deficits are destroying our economy for following generations and may not even spare us from the collapse of the prices we use to measure our personal wealth.
In short, we should not succumb to the siren song of lower taxes but, rather, that we need to equitably increase taxes to shrink our disastrous deficits. And, that those expenditures which are made are done judiciously, in the best interest of the country, today, and in the future. Only when this happens will we be on the road to true economic recovery.
For those, who still take a “me first” approach and think that lower taxes are in their personal best interest, they should look at their portfolios and compare their recent debt induced performance compared to the tax savings they hope to gain in the future.
Finally, for my generation, who inherited a healthy and robust economy which we have dissipated through profligate use of resources, over consumption, and insufficient investment, while allowing a grotesque, bloated, and distended financial system to evolve, we need to use our remaining time and energy to force the economic, financial, and fiscal changes necessary for the economic wellbeing of our children and grandchildren. And, it starts with our choices in the coming election.
gordy ringoen
9/10/08
Whether we should have an energy policy that includes consumption as well as non petroleum based energy sources or just drill, drill, drill.
Whether we should advance our interests in the world primarily through negotiation or through the threat and actual use of force.
Whether we should expeditiously end the wars in which we are engaged, or should they be continued indefinitely until some sort of victory is defined and accomplished.
Whether we should engage in other pre-emptive wars.
Whether we should have a policy and actions to limit greenhouse gasses.
Whether we support or deny equal pay for equal work and whether women should have the right to choose abortion.
Whether we should teach religious based doctrines such as “creationism” and “abstinence only” in our public schools.
Whether spying on citizens without warrant or probable cause is acceptable.
Whether we accept torture as an interrogation tool.
Whether we support Habeas Corpus for all people under our control.
Whether the Federal Government should contravene state and local government’s laws regarding environmental and social issues such as marijuana restrictions, gay unions, and gun control.
Whether we should support stem-cell research.
Who we wish to fill the vacancies of likely two and, possibly three, of the more liberal Supreme Court judges. A shift to the right would undoubtedly reverse Roe vs. Wade and would likely have impact on Freedom of Speech, Separation of Powers, and Habeas Corpus.
Whether tax cuts and free markets alone will reverse our economic and financial woes.
Whether the solution to immigration is higher fences, more border patrol, and incarcerations or developing polices which take into account our benefits vs. our costs of immigration and addressing the root causes.
Whether we should adopt policies and programs to provide health care for the nearly 50 million that have no medical insurance.
This is not an exhaustive list but does highlight some of the more important issues. They are reasonably easy to understand and everyone can make up their own minds where they stand on these issues.
The one important issue that there seems to be a great deal of misinformation about is taxes. Many of my peers claim that taxes are their number one issue. Obama would raise them while McCain wants to lower them. I suspect some of the people that take that position are really using it as an excuse to justify their vote for McCain while the real reasons lie elsewhere. It would be similar to the Palin nomination which may be an excuse to vote against Obama, but is not a rational reason to vote for Mc Cain.
None-the-less, there are many whose primary issue is taxes which I will discuss.
First, much of the campaign rhetoric can be ignored. McCain says that Obama will raise taxes while he will lower them. Obama says his tax proposal would lower taxes for 95% of the people. The New York Times last week said, after analyzing both positions, that there is little material difference.
McCain infers that tax cuts can be funded by eliminating earmarks. Earmarks are special projects authorized by Congress and approved by the president. They allow Congressmen to show their constituents that they are looking out for their interests in Washington. Some are worthwhile projects, while others, like the “bridge to nowhere,” are not so good. In any event, the people in the receiving districts love them as do the politicians who fight for them. They help them get re-elected. Sarah Palin needn’t apologize for trying to get plums for her constituents, but it is ingenious to claim that she is opposed to earmarks because she switched her support for the “bridge to nowhere” after it was dead in Congress. And, even though she said “no thanks” to the bridge after it was dead, she did not return the money, but rather, used it for other pork barrel projects.
Let’s put earmarks into perspective, they amount to about $18 billion per year or a little more than ½ % of Federal expenditures. They are relatively inconsequential and are not going away. The president has little influence over them and it is not a rational presidential campaign issue. Presidential, “line item veto,” which will not happen, would only further politicize the process.
So let’s finally get down to the meat of the issue, income taxes, higher or lower?
Let’s first look at a macro-economic view. It is forecast that our total goods and services to be produced in the U. S. over the next year will be approximately $15 trillion. Government expenditures, not including wars, will be about 21% of that amount. As you can see, from an economic standpoint, government expenditures are coming out of the economy on a current basis. It doesn’t matter whether it is surgery for a Medicare patient or a bomb that explodes in Iraq. The economic cost is the year in which it is spent or used. The economic cost of a war is the year in which it is fought. That which is spent on a war is production of goods and services that could have presumably been channeled to some other useful purpose either by government or the private sector.
Notice, from an economic standpoint, there is no consideration as to how the Government gets the money to pay for its expenditures.
So, how does the government pay for its expenditures?
It can tax it citizens and corporations.
It can issue IOU’s (Treasuries) to its citizens.
It can issue IOU’s to the Federal Reserve which, in effect, prints money to pay for them.
It can borrow from foreigners.
Those are essentially the only material choices.
The question is what is the best mix of these choices for the long term economic benefit of our country and, for us as and our families individually?
In looking at the list above, there are really two fundamental choices, taxing or deficit financing, as items 2-4 are all related to borrowing. The projected Budget for 2009 is a historic high Federal deficit of $480 billion, not including the cost of our wars which will add another $180 billion or more, plus, the likely elimination of the alternative minimum tax at $60 billion, and the cost of financial bailouts. It amounts to more than $2,000 per person in the U.S.
The projected taxes for the 2009 Budget includes $1,259 billion income taxes, $949 billion in Social Security taxes, and $339 billion in corporate taxes. You will note that Social Security taxes are just government revenues, like any other, and are not set aside for Social Security benefits.
It is fundamental to our tax system that it be equitable and just. Everyone can decide whether, a 13.5% Social Security sur-tax, beyond normal income tax, which falls almost exclusively on workers, is appropriate. Or, that a maximum of 15% capital gains tax which overwhelmingly favors the rich, meets those criteria. An early issue for the next president will be decision to continue the Bush tax cuts beyond their scheduled expiration in 2010. Continuation of the tax cuts will add $1 trillion to our Federal deficits over the ensuing four years. Fifty-two per cent of the tax cuts will go to the top 1% of incomes.
So, if the economic costs of government expenditures are the same, regardless of how they are paid, why not just tax and be done with it? Well, the problem with taxes is that you know specifically who, when, and how the bill is being paid. That is both its advantage and disadvantage.
Paying for Government expenditures with debt gives the immediate impression that no one will have to pay, but the reality is someone will pay, you just don’t know who, how, or when. Most economists complain that future generations are going to have to pay off our debts. Why would we expect that the next generations will become our economic slaves by taxing themselves of their production to pay for Treasuries that we issued to ourselves and foreigners? In other words, they think that our generation can consume everything we produce and then consume what the next generation produces. Not likely. How do our progeny walk away from these obligations? They simply deficit spend and inflate just as we have done. They will do exactly as we have taught them to do. Unfortunately, for the holders of those Treasuries, their purchasing power will fall. Future generations will diminish the value of the Treasuries we have issued through continued inflationary policies.
But, the more urgent problem with the deficits is that it destroys our economy. As the Government increases its share of the economy, individuals increase their debt to maintain their standard of living. The increase in debt in both the private and public sectors without corresponding increases in the real economy causes inflation in asset prices. The increase in prices of securities and real estate gives confidence to borrow and consume even more. This has incredibly spiraled without restrictions to the point where we have a negative economic savings rate and hence negative investment. With negative investment in education, infrastructure, and capital equipment there is continued economic gloom as far as the eye can see.
Further, the asset appreciation we have enjoyed in real estate and securities prices is nothing more than fool’s gold as we have not built the foundation for a strong economy. It is relatively easy to fool ourselves for a while, but it is impossible to change the basic economics of bad policy. Either through inflation or deflation the value of the asset claims on our economy will be diminished in value to the level that the real economy can support them. Sorry, there is no free lunch.
The deficits also lead to the unsustainable and equally dangerous balance of trade deficits which can be visited at another time as well as whether more deficits in the future will stimulate the economy or will be a further drag.
In summary, Federal deficits are destroying our economy for following generations and may not even spare us from the collapse of the prices we use to measure our personal wealth.
In short, we should not succumb to the siren song of lower taxes but, rather, that we need to equitably increase taxes to shrink our disastrous deficits. And, that those expenditures which are made are done judiciously, in the best interest of the country, today, and in the future. Only when this happens will we be on the road to true economic recovery.
For those, who still take a “me first” approach and think that lower taxes are in their personal best interest, they should look at their portfolios and compare their recent debt induced performance compared to the tax savings they hope to gain in the future.
Finally, for my generation, who inherited a healthy and robust economy which we have dissipated through profligate use of resources, over consumption, and insufficient investment, while allowing a grotesque, bloated, and distended financial system to evolve, we need to use our remaining time and energy to force the economic, financial, and fiscal changes necessary for the economic wellbeing of our children and grandchildren. And, it starts with our choices in the coming election.
gordy ringoen
9/10/08
Thursday, June 28, 2007
Margie Martini Jones - Title IX
Times have changed for the better!! We have gone from intermurals for girls' athletics to my daughters being able to compete in sports with some equal support with the boys. My youngest daughter, Barbara, was always being challenged by boys in swimming who did not know she was a competitive swimmer and she usually beat them! One great story in my family is about my sister Judi who graduated from Glacier High. She was a cheerleader there and later her daughter Marcy was a cheerleader at Kennedy High. Now her granddaughter is a junior and an athlete. She was asked if she wanted to be a cheerleader and carry on the dynasty and said "never". I say "hooray for Title IX
Tuesday, May 15, 2007
Chuck Cooper - Global Warming - What, Me Worry?
Now that the Intergovernmental Panel on Climate Change has issued its report that the likelihood is between 90% and 99% that human generated greenhouse gas has been the dominant cause of observed global warming over the last 50 years, I have decided to quit listening to the nuts and give a little thought to how it will affect me. I decided to limit my worries to the next 20 years or so, as my children are both worriers and will be able to carry on by themselves.
In Waco, where there is usually at least 30 days over 100 degrees, and several at 108, I have decided that an extra 4 or 5 degrees won’t matter much, and in fact may be offset by the increased range and frequency of the hurricanes. We usually get some rainfall from those, and once in a while a doosy. My spell checker thinks that should be “dooly”, but we almost never get those. So ok there. Some people worry about the increased tornados, but obviously don’t understand odds.
In Evergreen (actually Kittredge to be exact) it used to be dry until May, which was the snowiest month. The reason is the rain shadow from the Rockies. When it was cold it caused the clouds to unload on the western side. The last few years have had much more snow in the mid winter, and have been wetter. This year was very wet and the snows came heavy early. The forests here are reminiscent of those of the Cascades, in that you have mostly Douglas Fir on the west side, and mostly Ponderosa Pine on the east side. Doug likes more water than Ponder. Here we have currently about 90% Ponder and 10% Doug. As we get wetter, as the Rockies get warmer in the winter, I would expect the ratio to shift in favor of Doug. I personally like Doug more anyway, so I should be all right here also. If I start seeing mangrove, I plan to write my Congressman to see if the government shouldn’t join the rest of the countries in the world in recognizing the problem and trying to take some action. Well, to be fair, it isn’t just the Bush administration, France is with us on that one. Gives you kind of a warm feeling.
In Waco, where there is usually at least 30 days over 100 degrees, and several at 108, I have decided that an extra 4 or 5 degrees won’t matter much, and in fact may be offset by the increased range and frequency of the hurricanes. We usually get some rainfall from those, and once in a while a doosy. My spell checker thinks that should be “dooly”, but we almost never get those. So ok there. Some people worry about the increased tornados, but obviously don’t understand odds.
In Evergreen (actually Kittredge to be exact) it used to be dry until May, which was the snowiest month. The reason is the rain shadow from the Rockies. When it was cold it caused the clouds to unload on the western side. The last few years have had much more snow in the mid winter, and have been wetter. This year was very wet and the snows came heavy early. The forests here are reminiscent of those of the Cascades, in that you have mostly Douglas Fir on the west side, and mostly Ponderosa Pine on the east side. Doug likes more water than Ponder. Here we have currently about 90% Ponder and 10% Doug. As we get wetter, as the Rockies get warmer in the winter, I would expect the ratio to shift in favor of Doug. I personally like Doug more anyway, so I should be all right here also. If I start seeing mangrove, I plan to write my Congressman to see if the government shouldn’t join the rest of the countries in the world in recognizing the problem and trying to take some action. Well, to be fair, it isn’t just the Bush administration, France is with us on that one. Gives you kind of a warm feeling.
Friday, December 08, 2006
DRUG PLAN 2007
Like it or not, if you are on the stand alone Medicare drug plan, the odds are that you should change your provider for next year. Open enrollment ends December 31. Use the government web site to compare your current plan with the competitors. www.medicare.gov. Just because your plan was among the cheapest for 2006 doesn’t mean it is going to be close to cheapest for 2007. It sure looks like some of the cheapest plans are playing catch-up, relying on your inertia to keep you with them as they raise the price.
Here are some tips.
1.Don’t trust the reenrollment material your present carrier sent you. The “plan improvements” may be a slightly lower premium and a lower deductible, and a doubled co-pay. See those smiling people on the brochure? They are insurance company stockholders.
2. Don’t overemphasize the deductible. If you are going to reach the donut hole, the amount of the deductible is irrelevant. It is pay me now or pay me later. The major item is almost always the co-pay, not the deductible or the premium. And of course, only the total annual cost shown on the government web site matters.
3. Don’t enter all your drugs on the web site, just the expensive ones. Remember the counter-intuitive fact that the amount you pay, the co-pay, counts toward the maximum annual coverage. The generics that you can get at Wal-Mart or Target for $4 should not be purchased on your insurance, so they shouldn’t enter into your decision making on the web site.
4. Whether or not you are switching plans, if you are not in the donut hole refill all the prescriptions you can before year end. It is almost certain to cost more next year, and there is always the chance that a change in your prescriptions, or their cost, will subject you to the donut hole next year. December counts against this year, January the next year. If the computer rejects you as too early, call them to find out when you can refill. It may be before December 31. Better yet, sometimes they will fill it early and just send you a nasty letter.
5. If you are uncertain about something, email me. webmaster@highline56.com. I only know my own little corner of this, but I can poke around the internet. Google seems to have an answer for everything. And I have a good friend who is a pharmacist. Warning- while there is no charge, you will probably be pestered for a bio.
Think of this process as a fun thing, like using coupons.
Here are some tips.
1.Don’t trust the reenrollment material your present carrier sent you. The “plan improvements” may be a slightly lower premium and a lower deductible, and a doubled co-pay. See those smiling people on the brochure? They are insurance company stockholders.
2. Don’t overemphasize the deductible. If you are going to reach the donut hole, the amount of the deductible is irrelevant. It is pay me now or pay me later. The major item is almost always the co-pay, not the deductible or the premium. And of course, only the total annual cost shown on the government web site matters.
3. Don’t enter all your drugs on the web site, just the expensive ones. Remember the counter-intuitive fact that the amount you pay, the co-pay, counts toward the maximum annual coverage. The generics that you can get at Wal-Mart or Target for $4 should not be purchased on your insurance, so they shouldn’t enter into your decision making on the web site.
4. Whether or not you are switching plans, if you are not in the donut hole refill all the prescriptions you can before year end. It is almost certain to cost more next year, and there is always the chance that a change in your prescriptions, or their cost, will subject you to the donut hole next year. December counts against this year, January the next year. If the computer rejects you as too early, call them to find out when you can refill. It may be before December 31. Better yet, sometimes they will fill it early and just send you a nasty letter.
5. If you are uncertain about something, email me. webmaster@highline56.com. I only know my own little corner of this, but I can poke around the internet. Google seems to have an answer for everything. And I have a good friend who is a pharmacist. Warning- while there is no charge, you will probably be pestered for a bio.
Think of this process as a fun thing, like using coupons.
Wednesday, October 25, 2006
Deanne Blakley-Bellemans - MY LIFE AS AN OPOSSUM HUNTER
If you saw me, you'd probably say, that I don't look like an opossum hunter. But then again I'm a chef and they say that I don't look like a chef either. One of my daughters said I look like a wife. Well, I'm here to tell you, I'm not one of those either! Because if I was a wife, I wouldn't be hunting opossums, simple really! Husbands are prone to saying things like, stay back he's got fifty razor sharp teeth, and a very nasty disposition! I can see that silly, so what else is new? All the while he's brandishing a shotgun in his underwear, while bouncing on the bed, trying to take aim! WHOA, Frank Buck take it easy, it's just a little one (the opossum, what were you thinking?)!
Now that brings up the question, which would I rather live with? Opossums hands down! They're quiet most of the time, never bounce on beds with shotguns, just rustle about under the bed, or under something else, if it's not the bed room type. I'm actually of the opinion that they just come to have a little fun, and maybe eat a little cat food! But I digress.
The first thing I did when I moved into my mother’s former house was to dig a pond. Did you know that raccoons and opossums love ponds? When I caught my first opossum I was really trying to catch a raccoon, but opossums come out earlier in the evening than raccoons, who also just want to come in and have a little cat food. They mostly use the cat door, while the cats say, come on in make your self at home, we have fifty pounds of food in the garage, can we get you some more? Maybe it is self preservation technique; it does seem to work for them. And Opossums, well, cats can't seem to even see them. They say things to each other like, OPOSSUMS no, I don't see no OPOSSUMS! I'm about this time screeching for them to give me a hand and we'll be able to get this varmint out of here. Now the cats seem to think this whole routine quite amusing, and in that rather superior way they have, even seem to enjoy it!
So while trying to catch a raccoon, I caught my first opossum. I set out the have-a-heart trap, baited it with peanut butter on toast, and a little tuna, (I'm a chef, remember) I never go out and see what I've trapped at night, just wait for morning to confront a really mad beast, so imagine my surprise when my raccoon is an opossum! Never having seen an opossum in my yard before, I did the kind thing, I let it go! The next night, same thing, no raccoon just another opossum, different color this time. Well, I'm starting to catch on now, and this one is going to that "better place for opossums" that I've decided to use for opossum removal. So with gloves on, I pick up the trap, trot out the car, pop it into the trunk, and drive to that "better place for opossums." Getting an opossum out of a trap sounds like a simple little job, doesn't it? This place used to be a neighborhood, but all the houses have been removed, and it's kinda spooky, in fact to me it looks like a perfect place for a murder! Now my imagination is working overtime, and I can't get the damn opossum out of the cage, he's hanging on with his tail and all four feet, all the while playing opossum with me! I shake it, I bang it, now I'm getting right up close and personal with this thing and ugly, man you should have seen it and it does have a bunch of nasty teeth, mind you I didn't have time to count them. Finely out he flies and beetles off into the underbrush!
That was opossum number two. Opossums number three and four just stopped by for a short visit, and I was able to just shoo them out the door. Now when you have an opossum in the house, people just look at you and say, well aren't going to get it out? Like maybe I invited it in? I look back at them and say, "it's an opossum" as they look right back with blank stares, uncomprehending. What do opossums do? Right, play opossum and if it doesn't want to be found you won't find it! Number five was in the house for fourteen days. I didn't know he was there for some of those days, but when a vase was pushed over in the middle of the night while he was looking for H20 we met face to face in the dinning room. As I looked wildly around for something to trap it in, we both moved at the same time. As it raced upstairs I shouted “NO!” and dashed after it. Gone, just gone. The next day I'm out getting another trap. I thought a squirrel cage would do the trick, wrong! I kept catching it but the tail didn't fit in the cage. Back to get a bigger trap, now this one was big enough to catch a cougar, presto at 1:44 AM I've got him! According to plan he also goes to that "better place for opossums" I go off to watch fireworks!
Now with past experience such as it was, this year I realized that opossums seemed to be coming and going at will. Another mystery here at the ranch, how were they getting in? Number six made nightly forays under the bed, and as it made so much noise I thought it must be a mouse. I moved the bed, searched under everything, rushed out and a bought two mouse traps, baited one with cheese and waited for tomorrow to come! Hum, it took the cheese, sprang the trap, next baited with peanut butter, now it's taken the trap! Sooner or later it will dawn on me, that “it" is back! Coming around the corner, late one night I come face to face with one sitting on the washer, now I'm dressed for bed, but this is a golden opportunity. I cast around looking for something to put him in, grab my new picnic basket, and garden gloves, as I reach for him, my mantra is, you can touch him, sure you can, just as I reach out, it dawns on me, what am I going to with him if I do actually touch him? How am I going to keep it in the basket while I get dressed and drive it to that "better place for opossums"? With that thought, he's gone down behind the washer, mystery solved! They're just walking right in, coming through the dryer vent and that means they're under the house too! Woe is me, nothing's going right, right now so I get someone to come over and move the washer/drier, fix the hose and now, I think I'm back in business!
But I'm not the one in business, the little varmints just pushed the hose aside again and we're back to square one!
Morning dawned early, 5 AM to be precise, stuff is falling over, with eyes tightly closed, I pretend I don't hear anything. But I have a nagging feeling that I've been here before, I'm right I have! It's another opossum, in the kitchen, a small one, this is really way too much, enough of this wildlife game! This one actually seems to like games, he's pushed every box of tea in the house and some jars, off a shelf in the kitchen! When I finally stagger into the kitchen, it's now chowing down on cat food and doesn't seem to be afraid of me! It looked at me and went beetling off under the cupboards, well of coarse it did, have you seen me at 5 AM? This must be a plague of opossums; does the Bible mention anything like that? I don't think this one is the one on the washer, I think it's a different color, well at that early hour, who would actually know what color it was? So if the one on the washer, was number six, this might or might not be number seven, but who's counting?
The next night, I check to see if anybody is in the kitchen before bed, two boxes of tea are down, and then I'm eye to eye with him in a cupboard! So I got into my opossum fight gear, nightgown, purple gloves and broom, and start removing dishes one by one. All the while he's hissing and being in general a pretty nasty piece of work! About now I'm remembering what my friend Sam said about not, I repeat not, touching it, because it could take off a hand! Lacking a gun I had to go with what I had, it turned out that a broom wasn't going to do me any good right now, so I went with the yard stick! He didn't want to go, and he fought me all the way, finely I gave it a mighty poke, it grabbed the yard stick and hung on like a fish, so I fished him out and on to the floor! He made a dash for the under the, cupboards, but this was a well thought out plan and I had stuffed the holes with towels, so shouting all the while, I poked him right out the door! Number six/seven was barely out the door and number, let’s say eight, is already here!
I had the grand total of twenty-three hours, opossum-less, why is this happening? I haven't seen this one, but I know for sure it's coming in the drier vent! I had wedged the laundry area door shut, and today it was open, so maybe it's a bigger one, now that is scary! It's his move, so back to the waiting game! Or it could be number six returned and I gave him such a thrashing too. I thought he would be in Texas by now! Why me, why opossums, lots and lots of opossums, why?
When I moved into my mothers house I didn't know that I was creating prime opossum habitant, my mother never mentioned opossums! Wait! The cat is behaving strangely; maybe, just maybe she's decided to help me out here and is indicating that an opossum is under the sofa! This maybe the break I've been waiting for, wish me luck! Armed with my trusty yard stick, I'm going down stairs and look under the sofa. Wrong again!
I've wedged everything I can find around the washer/drier, hot water tank. When number nine comes back, he'll be trapped in this small area, no run of the house for this guy! And he comes every night, and every night we do battle, me with the yardstick, I whack at him trying to discourage him from coming in. I just want it gone; we do this for a week! On Saturday my ten and twelve year old grand girls come, we're going off to see pug puppy's and swim at a cousin's pool. Before I leave I check on the opossum booby trap, I open the door and there it is, and it's making a nest out of some of my insulation! I slam the door quickly. I think about it, and call the girls so they can see it, we peek at it, then I open the door all the way, nothing, it doesn't run or hide, so we hatch a plan, Abby, an ace goalie in soccer will guard the way into the rest of the house. Kate will hold the lid of the canning kettle, we have no trap, so have to go with what we have, and that is very large canning kettle. I have the kettle, the yardstick, and the purple garden gloves. I start with trying to just push it in to the kettle, it plays dead, so I reach for it, as I touch it, all hell breaks loose, it moves, we all start yelling, with a mighty whack it's in the kettle, Kate slams the lid on, we got him! While we're getting our selves out the door, Abby sits on the kettle to make sure it doesn't get out. We take it to that "better place for opossums"! The girls don't like the place, so we walk around with the kettle looking for an even "better place for opossums" in the "better place for opossums"! Now you'd think the thing would just dash right out, but no, now it doesn't want to get out of the kettle. Finally we overturn it, give it big thump, and number nine's now in a "better place for opossums".
Number ten? Number ten lives in a little house in the garden I bought for the cats, who though it a very funny idea, and while they were being rude, yukking it up about cathouses in general and how they would never use it, I told them they were ingrates and stashed it on the side of the house. Number ten seems to love it and I love the idea that we both have a house of our own and if she will stay in her house and not in mine, we'll get along fine.
Now about those raccoons....
Thursday, August 24, 2006
Linville - FINGER PICKIN'
When I got up to the UW in fall of '56, I heard a guy named Sonny James on the radio do a song called 'Young Love'. It was the first song I ever learned on a guitar. There was a guy in my fraternity that played Elvis' 'Don't Be Cruel' almost as well as Elvis did. So I got a 'Silvertone' guitar from Sears for about $10 and asked him to teach me how to play. He told me it's not really that easy and with secondary activities such as attending classes, studying, housework, hazing (including paddles in those days), pledge training, etc. there was very little time for sleep let alone learning how to play a somewhat difficult, chordal musical instrument. Well, sleep was deemed least important so that's what went first.
Music was a high priority activity in the Sigma Chi house then and there was an upper-classman named Jack Owens, who played a 4-string tenor guitar and he and 2 other Sigs, with bongo drums, played Calypso music at functions and they had a 3-nights-a-week gig at a place downtown called the Colony Club doing Harry Belefonte. I had been drafted as a member of our renowned 12-man-chorus by then, an acappella group, and we won many awards all up and down the west coast as well as at the UW for our presentations thanks to our musical director, John Iverson, a prominent Seattle attorney since about 1962. We had some exceptional vocal talent in all four voice parts, (they made me sing 2nd tenor and told me not to sing too loudly but I could reach the high notes in those days. Maybe my voice hadn't changed yet. I only had to shave about twice a week.) David Richdale, a member of the Calypso group, also a prominent Seattle attorney, and John Iverson had satin voices for the 1st tenor parts and we had a couple of deep, clear, bassos, and 'Ed Ames' baritones.
About that time, a guy named Buddy Knox came out with a song called 'Party Doll' and, by now, I had learned about 3 cowboy chords and, by beating a flat pick back and forth across the strings, I was rockin' and rollin', (or so I thought. It sounded good to me anyway and it got me a lot of attention at parties that I had never received before when I wasn't on a baseball field.) Not long afterward, the Kingston trio came on the scene and the folk era was born again. Everyone wanted to play their songs and we formed a group that could come pretty close. Then we heard those Fiji boys serenading our Kappas one night and realized, 'Wow, they're better than we are.' And they were. They became the Brothers Four. I knew them all and still catch their act once in a while although only one of the original members are left. I meant to ask Gordy Ringoen about them at the reunion but never got around to it. He and Roger Jenkins were Fijis at the UW.
I got busy trying to get a degree and get on with what I really wanted to do in flight school so, as a result, my music suffered. (Some people thought it had always suffered and still does.) After I had my wings, my first operational assignment was to McGuire AFB in NJ. One week-end Marilyn and I met some friends from pilot training in NYC and were strolling past a coffee house in Greenwich Village one summer afternoon when I heard some music coming from within that mesmerized me. Two guys and a blond girl were playing folk music and the guys were playing guitars with their fingers. It was the summer of 1962 and I had never heard anything that sounded that good. These guys could make two guitars sound like a whole orchestra. It wasn't long after that that I realized I had happened upon Peter, Paul and Mary. In those days, there weren't any books or music teachers that could show you how to play guitar finger-style unless you wanted to devote yourself to formal training in classical guitar or hang around Washington Square and smoke pot. My squadron commander would have frowned on the latter activity and I didn't have time for the former so it took me the next 20 years to figure out some semblance of finger style guitar. I'm still trying to figure it out as my fingers become more arthritic, my voice more crackly, and my memory less astute but, it keeps me entertained while, at the same time, it drives Marilyn up the wall.
When Jim Croce, Gordon Lightfoot and James Taylor were so popular, I wanted to learn as much of their material as I could. Their music wasn't just wonderful to listen to but it was all original. They not only performed it; they wrote it. Amazing! Croce was my favorite and he was really on his way up when he was killed in the plane crash in '73. Seems that happens to a lot of popular young musicians.
Clint Eastwood said in a rare interview, "When you get old, play some golf to develop patience, speak softly, and learn to play some music." I haven't mastered any of them yet, but I'm still working on it. I want to be just like him when I grow up.Tuesday, August 15, 2006
Drug Plan VI - A Donut Hole Trap You Need To Know About
My comments in Drug Plan Decision were OK as far as they went, making the point that what the insurer charges for the drug is important in how fast you reach the donut hole. But there was something I never noticed until I received statements from my insurer. I assumed that that it was what the insurance paid that totaled $2250 when you reached the donut hole. That is not correct.
Contrary to how normal insurance works, here you reach the donut hole when what the insurer paid AND WHAT YOU PAID totals $2250. Therefore no matter what plan you selected, if you are going to reach the donut hole before the year is out, you may want to pay the total price for some drugs yourself, saving the insurance for the drugs on which it pays the highest portion of the cost.
This is tricky, so here is an example. On a generic drug which costs $15, your co-pay may be $12, in which case the insurance pays only $3. Even though you paid most of it, the whole $15 counts toward the $2250 limit. On a drug that costs $400, your co-pay may be $51, so the insurer pays most of it.
The key is, when you reach the $2250, how much did you actually get from the insurance? To give an extreme example, if you used only the $15 generics the insurance would have contributed only $450, while you paid $1800. If on the other hand, you used the insurance on only the expensive drugs in the above example, the insurance would have paid almost $2000 of the total, and you only a little over $250.
Your insurance plan and your drug mix will of course be different, but the point is that there is almost certain to be some drugs that you should not use the insurance on, because the portion it pays is too little, while the total cost is eating up the $2250, after which you pay all until you reach $5100.
Thursday, July 20, 2006
Mike The Folk Artist - 50 YEAR REUNION CHECKLIST
The moment is near, one month to go,
When I will attend the Highline Reunion show.
What do I need to do to make an impression that will matter?
When there are so many others higher on the ladder.
Let me think, there must be a way out of the mist,
I’ve got it now, I’ll make a checklist!
#1. You have to loose weight and watch every calorie,
Start running and sweating and eat lots of celery.
#2. Buy some new clothes that make a fashion statement,
The double knit suit and white shoes will have to go in the basement.
#3. Color you hair to get out the gray,
Use a professional no matter how much you pay.
#4. Start staying up past your normal time for bed,
After eight o’clock you don’t want your eyes rolled back in your head.
#5. Think of things to say that are politically fit,
Get up to date with Paris, Jen, Angelina and Brad Pitt.
#6. Develop recalling names and faces without prodding,
Since your memory doesn’t work, practice smiling and nodding.
#7. Start dancing and moving around to the beat,
Or you will look really stupid falling over your own two feet.
#8. Come up with some stories that could have happened to you,
They will go over big even though they aren’t true.
#9. Make a slide show of the grandkids for all to see,
Don’t forget the video player and TV.
#10. Thank the reunion team for all of their planning and organization,
So that we could be cool for one last occasion.
I have made my list now on to the work,
If I do this just right I won’t look like a jerk.
Saturday, May 20, 2006
Margie Martini Jones
50 years ago, numerous graduating classes resolved to go out and make this a better world. Our class motto was “Today we follow, tomorrow we lead”. I thought about that for a long time after finding out that yet another piece of legislation passed that was going to make the rich, richer and the poor, poorer. I honestly had to wonder if our collective classes really made the world a better place.
I looked at pictures in the old “Highlines” on the website and wondered if any of those leaders went out and tried to change the world. If we all had, would there have been more wars, would 40% of middle class people be without insurance, would women still be making less than men? I am not really a “do-gooder” but I really believe in doing something to make the place better for our children and grand children.
When I moved to Wenatchee, I felt like I was in a time warp. I consider myself rather conservative, but in this town, I am considered a flaming liberal. I became involved early because I could not stand what was happening. Using my background in debate, I began speaking out. Later, my children did the same. Some of them found themselves in trouble in school and my poor husband wondered just what we were up to.
I joined the only activists Wenatchee the American Association of University Women. It was interesting to me that at one point after our AAUW Readers Theatre appeared in a school, the principal got an anonymous letter saying we were “pink ladies” and that did not refer to the color of our dresses. This only made us madder and we became stronger. We took up the cause of the Equal Rights Amendment; we fought to get a gifted program in the schools, and worked to change our antiquated form of city government and on and on. I must say it was fun. We even invited one of our local legislators to a “coffee hour” and when he arrived there were 75 angry women and no coffee and he heard our concerns sputtering the whole time. Incidentally, he declined further invitations to meet with us as did other elected people. I constantly met people who were happy with the status quo, or who agreed but were too timid to speak out, or who thought we were crazy. Often we found people who were just interested in making more money and not caring about anything or anyone else... We met kids we were trying to mentor who were only interested in getting everything from their parents and being responsible for nothing. Over the years, we saw our elected leaders, our generation, as anything but honest leaders... I wondered how many people I knew and had known who were doing anything for change.
Then again, maybe I am judging everyone too harshly, because our generation did many things to make life easier.and insure some measure of equality. Maybe I crossed paths with some of you when I testified in Olympia or prowled the halls of Congress working on education and women’s issues, I hope so. We were a bright class graduating in a time of relative peace. However as bright women we had yet to really break out of the nurse-secretary-teacher mold. I regret my college advisors talked me out of law school. We still have time to do something, so let’s go out and work harder and show we can still lead.
I looked at pictures in the old “Highlines” on the website and wondered if any of those leaders went out and tried to change the world. If we all had, would there have been more wars, would 40% of middle class people be without insurance, would women still be making less than men? I am not really a “do-gooder” but I really believe in doing something to make the place better for our children and grand children.
When I moved to Wenatchee, I felt like I was in a time warp. I consider myself rather conservative, but in this town, I am considered a flaming liberal. I became involved early because I could not stand what was happening. Using my background in debate, I began speaking out. Later, my children did the same. Some of them found themselves in trouble in school and my poor husband wondered just what we were up to.
I joined the only activists Wenatchee the American Association of University Women. It was interesting to me that at one point after our AAUW Readers Theatre appeared in a school, the principal got an anonymous letter saying we were “pink ladies” and that did not refer to the color of our dresses. This only made us madder and we became stronger. We took up the cause of the Equal Rights Amendment; we fought to get a gifted program in the schools, and worked to change our antiquated form of city government and on and on. I must say it was fun. We even invited one of our local legislators to a “coffee hour” and when he arrived there were 75 angry women and no coffee and he heard our concerns sputtering the whole time. Incidentally, he declined further invitations to meet with us as did other elected people. I constantly met people who were happy with the status quo, or who agreed but were too timid to speak out, or who thought we were crazy. Often we found people who were just interested in making more money and not caring about anything or anyone else... We met kids we were trying to mentor who were only interested in getting everything from their parents and being responsible for nothing. Over the years, we saw our elected leaders, our generation, as anything but honest leaders... I wondered how many people I knew and had known who were doing anything for change.
Then again, maybe I am judging everyone too harshly, because our generation did many things to make life easier.and insure some measure of equality. Maybe I crossed paths with some of you when I testified in Olympia or prowled the halls of Congress working on education and women’s issues, I hope so. We were a bright class graduating in a time of relative peace. However as bright women we had yet to really break out of the nurse-secretary-teacher mold. I regret my college advisors talked me out of law school. We still have time to do something, so let’s go out and work harder and show we can still lead.
Friday, May 05, 2006
Chuck Cooper - WISDOM : The Two Keys to Happiness
This sharing of wisdom is dedicated to Captain Linville, who speaks for all of us when he says "If I got a life, I don't know where I would fit it in!"
Happiness entails strictly following the two basic RULES OF LIFE. Some experts say there are three, but sunscreen makes my eyes burn, so I use only two. These rules are important throughout life, but are particularly so after retirement.
RULE ONE: Keep a list of all the things you have to do.
RULE TWO: With two exceptions I will get to later, don't drink in the morning.
The rule one list includes everything that you should do as soon as possible. That can be chores, errands, projects; everything from clean the garage to call your creditors. These don't have to be things that you don't like. It is OK to include things that you think you will enjoy. The key is to make this a list of items you have been putting off. Once you complete your list, relax and start enjoying not doing them.
There is nothing worse than having nothing to do. With your list you will always have plenty to do. Some people think that the goal is to go to work on your list and finish it up. This is a dangerous fallacy. Think about it. If you do everything on your list, you will end up with nothing to do. Why do you think retirees often feel that the weekends are no fun any more? Weekends are great because you are not going to work. Once you have no work to not go to, the weekend loses its luster.
Don't get me wrong. There is nothing wrong with doing one or two items on your list when the mood takes you. That can actually enhance the intervals when the mood hasn't taken you. Just remember, whatever you do has to be replaced by another item on the list, so cross them off with great care. People who finish their lists are in the same boat as those that don't keep lists, and can end up drinking in the morning.
Rule two is pretty self evident for those that have to go to work. Drink in those circumstances and you will soon end up relying on your list. But contrary to popular belief, this rule is even more important for retirees. In the first place, you can forget about the enjoying the afternoon pondering your list. You will be asleep. Second, it really screws up the cocktail hour. Not only will you have nothing to look forward to all day, but also the gin takes on a harsh taste the second time around.
The first exception is for Christmas morning with your in-laws. Here getting a little snockered not only improves your mood and the experience, it makes you clever and funny, improving the holiday for all. Likewise, after the large afternoon meal everyone is going to be sleeping anyway. Finally, and I really can't explain it, you are still looking forward to enjoying the cocktail hour.
The second exception is for when you defect to a hotel for the weekend and spend Sunday morning sleeping in, drinking champagne, watching old movies on television, and making love. I don't know what it is about old movies, but that sure beats contemplating the list.
Wednesday, February 22, 2006
Diane McMahon - Cars I Loved
All I wanted to do was drive!
I was 15 and had six months until I could get my learners permit. What a time I had. We had acreage so I practiced in the field and parked between barrels.
The day I turned 15 ½ I was at the licensing department’s door before they opened, got the necessary papers and was driving. Driving my Aunt and Uncle crazy!
We had a ‘49 DeSoto with Fluid Drive. “The Boat” we called it. Before that we had a ‘36 Chevy two door with the shift on the floor. I got to back it out and back in the garage and was in heaven. Back to the Boat – I “cut my teeth” on driving to Mt Rainier National Park and back. I loved those winding curving roads; my aunt was scared to death. I’d be pointing off in the distance and she would pale in color. She didn’t like heights so she would sit right next to me as we climbed the mountain.
One time I almost put us in the Green River by going too fast around a bend and hitting the brambles before I got stopped.
The day of my 16th birthday I was right there, at that same door, to get my license and I can remember my uncle showing me his driver’s license and telling me what a privilege it was to have one. (Course he grew up in the horse and buggy days and didn’t have a car until he was 20+)
It was fun going for ice cream and stopping at the drive inn. I got pretty good at leaving a small patch of rubber shifting between drive and 1st.
My boyfriend had a ‘49 Chevy two door that was lowered in the back and when he would pull in our driveway his pipes would scrape and he would get upset and have to straighten them again. I did learn how to shift in that car and he never had to replace a clutch because of me.
I have had some interesting cars since then. ‘49 Mercury that was a real hot rod, with a shift on the floor. How I didn’t get tickets then I don’t know. With seven children to haul around I had a Chevy Station Wagon (the old version of SUV’s) It was most fun when the kids could sit on a piece of cardboard and I would take the turns on a windy road really wide as they slipped from side to side. (Oh, the fun my grandchildren miss out on) When my mother gave me her car, a ‘64 Ford convertible, yellow in color. That started my love affair with convertibles. One day I passed this ‘67 red Firebird convertible sitting on a car lot and it winked at me and it was love at first sight. It had a Muncie 4 speed and a 440 engine and could it go, but it had to stop at every gas station (8 mpg) Good thing that car can’t talk! Next came a ’78 black Dodge Magnum. Sure a pretty car. I traded it for a ’84 Mazda 4 door with a sun roof and it never sat still. I took so many trips in it and eventually my Grandson drove what was left of the wheels, off.
Then there was the ’46 Jeep CJ2A, an old military vehicle the I kick myself for parting with but I had to “hot-wire” it to drive it and one day, sitting at a light, smoke started pouring out from under the dash and after I jumped out I remembered I could separate the wires and all would be okay. Only then I didn’t have the nerve to connect them again and had to be towed home. I drove that jeep all over the hills in Helena, Montana digging for Sapphires and places to keep cool because it was 99-110 degrees.
I then got a ‘89 LaBaren convertible and had a flashing good time in it. Ever cruise with the top down when it was 40 degrees? Turn the heater up full blast and your toasty warm. I used to take my elderly Aunt for drives and the wind would blow her hair and she would giggle like a school girl.
Now I have a ’98 Camry and love it. It goes the speed limit and doesn’t have to stop at every gas station and I can get my friends in and out of the back seat easily.
I have had some interesting incidents but no accidents and will admit to a couple of speeding tickets but I have tried to not abuse the privilege that started so many years ago.
Sunday, January 29, 2006
Chuck Cooper - If I Had My Life to Live Over Again
Ken Linville got me to thinking about this. After I arrived at sort of an answer I plugged the subject into Google to see what others have said about it. So far I see good ideas like have more fun, eat popcorn in the good living room, and so on. But the real answer to me lies in figuring out exactly what you would change, and I am not getting there. It is too risky to change anything when you don't know what the outcome might be. Even where life could have been better along the way, there is always the possibility it could have been worse, or, even scarier, worse now, when it is darn good.
A big unknown is whether the change of a single choice or event would propagate in ever widening differences, like that butterfly who flapped his wings and caused a hurricane, or die out like the ripples in a pond, with things ending up pretty much the same. Some might figure they could make a better choice of a mate that first time, but a second chance could change some things you might not like.
I think the answer is to have more than one shot at this. I will live it over and change just one thing (otherwise I won't know what did it), compare with the present, and then live it over again, change and compare, and then over again until I either get it perfect or get tired of reading Silas Marner. On the other hand, that sure seems like a lot of work for someone who is retired.
Friday, January 27, 2006
Ken Linville - THE GOOD TIMES GENERATION
We have all heard of the "Baby Boom Generation" and "Generation X", but demographers have named ours the "Good Times Generation", and for good reason. There were so few of us born during the last few years of the Great Depression that there was little competition for jobs, schools, housing, etc. compared to the baby boomers and thereafter. I often wonder how I'd have ever found a job had I been competing with the talented youth of today. On top of that historians say that we came of age during one of America’s great "golden ages", our "golden age" being that period between the end of World War II and the social upheavals that began in the mid '60's. Our generation really lucked out. We were too young for the Korean War and too old for Viet Nam. (Those of us who were involved in Viet Nam were at least a bit older than the average kid they sent over there and we'd been around the block a few times.) There was virtually no crime, child molesters, gangs, drugs, and no deadly sexually transmitted diseases. How sweet it was!
However, I try to avoid the excesses of the "good old days" syndrome. We tend to remember past events as they should have happened, and not always as they actually did. It has been requested that us Highline High School class-of-'56 members relate an anecdote about our school days, and I added one to Vignettes. Anyone who may have any corrections or additions to the story, please feel free to share it with us. It's as I remember it. But would I go back and do it all over again? Oh, yeah, how I wish! Especially now that there are not that many good years left. You often hear the quote, "If I had it to do all over again, I wouldn't change a thing." That certainly doesn't apply in my case. I'd like to change a lot of things. Not that I didn't have a ball. As I mentioned in the guest book, I thought that the fun life, as I knew it, was over when we graduated.
Saturday, January 07, 2006
Mike the Folk Artist
There was, in the time of Bill Haley, the bop, poodle cuts and other coolness too numerous to mention,
When special things would draw our attention.
“Ham bone” with his headlights and Levi’s slung low,
Walking down the hall would put on quite a show.
It was fairly common to hear tires squeal,
But it sounded special with Rue at the wheel.
For me it wasn’t a person, but cars lowered to the ground,
That would get my attention and turn by head around.
Low in front and lower in back,
With just enough clearance for a cigarette pack.
Chopping the top and adding skirts helped with the look,
And a flame on the hood is all that it took.
That was back in 1956,
Vehicles today have added new tricks.
For example, how can pickup trucks jacked up to the sky,
Attract admiring attention as they go by?
When I see one of these things I lose my composure,
And feel compelled to report them for differential exposure.
Wednesday, December 21, 2005
Drug Plan Decision V - Expense Used to Calculate the Donut Hole
It is not obvious what costs go into figuring when you have exhausted the first $2250 of "expense" and enter the donut hole, where you pay it all, and the magic figure $$5100, after which you pay only 5% of the cost, so it is worth going over it in more detail. The "expense" is whatever your insurer charges for each particular drug. That varies by insurer, sometimes a lot. One insurer might charge $200 a month for your particular mix, while another might charge $225. You might think that that means the difference is only $25 a month, and your portion only a fourth of that, or $8. Unfortunately, the difference is a lot more than that.With the $200 charge you will last 11 1/4 months before you pay the full price. So that last month you will pay $150 more than you have been paying. With $250 charge you last only 10 months, and get hit with the full charge for 2 full months. And that is $500! On the government web site that is factored in to calculating the annual cost, but you will have to dig to find the actual charges used by the insurer. That is shown at the bottom of the detail cost page, and only when you click on "show detail".
Just to repeat, the charges used in these calculation are NOT the "you will pay" numbers on the pharmacy list page, and NOT what you have been paying before January 1.
Saturday, December 17, 2005
Drug Plan Decison IV - Donut Hole and Discussion
In this exchange, Mike Pennachi and Chuck Cooper discuss Medicare part D, the donut hole, and some guesses at future complications. Medicare and the private insurers pick up part of the cost up to $2250 annually, and most of the cost above $5100, but nothing in between, the gap called the "donut hole". This can complicate the choices for someone with drug expenses in the gap.
Mike: I went through the Medicare planning process. The bottom line is that it looks like my estimated annual out-of-pocket expenses is $2,601.00. The Medicare planner was 2,847.00.
I went about this by listing my monthly drug costs and figuring how many months I would be under the plan ($2250.00) and how many months I would be carrying the whole amount. It came out that I would be covered for 8 months of co-pays and 4 months without co-pays. I added in the monthly premiums for all 12 months plus 4 months at the full cost of the drugs.
It would help if the planner showed the transition point so that people would know when they reached the donut hole. In other words, it would be helpful to know that for X number of months my monthly costs will be Y and then they will jump to Z for the rest of the year.
This of course is a moving target since the drug costs will change and so might the number and type of drugs one will take in a year.
After all is said and done, I will save about $775.00 per year under this program. The drug companies could do the same thing for me by cutting their costs by 23%. I'm sure there are lots of holes in my logic, but hey, what can you expect from a Folk Artist.
Chuck: No, I think your logic is right on. The donut hole of course will not affect the decision for anyone who does not already have some form of drug coverage, simply because something is better than nothing, even if you are back to nothing at $2250. But if you run over $2250 retail cost, you won't be able to figure your cost exactly. The run over will usually be in the middle of a month, so you will pay something different three months running. The web site is presumed to calculate this exactly, so it's what we have to rely on. The donut hole is also very important if you have drug coverage with an employer or a medigap policy. Even if Part D is better than your medigap cover for the first $2250, right now no medigap coverage cuts off at that point, so depending on your expense level, overall the medigap could be better since it continues to share the cost above the $2250 cut off of Part D.
Same with employer retiree drug coverage. Employers who continue to provide drug coverage equal to or better than Part D will receive a federal subsidy, so you would guess that employer coverage is more likely to last, and not be revised to stop at the donut hole, than will the medigap policies. After the end of this year, Medigap insurers can no long issue policies that include drug coverage, although the policies already in force can continue. But once drug coverage is no longer helpful in selling medigap policies, you would expect insurers to cut back on outstanding coverage at renewal. That is going to be a tough decision, to stay with a medigap drug cover, but I would still do it if I was in the donut hole and the payments over the whole range were significantly better than Part D. Even if there is a late join penalty, you can switch to Part D when your Medigap cover goes south. Of course, you also have to consider what happens after $5100. There medigap cover will probably not be as good as the generous Part D.
Mike: Do you think that with so many drug plans that some of them might go the way of the HMOs? It seems to me that it takes a "critical mass" to make these programs viable. Could there be a possibility of several companies backing out after a year or two? I think this should go into the selection process as well. Anyone for a crystal ball?
Another issue you might want to discuss is where the money from the Feds is going. Let's say that they are contributing 70 percent of the cost. The cost of what? Does it go to offset the "real" cost of the premium. If I pay $30.00 per month, does Medicare pay the provider $70.00? I know they are not paying it to the drug companies, or are they.
Chuck: Most of the players, and particularly the national ones, are already very large. Beyond a certain point it is doubtful if there is much in the way of economies of scale. The federal subsidy is stuctured to pay some to subsidize the basic coverage, to pay more for sicker patients and still more if the claims significantly exceed what the insurer expected. The carriers say that the government has pretty much eliminated the risk of significant financial loss, at least in the early years. I don't think you will see many insurers getting out very soon. The risk is more that insurers that are low-balling will raise premiums or co-pays. That will depend on how the federal subsidy is structured, i.e. whether one that estimates losses way low can get more subsidy. I don't have a guess on that yet. And since you can't do anything to ameliorate that risk in your choice, it is probably best to ignore it, and go with one of the lower cost offers. I am going to pick an insurer I know is big, even if it is not exactly the cheapest, just for the reasons you are talking about.
Monday, December 05, 2005
Drug Plan Decision III - Horseshoes and Hand Grenades
Does "close" count in chosing your drug plan? Yes. It is far more important to get started with a plan than it is to delay and dither trying to figure out the very cheapest approach. Why is that, when money is tight? Several important reasons.
First, between now and December 31, you can change your choice every day. Even after December 31, you get one more free change up until May 15. So choosing a plan now that looks right is not a final decision, so close is good enough.
Second, the plans themselves are changing, as the carriers are adjusting their plans, and can make changes once a week. When you look at your list of plans and see that some are 2 and 3 times as expensive as the least, you might wonder who on earth would pick the more expensive. Well, so do the carriers. Whenever the internet allows this kind of easy price comparison, prices either converge, or someone doesn't make any sales. So you are going to have to keep checking the web site up until December 31, and then periodically before May 15 of next year, and be ready to change plans.
Third, as I mentioned in Part II, below, on the Medicare web site the three costs under "What You'll Pay" may not add up to the "estimated annual cost". That is because of the "donut hole". The insurance you see only covers the first $2250 of expense, and that means the RETAIL expense, not what you see there as the monthly under "What You Will Pay", and maybe not even what you are paying now. If you have one of the discount cards that predated this new program, you hopefully have been paying something less than the full retail. You can get the retail cost used in the calculation by clicking on "show details" down where the detail cost page shows what you pay in the donut hole. There is a surprising difference between plans. So you see what I mean by "close" being good enough. That's all you are going to get.
Be sure you click on "View Cost Details" before choosing. There you will see the mail order pharmacy annual cost, which can be a huge difference. For my set, the second plan had the annual cost at $1439 in the list, but the mail order annual cost was only $1000. I like getting mail anyway. Another point- mail order may save you more than you think because the lower retail cost defers the donut hole.
Fourth, some insurers are using agents and other marketing devices to push their plans. If an agent knocks on your door, or sponsors a seminar you attend, what do you think the odds are that the plan you are shown is the cheapest or the best for you? Put yourself in the shoes of the insurance company. If your plan is at the top of the list on the Medicare site, you are getting almost all the sign ups, so why pay agents? Of course, if you are down there charging twice as much, it might be a pretty good idea. You aren't going to see any business otherwise. So sign up now for what looks the best on the web site, and every time someone tries to sell you a different one, haul out yours and ask them if theirs is cheaper. If they say yes, count your fingers.
Incidentally, I did call the Medicare 800 number to ask about the totals that don't add up. There was a bit of a language barrier, but the first answer I think was "that annual total is only an estimate". What? To my suggestion that it was a pretty poor estimate, being out over 40%, she said "yes". Has anyone else mentioned this to you? She said "yes, many times". So here we have a fifth reason for going for "close". This lady had been told of the discrepancy "many times" but had never tried to find the answer. You will do better calling one or more of the insurance carriers with questions. Note that the plan name is a link, and clicking on it will get you to the 800 number of the carrier.
Speaking of trust, you may have noticed a new pix for this entry. I threw in the dog and the gray hair to appear more reliable.
Saturday, November 19, 2005
Mike Pennachi Sr - on drugs
Drugs – Prescription that is
I want to write about drugs and I don’t mean coke,
These are the other ones that can make you go broke.
High technology and chemical advances,
Have greatly improved old folks chances.
We can move around, dance and go hiking,
But the price we pay is not to my liking.
High blood pressure, they call it hypertension,
Better be careful or you won’t live to see your pension.
Then there is sugar in all that we chew,
Not anymore if you have Diabetes 2.
And the prostate that’s big as a melon,
So that every 5 minutes your bladder is swell’in.
If arthritis doesn’t get you then a backache will,
The answer to all these are to take a pill.
There are lots of them out there, have you taken a look,
You can find them all listed in the formulary book.
Everything is there and they look really nice,
It only gets bad when you go to pay the price.
The government has in all its wisdom,
Come up with a plan for a prescription system.
We can get coverage that pays part of the cost,
But for the drug companies no profits are lost.
So forget about paying most of your bills,
Just save it all to buy your pills.
Wednesday, November 16, 2005
Mike Pennachi Sr.
They say that no matter how old we are, in our minds we are still 18 years old
As the 50-year reunion moves ever closer, my thoughts return to those early years. All the things I did that I wish I hadn’t done and all the things I wish I had.
This prompted me to write the words to a song. Perhaps someone out there could add the music.
THE CARS I WISH I HAD OWNED
THINGS HAVE CHANGED, THEY ALWAYS DO,
BUT BELIEVE IT OR NOT, I WAS YOUNG TOO.
IN THOSE DAYS THERE WAS A RULE,
YOU HAD TO HAVE A CAR TO BE REALLY COOL.
NOT ANY OLD CAR LIKE A FAMILY HAND-DOWN,
IT HAD TO BE SPECIAL FOR CRUISING ROUND TOWN.
LIKE A 40 FORD WITH A CLASSIC SOUND
A 49’ FORD LOWERED TO THE GROUND
A 54‘VETTE, THE FIRST OF THE LINE
OR A 56’ TBIRD, THEY LOOKED REALLY FINE.
I’VE OWNED CARS SINCE THE DAY I COULD DRIVE,
FROM A 47’ STUDIE WITH OVERDRIVE.
TO A 51’ CHEV THAT NEVER WINS,
AND A 57’ DODGE WITH GREAT BIG FINS.
THEY WEREN’T COOL OR EVEN TWO-TONED,
NOW THESE ARE THE CARS I WISH I HAD OWNED.
A 40’ FORD WITH A CLASSIC SOUND
A 49’ FORD LOWERED TO THE GROUND
A 54’ VETTE, THE FIRST OF THE LINE
OR A 56 TBIRD, THEY LOOKED REALLY FINE.
NOW THAT I’M OLD AND OUT OF MY PRIME,
I GUESS I COULD GET THEM ANY OLD TIME.
BUT THEY WOULDN’T BE COOL AND NIETHER WOULD I,
SO I’LL JUST CARRY THESE MEMORIES TILL THE DAY THAT I DIE.
OF A 40’ FORD WITH A CLASSIC SOUND
A 49’ FORD LOWERED TO THE GROUND
A 54’ VETTE, THE FIRST OF THE LINE
OR A 56 TBIRD, THEY LOOKED REALLY FINE.
THINK OF ME AFTER I GO,
WHEN YOU SEE THESE CARS IN AN ANTIQUE SHOW,
THEY’LL BE RESTORED AND PERFECT TO VIEW,
BUT THEY WON’T BE LIKE WHEN THEY WERE NEW.
AND PICTURE ME AT 17 AND BEHIND THE WHEEL
AND YOU CAN IMAGINE JUST HOW COOL I FEEL.
DRIVING A 40’ FORD WITH A CLASSIC SOUND
A 49’ FORD LOWERED TO THE GROUND
A 54’ VETTE, THE FIRST OF THE LINE
OR A 56’ TBIRD, THEY LOOKED REALLY FINE.
Sunday, November 13, 2005
Drug Plan Decison II - Sudoku
Complicated? Sure, if you are speaking to a room of 100 people, trying to cover all the possible variables. But you only have one situation. Yours. So it is time to apply the process of elimination. That is what Sudoku is about. You have this 9 by 9 grid to fill in with the numbers 1 through 9, and it looks impossible. But you solve it one cell at a time, by figuring out what numbers CAN'T go there. If you aren't into Sudoku yet, you need to try it. It delays Alzheimer’s as effectively as exercise, and is a lot less work.
So you start your decision process by figuring out what you can't do. If you are covered by an employer drug plan, the sponser is required to notify you by November 15 how it compares with the Medicare minimum. If it is better, you are not going to switch. Also, if electing Medicare Part D causes you to lose all of your other employer coverage, you are going to want to stay put, at least until your employer tells you you can do better with Medicare. If you don't have much in the way of drug expenses, say, less than $1000 a year, it is hoped you will be scared into signing up by the future "penalty" to support everybody else. Not too hard there either. But if you have no current drug coverage other than those discount cards that are going away (they actually worked, to my surprise), and some hefty costs, it is time to pick a carrier.
If there are 50 plus carriers listed for your area, all with some differences, how do you figure that out? The government web site Drug Plan Finder actually purports to work now. You put in the drugs you take, and it comes back with an annual cost to you. When I first entered my drugs, the best on my list was just over $1000, and the worst about $4,000. Since then the difference has shrunk, as insurers adjust their plans, as they can do weekly. The difference is still substantial, but it is still easy to see who is cheaper, and you would need a good reason to chose a plan with a higher total cost. Be sure to click on "Select Below" in the Plan Information column, then "View Cost Details". That will show you the annual cost for the mail order pharmacy. The cheapest one there may not be the cheapest showing in the first schedule, which is the retail pharmacy cost. In my case, all the pharmacies I would normally use accepted the cheapest plan, but I plan to use mail order, which is clearly the better deal, and you get 90 days supply at a time, instead of just 30. I guess I won't have to stress about this much. You can limit the list of pharmacies before you get your list of plans, but I wouldn't do that until I knew there was a problem.
A word about the web site, http://www.medicare.gov/. Since it is like the lecture that tries to be all things to all people, you have to labor through, and some choices are not obvious. Start by clicking on Compare Medicare Drug Plans. That is what you are there for. Even after you have entered the drugs you take and have your list of plans, you have to be careful. For most people, the estimated annual cost will not appear to equal the total of "What You'll Pay" in three colums, the annual deductible, the monthly drug premium, and the monthly cost share. Now you would expect that if you add the premium and the cost share, multiple times 12, and add the deductible, you should get the stated estimated annual cost. Anyone taking a couple of the more expensive drugs will push into the into the "donut hole", where there is no coverage, before the year is out. I will have some more to say about that in "horseshoes and hand grenades".
Chuck Cooper
The Drug Plan Decision - Newspapers
There are a lot of variables to the new Medicare drug plan, but the decision process should be fairly straightforward, and certainly not stressful or worrisome. This will be three posts, each with a simple step in the process. First, this is about how much to credit what you read in the newspapers. Next will be on the Sudoku process. Last will be on horseshoes and hand grenades. If any emails show up indicating anybody is reading this stuff, we can go into the actual details of the plan.
Here is the opening quote in today's NYT article. "I have a Ph.D., and i'ts too complicated to suit me," said William Q. Beard, 73, a retired chemist.... " Mr. Beard was interviewed ... where he and 100 other members of an adult Sunday school class recently received a two hour explanation of the drug benefit from a state insurance counselor.
Let's look at the reporting process. The editor decides it's time for another front page article on how complicated the drug plan is, and out go the reporters to get quotable quotes. You can't just go down the street asking people that look old. You will get stuff like "off the porch, sonny, or Fang here gets out", or "huh?". Worse, you get the nice old lady who insists you come in for cookies, and shoot the afternoon. No, you have to go where there is a big meeting of people who are over 65 and already think they need help figuring it out.
Now put yourself in the place of one of those seniors, we will say Bob. A cute reporter who looks like she is about 15 walks up and asks you if the session was hard to understand. Your own grandkids don't come around much, and you wouldn't mind seeing your name in the paper, so you chat her up. If you say "nah, piece of cake" or call her "Toots" she moves on to the next person. So you say "glad you asked, Alison, I am a retired nuclear physicist with my pharmocology license so I can work in my brother's drug store on weekends, and I just cannot grasp any of this. That's B-O-B, Alison. I don't know why the government made this so impossible." Now your friends will stop you on the street with "Hey Bob, was that you in the New York Times?".
OK, we are past that mental hurdle. The next step is Sudoku.
Chuck Cooper
Sunday, November 06, 2005
Nancy Carson - What We Leave Behind
Where is my black Chinese teapot—the heavy one with the rough fish scales covering the surface and the wide handle that makes it easy to pour? This teapot conveys its own gravity; if I lift it to fill a small cup I feel its presence. Tea from this pot is not to be swallowed lightly. Surely I would not have misplaced a pot of such importance.But I might have given it away. I give away most things. When my daughter was five and we were cleaning out in the spring, I let her give away her old favorite doll. “Some little girl who doesn’t have a doll will love it,” I told her. An hour later she came to me heart-broken and sobbing. “I gave her away, with no clothes on.” I hadn’t stopped her. I don’t stop myself from divesting.
Why is it that I give everything away so easily, and then worry that I am not connected? Where does this come from? Connection is central to life, but I am willing to dispose of possessions, memories, and sometimes people. My past evaporates at my direction. I live lightly on the land, proud of my transient nature. But today I am searching for that pot. Perhaps it is not wise to reinvent myself constantly, snakelike. Perhaps a little holding on would be a better course.
Some part of my need to divest must come from my place in my family. My mother is a saver. The basement of her house still holds boxes never unpacked from the last move, now some forty years ago. Mother worries what will happen to all the things in the house, like shoes from the 50s and nylon windbreakers and boxes of commemorative plates and enough gift-wrap for a decade. But each time I offer to unpack those boxes or clean out those closets, she concludes that it would be best to leave things as they are. To her they are valuable. She says, “We can’t just give those clothes away, they are worth something.” To her they are in investment; to me they are a liability. I think Mother believes that I will go through the house with a vengeance when she is no longer there to protect it. I think she imagines me stuffing her belongings into garbage bags and putting the dumpster right tin the driveway. Lately I’ve taken to trying to reassure her by saying, “You’d better keep those things, because we will want them.” But maybe she is right about me.
My daughter is also a saver. When my mother’s sister died, my mother and my daughter sat lovingly together going through the possessions, admiring and dividing the dozens of hats and purses and shoes. Mother is wearing those clothes, though she is 5.3” and her sister was 5’10.” She just used up the last inherited lipstick and it’s been four years. My daughter, an artist, uses the pieces she chose as props in photographs or wears them in downtown New York. I meet her at City Bakery at eight in the morning and she is carrying her great-aunt’s boxy red vinyl purse with the gold closing, circa 1953. She looks good. Although I am the visitor, I am wearing New York black, everything foldable, packable, shippable and disposable. Lately I’ve been buying garments made from tree bark—the better to be discarded.
My daughter’s apartment walls are covered by photographs and fabric and drawings. Every surface inch is decorated. To go there is to visit a foreign country, or several, as it changes often. She’s like her grandmother. They enjoy filling space. I enjoy spending time in monasteries, and one of the main reasons is the emptiness. I love the rooms. When I step into a small cell with a narrow bed, a desk, a sink and one window, I feel at home. Sufficient. Complete. I have everything I need, and for a few days it is all mine. I put a flower or some leaves on the table, or prop up a picture, or tape a poem over the bed. I’ve never had much desire for furniture, so my home looks like an art gallery. This spring a visitor, looking around the first floor, said, “Are you moving in or out?”
But living in monastic space is one thing, and living the monastic, unattached life is another. Non-attachment is a tranquil way of life, but it is not without cost. Which is why, I think, I am searching for this teapot. I don’t know what it symbolizes, but letting go of so much may be a strategy that needs revisiting.
Perhaps the teapot is on my mind because teapots are ceremonial. They are crafted for deliberate use, sometimes with rules in rituals, sometimes with others in celebration or welcome or consolation. I can make a cup of tea without a pot; choosing to use the pot serves another purpose. Divesting myself of possessions and leaving people is an efficient mechanism for moving on, but it skips a step. The step is ritual. When we let go of something important, we need to grieve. We need to be deliberate. We need to face what we are doing. We need ritual. What am I doing? What am I leaving?
I left my parents home as soon as I got out of college. I remain 3000 miles away, although my parents need my attention now. I left two husbands to move on, because it was so much easier than trying to fix things. I do not miss those husbands anymore than I miss tossed-out cardigan sweaters. I urged people who had worked for me happily for years to move on to new jobs with difficult bosses, the better to enlarge their life experience. I left jobs myself because there was nothing new to learn, and I am easily bored. I don’t leave everything, and possessions are only possessions. I did not leave my dog, and I do not leave my cat. Actually, I do leave my cat occasionally but I always come back, and I am teaching him to be self-sufficient. He’s learned to go to the neighbor’s window if he is hungry or needs to talk.
I have remained connected to my neighbors for over a decade now. I love the neighbors. On my block I am the person who rolls in the garbage cans and picks up the newspapers. At Easter I make construction paper baskets filled with eggs and cookies and leave them on porches early in the morning. I encourage the adolescent girls and keep an eye on the babies and the new mothers. I share with the women my age the never-ending, stomach-churning roller coaster of parenting, which seems to become harder as they children grow up and struggle with life on their own, far away and not wanting our help.
And I do not leave my friends. I am good at friendship. It does not occur to me to buy new bedspreads or shop for end tables, but I always know how my friends are, and what they need, and what I can do for them. Most of my friends are women, varying ages, varying backgrounds. I write to them, send them clippings from the New York Times, and share my book list. Our lives are interwoven, and I do more than my share of the weaving. Women have always formed strong bonds of friendship, and over the past 20 years I find friendship increasingly easy to construct and maintain. We’ve all learned that each of us is strange in a different way, and there’s nothing to be gained from holding back, and stories come tumbling out quickly.
So my life is full of friends, if not things. Good friends. People to do things with, to talk to, a few to confide in, friends who will be my created family when I need chemotherapy or a liver transplant. These are people not thrown away or held casually; they are cherished.
But these friends don’t live with me, and their lives do not depend on mine. I prefer not to be the center of anyone’s universe. So it seems that what I really leave is difficulty, and one kind of difficulty for me is men. Those two husbands, who turned out to be human. I had no will to stay and change, stay and make things better, stay and figure it all out. In particular, I had no will to stay and talk about it. I have mastered re-invention, but not perseverance. I can join in with enthusiasm as long as I can get out with ease.
Is it true that freedom is just another word for nothing left to lose? No baggage, no burdens, no having to check in with someone or adjust your schedule or share the bathroom. Deep down, I don’t share well. I want my spare space the way I want it. You can spend the night, but you have to go home early the next morning. You can travel with me but I’ll drive and I need a few hours to myself each day. I have become like a 20 year old man—commitment is not an option.
Is it because of the vacuum where acquisition normally falls that I cannot stay attached to a man? Are the genes for possessions and commitment intertwined? I spent too many years in love with an unavailable man, and I now realize just how well this has served me. He comes, he goes. I cry, I long, I languish, and then I re-invent myself. We change the conditions slightly each decade; first he was unavailable cause of religion, then because of marriage, and now we’re back to religion. This shadow dance allows me to preserve the possibility of moving West, going to Law School, reading the Great Books and restructuring my body. Anything can happen. I do not misplace this man. Unlike the teapot, I always know where he is. I put him away into my psychic attic until I need him, and somehow he shows up whenever my life becomes too difficult to face or offers some possibility of settling down. I do not let go of this one thing that I do not have.
Well, maybe 60 is when I settle down. All those options I’ve believed were mine are starting to seem less likely in the face of the American youth culture, the realities of the workplace, the real world of family responsibilities and commitments. Besides, the West is getting crowded. If I stayed home for a whole year and stopped discarding I could get the garden into shape, make a quilt, maybe even buy curtains. I could learn the Japanese tea ceremony, which only takes ten years if you practice with the same people every day.
Nancy Carson
9/98 - Italy
Diane McMahon
One thing that life has taught me is that we all change, inside and out. As we age our bodies do traitorous things to us. You know the "things" that happen as you age. Then there is our minds - as we age we learn soooo much. Not all of value but in some way it is all of value for these lessons bring us to where we are today. Full of wisdom, sorrow, happiness, grief and love for each day we wake up
Monday, October 24, 2005
Dave Klein - Government Advisories
Dave Klein - The Federal Gov't, around 2003, sent out a safety advisory warning employees of the hazard of falling out of one's chair in the office. I have always enjoyed Dilbert and really get a kick from the rage he can create among certain mid- and upper-level Management. That is, the ones that can understand cartoons. I can also attest to the Gov't practice of spending everything in the budget so as not to get less next year. Around the end of 1991, I was told my share of budget for supplies was $17, and to spend it! After searching the catalog I ordered a 12" X 36" Cork Bulletin Board for my work area. A REAL useful tool.
Opening Post
Here is our new op ed page.
