[Rhodes22-list] Political- Caroline's disappointing day.

[Herb Parsons]

You mean that moron Sarah said THAT, while all these learned and 
experienced politicians did what they did? Wow....

Brad Haslett wrote:
> Herb,
>
> Along that line of thinking, here's another article pointing out our
> folly.  So far, I've only heard one single politician point out the
> obvious, Sarah Palin "live within your means".  Now that oil has
> dropped from $140 a barrel to $40, her restraint on vastly increasing
> the size of the AK budget looks pretty damn prescient. The NYTimes
> should be writing an article about it any day now.
>
> Run the world for me, will ya?  I've got to go suffer through training
> today as the whippee not the whippor.
>
> Brad
>
> ------------------------
>
> Return of the Living Dead
> What the U.S. can learn from Japan's failed experiment with "zombie businesses"
>
> Anthony Randazzo | December 17, 2008
>
> Killing zombies isn't typically the responsibility of America's
> president or treasury secretary. But if the country is going to get
> through the current financial crisis, President-elect Barack Obama and
> his economic team better get out their shotguns and aim for the head.
>
> Today, our economy is plagued by struggling markets, liquidity
> concerns, and frozen credit. Twenty years ago, Japan faced nearly the
> exact same problems. Then they fell prey to the zombies.
>
> After Japan's asset bubble burst in the late 1980s, their economy took
> a sharp downturn, prompting government officials to try bailing out
> banks and investing in infrastructure, much like the activity and
> proposals floating around America today. The results were terrible.
>
> With the government propping up poor business models rather than
> allowing further job losses, firms wound up operating over the
> long-term without making a profit or adding any value to society.
> Their utter lack of vitality earned these perpetual money-leaching
> entities the moniker "zombie businesses." And unless American
> policymakers understand the failures of the Japanese response, we will
> suffer the same zombie fate.
>
> Remember that the Japanese asset bubble and the American housing
> bubble have eerily similar origins. Both were driven by aggressive
> behavior in financial institutions. Wall Street, which sought new ways
> to get quality returns on investments, turned to securitizing
> everything it could and issuing unwise subprime mortgages—all highly
> valued by the rating agencies, and all highly misunderstood. The
> Japanese aggressively pursued real property assets to the point where
> the inflated values were unsustainable.
>
> In both cases, the rapid rise in rates of return led to over
> confidence. In Japan, it is said that the market experienced a sense
> of euphoria, and poor investments were driven by excessively
> optimistic expectations of future economic development.
>
> The Nikkei, Japan's stock index, rose from 18,000 in 1986 to an
> intraday high of 38,975 by the end of 1989. Similarly in the U.S., the
> Dow Jones went from 7,591 in July 2002 to an intraday high of 14,115
> five years later.
>
> These large growth trends led to inadequate risk management,
> over-leveraged investments, and depleted capital reserves. In both
> bubbles, loans were given out like candy, often times to people that
> the banks knew were high risk.
>
> Government practices during both bubbles share many unfortunate
> similarities as well. In Japan, increased capital requirements caused
> many firms to struggle when their assets started to depreciate.
> Similarly, the inflexible mark-to-market regulations in America forced
> firms to raise capital quickly, sometimes driving them towards
> bankruptcy.
>
> In America, Federal Housing Administration policies encouraged the
> expansion of subprime mortgages, particularly through Fannie Mae and
> Freddie Mac. The idea was to expand homeownership for low-income
> families, though the increased demand drove housing up until the
> market was eventually oversaturated. Japanese regulatory policies and
> tax codes also caused land prices to unnaturally rise until they
> ultimately burst.
>
> Given these similarities, U.S. officials should take a careful look at
> how Japan's response to the crisis lead to the more than ten years of
> recession and stagnation known as "the lost decade." We do not want to
> duplicate Japan's mistakes.
>
> First mistake. The Bank of Japan tried to ease economic pains during
> their downturn through the 1990s by loaning large amounts of money to
> businesses. However, such attempts to recapitalize the market were
> counteracted by underlying management problems endemic to the dying
> firms.
>
> According to Shigenori Shiratsuka, Deputy Director and Senior
> Economist at the Bank of Japan, even though firms became unprofitable,
> the government still encouraged lending to them to prevent losses from
> materializing. There were heavy concerns about a failing firm
> increasing unemployment.
>
> The intense lobbying from special interest groups representing various
> sectors of the Japanese economy further perpetuated these ill-fated
> loans, funneling additional funds to zombie businesses. As Shiratsuka
> notes, "under such circumstances, loans to unprofitable firms become
> fixed and funds are not channeled to growing firms, holding down
> economic activity."
>
> Unfortunately, we're seeing a disturbingly similar trend in America
> today, as the cost of bailing out AIG continues to rise and Congress
> moves forward with a bailout for the auto industry. The $8.4 trillion
> (and growing) cost of "saving" firms deemed too big to fail completely
> ignores the inefficiency and poor quality of the very businesses the
> government is trying to save.
>
> Second mistake. With all those loans, the Japanese government was
> simply too integrated into the market to have adequate incentives to
> create the right policies. Daniel Okimoto, former director of the
> Asia-Pacific Research Center, points out that the interests of Japan's
> economic bureaucracies, such as the Ministry of Finance, became
> interdependent with the banking industry.
>
> Moreover, government officials suppressed data revealing the intense
> scope of the economic malaise, all while regulations were developed
> with government interests in mind. Transparency and public
> accountability were basically nonexistent.
>
> America now finds itself in the same position. The Treasury has taken
> equity stakes in many major financial institutions and insurance
> companies, not to mention the pending partial nationalization of
> Detroit's Big Three. This has created a myriad of conflicting
> interests as well as vast potential for fraud.
>
> Consider that while the bulk of what the Treasury, FDIC, and Federal
> Reserve have spent has been tracked, it's far from clear what the
> banks and other institutions have done with that money. Without this
> information, it's difficult to measure whether the $8.4 trillion has
> been effective. Fighting fraud is equally difficult.
>
> Third mistake. The length of Japan's asset deflation, recession, and
> liquidity struggles has been blamed largely on the lack of foresighted
> policies and political leadership. Politicians bent on retaining their
> power took action that sought to solve the present day concerns, such
> as infrastructure projects, without regard to their long-term effects.
> As a result, economic growth was not sustained.
>
> America suffers from a similar vision problem. Intent with avoiding
> any semblance of economic pain, federal officials have thrown moral
> hazard and laissez-faire principals to the wind. Creative destruction
> has been rejected, despite long historical proof that it is the best
> way for an economy to grow.
>
> Fourth mistake. Japan tried to climb out of its economic mess by
> raising taxes and cutting interest rates. Okimoto cites a series of
> policy mistakes in a report on Japan's economic stagnation that
> includes a consumption tax hike, business taxes, and heavy-handed
> reliance on interest rate cuts that reduced investment incentives.
>
> President-elect Obama has backed down temporarily on his oil industry
> windfall profits tax and his promise to end the Bush tax cuts. But he
> still plans on letting the Bush tax cuts expire in 2010 and has set an
> arbitrary cap of $80 per barrel as the most profit oil companies can
> make before a windfall tax.
>
> Neither Obama nor Congress has seriously considered cutting business
> taxes, cutting capital gains taxes, or creating an investment tax
> holiday. Any of these would encourage capital investment and the
> growth of businesses, thereby spurring on an economic recovery.
> Meanwhile, the Fed continues to slash interest rates with the goal of
> encouraging lending today, thereby limiting investment rates of return
> over the long-term.
>
> Fifth mistake. With the Japanese government enabling lending to zombie
> businesses, taking cash away from productive ventures, and passing tax
> laws and other regulations that did not promote growth, the private
> sector was actively discouraged from investing.
>
> Japan's economic growth during the 80s was due in large part to
> consumption growth and heavy capital investment. However, during the
> 90s, that money dropped-off as savings increased due to uncertainty,
> leading to a sharp drop in demand that further hurt prospects for
> recovery. The same problems contributed to the flight of foreign
> capital from Japan as well.
>
> To counteract the lack of private investment, the Japanese government
> turned to large-scale infrastructure programs. They built roads,
> bridges, and airports, all with the goal of creating jobs and saving
> the economy. But it didn't work. Public debt skyrocketed (it is now
> higher than GDP), unemployment doubled, and the economy remained
> stagnant.
>
> While private sector investment isn't totally stalled in America
> today, there is great uncertainty about what the government will do
> next, whether taxes will increase, and what future rates of return
> will be considering the Fed's rate-slashing binge. Foreign investment
> dollars are slowing as well, partially due to the global economic dip,
> but also because of errant policy.
>
> To make matters worse, Obama is planning a Japanese-styled
> infrastructure investment project, with the goal of restarting the
> economy and creating 2.5 million jobs. But the plans are unlikely to
> encourage long-term economic growth, the jobs are not sustainable, and
> the spending will increase national debt.
>
> And while some of Japan's infrastructure projects have served society,
> that value must be compared to what the private sector could have
> created with economic policies in place that encouraged free market
> activity. In other words, what are the unseen losses?
>
> Still there are reasons to be optimistic. Not only does America have
> the Japanese lesson to study, we are in a much better position to act
> than Japan ever was. Despite Wall Street's massive losses, for
> instance, there is over $100 billion in private capital available now
> for investing in infrastructure. With a little forward thinking, we
> can unleash the greatest new wave of investment this country has ever
> seen-one that originates from the private sector, not from government
> planners focused on propping up the living dead.
>
> Anthony Randazzo is a research associate at the Reason Foundation.
>
> On Thu, Dec 18, 2008 at 8:22 AM, Herb Parsons <hparsons at parsonsys.com> wrote:
>   
>> I think next time I overspend (and that would be NOW, it's Christmas you
>> know), I'm going to take a new approach.
>>
>> Rather than look for ways to cut back here and there to make up for my
>> earlier weaknesses, I'm going to simply approach my boss and tell him he
>> has to give me more money.
>>
>> Think it'll work?
>>
>> Of course, my boss can say no. But, I DO have access to payroll files.
>> On the other hand, if I did that, he'd probably fire me.
>>
>> Maybe the public should learn from THAT!!!!
>>
>> We're the "boss" in these things, we need to start firing people.
>>
>> Michael D. Weisner wrote:
>>     
>>> Brad,
>>>
>>> The appointment of an interim Senator seems to be the least of the problems
>>> facing New Yorkers or those from the great state of Lincoln.  Have you heard
>>> what our esteemed governor David Patterson is proposing?  While fiscally
>>> responsible, I doubt that it will stimulate the NY economy, rather much the
>>> opposite.  My favorite line in his recent address discusses how the NY
>>> budget could increase from 8 billion dollars to nearly 16 billion dollars in
>>> the last two months!  Come on, how many hands are in my pockets now?
>>>
>>> Be careful with the placement of and references to your pronouns - I'd hate
>>> to see your folks doing time for being pissed, although it might be all
>>> together possible in Chicagoland.
>>>
>>> Mike
>>> s/v Shanghaid'd Summer ('81)
>>>        Nissequogue River, NY
>>>
>>> From: "Brad Haslett" <flybrad at gmail.com>Sent: Thursday, December 18, 2008
>>> 8:06 AM
>>>
>>>       
>>>> Mike,
>>>>
>>>>
>>>>         
>>> {clip}
>>>
>>>       
>>>> Seriously, if I lived in NY I'd be pissed that this was being crammed
>>>> down my throat, just like my parents in downstate Illinois are pissed
>>>> that once again, a handful of Chicagoans will decide who their next
>>>> Senator will be - provided of course they don't go to jail first.
>>>>
>>>> Brad
>>>>
>>>>         
>>> {clip}
>>>
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>>>
>>>
>>>       
>> --
>> Herb Parsons
>>
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>>     
>
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-- 
Herb Parsons