Archive for the ‘Idiots’ Category

Macro Economics – Encourage People To Save Part I

Tuesday, March 24th, 2009

(Note: I actually started writing this post back in early December. I notice now that several talking heads on major news and “research” agencies are starting to think that banks keeping large amounts of savers’ money on hand, rather than shoveling it out the door in bad loans, might actually be a good idea. Be warned – this is a long post. Really long.)

Please consider the following information that I have gathered over the last ten years:

  • Basic economics: Money in exchange for goods or services.
  • The Federal Reserve, in cooperation with banks and other financial institutions, has been punishing savers for years. Just look at your savings account APY.
  • As a nation, our population is now referred to as “consumers”, even in casual conversation. Consumers don’t produce. They consume – resources, money, air, space.
  • The basic pile of rocks bank savings account doesn’t even keep up with inflation. In effect, savers lose money continually. Online banks, CDs, and the “very safe” vehicles often offer only a little better than inflation.

This is bad because those savers are the fundamental source of banking and investment assets. Yet those assets, those ultra-safe and reliable sources of money to loan out or invest, are constantly de-valued.

So banks (and other institutions) are fundamentally slitting their own throats.

Here’s why:

If you’re a bank with $1000 of savers’ money in your accounts, then you have $1000 that you can loan out. To encourage those savers to keep their money in your bank (so you can loan it out), you offer them %1 per year. That means that you add $10 to those savers’ accounts the first year, and compound it in the following years — effectively increasing the bank’s assets by the same amount each year.

Where does that $10 come from? Let’s keep this example very simple.

The bank lends a portion of that $1000 to other people or businesses, after checking to make sure the recipient is capable and willing to repay the loan plus interest. The bank conservatively sets a limit of lending out no more than %30 of its assets ($300 in this case) and charges %8 interest, for a gross profit of $24.

If the bank is destroyed, the FDIC will reimburse the savers. Nice and safe.

If the loan doesn’t get repaid, the bank covers itself by a) requiring some up-front payment, say %10 of the loan; b) seizing the property/business goods for itself and auctioning them off; or c) pursuing other legal means to recover the money plus expenses.

Still pretty safe so far.

So what we have is this:

Assets                                       Debits
Year 1    $1000 savers’ deposit        -$270 loan
$30 up-front for loans        -$10 savers’ payment
$20 loan interest                  -$10 business expenses
=========================================
$1084.02                                -$290

Assets                                           Debits
Year 2    $1084.02 savers’ deposit    -$240 loan
$30 loan repayment             -$10 savers’ payment
$19.20 loan interest              -$10 business expenses

==========================================

$1133.22                                    -$260

etc…

Until Year 10

With me so far? Everybody is making a tidy profit, right? Now, let’s add in the effects of inflation. We’ll assume %3 inflation per year, as a penalty, because everyone’s purchasing power has gone down (your money buys less food).

Now everybody’s hurting some, right?

Wrong.

And you’ll find out why in Part II.

Indoor Cats

Saturday, March 14th, 2009

S.O. and I have, at various times, had anywhere from two to eight cats living in our pile of rocks. None were declawed. All were treated at various points to prevent accidental multiplication. All were kept indoors only.

Gasp! Shock! Horror!

You didn’t DECLAW THEM?!?!

Well, no. We didn’t, and don’t.

We don’t keep furniture and furnishings so fine that they can’t stand the normal wear and tear of daily (sometimes hourly) use. That is what furniture and furnishings are for in our pile of rocks. Yes, the little multi-switchblade-equipped furry feline felons have, upon rare occasion, taken it into their fuzzy skulls that sharpening their talons upon our well-used furniture is a Good Thing. Judicious application of the Mighty Hand of No!! (spray bottle with water) usually takes care of the problem. For persistent feline stubbornness, a light dusting of dried cayenne pepper powder (followed by much howling, meowing, and dragging of nose through carpet) creates the appropriate atmosphere for cattish attitudinal adjustment. (Just make sure you warn your S.O., and vacuum it back up before guests arrive.)

Cruel? No. The one and only time I’ve been pepper-sprayed thoroughly convinced me that I never wanted to be a guinea pig at another self-defense demonstration. (I bought two of the devices on the spot, along with training in their use. You see, I could personally testify as to their effectiveness after I could breathe and see again.) I can speak from first-hand experience, and after consultation with the vet, that this treatment does no serious harm to our beloved pets. For each such cayenne pepper incident, the boundaries of What Is and What Is Not A Scratching Post required only one lesson.

It also happens to save money on vet bills. Here at Life of Pookah, we are all about sane frugal living.

Pookah wishes to go on record that Pookah learned proper behavior on the first lesson. Pookah has NEVER experienced cayenne pepper powder. Pookah has, however, watched Pookah’s foolish, stubborn daughter ignore the obvious signs of violating human territories. Pookah graciously allowed Pookah’s daughter to groom her own fur that day.

Pookah is still considering disowning Pookah’s “offspring”.

Crime! Blasphemy! Inhumanity!

You don’t LET THEM OUT?!?!

Let me explain something that may not be inherently obvious from my previous references to our small portion of the primordial scrub, upon which our pile of rocks is situated.

Where we live, there are these critters known as Wild Animals, and occasional Feral Pets.

And small tasty birds.

That means that there is a high percentage of likelihood that Mr. Fuzzywuzzy will end up as some critter’s dinner, claws or no. If dinner attendance is not enforced, Mr. Fuzzywuzzy *will* have lacerations and punctures to show for the attempted enforcement. This can still easily result in a dead pet. Additionally, with all of these wild and/or feral critters about, not only is there increased likelihood that Mr. Fuzzywuzzy will contract parasitic or communicable infection, there is also a significant chance that the local wild and/or feral critter control methods will accidentally send Mr. Fuzzywuzzy into the feline hereafter.

Take this interesting factoid for example: As of three years ago, there was a feral feline population explosion, numbering some fifteen or more individuals. Fox, coyote, raccoon, possum, and “other” critters in combination with nearby farmers taking exception to attempted chicken feasts and the inevitable attrition due to motor vehicles, reduced that number to barely a half-dozen within a year. Yes, they grow the critters big enough to do the job around here. Personally, I don’t know if muskrat or beaver will kill a cat – but they certainly get big enough to do so.

Now there are maybe three outdoor cats in our area of primordial scrub, of which one is a relatively new immigrant to the region. All of them have the battle scars to prove that they can hold their own – or at least know how to wedge themselves into an opening too small for nature’s dinner enforcers to get at them. (One is becoming a grizzled old veteran tomcat, who thinks that Marine special forces training is for wimps.)

In short, outdoor cats have a very reduced life expectancy in our neck of the primordial scrub. While I am all in favor of natural recycling, I’d much prefer to enjoy many years of companionship and affection with my pets than go through the heartache of finding their gnawed remains. Our indoor cats are well-fed, groomed, played with, play with each other, and get to watch small tasty birds through the window. Pookah herself has shown little desire to return to the Great Outdoors, even though the opportunity has repeatedly presented itself.

Pookah can always get another small tasty bird from the kitchen. If Pookah wants to play Chase, Pookah will let human see Pookah getting the small tasty bird. Humans do not take corners very well at all.

(P.S.: The foxes are absolutely gorgeous, but they are very shy. I have yet to catch one with the camera, but I’m still hoping.)

Why Some Economists Are Morons – On FoxNews

Thursday, February 5th, 2009

Article at Fox News: Frugal Americans Hurt The Economy

The article summarizes nicely in this line: “Economists call it the ‘paradox of thrift.’ What’s good for individuals — spending less, saving more — is bad for the economy when everyone does it.”

Hogwash.

Pure bull waste has more value than this reactionary garbage.

Saving more money — putting money into banks, stocks, and other financial vehicles — is a bad thing? So tell me, “Economists”, where do banks get their money to loan out to people? Do they just print it up in the basement? Do they beg for a taxpayer-funded bailout (and beg the question, where do taxpayers or the government get the money for that bailout)? Or do they get it from people who increase their savings?

Idiots.

Let’s try reworking this theory:

“Economists call it the ‘paradox of thrift.’ When the economy tanks and people lose around %50 of their investment and savings value, they wise up — spending less, saving more — so that their homes aren’t foreclosed on. This causes the market to contract sharply for the short term. But the long term benefits are a more stable and growing economy since individuals and financial institutions will have more assets available to them for extending and maintaining credit.”

Imagine this counter-point:
What if %30 of American taxpayers saved %10 of their income in a bank, money market fund, or investment service – towards a down payment on a house, towards a car to buy in the future, towards a flat-screen plasma TV, whatever? What if they did that steadily for 10 years instead of borrowing on credit for ten years? (Does this pattern remind you of the opposite of what’s been going on for the last decade? If yes, give yourself a kitty treat. Just don’t tell Pookah.) What would the total assets available in banks and other financial institutions be now? Wouldn’t American taxpayers (y’know, “consumers”) be able to still buy products sold in this country? Don’t you think that would have cushioned the hit caused by this recession? Did the reporter even bother to ask these obvious questions?

Reality check, Fox: The “economy” is still correcting. That “consumer debt” still has to be paid, or the consumer loses his/her purchasing power and critical assets – like a home. With employers performing credit checks to weed out prospective employees, the “consumer” has NO CHOICE but to go sane: Act more frugal, save more money, and pay off debts. Of course people are turning towards saving more – en masse – now. Just like they turned to spending more – en masse – back in the late 90’s. It is a logical and reasonable reaction.

There is no paradox here. There is only cause and effect.

Methinks someone was hunting for a sellable article, loaded with “controversy” and “spice”.

Maybe they’ll send someone under cover into the economy to find out what’s really happening. Y’know, all secret agent and stuff. Or maybe run a critique or counter-point to the article, and link it in so that the “reporting” isn’t one-sided. That used to be a reporter’s job.

(Was that enough contempt?)

Yes. Now, what was that about a kitty treat?

Whups.

Bailout of the Big Three – Part II

Tuesday, December 2nd, 2008

Well, well, well. The CEO’s of Ford and GM have volunteered to cut their pay to $1. This offer comes after all the controversy surrounding their last attempt at stealing, begging, borrowing, asking for a free handout from us.

Pookah would very much like a small tasty bird right now.

No mention of their multi-million dollar compensation packages. I wonder if the reductions on the paychecks is equal to the increase in comps.

No mention of what unproductive product lines they’re dropping.

Pookah thinks that human getting small tasty bird right now would be very productive.

On the plus side, the CEO’s are actually going to use their own company’s products: They’re going to drive to our beloved capitol to steal, beg, borrow, ask for a free handout – except for Ford (see below).

The suspense is killing me. Pet me now or your lap gets it.

Yes. Ford has somehow, miraculously, finagled the ability to not need a bailout. Will wonders never cease. Instead, they want a $9 billion line of stand-by credit that they don’t expect to have to tap.

They made their own gooshy food?

To make it more interesting, Ford:

  • Expects to reach the financial break-even point in 2011
  • Re-invest $14 billion to improve its products fuel efficiency by 14%. (How much of that improvement will be on their worst-performing vehicles?)
  • Called for producing more parts domestically for its vehicles – specifically mentioning batteries.
  • Is selling some/all of its private jets/leased airplanes.

So let’s recap: In 2 weeks, Ford:

  • Figured out a way to break even within 3 years.
  • Offered to cut executive pay – but not compensations – if they take government money.
  • Figured out a way to improve the fuel efficiency of its vehicles, but with no timeline, milestones, or other basic requirements of a project or commitment.

What do you think they could do with a whole 30 days to work with… say, all of December?

Pookah does not think it is a good idea to wait that long to make own gooshy food… or to get small tasty bird.

No deal, Ford. Your plan is still Junior Highschool. You haven’t even passed Finances 101 midterm exams. We’ll talk again after Christmas.

I still vote No Bailout.

Bailout of the Big Three

Wednesday, November 12th, 2008

Notice a pattern?

Yes. You have not fed Pookah yet today. This is a great problem.

Large company that pays its executives millions of dollars is begging us for money, or “the economy will go under because we’re too big to fail.”

Whenever someone asks me for a loan, here’s what I do:
Me: Do you have cable TV?
A: Yes.
Me: Cancel your cable TV, gather up your last 3 months of bills, statements, and paychecks. Then we’ll work out a budget for you.
A: I can’t cancel my cable TV!!!
Me: You don’t want my help.

Pookah wants you to help pet her.

See, “A” basically told me the following:
1. Cable TV is more important than my paying my debts.
2. Cable TV is more important than the car I use to get to work.
3. Cable TV is more important than my clothes.
4. Cable TV is more important than my food.
5. Cable TV is more important than my husband/wife/partner.
6. Cable TV is more important than my kids.

Cable TV is very important to my human. It makes him sit still more often. Sitting still means his lap is available for Pookah to sit in and get petted.

So here we have multi-million dollar paycheck, not including bonuses and comps, executives – most of whom have a history of bad decisions, financial and business incompetence, and who rely on lobbyist-backed legal protections of their market share, and NOT ONE OF THEM IS OFFERING TO TAKE A PAY CUT.

Pookah thinks you should take away their food bowls.

Bailout? Let them die. Then sue the lying bastards who ran the company for criminal negligence. Let other, better-managed businesses either rise up to fill in the gap, or take over their assets in a fire sale.

But wait… what about the economic impact? It will extend beyond these execs.

Okay. Dictate the terms. No one in management can make more than $100,000, including bonuses and other compensation, +/- inflation until the ENTIRE bailout is paid back with 10% compounded interest. A 5-person panel, 3 chosen by the House, 1 by the Senate, and 1 by the President, has full review and veto power over any company action. No company-paid vacations. No retreats. No company jets, yachts, or loans to employees. And fire any executive who objects to the terms on the grounds that they’re insane. Golden parachutes? Gone.

Now, how many of the Big 3 want a bailout?

If you or your company is on the rocks, it is sheerest stupidity to throw your crew overboard just so you can keep drinking wine. If you, as an executive, declare cost-cutting measures, the first place to cut is the fatty pork in your own paycheck. If you won’t cut the fat in your diet, then no one can help you.

Pookah agrees. Chicken does not contain much fat. Give more chicken to Pookah.

I vote No Bailout.