Some musings and quotes

The financial crisis explained in simple terms.

NOTE: This is a version of a story heard on talk radio and embellished by the author of this blog, who adds, “The crisis was created deliberately by Liberals aided by greedy bankers and politicians buying votes.”
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Heidi is the proprietor of a bar in Berlin . In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around, promoted by liberal politicians and their adoring media and as a result increasing numbers of customers flood into Heidi's bar.

Taking advantage of her customers' freedom from immediate payment constraints, Heidi gradually but steadily increases her prices for wine and beer, the most-consumed beverages gradually. Her sales volume increases massively as do her profits (and tax payments)

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit. Deciding to expand she opens several new bars on her greatly expanded credit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due his negativity) of the bank decides that the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar and by Heidi for her greatly expanded business.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %.

The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by “the Government” following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation I understand...
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In addition, the non-drinkers are mostly business people, some very wealthy, who hire 90% of the people employed and generate most of the new jobs. Seeing their profits deeply cut by the expanded taxes, they reduce their one-year and five-year financial budgets, cut their plans for expansion, reduce their payroll (that’s lay off many of their employees), and cancel orders for new equipment.

The stock market drops by 50% as investors move their holdings to safer places (like gold and Ireland).The media morosely reports the layoffs and order cancellations announcing, “We are now in a terrible recession brought about by greedy businessmen.” Consumer confidence (a very nebulous quality) drops precipitously, profits (and taxes) take a huge drop, and more and more businesses fail.

The government (who can’t manage anything and would seriously “screw up a one car parade”) takes over those failing “business that are too big to fail.” Between feuding and self-serving politicians and anal retentive government bureaucrats the economy collapses in line with a quote often attributed to a Scottish Historian, Alexander Tytler or Tyler. The true origin of the quote is obscure and might have originated in the early 20th century from an unknown politician or writer. Nevertheless, this does not detract from its accuracy.

One version of the quote on why democracies always fail is:

"A Democracy cannot exist as a permanent form of government. It can only last until the citizens discover they can vote themselves largesse out of the public treasury. After that, the majority always votes for the candidate promising the most benefits from the public treasury with the result that the Democracy always collapses over a loose fiscal policy, to be followed by a dictatorship, and then a monarchy."

A version of the second part of the misquote, attributed in 1983 to Arnold Toynbee is:

"The release of initiative and enterprise made possible by self-government ultimately generates disintegrating forces from within. Again and again, after freedom brings opportunity and some degree of plenty, the competent become selfish, luxury-loving and complacent; the incompetent and unfortunate grow envious and covetous; and all three groups turn aside from the hard road of freedom to worship the golden calf of economic security. The historical cycle seems to be: from bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more."

But the person who appears to be the actual author is Henning Webb Prentis, Jr., President of the Armstrong Cork Company. In a speech entitled "Industrial Management in a Republic," delivered in the grand ballroom of the Waldorf Astoria at New York during the 250th meeting of the National Conference Board on March 18, 1943, and recorded on p. 22 of Industrial Management in a Republic, Prentis had this to say:

“Paradoxically enough, the release of initiative and enterprise made possible by popular self-government ultimately generates disintegrating forces from within. Again and again after freedom has brought opportunity and some degree of plenty, the competent become selfish, luxury-loving and complacent, the incompetent and the unfortunate grow envious and covetous, and all three groups turn aside from the hard road of freedom to worship the Golden Calf of economic security. The historical cycle seems to be: From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more.

“At the stage between apathy and dependency, men always turn in fear to economic and political panaceas. New conditions, it is claimed, require new remedies. Under such circumstances, the competent citizen is certainly not a fool if he insists upon using the compass of history when forced to sail uncharted seas. Usually so-called new remedies are not new at all. Compulsory planned economy, for example, was tried by the Chinese some three milleniums ago, and by the Romans in the early centuries of the Christian era. It was applied in Germany, Italy and Russia long before the present war broke out. Yet it is being seriously advocated today as a solution of our economic problems in the United States. Its proponents confidently assert that government can successfully plan and control all major business activity in the nation, and still not interfere with our political freedom and our hard-won civil and religious liberties. The lessons of history all point in exactly the reverse direction.”

For more information about these quotes and their sources go to http://www.lorencollins.net/tytler.html
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A very interesting interview about Obama’s “share the wealth” plan.

INTERVIEWER: Hello.

SUBJECT: Hey! How are you doing?

INTERVIEWER: Very well, sir, thank you.

SUBJECT: All right. My wife had a hard time trying to understand why Obama's plan to "spread the wealth" was unfair. She couldn't see (sigh), you know, what was wrong with taking from those who have and giving to those who don't have so what I did was I simplified it for her. She's a woman that prides herself on education. She's working on a PhD at Vanderbilt and she makes excellent grades.

INTERVIEWER: Oh, no.

SUBJECT: Now, I told her, I said --

INTERVIEWER: Wait a minute, wait a minute, wait a minute. You are depressing me. Your wife's a PhD, working on a PhD, she makes excellent grades.

SUBJECT: Yes, and we have four kids.

INTERVIEWER: No, it makes total sense that she would think what she thinks because the culture she's immersed herself in, academia, is teaching her this stuff.

SUBJECT: (laughing) Well, let me finish. Let me show you what I did.

INTERVIEWER: Yes. Sorry for the interruption.

SUBJECT: That's okay. Let me just show you what I did to bring her around. I said, "You know, what if you made a hundred on a test and another guy in your class made a 60? This guy has a failing mark and you have a high passing mark. Would it be fair to say 20 of your points, bring you down to an 80, give the 20 to the guy that made the 60 and bring him up to 80 and everything is equal?" She said, "No." I said, "Why?" She said, "Because I earned that grade." I said, "Don't you think rich people earned the money that they get?" And so she was speechless. She couldn't say anything. She'd said, "No, I earned it." I said, "Think about it, Baby. "You're bringing a guy up from a failing grade to a passing grade, and we gonna bring you down to his level." I said, "Now you apply that type of example with everybody in the classroom, everybody being the dumper. Nobody would ever get out of your class because everybody would have a failing grade." So she then understood the point I was trying to make. Sometimes you have to use other examples to get other people to think, you know, to try to get the point across of what you're trying to say. That's all I wanted to say.

INTERVIEWER: Well, you did a great job out there. I don't know how much you made her "think" as you made her "realize."

SUBJECT: Yeah.

INTERVIEWER: But I need to ask you something, Tim.

SUBJECT: Go ahead.

INTERVIEWER: Has this conversion held? Does she still get it now that you've explained it to her.

SUBJECT: She gets it but she hates it.

INTERVIEWER: Well, I tell you, if she goes back to class where she's studying for her PhD and she runs this story either by a fellow student -- or even worse, a professor -- the professor will say, "Well, here's what you shoulda said when your husband posed this question: 'The people who have a lot of money didn't earn it. They have stolen it.'" This is Obama's belief. This is why they've stolen it. They have unfairly taken what's not theirs. They haven't earned it. That's the whole point, they cheated and steal and had lied to get it and that's why he's going to take it from them and give the money to like these poor people lining up at Cobo Hall in Detroit for it. That's what he believes. You gotta stay on this, my man, because a professor's going to tell her that if she dares tell this story, and the professor is going to say, "Well, you can't compare wealth to grades because there isn't anybody else... You can't take somebody else's grade but you could take somebody else's money from them while they weren't looking. You could cheat 'em, you could steal." They'll work on them like this. This is going to be an ongoing thing. You did a great thing here, a great thing. You've taken a big, giant step here.

SUBJECT: Oh, yeah. Well, I just appreciate that. She doesn't like to listen to anything that disagrees with her beliefs. I'm like, "Whatever." I think sometimes she just don't want to listen because people are realists.

INTERVIEWER: Well, look, she's like a lot of people. Her worldview is safely wrapped inside a cocoon in which she lives, and if anything penetrates it that upsets this security blanket she's living in, you're right, she doesn't want it.

SUBJECT: Yep.

INTERVIEWER: She does not want to be challenged with anything that would question her beliefs.

SUBJECT: Yeah.

INTERVIEWER: You have a huge challenge out there.

SUBJECT: Well, I'm teaching the four kids, bringing them up in the right way, teaching them.

INTERVIEWER: God less you. This is a great interview. I appreciate the fact that you're doing this, and I appreciate the fact that you are telling us.

SUBJECT: All right, have a good one.

INTERVIEWER: Thank you, Thank you very much. Well, sometimes it's just a simple little explanation like that is all it takes when you make it personal.
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Another difference between public and private enterprise.

Cheats and thieves in private business pay heavy fines and are sentenced to prison when caught. Liberal Democrats in government who do even worse are rewarded with bonuses and plush jobs. Ah, the blessings of liberalism/socialism/communism/feudalism.

One example of the results of the tireless efforts of Barney Frank, Chris Dodd, (then Senator) Barack Obama, Franklin Raines, Jim Johnson, was the melt down of the mortgage market.

Fannie Mae and Freddie Mac problems were started by democrat administration personnel. Two Senators receive more campaign contributions from Fannie Mae and Freddie Mac than all others from 1989-2008. Number 1 – Senator Chris Dodd, (D) CONN Chairman Senate Banking Committee and former 2008 Democrat candidate for President. Number 2 - Senator and now President Barack Obama. How did Barack Obama do this after only 3 years as a Senator? You fill in the blanks.

Remember when Barack Obama stood up for his Vice Presidential Search Committee member Jim Johnson? It was June 2008 and Jim Johnson had to resign because of a “controversy” about his time at embattled Countrywide Mortgage. It was not important that Jim Johnson received loans at a below market rate.

It was also largely ignored that Jim Johnson was former CEO of Fannie Mae. It seems that the CEO’s of Freddie Mac and Fannie Mae were cooking the books. The CEO’s had been inflating yearly earnings to receive their annual bonuses! They would then amend the earnings statements later in the year. Typical government chicanery, like base line budgeting.

Those CEOs cost several orders more Americans to lose several orders more of their hard earned equity than Enron’s executives. Ken Lay who was demonized in the media, sent to prison by the government, and was held up as an example of “evil capitalists.” Not a single CEO of Fannie Mae and Freddie Mac missed their annual bonuses. For example, Franklin Raines made $90 Million in bonuses from Fannie Mae in 6 years! It seems capitalists go to prison and pay heavy fines while liberal Democrats in government are paid bonuses and are even awarded jobs in government when they do the same thing. Ah, the blessings of liberalism/socialism/communism.

One other note: I find it hard to believe that these people, who directly brought about the mortgage collapse, are that stupid. Ergo, this was a deliberate action intended to do just what it did. For instance, in California, homeowner’s equity in the housing market dropped from around 60% to about 30% while the banks’ equity (mortgages) increased from about 40% to 70% of the housing market. Sure, some foreclosures cost banks a bit, but overall they almost doubled their share of the mortgage market. I wonder how much of that is controlled by Goldman Sachs? Hmmmmm!
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Obama money at Cobo Hall in Detroit

A huge crowd assembled at Cobo Hall in Detroit when it was announced that the federal government would disperse several millions in recovery funds to individuals in hard hit Detroit. A reporter from radio station WJR went there and interviewed several who were there waiting to apply for some of the money.

WJR interviewer finds a Model Obama Citizen - October 7, 2009

ROGULSKI: Did you get an application to fill out yet?

WOMAN: I sure did. And I filled it out, and I am waiting to see what the results are going to be.

ROGULSKI: Will you know today how much money you're getting?

WOMAN: No, I won't, but I'm waiting for a phone call.

ROGULSKI: Where's the money coming from?

WOMAN: I believe it's coming from the City of Detroit or the state.

ROGULSKI: Where did they get it from?

WOMAN: Some funds that was forgiven (sic) by Obama.

ROGULSKI: And where did Obama get the funds?

WOMAN: Obama getting the funds from... Ummm, I have no idea, to tell you the truth. He's the president.

ROGULSKI: In downtown Detroit, Ken Rogulski, WJR News.

Another woman is questioned:

ROGULSKI: What are you doing here?

WOMAN: We’re all here to get some Obama money.

ROGULSKI: How much money will you be getting?

WOMAN: I don't know, but it will be worth the wait.

ROGULSKI: Where's the money coming from?

WOMAN: I don’t know. It’s government money Obama’s giving us.

ROGULSKI: Where did he get it from?

WOMAN: It’s Obama money. He’s got lots of money.

ROGULSKI: And where did Obama get the funds?

WOMAN: He’s the President. He promised us money. God bless Obama.

ROGULSKI: In downtown Detroit, Ken Rogulski, WJR News.


NOTE: There were 65,000 who went to Cobo in hopes of getting a cash handout. Only 3,500 will actually receive any money. What do you think is going to happen in Detroit when those 61,500 find out they will not get any money?
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Some interesting facts about American car sales:

The latest sales figures from the auto industry tell a great deal about the people's faith in their government when it comes to running auto companies. (Or anything else for that matter.)

GM reported a drop of about 44% in sales from a year ago. Chrysler reported a 48% drop. Ford, the only major American auto company still in private hands, reported a drop of just 4%. That's a pretty good indicator of the faith the American people have in their government, at least the car buying public. Roughly the same trend was shown in the results of the "cash for clunkers" program. The public has eloquently expressed their opinion!


I had to add this exchange with one of my SFN friends

Al:

Don't worry about idealists on the left coming down on you. Mostly they are decent, caring people who see everything remotely political in their own definition of black and white, no shades of gray anywhere. White is anything that follows the emotional mantras handed down by their high priests. Black is anything that does not. They are firmly indoctrinated in the fundamentalist religion of the left and live in a la la land with hardly a clue as to what is actually happening. No matter how factually wrong they are or how factually right you are, their belief system overrides facts, and logic never comes into play. I have a whole bunch of them in my family that I love dearly.

Remember that great liberal Democrat Howard Dean’s rant of a few years back, "I hate Republicans! I hate Conservatives! I hate Middle America! YEEEARGH!!!" This is the brand of unreasoning passion that controls the minds of so many liberals.

Add to that this thought. I hear echos of the old Al Capone/Big Bill Thompson/Jake Arvey/Richard Daly I and II machine now ringing through Washington. I lived enough in Cook County to have personal experiences with that gang. In fact, the son of Capone's accountant was a long time drinking buddy of mine. I could tell hundreds of horror stories. Of course, most libs wouldn’t listen to any of them, let alone believe anything counter to their liberal belief system. Most idealists on the left haven't a clue what that gang is really up to. Doesn't bode well for our country unless the people wake up soon. I'm encouraged because I see that beginning to happen. I just hope it is not too late.

Ho
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Ho:

I agree. I expected more intelligence out of Don, but Liberalism seems to carry its own set of blinders. My elder brother is a retired Physics professor. Very intelligent. UNTIL politics is mentioned. Then he reverts to his Pavlovian conditioning and his brain flies south. You'd think a "scientist" would apply scientific rigor to politics as well (if it doesn't work, the theory is wrong), but that doesn't seem to be the case. But then, he was never a researcher, just a teacher in California where the teachers are all super libs. You'd think an ex-Navy career officer would be able to withstand the peer-group propaganda better.

Al