Tuesday, October 13, 2009

The Rustici Prediction

People have spoken. Over 60% of the American people oppose the purely democrat owned health care proposition. Still they attempt to ram it through via nuclear option. Should it pass, opponents of the package have until 2013 to stop it once and for all before its, and what amounts to arguably one of the worse nationalized medicine schema ever devised will suppress American prosperity for generations to come, as this new form of mandatory spending burdens the future.

Having recently spoken to Professor Thomas C. Rustici of George Mason University about the present political situation, an intriguing prediction was made under assumption that Democrats successfully push the thing through (of which he predicts that they will). As well as his own political strategy of how to roll it back.

In short, if this bill passes via nuclear option, then starting 2010 under the new congress led by perhaps Micheal Steele, republicans are going to have to nuclear option Obama right back.

The first point Professor Rustici raises, is that if this bill passes, then the Democrat party may as well be considered extinct considering the anger it will incite. Seniors are already aligned against him and what this bill will do to their medicare payments, the young who supported Obama grow ever more disillusioned as they struggle most of all to find work, and everyone else between will be insulted as their taxes are automatically raised (in a climate of heavy recession and inflation no less) courtesy of the soon-expired Bush cuts.

"Obama promised hope yet delivered fear..." cites the professor, especially with this health bill . And from the 60% disapproval of the democrat proposals, Rustici predicts a public outrage and disapproval rate for these so called "reforms" to peak upwards of 70%.

In other words, the Republicans will have overwhelming majority support to stop a successfully forced healthcare proposal before the cement drys. Over 100 seats between the House and Senate will be lost by the Dems in 2010, and Obama will be forced into a no-win situation as the final conspirator left unpunished in the eyes of the American people. Were he Micheal Steele says Prof. Rustici, he'd then use his position over the budget to completely shut down the federal government, until Barack Obama signed a bill annulling the launch of universal health care. Completely.

No federal funding for anything. At all. Not until Obama signs an annulment. Nothing. Nada. Zip. Nothing at all.

No federal funding for social security payments. No federal funding for student loans. No federal funding for further, "shovel-ready" porkulus projects. No federal grants. No federal subsidies. Not even the military, said Professor Rustici. Nothing budgeted to NORAD, FBI, CIA, the Army, etc.

Nothing. At all. Period. With it made very loud, and very, very clear, that the new Republicans will continue their nuclear winter of the federal government, until Obama is ready to sign the annulment of his nuclear rammed Health Care bill. After all, who'll care about a national defense when the greatest threat to liberty in the entirety of U.S. History has already been launched by the (and by this point, defunct) Democrat party? No terrorist attack, no external invasion is poised to ruin as many lives as this bill is set to do, should it be allowed to fully hatch in 2013.

Given the current public outrage and terror over the possibilties of a the rammed healthcare bill, it will be Obama left with the bag. According to Rustici, It will be Obama left with the blame, come what may from the republican controlled federal freeze. A line must be drawn says the Professor. An ultimatum must be set. The American people will be in overwhelming support of this courageous stand, and no amount of media spin will shake the polls in support of a conservative Congress's action. Micheal Steele must force an annulment out of Barrack Hussein Obama. Just as he would have originally forced his unpopular agenda against we, the American people.

~David Morris~

Wednesday, August 26, 2009

The Healthcare Debate - A New Case Study in Public Choice

I am one who has always believed that governments should adhere to and follow the guidance of their constitutions. The question is then raised however in what is to actually enforce a constitution's rules upon said government. When raised with this question, I concluded that only a significant threat level of voter scorn can perform such a deed. That in a republic of theoretical constitutional bonds, rational ignorance is the primary threat to the continued liberty of the citizens. Where they are apathetic, leviathan will attempt to shake its binding off in that particular area. Where they are fervently aware, leviathan will stay put and obey.

For example, the constitution states restrictions on the government in respect to discrimination based on race, nationality, etc. At first, government ignored these precepts, however in the present day, such is the awareness of the voter in regards to issues of race, that blatantly racist laws could never pass through the congress, and leviathan now stays put in that area in fear of the punishment it would receive were it to pull anything like the Jim Crow laws ever again.

In regards to the current health care debate, the H.R. II proposal provides a number of questionable legitimacy issues concerning the Constitution, from the inherent takings of insurance companies as the public option begins to monopolize the health care sector, to the notion of fining those who would prefer not to be insured. Surely, thought the current political administration, under the guise of good intentions, the people would prove apathetic to this issue, and the bill could be passed without challenge.

Evidently, according to the fervor of town halls and the poll numbers that correlate to them, this is not to be the case. Congressmen are discovering rational ignorance to be surprisingly absent in regards to this issue, and a career-level make-or-break decision awaits many democrats who may be partisan to this issue. Surely, given the unpopularity of H.R. II and the falling approval of President Obama on this issue, any democrat who votes for this bill can expect this to be the final act of their political career come next election, especially those democrats from districts that voted for McCain as president. On the other hand, to resist the will of the White House could alienate them from their own party, and leave them without party support in vying for their reelection anyway.

Pass or fail, negative consequences or not, the choice these congresspeople face in the vote of H.R. II will undoubtedly be one for the text books in regards of issues concerning public choice.

~David Morris~

Wednesday, March 18, 2009

The Latest Market Rally - Signs of a turn around?

Having been self-teaching myself investing lately, I have by extension grown to pay attention everyday to business news via CNBC. Last month of February, the Dow Jones bottomed out a 6876, a score it hadn't had since 1997. However for the month of march, it would appear to be slowly recovering, with the three day rally of last week (as of the time of this writing), restoring the Dow at a recent peak of 7571. What could attest to this market behavior? Could it be a sign of market recovery, or be merely a short run rally on account of some of the good news from the week of last?

Some of the attributes that may attest to the market's slow attitude shift would include the assurance by Bernanke (chairman of the Fed) that helped quell some of the pessimistic fear of the naturalization of banks. Talk of abolishing the Mark-to-Market rule that brought chaos to the books of many of these financial institutions, and the memo that was leaked from CitiGroup and Bank of America that they are still profitable has also aided in this. Bank of America for instance announced today (March 18th) that they in fact planned on being able to repay their TARP fund loan by the end of 2009 or early 2010, leading to a rally (which as an aside, led to this rookie investor making a profit in his practice portfolio, as I predicted that economic recovery would have to begin with real estate and financial sectors).

But is this really a long term recovery we are seeing? These market effects may be temporarily caused by the buy outs of Short Sellers in the market. Short sellers thrive on bearish markets, as they "borrow" a quantity of stock they speculate is going down, sell it, and then replace the borrowed quantity of stock after the stock price drops. If the price goes up against their bet, they are still contractually obligated to replace the stock they borrowed, whereby they would lose money.

Say for example you know that the price of your friend's used movie or videogame is $25, though in a week you understand that it will sell at only $15. You borrow the DVD from your friend, sell it for $25, and as the price becomes $15, you buy it back just as your friend is beginning to wonder what you've done with his disk. Your friend still has his DVD, but you just made $10. The risk you took was, had price of the movie actually gone up to $35 after you sold it at $25, you'd still need to replace the what you borrowed anyway, lest your friend discover what you were really doing with with his precious DVD and snap you in two as though you were a disk. You'd had lost $10.

Since the financial sector as experienced some unexpected good news as of late, this would account for a short term rally, as short sellers only profit on dying stocks, and must replace what they borrowed to protected their gains. However, President Obama still seeks his social programs and considers raising taxes on households above the $250k mark, and Nancy Polosi has begun speculative talks of starting a new stimulus package, which would no doubly lead to more pessimism of the future within wall street. Before this recession can truly, the sources of the Housing and Mortgage Crisis must be addressed. Mark-to-Market accounting must be forever done away with, and the policy mandate of Freddie and Fannie to promote indirect subprime Housing Welfare must cease.

Time will tell.

~David Morris~

Saturday, January 24, 2009

Why Bailing Out the Auto Industry is a bad idea.

In the midst of the current economic downturn, many businesses have called for bailouts from the government to save them from their dire circumstances. Admist the top of these to make the news as of late has been the auto industry. Their bailout proves tragic for not only will it fail to address the fundamental issues behind their poor performance, but also give congress leverage over on how to dictate the future activities of the industry.

The fundamental root problem behind the American big auto workers have been their cost structure, which is choked upon by obligations to unions. The high wages companies such as GM must pay for their workers, combined with the numbers of retirees who they are obligated to, has made such a company more of a retirement home first, and a auto producer second. Until these companies can be permitted to shake off such archaic union concessions in order to compete with the cost structures of their foreign competitors, no amount of taxpayer money can truly "resurrect" the industry.

What we have instead of a ressurection will in fact bear closer resemblance to necromancy; a zombie company that cannibalizes on taxpayer rather than healthingly sustaining its own self based on the merit of their products.

~David Morris~

An example of everyday government spending.

The following is an a interesting anecdote taken from the back cover of a book called "Burning Money" by Joseph Peter Grace (ISBN 0025449303). Its a common example of bueracratic processes unfortunately.

"An actual case.
One day the U.S. Navy decided to buy a hammer, the kind you buy for $7 at the corner hardware store. To the $7 cost of the hammer, add:
  • $41 to order the hammer and figure out how to use it.
  • $93 to make sure the hammer worked.
  • $102 for "manufacturing overhead."
  • $37 to make sure there were spare parts for the hammer.
  • $3 for packing the hammer for shipment.
  • $90 for the contractor's "general administrative costs."
  • $56 for the finder's fee.
  • $7 for the "capital cost of money."
The U.S. Navy ended up buying a $7 hammer for $436, and who paid for it? You.

Makes one ponder why anyone would want to trust the government with other aspects of the economy, if they can't even handle a transaction as simple as this without spending wastefully on pork.

~David Morris~

Monday, January 19, 2009

Basics of Economics

Thought I may as well share some basic economic principles shared throughout the science, straight out of my old notebook. For myself as much as for my readers.

Four Principles of Economics

1) Scarcity
- Without some kind of scarcity in everything, there are no reasons to make choices. The ultimate reality is, nature an ultimate scrooge, and the ultimate source of poverty, by virtue of the fact that if we want something, she doesn't just hand it to us magically from the sky. Without scarcity, there is no reason to for people prioritize their desires, and therefore, there would be no trade. Basically, the whole notion of scarcity determines supply and demand, which simply put, means that everything comes with a price-tag save the only two things that really are free (usually): Air and sunlight.

Please, never mix the basic concept of scarcity with the term "shortage." Shortage is a different term in regards to demand somehow exceeding supply beyond what natural market forces would decree. For a recent example, we recently had a shortage of oil brought upon the fact that China was basically hogging all of it for itself via government subsidized of gasoline. This is the sort of crowding out that would properly define a "shortage," not to be confused with the basic concept of "scarcity," by which everything has to come with a price.

2) Only Individuals Choose - There is no "hive mind" amongst human beings. Likewise, there are no choices to be had between individual brain cells. Therefore, all economics begin on the individual level; its hard to determine what a synapse has to do with monetary policy. Likewise, just because you join a group doesn't mean that you've suddenly joined a "group mind" as though everyone is psychically linked and thinking precisely on the same page with the precisely with the same values. Otherwise, why how would people ever leave a group?

This principle also makes another important, basic point: Economies are made purely out of people. There is no economy where there are no individuals. The moon has no economy. However, it can be said that there was one briefly, once you had astronauts being forced to make tradeoffs concerning their life support on the moon.

3) People choose rationally - There is purpose in what people do. A means to their ends. When we aim for a value, we do so deliberately.

4) Unlimited Wants and Desires - People are greedy. Greedy greedy GREEDY. We just are. Its in our DNA as a species. Why are we "greedy?" Because we have imagination. Achieving old goals begets new goals, new ambitions. Without greed, there would be no objectives in our lives. That's not to say all greed is monetary and material, but lets face it, there's always, always, something that you want, something you don't have yet, that you want to strive for. Your mind is always generating a new list of "things for you to achieve and/or obtain", and it won't ever stop until the day you die.

There is nothing intrinsically negative about the reality of unlimited wants, although most people are certainly aware of how it can be. It all depends on how one goes about their ambitions. Whether its done legitimately and voluntarily, or whether its achieved with force and fraud. As I always like to say: "Greed is good, because in order to feed your greed you have to serve others needs. Selfishness is bad, because its when you start to get selfish that then you start stealing."

~David Morris~

Economics with David Morris

Greetings to any and all viewers of this blog. Having recently with a degree in Economics at George Mason University, this fresh young economist decided that it was never too soon to start giving commentary, observations, and predictions behind the economics of the world around us. Hopefully, anyone spotting this humble blog will leave educated, enlightened, or at least persuaded to think.

To give people a heads up, this economist is trained to take somewhat of a more libertarian perspective on public policy. Bear in mind that the author of this blog is in no form and advocate of anarchy, simply aware that things work best when the government is no enemy to the populace. Successful capitalism demands government carries out its critical duty of defining, arbitrating, and above all else, protecting private property rights. Its critical however that people understand that the true primary function of government is that of a legalized monopoly of force. When it forces the wrong types of policies, it certainly has the potential to be more of a problem for an economy than a solution. With the right (and very carefully implemented) policies, it has the potential to refine efficiency.

As an economist who sees his nation often forgetting the tenants and intentions of our US Constitution, hopefully this blog can assist in keeping certain records straight, given the sheer amount of myths, fallacies, and just plain misunderstanding about the subject I've been spending the last 4 years of my life studying.

Economies at the bottom line are made out of individual people, not simply states. And its how people respond to incentives that is the key to understanding the world around us.

~David Morris~

The Recessive Economy - It began with Housing, it'll end with Housing.

Given today's current economic circumstance, people wonder when it will ever end. For now, many people are looking towards the promises of politicians, with their bailouts, stimuli packages, and promises of infrastructure spending hoping as though this will be the source of the solution to today's current financial crisis. Recovery from this recession will happen. This economist however, predicts that recovery will occur from another angle entirely.

The current financial crisis all started with a collapse in housing prices, and recovery for America will begin with a recovery in this sector.

The economic sense is simple. With housing finance issues that constrict the consumer, its only natural that consumer confidence will return once this is dealt with. As prices stabilizes, real stimulus will occur as people qualified for refinancing are saved money each month due to lowered and stabilized housing prices. Take for example, a household paying saved $300 per month every month through a simple mortgage refinance. $300 dollars may seem like a trivile amount, below the radar, but the road to recovery will be built as we take these savings per month and multiply it times thousands of refinances. Unlike the $600 government checks sent out last year (which rationally risk-averse people simply put away in the bank), these small drops in refinanced, stabilized mortgage rates, when multiplied by hundreds, will in due time result in people finally having discretionary spending once more.

This will lead not only in more capital accumulation, in which banks will finally be able to unfreeze their lending. With the mortgage pressure eased on the consumer I predict that they will finally be able to spend on raising the property values on their homes as Americans traditionally do. There will be increased demand in sectors relating to housing: furniture, landscaping, etc. People will want to spend money on their homes again, which means more money for retailers such as Home Depot, Lowes, and furniture stores in general, who will in turn be placing more factory orders for such products, and resulting in more expansion (and a demand for more hires in general).

As people reinvest in their homes, new hires will be inevitable. As America's Joe the Plumbers, Bob the Builders, Larry the Cable Guys, etc get new contracts to service the homes of these people who've gained more discretionary income from months of mortgage stability, its only natural that the volume of these new contracts will incentive small businesses to accumulate new servicemen abroad and the physical capital necessary for them to do their jobs. The economy will recover in this way, once real stimuli is created by dealing with the pressure people face holding on to their homes. It will not come from any democrat plan, though they will no doubt in inadvertently get credit for recovery. If Washington really wanted to have this problem solved sooner then later, then stacking the recovery work occurring in the mortgage sectors with a tax cut will get us there all the sooner. The key is not a one time stimulus; its to give people money they can count on in the long term.

Give America that, and America will put herself back on track.

~David Morris~