______________BP______________ __________Too Big to Fire__________

Government to BP Oil:  “You’re fired!”

It won’t happen.

_________________________________________________________________________________

Let’s play back the tape and see what the recurring theme is:

Investment and Mortgage Banking – Too Big To Fail

Health Care System – Too Big to Fix

American Automobile Industry – Interconnected Industries Too Big to Let Die 

       and, most recently:

Big Oil Blowup –  BP Oil Technology Too Complicated for Federal Takeover – Hence, BP Too Big to Fire

It is not a curious matter that none of the above occurrences represent government that is too big.  Rather, they represent corporate bungling on a scale so immense that government ended up being the controlled and not controlling one.  The very nature of larger and larger corporate size through loosely regulated market consolidation has, with greater frequency, backed the Federal government into a corner.   The government in case after case has essentially been forced  to reactively capitulate to corporate fumbling, incompetence, and other sorts of mishaps;  because to not do so would cause even more harm to its other constituencies.

A corporation’s successful development in America is a race to be the first (or second) to the top.   To be the first (or second) is usually the formula to be the biggest.  Entrepreneurial discovery,  innovation, and product development is a race to the patent office, then to the venture capitalists and banks; and, finally, a race to go public.  If a company can be the first to go public, it can be the first to generate the massive funds to scale up and get its name and product out there first.  This is immensely important because it  provides the means to dominate the market by acquiring its smaller, but potentially dangerous, competitors.  It’s not that competitors products wouldn’t prove to be better, it’s usually that the competitors are smothered by the avalanche when beaten to the punch.  The losing competitors are usually left the scraps of only being able to eat around the edges of the big, new pie.  The slow, chiseling background sounds of competitors are  just a reminder to the winner that it needs to continue its voraciousness to dominate.

An inevitable result is that most industries mature into a couple or maybe a few dominant players.  These dominant players, in effect, end up by virtue of their early success in controlling large parts of societal infrastructure.  The reliance upon this infrastructure is usually so great and so widespread that even minor disruptions, glitches, or upheavals of the dominant players are immediately and widely felt. 

Recall a while back when Twitter had a very brief technical mishap that disrupted its service.  Half of the United States seemed to go aflutter or atwitter over this.  Think of brownouts or temporary power outages by utility companies, cellphone system mishaps, or internet service provider interruptions.  These are relatively small inconveniences that cause palpable public panic attacks.  When e coli or salmonella outbreaks threaten, it causes systemic fear.  Bad milk, tomatoes, apples, lettuce, spinach, or beef cause havoc throughout society because of the reality that big corporations control so much of the food sourcing.   If Tyson Food has gas, the chicken industry burps in disharmony. 

When the scale of problem becomes a notch or so higher on the calamity scale, all hell can (and does) break loose.  I think that it’s time for the United States to take a necessary and healthy step forward and begin to regulate the extent to which a company can gain market share.  We have seen more than enough of the steroidal corporations that dominate to the point of societal damage.  The benefits to society of the economies of scale have a ferocious proportional step-brother – the massive disasters that occur when the incompetent or greedy side of scale reveals itself.  These corporate catastrophes not only paralyze society; they render government virtually impotent.

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Published in: on May 28, 2010 at 6:38 pm  Comments (3)  
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__ The Senate Financial Overhaul Bill __ For Consumers, It’s a FinReg Flop!

 

On April 19 I wrote an article critical of an amendment proposed by Senate Durbin to the Senates’s FinReg bill which would have capped the interest rate ceiling on consumer loans at 36%. Senator Durbin said that he tried to pick an interest rate high enough that even the biggest banks could not object.  Guess what?  They objected.    

Senator Durbin did not get his way with his 36% interest rate cap.  What the American public got instead was a kick below the consumer belt by Senate Republicans.    According to Reuters, the Senate  gave a 35 -60 thumbs-down vote on the Senator Sheldon Winehouse amendment, that could have put the brakes on predatory consumer loan lending.  What the Senate did for consumers was to let the large national banks, which do most of the credit card business in the United States, continue to be allowed to charge basically any rate anywhere that they wanted.  Their rate limitations, to the extent that there will be any, will largely be determined by the laws of corporate friendly Delaware and South Dakota which, essentially, have no interest rate limitations for consumer loans.  States will not be allowed to set their own interest rate caps within their states on lending done by national banks.

I haven’t looked at the analysis of the Senate vote, but I think I can safely stick my neck out and say that the 60 votes were overwhelmingly Republican ones.  If they want to vote their conscience for special big banking interests, then so be it.  But voting against an issue that gives the states more regulatory rights doesn’t quite jibe with the Republican Party line – that is, unless it is convenient to do so.  The Winehouse vote just confirms that the Republicans use state’s rights’ issues only when it is politically expedient (Bush-Gore comes quickly to mind).  I guess that there isn’t a constitutionally based principle in their bodies when it goes against their Wall Street buddy-banks.  It’s sickening. 

 Unless the House of Representatives does something drastic in the reconciliation process (don’t get your hopes up), the die is cast.  Of course, that means that we can look forward to endless TV commercials; mail solicitations will start rolling again; and people will continue to get fleeced.  But according to 60 Senators, that’s OK.  In fact, not was it only OK, they pressed the button that will make it happen.

I wouldn’t count on increased disclosure on credit card statements to do much of anything to alter the consumer loan landscape.  You don’t have to put in capital letters on the front of someone’s credit card statement that they will likely get in financial trouble.  They already know it.

PRISON POPULATION EXPLOSION (Reversing the Trend)

The Round House – Stateville Correctional Center – Joliet, Illinois

  

It is comforting to reflect that the disproportion of things in the world seems to be only arithmetical.                  Franz Kafka

 

The total number of prisoners in the United States is staggering.  

2,304,115 people were in prison in this country as of 12/31/2008 according to the U.S. Bureau of Justice Statistics.   That’s 753 people in prison for every 100,000 of our population –  just an astounding number.  That’s a lot of devastation for a lot of families.  In fact, it represents a lot of devastation, period.  What on earth has happened to produce such a societal disaster?

As  incomprehensible as it may sound, the United States has almost as  many prisoners as China and Russia combined, even though their combined population is almost 5 times larger than ours.   It is difficult to make much detailed comparison, however, because of the difficulty of obtaining accurate information from two countries not known for their openness.    Even allowing for a liberal comparative adjustment because of the lack of transparent statistics, the United States presents an alarming, anomalous case.  Russia is the only large country that has a per person ratio anywhere near ours.  Their ratio is 609 prisoners per 100,000 population.

Perhaps a comparison with our close ally, The United Kingdom, may offer a clue.  Surprisingly, for a country with similar values and a broad diversity of population, we discover an even wider comparative divergence than from that of the Communist totalitarian countries.  The UK at 4/30/2010 had 85,086 prisoners from an estimated population of 55 million, or 154 people in prison for every 100,000 of population.  Alternatively, the densely populated country of Japan at 12/31/2008 had 80,523 prisoners from a population of 128 million, or a mere 63 people in prison for every 100,000 of population.   It’s hard to do anything but speculate about what the huge disparities are between the United States and the rest of the world’s prisoner numbers.  

In spite of the disproportionately large prisoner population of the United States, there is a common trend amongst all the countries.  Prisoner populations have dramatically increased in all of the countries over the past 15 year period.   In the 15-year period beginning in 1992 with the Clinton administration through 2007, the United States prison population increased by about 1 million people, or a whopping 77%.  The UK’s percentage increase over the same period was 79%, Japan’s 85%, and China’s ~50%, with Russia trailing at a 21% increase.   These are large percentage increases by any measure, and there surely are some sociological studies to explain some of this phenomenon, but I want to look at the issue in a different way.  Instead of a hunt to find the best statistical studies, I want to race away from the empirical, and look to a more theoretical approach. Again, I would like to reprise Kafka, who had this to say,

In the fight between you and the world, back the world.

At least over the past 15 year period, it seems that Kafka has it dead right.  Society has gotten the best of the individual.  I don’t think that one could argue that the individual has become less noble or more savage in a mere 15 year period.  Rather,  the balance of power as between the two has shifted.  From this perspective, one would have to conclude that something in the nature of the individual’s attitude toward his or her political obligation to the government has markedly changed. More people have found more reasons to disobey the government, and those reasons have had their consequences.   

Currently, there does not seem to be any political will to do anything about the political trend.  The maintenance of a prisoner costs about $ 25,000 annually.  Quick arithmetic puts the United States cost at 57.5 billion dollars.  Some estimate that the current annual cost is actually a higher amount, approaching as much as $ 70 billion.  Of course, with rapid growth in prison populations, the government has not been able to keep up with prison building to accommodate more and more people.  At 12/31/2008 the occupancy level (based on official capacity) at prisons in the United States ran at 110%. 

The lack of political will to effectively address this issue, in spite of occasional rhetoric, is alarming.  It is unreasonable to believe that there is any citizen in the United States who wants more and more American resources (tax dollars) to be committed to building more prisons to house more prisoners.   I do not believe that this is a national goal.  Yet the societal ills causing these problems are, essentially a political non-starter. 

I would like to challenge the body politic to begin discussing the relationship between the individual and the society such that the trend lines might start going in the opposite direction.  The cost, the pain, and the inevitability of continuing on this current, unsettling path is a fearful notion to contemplate.  The sure and steady increase in the prison population is evidence of a society alarmingly out of kilter.  The solution cannot continue to be more prisons.  That is an insane course, and society cannot afford to continue to get it so wrong with its people.

Note:  Most of the statistics above were taken from or derived from information published by the King’s College of London in their “World Prison Brief.”

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Published in: on May 16, 2010 at 8:49 pm  Comments (12)  
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WHAT HAPPENED TO THE BOWLERS? The Middle Class Disappeared. That’s What.

According to Bill Abercrombie in a story he calls Number of Sanctioned Bowlers Dropped, the number of registered bowlers in the United States Bowling Congress has fallen from over 9 million in 1979 to about 2.3 million today.   That’s quite a drop by any measure.  Naturally, the bowling industry tracks these statistics quite closely and has tried to adjust its business model to cope with what seems to be a steady decrease in the popularity of bowling leagues.   Mr. Abercrombie cites that the, “reasons for the decline vary from other sporting venues being available, decline of the Baby Boomers, the amount of entertainment money accessible to the middle class, fragmentation of the family and the current economic climate.”  His citation is one that could have been written 30 years ago, however.   Bowling started in its death throes when:

Ronald Wilson Reagan was elected President of the United States in 1980.

I have fond memories of the explosion in the popularity of bowling in the 1950’s and 1960’s.  In about 1960, I recall my father taking me to see the opening of Rosewood Lanes in North Pekin, Illinois.   I remember that the joint was so packed that we could barely squeeze in the front door.  As a part of their grand opening, the proprietors invited  the most famous bowling team in the world (ever) – the Budweiser team from St. Louis.  It was exciting stuff.  In 1958, this team of bowlers, which included Don Carter, Ray Bluth, Pat Patterson, Tom Hennessey, and Dick Weber scored a team record of 3,858 pins, an America Bowling Congress record that stood for over 30 years.  In bowling circles, these guys were considered the equivalent of the 1927 or 1961 New York Yankees.  Don Carter, a member of that team, would later become the first athlete in any sport to receive an endorsement deal of  1 million dollars (from Ebonite Bowling Balls).   All five of these bowlers had long and successful individual bowling careers as well – and all were eventually  inducted into the American Bowling Congress Hall of Fame. 

 I know that it’s hard to believe it now, but bowling in the 1960’s had a big wow factor.  Most people in any walk of life can probably remember having fun at some point their life bowling with friends or family.   But now, a bowling alley is not the first place, nor even the last, that most people think of when contemplating an enjoyable recreational diversion.  I may or may not be typical,  but I have not been in a bowling establishment for at least 15 years.  The fad, if that’s what it was, is basically – just passe.  

Bowling has long  been linked to the blue-collar man.  Construction and factory workers in fact played a huge part in the rise of its popularity.  As the economy boomed with new construction, new automobiles, and almost everything else new after WWII, men earned enough money to not only support new families, but to take part liberally in leisure activities.  Bowling seemed to hit the spot for “a night out with the boys,” and the bowling alley developers and entrepeneurs caught on quickly.  Thousands of new bowling alleys sprang up everywhere, and bowling quickly developed into family fun with organized leagues for women and, also, children.  I recall a weekend bowling league that I joined as a child with my cousin – we all wanted to be pro bowlers.  Then, over a course of years, it just gradually began to peter out.  So what happened?

First, I am not about to completely blame the demise of bowling on former President Reagan.  For all I know, the amiable dunce may have liked to bowl., and may have been a bowling proponent. 

  However, for 8 consecutive years the Reagan administration  did about everything in its power to cripple the middle class blue-collar worker.  Aside from its notorious union-busting, it decimated (with Democratic Congressional approval) the steep progressiveness of the income tax rates, which had worked so well post-war for the middle class; it unnecessarily began systemic de-regulation, which consolidated corporate entities and  power (which continues to kill consumers); and it leveraged up government debt to fund what was a semblance of prosperity.  The middle class paid a dear price for Reagan’s follies, and the chasm between the bowlers and non-bowlers began a process of widening , which has not yet stopped.

It wasn’t and isn’t all about Ronnie though.  Television coverage hurt the business and popularity of bowling as much as anything.  Bowling is not a spectator sport. Somehow, it just doesn’t translate to an exciting viewer format i.e.  bowler picks up ball, walks, rolls ball toward pins, knocks down pins, and then does it again.  The commentary never was very exciting either, such as, “I wonder why he has a five-step approach and not the conventional four-step?”  I believe it all equates to the definition of viewer monotony.  Without successful TV coverage, other recreational sports managed to push bowling further and further into simply a niche activity.  With lousy TV ratings came almost no big advertising money, and then, no new business.  Hence, fewer and fewer bowlers were attracted to the sport.

Another theory about the decline of bowling in the United States involves a strange conspiracy theory about Japan.  In the 1980’s it was difficult to find new maple furniture anywhere in the United States.  The rage in the ’80’s seemed to be country oak or a more formal cherry.  Every piece of furniture that my parents purchased in the 1950’s and 1960’s was hard rock maple.  But when they wanted to add to their repertoire in the 1980’s, they were told that maple was not available. When they asked, “Why?” they were told that the Japanese had cornered the market for maple because of their insatiable appetite for the construction new bowling alleys.  Setting the conspiracy theory aside, it does seem on the face of it that bowling fever raged in Japan concurrently with the rise of their blue-collar workers in the explosion of their auto industry.  This, of course, paralleled America’s decline in the auto industry. 

If I have made any point at all about the relationship between bowling and blue-collar middle class workers, I would like to punctuate it with one last thought.  With the ascendency of Asia, and China in particular, and their determination to create at least some sort of middle class in the near future, I have a recommendation for investors out there.   Buffett, Berkshire, are you listening?  It’s going to be bowling in China.  If not now, then soon.  It might be time to get your money down.

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____CHITTY CHITTY BANG BANG____ SHITTY SHITTY BLANKFEIN

Senator Levin: Boy, that Timberwolf was one shitty deal.              

Senate Permanent Subcommittee on Investigations (2010)

Caractacus Pott: And after that, Vulgaria became a free country.

                                                Chitty Chitty Bang Bang (1968)

I have a weakness for watching special televised hearings conducted by the United States Senate.   I don’t know exactly why.  Maybe it’s because the choreography is so predictable regardless of the dancers.  Maybe it’s because I like feeling in the thick of the great debates in American politics while  just sitting in my robe eating donuts.  Maybe it’s because I truly believe that these shows are the ne plus ultra of caricatured theatrical debate.  Or, maybe, it’s because I continue to have hope that America can work out its problems right in front of my eyes. 

Other than the news media, I don’t really know how many other people share my interest.  After watching a good Senate hearing session, I am usually fired up enough to want to discuss it with somebody – really anybody.  I usually discover, however, that most people I know either didn’t have the time to watch or just plain didn’t care to watch.   Most of my follow-up Socratic dialogues, therefore, are simply my own loud rejoinders directed to the TV commentators.  

The Goldman Sachs hearing was, to my mind, one of the best hearings of all time.  It was delivered in three episodes, all of which occurred in one day (I understand that there is a lot of other work being conducted in the Senate).   For whatever reason, the Senate wanted to get this over in a hurry – a slash, burn, and get out of there sort of thing.  I believe that they had a good reason for this – namely, that the longer they questioned their witnesses, the more that they would show how little they knew about Wall Street and its machinations.  They judged that just about perfect.

One of my favorite portions of the debate was a segment of questioning by Senator McCain.  He went into a dramatic trance, slowed the meter of his voice down to where it just put you on the edge of your chair . . . waiting.   It turned out to be a wait in vain.  While he had some pointed questions that were building suspense about a particular deal, he didn’t have any idea what it was about when the Goldman witness interrupted his line of attack.  McCain, suddenly realizing that he was on the verge of confirming that this line was just a brainless monologue,  awkwardly stopped and yielded back to the Chairman.  It was a pitiful performance from him, but we’ve seen it for years.  Remember when he stopped his presidential campaign just before a scheduled debate to buzz into Washington in the midst of the financial meltdown to intervene in the crisis.  When he arrived at the table, he just sat there like the lightest of the lightweights – without so much as a clue about what was happening and what needed to be done.   

The attention-getting highlights though were provided by the Chairman of the Subcommittee, Carl Levin.  Senate decorum suffered considerably when he repeatedly uttered the “sh” word – over and over again.   I think it was entirely proper for him to use the word once, when he quoted the Goldman email the first time.  But to repeat the word again and again?  I am not sure if there has been a definitive count of the “sh” word that he used in the hearings, but some have said it was 13 times.  I’ve also read 30 to 50.  I listened to most of the hearing and would guess that the count is closer to 13, but it could have been 50.  It was way too many times more than once.

There was another word that was repeated ad nauseum during the hearing.  This one did not come from the Senatorial side but, instead, from the Goldman people.  The word “risk” was used by Goldman so often that it got to the point where I though some smart Senator might call them on it.  Over and over again Goldman interjected the word.  They used it euphemistically in every conceivable way.  None of their clients ever lost money – they just assumed too much risk.  Goldman never made any money – they just reduced the risk of their negative positions.  As a market maker, Goldman matched the risk that one client wanted to assume with the risk of another.  And if one client’s risk could not be matched with another client, then Goldman themselves assumed the risk – that is, until they decided to offload the risk and “get closer to home.”  You got the feeling from Goldman that it was a caretaker of  risk for the world, simply caught as an arbitrageur in the midst of an extremely volatile and risky situation.  One of Goldman’s main witnesses was, in fact, their head of their risk management department.  Wow, did the Senate Committee person responsible for that witness selection get suckered in advance by Goldman’s risk rhetoric, or what? 

All and all, Goldman used the word “risk” hundreds of times.  How could anyone not notice this?  Not one of the Senators did.  They were too wrapped up in the scripts prepared by their staffs.  There was not a thoughtful questioner in the entire bunch of Committee members.  If any of them would have just listened carefully to something other than their own babble, they just might have been able to penetrate the digression and repetitive shield that Goldman had erected.  But, not a chance.  The hearing turned out to be a marathon – but a marathon that was unnecessarily run in circles.

Now – don’t you wish you would have watched?

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_________WIND FARMS_________ Seemed like such a great idea until they showed up near my house

 

Actually, they haven’t shown up near my house — but near enough.  And the place where they have shown up has severely strained my sensibilities.

67 of these monster wind towers have shown up on a beautiful stretch of farmland in Logan County, near Lincoln, Illinois, not far from Springfield, and the view to my eye is sickening.

The best that I can describe them is vexatious to the spirit.

You can see the wind turbines littered along either side of Route I-155 on what has always been a stunning, scenic view.  Ordinarily, there is not much aesthetic value in driving along on the roads of central Illinois.  It is usually so flat and monotonous that  driving any distance at all can be quite tedious.  For example, I have always considered the drive on I-72 from Springfield, Illinois to Champaign, Illinois one of the most boring stretches of land in the Midwest.  The 90 mile trip would put a cup of coffee to sleep.  It is a flat corn-and-soybean-scape that can dull the senses in about 30 minutes. 

The drive from Springfield to Lincoln has always been a little different from the typical road trip around here, and a great deal  more interesting.   For example, there is the fairly dramatic landscape feature of the community of Elkhart, Illinois.   The community is built upon a an unusually large hill that has a distinct visual appeal along with a rich history.  It also sits aside old U.S. Route 66, as most of this section of the newer road does.  The most beautiful part of this 30-mile stretch of road from Springfield to Lincoln, however, is the dramatic fall and rise of the land to a vantage point that is just short of spectacular.  As a child, I always dreamed that someday I would be able to buy a piece of land that would be perched atop this vista and it would enable me to see all the storms and tornadoes approaching for miles.  This description is not to mistake this property for the grandiosity of Yosemite, the Grand Tetons, or Sequoia National Park, but for central Illinois, the horizons don’t get any better than this.

So where is this giant wind farm placed?  It is scattered across the very land that is the most spectacular.  For my money, the sheer number of these wind towers has aesthetically ruined this area.

Surprisingly though, many of the people who actually live in this area, including many that were born and raised on this land, do not share my opinion.  Quite the opposite, it seems that their testimonials are by and large positive.  As described  in a very good February 6, 2010 article http://www.sj-r.com/carousel/x655690726/So-far-so-good-for-people-near-Logan-County-wind-farm by Chris Dettro in the State Journal Register, most people living on or near these wind turbines find them soothing, almost hypnotizing.  They describe them as more quiet than the wind itself.  Stress reduction, problem-free, good for the community, good for the tax base, and on and on . . .  are their narratives.

These land owners are also quite well compensated with payments for use of their land.  I am not sure to what degree the compensation factor influences their opinions, but if they are happy about their compensation, it would be hard to expect them to be negative about the turbines.  After all, so long as the towers are innocuous or so long as they just eventually became part of their almost invisible world, much as a new barn or silo might, it is probably to hard to argue with them.   It is hard to say when you don’t actually experience it like they might actually experience it on a day-to-day basis.

American people are inventive, innovative, and problem-solving people.  Deep down, I believe that most of us want to manage our energy needs in a smarter way that lessens damage to the planet.  I think American people want to embrace new ideas, new technology, and other measures which will continue to sustain the scarce resources that we have.  It’s unclear for our society about what to do next, however.  Should it be solar, wind power, nuclear again, a judicious combination of what we now have, or some other admixture of current resources along with attempting the novel?  The world is definitely at a crossroads now as to what is the next, best development, and how to pay for it?  Perhaps wind power is part of the solution.  Or, perhaps, it is too early to tell.

I continue to wonder, “Are we really thinking these things through, or are we in a frantic, semi-contrived survival mode where, not only now but in the future, we risk looking like a decrepit Siberia?  After all the cellphone towers, mega-watt transmission towers, and giant wind turbines have gone by the wayside for improved power-creating and transmission technology, will we be left with nothing but a horrific landscape?

I hope not.  Green needs to be more than that.

                          Montmartre: the Quarry and Windmills
                                           Oil on board, 1886
                               Van Gogh Museum, Amsterdam

Even through the eyes and brush of Van Gogh, windmills are ugly.

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—– SENATOR RICHARD DURBIN —– JUST CALL ME MR. PERFECT 36

  

Mr. Perfect "36"

 “By a ‘silly’ theory I mean one which may be held at the time when one is talking or writing professionally, but which only an inmate of a lunatic asylum would think of carrying into daily life….It must not be supposed that the men who maintain these theories and beliefs are ‘silly’ people. Only very acute and learned men could have thought of anything so odd or defended anything so preposterous against the continual protests of common sense.”       C.D. Broad

I woke up fresh today, grabbed the early morning newspaper, started sipping my orange juice and nibbling my lightly buttered toast, when I was startled, not by a knock on the door, but by a story about Senator Richard Durbin’s news conference yesterday.  The article  in the Senator’s hometown newspaper, The State Journal Register in Springfield, Illinois, stunned me.  In it, 

 http://www.sj-r.com/top-stories/x1042540416/Durbin-to-introduce-bill-aimed-at-banks                                                                                                                                                                                  

 Senator Durbin said that he has introduced language into an amendment on a financial reform bill that would put a ceiling on interest rates.  He is quoted as saying, “I tried to take a number I considered to be so high that even the biggest banks couldn’t argue with it.  I said we couldn’t have an interest rate over 36 percent. . . . I think we ought to have an absolute limit.” 

Please tell me that I’m dreaming. 

After I caught my breath, I sat down to think about interest rates a bit.  That’s not a fun thing to do on an early Monday morning.  For starters, any discussion of interest rates leads directly into the abyss of laws covering the subject.  And, of course, laws covering interest rates can be complicated state or federal ones, depending.  Suffice it to say that I am not a lawyer and immediately disclaim anything here that might be construed as legal advice.  I neither offer nor suggest any legal advice, and recommend that you consult with a licensed attorney if you need or want such services. 

Now, back to just after my morning orange juice.  On the face of it, I think it fair to say that, in the United States, interest rates can vary from ZERO to, say, (um, Senator Durbin) 36%.  If you toss into the interest rate computations the rates of the pay-day loan outfits, pawn shops, and the title loan gang, you most assuredly have situations where the APY is higher than 36%.   Whatever the Senator’s legislative intent, to offer interest rate ceiling legislation to which no bank would object is, to put it mildly, surely usurping the voices of his constituents.  I mean, who in the world can conceive such a thing other than someone almost incomprehensibly out-of touch.  To me, his premise is just staggering. 

What if one begins the discussion of interest rates with the premise of “fairness” and not the premise that “no bank can to object to a ceiling of 36%”?  How then does the dialogue proceed if reasonable people of all ilk can begin with an attempt to decide what a fair interest rate might mean?  Might that be the place to start a discussion?  Surely that is a better alternative than what the Senate Majority Whip has pulled from his hollow hat? 

So, what is fair?  I doubt that there is an answer to that.  Maybe “fair” is a just place to start a discussion.  Or maybe, it’s just a concept to keep in the background when discussing rate ceilings because, after all, aren’t loan arrangements entered into voluntarily?  Well, of course, they are; but that spirit of volunteerism can lead to bad places. 

When I was a much younger man, I picked up a copy of a personal financial management sort of book.  I do not recall the author.  I seriously doubt that it was a best-seller.  I recall it being a patronizing thing – warning one away from the financial dangers-that-be out there in the cruel world.  At the time, I imagined that this book was written by a very boring person with a very boring life – a classic nerd, if you will.  However, there was one bit of advice he gave which jumped off the page and seemed directly aimed at me.  He wrote, “Don’t ever buy a consumable item with anything other than cash.  That way, you’ll never end up paying for something long after it has been used.”   That made perfect sense to me.   Maybe you, too? 

Don’t we all wish that we all followed that advice?  Well, no.  Life wouldn’t have been nearly as much fun – or dreadful, at times.  Let’s just move on here and admit that we are a consumer-driven society in a consumer-driven world and what makes the wheels of innovation and progress go round is the ability for the consumer to borrow.  Take away credit, the wheels come off, the cart crashes, and we all are trapped under a big immoveable object with total loss of all mass and momentum.  The United States has about 2.5 trillion in outstanding consumer debt.  Consider, too, that Americans charge over 2 trillion dollars per year on the over 180,000,000 million credit cards out there.  Whew! that’s a lot of plastic.  Take that away and I don’t think anyone knows what would happen other than total economic collapse. 

So, we’re all stuck with credit.  Consumers are stuck with the lenders.  The lenders are stuck with the legislators.  And the legislators are stuck with the consumers.   That is, the legislators are supposed to be stuck with the consumers.  Unfortunately, Senator Durbin, it looks like we’re stuck with you instead of the other way around.  Maybe something is amiss here. 

Let’s discuss real interest rate ceilings for a bit.  As a citizen of Illinois, if I were to loan money to a friend or a neighbor, or some other entity, I would be subject to my state’s usury laws.  According to information provided at http://www.usurylaw.com/state/ the interest rate ceiling that I would be permitted to charge is 9%.   If I were to charge more than that, I would be violating the State law.  Further, if I engaged in practices in which I had established a pattern of charging more than twice my State’s limit of 9%, in other words 18%, I might be subject to Federal RICO statutes, and that might very well be a felony.  In street vernacular, I would be considered a loan shark if I charged more than 18% to my neighbor or friend. 

Ah, but Senator Durbin wants a Federal law for financial institutions, apparently of all types, to be subject to an interest rate ceiling of double what would be a Federal felony in his own state for a person or other entity regulated by his own State’s usury laws.  I read that the Illinois usury laws also are applicable to amounts owed in civil judgments.  But the Senator wants to legislate by Federal law an interest rate ceiling for financial institutions that is 4 times the amount permitted by his own state for civil judgments.  Apples and oranges, the Senator might say.  I say not. 

I have my own hollow hat and my idea on what is a fair interest rate ceiling.  I think the big banks might not like my number, and might want to argue with it. 

My number is 12% APY 

What do you think? 

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115,000,001

I created my first blog, Funk University, about one month ago.  Strange as it may seem, I really do not remember why I decided to do so.  Blogs have never been popular reading for me.  I only regularly read one blog, Paul Krugman’s Conscience of a Liberal  in the New York Times.  He seems to be one of the very few intelligent economic voices out there.   I like to follow him so as not to get dumbed down by the likes of so many of the clueless.  He can also be quite funny.  Further, he suffers no fools nor other Nobel laureates.

Since Funk U was to be a new thing for me, I decided to do a little research on what blogging really is or, at least, is supposed to be.   In the process of trying to make that determination, I stumbled upon a an eye-opening number.  I discovered that 115,000,000 blogs had already been created.   I was at once dumbfounded by all of the reading material/opinions/photos/stories that I have, apparently,  been missing.  Then again, I am certain that I have missed more than 99.99% of all books written – even though I am equally certain that I have read more books than 99.99% of the average roomfull of book editors.

While I continue to blog away (about one post every other day), I continue to look for that second blog that will truly interest me.  Further, I will consider my blogging a success if I find at least one person who continually finds what I have to say interesting enough to return regularly.

Ok, maybe more than one person.  I think I’m past that.

Stay tuned.

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Published in: on April 8, 2010 at 10:36 pm  Comments (4)  
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New HIS and HERS Stackable Washer/Dryer Combo with QUAD Pedestals – UNBELIEVABLE!!!

It’s been under the radar for a long time now.  In spite of the secrecy, my sources have managed to get an actual picture of a completed prototype.  Sure enough, it’s the breakthrough that everyone has been waiting for in the washer/dryer arena.   Though the prototype looks a little wobbly, company engineers have provided assurance that this is a minor structural issue that will be resolved quickly. 

It is an impressive unit (I guess that you can call it a unit).  “What is has,” said a company spokesman, “is real heft.”  “And convenience, too,” chimed the design engineer, who conceived the product.  “It’s similar to his and hers sinks.  I mean, who doesn’t want double sinks when you wash and dry your face in the morning.  It just seems natural for the on-the-go couple to want the ultimate in personal, yet conjoined, twin washer/dryers.  It’s a totally now thing.”

It goes without saying that the unit will have the latest features – touch controls, steam options, 36 cycles, delay start, 20.6 cu. feet total capacity, 24 temperature settings, anti-vibration technology, pre-wash/bleach/softener dispensers, and energy-star compliance.   The quad pedestals are really what sets this product apart.  After the success of the useless single pedestals ($ 200 each), it was determined that if the concept was ever going to evolve, a double or triple stack wouldn’t quite do the trick.  Why not go all the way?  Sheer design genius.

As expected, the combo unit is dearly priced – $ 6,899 in white;    $ 7, 499 in blue or red (shown); and $ 8,999 in full stainless.  No rebates or reward points.

Even the kids are expected to love the product.  With the combined extra height and the front-loading doors, it is hoped that that the family children can be encouraged to play “clothes-toss” with their socks and soiled garments.  I agree that this could be a wonderful teaching tool for our children and grandchildren.

Pre-orders will be taken beginning in late fall.   All of the appliance stores intend to carry them in spite of the big price tag.  It is projected, however, that serious consumer spending will be on the upswing by then. 

The name of the manufacturer is being temporarily withheld at this time for security reasons.  However, I believe that I know the general place.  When the product is google-searched, the result comes up CENSORED. 

Dang.

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Published in: on April 7, 2010 at 10:03 pm  Comments (1)  
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