Monday, December 31, 2012

Red Flag Warning: We just don't know.

Well here we are. December 31, 2012 and nationally, we’re standing about neck deep in fiscal debt about to wash us over the edge. It’s as if we are ten feet away from the edge of Niagara Falls, we’re resisting with all our might, but the torrent of debt is edging us closer and closer to that moment when, as a nation, over the falls we go. What then?

Just like the guy in the barrel going off Niagara Falls, we haven’t a clue as to the out come. Will our nation be smashed to bits by the economic fallout from crashing on the rocks below? Will we be lucky, just bounce around a bit, and then float to the top mid-stream as we sail triumphantly down the river? Those are the two extreme endpoints of flying off the edge of the falls. But maybe, and more likely, something in between will happen. We might get banged up pretty bad from the initial landing, take on a lot of water, bounce around at the bottom of the falls for a while, then slowly bob up to the surface where we’re caught in an eddy current of stagnant water off to one side of the river.  Surviving the fall, but going nowhere fast.

Here is where we find ourselves caught in the Law of Unintended Consequences (LUC).  Donald Rumsfeld, former Secretary of Defense, said it best about LUC,

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.” 

LUC is an outgrowth of logic from one of the basic laws of physics that states for every action there is an equal and opposite reaction. We think we know what may happen if we dive over the edge, certainly most of us will be facing new tax requirements and many associated with the Department of Defense industry, government as well as contractors, will be hammered. But beyond these knowns, we don’t know what unknowns are lurking in that eddy current. The unintended consequences, the spin-offs from the initial action may be both good and bad. We just don’t know.

Some negative outcomes discussed by our pundit class, the talking heads who so accurately called the election for Romney, believe we will face massive unemployment, sharp rise in business failures, a increased inflation spiral, economic depression much worse the great recession, and the collapse of the student loan bubble, as well as, the housing market. But we just don’t know.

But might there be a silver lining in the debacle? How could that be, given the potential horrific economic conditions predicted?  Just maybe America will wake up from its debt-induced stupor.  Maybe our citizens will realize they can’t have it all for free. The free lunch promised to citizens, including our government, using easy credit is over and we have to go make it our selves.  Maybe our citizens will return to the founding principles that government can not, nor never will, provide for all our wants, but only for a few of our most essential needs.  Perhaps we’ll rediscover that spark of liberty in individual action that propelled our nation to its greatest heights.  Perhaps through hardship, austerity, difficult grinding day-by-day work we’ll find our way out and with that effort, find a new awareness of our America’s exceptional soul.

But we just don’t know. Good LUC in the coming New Year!

Sunday, December 30, 2012

Red Flag Warning: The future is now.

It is a question of not if, but when. When will the proverbial caught between a rock and a hard place occur? When will the basic fact that when what comes in does not match what goes out dawn on government leaders it can not go on indefinitely?  When will those who take from those who provide realize that those who provide can no longer support those that take?  When will the tipping point occur where the upward exponential curve of rising debt and interest surpasses the ability of the flat curve of revenue (taxes) to meet even the payment of interest? When will it come to pass that all income is taxed and it is still not enough to pay the piper?

Again, our liberal elite in the confines of their beltway newsrooms has failed to understand basic principles of economics, and even worse the lessons of history.  A quote from one of the leading liberal pundit class, Sally Kohn:

And amidst the back and forth drama between the political parties, who are so few leaders and political commentators addressing the false premise in the first place -- the simple, mathematical fact that the debt just isn't even close to America's biggest problem right now?”

Read more:
December 07, 2012

 I have to admit Sally is partially right.  Yes, right now the debt is not America’s biggest problem. Right now America’s biggest problem is its failure to recognize the debt will become the biggest problem in just a few years unless we do something about it now.  Mathematically, today, the debt is just a blip on the fiscal curve of life. It was rising slowly by millions, then billions in the past 20 years or so. However, since Obama came into the White House, he has added multiple TRILLIONS to the debt and plans yet more in the future.  This uptick in spending is equivalent of injecting steroids into Lance Armstrong.  The President juiced a crippled system so much that even at a “low” 3% interest rate, the mathematical resulting curve goes exponential in just a very few short years. 

For those of you with a public school education, imagine Al Gore’s green house gas CO2 graph he demonstrated so effectively in “An Inconvenient Truth”. His graph showed the CO2 steroidal injection creating an exponential curve shooting so high he had to get a cherry picker to lift him up to the expected top of the curve. Just change the graph’s units from tons of CO2 to dollars and bingo; you see the debt curve that is facing America in a few years down the road.

You may not like his tie or his politics, but Mr. Paul Ryan’s debt analysis is factually based and damned scary. His projection is we have but a few years to correct this massive upturn in the curve before the window closes and we shoot the moon with a mountain of debt that is unmanageable. What then, say you Ms. Kohn?

High unemployment is a crisis. The increase in poverty is a crisis. The foreclosure rate is a crisis. The deficit is not a crisis. It is an excuse for bad economics and bad policy that will hurt America today and in the future.”

Read more:

The question, When is American’s future going to come home to roost?  Ms. Kohn’s economic theory has us on a course too not only go over the cliff, but right off the edge of the universe. She has swallowed Obama’s approach of increased spending us further into debt to the point where our debt to GDP is over 100%. (Ms. Kohn points to this occurring during the Great Depression and how Saint FDR’s New Deal, got us out of that situation. What she forgets to mention that it took a World War to do it, as the New Deal had gone south by the late 30’s!)  

The result of such a debt to GDP ratio in the modern era is an economy like Japan or Greece. Think years of stagnation, horrific austerity, and years of chronic unemployment for millions.  Sound like a bright future you want for your children?

When the collapse of our debt occurs, what happens then? When America cannot even pay the interest on its racked up debts, what happens then? When our creditors (think communist China) call the loans, what happens then?  The resulting hurt, pain, and destruction of American’s financial security will be far worse than if we bite the bullet now, get our fiscal house in order, and then move carefully into the middle of the 21st Century, stronger and far more capable of meeting the global challenges of our world.

Ms. Kohn, the future is now.

Sunday, November 18, 2012

Red Flag Warning: Heed the cry from the backbench

I am reminded of the career of Winston Churchill. Here was a man who failed at a lot of things in life, but succeeded when his nation needed him most. Yet in the years before the fall of France in 1939, Churchill was relegated to the backbench of history, literally.  His seat in the House of Commons was, as we would say today, in the nose bleed section.  He none-the-less stood daily to warn his fellow citizens of the growing danger of German fascism. He was booed, catcalled, and told to shut his trap up. In effect he was told his views were out of step with the modern world.  The modern world knows today Churchill was tragically right.

I recall this bit of history to remind us that while our conservative ideas seem to have been rejected by a fair number of fellow citizens in the recent election, our conservative principals still impels us to likewise stand in the nose-bleed section and continue the call for fiscal sanity.  For if we don't, most likely there will come a day when America’s financial house of cards comes tumbling down. 

The spending spree cannot continue indefinitely. The math, regardless of viewing from the left or right, simply states a rate of change of any number at a constant percent will eventually rise (or fall) exponentially. The curve, famously exemplified by Mr. Gore’s hockey stick graph of global warming, rises slowly in the early period, but with each passing year the compounding percentage drives the curve nearly vertical.  Put dollars on Mr. Gore's graph instead of carbon dioxide and you’ll see what I mean.

The counter to this growth of debt, going exponential, you say, is to raise taxes. Indeed that will certainly, temporally, dampen the rate of increase to some degree. The problem that any first rate banker will tell you, at a certain point no matter how much revenue is collected, it will be impossible for even the interest portion of the debt to be paid.  The current hullaballoo over raising taxes on the “Uber rich”, greater than $200K, is but a tablespoon of water in an ocean of debt. It is kind of like putting an extra $5.00 note in with your $1,800 mortgage payment for reducing the principle. It feels good, but the $5 bucks effectively does nothing in the end. Worse, if you are only paying the interest to start with, the principle never is reduced. NEVER. Worse yet still, is piling on more debt on top of what you can't pay for to start with. Can you say, "more stimulus" to the tune of an additional $1.6 trillion in spending.

But I digress. What I really desire for you to see, if you've hung with me this far,  is what the outcome of this mess will look like if we fail to get our fiscal house in order. I wondered what life was like in another nation that out spent its ability to meet its obligations. Greece has been in the headlines for months, stories of bailouts and budget cutting that are interesting to a budding economist, but very little on the impact to real people of that fair nation.

On November 1st, I came across a little noticed article on Fox that was a vignette into the everyday citizen’s life under such draconian fiscal restrictions. The article, Ripped Apart by Financial Crisis, chronicles several Greek citizens barely surviving the crushing economic conditions. What struck me the most were the desolate emotions of the people, who have seen a lifetime of work swept away when their nation’s economy collapsed.  The government, the one they all thought was there to continue guaranteeing their personal benefits, is bankrupt. The good times are over, and each individual is on must figure out how best to survive.  

My red flag warning, again shouting from the backbench, is we must contain the spending. Our nation cannot afford subsidizing such things as Big Bird, corn, green energy and a bunch of other unnecessary stuff (see Sen. Coburn's Waste Book).  If we take stock now to fund only what is necessary for the mutual defense of our nation and safety of our citizens, then we may, just may, avoid a Greek like economic fiasco that would doom our children’s children to a life of economic poverty.  If we don’t, then we can’t say we were forewarned.

The Watchman

Sunday, October 28, 2012

Red Flag Warning: Ted Turner - Candidate for Supreme Jerk of the Century

This will be short and terse. Mr. Ted Turner "Creator" of CNN and owner of Ted's Place Steakhouse has made an unforgivable verbal flub. In an interview with Piers Morgan, CNN, he indicted that having military suicides exceed combat deaths was "good".
TURNER: I think the global policeman should be the United Nations. And I don't think we should need one. I think we should use courts the way we do in civilian life. It's time to put war and conflict behind us and move on, and start acting like civilized, educated human beings.
MORGAN: You made the point to me in the break there, more American servicemen have --
TURNER: -- are dying now from suicide over there than are dying in combat.
MORGAN: That's shocking, isn't it?
TURNER: Well, what -- no, I think it's -- I think it's good, because it's so clear that we're programmed and we're born to love and help each other, not to kill each other, to destroy each other. That's an aberration. That's left over from hundreds of years ago. It's time for to us start acting enlightened.

Go to the site and read the whole transcript (near the bottom of the interview). Morgan made it worse by immediately asking what it was like to give away a billion dollars. She too is guilty of insensitivity and brainlessness. She should have at least scolded Ted for such a callous view. By her failure to do so, does she agree with Ted, suicides by our Soldiers is "good"?

This despicable man who reaps billions from fellow American's who have protected his freedom believes having military deaths, from both combat and suicide, will cause us to give up our military to the UN. Well, we've seen what the UN can do. Either nothing or send in "police forces" who rape, pillage, and steal from the very people they are suppose to protect.

Sorry Ted. This is one Vet who will never again patronize your steakhouse. Go Eat That!

Friday, October 19, 2012

Red Flag Warning: What I see in Mitt that I don't see in Barack

Two debates are enough for the Watchman. The third, I suspect will confirm what the Watchman has already concluded.  Mitt Romney is presidential timber.

This comes as no big surprise to most of my friends, family, and co-workers.  I already lean hard right of center, almost libertarian in some respects, so the decision is not a giant leap of faith or roll of the dice. No, after careful consideration, Mitt is my man for the presidency. What do I see in Mitt that I don’t see in Barack?

Watching the debates and noted Mitt had a high emotional quotient or EQ in today’s business lingo. When it was his turn to take a seat or stand quietly, he was like a rock. Focused intently on what the President said, and in one of the best poker faces I’ve seen, he hardly moved a muscle. Without letting on he was deep in thought and then was prepared to respond with cogent analytical responses.

Some might find that approach cold and sterile.  Think though for a moment into the future. Consider President Romney sitting across from Russian President Putin with that same steady, controlled attentiveness.  How might the outcome of such a meeting be different from one with President Obama who seems to wear his EQ on both sleeves?  My bet is Romney would be a tough cookie to negotiate arms controls, economic issues, and human rights.  Consider the practice he’s had in negotiating business deals with other hard, steely eyed businessmen. Think that might be a factor missing in Obama?

Romney doesn’t have a need to be liked. He’s comfortable in his own skin and seems to move with ease among the other equally powerful people he comes across.  President Obama appears to have this yearning to be accepted and liked, thus his trips to Letterman, Stewart, and the View, all fellow travelers who fawn on him unabashedly. He is like my dog, can’t possibly get enough attention or petting, and sulks if no treat is forthcoming.

Another aspect I see in Romney that is missing from the President is his vision. Romney sees the future for what it will be, based on realities of what is within the realm of the possible. Romney’s five point plan is sufficiently detailed to let you know he’s thinking ahead just enough to sketch out the general ideas and will add the fine print in conjunction with congress.   I suspect he has a picture of what many of his initiatives will look like in his mind’s eye, yet doesn’t want to paint the full scene until he knows how the lay of the land will be on January 20.  Romney seems energized by the challenges and the harder it gets, the harder he gets. I see discipline and a dogged stick-with-it approach to work. He works.

Obama on the other hand, sees the future for what he hopes he can change it to be based on realities of what HE believes he can make possible. When the picture he sees in his mind’s eye begins to get blurry or too difficult to paint, he gives up in the ugly phase, looses interest, as he is not getting the right “strokes” from his followers.  Look at the developmental history of his single achievement, Obamacare. At several junctures he appeared totally disinterested and was throwing in the towel. When it got too hard he turned it over to Pelosi and Reid to do the hard slogging. I don’t see Obama as a looser or quitter, just a bored smart guy who looses focus when the mission bogs down. He plays.

I see Mitt with a heart that beats hot for America and Americans. Even his 47% comment really held much truth to it in terms of they are indeed firmly in the safety net, so he’s not worried about them. It’s the other 53% who are footing the bill he’s concerned about. The 47% should be too!  But more importantly, Romney desires for all to succeed, not just a few winners picked by government run amuck.  Barack focuses on the status quo, keeping the 47% down and growing it more where possible. He said he wants to spread the wealth and doesn’t believe independent business builds their success without government’s direct unseen hand in the operation. I see Barack with a vacuous heart, beating hot for the all powerful state and ignorant masses.

I see Mitt as a wise judge of people’s character and abilities. Look at his pick for a VP running mate, Paul Ryan. Mitt is unafraid to put people on his team that may shine brighter than himself. I see Mitt picking men and women, all from binders filled with highly qualified people, who will lead their departments with dignity and honor.  I don’t see Obama picking the best and wisest. If you look at each of his major cabinet team and the many Czars, they all have one thing in common: They shine less brightly than Obama, second or third string to Barack. Obama has to be the smartest guy in the room, bar none.  Just imagine what kind of pick he would make to the Supreme Court. Is there any left leaning legal scholar brighter than himself?

Lastly, but not completely as I keep finding more about Romney that I admire and less from Obama, I see Romney as a man of faith.  I am not a Mormon, but I am aware of their disciplined lives and their single-minded faith that God is God of the universe and we all must await His judgment. I see Mitt as a humble man before his God. I don’t see that at all in Barack.