The Fed is loaning money at 0% interest, while mortgage rates are about 5%.
If the deposit from the Fed was like a checking account, in that the money could be called back at any time, then the Fed requires 10% of the deposited amount held in reserve as cash. Then the bank could earn 5% times 10 = 50% interest on the money held in reserve every year.
But if the deposits from the Fed are like CDs, in which you basically can not readily get your money out at any time, but instead have to wait, then the Fed has a zero requirement for the amount of cash reserves to be held by the bank. Therefore a bank could earn an infinite percentage return on the money it holds in reserve, when loaning money borrowed at 0% and loaned out at 5%.
Our tax dollars hard at work...
Sunday, November 22, 2009
Ownership is imaginary, but useful...
Ownership is imaginary, but useful, because it rewards stewardship of resources. Who would oil a bike they did not expect to be able to use later? Who would sow if they could not expect to be the one to reap?
Government enforces ownership. Thus owners are the chief beneficiaries of government. Where government breaks down, as in Somalia, there is no longer any authority to turn to in cases of ownership contention, like theft or piracy. Thus violence becomes the settling factor, and force the arbiter in disputes. There ceases to be an incentive for stewardship of resources, since there is no security of ownership, as government provides.
Now, with the climate crisis looming, is not the time to weaken support for stewardship of natural resources for a number of reasons:
1) if energy resource owners do not expect to have secure access to in-the-ground reserves, they may sell them cheap, leading to an increase in carbon-rich fuel use, and thus carbon release to the atmosphere.
2) if shoreline land owners do not expect to continue to control these lands, they will not be motivated to join together politically to fight the climate crisis.
It follows that it is in the best interests of owners to support government. Hence property taxes make a lot of sense, since the people paying; the owners, stand to gain the most by the continuation of the current order that government maintains.
This is why it makes sense to raise property taxes in a recession/depression - we need to maintain civil order to prevent greater suffering, and owners need this at least as much if not more than others, since it is government that enforces ownership.
In our industrialized world, civil order is the basis for survival, not just a pleasantry we can do without. In this time of economic uncertainty, we all are trying new ways of making money, of surviving as individuals. Some of these ways will be against the general good. We need to stop these methods, and we need to be extra vigilant now in these hard financial conditions, because dire circumstances lead to innovation, both good and bad, and we need to maintain the expectations that the the property concept supports. These are, namely, that taking care of things is the best way to act, and that destroying something of greater public value only for lesser, but personal, gain will not work.
Another powerful concept is that of designated responsibility. For example, each of the rest of us stand to gain by enforcing sensible laws onto the selfish innovator of a new type of crime, and we each have some legal responsibility to enforce some laws in some circumstances, but as a group, we typically designate police officers and the courts with the specific responsibility of enforcing law, and furthermore each group of police officers takes responsibility for a certain area, and divide the work into shifts of time, when each work a given beat. This works
better because responsibility is designated.
The current financial disaster came about because no one was responsible for the enforcement of law onto the new financial entities allowed by neo-cons via revoking the Glass-Steagall act. Yet in response we act as though it makes sense to match declining tax revenues with reduced police forces, and reduced enforcement of law, when the opposite actually makes the most sense. The opposite is increased enforcement during these times of temptation, and increased taxes to pay for it, especially on those who stand to benefit the most by the continuation of our imaginary ownership concepts.
It would be deeply ironic if the financial disaster to which lax regulation led us, led us in turn to lax regulation via government cutbacks, and if this led those most liable to gain by the continuation of the concept of ownership to cut back on just that which best protects the advantage they have worked so hard to create.
We will need more than increased enforcement to get us out of the current financial and environmental bind - we will need to rethink what we do, and take wise counsel. One of the classic ways to take counsel is by reading.
With the invention of the printing press, many can now read what a few have written. Just a few, who have figured out a better way, can lead many along that path. Instead of only having each of us read once a book we bought for ourselves, we have invented libraries, and made them public, so that many can benefit from one book of wisdom. It is a powerful technique that strengthens in the inevitable clash with other different ways of doing things. As we each learn how profoundly changed our individual circumstances are by the financial turmoil of the era, we will each need to rethink our approaches, figure out new ways of doing things, or old ways of doing things that newly make sense, given the new higher cost of energy, and new realization of the great cost of releasing so much carbon from fuel use. There is a great opportunity to take counsel from the learned, via their books, through public libraries, and we can assist each other in doing so by expanding library hours, and by directing acquisition departments to shift emphasis from the purely entertaining to the substantive books.
Libraries also provide access to the powerful tool of the internet for those without the tools at home, It is especially important to provide access to hope, to honest ways of bettering one's life in ways that benefit society, instead of degrading society, to these of us who don't have much, and who are thus more tempted by the struggle for survival to better themselves at the expense of others. Expanded library hours could help here too.
Government enforces ownership. Thus owners are the chief beneficiaries of government. Where government breaks down, as in Somalia, there is no longer any authority to turn to in cases of ownership contention, like theft or piracy. Thus violence becomes the settling factor, and force the arbiter in disputes. There ceases to be an incentive for stewardship of resources, since there is no security of ownership, as government provides.
Now, with the climate crisis looming, is not the time to weaken support for stewardship of natural resources for a number of reasons:
1) if energy resource owners do not expect to have secure access to in-the-ground reserves, they may sell them cheap, leading to an increase in carbon-rich fuel use, and thus carbon release to the atmosphere.
2) if shoreline land owners do not expect to continue to control these lands, they will not be motivated to join together politically to fight the climate crisis.
It follows that it is in the best interests of owners to support government. Hence property taxes make a lot of sense, since the people paying; the owners, stand to gain the most by the continuation of the current order that government maintains.
This is why it makes sense to raise property taxes in a recession/depression - we need to maintain civil order to prevent greater suffering, and owners need this at least as much if not more than others, since it is government that enforces ownership.
In our industrialized world, civil order is the basis for survival, not just a pleasantry we can do without. In this time of economic uncertainty, we all are trying new ways of making money, of surviving as individuals. Some of these ways will be against the general good. We need to stop these methods, and we need to be extra vigilant now in these hard financial conditions, because dire circumstances lead to innovation, both good and bad, and we need to maintain the expectations that the the property concept supports. These are, namely, that taking care of things is the best way to act, and that destroying something of greater public value only for lesser, but personal, gain will not work.
Another powerful concept is that of designated responsibility. For example, each of the rest of us stand to gain by enforcing sensible laws onto the selfish innovator of a new type of crime, and we each have some legal responsibility to enforce some laws in some circumstances, but as a group, we typically designate police officers and the courts with the specific responsibility of enforcing law, and furthermore each group of police officers takes responsibility for a certain area, and divide the work into shifts of time, when each work a given beat. This works
better because responsibility is designated.
The current financial disaster came about because no one was responsible for the enforcement of law onto the new financial entities allowed by neo-cons via revoking the Glass-Steagall act. Yet in response we act as though it makes sense to match declining tax revenues with reduced police forces, and reduced enforcement of law, when the opposite actually makes the most sense. The opposite is increased enforcement during these times of temptation, and increased taxes to pay for it, especially on those who stand to benefit the most by the continuation of our imaginary ownership concepts.
It would be deeply ironic if the financial disaster to which lax regulation led us, led us in turn to lax regulation via government cutbacks, and if this led those most liable to gain by the continuation of the concept of ownership to cut back on just that which best protects the advantage they have worked so hard to create.
We will need more than increased enforcement to get us out of the current financial and environmental bind - we will need to rethink what we do, and take wise counsel. One of the classic ways to take counsel is by reading.
With the invention of the printing press, many can now read what a few have written. Just a few, who have figured out a better way, can lead many along that path. Instead of only having each of us read once a book we bought for ourselves, we have invented libraries, and made them public, so that many can benefit from one book of wisdom. It is a powerful technique that strengthens in the inevitable clash with other different ways of doing things. As we each learn how profoundly changed our individual circumstances are by the financial turmoil of the era, we will each need to rethink our approaches, figure out new ways of doing things, or old ways of doing things that newly make sense, given the new higher cost of energy, and new realization of the great cost of releasing so much carbon from fuel use. There is a great opportunity to take counsel from the learned, via their books, through public libraries, and we can assist each other in doing so by expanding library hours, and by directing acquisition departments to shift emphasis from the purely entertaining to the substantive books.
Libraries also provide access to the powerful tool of the internet for those without the tools at home, It is especially important to provide access to hope, to honest ways of bettering one's life in ways that benefit society, instead of degrading society, to these of us who don't have much, and who are thus more tempted by the struggle for survival to better themselves at the expense of others. Expanded library hours could help here too.
Saturday, November 21, 2009
Afghan War Cost: What can we afford?
I read today that the US counterinsurgency field manual recommends a soldier for every 50 residents of an insurgent region:
http://www.tnr.com/article/world/stalemate
Afghan population estimates range from 23-33 million people currently, with most estimates being near 30 million, (from an English language Google search of UN and CIA sources). Let's assume the population is 30 million. So an occupying force of 600,000 would be needed.
With non-US NATO troops at 34,000, the Afghan army currently near 100,000 and the Afghan police at 80,000, there would need to be about 386,000 more troops put up by the US.
How will McCrystal get it done with 40,000 over the 68,000 US troops already there? Won't he be 386k - 108k = 278,000 US troops short?
Then the expected cost of occupying Afghanistan successfully for the US would be 386,000 troops times US$1 million per troop, or about US$ 386 billion per year.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGvM0165Q9bs
If we can get local control set up in a decade (unlikely, says Rory Stewart, Harvard:)
http://www.hks.harvard.edu/news-events/news/testimonies/rory-stewart-on-afghanistan
then the total US cost would be US$ 3.86 trillion; if it took twenty years, the US cost would be US$ 7.72 trillion.
We have a US population of about 0.3 billion, so that is $26,000 per person, right? Can we get that kind of money? If we could, aren't there better things to do with the money? What will assuming this kind of debt do to the dollar's strength?
http://www.tnr.com/article/world/stalemate
Afghan population estimates range from 23-33 million people currently, with most estimates being near 30 million, (from an English language Google search of UN and CIA sources). Let's assume the population is 30 million. So an occupying force of 600,000 would be needed.
With non-US NATO troops at 34,000, the Afghan army currently near 100,000 and the Afghan police at 80,000, there would need to be about 386,000 more troops put up by the US.
How will McCrystal get it done with 40,000 over the 68,000 US troops already there? Won't he be 386k - 108k = 278,000 US troops short?
Then the expected cost of occupying Afghanistan successfully for the US would be 386,000 troops times US$1 million per troop, or about US$ 386 billion per year.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGvM0165Q9bs
If we can get local control set up in a decade (unlikely, says Rory Stewart, Harvard:)
http://www.hks.harvard.edu/news-events/news/testimonies/rory-stewart-on-afghanistan
then the total US cost would be US$ 3.86 trillion; if it took twenty years, the US cost would be US$ 7.72 trillion.
We have a US population of about 0.3 billion, so that is $26,000 per person, right? Can we get that kind of money? If we could, aren't there better things to do with the money? What will assuming this kind of debt do to the dollar's strength?
Sunday, November 15, 2009
Does Goldman-Sachs know something you don't?
Re:
http://www.mcclatchydc.com/227/story/77791.html
For Goldman-Sachs (GS) clients, the question now is not why GS bet against
the housing market. The question is 'Why didn't you tell me?
One might hope that one could hire such brilliant analysts to defend one's
own financial interests (say by putting it into a contract or something).
Recent evidence suggests that even if you find and hire firms that do
understand reality, and can tell a bubble from real value growth, they
will not help YOU.
It is clear that GS did not err in serving their clients out of ignorance,
or incompentence, like the other Wall Street firms - Their record in
serving their own financial interests here proves that.
Can self-interest explain GS perfidy? Wouldn't an investment advising firm
stand to gain when its reputation is enhanced by its clients either
gaining more, or losing less, than other firm's clients?
Here, GS missed the boat, so rational self-interest fails to explain the
firm's behavior, if we assume that clients can learn from reality, and that free markets work, etc.
GS, although perceiving their immediate self-interest in hedging their housing
bets, did not perceive any self-interest in actually serving their clients
similarly.
Perhaps we have only one of three conclusions left:
1) GS is stupid. This is countered by the facts of their success.
2) GS is crazy - crazy like a fox.
3) GS thinks their clients are stupid, too stupid to see GS's perfidy, and
that there is no market-driven need to actually serve their clients
competently, or honestly.
Or is there another, more innocent explanation? Perhaps GS knew that their
clients did not trust GS enough to believe GS when it gave accurate, but
unpopular investing advice. (Cue: violins) GS, knowing that it could do nothing for its insufficiently-trusting clients, was left with no recourse but to survive
alone financially, without its irreparably-doomed clients (Sorry, guys - no time to explain).
While one might be able to discern, with further examination, which of
these best explains our reality, perhaps it is enough to see that any one
of these are true, as one considers investment advisors, or government
management of financial firms.
In sum, the only people wise enough to see the housing bubble were not
honest or sane or trusted enough to tell their clients about it.
And Goldman-Sachs, in its exceptional and now-proven wisdom, knew that the
free market does not work (for you).
Brian Cady
http://www.mcclatchydc.com/227/story/77791.html
For Goldman-Sachs (GS) clients, the question now is not why GS bet against
the housing market. The question is 'Why didn't you tell me?
One might hope that one could hire such brilliant analysts to defend one's
own financial interests (say by putting it into a contract or something).
Recent evidence suggests that even if you find and hire firms that do
understand reality, and can tell a bubble from real value growth, they
will not help YOU.
It is clear that GS did not err in serving their clients out of ignorance,
or incompentence, like the other Wall Street firms - Their record in
serving their own financial interests here proves that.
Can self-interest explain GS perfidy? Wouldn't an investment advising firm
stand to gain when its reputation is enhanced by its clients either
gaining more, or losing less, than other firm's clients?
Here, GS missed the boat, so rational self-interest fails to explain the
firm's behavior, if we assume that clients can learn from reality, and that free markets work, etc.
GS, although perceiving their immediate self-interest in hedging their housing
bets, did not perceive any self-interest in actually serving their clients
similarly.
Perhaps we have only one of three conclusions left:
1) GS is stupid. This is countered by the facts of their success.
2) GS is crazy - crazy like a fox.
3) GS thinks their clients are stupid, too stupid to see GS's perfidy, and
that there is no market-driven need to actually serve their clients
competently, or honestly.
Or is there another, more innocent explanation? Perhaps GS knew that their
clients did not trust GS enough to believe GS when it gave accurate, but
unpopular investing advice. (Cue: violins) GS, knowing that it could do nothing for its insufficiently-trusting clients, was left with no recourse but to survive
alone financially, without its irreparably-doomed clients (Sorry, guys - no time to explain).
While one might be able to discern, with further examination, which of
these best explains our reality, perhaps it is enough to see that any one
of these are true, as one considers investment advisors, or government
management of financial firms.
In sum, the only people wise enough to see the housing bubble were not
honest or sane or trusted enough to tell their clients about it.
And Goldman-Sachs, in its exceptional and now-proven wisdom, knew that the
free market does not work (for you).
Brian Cady
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