Thursday, September 25, 2008

The silver lining

I'm feeling myself run out of steam on the bailout issue. I guess I've made pretty clear how I feel about it, and it's starting to take on the air of a done-deal. So I won't bother to link to James K. Galbraith's article in today's Washington Post calling the need for the bailout into question and calling on us to focus atteniton on the yawning local and state infrastructure needs that will continue to go unfunded as so much money goes to bail out Wall Street. Well, maybe I will after all.

But I've been thinking that there may be a silver lining in all this, if we choose to pursue it. There are in fact two crises facing our country that for me stand out above all the others. The first is the financial crisis, with its impact on the economy and on our ability to pay for all the infrastructure needs we've been neglecting as we've been trying to drown government in the bathtub. And the second is the environmental crisis and its handmaiden, the increase in price for fuel and all the things we produce and transport with it.

These crises tell us that the way we have been living is unsustainable. We can't expect to sell imaginary derivatives forever, and we can't expect to import cheap goods from China forever. It’s unfortunate, perhaps, that it takes crises on such monumental scale to call into question the way we have organized our lives and our society. It seems we will only take the steps necessary to address these issues when we are forced by circumstance, high prices, or shortage to do so. That's human nature, apparently, or at least American nature.

Be that as it may, now, because of circumstances, our society has come to of a fork in the road. We have two choices. We can hope that gas prices ease, that credit becomes more available, and go blithely back to SUV-lovin', big-screen-TV-watchin', I-phonin' ways, relieved at having the averted the tragedy of having to find a way live a different kind of life - within our means, and within the capacties of the earth. Or we can take this opportunity, as individuals and as a society, to make a different choice, a more sustainable choice, a greener choice, a more frugal choice, a simpler choice.

I know how the Kansas Chamber of Commerce would vote. As the Eagle has been reporting, they are bringing in speaker after speaker to call global warming into question, and to give dire predictions about the impact on the economy if measures like cap-and-trade are initiated. But this flat-earth approach won't help - we may be able to ignore the issue for another few years, but reality can't be ignored forever. And the same goes for the "drill baby drill" crowd.

Instead, we can use the crises that face us opportunities to look closely at the way that we as individuals, and we as a society, have lost sight of the bigger picture in our quest for an endlessly expanding consumer lifestyle based on cheap oil, cheap credit, and the despoliation of the earth. Perhaps we can begin to make choices that are thoughtful rather than rote, that speak our meaning needs rather than our greed, and that are generated by our values rather our instincts. Perhaps we can take this opportunity to begin to redress the imbalance in our lives and adapt a mode of living that is more sustainable, enjoyable, and yes - simple.

If we can, this just might be the silver lining in the clouds we see today.

Overhyping the risk

Here's something from Daily Dish, regarding the possible ill effects if the bailout doesn't pass.

Even in our pessimistic alternative forecast, the peak-to-trough decline in real GDP is just 1.5% and the unemployment rate peaks below 7.5%.
I don't want to underestimate a 7.5% unemployment rate, because real people will get hurt, but doubling the national debt to prevent it just doesn't seem like a good investment. And President Incompetent's scaremongering last night doesn't impress me one bit. That's the only thing he has - the only thing he's ever had.

While we're on the subject, here's KangroX from Kos:

What's truly astounding is that it may be necessary in order to keep the whole world's economic underpinnings from dissolving into anarchy, and yet everyone has to stop and think twice. Three times, even. Why? Because nobody in their right mind thinks Bush and his cronies can be trusted with the money, much less to actually do anything worthwhile with it.


The sad truth is that under no circumstances should this president be given unfettered and unreviewable authority over this fund. Sadder still is that despite the best efforts of well-intentioned legislators, no statutory regimen can be devised that can by itself make a president who believes he is above the law submit to real and rigorous oversight. Which in truth means that the bigger risk in this is actually funding this bailout while George W. Bush is president.
And anyway - can anyone really say that this bailout will actually work? Isn't $700 billion a lot to hold out for a hope?

Wednesday, September 24, 2008

Elevator to the lobby

One of the many concerns I have about that bailout is that it will have to pass with Democratic votes as conservative Republicans posture against fixing the mess they have largely caused. Patrick Ruffino had some such advice for McCain the other day:

If a bailout is to pass, let it be with Democratic votes. Let this be the political establishment (Bush Republicans in the White House + Democrats in Congress) saddling the taxpayers with hundreds of billions in debt (more than the Iraq War, conjured up in a single weekend, and enabled by Pelosi, btw), while principled Republicans say "No" and go to the country with a stinging indictment of the majority in Congress....

This has the added advantage of allowing Republicans to posture again as "deficit hawks" in the next Congress, as watchdogs of the public purse - as long as they're protecting us from health care and infrastructure investment and not the depredations of the merchant banking class, which are fine.

What they know is what is becoming clearer, that this plan is a dog and it will poison the political chances for years to come for whoever seems to be responsible for it. The Dems, realizing this, won't commit to voting for it unless there's a majority of Republican votes as well.

As good and well as this might be politically - and I have to say, I saw Barney Frank on Charlie Rose last night and he said something really does need to be done, and maybe he's drunk the Kool Aid but I really do like Barney Frank - I just know that the Wall Street lobbyists are climbing up and down our members of Congress, making sure a) that they get the best possible price for their garbage securities, and b) that there are as few strings and as little oversight as possible. I can't help but thinking that the plan when it finally comes will reflect this, and unfortunately, you and me don't have no lobbyists. Wall Street will in the end get what it has been paying for.

And speaking of which - how can I be sure that none of this money - our money - is going to pay for the lobbyists who are encouraging the Congress to reward their irresponsibility with ... our money? In other words, how about some restrictions on Wall Street lobbying, while you're at it?

Tuesday, September 23, 2008

Monday, September 22, 2008

Who's gonna hold the purse-strings?

Angry Bear points out that if the bailout goes through, and McCain wins the election, the likelihood is that the $700 billion dollars will be in the unfettered hands of likely Secretary of the Treasury Phil "Nation of Whiners" Gramm.

Oh, and just for kicks, here's a quote from McCain that's been making the rounds:

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

When "we have to do something" is the worst reason of all

The conventional wisdom seems to be that a bad bill is better than no bill at all. Fortunately, Paul Krugman of the Times agrees with my point that the bailout as it has been presented thus far is a bad idea:

Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.
This administration, which has proved its incompetence time and again - and continues to do so, with this crisis - is not in a position to say "trust us." I don't. The fact that they're doing this with the same technique they used to push through war in Iraq only reinforces my skepticism. Please, Democrats, don't give in to this blackmail! A good bill, which protects the small fish in the pond, or no bill at all!

And if you want to know where to start, let's ask Sen. Bernie Sanders, who as ever is one of the only ones who makes any sense in this country:

To pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;

b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and

c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies’ stock goes up.

Sunday, September 21, 2008

Legislate in haste, repent in leisure

The more I think about it, the more I think it's a really bad idea to rush through bail-out legislation the week before Congress breaks for the year. I just think about the Patriot Act and about how a lot of really bad ideas got through there because there was a sense that something, anything had to be done, right now, and we haven't been able to get rid of a lot of it even now. I would rather there be competent leadership on this issue after the first of the year. (Hope, hope, hope.)

Going back to the WashPost article I posted to last night, I wonder how such a large input of money will warp the market and prop up sectors that don't deserve to be propped up. In other words, there have been unintended consequences of every bailout this far - what will the unintended consequences of this bailout be?

I heard on NPR this morning that maybe the $700 billion is totally gone, maybe if these security stabilize they can be sold back to the private sector. Well, that's reassuring. I'm quite sure that they will be sold back at a rate that will allow a hefty profit to the private sector, which then gets to profit three ways - at the beginning by making the bubble, in the middle by getting bad debt off their books, and at the end by buying back recovered securities from the feds at a discount.

And so government of the rich, by the rich and for the rich has not, you can be assured, perished from the earth.

Saturday, September 20, 2008

Let 'em jump

Here's an article from the Washington Post explaining how Wall Street machinations, executive branch negligence, congressional greed and the legacy-whoring of Alan Greenspan all combined to contribute to the Wall Street meltdown. And now we're supposed to pay for it.

In an effort to offset the economic strain from these losses [from the bursting of the Internet bubble], the Fed once again rapidly increased the money supply and slashed short-term interest rates to 1 percent -- a level that hadn't been seen in more than 45 years. This enormous monetary stimulus (along with significant federal spending) energized the overall economy, but it also led to the greatest housing boom -- and possible bust -- this country has ever encountered.


Once again, the investment banks raked in billions of dollars in fees, giving them incentive to keep lowering underwriting standards, allowing mortgage companies to originate and sell even the most unscrupulous home loans, which Wall Street then dumped onto the investment community. Wall Street never once questioned the ethics of these activities; it too was focused on the enormous rewards that allowed its firms to pay out an unfathomable $62 billion in bonuses in 2006 alone.

The price of all this greed? Sadly, because of the actions of the investment banks, the mortgage industry and the rating agencies, the investment community has now incurred an estimated $1 trillion and more in losses. Even more troubling, housing prices have dropped 20 percent from their July 2006 highs, with the very real likelihood that housing could contract another 15 to 20 percent -- essentially wiping out more than $4 trillion in housing values. This would be the biggest hit since the Depression to Americans' most important asset.


Wall Street's actions are now profoundly hurting American families, communities and the entire U.S. financial system. People are being thrown out of their homes. Once seemingly indestructible financial entities are succumbing to the crisis they have created and have jeopardized the stability of the global financial system. Isn't it ironic that the same firms that preached free-market capitalism are now the ones begging for a taxpayer bailout?

The writer is a Wall Street guy so he certainly isn't politically suspect like I am. One could wonder why this wasn't being written last week, or anytime over the past 5 years, really, but who would have heard it through all the Swift Boat politics?

The smartest thing the Fortune 500 ever did was transfer the pension system to the 401(k) system, because that gave a lot more people a stake in the wellbeing of these financial industry reprobates. It's penny ante by comparison, but it would be much harder to sell the bankrupting bail out on the table now if Richie Rich was the only one benefiting from it.

Unless and until I hear someone in a position of authority suggesting, nay demanding that the Bush tax cuts be rescinded now, I will know they are not serious.

And while I'm on the subject, let me ask you one question that may seem gratuitous: Can you imagine anyone less suited to deal with this issue, who inspires less confidence in his competence, understanding, or judgment, than George W. Bush? It is the tragedy of this country's broken political system that, in fact, I can - and she's running for Vice President.

Profit is privatized, risk is socialized

The American economy gave up useful productivity for the sake of inventing new and ever more esoteric and innovative ways to gamble on financial instruments - mortgage securities, derivatives and all the rest. The rest of it was sent overseas. This gives 25 year olds on Wall Street a good living and a lot of CEOs ridiculous packages of salary and benefits but doesn't do *&%$ for the rest of us. Then when the whole contrivance goes belly up, as anyone looking at this from any other venue than from the pages of the Wall Street Journal could have seen coming - guess who gets to pay for it all? You watch - the stock prices of all the remaining banks and brokerage houses will go up in the next few days, because every bad loan on their rolls will be foisted on the rest of us as part of this bailout.

We've been neglecting our infrastructure for 30 years - and it takes bridges falling into rivers to get anyone to spend any money on it. It's clear we need to spend significant amounts of money on roads, bridges, railroads, green and renewable energy etc., and just before the election that may finally allow this to happen, lo and behold, we "have to" spend three quarters of a trillion dollars bailing out Wall Street. So guess what - the money for infrastructure won't be there. I guess flushing the money down the toilet in Iraq wasn't enough for these people.

But dare suggest raising taxes and it's a criminal offense. It all goes on the credit card. If this is really so important, isn't it worth, you know, actually paying for it?

The next time you hear anyone talk about "values" or the cosmetic habits of farm animals, just remember - three quarters of a trillion dollars going to make sure that Mr. Potter's contemporary equivalent doesn't have to sell his fifth house.

Thursday, September 18, 2008

Ad Avoidance

Take a look at this one, from Get Rich Slowly. It's about advertising - its pervasiveness, and the avoidance thereof - which is one of the things I'm always going on about.

I saw a study somewhere that says that even people who think they are avoiding or not paying attention to or not affected by advertising, in fact are all of those things. Susan Linn said that children can name brand logos before they can read.

I've often looked through the Sunday New York Times, which I love, and seen all the ads for all the high end designers, high end real estate, etc. and thought - how much can this "liberal" paper call attention to class or income distribution issues if so much of its income depends on high end advertising?

And avoiding television helps, but marketers are smarter than that - that's why there's advertising in magazines, on billboards, and on every website you (and your kids) see - except this one!

And remember rule 1 - don't buy anything you see advertised on television!

House of Horrors

The situation with the house in Illinois finally seems to be coming to an end. When last we checked in, the bank had done an appraisal that drastically overvalued the house, by about $30,000, and based on that had turned down the latest short sale offer. Soon after that, the lawyer who was working on it told us that she was going to ask them to have another appraisal done, because the first one was so ridiculous, but that we had to pay for it. My brother-in-law, our main financial Smart Guy, advised us to do it, saying that selling short, even after being in default for a year, was a lot better than foreclosure. "It's a small investment with a potentially big upside" is how he put it.

So we put $475 on the credit card for that, but he was right, because lo-and-behold, the appraisal came back at a whopping $50,000 less than the other one (and $25K less than we paid for the house, which sounds about right, given the market). That was about a month ago. Then the bank had to have it explained to them why there was such a great disparity between the two appraisals, and that took awhile (the appraisal company explained it based on a misinterpretation of the square-footage of the house by the first appraiser). Now we're just waiting, supposedly, for the last guy at the bank to put his initials on the agreement. And it's really the last minute, because the foreclosure sale is scheduled for next week!

The one thing I don't think I've said before is that we had a second mortgage on the house, from the synagogue, which lent us money in the hopes that we would stay there a long time - ha ha. (They kicked me to the curb after the first contract.) If the house had sold everything would have been fine but it didn't, and in a short sale situation they have to be enticed to release their lien. So we had to offer them a settlement; we offered about 10% of what we owed, which they accepted because, we speculate, the situation is embarrassing to them. About the kindest thing I I can bring myself to say is that I'm sure it wasn't their intention to ruin us financially, even though that's what ended up happening. If the house forecloses that lien isn't covered and they could still sue me; I don't really want to give them $5K to watch the house foreclose, but that's a bridge I'll have to cross when I get to it.

Now (if everything goes "well") I have to come up with 5 grand which, if you've been paying attention, I don't have. By next week. Fortunately we have some relatives who actually don't live paycheck to paycheck - can you imagine? - and they've promised to help us out. So there's another debt to add to the pile. But - and I say this much more in weariness than in any kind of happiness - it looks like the albatross will be off our necks, one way or the other, by the end of next week. Famous last words, as I know better than anyone.

Wednesday, September 17, 2008

Budget woes

A continuing sore subject is DW's and my inability to stick to the budget. I've written before about our challenges in feeding our family of 5 for anything resembling (at least to my mind) a reasonable amount. (I set $450 as a goal but we have a hard time getting through a month spending less than $900, which to me seems crazy.) DW also has a tendency to say, well, we need this and this and that, and run to the store and get it, despite where we are in the month or the budget or whatever. (Although she won't do it if I jump up and down and say we really don't have any money.) The latest one was we got her Visa bill today, we're supposedly trying not to use them but every month on her card there's a $100 or $150 charge from Target for school supplies or clothes for the kids or whatever. We've really been making an effort to pay the cards down but of course we can't do it if I make a $200 payment and she spends $150 on school clothes! Her answer is, well, the kids needed clothes, what was I supposed to do? Well, that's fine, but the money you're using is not real money, and it's interfering with our ability to dig ourselves out of our hole.

Much as I would love to rake her over the coals on this, I really can't because a) she reads the blog and b) I have my own things I spend money on, like the farmer's market and the free range meat guy and building up the liquor cabinet. I have virtually given up spending money in bookstores, not completely but mostly, and I pay cash when I do go. But I am far from a saint on this. Jako got $120 out of me yesterday, it'll last 2 months but still.

I think what we may have to try is to stop using, not only the credit cards, but even the debit cards. I read somewhere on one of the frugal sites that if you carry around the cash with you you're more likely to stick to the budget. So maybe we'll have to try that.


Article in Newsweek this week on "what to do when you kids want to dress like TV stars." This goes into the category of "helping your kids withstand peer pressure" which is a very sensititve subject with a lot of people. Our approach on this is multifold: we still have young kids, and they haven't quite realized yet what cool is. We use what the article considers one of the most effective approaches, which is to tell the kids, "We can't afford it," which in our case has the added advantage of being true. We're also very restrictive with TV to prevent some of this wantism, and what TV they do watch is accompanied by incessant propagandizing on our parts against anything they see advertised. (Rule of thumb #1 - Don't buy things that are advertised on television! You stay away from a lot of crud this way.) Of course this would be of only limited use if "all the other kids are wearing it". Our kids' school has a school uniform requirement, which also helps, but the middle school doesn't, so I expect to be more challenged on this front in the coming years. And this is Wichita, and not Manhattan, LA or the North Shore of Chicago. So the expectations are, I think, slightly more down-to-earth. At least, I hope so.

Monday, September 15, 2008

R"H resources

From the indispensible Jew and Carrot blog, a list of healthy and sustainable Rosh Hashanah resources. The one that struck my eye was the mention of raw honey, which I've been getting from Jako for about six months now. He apparently has apples available now as well. Hmmm....

Tuesday, September 9, 2008

Simple self-reflection

The High Holy Days are a couple of weeks away. This is the time of year for self-reflection, for comparing the values we profess to the way we actually live our lives. The goal here is not self-recrimination, but to take stock of where we are and to make some effort to bring our beliefs and our behaviors into some better alignment.

Here are some questions, from a simplicity perspective, that might help guide that introspection. Some of the questions have options, this is because no one's goals are exactly the same. If none of the options fit the way you would aspire to live your life, go ahead and put yours there. This is a guide, not written in the proverbial stone. There are 10 to start (nice round number, very popular in the tradition); if I think of any others I will post them:

1 - Do I have the right balance between work and home? Do I get to eat dinner with my family at least (two / four / six) nights a week? Is all my time with kids / partner in the car, or do I have face to face, conversation, do-nothing time with them as well? Are my kids' activities overwhelming the family? Remember - kids need simplicity too!

2 - Am I eating healthfully, and mindfully? Do I eat at home most nights? Am I growing my own food or purchasing it locally, as much as possible? Am I staying away from processed foods? Do I limit my intake of fast food and junk food? Do I eat enough fruit and vegetables?

3 - Further on eating: Am I eating in accordance with what I know about how food is produced and distributed? Do I still buy factory-farmed meat, dairy products and eggs even though I know quite well how the animals are treated?

4 - Am I setting aside a Shabbat, a sabbath that is a break from work, the computer, the television? Do I set aside time each week for reflection /quiet reading / prayer?

5 - Is television/the internet my main leisure activity, or do I set aside time for exercise, for continued learning and growth, for time with friends, for volunteering?

6 - Have I put my credit cards away, or am I still using them for convenience / when I want something I can't afford to pay cash for? Have I made an effort / plan to retire my debt? Do I have sufficient emergency savings? Am I fully utilizing my employers' retirement fund match?

7 - What kind of consumer products am I still buying? Do I really need that new (whatever it is) that I've just bought / have my eye on?

8 - Do I buy things to make myself feel better, or to express love to my loved ones? Can I find any better ways to do those things?

9 - Am I reusing / recycling / composting as much as possible? Do I keep in mind, when purchasing a new product, where the old one is going to go, and where the packaging of the new one is going to go?

10 - Am I giving sufficiently to tzedakah? (3 % is the lower limit on that, I would say, 5% is better.) Am I supporting my church/synagogue, federation, food bank? Am I volunteering my time, and how much? Are my kids seeing how important giving / volunteering is from my actions?

Again, the point here is the (gently) bring our actions into alignment with our intention. I don't really use the language of "sin", but I would say that if you're really living in flagrant contradiction to your deeper values (if you work in an exploitative industry, say) then that's a place where the language of "sin" may be appropriate, and where some deeper reflection, and possibly more radical changes, may need to be made.