Rob Paris Blog

Rob writes about news, economics, politics and other things

Archive for September, 2009

Jim Rogers on banking

Sep 30

Posted by robparis in General | No Comments

This video is over two weeks old, but it’s new to me. This all makes too much sense for the government to listen. Instead, they’ll do the opposite. Here are two great quote from the video.

“How can the solution for debt and consumption be more debt and more consumption? How can that be the solution to our problems?”

“Banks have been going bankrupt for a few hundreds years. The way the system works is when somebody fails you let him fail. What we’re doing now is we’re taking the assets away from the competent people and giving them to incompetent people and telling them now you can compete with competent people with their money.”

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Select quotes from the Great Depression

Sep 23

Posted by robparis in General | 7 Comments

… and why I don’t believe a word Bernanke says.
According to Bernanke,
“…from a technical perspective the recession is very likely over at this point”
and
“… there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery”

I’ve seen these quotes time and time again… from during the Great Depression. They were just as wrong then.

I planned on making this in flash and laying the quotes over the corresponding time on the chart, but due to limited flash abilities, I didn’t. Does anybody want to make it for me?

Before looking at the quotes below, take a look at the stock market performance during the time frame in which the quotes were made.

1928-1932

With a chart like this, you’d expect the economists too be pessimistic. That’s not the case.

These quotes are all over the Internet. I’ve found the original source for some, and for others, I’ve just posted the source where I found them. Collections of these types of quotes already exist, but I’ve chosen the ones that stood out the most to me. I’ve included the date and occupation of the person where I could.

Economist John Maynard Keynes in 1927

“We will not have any more crashes in our time.”

President Herbert Hoover on August 11, 1928

“Unemployment in the sense of distress is widely disappearing…We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not reached the goal, but given a chance to go forward with the policies of the last eight years, and we shall soon with the help of God be in sight of the day when poverty will be banished from this nation. There is no guarantee against poverty equal to a job for every man. That is the primary purpose of the economic policies we advocate.”

President Calvin Coolidge on December 4, 1928

“No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”

Financier, Bernard Baruch, June 1929

“The economic condition of the world seems on the verge of a great forward movement.”

Economist Irving Fisher on September 5, 1929

“There may be a recession in stock prices, but not anything in the nature of a crash. Dividend returns on stocks are moving higher. This is not due to receding prices for stocks, and will not be hastened by any anticipated crash, the possibility of which I fail to see. A few years ago people were as much afraid of common stocks as they were of a red-hot poker. In the popular mind there was a tremendous risk in common stocks. Why? Mainly because the average investor could afford to invest in only one common stock. Today he obtains wide and well managed diversification of stock holding by purchasing shares in good investment trusts.”

Economist Irving Fisher on October 17, 1929

“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

Banker Arthur Reynolds, October 24, 1929

“This crash is not going to have much effect on business.”

Financier, J. L. Julian, October 26, 1929

“The worst is over. The selling yesterday was panicky brought on by hysteria. General conditions are good. Our inquiries assure us that throughout the country business is sound.”

Analyst R. W. McNeel, October 30, 1929

“This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”

Businessman J.D. Rockefeller, Sr., October 30, 1929

“Believing that the fundamental conditions of the country are sound and that there is nothing in the business situation to warrant the destruction of values that has taken place on the exchanges during the past week, my son and I have for some days been purchasing sound common stocks. We are continuing and will continue our purchases in substantial amounts at levels which we believe represent sound investment values.”

Newspaper, The Times of London, November 2, 1929

“Hysteria has now disappeared from Wall Street.”.

Magazine, Business Week, November 2, 1929

“Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”

School, Harvard Economic Society (HES), November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”

Economist, Irving Fisher, November 14, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”

President, Herbert Hoover, December 1929

“I am convinced that through these measures we have reestablished confidence.”

Government agency, U.S. Dept. of Labor, December 1929

“[1930 will be] a splendid employment year.”

Treasury Secretary, Andrew W. Mellon, December 31, 1929

“I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”

Treasury Secretary, Andrew W. Mellon, February, 1930

“There is nothing in the situation to be disturbed about.”

President, Herbert Hoover, May 1, 1930

“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”

President, Herbert Hoover, June, 1930

“Gentleman, you have come sixty days too late. The depression is over.”

Economist Irving Fisher in September, 1932

“As this book goes to press recovery seems to be in sight. In the course of about two months, stocks have nearly doubled in price and commodities have risen 5½. European stock prices were the first to rise, and European buyers were among the first to make themselves felt in the American market.”

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You distract!

Sep 16

Posted by robparis in General | 1 Comment

What happened?

This post is going to talk about South Carolina Rep. Joe Wilson’s outburst during the joint session of Congress on September 9th. I’m not taking sides and I’m not going to debate who was right. I’m just looking at what happened and what the reaction was.

During Obama’s speech before Congress on September 9th, Obama made a comment that Wilson did not agree with.

Obama: There are also those who claim that our reform effort will insure illegal immigrants. This, too, is false – the reforms I’m proposing would not apply to those who are here illegally.

Wilson: You lie!

Immediate reaction
The immediate response to Wilson’s outburst was a brief pause by Obama, then a smile, and then back to the speech. On the side, Michelle Obama shook her head in disapproval. I’m not sure if Michelle was disapproving Obama’s comment, or Wilson’s comment, but it’s safe to assume that it’s the latter.

It’s happened before
This speech was not intended to be an open conversation and Wilson’s response was clearly unexpected. However, this isn’t the first time a presidential speech has been interrupted. In 2005, during Bush’s State of the Union address, Democrats boo’ed Bush while yelling “No!”.

Four years later, when Wilson acts in the same manner, there’s a big raucous.

The apology
Immediately after the speech, Wilson apologized to President Obama. According to Obama, Wilson’s apology was made “quickly and without equivocation”. Obama added that “we all make mistakes” and that he accepted Wilson’s apology.

Nancy Pelosi has a similar reaction. Pelosi agreed that Obama was right to continue his speech and not to “give it any more attention than it deserved.” Pelosi also said that, “It’s time for us to talk about health care and not Mr. Wilson”. I agree with Pelosi on her first statement. Wilson’s comment shouldn’t be getting any more attention. I’m sure that’s what going to happen.

The resolution
Pelosi later changed her mind after Wilson wouldn’t make an additional apology to House leaders. Almost one week later, on September 15th, the House of Representatives formally admonished Wilson. With a vote of 240-179, mostly along party lines, the following resolution passed:

Whereas on September 9, 2009, during the joint session of Congress convened pursuant to House Concurrent Resolution 179, the President of the United States, speaking at the invitation of the House and Senate, had his remarks interrupted by the Representative from South Carolina, Mr. Wilson; and

Whereas the conduct of the Representative from South Carolina was a breach of decorum and degraded the proceedings of the joint session, to the discredit of the House: Now, therefore, be it

Resolved, That the House of Representatives disapproves of the behavior of the Representative from South Carolina, Mr. Wilson, during the joint session of Congress held on September 9, 2009.

Commentary
Now Wilson must be aware that he was a bad boy. Rather than formally disapproving of Wilson, why not send him to the corner for 15 minutes to think about what he did. Wilson was obviously aware that the Democrats disapproved of what he said, and that the Republicans didn’t. That’s why the vote went along party lines. I don’t see the point of formally disapproving. If the resolution was to make a point, then they should have made a point. Instead, Democrats chose to stick his nose in it and make him sleep in the backyard.

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And keep your hands off my Medicare

Sep 11

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Excerpts from Obama’s speech at a high school in Portsmouth, New Hampshire on August 11, 2009

First Obama said,

“Our deficit will continue to grow because Medicare and Medicaid are on an unsustainable path. Medicare is slated to go into the red in about eight to 10 years. I don’t know if people are aware of that. If I was a senior citizen, the thing I’d be worried about right now is Medicare starts running out of money because we haven’t done anything to make sure that we’re getting a good bang for our buck when it comes to health care. And insurance companies will continue to profit by discriminating against people for the simple crime of being sick. Now, that’s not a future I want for my children. It’s not a future that I want for the United States of America.”

Obama starts out strong. He admits that both Medicare and Medicaid are on an unsustainable path. He mentions that in 8-10 years, Medicare will be in the red. It’s probably less than 8-10 years, but it’s close enough.

Obama then goes on to make an outrageous claim. He says that insurance companies are profiting by “discriminating” against the sick. That’s not discrimination, that’s called a market. It’s providing a service. Is my plumber “discriminating” against me because I have a broken toilet? Is Grimaldi’s “discriminating” against me because I’m hungry? The insurance companies are providing a service, not “discriminating”.

The key point of Obama’s first statement is that, “Medicare and Medicaid are on an unsustainable path”. Later during the Q&A session of the same speech, Obama gets the following question:

“My name is Peter Schmidt. I’m a state representative from Dover. I’m a senior citizen. I have a wonderful government-run health care plan called Medicare. I like it. It’s affordable, it’s reasonable, nobody tells me what I need to do. I just go to my doctor at the hospital, I get care.

Now, one of the things you’ve been doing in your campaign to change the situation is you’ve been striving for bipartisanship. I think it’s a wonderful idea, but my question is, if the Republicans actively refuse to participate in a reasonable way with reasonable proposals, isn’t it time to just say we’re going to pass what the American people need and what they want, without the Republicans?”

Now here is where Obama has to tell Mr. Schmidt the truth. He’s going to reiterate the point he made 20 minutes earlier about the unsustainable path of Medicare. He’ll talk about how the program is going to run out of money. Wait for it…

“Well, let me make a couple of points. First of all, you make a point about Medicare that’s very important. I’ve been getting a lot of letters, pro and con, for health care reform, and one of the letters I received recently, a woman was very exercised about what she had heard about my plan. She says, “I don’t want government-run health care. I don’t want you meddling in the private marketplace. And keep your hands off my Medicare.” (Laughter.) True story.

And so I do think it’s important for particularly seniors who currently receive Medicare to understand that if we’re able to get something right like Medicare, then there should be a little more confidence that maybe the government can have a role — not the dominant role, but a role — in making sure the people are treated fairly when it comes to insurance. (Applause.)”

What happened to the unsustainable, running out of money part? That was so 20 minutes ago. Now government is able to “get something right like Medicare”. I see what you did there. Make a joke, tell a lie. Hopefully, when you’re done talking, people will still be thinking about the joke and not notice the glaring contradiction you just made. It should be noted that the quote ends with “(Applause.)”. It looks like the plan worked.

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Abraham Lincoln’s First Inaugural Address

Sep 10

Posted by robparis in General | No Comments

Select quotes and commentary from Abraham Lincoln’s First Inaugural Address

Monday, March 4, 1861

QUOTE
Apprehension seems to exist among the people of the Southern States that by the accession of a Republican Administration their property and their peace and personal security are to be endangered. There has never been any reasonable cause for such apprehension. Indeed, the most ample evidence to the contrary has all the while existed and been open to their inspection. It is found in nearly all the published speeches of him who now addresses you. I do but quote from one of those speeches when I declare that— “I have no purpose, directly or indirectly, to interfere with the institution of slavery in the States where it exists. I believe I have no lawful right to do so, and I have no inclination to do so“.

COMMENTARY
Lincoln directly states that he has neither the lawful right nor inclination to interfere with the institution of slavery (in states where it already exists). Lincoln’s opinions about slavery were well documented as he frequently made it a key point in his speeches. In an attempt to appease the South, Lincoln made it clear that he would not free the slaves in slave-owning states. However, on September 22, 1862, 18 months after entering office, Lincoln issued the Emancipation Proclamation, declaring that slaves in any state of the Confederacy, that did not rejoin the Union by January 1, 1863 would become free. The Emancipation Proclamation made no claim on states that were currently in the Union. Instead of freeing slaves in states where Lincoln had power, he declared that they become free only in states that he did not have any power.

Although Lincoln’s address states that he had, “no objection to its [the Corwin Amendment] being made express and irrevocable”, it was during his presidency that an amendment with an opposing viewpoint was passed. The proposed Corwin Amendment stated that, “No amendment shall be made to the Constitution which will authorize or give to Congress the power to abolish or interfere, within any State, with the domestic institutions thereof, including that of persons held to labor or service by the laws of said State.” However, on December 6, 1865, the Thirteenth Amendment to the United States Constitution which called for the abolishment of slavery and involuntary servitude was adopted. “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.”

QUOTE
Those who nominated and elected me did so with full knowledge that I had made this and many similar declarations and had never recanted them; and more than this, they placed in the platform for my acceptance, and as a law to themselves and to me, the clear and emphatic resolution which I now read: “Resolved, That the maintenance inviolate of the rights of the States, and especially the right of each State to order and control its own domestic institutions according to its own judgment exclusively, is essential to that balance of power on which the perfection and endurance of our political fabric depend; and we denounce the lawless invasion by armed force of the soil of any State or Territory, no matter what pretext, as among the gravest of crimes“.

COMMENTARY
Lincoln denounces the lawless invasion by armed forces on any State or Territory. He goes on to show how strongly he believes this by saying, “no matter what pretext” and by calling an invasion “among the gravest of crimes”. Later in his inauguration speech, Lincoln goes on to say that,

QUOTE
In doing this there needs to be no bloodshed or violence, and there shall be none unless it be forced upon the national authority. The power confided to me will be used to hold, occupy, and possess the property and places belonging to the Government and to collect the duties and imposts; but beyond what may be necessary for these objects, there will be no invasion, no using of force against or among the people anywhere.

COMMENTARY
Lincoln states that there is no need for bloodshed. However, soon after the states announced their succession, the South was invaded in the bloodiest war in United States’ history. A war in which 620,000 were killed, more casualties than the nation’s loss in all its other wars combined. Lincoln makes it a point that he will hold the property belonging to the Government. However, the Southern states, either as independent states, or as the Confederacy, are not the property of the federal Government.

QUOTE
Descending from these general principles, we find the proposition that in legal contemplation the Union is perpetual confirmed by the history of the Union itself. The Union is much older than the Constitution. It was formed, in fact, by the Articles of Association in 1774. It was matured and continued by the Declaration of Independence in 1776. It was further matured, and the faith of all the then thirteen States expressly plighted and engaged that it should be perpetual, by the Articles of Confederation in 1778. And finally, in 1787, one of the declared objects for ordaining and establishing the Constitution was “to form a more perfect Union.”
But if destruction of the Union by one or by a part only of the States be lawfully possible, the Union is less perfect than before the Constitution, having lost the vital element of perpetuity.

It follows from these views that no State upon its own mere motion can lawfully get out of the Union; that resolves and ordinances to that effect are legally void, and that acts of violence within any State or States against the authority of the United States are insurrectionary or revolutionary, according to circumstances.

COMMENTARY
Lincoln’s conclusion cannot be logically drawn from his premises.

  • one of the declared objects for ordaining and establishing the Constitution was “to form a more perfect Union.”
  • if destruction of the Union… be lawfully possible, the Union is less perfect than before the Constitution
  • It follows from these views that no State upon its own mere motion can lawfully get out of the Union

First, Lincoln’s second premise is not true. Lincoln’s view that the Union would be less perfect if certain states seceded his only his opinion. I’m sure Jefferson Davis and 9 million other Southerners would disagree.

Second, even if both of Lincoln’s premises were true, there is no logical progression to his conclusion. Because the Constitution was created to make a perfect Union, and succession would make the Union less perfect, does not mean that no State can leave the Union. This is failed logic.

QUOTE
If by the mere force of numbers a majority should deprive a minority of any clearly written constitutional right, it might in a moral point of view justify revolution; certainly would if such right were a vital one. But such is not our case. All the vital rights of minorities and of individuals are so plainly assured to them by affirmations and negations, guaranties and prohibitions, in the Constitution that controversies never arise concerning them.

COMMENTARY
This claim does not make sense. How can Lincoln state that the rights of minorities are so plain and that there are no controversies at a time when the controversy over a Constitutional right for a minority (the South) is so rampant?

The key points of Lincoln’s first inaugural address were nothing more than words. Lincoln failed to keep his promises to the American public. At the same time he greatly reduced the civil rights of both the North and the South. For this, he was rewarded a second term.

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Select quotes from Atlas Shrugged

Sep 8

Posted by robparis in General | 2 Comments

After a little re-reading, I’ve noticed another part of Atlas Shrugged that seems to be timely. Here are some quotes about a small-scale factory socializing, among other things, health care.

Atlas Shrugged – Part II – Chapter X

The plan was that everybody in the factory would work according to his ability, but would be paid according to his need.

…it wasn’t too clear, but nobody asked any questions. None of us knew just how the plan would work, but every one of us thought that the next fellow knew it. And if anybody had doubts, he felt guilty and kept his mouth shut—because they made it sound like anyone who’d oppose the plan was a child killer at heart and less than a human being. They told us that this plan would achieve a noble ideal.

When it’s all one pot, you can’t let any man decide what his own needs are, can you?

Well, anyway, it was decided that nobody had the right to judge his own need or ability. We voted on it.

In the old days, we used to celebrate if somebody had a baby, we used to chip in and help him out with the hospital bills, if he happened to be hard-pressed for the moment. Now, if a baby was born, we didn’t speak to the parents for weeks. Babies, to us, had become what locusts were to farmers. In the old days, we used to help a man if he had a bad illness in the family. Now—well, I’ll tell you about just one case. It was the mother of a man who had been with us for fifteen years. She was a kindly old lady, cheerful and wise, she knew us all by our first names and we all liked her—we used to like her. One day, she slipped on the cellar stairs and fell and broke her hip. We knew what that meant at her age. The staff doctor said that she’d have to be sent to a hospital in town, for expensive treatments that would take a long time. The old lady died the night before she was to leave for town. They never established the cause of death. No, I don’t know whether she was murdered. Nobody said that. Nobody would talk about it at all. All I know is that I—and that’s what I can’t forget!—I, too, had caught myself wishing that she would die. This—may God forgive us!—was the brotherhood, the security, the abundance that the plan was supposed to achieve for us!

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Croton Water Filtration Plant Project

Sep 6

Posted by robparis in General | No Comments

According to New York City Comptroller, William C. Thompson, the new Croton Water Filtration Plant Project is necessary to “ensure that our water remains clean”. Additionally, the federal government charged that the city had failed to protect its water system. Accordingly, New York City agreed to build the Croton Walter Filtration Plant. With such an important issue, the plant should have been fast-tracked and completed within 5 years. Don’t remember hearing about this? Maybe it’s because this happened over 10 years ago. Haven’t heard anything about it recently? Maybe it’s because the plant isn’t ready yet – not even close.

According to a study by the City of Winnipeg, a new Water Treatment Plant, from pre-construction approval to operation, should take 6 years and cost $204 million. “This includes design, construction and environmental approval costs, and provides for inflation.” Only 2-3 of these years are needed for actual construction.

In New York, as usual, government planners have under-budgeted and under-estimated project times. Although the plant should cost $200 million, New York City budgeted $992 million and 8 years. That’s 5 times the budget and 150% the allotted time. Maybe they were following the rule of thumb that project always take twice as long and cost twice as much as planned.

In usual government fashion, the treatment plan “will cost more than twice the original estimate of $992 million and it will not be finished on time“. With a budget expansion of over $1 billion and an additional 4 years tacked on, the new plant is expected to open on October 31, 2011 at a cost of over $2 billion. October 2011? Don’t hold your breath. And unlike the World Trade Center, this is without the MTA and Port Authority holding it up.

After acknowledging the importance of the situation, over 10 years have gone by, and there is still no treatment plant. It’s a good thing the government can milk the taxpayers and doesn’t have to beg bondholders for more money, otherwise this plan would have been grounded years ago.

If it can’t produce clean drinking water in a dozen years for 10 times the average cost, why should we trust the government to manage something as complicated as a health care system? We also shouldn’t trust their cost estimates. Not without magnifying them 10-fold.

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