Travel in China- Traffic Jam Rescue

In Bangkok when I was last there, traffic was continual gridlock during the workday. The only reason to ride in a car rather than walk was to preserve your lungs or carry heavy stuff.  A good part of the business day occurred in the back of the giant Citroën.  In the linked WSJ.com story they talk about rescue from gridlock, but here is a secondary market: meeting shuttle. 

No big shot fat cat, Chinese, Russian, Euro or American will get out of a limo to ride the back of a tiny screaming motorbike. Why not have your appointments shuttled to you?  Imagine the power statement, the ability to manage supplicants!  "Take the next guy to the provinces and dump him." "Hey dude, your moto is here, get out or walk." So many other great options!  Ride around taking meetings, living large, in limo opulence or maybe SUV spec ops mode, depending on your brand positioning. 

I first saw this story on Carpe Diem, Prof Mark J Perry's economics blog.  Check it out:

Markets in Everything: Traffic Jam Rescue
CARPE DIEM | JANUARY 11, 2011
http://pulsene.ws/HMNU


BEIJING - "With more Chinese people getting behind the wheel every day, traffic jams are a major headache in most cities ...

--
Shared via Pulse, an awesome news reader for iPad, iPhone and Android. Check it out!

Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats - ...

If you like to think about the world in which we live, human health and wealth, but also like Sports Center, you MUST look at this clip of Hans Rosling, a world class statistic presenter. There is a lot to think about here, history, implications, our place in the world.  Don't forget to read the comments, some are good, some stupid.  

Go to Washington, Young Man!

In a paraphrase of Horace Greeley, my best advice for those seeking a career is to go to Washington, DC that is.  "Swimmin pools, movie stars".  Government is where its at for anyone seeking a career in the preeminent growth industry of our time.  Its not Democrat power, its not Republican power, I'm talking about green power!  Money- M-O-N-E-Y!

Professor Matthew Perry, of the U of Michigan, Flint, posted some neat, simple charts that illustrate the point on his blog, Carpe Diem.  Follow the link I munificently provide, and check it out.

Then start asking yourself, how you can get into the best business model ever:
- Elitist benefits package,
- Revenue streams dictated by fiat: need more revenue?  Print it or confiscate it!
- Marketing replaced by imposed demand: Need to increase demand?  Legislate!
- Competition squelched by bureaucracy
- R&D costs replaced by junkets and lobbyists
- Quality shmality!  Who's gonna expect anything of value from you?

Power, prestige, and a business climate operating under the rules of Bizzaro World!

Asia- The Next Generation

I traveled to Asia quite a bit in the 90's.  In 2005 I had occasion to go back, specifically to Seoul, Korea.  My impression:  What Tokyo was in the 90's, Seoul is today.  The development from a gray/brown concrete mess into a world class city.  The people who used to be Chicago-like in their work ethic have become Manhattan-like.  Young professional women dressed in the latest fashion, going out to socialize after work.  The change is profound.

In fact, the changes I saw in Korea are emblematic of the growth of Asia.  The last 20 years have been a period of perhaps unprecedented growth around the world, and I was wondering if Asia had managed to keep up.  Recently I saw some statistical proof and projection of the revolution taking place in the world.  Draw your own conclusions, there are many as to the cause of the growth.  And the effect?  That will be most interesting to see to!

In the link I attached to this post you can see Professor Hans Rosling present statistics about fundamental societal changes in Asia.  It is one of the most thought provoking presentations of data you will ever see.  Take the time to watch it and to read the comments, for once they add value.

China- tellin it like it is

Who would have thought that the Chinese would sum up my feelings about where to invest? And the state of the economy? And my view of the government role in all this? The following was taken from the Financial Times:

Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.

Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

And the Reply to my Reply to his Reply

So, a few minutes later, a swift response from to my reply. From the IMA robot:

The e-mail address you have contacted does not accept direct email. If you have sent this message in error please disregard this reply.

If you are attempting to communicate with a Member of Congress, please visit the U.S. House of Representatives "Write Your Rep" website at http://www.house.gov/writerep.

The opportunity to respond is severly hampered when you can only send notes that are about the size of SMS messages, but the Congressional staff can reply with a position statement. Does anyone think anyone in Washington is listening to us? Is it any wonder that Lobbying is the only way to impact these people?

Of course, I will jump through the hoop, and go to the website, and fill in my information and send a snippet to the esteemed honorable representative.

And a swift reply from Rep Dicks

I was pleased to get a reply from our Representative, Norm Dicks. It follows my response to his response below:

Dear Rep Dicks,
Thank you for your response. It is clear and detailed, and I appreciate the thought that has gone into your position. I find I do agree with you about President Bush's administration's mishandling of the economy, for all of its 8 years, though we may not agree on the how of that mismanagement!

I would be a happier person if the government had acted days sooner to avert the Lehman collapse, that having cost me significantly in my retirement.

It is clear the government will be taking a more assertive role in the future. I don't like it, but it is a developing fact. The concern I have is about the haste and the track record. Unintended consequences always accompany legislation. Please do your best to minimize them, that is all I ask.


On a specific note, the Mark to Market accounting rules must be changed! This is one of the key factors in how this mess has leveraged to such a degree. As a lesson to legislators, it is a prime example of unintended consequences.

As to Mr Summers' recommendations, and HR 384, I find the banning of dividends to be personally punitive. Dividends are one of my key sources of income. The profits that are dividends should accrue to shareholders of these institutions, of which I am one. As is now the government. As to the restrictions on executive pay, that is a nice action that makes everyone feel good, but can you quantify the overall impact on the economy? How much payroll will be saved, and what percent is that of the mess? This is not intended to be argumentative, but the time spent railing about it could be spent educating the public and dealing with more substantive issues. Having said that, any institution that takes the bailout money surely knows it is subject to Gov't intervention in less pleasant ways, so caveat emptor.

Keep a sharp eye on the funds as you have promised, and please remember that common sense in times of crisis must take precedent over party politics. Please help your colleagues see their role as a check and balance is more important than the President's agenda.

Mr Dicks, I appreciate your service, and wish you and your colleagues insight, fortitude and courage to deal with the issues we face in a way that will not leave your successors and our children burdened with debt nor with an diminished America.
Paul
512-497-8505




On Feb 5, 2009, at 1:53 PM, Congressman Norm Dicks wrote:



Dear Mr. Banbury:

Thank you for contacting me to comment about the administration of the Troubled Assets Relief Program (TARP) and the request that was made in mid-January by President Bush to release the second portion of funds allowed by the Emergency Economic Stabilization Act (EESA).

In October, Congress approved the EESA, establishing a $700 billion fund to be used by the Department of the Treasury to stabilize the financial services industry, which was potentially facing total collapse after the a number of the nation's largest financial institutions, including Washington Mutual. Under the bill, the Treasury Department was given the authority to use $350 billion immediately, with another $350 billion being released upon the request of the President as long as Congress did not pass a resolution disapproving of the request.

With most of the first $350 billion, Treasury Secretary Paulson recapitalized the major national financial institutions and a number of smaller, regional banks. In return for the infusion of capital, the U.S. Government received preferred stock in each participating institution, so if the industry can survive the current economic downturn, it is likely that the nation will actually realize a profit. But reaching that point is still well into the future.

Although I believe that the funds, as spent, were largely responsible for staving off the worst, I was deeply disappointed with the administration of the TARP funds by the Bush Administration. Although several oversight provisions were included in the EESA, then-Treasury Secretary Paulson was slow to implement them, frustrating many in Congress. The bill also included provisions directing Treasury to establish a program to help homeowners to continue to make payments and avoid foreclosure; however, the Bush Administration refused to act. Finally, the agreement reached with the previous Administration should have led to restarting lending to qualified small businesses and municipalities. For the most part, however, the Administration focused almost exclusively on recapitalizing large financial institutions to the exclusion of these other points.

In recent weeks, as job losses have increased and financial institutions have continued to struggle with record losses, it had become clear that the second $350 billion allowed by the EESA would be necessary maintain the viability of the industry and to continue to try and reinvigorate the credit market. However, given the poor performance of the BushAdministration, many Members of Congress, including myself, believe that we need assurances from the Obama Administration that the language included in the law will be met.

In response to Congress, President Obama's chief economic advisor, Lawrence Summers, outlined five changes to the program that the President intends to pursue:
o Easing credit and lending for small businesses, consumers and municipalities;
o Strengthening oversight of the program and moving quickly to overhaul financial industry regulations;
o Launching "a sweeping effort to address the foreclosure crisis" by reducing mortgage payments for troubled homeowners and changing bankruptcy laws;
o Limiting executive compensation at firms that receive government funds, banning most dividend payments and limiting stock buybacks and acquisitions of financially healthy companies; and
o Replacing government funds with private investments as soon as possible.
These are similar to points that then-candidate Obama supported in October, and I believe they will be important forensuring the success of the program.

With the support of President Obama, the House considered H.R. 384, which would codify the new requirements and clarify portions of the EESA to ensure that the new Administration complies with these agreed-upon points. In addition to more stringent reporting requirements for the expenditure of future funds, it would require a public disclosure of how past assets have been expended. It would also require that at least $40 billion of the second portion of the package be used to help prevent foreclosures, which I believe is critical to stabilizing the real estate market. I strongly supported passage of this bill.

When President Bush requested the second $350 billion for the TARP on behalf of the incoming President, it triggered an EESA provision wherein the funds would be issued in 14 days unless both Houses of Congress voted to disapprove of the request. The Senate rejected a motion to disapprove on January 15th, thus assuring that the funds would be released. Subsequently, the House took a largely symbolic vote on H.J.Res. 3, with a majority of the House voting to disapprove of the release of additional money, largely to protest the mistakes of the Bush Administration. Although I share many of those sentiments, I believe that President Obama, from within the structure established by H.R. 384 and the outline he has provided, will administer the new funds in a wiser and more appropriate manner. Most importantly, I do not believe that the crisis for which these funds were originally approved has passed.

President Obama has just announced that new rules have been put in place to tighten restrictions on executive compensation for future recipients of federal aid under the government's financial rescue program. Also, Companies that need special assistance from the government to survive would face mandatory restrictions on compensation for their senior executives: no more than $500,000 in salary and no additional compensation other than shares of the company's stock that can only be redeemed after the government investment is repaid. I support the President's decision.

As funding is released and the program continues, please be assured I will work with my colleagues in the House to assure vigorous oversight of the program. In addition, I intend to work with the new Administration to ensure that the regulatory agencies responsible for overseeing the financial services industry are more aggressive and have adequate resources to prevent this from happening again.

Recession or Depression?

Now that we have officially been in recession for a year, we can all let a sigh of relief and congratulate ourselves on our survival. How hardy we are! The financial media is now falling all over itself to present an escalating view of how close we are to armageddon.

PANSIES!

One of the last great stories my dear old Dad told was about his first realization of what the Depression was like. It was the thirties, he was in his early teens. I will do my best to convey what he told me.

When it was clear that the depression was impacting everyone, my Dad's father was fortunate to be in a good position at Ford, as a foreman in a stamping plant. A little side story here. These were the days when Henry Ford was beginning to lose it, he was autocratic and paranoid. He had turned over much of the day to day operations to Harry Bennet, a thug in the truest sense. The riots and beatings in which Bennet's henchmen beat and killed workers were his "management style".

My grandfather ensured his job in the best way he could, by running his stamping machines faster than anyone else. He was not a very pleasant man. But he had the ingenuity common to most folks from the farm, he could really get it done, whatever it was. In these days Ford was learning how to run the world's biggest manufacturing plant, The Rouge, as it was built. Guys like Grandfather made their contributions. One was that when he got his line's production running at a hell for leather pace, the scrap out of the machines became ankle deep, and had to be cleaned up. The sweepers interfered with running the machine, and production suffered. So he had pits dug under the machines and the tailings were kicked into the pit, where they could be cleaned out with less interference to the work.

The day foreman had the pits filled in, because they weren't supposed to be there. In a very credible threat to the day foreman's life, Grandfather prevailed, and the pits restored. That is how guys like him kept their jobs.

One day, as Dad told us, his father came home on Friday and announce that he had bought a small farm. The family was packed up in the Model A, and drove out to the farm, about 90 miles north of the plant, 60 miles north of where they currently lived. Here is how dad put it: "He let us out of the car, and told us, "Here it is, this is how we will make it. You will learn to farm it, and you may starve, but by god, this family will not take one cent of public assistance." and that was that."

Now I'm sure it didn't happen like that, Grandfather may have spent the weekend with them to get things going, and Grandma was a very capable farm gal, but the fact is that the family was moved that quick, and the alternative to learning to farm was not going to be going on the dole. People thought like that then.

That year, Grandma, Dad and his 4 brothers and sisters cultivated, planted and harvested 40 acres of the farm with hand tools. There was no tractor, no horse team. They planted beans and potatoes. That is what they lived on, trading for other staples, hunting, fishing, and picking berries for the rest. They made the farm work, built it up into a good operation of about 120 acres which for various reasons my Dad ran at the age of 16. Grandfather continued to work at the Rouge, making the 90 mile drive to and from the farm every weekend in the Model A, quite a commute!

Oh, and Grandfather seems to really have been that much of a hard-assed bastard. But I don't really know, I only know what Dad told us of him, and his word was gospel.

All this is typical of what was done by people during the Depression. Do you think we are in one now? Here are four other views of what life was like in the Depression.

Where I Come From...

... is a popular country western song.  It is a toe tappin fun ditty.   But where I come from is something less colorful.  Maybe a good writer could put a better face on it, I don't see how.  I come from Detroit, the Motor City.  A place that seems bent on self destruction and is too, what, I guess "obtuse" is a polite way to say it, too obtuse to realize it is too pathetic to be a laughing stock.  

I left during one of the many downturns in the Auto industry.  Mine was 1981.  The price of oil drove gas prices up and the Big Three were completely unprepared to deal with the instant change in consumer sentiment.  Foreign economy cars gave small companies that were a joke months before the entry they needed to do what the automakers could never in their hubristic minds conceive, an opening to surpass the Big Three.  

At the time, unemployment was running at 25%, and in every family I knew, the main breadwinner was out or work.  I was running restaurants, and though it was still a scornful excuse for a profession, it kept bread on the table, and enabled me to leave.  The thing I learned living elsewhere, and remember to this day, is how nice it was to work in cities where people came to work ready to work, where they were not marking time till the plant called them back, where they could be inspired to work with a good attitude.  I never wanted to return to Detroit. 

So what should we do with businesses that are repeatedly out managed, out produced, out marketed, out positioned, out planned, out executed?  Should we let them have another chance?  

Did you know the number of auto worker in the USA who don't work for the big three number about half of those who do?  And did you know these workers make about the same wage as those who do?  Toyota, Honda, Kia, BMW, etc. are doing fine here, and there are parts of the country that appreciate these employers.  Read about this in William Perry's blog, Carpe Diem.  

An Opposing View On The Bailout

I ran across this column, by Arthur Laffer, the guy who made the Laffer curve known, and a leading proponent of tax cuts to encourage economic growth. Some people think he is right, some think he is wrong. I always like starving the government of money to keep it disciplined, but then they go and spend in deficit with no compunction.

Personally, I have no confidence in government doing what is best for the economy, but great confidence in the economy to survive anyway. The bailout will look less and less like a good idea in the several years, but if it didn't occur, what would really be happening now is an interesting speculation.

Finally, my take on this financial crisis

To my thinking, it all began back in 1977, with the Community Reinvestment Act that began requiring banks to make bad loans. It continued with government bugling disguised as regulation, and as non-regulation.

This opinion piece from Forbes is a very brief explanation of how this "good intentioned" act created the by now predictable unintended consequences that legislation of markets is prone to. Also in this article, is information about how securitizing bad loans has absolved the lender from responsibility for the loan, by allowing loans to be bundled in to Securities that are sold, the beginning of the Derivatives problem, and the beginning of Freddie Mac and Fannie Mae's downfall- when the government put strong pressure on them to buy the securities backed by these questionable mortgages.

Then of course, to make sure there was more official support for these loans, the Government stepped in to emphasize its direction via Freddie and Fannie. We now know the unintended consequences of that action. From the NY Times of Sept 30, 1999 is an explanation of how Fannie Mae and Freddie Mac were compelled, in an act of "good intentions" to underwrite loans that had no business being made.

This issue was compounded by subsequent regulatory acts that next absolved those banks of the risk of loans by allowing them to be bundled into securities to be sold to investors "upstream". Those bundles became Derivatives, the financial instrument that made big banks around the world investors in our mortgages, providing more and more money and incentive to lend, which Warren Buffet and George Soros, the SEC and a Congressional Committee that reviewed them all condemned. Warren Buffet was warning about them in 2002, as you can read here, excerpted from his annual report. The column is long, but is the words of Mr. Buffet himself, and not too technical. Seems commons sense now, but his and other voices of concern were overruled by Robert Reich and Alan Greenspan, allowing the Derivative Market to go unregulated, thus leveraging bad loans on homes into bad investments of multiple times greater value in banks around the world. What other voices were warning against derivatives? George Soros, the man who hate Republicans, the SEC in the form a mere female regulator, and the report that congress commissioned to look into derivatives. But in 2002, Greenspan was considered to be a water-walker. I doubt history will continue to revere him as much as Bill Clinton and George Bush did.

From a blog by Professor Perry, and economist and the University of Michigan, a series of writing on the mortgage mess. This is more authoritative, wide ranging and expert thinking than mine, and is why I link to the Professor's blog on Exechobos.

My Editorial Opinion: My experience is that money will always find a way to grow, profits will always be made, whether the system is highly regulated like in China, or less regulated like in the US. Government regulations are like obstacles in the road, put there with the intent to manage traffic, but money flows around them, finding a way to go where it can best make more money.

In the case of the requirement to loan money to people who couldn't afford a home, whether in Detroit during the 80's or LA in 2006, banks figured out how to meet the requirements of these acts, and offset the added risk with balloon loans, etc., then sell these loans to other banks in the form of derivatives.

It leaves me thinking that the price of homes was driven up by the increased number of people who were able and wanting to buy homes, due to the ability to finance homes, even as prices went higher. The demand was unleashed by the ability to finance home ownership, and the prices went up as result. The spiral had to end, as they always do. Prices will come down, as they always do. Money has been made and will be lost.

Unfortunately, I think the derivative investments that were based on mortgages were eagerly shared by financial institutions all over the world, because the returns were good, and there was a perception that the US Government would always support Frannie and Freddie. Until they didn't, and panic set in. Then banks dried up credit, and companies as powerful as GE couldn't use the credit they depend on for everyday operations, so we have the start of a panic and meltdown, that governments around the world could not permit. The damage could not be confined to the housing market or mortgage lending business, it has been spread and leveraged too far. So, while I hate government bailing out banks, I can see it is a necessary evil.

Americans think everything sucks, but I am OK

There is a column in the Telegraph about the gap between reality and the media/polititcian built perception of the US economy.

In the Telegraph, Irwin Stelzer writes: "Fortunately for America, the state of the nation is not quite as described by the Democrats. Some 85% of Americans do have health insurance. Of the 45.7m people who are uninsured, many receive healthcare at no cost to themselves from the non-profit hospitals that account for about 90% of all such institutions in America. And, according to The Wall Street Journal, 25% of the uninsured are eligible for government-funded Medicaid, but have not signed up, and 54% are between the ages of 18 and 34, a group heavily weighted with people who probably see little need for coverage. Can things get better with sensible policies? Sure. But experience in other countries suggests that huge government intervention in the healthcare system might not be the answer."

The idea that the US economy is fundamentally healthy is an unpopular one, as is the idea that Gustav is just another tropical storm. Hyperbole sells adspace and news papers, because we just like to tune in or read about the big train wreck. Of course, we don't have to buy into the idea that we were actually ON the train, do we?

The Big Chains meet Real Competitors

This is a subject near and dear to me. I was one of the big chain guys, competing with "mom & pops" and other big chains. We always tried to get each restaurant to compete on a local trade area basis, acting as if they were the only restaurant of their kind, with no big brand or marketing to rely on. I maintain that any good local business should be impervious to the big brand invading their neighborhood, if they are doing their job right. For that matter, any bit brand local business should be able to defend themselves from another competitor opening in their neighborhood using the same tactics. First, watch the video at Reason TV that made me think of this post:

The secret of success? Operate your business better than the manager the big chain hired to run theirs. Cleaner, more appealing, better service, more relevant to the locality, better quality, more fresh, more involved in local marketing opportunities. Those businesses that fail in the face of competition probably are unable to withstand the short term sales decline that comes when a new competitor draws clients away for a trial run, and may not have a fundamental strength that brings clients back. For those businesses that expect local trade to be a captive audience, who don't have a defining benefit that customers want or need, they are just potential failures waiting for a competitor to put them deservedly out of business.

US Economic Health

The dollar is increasing in value, so we are happy for what the means to our current travel plans. And for what it means to the US. Here is some analysis as to why. It is a competitive world, and it was apparent recently that just as in the 80's, other nations were rooting for our decline. What now seems apparent is that what goes around comes around.

While a weakened dollar was driving US exports higher, it was also propping up high oil costs, and hurting our economy. Now we are seeing the dollar rise against other currencies. Reports of the demise of the US economy, so relished by other countries and some people withing this country, seems to be premature, as Mark Twain said.

If you read the blogs on my side bar, you can see in Carpe Diem that the economy grew by over 3% last quarter. Once more, a recession is non existent, despite what the media and politicians want you to believe. More evidence of how resilient and fundamentally strong the US economy is.

Charlie Wilson's War

Many of us have seen the Tom Hanks movie about Charlie Wilson, and how he managed, as a no-accomplishment, no-impact representative from Texas to fund the war between the Soviet Union and the Muhajadeen, thus precipitating along with Reagan's policies the fall of the Soviet Union. Well Mr. Wilson is still around, and has written a column worth reading. In it he refers to the Peace Corps, and there is a link in the column to more articles about the Peace Corps. This is good reading if you are up for some thinking. It made me think that foreign aid may not be wasted spending after all, if used wisely.

An Interesting Look at Our Economy

I found another blog with some interesting posts. This one is a comparison of US to Euro economies and illustrates very well how well off we in the USA are. The writer does a lot of good research to get his data, and since he is a college professor, he must be smart, right? So, unless you are one of those whose guilt about being an American interferes with common sense, you can be proud of living in a society that has created more wealth and lifted more people out of poverty in a shorter period of time than any society in history. Relish it, be grateful, and do something with the privilege.

Oil is Less Profitable Than Railroads

Margin. That is what is relevant. What percent of the dollars that come into an enterprise are converted to profit? Here is a great table that you can sort, showing various industries. The margin % column shows the oil industry ranks right below railroads. Scroll down to find them... Keep scrolling...down further...almost there... yes, right there, number 60!

Now, how reasonable is it to impose a windfall profits tax on oil? Why are they a "worse" industry than say, computers? And how much in tax is enough for the government? Oh, we already know there is no limit to the amount of money they can spend, so taxes must follow. Who is next?

As Oil Demand Declines, So Does Price

Supply and Demand is inexorable, no matter what governments and non-free markets try to do. Inevitably a lowered demand will drive down price. As will an increase in supply. We are seeing both occur.

The price of oil seems to have begun a retreat, as demand has fallen sharply. I have written about the reduction of gasoline use several times, including in this post. Now we see the price of oil back to the low $120/bbl range, and a set of oil price reduction events in place that will gain in momentum. They are:
1) reduction in miles driven
2) increase in mileage of the entire US auto fleet
3) relaxation of constraints on drilling in the US

These three things will act to further reduce oil prices. If this continues, the pendulum will swing so far that oil companies will be dis-incented to develop more costly oil sources, and the cost of gas will go below the number that compels conservation, and we will be right back where we were, on the edge of a problem. Irwin Kelner, Chief Economist at Market Watch agrees in his recent column.

How to ride out a "recession"

A column by Steve Chapman got me to thinking about how the economy impacts me. Read it.

No American feels the impact of an international economic crisis. But the reality that does touch people is having to sell a home at a loss to avoid having it foreclosed. That seems to be the person "on the tip of the spear" of our woes. Fortunately, that person represents 0.58% of mortgage holders. Yes, thats right, a small number. But it is a bigger number than the usual 0.28%, so that's where the giant numbers you see come from. Fun with numbers. If I had a business that generated $0.28 per year in sales, then I was able to get to $0.58 in sales the next year, I could report that sales were up 107%! It is so easy to succeed.

In the US, there are over 119 million homes. Of those, 40% are owned free and clear, not mortgaged, according to the Census. So doing the math, 4 million homes are somewhere in the process of foreclosure, including being more than 30 days late with a payment. We have all been in foreclosure, technically.

The situation of foreclosure, like most bad things, is a result of accumulated problems, that when taken alone, are not disastrous.

1) No personal safety net of savings, or one too small is the poor foundation that leads to economic collapse.

2) Job loss is part of the issue in 38% of foreclosure. The jobless rate going above 5% is indicative of a real problem, for anything below that is considered full employment, so the trend is disturbing as are the actual numbers.

3) A health crisis is part of the problem in 25% of the cases. That people living on the edge of financial ruin own a house but not health insurance is puzzling, seeming to add more weight onto a weak financial foundation.

ADVICE NUGGET TO THE KIDS: When you lose a job, get another, regardless of how fulfilling it is; and maintain health insurance first, it is a basic, and it is affordable; and maintain 6 months of living expenses in a savings account. This is how you avoid financial ruin.

Editorial comments follow.

The fever to get more Americans into their own home has been a political goal that has spawned profits and risky decision making by banks and individuals since the mid eighties. Billions in profits have been made on the decisions to lend money to people who can't afford to pay it back. But with a booming economy, everyone "won". The trillions more that was "going" to be made on the interest for these loans in the thirty years of their life was too tempting for bankers and financial geniuses who then packaged these potential income streams into leveraged instruments they could sell. And more of the financial geniuses snapped them up.

Now, the piper is to be paid. Ooops! A rise in foreclosures means no money comes in to service the loans, and confidence, the key ingredient in the scheme, fails, as do those foundations of the leveraged notes. And when a leveraged note fails, the repercussions are, well, LEVERAGED! Owwieee!

But what I want to know is, why is the government using my money and your money to "fix" all this for those who profited and are now suffering? Why did I act responsibly and miss this gravy train? I want my share of your money too, after all, isn't that my right? See how easy it

is to go down the road from compassion and concern, past no accountability, and arrive at socialism? Oh, and if you wonder why that is bad, bone up on the countless and continuing failures of socialist systems.

But really, is the human face of our poor economy as bad as we are led to believe? If the statistics aren't talkin to ya, look at this map:

The red is bad. These are the areas that are feeling the problem, and causing the problem. Keep this in mind, the creative financing that allowed people to buy homes they couldn't afford became popular because the cost of the homes was too much for them to afford. There is a pattern there. Get rid of Phoenix (why the HELL do homes there get so expensive), LA and Vegas, well throw in Detroit too, just because it is a good idea, and guess what, nationally the foreclosure rate is lower than it historically is. Makes you think, eh?

BIG ADVICE NUGGET FOR THE KIDS: If you can't afford something, do not buy it.

OK, so reality time:

1) House prices went up,

2) lenders figured out how to exploit the laws congress passed in the eighties to allow those who were not able to qualify for loans to do so (now this is a great case of unintended consequences to legislating social programs at the expense of economic reality!),

3) people were able to buy homes they couldn't afford when they signed loan contracts with ridiculously escalating interest rates, HOPING that the future would not occur,

4) real estate prices continues an upward spiral in response to a new, falsely created mass market of buyers,

5) more people signed loan contracts to get on the real estate market ride in spite of being stretched beyond their economic means to make the silly low payments of the first two years of the ARMs,

6) and a loss or reduction of one income, or an onset of a medical problem occurs, gas prices and food (thank you Iowa Corn Growers for the bio fuel madness lobby) prices go up,

7) the shit hits the fan (SHTF)!

But what of the rest of us? We are suffering too, or so the news tells me. Well, we can always tighten our budgetary belts, rethink our spending needs and wants, and keep on drivin' (well figuratively). It has worked every time, and will work now. And the price of homes nationally is down about 6%, a start, so save your money, and buy a house with 20% down.

UPDATE: new data compiled and reported this week shows that the only states with housing prices down more than 4% are CA, FL, NV and AZ. All the places that have experienced the incredible escalation of prices and have been experiencing the worst of the foreclosures. It is so logical, it is silly. The issue- the most quoted report on housing, Standard and Poor's Case/Schiller report, fails to cover the entire market of homes equally. Here is an article on how that is done.

Exxon posts record...taxes?

Reported in his blog Carpe Diem, Professor Mark Perry shows the relationship of Exxon's latest quarterly profit to the taxes they generate. Profits- $11.68 Billion. Taxes- $32.36 Billion.

This includes the taxes they collect at the pump, which congress is trying to increase. And keep in mind, there is a growing concern by states governments that we are conserving too much fuel, and they are losing out on the tax bonanza we pay at the pump. It is sad for them. Boo Hoo.