Willing Suspension of Belief . . . Until January

Alas, we are on the front end of a presidential election year, and are confronted by an array of dismal choices for the office.

Obama is the nicest Socialist ever elevated to the Office, but likeable though he may be, I remember top marginal tax rates of 70%.  I have not heard anything definitive from Mrs. Obama about the nature of "fair share."  If she would be willing to cap it somewhere, say 50%, I would be calmer about the looming centrally planned economy. 

The talking heads in last night's Republican debates are tragically disconnected from any semblance of Presidential timbre.

Gack . . . this is all too gloomy.  AND, it is time for Christmas cheer because my sons will soon be home from school for the holidays.  While Coleridge suggested willing suspension of disbelief, that tonic is not restorative for me, because I believe only too much in our present political quagmire.  With a modest tweak, it can evolve to willing suspension of belief, and permit, just for a moment, an optimistic, cheerful outlook to last for the duration of my sons' time at home.  When they head back to school, I will dutifully return to hand wringing and weighing the lesser of the evils.

To apply this suspension-of-belief tonic, , one only needs to draw up a list of one's heartfelt political desires that will be disregarded in the months leading up to the November election.  After creating the list, proofread it and streamline it as if you were going to publish it.  Then, share the list with someone possessed of respectable political judgment.  The moment you hit the "send" button, you will feel the serenity wash over your person as if you had just been acquitted of a crime.  In truth, the tonic lasts for two short weeks, and that is probably beneficial.  (Perish the thought of joining the masses in the consoling opiate of not rocking the boat.)  Herewith, my list.

ESTEOPY's TEN-STEP TONIC ACTIVATION LIST

 WILLING SUSPENSION OF BELIEF

1. Term limits for executive, legislative, and judicial branches of state and federal government.

2. Campaign finance reform:

                    100% of elections will be publicly financed

                     only individual (natural person) contributions are legal with a $100 maximum

                     PACs are only allowed for single issues, not for candidates

                     No soft dollar contributions

                     Candidates cannot donate their own funds to other candidates

                     Television advertising is prohibited

                     mandatory online disclosure of campaign contributions and campaign
                               financial statements by national, state, and local elected officials

3. Establish a voter ID system based on a single fingerprint captured by poll judge and with the ballot

4.  Deconsolidate industries: banking, energy, oil & gas (remove TBTF risk)

5.  Derivative contracts must be standardized, disclosed, and exchange-traded

6.  Any securities trading firm

          may not accept federally-insured (or the equivalent) deposits, and

         must be constituted as a general partnership with GP capital at risk, and

         must register as such and must disclose, in the aggregate, derivative contracts, and

          may not borrow money from commercial banks that accept insured deposits

          may raise capital with commercial paper

7.  Privatize K-12 education to be modeled after our network of colleges: some public, some private.

           Recalcitrant students will attend work-study schools where they learn as if an apprentice
               to an artisan, craftsman, or skilled tradesman – learning by doing, with 5 to 1
               student/teacher ratio.

           Extremely recalcitrant students will be placed on a farm to learn animal husbandry, farming
              and organic gardening.

            Drop out age is increased to 18.

            As of age 13, truancy can lead to loss of civil liberties.

8.  Break up the federal government.

         All functions shall be returned to the states except for a skeleton crew allowed for Departments of State, Defense, Elections, and Currency Regulation.

          The federal government shall be financed by an assessment on the States, allocated proportionately based on tax revenue and population.

            The assessment rate can only be changed by a vote of all the people during a national election.

            The aggregate assessment must rise and fall based on underlying economic conditions and population.

            The assessment is only for annual operating expenses and does not include social engineering, income redistribution, or economic incentive monies.

             Wars may only be financed with the sale of savings bonds for which an individual state is the obligor, not the federal government.

               Transfer all US Treasury debt to the states based on proportional ratios of state GDP, population, and number of state-dependent citizens. Each state becomes the debtor to the lender (China, Japan, etc)



             This has the effect of

                     subjecting spending to a balanced budget constitutional provision at the state level.

                     eliminating earmark spending,


                     eliminating the Internal Revenue Code

                     letting each state mediate class conflict rather than the whole nation at one time, and

                     letting each state decide how and what to tax (capital gains, carbon emissions, water)
           
9.  Eliminate marriage as a civil construct. Make all matrimonies a civil union in the eyes of the government and judicial system. Relegate the idea of “marriage” to religious organizations. Require enforceable pre-nuptial agreements for all civil unions.

10.  Establish mandatory DNA paternity identification for every child born in the USA (except IVF).



Video violence: devil or angel?

The Supreme Court justices must have a copy of the Constitution without the Preamble. My copy includes “insure Tranquility, and . . . promote the general Welfare.” I cannot reconcile this with inuring children to violence. Last week, my friend told me that the most dangerous response call for police is a domestic dispute. Maybe we could ask a cop to double check whether the version used by the Justices included the Preamble.


By influence peddling, I lost faith in Congress. By WMD lies, I lost faith in the Presidency. By the CT eminent domain decision and this one on violent videos for kids, I have lost faith in the Judiciary. When you bludgeon your citizens into loss of faith in government, soon after it becomes “every man for himself.” Our last shred of cohesion becomes lack of a better alternative. Oust these Tyrants living inside the Beltway.

Wasilla contemptitis?

Leonard Pitts: Don't Know Much About History?


The antipathy for Sarah Palin is a fine lens into motives of pundits and power brokers. My feeling about Mrs. Palin is that she will be like a Ross Perot – will give voice to a certain constituency, and then move offstage. Would I vote for her? Sadly, it has been a long time since I had the luxury of voting for a candidate. Usually, I have had to decide whom to vote against. However, it is fascinating to watch and listen as her fanatical enemies yank one chain after another to get anti-Palin propaganda in the news.


Her intelligence: Apparently she attended a couple of colleges and bolted together a college degree. Alas, these schools do not impress the east coast elite. Nor are these elite pleased with her choices of news outlets.

Her malapropisms: The elite will not tolerate her factual goofs or naïveté on certain policy issues. Odd how newspapers are respected for their “Clarifications and Corrections” columns, but it is their sole privilege to elucidate, rectify, retract, or explain why an error was made.

Her faith and family values: The conspiracy theories and Vanity Fair spreads have been guilty pleasures for her enemies. All of these have been calculated to discredit her as a slick marketing package. Dis is reeelly funny. Are not the pages of Vanity Fair and the ad slots of CNN replete with slick marketing packages? What’s not to like about a slick marketing package if it is your bread and butter?



It is beyond comprehension why all these commentators give a hoot about her. Why do they go to the trouble to elevate her into national focus as if she were a contender, and not the pretender they so confidently proclaim?

As an olive branch to Palin haters, let’s amend the Constitution, (Article Two, Section One):

a. No Person except graduates of exclusive colleges shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the average IQ or GPA of journalists, and been fourteen Years a public servant approved by the media within the United States.

b. The Media may determine the acceptable faith practices for Candidates, and the practices shall be the same throughout the United States.

c. Before entering upon the Execution of such Office, the President-elect will take the following Oath:--"I do solemnly swear that I will faithfully execute the Office of President, and will defend the Constitution, except that citizens persevering in support for candidates with inadequate intelligence, education, secularism, or newsfeeds, shall be denied 14th Amendment rights.”

Cartoon: IMF Prez and "poor defenseless woman"

Re:  Cartoon published in the Charlotte Observer, 05/19/11

Vulnerable is not the same as defenseless.  Everyone is vulnerable to evil.  The cartoon’s allusion to “poor defenseless woman” was manipulative emotional rubbish.  Women are not defenseless.  They have great weapons of self-defense like education, work ethic, survival skills, intuition, optimism, and original thought.  The book Guns, Germs, and Steel made the point that military and economic success  had everything to do with wielding knowledge to benefit from natural resources in the habitat, and was not contingent on domination in hand-to-hand combat.  Beginning with the class of 2013, Algebra 2 will be mandatory for a high school diploma.  I cringe to think of a girl in this math class daydreaming about the default path of “poor defenseless woman” instead of embracing the struggle to achieve an independent, capable self-image.  Like the pink bumper-sticker says:  I hope she fights like a girl.

Brain Drain

techcrunch.com, 3/26/11: friends-don’t-let-friends-get-into-finance


Too Many Top Engineering Grads Go to Wall Street.

"You say you want a revolution......well you know, we all want to change the world." ~ J. Lennon


I am with this Techcrunch guy.



The validity of his point, however, has the danger of leading to quota control instead of market-based controls.

Government-chosen quotas would not be the best idea.



However, you could solve the problem with a market based solution:

1. All commercial banks must divest all of their investment banking operations. Restore the Glass Steagall Act.

2. All investment banks and private equity firms must be capitalized as unlimited partnerships, so that risk activities are risking the capital of the people taking the risk. Crucial! This is how it was before 1970, and it was that way for a reason.

3. A cap of 25% of the value of the stock market could be owned as indexed investments. *



Items #1 and #2 have been mentioned by several unbiased market observers, but due to the campaign contributions of banks & Wall Street, they are DOA in Washington.

Item #3 is one of those "Emperor has no clothes" stories. So many people make so much money this way. It is like kudzu. One introduced to the habitat, it takes over. And, consistent with the author's claim of ongoing exotic financial engineering, more derivative-type indices are being constructed and traded every day.



My Queens history professor, a determined yet respectable liberal, pointed out to me a real flaw of capitalism -- it is regulated by boom-and-bust cycles. I grant that her observation is true, however, insightful financial regulatory oversight can modulate the peaks and valleys. Those are:

the Federal Reserve's management of the money supply and their supervisory role over national banks;

the SEC's supervisory role with investment banks, mutual funds and securities broker-dealers

the Glass-Steagall Act that separated commercial banks and investment banks;

The FDIC and the Comptroller of the Currency who audit banks to determine they are making sound credit decisions.

You may notice that all of these regulatory activities were suffocated under the Bush Administration. If we would just enforce the regulations that we have, that would greatly diminish the boom and bust cycles. Since the Bush Administration failed in this way, I fear that the author's notion of "friends don't let friends go to Wall Street" will get hijacked by some well-intended liberal partisan, or some hack like Pelosi, and artificial restraints will get imposed. I totally agree with the author's plaint -- the brain drain needs to stop. But I sincerely hope we will do it in a way that admits that Govco is not qualified to allocate intellectual capital.










*[You can invest your money in specific stocks and bonds, in specific mutual funds, or you can just invest in an "index" fund that is guaranteed to mimic the value of the index, such as the Dow 30 or the S&P 500. The problem with this is that when markets are volatile, individual investors {"retail" investors in industry parlance} retreat and just put their money with an institutional money manager. Also, volatility causes retail and institutional investors to just give up trying to pick smart investments, and they put their money in "index" funds, being resigned to the belief that nobody can outsmart the market. As the percent of the stock market "held as an indexed investment" increases, this concentrates the investment decisions in the hands of those (usually institutional investors) who still buy and sell securities outright. Sadly, (a) the index investing phenomena and (b) the trend of retail investors giving up and just letting institutional money managers make the buy/sell decisions, stokes the volatility of the market because with fewer people making independent decisions, liquidity in the market is reduced. Liquidity is the presence of many interested buyers and sellers in a marketplace. Low liquidity = high volatility. High volatility = downward pressure on stock prices, since most investors don't know how to profit in volatile markets or don't have the stomach for it.]

Government Spending Tyranny

Would Mecklenburg taxpayers ever DEMAND efficient use of tax dollars?  If so, many of the painful cuts could be avoided.  Obstacles:  1.  The people who do not want the cuts are the people with all the relevant information:  the staff.  Yes, the budget is public record, but no, the insight is not.  2.  Every dollar spent has a passionate or powerful advocate in our community.  What would be required to cut spending is to tell that advocate, “No.”  The Elected Ones would prefer to avoid this conflict:  to get along, go along.  3.  The people protecting spending are sophisticated, organized, and experienced.  The people who want more efficient spending and no tax increases are poorly informed, disorganized, and inexperienced.  The people in the Middle East are demanding an end to despotism.  It must take tyranny to get people to act.  I certainly feel the tyranny of the intractable spending.

Heartless budget cutting?

1. Is the current level of government spending justified? Instead of saying, “Raise taxes,” consider, “Get the waste out.” Demand that money be spent more effectively.

2. Local governments do not aim to allocate resources to efficient producers. Their goal is to maintain a “service level” and this is how they evaluate themselves.

3. The only cost containment device: whether aggregate spending will require a tax increase.

4. A clever government budgeteer can deflect budget cuts with proposals to cut only sacred cows: police, teachers, street repair. The electorate will cry, “Woe is me! Don’t do that! OK, you can raise taxes.”

5. Yes, our society is judged by how we treat our most vulnerable. I hear that line frequently at budget talks, but not so often at talks discussing the humane treatment of prisoners, the indigent elderly, the mentally ill, and children of negligent parents.

Healing our Financial System

http://www.economist.com/node/18013965/comments#comment-814094

Herewith, my two cents on measures needed to heal our financial system.

tiger ticker wrote: Jan 27th 2011 11:27 GMT


It would be fun to set up a villain hierarchy somewhere and have people vote on it. My top villains would be:

  

(1) The human social need that impels "don't rock the boat" thinking: many people would have spoken out if they had known that the messenger would not get shot or ostracized;

  

(2) the common phenomenon that CEOs of financial companies do not know what is under their own roof; these naughty boys do not make it their business to find out because it would annoy the rainmakers; to borrow a Michael Lewisism, the BSDs and gunslingers will not submit to systems of control;

(3) capital allocation schemes in the US that stimulate risky behavior:  reckless banks get government-guaranteed deposits with insurance premia that are not at market rates, the too-big-too-fail doctrine which provides that LTCM or Goldman Sachs or Citibank or FNMA can do absolutely any risky thing with impunity;

  

(4) the harsh reality that regulators cannot keep up with the arcana invented by MIT graduates on Wall Street (eg, synthetic credit default swaps, off-balance sheet SPEs that disguise leverage, CDOs tranched out in 12-dimensional arrays, etc.) and

(5) campaign finance that permits legislators to get ridiculous amounts of money from those they regulate (Frank, Dodd, eg.)

My amateur-hour Rx:

• restore the wall (Glass Steagall) between commercial banks and investment banks;
• require FDIC-insured banks to pay deposit insurance premia that truly reflect their risk rating;
• require investment banks and auditing firms to be full recourse partnerships;
• deconsolidate (AT&T style) the banking industry;
• establish a legal limit on annual consumer debt service (debt amortized fully over 30 years) as a percent of income; and lastly,
• change all campaign financing to public taxpayer funding so that legislators will no longer be for sale.

Obesity Research

Charlotte Observer, Jan. 5, 2011
http://www.charlotteobserver.com/2011/01/05/1956356/weight-loss-ideas-that-work.html

Applause for the efforts to pay attention to early onset obesity. I cannot see the wisdom of a government-based solution, such as taxing sugary drinks. Other ideas:


1. Eliminate child abuse.

2. Give every child two involved, committed parents.

3. Promote parenting skills.

4. Associate fruits and vegetables with physical attractiveness and high energy.

5. Instead of top-down research (testing digital coaching), use the research dollars to observe behaviors of obese children and how their food choices are associated with emotional needs. Identify what percent of their consumption comes from ready-to-eat food and snacks (impulse) vs. prepared food (planned.)

6. Identify any genetic predispositions for compulsive eating, such as slow neural awareness of satiation, sugar craving, or low serotonin levels.



Given the many mental health professionals listed in the phone book, it is amazing that we cannot call obesity what it is – a symptom of emotional suffering.

$50 Billion Facebook?

http://www.economist.com/node/17853336?story_id=17853336&fsrc=nwl

Is Facebook Really Worth $50 billion?

Thank you, Economist, for emphasizing the octopi suction cups characteristic of Goldman Sachs. May I ask why a national bank is permitted to make these investments when they have depositors’ money guaranteed by the US Government’s FDIC?


When I worked on Wall Street, the whizziest of the Whiz Kids were the ones who could figure out how to circumvent regulations that prevented a desired transaction. I remember the NYSE “fully distributed” rule that was the last impediment to a “recapitalization” so in vogue then. The discussion of this problem was so amusing…. we stood around and spoke like the gods on Mt. Olympus, observing that being listed on the NYSE was overrated. Another was a “Section 521 Note Monetization” which was an invention (effective but short-lived) designed to circumvent paying capital gains taxes when divesting low-basis subsidiaries.

The point is that there is no regulator, all of whom make less than $500,000 per year, that can stay one step ahead of the parasites on Wall Street who exist to design transactions that circumvent regulations. No doubt, they are bright boys there at Goldman Sachs. No doubt, Govco cannot compete for the talent Goldman hires out of Stanford, Cal Tech, and MIT.

My thesis: the ONLY way to regulate Wall Street is to require investment banks to be private partnerships funded with the partners’ capital. Otherwise, they are on opium (OPM – other people’s money) and they have no incentive to take prudent risks, especially now that they are too big to fail.

Even if Goldman reverts to a private partnership, take note of their disproportionate influence in halls of government: Hank Paulsen, AIG bailout proceeds, slap-on-the-wrist fines, just to mention a few. Of this, you can be sure: there will be no exposé on Goldman Sachs, not from Hollywood, not from print media, not from blogs, not the SEC, and not the Federal Reserve. The Rolling Stone article and The Big Short merely scratched the surface of the real story. There is no one out there smart enough to get the story AND remain safe from the octopi suction cups. Of those powerful enough to get the story, they are in Goldman’s back pocket.

People used to worry about the military-industrial complex. At least those actors were visible to the press. The average voter has no idea of who Goldman is, and even the educated voters are easily conned by their sophistry. Goldman Sachs is more entrenched than kudzu.