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Monday, August 19, 2013

Cruz could run

Ted Cruz released his birth certificate and boy, does this give us something fun to think about!

Evidently all the old Mitt Romney advisors have gone over to Christie so everyone thinks he will run for President.   As usual, the Mitt mongers are spreading rumors and negatives about all the other candidates, as is their habit.  Among rumors is the one that Sen. Ted  Cruze could not run because he is not a "natural born American citizen" as the Constitution requires.

From the beginning I have scratched my head over the birther thing.  If your parent is a US citizen, you are too.  Think of all the kids who were born abroad while parents were in the US military or doing missionary work.  Think John McCain born in Panama while his dad was an admiral.  So then Obummer had an American citizen mother, even though we don't know where on earth he was born.  His birth certificate is clearly a fake job.  Why did he fake it when he didn't need to?  Maybe just to relieve talk about him not being a true American. Maybe to tweak the noses of suspicious people on the right.  Maybe just because he thinks "a good lie should not go to waste."  Beats me.

Ted, it turns out was born of an American citizen mother and a father from Castro's Cuba.  His dad and mom went the Canadian route to escape Fidel. Just a few years before, Cruze's dad was indeed an American citizen living in a US Territory and resented being called a citizen of communist Cuba. So Ted is a natural born US citizen born abroad like McCain in Calgary, Alberta in a hospital on '48th Av' as they say.  But according to Canadian law that makes him also a natural born Canadian, eh? Hence he is legally a dual citizen and can run as a member of Parliament.  Or ride in the chuckwagon races.

Oh the possibilities!  Run as an MP from Alberta, threaten secession as Alberta has done if the federal government doesn't allow certain independences.  Become Prime Minister.  Then return to USA, run for Prez and win.  What we now have is a model.  This is how the Hapsburgs managed to inherit half of Europe.  How Margaret became queen of Denmark, Norway and Sweden. 

Merge USA and Canada with of course the proviso of strong state's rights.  If Taxachusetts or the Newfs want to live out their lives on welfare and socialized medicine, their state should arrange it and leave the rest of us alone.  Corporate taxes will be cut to the Canadian low rate.  Bill of Rights borrowed from the lower 48.  Approve the Keystone pipeline.  Make BC happy with several new military bases.  And just give LA and Hollywood back to the  Mexicans, La Raza, and the drug cartels.  Then seal the border somewhere south of Bakersfield.  Tell the nasty Native American guys in Canada to stop bitching or we will require you to move to Oklahoma where they will lull you with lots of barbecue and soon have you talking slow, attending both powwows and rodeos, and voting Republican all the time. 

Any questions?   

Sunday, August 18, 2013

Fixing the economy, part III

I can teach you how to calculate what the price of gasoline should be.  There are 42 gallons in a barrel of crude.  So if you take the open market price per barrel and divide by 42 you get the price of the raw materials.  Recently price per barrel was $105.  So here’s the calculation.

                        $105/barrel equals     $2..50 per gal.

                        Add refinery margin        .13

                        Add transportation           .10

                        Add retail margin             .05

                        Add state&fed tax(OK)    .35


                        Total                            $3.13 per gallon pump price

Do you buy your gas that cheap?  No, I don’t either.  Here’s why.  20 to 30 cents extra is added to refinery and transportation margins when the EPA demands that 20 different grades of gasoline be produced for environmental reasons.  But these fairly new regulations have had little benefit on the environment.  If we just removed the restrictions and went back to the 1990’s we’d have cheaper fuel. 

            Next question.  How much does it cost you when Oblamer won’t okay the Keystone pipeline?  We keep hearing about 20,000 jobs to build and maintain the pipeline.  But what is the price of your gas doing?  There is a bottleneck in the pipeline network that is slowly being fixed which Keystone would have instantly alleviated.  For the last 4 years we’ve had gasoline prices that have suffered.  The commonly quoted West Texas Intermediate price has been down as low as $80 while North Sea Brent has been $115 at times.  We just can't get WTI and other mid-continent crudes distributed. Because Keystone would help alleviate the bottleneck it would allow more distribution of crudes from the middle part of the country where the boom is on.  Thus a refinery in Lyndon, NJ  would get to use WTI rather than expensive Brent for most of its refining.  Recently, other pipelines have been built and this has partly alleviated the bottleneck, but for 4 years Oblamer and the environmentalists have cost most of the country about 30 cents per gallon at the pump.

            Third question.  How much has it cost you to keep the half-moratorium on drilling on federal lands and in federal waters?  Here the answer is not large, maybe a nickel since oil is a fungible commodity and increased production in USA doesn’t change total world production and hence world price that much.  And since 2006 US energy imports have fallen in percentage from almost 30% to 12% as private land production has boomed.  But had the trends in horizontal drilling been  extended to federal lands and waters, it is estimated that net imports would now be—are you ready for this?—zero.  No import reliance would make questions about whether we should be involved in the latest Middle East follies a lot easier to answer.

            And that also shows the imperative of keeping EPA and the radical environmentalists from destroying the fracking revolution.  US production of oil has risen from 6% of world production to 12% just behind Saudi Arabia (13%) since 2005.  It has also reduced the prices of natural gas from nearly the world average $12.40 to $4.03.  That gives us a significant advantage over China at $13.70 and Japan at $14.10 and Europe at $10.11.  The advantage will ultimately translate into manufacturing jobs as cheap energy brings those jobs home.  JP Morgan Asset Management, from whom I owe all these numbers, also estimates an economic drag on our economy of about 1.0% due to high fuel prices since 2010.  Yet US petroleum imports as a percentage of GDP is at 2.5% (2Q’13)—at almost record highs as per the early 80’s.

            Now consider.  If we add 1.0% to our lackluster 1.5% growth this year, it becomes a respectable 2.5%.  Had we had merely that kind of recovery growth for the last 4 years, we’d be near 5% unemployment, $3.00 gasoline and a consumer sentiment index that is well above this lousy 80% where we are today.

            How do we fix our economy? We shoulda listened to Sarah Palin.  Drill, baby, drill!         

Monday, August 12, 2013

Fix our economy part II

Second in a multipart series about what a Republican House and Senate could do despite Obama as President.

Larry Kudlow says that a Republican Congress could do two important things if they had a majority.  First, repeal the fiduciary requirement of Dodd-Frank. Second, act to stop requiring banks to lend home mortgages when the mortgagee is not a good credit risk.  Bad risk lending is an well-recognized important cause of the Recession of 2007.  Oddly, Dodd-Frank misses this cause entirely in a wrongheaded attempt to make credit-crisis recessions never happen again. 


Let’s look at fiduciary duties first.  Dodd-Frank attaches a fiduciary duty to anyone who gives financial advice.  That means that anyone giving financial advice is held responsible for the actions of account holders who take that advice or are under the mentor of the advisor.  That is, the advisor assumes a duty for the account to be traded reasonably.  But what happens if a client demands that his broker do foolhardy things and subsequently loses his shirt? Here’s the catch. The broker, not the wacko client is held responsible.  Hence in any case where a broker advises trades that lose money, clients can sue. 


What will this cause?  Brokers are now demanding agreements where they have absolute authority in all trades.  Still, lawsuits threaten to overwhelm brokers as they once did in Europe.  Europe’s solution was for  government to authorize only a few mutual funds for investment.  This is the way it is done in Britain and Germany and most of Europe today. You go to a bank and select from a handful of index funds.  There are no other funds allowed.  Consumer choice is almost nil.  The bureaucrats are in control of your ability to invest.  Needless to say, government mutual funds suck.  Moreover, fees are set by the bureaucrats.  Instead of half or one percent management fee, it is typically 1.5% and set by law.  Of course, the rich can invest in individual securities, but most middle class folks are locked into poor gains. 


Not removing this aspect of “Frankendodd”, Kudlow will lead to languishing 401K’s which will spawn poor investor and consumer sentiment and a lethargic economy. 


Have you noticed how hard it is to get a loan these days? Privatizing Fannie Mae and Freddie Mac would release a great deal of capital into the loan markets.  Banks are skittish after the mortgage crisis of this last recession and are trying to lend only to good credit risks.  But if government demands they lend to borrowers doomed to default, we are only setting ourselves up again for a second crisis.  In this environment, banks hold their funds overly close to their chests and are invested largely in treasuries, instead of lending it to ordinary people.  But if we would allow bad loans to fail and the market to heal, then natural creditworthiness to rule the loan marketplace, lending would increase 50% Kudlow insists.


Finally this point is made about Sarbanes-Oxley.  Do you save all your old junk mail?  How about the spam on your computer.  Probably not, but the finance industry is required by this bill to save ALL communications, including a vast amount of advertising and junk solicitation. Congress needs to correct this and in so doing will lower finance costs which have risen considerably in recent years.


The communications requirements and the onerous fiduciary duty could probably be handily passed by a Republican Congress and even passed over Presidential veto with a bipartisan plan.  But the matter of rescinding  bureaucratic lending meddling would be a tougher sell without a Republican President.    

Thursday, August 8, 2013

Fix our economy, Part I

There is an unknown amount of earnings made by US companies abroad that is not brought home (like selling an iphone in Germany and putting the money in a German bank.). This is putting a huge crunch on the American economy.  My international economist says this is staggeringly significant but little-noted by the news media. Here’s what he says is happening.

            Obama rescinded a program whereby US companies who have paid taxes on foreign profits would not be double taxed upon bringing those earnings home in 2009.  The thought was “plugging this loophole” would glean more tax money.  Instead, it has just parked funds abroad as companies choked over paying 35% taxes on dollars brought home.  Consequently, profits that could be plowed into US expansion of the economy are being held in limbo overseas.  But the Dems aren’t about to lower or forego the taxes.  They want government revenue worse than a vibrant economy. Heck, a bad economy just drives everyone into the arms of government dole.

            Why would repatriation help the US economy and not simply sit in an American bank as it is now doing overseas?  Just watch the next episode of House Hunters International, my econ guy notes.  You will notice a lot of foreigners do a lot of chilling out and hanging around.  Indeed, in much of Europe, unemployment of twenty-somethings is so high that it has become standard practice for kids to return from a college or tech degree to live at home until they are 30-40 years old.  Or as one wag put it, “Jesus must have really been Italian.  He ate olives, drank wine, wore sandals and stayed at home until he was 30 years old.” Workers put under such duress, lose skills.  Workers under heavy regulations don’t create new things.  Hence attempts to move production abroad by US companies have often ended in disasters as the foreign workers couldn’t handle the tasks or technical aspects of the products. 

            An example.  Much of Apple’s manufacturing is now abroad, but the engineering and brains stays in USA. Only Americans seem to develop new designs and products.  France wants a 30 hour work week. India doesn’t do a lot of tinkering required of engineers.   If Apple could repatriate the dollars they would expand new product development here at home.  But why do that when the dollar was taxed at 10% in Ireland but now faces 35 cents grabbed by the US government?   

            How much money is at stake?  Estimates are $10-$20 trillion.  Think of it this way. That’s roughly the same as the US GDP of $16 T or 1/5 the net worth of America. 

            Err, suppose we were to hold a six month tax holiday: No taxes on any assets that could make it back to USA within six months.  The result would be an explosion of wealth itching for development in US companies.  But Obama hates this.  Not only does he get no revenue from this exercise but he then is faced with the political pressure to continue the moratorium—since it would be so wildly successful.  But a Republican congress could do it over his head or with a Republican President this could be enacted.

            Or, businesses will find a sly trick.  Costco had millions abroad.  Here’s what they did.  Suppose your company has, say $100 million, trapped abroad.  So you float a bond for $100 million here at home at say, 3% for say, 10 years.  Then you use your foreign money to be the sinking fund to pay off the bond.  Result: you get $100 million in quick cash in your US bank and pay 3% on it for ten years.  The foreign money simply disappears.  No 35% tax.  Obama hates your guts.  Obama demands a government agent be seated at your board meetings like he did to Apple.

            Meanwhile Obama is pressing for “growing the economy from the middle out” whatever that means.  Probably it is a fantasy of the middle class creating jobs or just a feel-good line of talk about how the middle class is important to him. Let me show why the middle class can’t create jobs.  Remember those guys in foreign places who spend a lot of time hanging out or living at home? Talk to many European middle class workers and they will tell you they are working 2 or 3 jobs in order to support their lifestyle.  That is what economists call an economic structural problem.  So many hurdles are put in place by government that businesses are finding ways around the rules—paying cash, hiring contract labor, hiring part time,etc. And the part time gang can’t create much in the way of new development. Here in USA, we know that unemployment is significantly education stratified.  Unemployment among less than high school degree folks is 12.6%  Among high school grads, it is 8.6%.  Among college associates degree folks it is 7.0%.  For bachelor’s degree workers it is 3.8%  The educated are virtually fully employed. Now you tell me how we are going to stimulate the 7-12.6% guys in some way so that they can “create jobs” among the already fully employed better-educated middle class.  The 7-12.6 guys struggling with part time employment don’t create new products.

            Germany is thriving today for a simple reason.  Under the unlikely Gerhardt Schroeder, they decided to lower mandatory job benefits.  The 2 year unemployment benefits (about like USA’s 99 weeks) was lowered to 5 months.  Under Merkel more changes.  Min wage was cut.  Prolonged health care after a layoff was cut considerably. This is the stuff that small businesses worry about.  (A Fortune 500 company doesn’t worry about healthcare.  They worry about repatriation of assets) And as a result, small business has blossomed, unemployment among the young is a quantum leap higher than the rest of Europe, and their economy soars while the rest of EU languishes. Are we to be Germany or Greece? I just pray for a Republican for change.  

Friday, August 2, 2013

Phone-y scandals & 500th anniversary

Turns out that all you Republicans who were dissing Obama for his “phony scandals” statements were wrong.  He was telling the truth.  A Fox news reporter reported yesterday that she was doing investigative work at a Food Stamps outlet and zealous government workers gave her not one but 3 Obamaphones despite her saying she probably didn’t qualify.  There you go.  Obama may have been talking about this scandal of phones being handed out to people who aren’t poor and don’t qualify.  Phone-y scandal. (Ahem!)


I have been discussing the life of Luther with some historians.  We are coming up on the 500th anniversary of the Reformation, Oct. 31, 1517.  But this is a rather artificial date based on Luther’s posting of 95 Theses on the Wittenberg church door.  In Jan. 1518 those Theses were translated into German and circulated  making Luther a hero among the Germans.  Thoughtful historians have suggested that the Luther-Eck debates of 1519 are a better event to signify the beginning of the Reformation.  That was the watershed happening that laid the groundwork for excommunication of Luther and brought out his anti-papal stands. 

But those are political dates.  What I want to ask is when did the Reformation begin in Luther’s brain? That is, at what point might we choose to note that Luther had split with the establishment in spiritual terms? The Spiritual Reformation. The answer has to be about 500 years ago today.  Here’s a small time line of his thinking on faith. 

1501 Luther entered college to study Law and become the lawyer for his father’s business.

1502 Bachelor’s degree.  1 year.  Smart guy!

1505 Master’s degree. While traveling from school to home, he was caught in a thunderstorm and was nearly struck by lightning.  In fear of his life, he vowed to St. Anne that he would become a monk. Entered Augustinian cloister at Erfurt.  He was a smart guy, worked very hard, but was troubled by sin and God.

1507 ordained a priest.

1508 The ‘troubled friar’ was sent to the Augustinian monastery at Wittenberg University to teach logic, physics and theology and work on his doctor’s degree. Luther saw God as an impossibly harsh taskmaster and man trying to work out his salvation in terror.  Also about this time, he read the writings of Jan Huss and, by secretly agreeing with Huss, grew even more tormented because Huss was burned at the stake as a heretic. 

1509 Luther wrote about how he struggled with Romans 1:17 “For in it [the gospel] the righteousness of God is revealed from faith for faith, as it is written, “The just shall live by faith”.  So if you think God’s righteousness is impossible, it is to be feared as your condemnation.  Luther struggled with this passage for several years. 

1510 Sent to Rome.  What shall we do with this messed-up genius monk?  His superiors thought he might develop a love of the church if they sent him to see the finery of Rome.  They sent him on an errand to deliver papers to the pope.  The whole thing backfired.  Luther was sickened by the decadence and immorality of the holy city.  In 1511 he returned disillusioned.

1512 Became Doctor of Theology and succeeded Johan Staupitz.  Staupitz was vicar-general of the order and he began a new strategy to help Luther—work him to death, and thereby get him to stop navel-gazing and worrying about his salvation.  It worked because Luther began to scour the scriptures until he made sense of taking them literally and found the light of his life. 

1513 Luther began to lecture on Psalms in the fall of 1513.  He read “the Lord is my Rock and my Salvation” and explained it by grace.  He taught that over and over again. scriptures should be understood literally as God’s very word and that they pointed to God’s tremendous mercy embodied in the sacrifice of His only Son (grace).  So here we have two of the three principles of Luther’s beliefs, “Sola Gracias, Sola Fides, Sola Scriptura” (Grace alone, Faith alone, Scripture alone).  As soon as you believe in grace alone, the notion of indulgences grows jaundiced.  As soon as you believe in literal scripture which attests to its own uniqueness of God’s expression, you grow chagrinned by decisions of Church Councils and pronouncements by a pope. I submit that sometime from August and December 1513, Luther’s beliefs came together.  Perhaps this is the spiritual Reformation and it was only a matter of time before the world would hear it. So the 500th anniversary is right now.

1515 Staupitz made Luther pastor of Wittenberg church.  Luther protested that he would die from too many things to do.  But now, as he prepared his daily lectures at the U. he had to also sermonize his ideas into the vernacular of the peasants in the pews.  His theologic discourses went through Romans, Galations, and Ephesians.  Gone are doubts about Rom. 1:17.  Rom. 5:8, “while we were yet sinners Christ died for us,” has become a new theology of Simultaneously we are Saints and Sinners.  His teachings on Romans were compiled and published by the Vatican. They show a stunningly incisive mind and a discerning Greek translator who links the entire book into one coherent teaching of the soul’s struggle with God’s demands of the Law and His grace for the sinner to a sanctification (progress) of faith. [Compendium on Romans, was thought to be a lost book until recently when the Vatican “found” it during discussions with the German Evangelical Lutheran Church.  Those discussions in the early 90’s concluded that Rome had been sadly mistaken in Luther’s excommunication and that Catholics and Lutherans believe in the same Grace. The Cardinal who led those discussions became Pope Benedict]

1516 Bubonic Plague hit Wittenberg but Luther valiantly remained at his post, a man who courageously knew his life was in God’s hands, doing his duty to the job.  And Wittenberg began to grow by leaps with is leadership.

1517 In protest to sale of indulgences he posted 95 statements or theses against the practice.  Noteworthy is that the local bishop read them and found no problem with Luther’s arguments except that they were pretty inflammatory and advised him to keep his mouth shut for awhile.

1518 Theses were translated into German and printed widely.  All of Germany seemed to leap to it’s feet in acclaim.  Luther spoke not only to faith, but also fairness and German nationalism.  Luther was not a separation of church and state guy. Yet he strove to patch things up with Pope Leo.  Leo agreed that Tetzel had gone rogue with claims and relieved him of duties selling indulgences.  Humanistic Leo and faith-filled Luther exchanged 3 letters of reconciliation and things for a while looked to be on the mend.

1519 The Dominicans weren’t happy.  They were the leading proponents of Scholasticism and divine Papal authority.  They induced Luther into a trap, a debate with Johan Eck, a leading scholar.  Luther was exposed to be at odds with official church teaching but became a superstar in the minds of many Germans who read or learned of the debate.  His simple ways of making a point became famous.  For example, when the sacrament of communion came up and Catholic teaching contended that the bread had transformed into Christ’s body, Luther asked, “If a mouse is eating crumbs beneath the communion rail, is he eating bread or is he eating God?” (That is to assert, the host is both bread and, only by the faith of the one eating, can also be Christ’s body.) From this debate forward, the Reformation was on—in spiritual argument, political and warfare struggles, nationalism and reform.


So then, what should we celebrate as the 500th anniversary of the “Spiritual” Reformation? Perhaps one would say fall of 2013 or sometime in 2015.