Monday, January 3, 2011


Unless you're an unbridled optimist or a complete moron, it should be obvious to everyone by now that what we're going through is The Great Recession. A significant difference between what we're going through now and it's historical predecessor the Great DE-pression: this thing we're going through now is the direct result of Government meddling in the credit markets. A similarity: in both cases the circumstances that are causing it to continue are Government-induced.

I actually understand economics - it is a required part of Philosopher School -

Barney Frank and Christopher Dodd deserve blame for Fannie and Freddie

The proximate cause of the collapse of confidence in the world's banks were millions of improvident loans to American housebuyers; responsible for guaranteeing half of this $12 trillion market were Freddie Mac and Fannie Mae, the so-called Government Sponsored Enterprises were formally nationalized in September of 2008 to prevent their immediate and catastrophic collapse. Barney Frank and Chris Dodd were the leading figures blocking all the earlier attempts by President Bush — and other Republicans — to bring these lending behemoths under greater regulatory control.

In September of 2003, after outside investigators established that they were not adequately hedging against risks and that Fannie Mae in particular had scandalously misstated its accounts, the Bush administration launched a measure to bring Fannie Mae and Freddie Mac under stricter regulatory control. In 2006, it was revealed that Fannie Mae had overstated its earnings — to which its senior executives' bonuses were linked — by a stunning $9.3 billion. Between 1998 and 2003, Fannie Mae's executive chairman, Franklin Raines, picked up over $90m in bonuses and stock options.

That's ninety MILLION, folks.

Barney Frank & Co blocked all Bush's attempts to put a rein on Raines. During the House Financial Services Committee hearing following Bush's initiative, Frank declared: "The more people exaggerate a threat of safety and soundness (at Freddie Mac and Fannie Mae), the more people conjure up the possibility of serious financial losses to the Treasury which I do not see. I think we see entities that are fundamentally sound financially." His colleague on the committee - California Democrat and moron - Maxine Walters said: "There were nearly a dozen hearings where we were trying to fix something that wasn't broke. Mr Chairman, we do not have a crisis at Freddie Mac and particularly at Fannie Mae under the outstanding leadership of Mr. Franklin Raines."

When Raines himself was challenged by the Republican Christopher Shays, to the effect that his ratio of capital to assets (that is, mortgages) of 3 per cent was dangerously low, the Fannie Mae boss retorted that "our assets are so riskless, we could have a capital ratio of under 2 per cent".

English translation: Fannie Mae and Freddie Mac were covering mortgages - loans - that a mob loanshark wouldn't touch with a ten-foot barge pole.

Who Was Responsible?

The housing bubble collapse and the resulting panic that triggered the present worldwide financial meltdown cost homeowners and investors trillions and resulted millions losing their jobs.

The prime culprit is Congressman Barney Frank of Massachusetts. Senator Dodd of Connecticut was also complicit, raking in campaign contributions from Fannie Mae while urging them to package up and sell worldwide with the implicit guarantee of the United States the subprime paper Democrats had forced banks to issue to the uncreditworthy.

Barack Obama himself was in the forefront of efforts to force banks to make loans they never should have made. Fresh out of law school in the early 1990s he was training community organizers in Chicago (i.e. ACORN) how to break up bank board meetings and intimidate bankers; to demand they make mortgage loans to credit shaky minorities. Intimidation worked and the disintegration of credit standards - blessed by the Clinton Administration - was on.


Current deficits are unsustainable - so the Obama Administration and the Democrats' solution has been to make them even more so; the 111th Congress added more debt than the first 100 Congresses combined: $10,429 per person in U.S.

The President has told us with a straight face that the irresponsible fiscal policies of his predecessor took the federal budget on an eight-year joyride. The only fiscally prudent method to get things under control, therefore, is to take the average Bush deficit for the years 2001-2008 and double it, all the way to 2020. In other words, to get out of the hole, we need to dig a hole twice as deep for one-and-a-half times as long.

We are incentivizing financial unsustainability. According to USA Today, when the economic downturn began, the U.S. Department of Transportation had just one employee making over $170,000. Two and a half years later, it has 1,690. The same applies across the board for the entire vast bureaucracy of U.S. Government workers - government keeps on expanding while the Private Sector shrinks, and the average government worker makes twice as much as his counterpart in the sectors that actually produce goods and services.

Back to Basics

Somebody tell me where the National Endowment of the Arts, the Department of Education or the Environmental Protection Agency are spelled out in the U.S. Constitution? Short of roads and bridges, providing for the common defense and public welfare (no that doesn't mean Welfare) - what exactly IS the mission statement of Government? When we examine it up close, questions inevitably arise; like, do we really need a Government media arm - NPR?

The sad fact of the matter is that we could dismantle the existing government infrastructure bit by bit, knock off Departments, Bureaus and Agencies - Hell, we could sell NASA - and it wouldn't make barely a dent in the National Debt.

Department of Defense is the big one - they account for about 40% of the Federal Budget. Social Security, Medicare, Medicaid, Welfare, etcetera, account for about another 40%. All the rest - Bureau of Land Management, the U.S. Geodectic Survey, Department of Indian Affairs, etcetera - cover the 20% that's left. That's a drop in a bucket compared to the DoD and Social Security. Nobody wants to cut Defense, and cry as they might, people over 65 like that $600 check coming once a month.

So what are we going to do about it? This is my advice to the Republican majority members of Congress - the incoming Class of 2011:

The Ten Percent Plan Plan

I suggest a ten percent cut across the board on EVERYTHING. I've personally seen government waste, fraud and abuse - it's everywhere the Government is. As an active-duty member of the military I was paid by the U.S. Government for twenty-five years and nowadays I sell goods and contract my services to the same. The U.S. Government could take a ten percent budget cut in it's stride and not even notice the difference. Such a budget cut would go a LONG WAY toward paying off that 14 trillion dollar bill that Obama, Pelosi and Reid have run up over the past two years.

The once mighty and all-powerful Rome fell, so can we. Rome was the Superpower of the Ancient World; no nation on Earth is immune to the very real economic forces of currency, supply and demand.

And that's just a start, folks; I ain't done yet.

The One-Thirds / Two Thirds Plan

A basic principle of tactical planning is the One Thirds / Two Thirds concept. When planning an operation, anticipate the planning & mission prep portion to take two thirds of your time and resources - operational activities will take only one third. Of the mission itself, infiltration, reconnaissance, actions in assembly areas and objective rally points will take two thirds of your time & resources, actual actions on the objective will take only one third of your time if that.

The One Thirds / Two Thirds Plan applies in many ways. Battles are fought by battalions - a battalion classically consists of three line companies, which can be deployed two up front, with one held back in reserve to assist whichever line company is being engaged by the enemy. Or the reverse can apply - one up front to draw the enemy, two held back to maneuver about. This concept applies equally to the subordinate units within the companies - platoons, squads and fire teams. In a tank company, the One Thirds / Two Thirds concept can apply to individual tanks - the old 'Two Up, One Back, or One Up, Two Back'.

Lets apply the One Thirds / Two Thirds Plan to taxation, shall we? The idea is that if we free up the taxpayers, that extra pay in their pay envelopes goes into the economy, which in turn drives the engines of commerce, generates demand for goods and services, and gets companies hiring again. So lets work it this way: how much should we be taxed?

To answer this question, let us consult the ultimate reference resource: the Bible. Specifically, the Pentateuch; the first five books of the Old Testament, written by Moses.

Numbers 18:25-30 (also Leviticus 27:30) explains how the Levites were to use these required tithes (taxes). The Levites were God’s delegates chosen to operate the temple and to lead the theocracy of Israel, the national government run by God. The first tithe (10 percent mandatory taxation) was used to supply the needs of the Levites who ran the government. The second tithe found in Deuteronomy 12:10-11, 17-18 supplied for the national religious worship festivals, the ceremonial feasts and celebrations such as Passover. Deuteronomy 14:28-29 refers to a third tithe. This third tithe was known as a welfare tithe to help the poor, strangers, the fatherless, and the widowed. This was to be deposited in the towns every third year. That averaged out to an additional 3.33% every year. All three tithes were essentially a tax base of 23.33% for the funding of Israel’s government. In addition to the 23.33% there were other required taxes such as profit-sharing taxes (Leviticus 19:9-10) and Sabbath rest for the land every seventh year (Exodus 23:10-12). There was also the annual third of a shekel temple tax used to furnish and maintain the temple.

If we apply these income tax requirements to our contemporary situation, the obvious conclusion that we should be taxed at least 23.33% of our income.

Twenty-three point three three percent? I can live with that. Heck, I'd be willing to up the ante to thirty percent, or even thirty-three percent just to make the math easy.

But if we investigate further; Numbers 18:12 describes the first harvest principle. God set the example of giving to the Levites the very best of what the people had offered to Him. Well, I have twelve harvests a year; I could easily handle being taxed on thirty-three percent of my first harvest.

It's a bold plan - an ancient Roman poet named Ovid said, "Fortune Favors the Bold." If the Federal Government was ever willing to free up that amount of taxable income into the hands of the citizenry, can you imagine how economic activity would soar, and how revenue would pour into the Government coffers?

That's my story and I'm sticking to it.



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