Will America miss something special?

I can’t help feeling like America will miss out on something special. Tonight, Senator Obama defeated Senator McCain for president of the United States. McCain is an exceptional man, one that doesn’t come along very often, particularly in politics. He will not be president.

McCain has demonstrated some unique abilities and qualities over a lengthy period of time. He has offered his life in service for his country. He has shown an ability to work through differences, by working both sides of the political aisle in Congress. He has proven himself to be an honorable man with integrity and that can not be questioned. Unfortunately, such a man won’t lead the country.

My feelings are more a reflection on McCain as opposed to Obama. I have no doubt that Obama is a decent man. Obama seemed to be more charismatic during the campaign and also also seemed to represent “change”. Those are what seemed to appeal to the American public.

It is ironic that McCain’s concession speech is such an excellent demonstration of his ability to lead. McCain shows a respect to those who are different and to those with differing opinions. He shows that his country comes first. He shows that there is a point where one can cross the line in politics and he knows where to draw the line – and keeps his followers inline. His honor and integrity are clearly evident.

What does the next four years hold? Nobody knows, but I hope to follow McCain’s lead and support the new president. To quote McCain, “I wish godspeed” to our new president.

My fellow Americans, please don’t vote.

My fellow Americans, please don’t vote in the 2008 presidential election. You have already made a mess of things. You are not in a good state of mind. At this point I have no confidence in your being able to make any type of reasonable decision.

First, you entered into faulty mortgage agreements. The mortgages were obviously flawed, yet you signed them – in large numbers. It is truly disappointing that you can not even manage or understand your own finances. The only way those mortgages could have worked is if your home increased in value by 10+% each year. You are either greedy or stupid.

But that is not the worst of it. When your mortgage failed, you blamed someone else – the bank, the lenders, the government. And what really is upsetting is that many of us are being affected by your foolhardiness. The economy is in a downturn because of your inability to manage and understand your personal finances. Many of us saw these loans as flawed and didn’t participate, yet we are now affected by the economic downturn.

Unfortunately, it gets even worse. The turmoil you’ve created has caused you to lose your sanity. You go around ranting and raving and doling out blame. The government is at fault. The Republicans are at fault. The Bush administration is at fault. There need to be regulations that prevent people from doing stupid things with their money – blah, blah, blah. You want those who were in office while you acted poorly to be voted out.

And here is where it gets scary. Since you blame the government for your idiocy, you want to change it simply for the sake of change. You want to put someone in the highest office who has virtually no experience. He was first elected to the Senate in 2004. Yet he has spent half his time there campaigning for president. He tells you things you want to hear, including playing the blame game. How is someone with no experience at the national and world level going to fix things? It seems like such an individual is likely to make an entirely new set of mistakes – on top of the problems that already exist. How can you trust someone who leverages your anger for a vote?

Please, my fellow Americans, don’t vote. If you can’t manage your own finances what does that say about your ability to make significant decisions. If you are bitter about the economy, wait until your anger subsides before doing something else that is stupid – 2012 is just around the corner.

The state of the American Empire

The financial crisis that is gripping the United State and the world had prompted me to think about the state of American Empire. Throughout history, all empires have eventually fallen – Greeks, Romans, Spanish, etc. What is the state of the American Empire? I don’t think it is on the rise, but perhaps just past its peak, just on the downfall.

I am not sure what has been the cause of the downturn of prior empires. In the case of the American Empire, I feel Americans may have gotten “soft”. I question that the principals, work ethic, persistence, and ingenuity may not be there like they once were.

One word that comes to mind is “entitlement”. Americans seem to have a sense of entitlement. They feel entitled to own a home, they feel entitled that their homes increase in value by double digit percentages each year, they feel entitled to own their own transportation (regardless of its effects on the environment), they feel entitled to have their nest eggs grow each year, they feel entitled to afford $4 for a cup of coffee.

Opportunity seems to have been replaced with entitlement. Given that one works hard, is persistent, is innovative, and also has some luck, one can achieve through opportunity. Achievement can then breed entitlement. In today’s society, opportunity seems to be a bystander- along with its ingredients and implications – and entitlement is assumed.

So, what is next? Maybe the American empire can extend or reinvigorate itself. Being a melting pot, perhaps immigrants to this country can sustain the American spirit. Or, maybe the American Empire with be the last empire as we know it. With globalization is there really the impetus for one country to represent a dominance?

Related Links: http://www.newsweek.com/id/166821

Pulling back the curtain on the economy

How did the U.S. economy get into this mess? Well, I think one man is largely responsible. I call him Oz.

Nearly ten years ago the dotcom bubble occurred. This was an aberration. Large numbers of investors, many of which could be called speculators, were able to affect the economy by investing in new Internet companies. Tremendous amounts of money were poured into technology businesses. The surge drove the stock market up and employment down. Salaries soared in the technology sector. There was a shortage of talent. People who knew nothing about the Internet or software were switching careers. All was good in the land of technology.

Then reality hit and the bubble burst. New technology companies closed their doors – usually quickly. Unemployment increased. Stock markets tumbled. The bubble was so big, the U.S. and global economies felt the effects.

To make up for this financial tailspin, Oz stepped in. He stood in front of his economy machine, with its dozens and dozens of switches, buttons, and levers. He thought he knew how all those controls operated and inter-related. There he was making adjustments moving the various switches. Oz was going to fix things. Later on Oz admitted “he didn’t get it”.

That is when the damage was done. Oz lowered interest rates drastically and kept them there. He knowingly created a housing boom to curtail the dotcom fallout. This was a way to avoid the financial downturn from the technology sector. He panicked, made unnatural adjustments, and let them run their course. He had no real understanding of the side effects of his actions.

In actuality, Oz knowingly substituted a housing bubble for a technology bubble, to avoid a downturn. As the technology sector contracted, the financial sector boomed. This time the boom was fueled by Oz’s polices at the Federal Reserve. The low interest rates lured more speculators. Mortgage companies were popping up every where. They were offering loans backed by investors (speculators) – not banks. Banks, which traditionally backed loans, now offered loans backed by investment banks, who thought they could make money via new lending products based on low interest rates. Housing prices skyrocketed. With these new loans everyone one could own a home. All was well the American dream.

It turns out the cure was worse than the disease. Oz created a housing boom that was an even bigger aberration. The new financial products were unrealistic. Reality hit again. Foreclosures increased. The housing market ground to a halt. Markets plummeted. Oz brought some of the largest investment banks in the country to their knees, with several going out of business.

What was Alan Greenspan thinking? I am not sure, but I believe one conclusion can be drawn. The economy is complicated – too complicated to try to control. No one man can understand it, nor control it. To think so is foolhardy and to try makes one a fool. Here is a case where one foolish man created an economic disaster almost single handedly.

Taking a vacation from healthcare.

Here I am reading the Sunday newspaper and I am reminded of the alleged high costs of healthcare. This article indicates that even those with insurance are feeling the pinch. Apparently the various additional fees associated with insurance plans – like copayments – can add up to be significant.

I find consumer’s behavior toward health and associated costs, including insurance, to be perplexing. Consumers simply don’t want to pay for health related items. Why does the $2000 a year vacation have higher priority? Why are those $300 a seat tickets to the Red Sox game critical to have? Why do people need to have those hideous, gas guzzling SUVs? Oh, and what about the $4 cup of coffee at Starbucks. It doesn’t make sense. Where are peoples’ priorities?

And there is also a high degree of misunderstanding regarding healthcare costs? Most people don’t understand the difference between health insurance and a health plan. Insurance is protection against a catastrophic event. The implication is that insurance doesn’t cover ordinary items, such as routine checkups. A good analogy is auto insurance. It covers accidents, but not routine items such as oil changes, tires, and brakes. Health coverage implies some thing that is more comprehensive than insurance. HMO plans address health coverage, but most are not without additional costs. A plan with virtually no out-of-pocket expenses would be prohibitive – and likely not a good value to most consumers anyway.

The upshot of all of this is that healthcare is a responsibility of the consumer. It is just like food, shelter, and transportation costs. Until consumers assume a responsibility for their own healthcare and associated costs, the system will appear to be broke. So, for those who would rather think about a vacation rather than their own healthcare, good luck.

Huge profits in college education

Every so often the local newspaper here publishes a story about the huge profits made at one of the local universities. I have no problem with a school making a profit. Schools and places of worship also receive tax exempt status. I have no problem with that either. However, I do see a problem with huge endowments and the associated for-profit investing activities at schools.

Schools are in the business of educating. It is on that basis that they receive tax exempt status. When significant activities and resources are dedicated to building an investment portfolio, they are also in a business of making money – and that extends beyond the business of education.

Additionally, consider whether schools really should be involved in investing activities. Investing is risky. Are schools willing to accept losses? Are the supporters and alumni, whose donations are being invested, willing to accept the risks? So far things have been rosy. But what happens when the first school experiences significant losses? I assume the government will be expected to bail them out. Schools are not in a position to handle losses, which is a strong indication that they should stick to what they know best – education.

The practice of avoiding the payment of taxes is unethical. There have been many situations where businesses devise schemes to avoid paying taxes and those schemes are frowned upon. Consider this one where the top contrator in Iraq “skirts US taxes”. How is this different from what schools are doing? Why are schools allowed to “front” as an educational entity, while running significant non-educational operations?

If schools are participating in significant non-education activities they should be treated accordingly. Perhaps it is time to consider taxing private educational instituations? Perhaps separate business entities must be established for non educational activities – and those are taxed? Something must be done.

Schools must remain in the business of educating. It is unethical for an educational institution to significantly participate in other activities – whether they are profitable or not. Congress needs to take action and close this loophole. While the practice of building an endowment is not illegal according to the letter of the law, it is unethnical and not in conformance with the spirit of the law.

The high price of gas

There is quite a bit of talk of the high price of gasoline and that it will likely cost $4 per gallon soon. Some people refer to this with “outrage” or a “crisis”. Why isn’t someone, such as the government,doing something about it.

Perhaps the cost of gas isn’t that high, considering inflation. I’ve read gas prices have not matched inflation. This chart indicates that inflation has not match increasing gas prices. This article indicates that the current peak prices have recently exceeded inflation. By and large, gas has been relatively cheap.

And why isn’t someone, such as the federal government, doing something about the cost of gas? Because they don’t see the situation as being that bad. A sort of natural equilibrium exists in the industry.

The sources of oil don’t want the price to increase to drastically. That produces behavior which cuts demand drastically: consumer start conserving. businesses reliant on oil cut back, alternative energy sources gain momentum, etc. If any of these efforts have a high degree of success, it could drastically affect the demand for oil in the long term.

If the feds saw a true crisis, there are plenty of options available to the U.S. government. There are U.S. reserves that could be drawn upon. There is plenty of oil here in the U.S. and North America, and those could be relied upon more heavily. The situation isn’t at a point yet where those measure are believed to be needed.

So things just aren’t that bad. An adjustment to the price of oil is in process. A year or two from now, $4 for a gallon of gasoline will be accepted and the economy will have adjusted. People will back back to driving their 12 mile a gallon SUVs.

While I think I understand the situation, my personal views are much different. The U.S. (and the world) needs to end its reliance on oil. While I believe in free markets, I think the government should step in and put a large tax on gasoline (start at 25 cents/gallon and over the course of several years raise it to $3/gallon). That would accelerate activity in industry to seek alternatives. That may seem extreme to many Americans, but it is already the norm in Europe.

A political side-effect, and one that is quite beneficial, is that without the reliance of oil, the Middle East can grow at its own pace. Industrial nations will have no need to interfere with those oil producing nations, and those nations can evolve at their own natural pace – without the U.S. (and other industrial nations) pushing them along because of their thirst for oil.

Recycling

I just came across this news story on recyling. That is when I realized I didn’t really understand the difference between recycling and redeeming. I think redeeming bottles means one can take a bottle to a store a receive the deposit for it (typically five cents here in Mass.). Recycling (as implied by the article) is when a truck comes by and picks up recycled items, typically stored in a separate container.

Of course, everyone has their take on it. The homeless want more opportunities to make a nickle. The state sees this as a revenue opportunity, because they make money on unreturned bottles. The environmentalists love the idea, because every effort should be made to recycle anything that can be recycled – even when recycling consumes more energy. And finally, there are those that believe deposits on bottles (paying people to return bottles) takes away from other recycling efforts.

Is it possible to determine if recylcing simply makes sense? I recall the effort to recycle started as a way to preserve natural resources and limit waste. Those items were not really discusssed much in the story.