Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America

If you would like to know how and why our nation is in such dire economic straits, and you are not an economist, stock broker, CPA, or financial planner then Fed Up: An Insider’s Take on Why The Federal Reserve is Bad for America provides the answers you’ve been waiting for.

Author Danielle DiMartino Booth spent nine years inside the Dallas Federal Reserve as an advisor to Richard W. Fisher, former CEO and President of the Federal Reserve Bank of Dallas. She is a financial expert who Market Watch hailed as one of four economists to take note of in the Trump era.

By now I suspect that anyone paying the slightest attention to the economy knows that central banks manipulate rates, most importantly, interest rates. This is neither shocking nor news. What is news, and definitely shocking, is DiMartino’s revelations regarding the incompetence prevalent within the Federal Reserve and the unwillingness as far back as Alan Greenspan, Ben Bernanke, and now Janet Yellen, to admit that what these academics worship in theory simply does not work in practice.

DiMartino Booth saw the crash of 2008 coming and tried to ring that bell. But, lacking the requisite PhD and peer published articles that seem to be the insider credentials revered over common sense, she could not get the Fed to take her warnings seriously. After the crash, she once again warned and watched, as did Fisher, the disastrous consequences of repeated quantifying easing (QE) by the Fed… disastrous only to pension holders, money market accounts, retirees and well…regular Americans. To the contrary, repeated QE combined with bailouts of the banks that should have been allowed to fall on the sword of their own greed and corruption, became the boon that have now made these “too big to fail” banks even bigger.

As a lay person who definitely falls within the category of “average American” who is most adversely affected by the Fed’s uncontrolled tampering with rates, the book is infuriating. It makes you want to scream that the same people who inflict so much pain through their hubris and incompetence are the very people who continue to profit from it. They keep making their millions, unaffected and outside the parameters of the conditions they create through the idiocy of their decisions.

The most recent example? Former President Obama, alleged champion of Main Street and abhorrent of income inequality, nominated Janet Yellen to succeed Ben Bernanke as Chairman of the Federal Reserve when he could have done otherwise. Janet Yellin, who never saw a rate decrease she didn’t like and who lives in a theoretical bubble that is removed from all economic reality. Janet Yellin, who has said that if she could take the country to negative interest rates she would. Do you know what that means? It means banks charging you, rather than paying you, for the pleasure of holding your money.

So where does private citizen Barack Obama make his first stop to earn income? To a Wall Street firm who is paying him $400,000 for a one-hour speech. Yes, Wall Street.. the beneficiary of Barack Obama’s and Janet Yellin’s fiscal policies which, while pumping up Wall Street, devastated average Americans, exponentially increased national debt and exploded unemployment.

Really, it makes you want to scream. Which is disturbing because when the effects of this manipulation and debt come crashing down, as they must, I can see a dangerous level of collective rage emerging from those who have born, and continue to bear, the brunt of the pain inflicted by these arrogant and greedy people who care not a whit about average Americans. They care about themselves first and their cohorts in crime, in and out of government, second.

DiMartino Booth is no shrinking violet. She has a great deal of courage. She is taking on the most powerful people in this country. Fed Up is not the ravings of an unhinged conspiracy nut. To the contrary, it is a well-documented, factually substantiated expose of an incompetent group of individuals running a corrupted system. Most of the book relies upon actual quotes and minutes from Fed meetings which paint a picture of systemic failure and a stunning refusal by allegedly educated people to admit just how wrong they continue to be.

Combine the people within the Fed with the monetary policies coming out of it and you’ve got the classic definition of insanity: “Doing the same thing over and over again and expecting a different result.”

DiMartino Booth has done her job. She is once again ringing the bell. This time we can all hear it.  Now it is up to us to do our part. I only hope we find a more constructive way of channeling the rage that will surface when all that she has exposed inevitably hits the proverbial fan.                  Carole

The Death of Compassion

Twenty years ago I saw a play called An Inspector Calls.

The premise was that a police detective is called to investigate the death of a young lady who works for a prominent family to discover how she died. The family is horrified, and initially confused, as to why the Inspector is called to interview them. What follows is a tense and uncomfortable investigation. In the end, the family discovers that they were all, in fact, caught up in this poor girl’s death.

Although no one in the family actually killed her each, in their own way, was complicit and responsible for her death. Through neglect or indifference, the combination and culmination of all their actions led to her untimely demise.

The play has stayed with me over the years because it touches on how each of our seemingly separate lives is intertwined. There is no escaping our responsibility to one another. There are always consequences to our actions. I was starkly reminded of this when, a few weeks ago in my home town of Austin, TX, a man shot and killed three people. He fled, was hunted by police and, near capture, killed himself. Although I did not know him, I knew many people who did.

What I do know is that he was behind on his bills as many of his customers had not paid him. Normally, he could cope with financial pressures; but, with his wife diagnosed with cancer and no medical insurance, his needs were more pressing.  Add to that a daughter ready to go to off to college, and I would imagine his lack of receivables and worries put him over the edge.

As a contractor, he had recently done a great deal of work for a local family who refused to pay him. He killed the couple and their neighbor. The couple he killed had a reputation for “stiffing” contractors…getting free work any way they could. Two weeks ago their luck ran out. Perhaps had his other customers paid him timely he might have been able to shrug off that particular insult. Clearly he could not. The result of it all is four dead people. Yes, the contractor is responsible for the deaths of four people. But, as I am reminded of that play many years ago, it seems all the others were quite complicit in this tragedy as well.

Not one of us is disconnected from the whole. None of us fully, or necessarily ever, knows the damage we do to other people through carelessness, insensitive, neglect or maliciousness. In this case, it was not paying bills on time for work received.

In the Catholic faith, we believe not only are there sins committed through our actions but also by our inaction (sins of omission). This theology supports the reality that we are not bystanders in life. We will be held accountable for what we do… and what we fail to do.

The recent story of attacks on Jews in Europe triggered my thoughts on this subject. Recently, in Europe, there has been a sharp uptick in attacks on Jews. This has been well documented and tied to the influx of new, poorly vetted immigrants. Yet, there has been no coordinated effort anywhere, by Jews or non-Jews, to stop this. I am not Jewish; but, I have many friends who are. Most of them carry a fury about what happened during the Holocaust and have vowed “never again. Yet, all of them go on with their lives…work, play, dinner with friends etc. None of them have boarded a plane to France to help defend their brethren. They are all bystanders. For all of their talk, none of have taken action to help their brothers in faith.

Still, I am no different. The ongoing, global attacks on Christians and Catholics have also been on the rise and I’ve not taken up arms to help them. Although I served in the military and fought in a just war, throwing the Iraqi’s out of Kuwait, and did my duty, I have been remiss in my duties to my fellow Catholics who are being slaughtered all over the Middle East. I am a spectator from afar. And yes, it pains me that I am like everyone else. I have my own responsibilities with six kids to feed, clothe and take care of and so I tend to what is in front of me and push to the back of my mind, and my priorities, what is not.

However, we have examples of people who take up the fight. In the Bible we have the story of Moses, who fled his homeland and settled down to start a new life. But the gnawing feeling of the oppression he witnessed in Egypt stayed with him. After nine years, he left his wife and son to return to Egypt to help his People.  In more modern times, there was Gandhi, Dietrich Bonhoeffer and Martin Luther King. When reading their stories, all I can think of is, “Would I be able to make such a sacrifice?”

Even at home, here in the U.S., when give the chance to defend our rights we do not. In the recent United Airlines scandal, not one passenger intervened when a fellow passenger was assaulted and forcibly dragged from the aircraft. They acted like sheep. Maybe instead of watching they could have tried to stop the police from doing something illegal. Or maybe all of the passengers could have disembarked from the plane to protest the egregious act. Yet, they did none of that. They all sat on their rear ends because they had things to do elsewhere and places to go. They were weak because they did not want to complicate their lives.

United Airlines dragged a passenger off the plane because they knew the other passengers would do nothing. The airline knew they could get away with it. Even our government knows this as they brazenly pass laws and regulations contradictory to our Constitution. They know it when they empower TSA agents to exceed their boundaries and terrorize passengers with what are clearly illegal searches. The architect of Obamacare brazenly said the Administration lied to the public and then bragged to the press about how it passed the Affordable Care Act…because he and they knew Americans were “too stupid” and too lazy to fight, or even challenge, the law. This is our state of affairs.

We are getting close to a tipping point as our public and private institutions continue to treat the general public with revulsion and disdain. It hurts me to say we deserve it. If we, as individuals, are not willing to fight for our rights, why should we expect it from others? There irony is, of course, that in forgetting how connected we all are, and how action and inaction affects us all, our silence as individuals in the face of oppression will be the undoing of us all.

Steve

sleeclark@gmail.com

The Untold Story of United Airlines Brutality

The story of what happened on United Airlines has been about the violence and brutality inflicted upon a passenger. That story is not nearly as troubling as the one no one is writing about. What happened on that flight was how the German government, led by Adolph Hitler, was able to kill twelve million people. What happened on that flight was cowardice in the face of abuse of power.

None of us know what we will do in an emergency or life threatening situation until we are there. So it’s easy to say what we would have done had we been there. Hindsight is not only 20/20…it’s also safe. What can be said is that if you know what you believe in, and you know what is worth facing consequences for, then your action in such unanticipated moments will be motivated not by what is expedient or beneficial to you, but rather by your guiding principle.

Everyone on that flight knew that was happening was wrong. I don’t care what United’s Rule 25 says or what its CEO says in justifying the assault and battery that occurred. Nor do I care a whit about United employees who “needed to get where they had to go.” Everyone knows that what happened was wrong. It was the application of brute force with total disregard and disrespect for another human being. It must have been horrifying to watch right before your very eyes. Yet no one present did anything about it.

Why?

We say gold is a rare commodity and difficult to mine but courage is much harder to find. It was totally lacking on that flight. Three hundred people watched, horrified, and did nothing about it. What could they have done? Well, if they weren’t trying to make certain that they weren’t next, and they had a principle of which they were certain, they could have stood and said, “We’re all leaving this plane. You just bloodied a passenger because he was resisting disembarking. Now you can have the whole aircraft for non-paying United employees because we’re getting off and never flying United again.”

That’s what courage looks and sounds like. But instead, what happened on the flight was precisely what German Lutheran Pastor Martin Neimoller wrote about:

“First they came for the Socialists and I did not speak out…

Because I was not a socialist.

Then they came for the Trade Unionists and I did not speak out…

Because I was not a Trade Unionist.

Then they came for the Jews and I did not speak out…

Because I was not a Jew.

Then they came for me….and there was no one left to speak for me.”

He was one Asian man, minding his own business, sitting in a seat he had paid for, harming no one. His history and his background are irrelevant. Unless, of course, you are looking for a reason to justify or excuse, in your own mind, why what was done to him was not so bad.

And those people present on that plane? Well, it was happening but not to them. It wasn’t their seat, it wasn’t their problem. Best to not draw attention to one’s self and perhaps be the next victim.

What breeds victims is an unwillingness to stand in the face of evil. Whether it is a bully in a school yard, an abusive spouse, a rogue cop, ISIS, or a corporate policy that justifies violence…the failure to refuse to tolerate what we know is wrong is the slippery slope to enslavement.

It is Passover. It is a holiday that exists to remind us that we are only enslaved to others when we tolerate indignity and deny the laws of God in so doing. Yes, it takes courage to walk into the unknown and risk the safety of what is. But when what is robs you of your humanity then the unknown should be welcomed and the risk worth taking.

On Palm Sunday 50 Coptic Christians were killed in a suicide bombing in Alexandria, Egypt.  First they came for the passenger and we did nothing…                           Carole

 

Trump and The Middle Class

There is no doubt Trump’s election was a victory for the middle class. It was fed up with Obama, the media and the lies that politicians were feeding them. While the media reported on the economic boom and the benefits of Obamacare, the middle class was dealing with lower wages, higher inflation and a shrinking job market.

The middle class had enough and elected someone who they believed would help them.

President Trump’s election highlighted divisions that already existed. The middle class and the Conservative movement hated the policies of Barack Obama; but, they acted in a manner respectful of the Presidency. To the contrary, President Trump has not been given the same measure of respect by the Left whose members have come at him with figurative pitch forks.

I believe we’re approaching what may well be the most dangerous period in our country’s political history. We face a myriad of serious problems, starting off with a twenty trillion dollar deficit. Yet, I continue to be optimistic that what lies ahead will be great for the country.

Because of our enormous debt and the size of government, President Trump has implemented a hiring freeze on all federal employees. Government employees have been put on notice that change is the order of the day, but they are not alone. Lobbyists, and all those who make money off of the government, are worried as well. President Trump is a threat to their way of life and of doing business. When Boeing airlines made known the price of the New Air Force One, the President balked and said, “No. It is too expensive.” It was an unequivocal message to all contractors that the days of bilking the government were over.

The main push back for the President has come from the Deep State. The “Deep State” has been referred to as “the secret government-within-the-government” that actually holds tremendous power.  Many of the government secrets and power structure reside in the Deep State and many members of our government operate there.

Presidents come and go; but, people who have real power often stay in government positions for decades. For example, there are 79 members who have been in Congress for at least twenty years. Now add in all the career government employees, over 1 million, that work at all of the government agencies and you get an idea of what comprises the Deep State. These people  have a vested interest in keeping things as they are. This President is a threat to all of them.

The key to understanding the war being fought between the Deep State and President Trump’s vision of America is knowing how money flows in the United States. For the last 30 or so years, the U.S. economy has been built around a model that created vast power in Washington. This model has three key components.

First, we have a highly “progressive” income tax. This ensures that anyone who makes significant income will pay the majority share of the government’s expenses. We live in a country where half the country pays zero taxes and the top 10% pay  80% of all taxes paid. Because of this, the electorate continues to vote for more and more government. They do so because the pay off is no taxes and increased benefits.

Secondly, the government has an incredibly powerful regulatory scheme in place. This allows Washington to essentially control vast segments of our economy.  Healthcare and Wall Street come to mind. Look at Wall Street, for example. Who gets to sell a bond or stock to the public? Only those approved by the Securities and Exchange Commission.  This power results in a tremendous amounts of graft– legal fees, fines, and hidden lobbying that flows into Washington to feed the parasites. The Left’s rallying cry to harness capitalism revolves around regulation. But these regulations only make the players in the industry more powerful while simultaneously shielding them from new competitors. The regulations only exacerbate the problem for the consumer and benefit business…the opposite of what was intended.

Thirdly, there is  the North American Free Trade Agreement (NAFTA) which gutted the U.S. manufacturing sector when it was sold as a means of boosting it! In addition, these trade agreements have allowed our country to export all of the inflation generated by our central banks, since the U.S. dollar is the world’s reserve currency. This has led to decades of declining interest rates and allowed the government to borrow endless amounts of money without any serious consequences.

I believe these three policies are the foundation of the Deep State. President Trump has started to attack many of these pillars. He has begun a fight with the Deep State. His opposition is coming from all sides. The media and the politicians are trying to obfuscate the issue; but this opposition is real and dangerous because they know the President has the power to dismantle The Beast.

What President Trump is doing right now by way of  his border-adjustment tax (taxes on imports), additional tax reform, and regulatory rollback is targeting each of these pillars at the same time. If he succeeds (“wins” in Trump speak) the power that has been consolidated in Washington, D.C. over the past 40 years will evaporate.

The Left and the Right have both been enemies of the middle class. Take a look at NAFTA.  The case for NAFTA was that it would allow American consumers access to cheaper products, thus helping them. That it did, but at what price? It devastated the manufacturing industry.  So although the the middle class had access to cheaper goods, they did not have the money to buy them. So where did the money go? To Washington and to the top 10% of America’s wealthiest who were able to access foreign markets and shield the resulting income from America’s tax system! Shameful.

Then, take a look at our tax system with its complexity and aggressiveness that have hurt the middle class the most . The U.S. is the only industrial country in the world with global income taxation. That’s right. You have to pay federal income tax no matter where you live. So what have the big corporations and wealthy individuals done? They have moved their assets offshore and set up companies outside the purview the U.S. government thereby shielding their assets from Washington.  The result is that the tax burden has fallen on the middle class to make up this shortfall…punishing wage earners while rewarding individuals and corporations who use overseas labor.  While the rich shield their money the poor pay no taxes. Voila! The middle class foots the entire bill. The result has been a decline in real, after-tax wages over the last 40 years.

Such is the recipe that has destroyed the middle class.

Trump’s tax plan is to effectively lower income taxes to 25% and implement a value-added tax to discourage foreign production of U.S. products. In an nutshell, this tax plan will force companies to come back to the U.S. and produce their goods here. Companies will no longer be able to hide overseas. These two changes will turn this entire economic structure on its ear and gravely hurt the Deep State which controls it. The winners will be the middle class, small-business owners, wage earners, and America’s manufacturing base. The losers? All of those who have invested heavily in the current Deep State regime.

With passage of the bill,  Trump’s new economic model could become a reality by the end of 2017 and initiate a new economic paradigm for the United States. The line is drawn. Let’s keep a close eye on who is standing on which side and why. Then when midterms roll around, let’s hold accountable those who stood on the side of the Deep State in opposition to middle class Americans. No more secrets and accountability. Wouldn’t that be novel.

Steve

sleeclark@gmail.com

 

 

No Acronyms Allowed!

“We have to depart the LZ by 0500 so that the recon can be complete by 0600.”  That was about all I remembered from the briefing…or all that I could understand.

The briefing was given in the mess hall of a navy ship in the middle of the Mediterranean. I was part of a Marine unit that was deployed to the Middle East for six months. Given the instability in the world, the MEU Commander had to develop contingency plans for all types of situations.

These types of briefings are normal during a float. For example, if an embassy had to be evacuated, the Colonel of the deployment had to formulate a plan on how to accomplish the evacuation. Logistical complexities of such missions require that the Marine Officer would have to brief the Colonel, in a single meeting, on the strategy to employ. If any of the proposals seemed out of whack, or needed to be fixed, this was the platform where it was done.

Briefings usually lasted about an hour.  It was not uncommon to have thirty or so people presenting. Air officers, helicopter pilots, infantry officers, ordinance officers, radio specialist, etc. would all have their say. In order to make the briefings quick and keep them moving along, acronym’s were used to speed things up.  But given the number of groups inputting their perspectives and expertise, each with its own lexicon, it was like listening to a cacophony of terms that, for the uninitiated, was super confusing.

The U.S. Marines have been around for over 200 years. To their credit, they have been able to successfully orchestrate the system that brings all this diversity of information together. Luckily for me, I was able to figure out what was being said!

When I transitioned to finance and started working at an emerging markets desk, I had to once again learn a new language: this time it was “finance speak” and the acronyms used in that world.

The nature of the finance world is that it is secretive and cut throat. I did the best I could with the new language, but it was close to impossible to understand all of the jargon. In the Marine Corps, the officers would go out of their way to make people understand what they were saying (afterall, lives were on the line). But in finance, it was common for people to give vague and unhelpful answers.

Michael Burry, who made millions of dollars shorting the housing market, said one of the reasons he looked into the trades with greater scrutiny was the sheer number of acronyms and jargon used to describe the housing market. When he called bond salespersons to walk him through the details of the structures he was thinking of buying, he realized that for all of their pedigree they understood very little about what they were selling.

So, to educate himself on all the terminology, he ordered a variety of prospectuses and started combing through them to understand all of the terms. He created a dictionary of those terms and acronyms until he understood everything that was being marketed and sold to investors.  Armed with that knowledge and understanding he bet against Wall Street… knowing that the firms selling those instruments had no idea what they were doing.

Ray Dalio, the hedge fund manager of Bridgewater, does not allow any acronyms to be used in meetings or reports. Everything has to be explained down to the last detail, so that everyone within his firm understands what they are doing. He has stated that acronyms become like a code and secret language behind which people hide.

True knowledge comes from being able to explain things;  even the most complex things.

Part of the reason most of the major financial institutions went under during the last crisis was because information was hidden and guarded. Many of the employees at the banks had no idea the extent of the recklessness of their mortgage departments.  At the time, I worked at Merrill Lynch on a bond desk.  We were having a great year and had no idea the damage the mortgage department was causing. We were shocked by the amount of risk they had taken.  Be assured that had more people been informed of the risks the mortgage area was taking, the positions would have been wound down and the bank saved.

In reading memoirs written prior to the crash about working at a bank and trading for one,  what stands out for me is the lengths to which employees, as well as management, guarded their trading secrets. The mindset was, “If show people how I am making money, the firm will fire me and do it for themselves.” So the information was never shared.

Contrast this attitude with Google which gives away all of its information for free.

Part of the reason Bridgewater is so successful is because it shares its information. Bredgewater is relentless in getting at the truth…even down to the language it uses.  No abbreviations.  No acronyms. If you work for Bridgewater and want to share something, you must explain your thoughts fully…down to the last detail. Imagine if that same rigor and search for the truth had been the standard for the banking industry prior to 2008. How different our lives would be  today!

It really makes you wonder why its ever done otherwise.  Truth is inevitably revealed and when it is, it also prevails. Both companies and individuals willing to embrace that fact are the ones that will survive and prosper this time of cultural transition.

Steve

sleeclark@gmail.com

 

Theft in The Financial Markets

Many people in positions of  power tend to think of themselves as being God-like.

bankers-theft

No where is this more apparent than among the financial and government planners who beset the West. Educated at the best schools and responsible for the finances of the rich and powerful, it is understandable that they think of themselves way. They have come to believe, due to their education and responsibilities, that they know better than mere mortals. This hubris and arrogance was given credence in part by a British economist named John Keynes.

Keynes developed an economic model of thought which asserted that the government had a rightful role to play in the financial markets. Central to Keynes’s theory was the premise that the economy was just a matter of inputs and outputs that could be tinkered with to effect greater efficiency. The main thrust of Keynes’s argument was that whenever the economy stalled the government had an obligation to inject money into the economy to get it moving again.  Keynes’s theory is known as “Keynesian economics” and his disciples now act as the main policy makers in the West.

Today, it is standard practice for government officials to start meddling in the private sector whenever there is a slowdown. They cite Keynesian economics for their actions. During recessionary times, government officials will increase public spending, create more public works projects and inject money into the banking system. President Franklin Roosevelt and Barack Obama, both presidents during recessionary periods,  resorted to massive government spending to aid the economy.

Keynesian economics has become the dominant form of monetary policy today in government circles. The way policy makers inject money into the economy is by lowering the cost of money. They do this by manipulating the financial markets. The idea behind it is that cheaper money will stimulate the economy and create new jobs.

For example, during the last eight years, most major central banks have been buying their own debt to lower the yields. But these lower yields have not spurred any economic activity. Rather, it has caused actual investors to earn less interest income. If government bonds actually yielded something tangible, private investors would be earning a return on their money and putting that money to productive use. But since that money is not going to individual investors, the economy is continuing to stall.

The slower growth that we have seen over the last few years has pushed the government to enact more and more policies for even cheaper money. The end result is that, in many countries, we now see negative interest rates.

Figuring out what interest rates should be is not hard.  Take GDP growth (currently 2%) and add  2.5% for inflation and you get your money which should be 4.5%.  However, currently bond yields are only 2.15%. The difference between 4.5% and 2.15% rates is the money that is being stolen by these bad policies. Given the size of the market, we are talking billions of dollars that are not flowing into the private sector.

For some reason, this theft by the government is never reported as such. Instead, we use the terms “quantitative easing”, “buy backs” and stimulus packages to mask the central planners’ actions.  Call it what you will, its theft.

Pension funds, IRA’s, and retirement plans all use the rates on the bond market to plan their investments. However, because the bond markets have been so distorted by government interference, the yields that investors were expecting are no longer there. Investors have been forced to speculate and invest more heavily in the market to recoup this “stolen” money.

The scope of this government manipulation of global stock and bonds markets is enormous —larger than the U.S. government’s manipulation of housing prices when they kept rates low and used Fannie Mae and Freddie Mac to back housing loans. Most economist believe central banks around the world have created more than $11 trillion in new money, all of which has been invested in financial securities, real estate and commodities. The amount of government investment and intervention has never before been done on such a massive scale.

There is simply no way for this to end well.

Eventually, markets  always correct themselves. The U.S. stock market is trading at record highs and at record-high valuations; but, earnings have fallen for five straight quarters. This simple observation is obvious to many but somehow not to our elected leaders. The world’s major economies are groaning with inflated securities prices and a debt burden they can not afford.

Who knows what will happen when investors realize that the party has ended? When investors scramble for the exits, there will be nowhere to go. By law (The Volcker Rule and others) banks will not be able to act as as intermediary for the majority of these trades.

We have forgotten the seed of all growth is capital. Capital is essentially the surplus from our economic activity which is then used to fund future growth. With rates being what they are, investors are being forced to risk and speculate in the markets and not save that all  important seed —  capital. Our government policies are discouraging capital formation.

When the market implodes, and it will, there will be no capital stored up to start over. It will all have been destroyed. So while we’re distracted by demonstrations and the illusory insanity of politics, the very foundation of our thriving nation has been eroded right before our eyes by the very people we trust to use good judgment in protecting it.

 

Steve

sleeclark@gmail.com

 

New York State & Airbnb

Did you ever see the 2002 movie Minority Report with Tom Cruise? It is a great film with a brilliant premise which is that  it is better to stop a crime before it ever happens. Tom Cruise plays a police officer in a unit called “The Pre-Crime Task Force.”  With the aid of super psychics, they use their abilities to stop crimes just prior to their commission.

precrime

Once notified by the psychics, the police officers arrest the perpetrators before the crime is committed and incarcerate the “criminals”  before they can take action. So, even though they’ve committed no actual crimes, they are still sent to prison.

The “intent” was all that mattered.

Although it’s a science fiction movie and takes place in the “future” you’re left with the impression that the idea is far fetched and could never happen. That is….until now.

Just last week Andrew Cuomo, Governor of New York State, signed a bill making it illegal to advertise your home for short-term rentals on websites like Airbnb. So, even though you might not ever rent your space, the sheer fact of publicizing your intent to rent will run you afoul of the law. Like pre-crime, you don’t even have to rent out your unit to get into trouble.  You just need the intent. No it’s not science fiction…its New York State.

As it stands, New York already has a law on the books making it illegal to rent out your home, or rooms, to short term tenants. The state also has heavy handed condo Boards that rule and restrict New York real estate associations. Most of them have stringent measures that forbid short term rentals.

The penalties to advertise carry up to a $7500 fine. Seem egregious? Yes…when D.W.I fines in N.Y range from $500 to $5,000 dollars and reckless driving fines are only $300 dollars! These are fine for actual crimes not an intent to commit one.

The fact is, Airbnb solved a huge issue for visitors to N.Y.  New York, especially New York City, has some of the highest hotel rates in the world along with some of the highest hotel occupancy rates. It is hard to find a hotel room that rents for less than $200 a night in New York City, so cheaper alternatives were needed.

Companies such as Airbnb filled a need. It’s not like New York City isn’t benefiting. Airbnb generated over $400 million dollars for New York City property owners last year.  So, at face value, it would seem everybody would be better off by having Airbnb in New York.  Hotels still have high occupancy rates that are not being negatively effected and property owners can generate additional income while having visitors enjoy a better experience. Finally, even the politicians get their tax slice of the $400 million.

Now those benefits are gone.

The reason why Airbnb was barred was alleged to be “safety reasons.” This seems always to be the justification of every action the government takes.  The statement read, “The government must ensure that all buildings comply with fire, building and other safety codes relative to their class.”

Give me a break!

I lived in New York City. You can barely walk down the street without obtaining a multitude of permits. Now, all of a sudden, those rental properties built over the years somehow slipped through licensing and zoning agency purview and were built without the government’s oversight in the first place? Please.
 
State Senator Liz Krueger issued a statement in favor of the law, calling it “a huge victory for regular New Yorkers over the interests of a thirty-billion dollar corporation.” Really?  The majority of Airbnb’s profits flow to individuals. In fact, the company Airbnb has lost billions of dollars since it was founded. It has never generated a profit. The platform was designed for individual parties to benefit, not corporations. Senate Liz Kruger is a liar for saying something so blatantly false and misleading!

So this “victory” is actually one for the power brokers and against regular New Yorkers…ordinary people who use the site to generate extra income and help make ends meet. These people will now lose that needed extra income.

With stupidity like this so pervasive in government, especially in N.Y., it’s no wonder why people are leaving the state. Since the 2010 census  653,071 people have left the state. This was the largest decrease of any state, both in absolute terms and as a percentage of estimated population since the start of the decade.

The Empire State doesn’t say why residents are leaving, but we can think of several possible reasons: high taxes, high unemployment upstate, high housing costs in the city, and a large (and corrupt) bureaucracy—for starters.

Ironically, New York City already has the infrastructure within the surveillance state to “detect” pre-crime…not unlike the world which “Minority Report” portrayed.  So it should not come as a shock that in real life, and in real time, the bureaucrats and administrators are already writing laws that will allow them to impose upon New Yorkers what they obviously thought was a darn good plot.

Truly scary stuff.

Steve

sleeclark@gmail.com

Boredom and the Digital Age

When I was a young kid I spent my summer months by myself in Ecuador.

boredom

Well that is not entirely true.  I stayed with my grandparents. But, since my grandmother was bedridden and my grandfather spent all day at work, I was left on my own.

My day began at 7am and from that point on I was on my own. I had no friends and nobody to play with. All of my cousins were at school so I only saw them on Sundays.  Being away from home,  I had none of my usual toys to entertain me.

Those years were pre-internet. TV was out of the question because there were only three channels anyway and the TV was in my grandmother’s room. I was really left up to my own devices so I learned how to deal with silence and boredom and how to entertain myself.

I grew up in boredom and know how to use it. That experience taught me how to work independently and without much guidance.  Its fair to say that the seeds of my independence were born during those years..

Now, I look at my children and see that they have no periods of boredom. They are continually connected through their phones, computers, video games and streaming companies such as Hulu and Netflix. I do limit their use but its an ongoing battle.

My oldest child is really a fan of pop culture and will “binge watch” shows for hours on end. I know this is bad for her and have implemented ways to budget her time; yet, she still finds a way to watch her shows. I am not alone on this. Many of my friends’ parents have expressed their dismay at the amount of time their children spend on electronic devices.

Admittedly, all of these mediums have some benefits to them if used in the proper context. However, I personally fell that, in the end, these new tools can become vices that seductively lure us away from a meaningful life. Boredom never enters into the minds of children today simply because they are forever being entertained. That quiet space where self-direction and creativity are born is disappearing.

Boredom trained me to become patient and to allow things to unfold naturally.

When I was in the Marine Corps, we had to do one particular training on how to plot ambushes.  An ambush is a tactic where the attacker hides him/herself and waits for the enemy to walk into its trap. One emphasis of the exercise was to stay in position, motionless, for hours on end. Regardless of the weather conditions, bodily needs and mental state, we had to learn to stay quiet and still without moving. Even the Marine Corps, which prides itself on its aggressiveness, understood the need to be silent and still for long periods of time in order to be successful in war…even if t iss maddeningly boring!

My tenure as a professional bond trader also required immense patience. One of the main skills needed was the ability to watch computer screens for hours on end in order to identify subtle price movements  It was not uncommon for me to spend eight hours a day glued to my screen, unable to leave my desk, because of the demands of the job. Many times, the days were tedious and the work grueling; but, I was self-trained in knowing I could sit there and do the work. Part of the job was to sit, watch and pounce like a tiger when price aberrations appeared on the screen. The success only came to the traders who had the ability to watch and wait for long periods of time, the ones who could handle boredom, and be there in the moment to seize the opportunity when it arose.

I am not so sure that our devices and our culture are forming the types of people who can sit down and do the grueling  work that is needed to accomplish so many necessary aspects of productivity.

Take the classic song Hallelujah written and performed by Leonard Cohen which was released in 1984 and never found an audience. The reason was that the first iteration of the song was not very good and Cohen knew it. But he also he knew the song contained seeds of greatness.  Cohen would not relent. He went over and over the song. He picked at it and picked at it n an effort to refine it. For him it never became a hit. And yet other artists saw the beauty and power within the song and, for years fiddled, with it for years. For years. It wasn’t until an artist named Jeff Buckley shortened the song and edited the lyrics that it became a hit. That was 15 years after Leonard Cohen wrote it.

“Hallelujah” is now considered one of the greatest songs of all time. Some songwriters call it one of the top ten songs of all time. One of the reasons that the song is considered great is because of the sheer amount of effort by various artists over the years who took the time, and exhibited the patience, to do the work. They studied, played and tinkered until a masterpiece was emerged.

Think about it. A five minute song took 13 years to create.

Admittedly, I too have been affected by this digital age. I’ve wasted plenty of time on my phone knowing the time was being misused. But at least I have a point of reference.  I have something against which to measure myself..all those years when I learned the value of downtime.

All of these terrific companies that have been created over the last few years such as Facebook, Instagram and Snap Chat are a testament to the genius of their creators; yet, there was a “method to their madness.”  They were designing systems and processes to grab your attention so you’d waste your time on their platforms and to their economic gain.

Slavery comes in many forms.

Steve

sleeclark@gmail.com

 

 

Real Estate Ownership

For years, the financial industry and media pundits have told us that the way to wealth is through real estate. So what do we really own when we buy a house?

Many people feel that once they buy a house they own it; but, if you have a mortgage, its the bank that owns the house not you. Forget to pay your property taxes? The tax man will take your house regardless of who “owns it.”

real-estate-businessThe real estate industry has an entire machine that promulgates the benefits of home ownership. From the ads on TV to radio commercials… the average consumer is inundated with messages assuring that real estate is the way to achieve financial success. Yet, when the real estate market crashed in 2008, many people were wiped out.

What happened?

Real estate prices had become so over-inflated that it was no longer economical to buy.  Without any more buyers entering the market, prices collapsed. It got so bad in some cities such as Detroit that houses could be bought for one hundred dollars!

In fact, business colleagues of mine started a company to capitalize on the rock bottom prices in Detroit.  Because of the huge downturn, the city was literally giving houses away. The municipality was going so far as to raze certain neighborhoods because there was just too many vacant houses. In fact, wilderness began reclaiming parts of the city with deer actually showing up in Detroit!

It wasn’t only houses that were on sale. Skyscrapers in parts of downtown Detroit were selling for under five million dollars. This was crazy when you realize that prime apartments in major cities such as Miami were being valued at the same amount as skyscrapers in Detroit.

The funny thing was that even at rock bottom prices, Detroit had a hard time finding buyers.  If you think about it, it makes no sense that a house could sell for so little.  But, if you truly understand how housing works and the role government plays in that equation, it makes perfect sense.

The $100 price was an only an illusion of the true price of the home. If you bought the home, there were bills that had to be paid; mainly the ongoing tax bill levied by the government that ran north of $5,000 dollars per year. So what my colleagues were really buying was a $5,000 annual liability that they would have to pay.  In addition, in order to buy the house, the old tax bills (tax liens) had to be paid off to make the house current.

This is why Detroit had such a hard time selling its houses for rock bottom prices. Nobody likes to buy a liability, particularly one that would likely increase if more people continued to leave Detroit.  The people who remained would have to pick up the shortfall in property tax revenue created by everybody else who moved.

Detroit became the epicenter of the lie of real estate. There is no such thing as home ownership in the U.S.  We are all tenants. Our landlord? The government. And their claim on your land has first priority as a lien over all other creditors.

Tax liens are all the proof you need to know to prove that the real owner of your house is the government. If you fall behind on your mortgage, the taxes on your property don’t get paid. When that happens, the local tax office will auction off the unpaid taxes that you owe to investors for double digit returns. If your tax bill remains unpaid for a long enough period of time, the tax lien holder owns your house. In terms of debt structure, tax lien holders are senior to mortgage debt.

So for example, if you fall behind on a $300,000 mortgage and a tax lien holder buys a $3,000 tax lien on your property, that tax lien holder now has a lien senior to the mortgage holder. If, by chance, you default and the bank cannot/will not pay off the lien holder, the tax lien holder can be awarded the house. So, even though the mortgage company took the biggest risk and lent most of the money, by law, they are junior to the tax man.

I give credit to the millennials. They see first hand the dangers of owning too much real estate and the stresses it can cause. They have shunned home ownership and seem less concerned about material goods. Out of the crisis in 2008 came the movement to own your own home; but, without having the government as your landlord.

Tiny houses are the solution to owning your house free and clear. The way that that they get around this law is by building small houses and placing them on a trailer. Because the house can be moved by vehicle and house never touches the ground, the government can not tax it. Although the houses are small, they are fully functional and can be bought for as little as $35,000 dollars.

tinyliving

Life in the U.S over the last fifty years has revolved around living in a communities. Home ownership has been a way for politicians (and municipalities) to tax homeowners to achieve their objectives. Public education has been the main selling point for living in these communities and the means by which politicians sold their plans. But look at what happened in Detroit. Citizens rejected the notion that it was worthwhile to stick around for a public education…one that was sub-par at best. Having lived in New Jersey for many years, I know first hand how run down many of these public schools have become.

The tiny house movement, home schooling and the move to online education courses have all become threats to the notion that we need to live in one community and have our tax dollars used for public education.

Man’s natural inclination is to be free… especially from the tyranny of government. Because government uses tax payer monies to pay for local, state and federal employees its fair to conclude that government employees’ lives and their income are more important than us non-government employed citizens. The fact that the government can take away our houses because of a tax bill,in order to keep funding its own sustenance and growth,  just goes to show you what governments’ and politicians’ priorities are.

The tiny house movement might just be the first step toward a nation of true home ownership. Bravo to the millennials on this one! They looked around and saw that more is never enough so they’ve concluded that…less is more.

Steve

sleeclark@gmail.com

 

Time To Bug Out

“Bug Out” was a derisive term that emerged out of the Korean War after the U.S. Army hastily retreated from it’s holding position during attack. We abandoned our positions and fled en mass as the Chinese overran our positions. They “bugged out” the same way a cockroach flees when the lights are turned on. Weapons, equipment and radios were all left behind in the hasty retreat. That retreat by the U.S. Army left our Marine Corps brethren totally exposed on their right flank, which enabled the Chinese to completely  surround the Marines.

Bug Out

The Marine Corps were able to extract themselves from this precarious situation by doing a retrograde to the Chosin Reservoir and narrowly escaping the Chinese horde. Had it not been for the Marines bravery and resiliency, the outcome would most likely have been a total disaster for them.

The term “bug out” came to mind as I sat watching the Twin Towers come down 0n 9/11/01. Earlier that day, I had been in Tower 5 , one of the buildings connected to the World Financial Center, and was able to escape with my life. Later that same afternoon, my wife and I, joined by friends,  gathered on the lawn opposite the Twin Towers to watch the inferno while trying to gain some understanding of what had just happened.

At the time, we lived in a community in Jersey City populated with many people from Latin America.  These were our friends…Brazilians, Argentinians and Mexicans to name just a few. For the most part, we all worked in the banking sector and our lives were connected by families and jobs. Since I spoke Spanish fluently, most had no idea I was an American or that I had served in the military. They all thought I was an immigrant, like them, who was here under a work visa.

While they were all dismayed and distraught by the events on 9/11, to a person they all had the same plan in mind, to bug out, to leave the country as quickly as possible. The day before they were all happy living and working in the U.S., thrilled that they had high paying jobs and great careers as they had been unable to find these opportunities in their home countries. Yet, on the day of the attacks, they were already beginning to pack their bags and head home to, what they perceived to be, safer venues.

In a sense I could understand their concern. They were foreigners in a foreign land and, consequently, had no horse in the race. The U.S was being attacked and they were not willing to risk their lives as they were not Americans.  They all wanted to leave. I get that…to a point. On the other hand, they were willing to reap all the benefits American society had to offer them as long as they didn’t have to assume any of the responsibilities that citizenship required.

In essence, this is the problem of immigration (illegal and legal). If the only reason people want to come here is to extract benefits, in the case of my neighbors and high paying jobs, how was is that group of people any different from the illegal aliens who come here for free government benefits?  Neither group is here to benefit the country, only themselves.

When I was in the Marines, I had the honor of serving with a Marine from Ireland and one from the Dominican Republic, both of whom had joined the Marines as a path to citizenship. They served with honor and would have paid the ultimate price for this country. However, when I worked in the banking sector I was surrounded by foreigners whose main aim was to make as much money as possible and then “head home.” Hardly any of them had any real interest in understanding the country and the sacrifices people have made to make this country an economic juggernaut.  Admittedly, not all of them were like this; but, the majority was.

There is clearly something awry with an immigration policy that allows in economic “hit-men” (and women) whose sole purpose is to get as much money as possible from the American companies they work for and take it elsewhere.

Part of the reason Donald Trump is doing so well in the polls is his “pro U.S. worker” message. The middle class has felt the economic squeeze via illegal immigration as these immigrants compete with the middle class for jobs. Yet these same immigrants don’t pay any of the taxes for publicly funded programs, such as education and health care. The middle class feels unduly burdened because they are taking the hit and paying for it, too.

The white collar worker has felt the brunt of legal immigration, especially in banking and technology sectors via the HB-1 visa program which now pits Americans against immigrants for these high paying jobs. Many corporations know these immigrants will work for less performing the same job. The recent Disney scandal where American workers were forced to train their foreign replacements as a precondition for receiving termination benefits shows the great lengths to which American employers will go to bring in cheap labor.

The United States was founded on principles of Life, Liberty and Pursuit of Happiness. Many Americans and countless   families have paid the ultimate price for this great nation’s founding and its existence ever since. Today many people, especially the young, are attracted to the financial structure of socialism..being sold as an alternative to capitalism. But economic socialism is a derivative of a failed political system: Socialism. Capitalism is not. It is a purely economic model…one which has brought more wealth and innovation to the Western world, and more economic relief to the world in general, than any other in human history.

We were not meant to be a system of commerce where each and every transaction is to be judged by its optimal economic return. The immigration policies that the U.S has created, which incentivize illegal immigration by way of free benefits, undermines the ability of capitalism and free markets to self-correct.

Ultimately, the brilliance of the American citizen, and in particular the American worker, is that we are a nation that was built on showing up and staying the course…not bugging out. The path to citizenship should be one that honors that history.

Steve

sleeclark@gmail.com