Archive for the ‘Economics’ Category

The Man Who Made His Accountant Cry

Saturday, March 29th, 2008

Larry Ellison Loves Himself

What has 23 acres, an 8000 sq. ft. house with two wings, a guest home, three cottages, a gym, a 5-acre lake, two waterfalls, two bridges, and hundreds of mature cherry and maple trees planted among 1000 redwoods pines and oaks?

The $200 million estate of Larry Ellison, the $25 billion, 12th-ranking member on the Fortune 500 list of world’s richest asswipes. The one that had his aptly-named Octopus Holding company buy it from him in 1995 for a deflated $12 million. The one that just “earned” him a $3 million property tax cut based on a professed 60% decline in the home’s value vs. the 6.3% for an average home. An average home - the ones not being foreclosed on anyway - that is being over-assessed because the neighbors can’t pay their mortgages down at Loan Shark Larry’s Savings and Loan.

And the rationale for the cut? It’s even richer than Larry (and apparently God) himself.

According to his tax appeal, the behemoth bungalow in his private redwood grove suffers from “significant functional obsolescence” because there apparently isn’t much of a market for $200 million pimp cribs. He also says the 16th century Japanese architecture, “over improvements”, and “excessive landscaping” are too costly for mere millionaire to maintains, so gee he’d appreciate it if just give him a break willya?

The Woodside White Elephant
In other words, Larry builds a Japanese-bred white elephant that no one can afford to buy, maintain, or want to live in so the taxpayers now owe him $3 million for his foresight in building such an opulent slum. Or as a consumer watchdog group puts into perspective, “Three million dollars to Larry Ellison is the equivalent of $300 to the average home owner.” Oh, and just so you know we aren’t picking on poor beleaguered Larry, Bill Gates did the same thing several years ago with his Redmond, WA-based monument to ostentation, avarice, and greed.

It makes you really admire modest billionaires like Warren Buffett, who actually pay taxes.

But Woodside, CA town manager Susan George says the deal is on the up and up. “It shouldn’t make any difference how much money he has if the process is fair. We’ll miss the money. We always have good things to do with it.”

True enough, but that’s relatively easy for George to say. Cash-flush Woodside is usually the top or near-top median income ZIP code in the country. The rest of relatively affluent - but still within human understandingly affluent - San Mateo County isn’t so lucky. They have people who can’t afford to claim their E. Palo Alto, cockroach-infested apartment is worthless because it’s “significantly functionally obsolete” with a leaking roof and broken plumbing. BTW, East Palo Alto is the other Palo Alto, the one that’s not home to multiple multi-millionaires and Stanford University. The folks in E. Palo Alto suffer from a crippling crime rate and crumbling housing over there on the wrong side of the freeway - the side that isn’t protected by sound fencing like the gracious folks across the road.

Rich Shouldn’t Matter
In principle I agree with the town manager. It shouldn’t matter how much money you have. So I suppose Larry wouldn’t mind if his revaluation was the going 6.3% - just to be fair and all. I’m sure he won’t mind, because he could just recoup the money by delaying the painting of his yacht, the world’s largest. Or perhaps he could stop routinely violating nighttime noise restrictions at San Jose International for landing after hours in his private Gulfstream jet. He was exempted from the noise restrictions too.

Larry is well-known as the infant-terrible of Silicon Valley. He runs his company Oracle based on the principles of Sun Tzu’s The Art of War.

He regularly buys out any competitors, frequently in hostile takeovers - and grinds their successful products under his heel in order to buy new sails for his America’s Cup yacht or gas for his aerobatic team. At each hostile takeover, employees lose jobs to feed Larry’s Giant Maw of GreedTM. And it’s a hungry maw indeed. So hungry, that Larry’s accountants warned him several years ago to cut his fantastic spending lest he bankrupt himself.

It’s Tough Out There for a Billionaire Pimp
I guess $12 billion doesn’t go as far as it used to.

I’m a firm believer in capitalism, although I recognize its limitations if left totally unrestricted. I have nothing against people earning money. In fact, I don’t care if a person makes billions - more power to them. But if you make billions you also inherit some responsibilities.

One of those responsibilities is paying your taxes like any other good citizen of modest means without a buttload of full-time shysters to find boondoggle tax breaks. It also comes with a moral responsibility to not deprive others to feed your own hubris and greed. Don’t take money away from schools and hospitals simply because you can. It’s not a frickin’ game to see who dies with the most toys. Don’t lay off employees to get that quarterly bonus that’s just about equal to the money you “saved” by laying them off. I don’t require you to find the light and abandon your Marley-like stinginess like Bill Gates turned away from his once well-known anti-philanthropic ways. Hell, you can even illegally fly your jet late at night provided you pay buy soundproofing for the more modest home owners who will go to work exhausted tomorrow from a lost night of sleep courtesy of your (literally) money-burning flying hard on. In short, all I ask you to do is act like a normal human being instead of a shit stain in the crotch of humanity’s Jockey shorts.

In short Larry, stop being such an asshole.

Cross posted at The Omnipotent Poobah Speaks!

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“Live Within Your Means!”

Tuesday, March 25th, 2008

Talk about mixed signals. This article is basically lecturing people about sticking to a budget. Of course it’s good advice, especially with the housing crisis, credit crisis, the tanking economy…

But a huge percentage of our economy is based on discretionary consumer spending. Where would we be without it?

Every year starting in late November, tens of millions of Americans go into a crazed, foaming-at-the-mouth shopping frenzy. They spend money they don’t have, to buy a bunch of expensive presents nobody needs, just so they can impress people they don’t even like.

And while this mad stampede is going on, millions of business owners are terrified — mortified. They’re scared shitless that this year’s shopping stampede might not be quite as frenzied as last year’s.

If everyone started living within a budget and buying only what they could afford, this country would go through cold turkey that no junkie ever imagined. It would’ve been better if this whole credit/debt concept had never been adopted. But now that we’re in this mess, what’s the best way to get out?

There was an excellent TV series a few years ago — American Dreams (2002-04). It was about an extended family in Philadelphia during the early 1960s. The father owned a TV store. One day another merchant was telling him about this revolutionary new phenomenon: credit cards. The TV store owner said “What, somebody’s gonna pay more for something just so he can have it now instead of waiting ‘til he can afford it? No way!”

[sigh] if only…

Now that more Americans are being forced to live within their means, maybe the government could try the same thing. Riiight. After all, credit and bankruptcy counselors have to lay out strict merciless budgets for their clients. If any item isn’t absolutely crucial — Ixnay! Imagine somebody telling our reckless president:

“I’m sorry George, you just can’t afford to invade any more countries. Look at this multi-trillion dollar debt you’ve run up. Look at this shit! What were you thinking??”

And while we’re at it, can we afford to keep spending billions of dollars on some asshole’s “Family Values” agenda?

“War on Drugs? Are you crazy? You’ve spent yourself into bankruptcy trying to enforce your “values” onto everybody else. Not one more cent for your Morality Industrial Complex. Nope, I don’t want to hear it.”

Why Spitzer Had to Go?

Sunday, March 23rd, 2008

Here’s another one sent to me by Chris – this time by my son Chris rather than my friend-since-ninth-grade Chris: http://www.brasschecktv.com/page/291.html As the link points out, the takedown of Elliott Spitzer for admittedly sleazy behavior, using what should have been confidential FBI information, took place shortly after he publicly pointed out the role of the Bush administration in creating the subprime mortgage mess by blocking the efforts of the state attorneys general to regulate lenders and investigate predatory lending. It sort of reminds me of the way Nixon used the IRS as his personal political hit team against people that made his enemies list.

Charlie Rose: Paul Volker On Bear Stearns Bailout

Wednesday, March 19th, 2008

Former Federal Reserve chairman Paul Volker appeared on the Charlie Rose show last evening to discuss the recent actions to bailout Bear Stearns. Volker points out that the actions were unprecedented and he cautions that doing so may be an argument for greater regulation of investment houses like Stearns.

Volker’s remarks were focused on his concern that we are witnessing a transformation in the financial market. As such, he argues that it is time to review the mechanisms we have in place to insure that the economy is being protected from the bad decisions of these newly emerging financial players.

Volker doesn’t believe that the Federal Reserve should play a larger part in the regulatory process; rather he contends that they were forced to step into the void with regards to Bear Stearns. Volker suggests that the regulatory process should originate with our elected representatives.

The problem with that equation (even though I agree with Volker) is that the influence of the players in the financial market is daunting…and nothing provides better evidence of this influence than the recent rewriting of bankruptcy laws making it far more difficult for individuals to walk away from debt. Unfortunately, it appears that our government is on the precipice of bailing out the same financial institutions that sought to limit the options for relief by financially strapped citizens.

Yes, the GOP likes to be seen as opposing handouts and welfare…except when it is directed to those corporations that ante up each election cycle. The welfare reform enacted under the Clinton administration was one of the first steps in this shift towards escalating corporate welfare. If this trend continues, be prepared for further financial calamities of greater proportion…with astronomically more acute consequences.

Cross-posted at Thought Theater

George Bush (Brillant Master Of The Obvious) Says, “In The Long Run, Our Economy Is Going To Be Fine”

Monday, March 17th, 2008

No one ever claimed that George Bush has a powerful intellect. Certainly, you can’t expect more from the man who claimed a while back that we should “not misunderestimate” him. I cannot help but hearken back to that wonderful scene in the classic movie Animal House - where with the hoards roaring at him, the ROTC cadet yelling “all is well, remain calm” while getting flattened by the onrushing mob.

George Bush is so insignificant to the economy except for the inexcusable abuse of his administrations authority to get our country into this situation. His recent one minute speechifying is proof that he is irrelevant at this point in time:

9:40 A.M. EDT

THE PRESIDENT: Mr. Secretary, thank you very much for coming by today to talk about the economic situation — we’ll be meeting later on this afternoon with the President’s Task Force on Financial Markets.

First of all, the Secretary has given me an update. One thing is for certain — we’re in challenging times. But another thing is for certain — that we’ve taken strong and decisive action. The Federal Reserve has moved quickly to bring order to the financial markets. Secretary Paulson has been — is supportive of that action, as am I. And I want to thank you, Mr. Secretary, for working over the weekend. You’ve shown the country and the world that the United States is on top of the situation.

Secondly, you’ve reaffirmed the fact that our financial institutions are strong and that our capital markets are functioning efficiently and effectively. We obviously will continue to monitor the situation and when need be, will act decisively, in a way that continues to bring order to the financial markets.

In the long run, our economy is going to be fine. Right now we’re dealing with a difficult situation and, Mr. Secretary, I want to thank you very much for your steady and strong and consistent leadership.

Thank you very much.

END 9:41 A.M. EDT

So, in the one minute it took George Bush to deliver his comments, has he been able to restore your faith in his leadership to deliver us from the mess he helped cultivate? Right, of course our economy will be fine in the long run. We recovered from the Depression right? It’s what’s happening right now that hurts.

Pretty soon, they are going to foreclose on the undelivered FEMA trailers and then what? Too bad George can’t think past saving his pals in big business. If he was so keen to screw the little guy by routing the Chapter 11 laws, why wouldn’t they have let Bear Sterns sink in it’s own sauce?

When it gets right down to it, we see the President and his staff doing the time honored W, Rove and Co thing, saving their friends asses, screwing the little guy, and then blaming some one else for the economy they delivered.

Q For people who are losing their homes, or losing their jobs, and then they see the government helping engineer this $30 billion line of credit for Bear Stearns, and help for other financial investment firms on Wall Street, how do you reconcile the two?

MS. PERINO: Well, the way I would answer that question is in two parts. One, this isn’t about bailing anyone out. These actions are intended, as I said earlier today, to minimize financial market disruptions. And investors in Bear Stearns are taking large and significant losses in this transaction. And that’s not what happens in a bail-out. They bought into a company, they took a financial risk — and it had paid off quite well for them a while ago, but today they’re looking at a stock that’s only worth $2. And the Fed, what they did last night, is try to provide liquidity to the markets so it would stabilize, and we could have orderliness in the system.

But I would also say that a major market disruption would have very damaging consequences and be very painful for everybody, from the small business owner to the homeowner, for everybody all the way up and down the economic food chain. And the goal here is to prevent a major disruption in financial markets. And the Fed is taking decisive action when necessary, and that is what they saw last night.

In addition to that, homeowners and small business owners and everyone across America needs to know that we’ve acted on multiple fronts, starting back in August — that was when the President recognized that we might be heading into some headwinds in the economy, with several different aspects of it. And if you look back consistently over those past several months, he has said that we needed to take some action. And over time, we proposed legislation, dealing with the housing market. We also worked with the private sector to help homeowners, through HOPE NOW, and then Project Lifeline. We supported legislation that would not penalize people for writing down mortgage debt when they did a refinancing. And that finally became law.

We haven’t had Congress act on one of the most important things they could do, which is Federal Housing Administration — changes in reforms that we’ve asked for. It’s been about seven months since the President first announced that, and Congress is now and again on a two-week recess, and nothing is going to happen.

But at the same time, back in January, the President said, when we worked on the stimulus package, that the reason that we’re doing that is because we could see in the future there could be a potential downturn in the economy. And so if things were to get worse, we would have a stimulus package in effect. We called that, remember, an insurance policy, a booster shot, that we said would take effect and have impact later in the summer. And the President and Congress were right to work together on that bipartisan package, because those tax rebates will be going out to people all across the country, including the homeowners that you talk about.

Q But, Dana, how does this square with sort of traditional conservative economic principles of limited government involvement in terms of, sort of, maybe culling the herd a little bit, letting the firms that are going to fail, fail, and thus more can sort of live on the back end?

MS. PERINO: Well, I would point out again that, remember, investors — Bear Stearns basically went from a company that was doing quite well to failure, and at $2 a share, I should think that those investors are seeing — feeling today the consequences of that risk in a marketplace. But I would remind you that what’s right for the markets and stability for the financial system had to be taken into consideration. And that’s what the Fed decided to do, is to act quickly, to act decisively, to make sure that we could provide what’s needed right now, which is stability and liquidity and orderliness.

And the Treasury Department is able to answer lots more of detailed questions, and the Fed certainly on historical questions in this matter.

Q But people who are facing, say, foreclosure, the individuals, the little guys who are facing a foreclosure are looking at the big guys getting government, if not brokered, certainly they’re overseeing deals that are engineered to sort of keep the big picture financial community afloat, and they’re saying, well, where’s my boost of liquidity?

MS. PERINO: They’re going to get that boost of liquidity in the form of a stimulus package and a tax rebate that’s coming to them the second week of May.

Q But that’s not going to save their houses.

MS. PERINO: The other way to help work on the housing issues is to take advantage of some of the programs that we have in place, to talk with HOPE NOW or Project Lifeline, for those who are in more serious dire straits, and also to work — for us to continue from the administration to call on Congress to finally take action on Federal Housing Administration reforms, which we think are necessary to help homeowners across-the-board.

But I would remind you, and remind consumers all across America, that the decisive action taken by the Fed yesterday was precisely to prevent long-term economic harm to everybody in the United States, including, as you said, the little guy.

Right, so they are suggesting the 300 or 800 so dollars you and I get are the equivalent of the multi-billion dollar bail out of the investment industry? Right. When was the last time Reagan applied strategy of “trickle down economics” actually worked to help leverage the little guy up out of an economic hole she or he didn’t create?

Uh Oh!

Saturday, March 15th, 2008

Sure fire way to get the market to tank even further? Add President Bush’s sharp intellect to solving the fiscal woes of our country:

President George W. Bush plans to meet on Monday with top U.S. financial policymakers, the White House said, at a time of increased strains in credit markets and fears of a recession.

What’s that sucking sound? That’s the market drowning in corporate bail outs (read: corporate welfare) for the already rich (Bear Sterns ring a bell any one). Any one taking bets on if Bush will be able to fix this situation like he’s fixed Iraq?

An Urgent New Drug Problem!

Thursday, March 13th, 2008

For those of us whose purpose in life is to guard America’s morals — our work is never done. We already have our hands full fighting off the Homosexual Agenda and the Devil’s Music. And now there’s a dangerous new drug from Mexico, just waiting to seduce our youth and sap their moral fiber.

Salvia Divinorum is a hallucinogenic plant that grows in Mexico. And now Americans are starting to use it. Don’t you understand what this means???

A Mexican drug coming into the United States — symbolically, this represents gangs of swarthy Meskins invading our decent Godfearing nation. These lazy hopheads will destroy everything America stands for.

Most of our politicians are unaware of this serious problem. They’re too busy whining about the war in Iraq and our crumbling economy. But fortunately, a Florida state representative is coming to our rescue. Mary Brandenburg has introduced a bill to make possession of Salvia a felony — five years for any dope fiend caught with this drug.

But this isn’t enough. Prison sentences need to be longer than that. And the American people need to be made aware of the hideous effects of this drug. This new menace will destroy anybody who uses it. An ordinary decent American who uses this drug will turn into a pervert; a monster!

We need to spread the word. Perhaps we could make a documentary: Salvia: Assassin of Youth.

We Don’t Need No Steenkeeng Record Companies

Tuesday, March 11th, 2008

First Radiohead; now Nine Inch Nails. This makes two popular bands whose latest CDs were released online. They’ve completely bypassed the recording industry. There’s nowhere else for this trend to go but UP.

Another dinosaur is slooowly losing its grip. And it couldn’t happen to a nicer bunch of douchebags. The world is full of meanspirited amoral industries, but when it comes to taking a shit on the general public, the Recording Industry Association of America stands head and shoulders above the rest.

As you know, the RIAA has sued thousands of individuals. For the heinous crime of downloading music for free, they’re often sued for hundreds of thousands of dollars each. OK, so it’s wrong. But a $200,000 fine?

On top of that, the RIAA has virtually strangled Internet radio. Sky-high royalty fees — for which the RIAA is responsible — have forced a lot of webcasters to close down. Their new fees (retroactive to 2006) are proportionally much higher than those paid by large commercial broadcasters. It was nice while it lasted.

Record companies have also been catching it from Big Box retailers. Because CD sales have gone way down lately, Target and WalMart (among others) are setting aside less shelf space for CDs. And as fewer CDs are available in stores, the public will buy fewer CDs, stores will set aside even less space for CDs, and the cycle continues…

Personally, I probably won’t make use of these online CDs. I’ve never downloaded anything (but I listen to music on YouTube a lot). I’m one of those Luddites who has to have a solid physical record reel-to-reel tape eight-track cassette CD right in front of me, with a label that says “Name of Song” by “Performer.” (But I still tape music off the radio, which supposedly brought the recording industry to its knees in the 1970s.)

But as people buy fewer CDs and get more music online, the RIAA will ultimately go the way of the covered wagon repairman. It can’t happen soon enough.

Working The Economic Voodoo: Bush’s Magic “Shot In The Arm”

Friday, March 7th, 2008

If you listen to W, today, you would think we are all but one shopping spree away from fixing what ails our economy.

Secondly, the growth package will provide tax rebates to more than 130 million American households. These rebates will begin reaching American families in May. And when the money reaches the American people, we expect they will use it to boost consumer spending, and that will spur job creation, as well.

Well, we all wish that were true. Unfortunately, it’s our reckless spending on wars and mortgages we can not afford that his killed George Bush’s economic plan.

When a person suggest that all we need do is go out and spend our way out of recession, she or he misses the whole point. It’s not spending that we have trouble with; it’s spending without the means to cover the costs. All Bush is doing is feeding our habitual spending beyond our means by encouraging “retail therapy.” That’s like giving crack free to the local crack head. Before you know it the blow is gone and you are back to the debt ridden operation you had before the check arrived. Sounds like more of that twisted brand of GOP fiscal conservatism that put us where we are now; in a very large hole with no ladder big enough to reach the rim out.

Well, shoot, if I get one extra Starbucks Latte out of my rebate check I’ll be happy, but I doubt it will create a new job. In fact, if I were responsible, I will simply have to sign over the rebate check back to the government to pay my tax bill in April.

Just out of curiosity, what do you plan to do with your check to accomplish the President’s aims?

All About The Onion: 63,000 Jobs & An Economy Without A Core

Friday, March 7th, 2008

It’s difficult to find anything to smile about in the latest jobs report. Despite the assurances from the Bush administration that the economy remains strong, each new report brings evidence that we’re in a recession. It looks like the administration is either in denial or simply employing the same “head in the sand” mindset that spent the last five years telling Americans that the situation in Iraq is improving. Despite the president’s rosy rhetoric, I choose to believe that the data doesn’t lie.

The current economic uncertainty reminds me of a metaphor shared by a friend many years ago. While discussing borderline personality disorder, a psychological condition prone to sociopathic behaviors, she described it as being akin to comparing an apple to an onion. The normal personality is like an apple, in that it has a core; whereas with the onion, you peel away layer after layer to find that no core exists.

It’s not a perfect analogy, but it underscores my belief that this latest period of economic expansion has lacked the essential fundamentals to insure economic stability. When one strips away the facade of inflated home values…driven by artificially low interest rates…all that remains is a tenuous economy in the throes of adjusting to the instability and uncertainty of globalization.

The economy shed 63,000 jobs in February, the government said on Friday, the fastest falloff in five years and the strongest evidence yet that the nation is headed toward — or may already be in — a recession.

“I haven’t seen a job report this recessionary since the last recession,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington. “This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy.”

The loss in February was the second consecutive monthly decline in the labor market; economists had predicted a slight increase. The government also revised down its estimate for January to a loss of 22,000 jobs — the first decline in four years — and cut in half its estimate for job growth in December.

Wages stayed stagnant in February, further depressing the outlook for consumer spending over the next few months. Among rank-and-file workers — more than 80 percent of the work force — average pay grew just 0.3 percent to $17.20 an hour. Wages are effectively running flat when adjusted for inflation.

These job losses are only one segment of the current economic downturn. Truth be told, the housing crisis and its impact on financial markets looks to be an unprecedented debacle that has yet to fully unfold. The efforts of the Federal Reserve to reduce interest rates and make huge amounts of capital available to struggling financial institutions is a testament to the severity and complexity of this crisis.

I suspect the powers that be are hesitant to offer a candid assessment for fear it will trigger even more caution on the part of consumers. To a degree, that is prudent. Unfortunately, this snowball is already rolling and I see little reason to offer false assurances that it won’t continue to expand. I look for the government to make added admissions in much the same manner found in a criminal investigation…as more evidence is unearthed, the administration will find itself unable to continue with the denials.

Look no further than a comparison to the Saving & Loan scandal of the late 80’s to understand how the government will attempt to downplay the gravity of the situation. Sadly, I’m concerned this fiasco may be far more pervasive. While the S&L scandal was primarily isolated to commercial real estate, the current crisis involves residential real estate and millions of homeowners. That alone suggests a greater magnitude; one that will strike a blow to a core source of economic growth…consumer confidence and spending.

I don’t want to be an alarmist, but I see a unique and troubling confluence of conditions that have the potential to challenge our existing economic constructs. The growth of multi-national corporations with GDP’s that rival those of many nations serves to undermine the assumption that all Americans share similar economic objectives with consistent measures of success. It simply isn’t true in this day and age of global investments and the outsourcing it facilitates in order to increase the bottom line. When the goals of a huge corporation no longer comport with the goals of their nation of origin, the established economic models have become outdated and virtually irrelevant.

I realize I’m painting a gloomy picture. At the same time, I’m convinced that the American public must demand an honest assessment and an open dialogue with regard to these dramatic developments. If we allow our politicians to plot the course…in conjunction with their corporate benefactors…we may find ourselves in a conflict with the United Empire of ExxonMobil…a conflict that we can neither overcome or endure.

On that dark note, I think the following video from The Onion captures much of the essence of this shifting economic construct. It made me laugh…but as with all comedy…it also underscores an undeniable truth that requires our consideration.

The Onion: Outsourcing Child Care Overseas

Cross-posted at Thought Theater


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