Us pawns, being along for the ride without being asked, are about to take a real beating in the markets. Unless the Beltway Circus decides to be serious about matter, it is looking more and more than the country will be looking as some form of technical default. Not that we will, this country would never default, the threat of such action is nothing more than a political tool.
At this moment the House has a bill that no Democrat will go along with which means we have nothing. This weekend will feature many late nights and political theatre but little real movement. If the statemate persists until the deadline, it could be nothing will happen and this will drag on for the rest of the month. I am certain Treasury will find a way to keep most functions running until there is some agreement.
The latest Case-Shiller numbers out yesterday merely reinforce what every professional in the residential real estate business knows already; this market has gone nowhere the past two years. Looking forward, prices of San Diego residential real estate will probably not be much different than today. Too many institutions have a vested interest in maintaining stability for some period of time. The fix is in.
All of the stakeholders have struck an unspoken bargain. The Federal Reserve Board will keep mortgage rates as low as the international markets will allow. Banks and other creditors will not dump their huge inventories of foreclosed homes on the market. Instead they will bleed their properties onto the marketplace in an orderly fashion, carefully watching the inventories of homes on the market. Lenders will also slow down the pace of seizing homes. They have decided this is in their best interest as reducing the number of defaults help prop up values in neighborhoods and of course reduces the headaches of managing, rehabbing and selling homes as bank-owned properties.
Buyers are also part of this deal. There is a consensus that prices and rates are relatively favorable. Risk in prices is built in to the bargain. Larger down payments and a financially strong buying cohort will insure against another colossal collapse; today’s buyers are stronger financially than the ones that bid up these prices in the first place. In short, new and returning buyers are the survivors and will have the means to keep their homes in the future.
The last bunch of failed owners who purchased in the Great Run-up needed only one small financial reverse to sink them and their investment. This will not happen this time around.
Moody’s reported today that U.S. corporations increased their cash holdings by 11% over the past year. Their current collective piggy banks now sport $1.24 trillion in cash! About 600 of those billions are sitting in foreign banks and not subject to Amerian taxation but that is for another time.
It is difficult not to be upset with this behavior; some of that cash should be used to stimulate the economy and grow some jobs. After all, that is the core of Trickle Down Devotees. They have had the ears of some policy makers since the Reagan administration and have sold us a bill of goods. Cut taxes and businesses and individuals will invest. They will do so not because they have low taxes, they will only do so when it suits their interests. But that is how it should be. We as a culture need to be more aware of this and make better decisions.
Corporations are ruthless and impersonal money-making machines. And they should be. Their single-minded drive for profits is what makes our business system the finest in the world. What gets lost here is that any social good that comes from corporations must be forced upon them in some fashion. They donate and give money because it is in their interest from a marketing and tax points of view. They do not sponsor worthwhile projects from any altruistic motive, only the profit motive.
Again, this is not immoral or poor behavior. Corporate America acts in the best interest (in this order) of the people running the corporations, the bondholders, the stockholders and if it fits, the rest of us.
Many times Americans do benefit from corporate giving or altruistic behavior, but the kind of giving we need today is for corporations to show some economic courage and hire. Certainly a tax break or penalty can be created to encourage this behavior. We pay corporate farmers not to grow so why not pay for some jobs?
The political theatre now going on in Washington is just another way to avoide making the hard choices. The default crisis will only be solved when the Speaker finds within himself the political muscle to enforce party discipline. I know he wants to make a deal with the President that does include tax increases(Oh, I forgot they are not called taxes anymore, the PC term is now ‘revenue’) but he cannot enforce his compromise within the right wing of his party. Sam Rayburn must be turning over in his grave! In his day, or in the day other than ours awash with excessive democracy, the Tea Partiers now signing on with the Speaker would find their offices relocated next to a boiler or opening on to the House dumpster. Their parking spaces would be in the adjoining zipcode.
The Speaker and the President had our best interest at heart when they struck the Grand Bargain a fortnight ago. Unless the President caves, I suspect we will see a return of the basic tenents of their joint plan, higher taxes, lower spending and a path to national solvency. The free-lunch whining crowd found in both parties are going to have to suck it up. We have no other choice. If we fail now at this moment, the Chinese and the Euros may take the punch bowl. Then, look out!
The Republican Senate leader has countered the President with some very clever legislative legerdermain. His solution to the debt ceiling crisis is to kick the can down the road. I have to admire his idea from a pure political point of view. It define self-interest politics. The President, of course, does not want to let the Republicans off the hook. Recent polling shows that most voters are affixing blame to the junior party and perhaps there is far more acceptance of our economic dire straights than the pols want to recognize. Taxes have to go up, the free lunch went away years ago. Spending must also be adjusted; the nation cannot long endure on this path.
This is a time of shared sacrifice. I know I will take a hit under the proposals, but I know there is little other choice. The concept of shared national sacrifice is what made this country what it is. The Me-Me thing sent us down this road; the notion that we could eat all of the chocolate we want, don’t exercise, and lose weight. As the nation struggles to get off of the ropes, everyone needs to pull the oars.
The notion of no tax increases of anysort runs counter to logic. I fail to buy the idea of taxing “job-creators”. The only people losing jobs will be at the Porsche factory.
Those of you who play chess know the value of controlling the center of the board. The President, with his press conference yesterday, has re-framed the battleground and has taken up the best real estate on the chess board. Until yesterday, the debt ceiling debate has been largely framed by the views from the ideological poles. To be sure, the two sides have been inching toward each other over the past month, but neither side was willing to move into the broad middle ground in any kind of substantial manner.
The President was able to move into this vacuum easily. All he need to do was to increase the size of the spending cutsHis political opponents have given no ground on their sacred cause of no tax increases. My moving to the middle with broad and significant spending cuts, the President has effectively painted House Republicans obstructionists not willing to compromise enough to resolve the issue.
Further, it appears the good cop-bad cop tag team running the GOP has some leadership issues. The Dems are speaking with one voice, giving them an edge in the news cycle. The Senate GOP proposal of Tuesday was nothing more than a white flag. That message was clear, we want to duck this issue until the elections. The President is too cagy to abide this last minute attempt to postpone making any hard decisions.
The current budget ceiling debate has shown the emperor is naked. All of the players in this drama know the right thing to do. Everyone knows what must happen; raise taxes and cut spending. We all live on budgets and know that is how the world operates. At some point you run out of borrowing power and have to go the loan sharks. As a nation, we are closer to that point than you think.
All anyone in the beltway cares about is the next election cycle. Oh wait! I forgot! That cycle started the day after the last election. Their fear is obvious and there is a real lack of political courage in this country. How will we ever extricate ourselves from this mess without some inspired leadership from both parties.
Republicans in the House and Senate are only worried about a challenger from the Tea Party. For them, new taxes are a certain ticket back to their home town. They lack any faith in our political system and in their party faithful: that voters in the GOP will not see the need to move toward balancing our budget, that voters will succumb to the simplistic and glib appeal of the no-taxers.
On the other side of the aisle, they know government expenses must be cut but that most of the non-interest budget expense lies with Social Security and Medicare. No pol from either party wants to touch that third rail.
It is this simple; reduce entitlements, raise taxes, and bring back the the thousands of servicemen serving abroad. Do we really need 50,000 troops in Germany?
Spending some time on the east coast always brings about some reflection on the left coast. We were lucky and caught some decent weather, no rain and little humidity. The only difficulty was the traffic and the poor signage. It was good to have a talking GPS, otherwise some real disasters could have occurred.
Not a day went by without 1) paying tolls, and 2) sitting in traffic jams the like of which I never experience out here. Considering the politics of the region, I wonder way the citizenry puts up with a regressive tax system. Toll roads punish the poor and hardly affect the better off.
Twice during this trip I have picked up lost cell phones and returned them to their owners. The recepients were pleased but did not realize how lucky they were
A few days ago my wife and I took the free Staten Island Ferry. I wanted to get a slice over in an outer borough just to do it. We had just enough time to grab one at Z Brothers Pizza, located just off the ferry terminal. To call this area gritty is to be too kind.
The joint was filled with an odd assortment of urban marginals, all of them cursing and discorsing at high volume levels. Unfortunately, my spouse dropped her phone there. We did not realize it until back in lower Manhattan.
I called the number and negotiated the “reward” with a strung-out person, who claimed he had to fight with another customer, who merely wanted to steal the phone. Apparently a grand compromise was struck between these exemplars and the spoils were divided. One genius got the case and the other the phone.
I negotiated a reward of $20 and another $10 delivery fee. This character met me at the Manhattan side, sweaty, nervous, all 280 pounds of him.
With police all around, I could have stiffed this loser but a deal is a deal.
Money and class drive much behavior in our culture, I could afford to act morally more easily than the two boneheads in the pizza parlor.
