Post No. 147: This Above All: To Thine Own Self Be True

We recently read an article about how President Obama became so unpopular in the short time since his election.

The Senior Fellow of the Institute, Laughingman, operates a couple of blogs. One focuses on marketing and advertising issues. We issued this challenge to his readers:

“What would ad professionals do to assist the President to improve his image / approval rating just before mid-term elections, considering he really can not do much about the economy?”

One of the participants responded with the following, which we decided to share.

© 2010, the Institute for Applied Common Sense

Simply put, President Obama has been poorly served by his political advisers. Some heads should roll, including that belonging to his Chief of Staff.

When newly elected President Clinton presented his first spending proposals, his economic advisers told him they were unaffordable, and that Wall Street would not put up with them.

This led to Clinton's famous lament, "Are you telling me that the future of my presidency is in the hands of a bunch of bond traders?"

Rahm Emmanuel's advice on the original melt down in Detroit is reported in Steve Rattner's book as, "[Muck] the UAW."

Considering the history of the Clinton administration's conflicts with Republicans in Congress, this was a strange and veracity-challenged approach to begin with. Considering that President Obama had represented himself as an individual capable of building bi-partisan coalitions with the opposition, his selection of Emmanuel boggles the mind.

From the beginning of the Clinton administration to the end of the Bush era, the share of national income trousered by the top 1% of earners increased from 9% to 28%.

To prevent a self-inflicted melt down of our banks, we are
lending the banks our money at less than 1%, and allowing them to lend it back to us at up to 15%, when they feel the urge to lend to us, if at all.

Housing prices, the engine behind the last recovery, are down by 30%, and are likely to fall even further while wages continue to fall, as corporations take advantage of a 9.5% unemployment rate, and a 16%+ underemployment rate.

In the mean time, CEO compensation for the 50% of companies which have dismissed the most workers has increased by better than 40%.

With two months left until the next election, and the President's approval numbers sinking faster than the Titanic (and about to explode a la Hindenburg), what is the best strategy to reverse the impending?

Simply let Obama be Obama.

And thus the title of this piece, which reflects the ultimate in personal responsibility.

A couple of years ago, the majority of voters elected a newcomer with some undefined, intangible quality which led them to say, “He’s our guy.”

It is his responsibility to lead using that same intangible which got him elected.

There is no way to change the opinions, however flaky and factless, of Rush Limbaugh's audience, or Glenn Beck’s parishioners. In this polarized society, the only path to Democrat survival is to get the Democrat faithful up off their asses and into voting booths.

Trying to defuse all of the disinformation floating around out there just
plays into the hands of the opposition, and the nation will be the loser in the long term.

On the announcement of the (equally ridiculed by Wall Street) $5/day wage,
Henry Ford explained he was trying to build a mass market product. "If my workers can't buy them, who will?"

That is not exactly the attitude "[Muck] the UAW" conveys.

Expanding Medicare and Medicaid to ensure that our citizens are protected
from health-borne economic disaster is not an extravagance - it is arguably part of the “unalienable right…” to the “pursuit of happiness.”

Last year, Humana, one of the nation’s largest health care providers, dismissed 700 health care professionals and replaced them with newly-hired accountants....

Can you spell "gaming the system?"

Our economy will continue to suffer until we find a way to rebuild consumer confidence which translates into buying power, which represents 70% of our GDP, and that’s not going to take place prior to the elections.

Giving members of Congress (the only class of criminals native to the
United States of America) something to be proud of may be beyond the powers of any president, but giving the voters a choice they can be proud of is part and
parcel of the president's Bully Pulpit.

At least that’s what I would do.

But in the next election, I’d rather be working for the Republicans. At least I would have a better chance of getting paid....

Post No. 146a: Article of Interest re Response to BP Oil Spill

Over the past several years, there has been much discussion regarding the role of government versus the role of the private sector in addressing societal issues and needs.

The Laughingman came across the following article from Garden and Gun Magazine, which details the efforts of one private sector entity to deal with the Gulf event.

Should the US leave the response effort entirely in the hands of the private sector, entirely in the hands of the government, a combination of the two, or even perhaps neither, thus leaving it to individual citizens to address as they see fit?

July 1, 2010

Garden and Gun Magazine

Goings On

THE PERFECT GULF RESCUE BOAT

No one understands the tragedy in the Gulf as well as fishermen. So it's no surprise two diehard anglers have made it their mission to make a difference - government red tape and BP be damned.

Mark Castlow, the owner of Dragonfly Boatworks in Vero Beach, Florida, and his colleague, Jimbo Meador, took one look at the crafts used to rescue oiled birds and knew that they would be of no use in the marshes and shallows of the Gulf Coast, precisely where many injured birds will go when in distress. So thanks to some financial backing from Jimmy Buffet, they halted their production line, sketched a resue boat on a napkin, and ....

To view the remainder of the article, click here.

Post No. 133c: TV Program of Interest: Common Sense Principles for Troubled Times

At 5:00 pm EDST today, Professor Robert Frank of Cornell University will discuss his book, The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times, on C-Span2 Book TV. Click here to see a synopsis of the program.

Mr. Frank is also a New York Times columnist, and will discuss what he believes are the most important economic principles, and the need to explode the worst economic myths.

During his discussion he discusses the conflict between individual logic and group logic, and ways to address that conflict. He also addresses how society might address behaviors which all humans recognize are bad for us, but we pursue anyway.

Post No. 122c: Thinking About Innovation and Business Models

We're always interested in different ways of viewing subjects.

To the right of our blog, in the light green column below our Shelfari bookshelf, appears what is referred to in the blogosphere as our “blogroll.” It is a list of blogs which we find to be of interest, and links to them are provided. One of the nifty aspects of New Media technology is that it provides the ability to exponentially expand one’s realm of contact. Folks can “stumble” on your content without you actually directing them toward it.

One of the more interesting blogs which we follow is that of J.P. Rangaswami. His blog, Confused of Calcutta, is about information. Rangaswami was born in Calcutta, and lived there for half of his life before immigrating to the United Kingdom in 1980.

Originally an economist and financial journalist, he now considers himself to be an “accidental technologist.” He deals in the ether where finance meets technology.

He recently generated a post about long-term business cycles and author Hugh MacLeod's upcoming book. It so piqued our interest, and made us think about issues currently being battered around about the global economy, that we thought that you might also find it to be of interest.

Check it out. Some of his references to other thinkers on the subject might prompt you, as it did us, to do some further reading about economic theory and business.

Nothing is ever quite is simple as it may first appear.

Post No. 119: “Where Have You Gone Joe DiMaggio?”

© 2009, the Institute for Applied Common Sense

In the world of social commentary, there are “observers” and “critics.”

People often ask how we approach preparation of articles reflecting our observations.

Short answer? We watch C-Span, the History Channel, Tom and Jerry, and Turner Classic Movies all weekend. During that time, we absorb roughly 50 different points of view on various subjects, and give Tom’s observations more weight.

We consider them further during the week, while watching the news and Congressional hearings, in an effort to identify themes or “cross-over” principles, which arguably apply to divergent subjects. It could be sports, science, religion, and music. Like Wile E. Coyote, we keep chasing the Road Runner, seeking something.

(We also walk through book stores each week and pick up any and everything.)

So many today claim to know, with certainty, how we got here economically, why and how this or that President was flawed, and why we will fail as a nation if we do X. This banter drove the Logistician to Brazil for his sabbatical to study with the heads of the samba schools.

Before he departed, while eating his standard meal of sardines, beef tongue, and horseradish on pumpernickel, he asked, “How are these people able to come up with evidence which only supports their position?” He abhorred “goal determinant analysis.”

He then asked, “Why didn’t these people step forward to take control before things imploded?”

We seem to be dissatisfied with virtually every aspect of our lives, along with the people running most of our institutions, not to mention our significant others).

There’s no shortage of “incompetents” according to the critics: politicians, doctors, commercial banks, insurance companies, the Federal Reserve, drug companies, pedophile priests and Boy Scout leaders, automobile companies, oil companies, current and past Presidents, the housing and construction industries, the poor, the rich, CEOS, lawyers, investment bankers, immigrants (whether illegal or not), unions, doped up athletes, Hollywood, and of course, Wal-Mart.

It’s a Herculean task to find anyone or anything held in high regard, and about which at least 70% of Americans view positively. We’d settle for 60%.

Apart from all of the new input we consume, we constantly review earlier posts, to consider their continuing applicability. In Post No. 85 in February of this year, amid rising concerns about the global economy, we generated, Why We Suspect, To Our Dismay, That “Whatever” Our Leaders Devise Will Not Work.

In Post No. 27 in July 2009, we wrote about The Inability of our Leaders to Please (or Lead) Us.

Finally, in May 2008, in Post No. 9, Recognizing the Potential of the Innovative Thought Process (We are a Better Country Than We Currently Think of Ourselves), we noted that a recent poll revealed that 81% of Americans felt the country was heading in the wrong direction.

And that was before the recession was officially announced, and blame assessed.

And before Obama was even nominated.

The sentiment crossed ideological lines. Amazingly, it was something about which the majority could agree.

Thomas Woods was recently on C-Span. He is the author of Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse.

We’ve now watched his presentation 4 times. He had so little positive to say about much of anything over the past 30 years, that it made us stop and think about the views of other commentators over the past 18 months.

Then we asked, like the Logistician, “Why aren’t these people leading us?”

Of course, hindsight is always 20/20, and some are simply Monday morning quarterbacks.

But shouldn’t we be concerned that despite the personal successes of many of our leaders and captains of industry, our country as a whole appears to be in such a precarious state?

Does our current political climate or system discourage the true best and brightest from running for public office, and seeking the helm of our major industries?

Does the public scrutiny of our leaders serve as a disincentive for the “truly qualified” to share their wisdom and insight with us for the public benefit?

Maybe a nation really does deserve the leaders that it gets.

And here the rest of us stand, growling, and fighting like Dobermans for scraps of raw meat.

During our preparation of this piece, the words of Simon and Garfunkel kept swirling in our heads:

“Where Have You Gone Joe DiMaggio? A Nation Turns Its Lonely Eyes to You, Woo, Woo, Woo.”

You critics, who have figured it all out, and find others to be incompetent, please step forward and participate in fixing this mess.

We need you.

Post No. 111: Been There; Done That

© 2009, the Institute for Applied Common Sense

We frequently suggest that in tackling problems, we examine history, starting with a minimum of 5,000 years, and as far back as 13,000.

However, we’ve come to the conclusion that history alone may not always be able to help us out of jams.

Alan Greenspan recently lamented that those principles he relied on for 40 years no longer apply.

An historian once noted that we should always proceed with caution when we think that the policies of the past can be reapplied, and will generate similar results.

We might do well to consult physics, and better understand the laws of static and dynamic forces. (These are older than humankind and history.)

In order to assess or address anything within a dynamic system, one must freeze or suspend all movement or change, of as many variables as possible, or otherwise isolate the component at issue.

We also know that slight tweaks (no, not tweets) of a variable can result in dramatically different results.

Logic dictates that the larger and more complex the system, the more difficult it is to manage or affect any part of it.

As comforting as it may be psychologically, to resort to playing marbles and pick-up-sticks, it is of questionable value to return to many practices of the past.

Imagine trying to reconstruct that romance which you had with that guy or gal back in school (altered state of consciousness or not), and hope that those old moves lead to the same results.

As a nation, we can never re-create the circumstances extant when prior practices and policies were implemented and applied.

The world may have changed every year back then, but it now changes every nanosecond. We need to recognize this, and conduct ourselves accordingly.

It’s actually lazy and simplistic to merely repeat the practices of the past, even if they were successful. It requires far more energy, commitment, focus, and innovation to craft appropriate approaches to new conditions, everyday.

Sitting on the sidelines and simply watching changes occur without responding also may not be the best tactic.

To suggest that our enemies or competitors have been sitting still, or that the conditions in our country have been in suspension, is just plain science fiction.

For years, Corporate America used large, 100 year old silk-stocking firms to perform its outside legal work. The Logistician and his partners sought that same work, somewhat successfully, by offering a lower rate. They were smaller, more nimble, had lower overheard, and more importantly, hungrier.

Yet, many corporations were reluctant to make such a change. If things went awry, someone would undoubtedly question why the referring counsel did something out of the ordinary, and did not stick with the tried and tested firms.

Hollywood’s like that. It’s far easier to explain why “Men in Black 12” did not generate record box office numbers, than a new concept.

But consider this.

If you‘re surprised about a development over a span of 30 years, like the demise of our educational and industrial systems here in the U.S., you probably were asleep at the switch, and not paying close attention to changes on an annual, much less a monthly, basis.

We all have a tendency to go through repetitive motions. They’re safe, familiar, less subject to scrutiny, and require less effort.

UPS had a marketing campaign which referred to “moving at the speed of business.” Hong Kong is a 24 hour business city. Imagine what happens to others when their business communities are asleep.

It’s the nature of competition, and the nature of change.

There’s been much noise about returning to the policies of Clinton, or Reagan, or Kennedy, or FDR. Quite frankly, returning to those dated tactics, no matter which side of the ideological line they may fall, may not be particularly helpful.

Those circumstances no longer exist, and will never exist again. And that doesn’t take into consideration the efforts to revise history.

We can’t duplicate the economic variables. We certainly can not re-create the psychological and social variables.

Going forward, we need to craft new procedures, new principles, new tactics. Ones that fit our current conditions, which have never existed before.

So to all of our politicians and policy makers out there, please detach yourselves from your ideological goals and preferences, and repeating that mantra about what you think worked in the past.

Try to figure out what’s most likely to work, TODAY, going forward, based on current conditions, and those we anticipate.

The world is far flatter than we once thought.

Post No. 53: Are We Really Interested in Crafting a Solution to Our Financial Mess?

© 2008, The Institute for Applied Common Sense

Washington, we have a problem.

Now, I am neither an economist nor a rocket scientist, I am just a consumer, and as such, along with the rest of you, I am responsible for two thirds of America’s economic activity.

And, along with the rest of you, I don’t have much trouble defining the problem:

In the last ten years, the cost of energy has gone through the roof, taking the price of everything that moves, from food to flashlights, along with it.

Similarly, the cost of housing is up more than 50%.

Unfortunately, our real income has actually declined, along with the value of our homes… and in the last two weeks, the value of our retirement savings has declined more than 20%… some two trillion dollars worth of evaporated wealth.

But, if you had turned on the television and watched C-Span, as I did while generating this article, you would have seen the hearing, conducted in the House of Representatives on October 7, 2008, regarding the collapse of AIG Insurance.

Several former CEOs testified during that hearing. Probably most of us think that both corporate America and our politicians, on both sides of the aisle, have failed us.

Apparently, the feeling is mutual. In corporate think, the above problems seem to be our fault.

I strongly suspect that if you asked the average citizen, he or she would tell you that they feel that both corporate America and our politicians, on both sides of the aisle, made out like bandits during the period of high flying and free wheeling, without much in the way of restrictions or regulation, or concern for the American public for that matter.

Virtually every nickel we contributed to the growth of the American economy, through productivity improvements and cost reductions, was channeled to the occupants of America’s executive suites.

Less than ten days after borrowing $85 billion from us to keep from going broke, the executives of AIG spent $400,000 on themselves at a management retreat at an ocean front resort. (One of the Representatives even had pictures of the resort, and a breakdown of the costs of the rooms!)

That’s FOUR HUNDRED THOUSAND DOLLARS… and it obviously occurred to no one running that company that this might not be the best time to continue business as usual, as is their right and due. What good is being a Master of the Universe if you can’t enjoy the perks?

To borrow a notion from Ross Perot, perhaps we should reconsider who we put in charge of our financial well-being.

Perhaps we should reconsider allowing lawyers to become elected officials.

Perhaps we should do the same with CEOs.

Because what was to be witnessed during this hearing was not an effort to get at the truth and underlying causes for our current economic emergency, but lots of posturing, blame assignment, and defense of the status frigging quo.

You can’t really blame these guys; if any of us were trousering (oops, my bad, or skirting) $60 million a year, we would also mount the best defense that money could buy in support of our right to haul home such lucre.

Yesterday, we posted a poem by Pablo Neruda (http://theviewfromoutsidemytinywindow.blogspot.com/2008/10/post-no-52-and-now-some-pablo-neruda.html). Apparently neither the former CEOs nor any of our politicians have read You’re the Result of Yourself. It’s well worth a read.

Lawyers, particularly experienced ones, develop a skill for asking the right questions to get to the heart of the matter. They also know how to make arguments in favor of their positions, and against those of others.

That’s what they get paid for.

What should concern us now is that none of this is appropriate in connection with the current financial mess in which we find ourselves as a nation. And time’s awasting....

What we need now is for our politicians, leaders, and the members of our government to “dig deeper,” and try to expose the underlying causes of this situation (no matter who’s at fault), and how we might best prevent it from occurring again.

What we do not need is yet another PR campaign, pointing to a light at the end of the tunnel, and pretending that it is not an oncoming freight train. (By the way, the laws of physics repeatedly suggest that you will not beat that collision.)

I’m one of the few people who actually enjoys listening to hearings before governmental bodies. Any sensible person would not. Frequently, those being questioned present prepared statements, exculpating themselves from liability, and then proceed to provide responses more concerned about liability than solutions. In many instances they are accompanied by counsel who coaches the witness.

Even more disturbing is the manner in which the “questions” are posed, if you can really call them questions. During the House hearing, for example, we witnessed Representatives essentially make speeches, reflecting their positions, and condemning the conduct of AIG. They chose the words to characterize the conduct, and they injected emotion into the issue, when and where they saw fit.

It was more than clear that the purpose of these self-serving speeches had more to do with elections than economic enlightenment.

Once they had almost used up their allotted time, they would ask a very short question, which would be very difficult to answer considering the 3 minute monologue preceding the question. When the witness tried to answer, he was frequently interrupted by the Representative, only to have the time expire without the witness having said anything of real value or substance.

Now we know that many of you will simply say, “That’s the way these things work.”

However, in this period of economic uncertainty, that’s just frankly, unacceptable. That any of our politicians would place their continued occupation of a political position above our need to know and the financial interests of the American people is not only sad, but something in which we should no longer acquiesce.

This is ridiculous folks. Even I, an insignificant nitwit, could pose a series of questions designed to get to the bottom of this mess. Why can’t our highly compensated, highly educated, highly sophisticated, highly experienced elected officials pose questions that really matter, without consideration of their interests?

What’s more disturbing is that the ineffectiveness of conducting a hearing of this sort, at least in terms of getting to the root of the problem, is fairly obvious, even to the casual observer. That our politicians think that this is appropriate, and acceptable to us, is, quite frankly, pissing me off.

This is the question we need to have asked and answered until it makes sense even to an insignificant nitwit:

“You gentlepeople have managed to hitch this great country’s economic star to a wagon, and the mule just died. How do you propose we fix that, this week?”

© 2008, The Institute for Applied Common Sense

Post No. 49: Finally, Someone Explains Something That We Can Understand

I was fortunate enough to receive a decent education at some decent educational institutions. I also took corporate, business, accounting, banking, finance, and various other management courses.

However, I must be honest. I do not understand even a quarter of what occurred over the past 20 – 30 years to lead to our current financial situation.

Although I am sure that most of us can point to some emotional, conceptual issues, be it outsourcing, illegal immigration, two foreign wars, decreased industrial output, and greed, I just really feel like I am in the minority in terms of understanding investment banks, hedge funds, selling short, bundling, derivatives, and such.

Just last week, I contacted two of my graduate school buddies, one with a specialty in banking, and the other in corporate securities, and I told them that I hoped that they were in the Senate Banking Committee sessions to keep them honest.

One of them, “The Bear” (no relation to the term to describe financial markets), forwarded the following article to us by John P. Hussman, Ph.D. of Hussman Funds, entitled You Can’t Rescue the Financial System If You Can’t Read a Balance Sheet, which was posted by Dr. Hussman earlier today. It provides food for thought.

September 29, 2008

You Can't Rescue the Financial System If You Can't Read a Balance Sheet
John P. Hussman, Ph.D.
All rights reserved and actively enforced.

This is a bad idea.

However the final legislation is written, the Troubled Assets Relief Program (TARP) being rushed through Congress will evidently be built around its single worst provision, which is that the Treasury will have authority to purchase distressed mortgage securities from U.S. financials.
As I noted last week in An Open Letter To Congress Regarding the Current Financial Crisis, the sequence of bankruptcies that we've observed among U.S. financials has been almost exactly in order of their gross leverage (the ratio of total assets to shareholder equity). The reason for that is:
1) as the assets of a financial company lose value, the losses reduce the asset side of the balance sheet, but also reduce shareholder equity on the liability side;

2) as the cushion of shareholder equity becomes thinner, customers begin to make withdrawals;

3) in order to satisfy customer withdrawals, the financial company is forced to liquidate assets at distressed prices, prompting a further reduction in shareholder equity;

4) go back to 1) and continue the vicious cycle until shareholder equity goes negative and the company becomes insolvent.

Let's return to the basic balance sheet of a typical financial company before the writedowns:
To read the remainder, click on: http://www.hussmanfunds.com/wmc/wmc080929.htm.

Post 47b: First Draft of Economic Rescue Package Released at 5 pm EDST

View the first draft. Still to be finalized.

http://www.foxbusiness.com/story/markets/economy/draft-economic-rescue-package/

Post 47a: If You’re Willing to Momentarily Laugh about Our Current Financial Crisis

We, here at the Institute for Applied Common Sense, generally try to avoid cynicism, since our ultimate goal is to encourage the development of innovative solutions to serious societal issues. We always assume that positive changes can be achieved. At the same time, we recognize the importance of entertaining views across the spectrum to stimulate thought and keep us on our toes. We further appreciate the role of wit and humor.

It is in this spirit that we submit for your consideration the Con Man’s Blog of Jack Payne. The following is an excerpt from his September 26, 2008 post, entitled:

Legal Scam? – Con Artists’/Politicians’ Ace in the Hole: Create Controversy

Generating 2 Strongly Opposing Sides is Key to a Good Legal Scam Employed by Con Artists and Politicians Everywhere

“It’s said that the hand that turns the knob opens the door.

If you be the con artist / politician, you know that to succeed in selling a legal scam, several steps are essential – steps necessary to just getting to the door, before you can even hope to open it.

As it’s said: Never wrestle a pig; you’ll both get dirty, and the pig likes it. Take the easy way.

You must hatch a problem so that you can organize a group of people to step in with the “solution.” You must then employ the Us and Them technique so that your group of suckers can be manipulated, with strong emotion, to become the “void-filler” in this legal scam. Tell them your powers can only be used for good. At no time overlook the potency of collective stupidity….”

It only gets better. Check it out: http://www.legalthriller.blogspot.com/2008/09/legal-scam-con-artists-politicians-ace.html



I

Post No. 47: Needed - Attitude Adjustment Following Meltdown

© 2008, The Institute for Applied Common Sense

Much has been made in recent days regarding a prospective leader’s ability to multi-task. And yet we must recognize that there are consequences.

Just yesterday, a colleague here at the Institute mentioned that there was plenty blame to go around in connection with this economic mess. He also suggested that the first step in addressing a problem is to take responsibility for having participated in its creation.

Consequently, we the citizens of this nation, must examine ourselves, since a nation is not comprised of political and business leaders alone.

Most available evidence suggests that members of the last two generations do not read anything but comic books. They purportedly depend almost entirely on friends, and the Internet, for their news. In the competition to be among Phil Night's "Cool Five," (http://www.meetup.com/members/3961181/) being first with the rumor counts more than being right with the implication.

And when you are doing six things at once, who has time to run the numbers, or check the sources? In the interest of fiscal responsibility, GM has canned more than half its North American work force in the last five years... replaced them with a workforce with virtually no experience in auto manufacturing… but willing to work for half as much. And while GM was busy canning workers, revisiting the expectations of retirees, cutting "supplier" costs, building new factories in the cheapest labor markets possible, and taking a fling in the sub prime real estate lending market, Toyota increased its US production by half to become the best selling brand in the US, and the best selling producer in the world.

In the mean time, Toyota's credit arm surpassed both Ford and GM's captive units to become the most profitable lender in the US.Toyota's currently underutilized employees are still working for Toyota... most receiving more training, and thus looking toward the future.

That may be partly due to government involvement in corporate conduct, as is the case in many countries, but it still reflects the nature of the competition, not quite as anxious to post quarterly profits and thus sacrifice the long term. The scientific method teaches us that experience is not expensive; it is priceless... that results you cannot duplicate cannot be attributed to the work you are doing... and that repeating the same actions and expecting different results is insane.We do not need to reproduce the ten year long recession Japan suffered after their housing bubble burst.

But if we are going to avoid it, we are also going to have to concentrate on what they did right...and wrong, and learn from their mistakes.

We as a nation need to observe how others do things, and take notes. To do that, some of us are going to have to spend a bit more time reading printed material other than comic books...and a bit less time on FaceBook, running down the latest rampant rumor.

A colleague, after teaching adults students at a local community college, called me up and said that he felt that someone had “cheated these people out of an education.” The cheaters obviously did not appreciate that cheating affects us all, and for the long term.

With the New Deal, more and more of our citizens learned to depend on government. In recent years, more and more workers learned not to depend on jobs, particularly in the corporate arena, and launched out on their own.

Having now determined that we can not trust our government and political leaders, perhaps it’s time for ordinary citizens to take charge of their destiny, and rely less on our purported “leaders.”

Maybe McCain had it right in picking someone who could connect with “regular citizens.” I can’t imagine any hard working citizen from that social strata doing to this nation what our corporate and political leaders have done.

© 2008, The Institute for Applied Common Sense

Post No. 45a: Where is Adam Smith’s "Invisible Hand?"

Where is Adam Smith’s "Invisible Hand? "


1. Thus far, 53,000 babies have become sick, and 4 have died from this product. I imagine that if you are in a country of 1.4 billion, that’s small change. But do we here in America care? Check out the latest on the global milk scandal.

http://www.cnn.com/2008/WORLD/asiapcf/09/24/china.milk/index.html?iref=newssearch

2. By the way, some have suggested that there is a common element which exists between the motives of those behind the Chinese global milk problem and those individuals who led our country into its current financial mess. It might be instructive for us to revisit the ideas of Adam Smith. http://en.wikipedia.org/wiki/Adam_smith; or http://encarta.msn.com/text_761556047___0/Adam_Smith.html

3. Finally, we previously examined the failure of our government to address, three years later, the basic living standards of some of the Louisiana residents ravaged by Katrina. Earlier today, the news reports showed long lines of cars containing Galveston, Galveston Island, and other South Texas residents heading back to their homes. http://www.cnn.com/2008/US/weather/09/24/galveston.ike/index.html?iref=newssearch. Does our country have the political will and economic resources to return these folks back to the status they enjoyed prior to the storm? If so, will any Louisiana residents still be in limbo after the needs of Galveston residents are theoretically addressed?

Just stuff to think about today other than our current financial and economic complications…. You know, maybe we have created a false sense of expectations in this country. When you take people’s money through taxation, they develop expectations about what the government can and should do, and I can guarantee you that the expectations vary in amount and degree.

Post No. 45: CEO America by Guest Author "Mark Twain"

CEO America

© 2008, The Institute for Applied Common Sense

Shortly after the election of George W. Bush to the presidency, someone commented that for the first time in American history, we might see a president who would run the country like a corporate CEO.

Few of us appreciated, at the time, the prescience of that statement.

We are now at a tipping point.

We have two, very, very good guys... individuals who make their own party finance people squirm and sit up nights worrying about their own futures... running for president... and, ladies and gentlemen, the game has changed.

When Congress gets done, we, the American taxpayers, will be on the hook for about $1 trillion, to guarantee that the derivatives, sub prime mortgage bundles, and a host of other questionable financial vehicles, we were repeatedly told we were "not sophisticated enough to understand."

(Tell me if I am alone; however, I know very few regular, working class people, who would have tried to pull this B.S. off, at least not in good conscience.)

What this means is that neither candidate will get to do any spending on behalf of his financial backers.

There is not enough difference between these two guys, with respect to the leadership qualities which really matter, to overload a mosquito in flight.

We are forty something days away from an election that will decide the future of our country... and we are being inundated with paid for advertisements debating the meaning of putting lipstick on a pig.Talk about putting lipstick on a pig.

What is more interesting is how the talking heads and spokespeople who engage in this ridiculous banter generate more in annual income than the average American family.

The first question I want to hear answered in the upcoming debates is: "Where would you put your opponent in your cabinet?"

And the second is, "Who would you put in charge of the economy?"

In 1975, car sales fell 50% below 1974 levels.

Sure the Arabs had something to do with it...but the bigger problem was our own federal government's "Seat Belt Interlock Law."

A law that fixed no problem I know of... and I fear without some serious discussion of what has got us into this financial hole, we will see another such idiotic piece of legislation promoted to the public as the solution to the rape Congress is currently debating.

Of course, I could always be wrong... but I am part of the emergency medical staff the local politicians are bragging about... and as best I can tell, they have no intention of paying me for my services... but I’ve got a few creditors out there who want some serious bucks from me... and want them right now... for services rendered to me and my family which were far more pressing and necessary than padding the wallets of some greedy business types.

Go figure....

Yeah, you business types may consider me unsophisticated, but I’m mad at hell… and, for good reason.

© 2008, The Institute for Applied Common Sense

Post 44b: Anxious in America by Thomas Friedman

This is a reprint of an op-ed piece by Thomas Friedman originally published on June 29, 2008

Copyright 2008, The New York Times

June 29, 2008

Op-Ed Columnist

Anxious in America

By THOMAS L. FRIEDMAN

Just a few months ago, the consensus view was that Barack Obama would need to choose a hard-core national-security type as his vice presidential running mate to compensate for his lack of foreign policy experience and that John McCain would need a running mate who was young and sprightly to compensate for his age. Come August, though, I predict both men will be looking for a financial wizard as their running mates to help them steer America out of what could become a serious economic tailspin.

I do not believe nation-building in Iraq is going to be the issue come November — whether things get better there or worse. If they get better, we’ll ignore Iraq more; if they get worse, the next president will be under pressure to get out quicker. I think nation-building in America is going to be the issue.

It’s the state of America now that is the most gripping source of anxiety for Americans, not Al Qaeda or Iraq. Anyone who thinks they are going to win this election playing the Iraq or the terrorism card — one way or another — is, in my view, seriously deluded. Things have changed.

Up to now, the economic crisis we’ve been in has been largely a credit crisis in the capital markets, while consumer spending has kept reasonably steady, as have manufacturing and exports. But with banks still reluctant to lend even to healthy businesses, fuel and food prices soaring and home prices declining, this is starting to affect consumers, shrinking their wallets and crimping spending. Unemployment is already creeping up and manufacturing creeping down.

The straws in the wind are hard to ignore: If you visit any car dealership in America today you will see row after row of unsold S.U.V.’s. And if you own a gas guzzler already, good luck. On Thursday, The Palm Beach Post ran an article on your S.U.V. options: “Continue to spend upward of $100 for a fill-up. Sell or trade in the vehicle for a fraction of the original cost. Or hold out and park the truck in the driveway for occasional use in hopes the market will turn around.” Just be glad you don’t own a bus. Montgomery County, Md., where I live, just announced that more children were going to have to walk to school next year to save money on bus fuel.

On top of it all, our bank crisis is not over. Two weeks ago, Goldman Sachs analysts said that U.S. banks may need another $65 billion to cover more write-downs of bad mortgage-related instruments and potential new losses if consumer loans start to buckle. Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion.

My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.

I continue to be appalled at the gap between what is clearly going to be the next great global industry — renewable energy and clean power — and the inability of Congress and the administration to put in place the bold policies we need to ensure that America leads that industry.

“America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so,” Wall Street Journal columnist Gerald Seib noted last week. “A political system that expects failure doesn’t try very hard to produce anything else.”

We used to try harder and do better. After Sputnik, we came together as a nation and responded with a technology, infrastructure and education surge, notes Robert Hormats, vice chairman of Goldman Sachs International. After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. After Social Security became imperiled in the early 1980s, we came together and fixed it for that moment. “But today,” added Hormats, “the political system seems incapable of producing a critical mass to support any kind of serious long-term reform.”

If the old saying — that “as General Motors goes, so goes America” — is true, then folks, we’re in a lot of trouble. General Motors’s stock-market value now stands at just $6.47 billion, compared with Toyota’s $162.6 billion. On top of it, G.M. shares sank to a 34-year low last week.

That’s us. We’re at a 34-year low. And digging out of this hole is what the next election has to be about and is going to be about — even if it is interrupted by a terrorist attack or an outbreak of war or peace in Iraq. We need nation-building at home, and we cannot wait another year to get started. Vote for the candidate who you think will do that best. Nothing else matters.

Copyright 2008, The New York Times

Post No. 44a: An Argument for Further Deliberation about Our Financial Situation

Copyright 2008 The New York Times Company

September 22, 2008

Op-Ed Columnist

Cash for Trash

By PAUL KRUGMAN
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.

So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.

Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.

Copyright 2008 The New York Times Company

Post No. 44: At What Price Dumbing Down?

© The Institute for Applied Common Sense

One of the somewhat overlooked ironies of this campaign year is that a black man, who was born outside of this country and the product of a broken home, and who managed to beat the odds and become a reasonably well educated public servant after attending two Ivy League institutions, is currently being framed as an “elitist” in our society.

That this should occur should cause us all to pause.

Last spring I managed to get myself involved is scoring reading and writing competencies for some of the prospective graduates of one of our state institutions.

The state wide results just came in reflecting an, on average, 2% decrease in reading comprehension, and a 17% increase in writing communication.

Not surprisingly, the schools that scored worst are challenging the test.

Even less surprisingly, I will be spending the last half of October explaining my scoring.

My guess is that this anomaly can be explained by the Internet.

Computers have got kids writing, seriously, earlier than ever before in history... but to paraphrase Mr. Gossage (http://adage.com/century/people023.html), they write about what interests them.

If we continue to dumb down and politically correct our text books, year after year, to revise the content to match whatever we consider to be the prevailing political winds... we shouldn't be surprised if our children choose to read that which seems to be of more immediate, personal, value.

And the more we chose to force our teachers to keep to the politically correct curriculum of the day, the less opportunity these mostly right headed people will have to inspire and challenge their students...absent which we are well and truly screwed.

Advertising is not a bad example of what has gone wrong with our culture.

There is nothing more expensive in the marketing business than a failed campaign. But agency holding companies have gotten into bed with client purchasing departments, often offering to provide their services for free, and earned back their 20 - 30% margins by eliminating the people who actually do the work... not to mention any semblance of a training program

The result is often a single ad that offends nobody world wide... mostly because it is so innocuous nobody world wide notices it...supported by intergalactic media buys.... The Olympics come to mind...that cost nothing to negotiate... can be promoted as being available at some fictional discount only because of the agency's "massive media clout," and get bought on the discount rather than their effectiveness.

All of which we do under the umbrella of branding...and we ought to be ashamed of ourselves.

This is not the way people buy stuff.

Jim Jordan [http://en.wikipedia.org/wiki/James_Jordan_(publicist)], a giant in the marketing field, once said. "It's not creative unless it sells."

Bill Bernbach (http://en.wikipedia.org/wiki/William_Bernbach), also a giant, said, "It won't sell unless it's creative."

They were both right.

The problem is the people who now run their agencies got their jobs by buying things cheap... and that's what they talk to the client about when they sit down for their quarterly "state of the account dinners."

Unfortunately, expressing any of the above in front of current agency and client management can produce chronic underemployment.

More unfortunately, if somebody doesn't stand up pretty quick, we are on our way to becoming a supplier of natural resources to countries that have mastered the art of adding value.

In the immortal words of Jimmy Williams, "When you stop taking pride in what you make, you have hitched your star to a wagon."

Which I believe is Mr. Friedman's (http://en.wikipedia.org/wiki/Thomas_Friedman) point as well, in his discussion of innovation, global competition, and the future position of the United States. (http://theviewfromoutsidemytinywindow.blogspot.com/2008/09/post-no-41b-television-worth-viewing.html.)

At the end of the day, it really is all about creativity and innovation…. It’s what ultimately sells.

Always has, always will.

© The Institute for Applied Common Sense

Post 36b: Suggested Reading: "The Rise and Fall of Great Powers

© 2008, The Institute for Applied Common Sense

We have a tendency to read the latest books on the New York Times Best Seller List, or the classics. We sometimes forget about important works from just a few years ago. In 1987, Paul Kennedy published The Rise and Fall of Great Powers: Economic Change and Military Conflict from 1500 to 2000 (http://books.google.com/books?id=9rpmAAAAMAAJ&q=%22The+Rise+and+Fall+of+Great+Powers%22&dq=%22The+Rise+and+Fall+of+Great+Powers%22&ei=TYawSK6sG4XKzQSxuITxBg&pgis=1). For years, it was mentioned by academicians, leaders of industry, and politicians alike in discussing America’s place in the world, and its prospects. However, it appears that it is not mentioned with much frequency these days. We feel that the message contained therein needs a re-examination. Additionally, a number of you have requested that we reference this work again so that you might acquire it.

The following is taken from an earlier post, No. 9, entitled, "Recognizing the Potential of the Innovative Thought Process (We are a Better Country than We Currently Think of Ourselves)" (http://theviewfromoutsidemytinywindow.blogspot.com/2008_05_01_archive.html).

“In his significant work, The Rise and Fall of Great Powers: Economic Change and Military Conflict from 1500 to 2000… Yale professor Paul Kennedy discusses and analyzes patterns that exist during the ascent to power, and those associated with the power’s subsequent decline. Originally published in 1987, and after receiving rave reviews at the time, I am simply amazed that so little reference is made to it in the current discussion of where we are as a Nation. Anyone examining the book will immediately note that Kennedy did his homework, in that it is replete with economic data, which actually makes it somewhat difficult to digest. Be that as it may, he concludes that there are three main factors that appear to repeatedly contribute to the decline of a world power. Two of them are of relevance to the United States at this point in time.

Kennedy submits that one factor is that the power is overextended militarily throughout the world, which leads to a depletion of its coffers, and a drain on its economy and energy. The second involves technology. As a general proposition, the country which possesses the highest level of technology, which also translates to the most sophisticated and effective weapons, stays in power. It generally has spent a considerable period of time, and a significant component of its resources, on research and development associated with that technology. When such a power exports its technology and that technology is easily and quickly duplicated by others without the attendant investment in its development, other emerging economic powers can then adopt it and overtake the inventing country. Not only is the technology exported in such a transition, but the scientific knowledge base is also adversely affected, along with the technology workforce.”

Here’s hoping that the United States does not have to experience the decline during our lifetimes, or that of our children, or their children, or their….

© 2008, The Institute for Applied Common Sense

Post 27b: Article of Interest from the Seattle Times

Many of Us Likely to Outlive Savings

Nearly three out of five middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles, a new study from Ernst & Young has concluded.

The study, set to be released Monday, finds that Americans will have to drastically reduce their standard of living before retirement to live comfortably, or even avoid destitution, later in life.

Middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize their chances of outliving their financial assets, the study found. Workers seven years from retirement will have to cut their spending by even more — 37 percent.

"People are going to have to adapt in a number of ways that they weren't anticipating or hoping for," said Tom Neubig, national director of the Quantitative Economics and Statistics practice at Ernst & Young. "I think a lot of people are hoping to maintain roughly the same standard of living after retirement. Our study suggests they are going to have to make some changes."

And cutting back on spending is no small feat at a time when inflation and the cost of living are rising. Fluctuating investment returns on 401(k)-style plans in this wobbly stock market are not helping matters."

Most people, if they look at their life expectancy and they think they will live to 90, they are nuts to retire at 60. They're going to be living in poverty at 80," said Peter Morici, an economist at the University of Maryland.. "I think it's a wake-up call to baby boomers to get serious about getting their houses in order."

If a married couple is making $75,000 at retirement and relies solely on Social Security, they have a 90 percent chance of running out of money if they maintain their pre-retirement lifestyle. The addition of income aside from Social Security drops the couple's chance to 31 percent.

Sunday, July 13, 2008 - Page updated at 12:00 a.m.

By Nancy Trejos
The Washington Post
http://seattletimes.nwsource.com/text/2008048859_retirees13.html