Archive for March, 2008

The Thinker

A little empathy please

At one time or another, we have all felt the weights of prejudice, oppression and injustice in our lives. For most of us, these experiences are intermittent or transitory. Most likely you have had a teacher or two who you felt unfairly singled you out. Most likely, you were at least once the victim of a school bully. You may have had a toxic boss who unfairly took out his personal animosities on you.

Some forms of prejudice and oppression never wholly go away. Perhaps the most broadly experienced across society is obesity discrimination. If you are morbidly obese in America, you are frequently looked down upon. People do not want to sit next to you in airplanes. They often think that obesity is wholly related to lack of will, as if genetic predisposition toward obesity, such as runs in my wife’s family, did not exist. You would be hard-pressed to find a morbidly obese politician. Their chances of being elected are minute, no matter how eloquent they may be.

Discrimination, subtle or overt is all around us and we have all felt it in one for or another. Now let’s talk about racial discrimination. Many, maybe most White Americans are upset because they have been hearing and seeing snippets from the sermons from the Rev. Jeremiah Wright, Barack Obama’s preacher. Many are getting hot under the collar. How could this man of the cloth call on God to damn America? Doesn’t he know that God is pro-American? How could he express it with such fervor? Why, they wonder, would a politician like Obama even associate with such a man? Doesn’t this imply that Barack Obama also thinks that God should damn America?

For many of us in White America, racial discrimination is yesterday’s news. The law has outlawed discrimination we say. If a dwindling minority of us are going to be bigots, well, that’s their business and we sure do not condone it. The rest of us White Americans, well, we are in the post-discrimination age. Therefore, it behooves African Americans to be where we already claim to be. If they just believe they are not oppressed, as we believe, then soon they will be enjoying the full fruits of this free society. All they have to do is get this chip about being born black in America off their shoulder. They need to show their moxie, like Colin Powell. They need to act, well, a lot more white.

The reason many of us white Americans feel this way is because discrimination for us tends to be an occasional thing. It is not persistent. It is rarely overt and even more rarely covert. We generally navigate okay because we are part of the tribe, of the mainstream. It is quite a different thing when discrimination is a lifelong phenomenon. African Americans know this. Other minorities experience it too, including Latino Americans and homosexuals. Yet for some reason, many of us in White America are clueless.

Discrimination is about driving down the interstate and being frequently pulled over by white state troopers because you are black. It’s about having this creepy feeling, often borne out by evidence, that you are being watched by store security. It is about going to job interviews, getting a kind of absent look from your interviewer and finding repeatedly that for some strange reason the white person got the job. For older African Americans like Jeremiah Wright, there are persistent memories of growing up and having to sit in the back of the bus, not being allowed to drink from “white” water fountains and being called “boy” by whites even when you were a man. It is about being discriminated against, not just for being black, but also for having a “black attitude”. It’s about the naiveté of white Americans who think that because some laws have been changed that African Americans are supposed to put aside the oppression that they felt through much of their life, just like that!

White Americans don’t know or don’t acknowledge the very real discrimination that is still happening. It happens most overtly in our schools. Communities with lower property values have less money to fund the schools. African Americans disproportionately live in these communities because they cannot afford nicer neighborhoods. Even in places where there is plenty of money for the schools (and Washington D.C. comes to mind) the schools are saddled with a dysfunctional bureaucracy that outlasts mayors repeated attempts to rectify things. Even if relatively well moneyed school districts like Washington D.C. could attract the best and the brightest teachers, they generally still do not want to teach there. Why? Well, the crime rates are high. The schools are dysfunctional. Many of the students are dysfunctional. They live disproportionately in single parent household where the parent (generally the Mom) is working two or three jobs to make ends meet. Why deal with it? The wealthier suburbs offer more money, better working conditions and their students are a lot less likely to go postal. That is because their students have a mother and a father at home, and their parents are involved in the local PTA.

When a state legislator suggests that school funding should be equal across the state, such attempts quickly shot down. We get a variant of the states rights arguments used for generations to oppress blacks. It is about local people having the right to decide local issues, we are told. Let’s forget that the effect of this policy means that some children get a more equal education than others. Therefore, the cycle continues for another generation. White America shakes their heads at Black America and does not understand why they just cannot pull themselves up by their own bootstraps, even though their bootstraps are still being held down. In reality, the playing field is not close to equal.

The Rev. Jeremiah Wright spoke to a pain and a stark reality that is obvious to his African American congregation. If America were truly a land of equal opportunity, there would be no reason for him to call for God to damn America. Would any White American willfully choose to change lives with a typical Black American for a decade? I doubt it. Because in truth we know that African Americans get a pretty raw deal. We know we could act white all we wanted, but we would still be discriminated in ways both overt and pernicious because of the color of our skin. It would not be by just a handful of crazy people, but by many people every day of our lives. For starts, we had better take the bus instead of trying to hail that cab.

We are asking African Americans to be like us even though the environment we provide is only partially welcoming to them. Burdened with much more baggage than most of us in White America, we somehow expect them all to soar toward the stratosphere, though most of us fail in this endeavor. In reality, this attitude shows our appalling naivety.

As Barack Obama has said, America claims to be the land of equal privilege and responsibility. The reality is that we are a long way from being there. The attitudes of White Americans, expressed in our vilification of Rev. Wright, shows just how large this gap actually is.

We should be reaching out in compassion to suffering souls like Rev. Wright, rather than condemning him. Jesus stepped outside his tribe. He hung out with beggars, lepers and prostitutes. In doing so, he learned about their suffering. The Buddha also had this experience and it changed his life. Reverend Wright’s words are evidence of a huge gaping psychological wound in our country. He speaks for many millions. All Barack Obama has asked of us is to have an honest discussion on the reality of race in America today. His remarkable speech was a first step in this discourse. Until we confront this pain, which affects all races, we will be like Sisyphus, doomed to keep repeating the same pointless mistakes into future generations.

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The Thinker

Do the delegate math and the outcome is no longer hazy

It is probably just as well that I did not bet any money on Hillary Clinton being our next president. Last summer I gave her 4 out of 5 odds that she would be our next president. I certainly was not calling the election more than a year in advance but I pointed out that the dynamics were heavily in her favor. More recently around Super Tuesday, I said I still had confidence that she would be the Democratic Party’s presidential nominee. No longer. What happened? Clearly, Barack Obama proved to be a very formidable candidate but overall the primaries and caucuses have been quite close. While neither has enough delegates to claim the nomination yet, CNN calculates that Obama has a lead of 137 delegates. It gives Obama 1,622 delegates (1,413 pledged, 209 superdelegates) to Clinton’s 1,485 (1,242 pledged, 243 superdelegates).

2,024 delegates are needed to win the nomination. John Edwards also has 18 pledged delegates. So 3,125 delegates have been awarded. 692 delegates (566 pledged, 126 superdelegates) have yet to be selected in the remaining primaries and caucuses. By my calculations, this leaves 232 superdelegates uncommitted.

You can see the result of my math below. I used recent polling where available, and split the difference where unknown. Clinton has to rustle up 539 delegates to win the nomination. Obama needs 402. Hillary must win 59% of the remaining delegates and superdelegates to clinch the nomination. How likely is that? It is very unlikely. My estimate is that she will get 479 delegates, or fall 60 delegates short. I might add that I was being optimistic about many of her primary wins. I awarded committed superdelegates in proportion to those currently earned, where she has a 52% to 48% advantage.

State/Terr Delegates

Total (Pledged)

Clinton Obama
% Vote Delegates % Vote Delegates
PA

187 (158)

57 (55)

90 (85)

43 (45)

68 (73)

GU

9 (8)

50 (50)

4 (4)

50 (50)

4 (4)

IN

85 (72)

50 (51)

37 (38)

50 (49)

35 (34)

NC

134 (115)

45 (42)

52 (48)

55 (56)

63 (67)

WV

39 (28)

65 (67)

18 (20)

35 (26)

10 (8)

KY

60 (51)

58 (65)

30 (37)

42 (30)

21 (14)

OR

65 (52)

50 (41)

26 (21)

50 (59)

26 (31)

PR

63 (55)

50 (68)

28 (38)

50 (32)

27 (17)

MT

25 (16)

45 (41)

7 (7)

55 (57)

9 (9)

SD

23 (15)

40 (55)

6 (9)

60 (45)

9 (6)

Subtotal

690 (570)

298 (307)

272 (263)

Uncommitted Superdelegates

352

52

183

48

169

Committed + Super

1485

1622

3909

1966

2063

Edwards

18

Total Delegates at Convention

4047

It does not take a rocket scientist to say Hillary Clinton faces very long odds at winning the Democratic nomination at this point. I put her odds at 1 in 15. Moreover, I suspect I am being optimistic.

If somehow she does manage to eke out a win, it will be either because Barack Obama’s campaign imploded (which is very unlikely) or because she managed to convince a very large number of superdelegates to vote against the majority of the pledged delegates. The latter outcome, if it happens, would be the worst thing that could happen to the Democratic Party. It would likely tear it asunder. It would also make it very likely that John McCain will be our next president. Republicans praying for a miracle are praying for this one.

I doubt very much that either of these scenarios will happen. Hillary Clinton will not win this nomination but Barack Obama will. Despite Hillary’s claims that she is the more electable candidate, I strongly disagree. Unless the Democratic Party implodes, the dynamics are highly in the Democratic nominee’s favor.

As for Michigan and Florida’s delegates, it is clear that neither state will redo their primaries. In neither primary did candidates compete openly. Therefore, it is likely the DNC will split their delegates 50/50 between Obama and Clinton, effectively giving no candidate an advantage.

It is not clear to me why the media has not picked up on this story. Perhaps if they were to explain it the way I explained it to you, much of their revenue would dry up. Pretending there is suspense in the Democratic nomination when in reality there is little probably feeds their bottom line.

Barring some catastrophe, Barack Obama will be our 44th president.

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The Thinker

Review: The Crying Game (1992)

Just who are we, really? Many of us remain mysterious even to ourselves. We do not really know who we are because our mettle has never been put to the test. Instead, we lead comfortable lives safe in our cocoons. Others take chances in life and in the process discover just whom they are. That is the premise of The Crying Game (1992).

Fergus is a dutiful Catholic living in Northern Ireland who joined the Irish Republican Army. He thinks he knows who he is. It is not until he gets embroiled in the kidnapping of a British soldier (Jody, played by Forest Whitaker) and is required to kill the soldier to prove his mettle that his true nature is revealed at last.

Unfortunately, joining the IRA is a bit like joining the Mafia. You cannot just quietly resign. You are tied to the IRA for life. The kidnapping goes badly awry. His victim ends up dead anyhow when he is run over by a British Army truck during an escape. The British Army, which has been tracking them, discovers their hideout and violently destroys it along with seemingly everyone else engaged in this plot. Fergus is lucky to escape with his life. He moves to London in the hopes of escaping the IRA and his own trauma. Yet he remains haunted by the British soldier that he came to know. He carries Jody’s wallet with him. It contains a picture of his British girlfriend, Dil (Jaye Davidson). Jody figures that he will be killed. He begs Fergus to look up his girlfriend and tell her that he loves her.

Not coincidentally, Fergus ends up doing construction work in London not far from the beauty salon where Dil works. He is too embarrassed to tell her of his relationship with Jody, but does have her cut his hair. He then follows her to a pub where she sings after hours. Perhaps in reaction to the shabby way the IRA treated Jody, he feels protective of her. When an abusive man enters her life, he steps in to protect her. A relationship develops, but Fergus, like the rest of us, is clueless that Dil is no ordinary woman. In fact, she is not a woman at all. She is a transvestite, which Fergus discovers in the worst possible way.

As if dealing for his feelings for Dil were not enough, the IRA tracks him down in London. Against his will, they involve him in the assassination of a British official. They learn of Dil and use his relationship with him as leverage. Fergus discovers that Dil may be a guy, but he cares deeply for Dil. He does his best to protect him. Dil may not be a woman, but he is a special wounded soul. Fergus feels the need to protect him, not just as penance for his role in Jody’s abduction and death, but because there is something worthy of cherishing.

In short, this is a movie full of surprises. Fergus’s character is stretched like so much Silly Putty. He unwillingly learns a lot about who he is in a very short time. His real values are quite different from those he has espoused. He may have been caught in the political firestorm for Irish unification, but his essence is to be a loving and healing man.

This was a challenging movie to film and direct. It is also a difficult film to watch, because it is full of violence and uncomfortable sexual situations. It is full of wonderful character actors including Jim Broadbent, as the pub’s bartender and Miranda Richardson as Jude, the pretty yet fanatical IRA lieutenant. This is not entertainment. The Crying Game is meant to make you think and challenge your predispositions. It succeeds.

The Crying Game won two Oscars for Neil Jordan, its screenwriter and director. There is nothing particularly fancy about the movie. Like the 1960s TV series The Prisoner, The Crying Game is really about discovering the depth and breadth of one human soul. Occasionally, as in Ferguson’s case, his soul is far more expansive and caring than he could even begin to grasp.

I rate the movie 3.2 on my 4.0 scale.

 
The Thinker

Iraq’s holding pattern

On the fifth anniversary of our invasion,it is hard to escape the fact that most Americans are busy tuning out the Iraq War. The Iraq War is old news. Yesterday, it was hard to muster even a few dozen war protestors for a demonstration in front of the Internal Revenue Service. While more sectarian death in Iraq is hardly news, reckless philandering by a call-girl happy governor is news and so much more interesting.

I do not mean to suggest that Americans have forgotten about the Iraq War. By large margins, Americans agree that going into Iraq was a mistake and want us to withdraw. Only the fools who instigated this war like President Bush and Vice President Cheney remain in denial. President Bush said yesterday that the surge “opened the door to a major strategic victory in the war on terror”. I want whatever he is snorting; it must be pricier than Elliot Spitzer’s call girls. Also yesterday, Vice President Cheney took time from his busy schedule to sneer at the American people. Asked by ABC News for a reaction to polls that consistently show two thirds of the public oppose the Iraq War he rejoined, “So?” A small majority of Americans now think that we could ultimately succeed if we stayed in Iraq long enough. Yet the public does not want to hang around long enough to see if it can happen. Maybe the ten billion dollars a month that our occupation is costing has something to do with our calculus.

The Iraq War has become the crazy old grandmother in our nation’s attic. We find it convenient not to talk too much about it. Our reaction is understandable if not childish. Just as Germans found it was hard to talk about the Holocaust after World War II, so we find it hard to stay engaged on our folly. In some ways, it was easier to stay engaged when things were getting worse. For the price of his surge, Bush at least bought himself at some relief from the incessant questions of his decision to invade Iraq. Instead, we find ourselves focused on some of other catastrophically bad decisions his administration made which are much closer to home, like skyrocketing gas prices, a falling dollar and our plunging stock market.

President Bush of course wants you to believe his surge is not just working, but will actually bring peace to Iraq. Here is what is working for sure in Iraq: ethnic cleansing. Before our invasion, ethnically mixed areas in Iraq were commonplace. Few cared whether a Sunni married a Shi’ite. Now, only a handful of mixed neighborhoods remain. The result is that Baghdad has been transformed into hundreds of smaller cities all but a handful of which are either Shi’ite or Sunni. Mini cinder block Berlin walls separate these enclaves. Within its citizens are generally safer than they were when they were ethnically mixed. The dubious success of ethnic cleansing (which we did not succeed in preventing earlier in the war) is responsible for much of this reduction in violence. Our forces have also been blessed by decisions of some militias, like Moqtada al-Sadr’s, to refrain from violence.

Unquestionably, considerable violence was quelled because of the surge. Bush and General Petraeus can take credit for this. In itself, it is not too surprising. It is hardly a novel strategy. When crime rates spike in the District of Columbia, police go on overtime and saturate crime prone areas with cops until crime levels drop. With enough force, you can win a rough peace anywhere. The problem is it is a faux peace. The thorny political problems remain. Only three of the eighteen political benchmarks we laid out for the Iraqi government has been achieved. Meanwhile, the Iraqi parliament is planning another two-month vacation. They might as well go on vacation since they seem unable to agree on much of anything. In truth their parliament is quite representative. Their inability to agree on much of anything shows that the country of Iraq is simply a fiction.

What about those “concerned local citizens”? These small police and military forces are in primarily Sunni areas of the country. It is true that they have largely gained the upper hand against al Qaeda. Al Qaeda though remains a tiny fraction of the unstable forces in the region. What is less reported is how such cooperation was achieved. Sunnis are cooperating with American forces for two important reasons. First, Shi’ite militias were succeeding. Sunnis were losing their civil war and needed help anywhere they could get to survive. They found it convenient to make the Americans their friends. Cooperating with us became better than extinction. Second, they were bribed. Those concerned local citizens did not spontaneously come together, but found common cause only when we started handing them money and arms.

The Iraqi Army remains largely ineffectual. For all practical purposes, it can be considered a Shi’ite militia, and not a very good one at that. They show all the sterling qualities of the South Vietnamese Army, only they are not nearly as good. Few of their battles are waged independently. Most are done in cooperation with American forces. The surge has helped “concerned local citizens” deal with their own security problems by providing the necessary guns, ammunition and training needed to control behavior. All factions seem to tacitly agree on one thing: they do not want to agree to solve their thorny problems. Their real loyalty is to their ethnicity, not their country.

The reality is that Iraq has already self-segregated into three ethnic states, only its boundaries are still fluid, particularly within Baghdad. As I predicted, in areas where our military forces were densest, terrorists and insurgents relocated to areas that are more favorable. Currently these are cities like Karbala, Kirkuk and Mosul. 160,000 troops is a lot, but it cannot pacify all of Iraq. The civil war, well underway before the surge began, has at best been postponed. However, no occupation force can stay forever. The Iraqi government shows no willingness to actually govern their nation. They cannot even come to consensus on some of their most basic problems, like the division of oil revenues. This means of course that the country of Iraq is dead and cannot be resuscitated. It existed as long as Saddam Hussein ruled. It was doomed to fall apart when he was overthrown.

Force of arms and infinite patience will not force the shards of Iraq back into a coherent shape. The surge has helped to reduce the level of violence. What is needed now is an imperfect end to our occupation. It will not come from this president, but I expect the next one will implement a withdrawal strategy similar to what I penned last September. For a limited time, we should facilitate the desire of Iraqis who want to move safely from one ethnic area to another. We should do our best to police the boundaries of these new states. Then we should withdraw a few divisions every month until we are gone. With luck we may find some other international forces to take our place.

On one thing, I am certain: a year from now under a new president we will at least have begun a real withdrawal from Iraq.

 
The Thinker

A bundle of confusion

If you own a horse, you have to let it run regularly. If you own a sports car, you should take it on a racetrack occasionally for the pleasure of being smashed into your seat while you accelerate. Similarly, if you have a high definition television (HDTV), you do not buy it to watch interlaced analog TV signals with only 473 lines of resolution. You want content that will make you appreciate the fact you just spent $699 on a high definition TV.

That is how much we paid for our HDTV. It is an Olevia 37 inch HDTV that comes with more ports and options than we will ever use. Our TV room is small but despite its relatively modest screen size, it still seems enormous to us. The TV it is replacing worked perfectly fine. It is now sitting in our basement queued for a likely donation. While only about seven years old, it was doomed soon after it was bought. The FCC declared that on February 19, 2009 TVs like ours will be obsolete unless we buy a conversion box. Even if we did our picture quality would not have been improved. Neighbors would laugh at us for being so 20th century.

Both our cable provider (Cox Communications) and our phone company (Verizon) have spent years tempting us with their all-digital services. We have our Internet and cable TV service with Cox and an old-fashioned POTS line with Verizon. On a typical month, I pay Cox $93 and Verizon $32. Both Cox and Verizon have been luring us with bundled services. If we bundled all our communications needs with them, we were told, we could save some money.

Verizon has its fiber optic FiOS service. In addition to providing high-speed Internet access, you can also receive a lot of other content, including their version of movies on demand. Cox offers essentially these same services for roughly the same price. How do I know? Well, it is hard to tell. Masters of voodoo marketing are putting together their sales brochures. They excel in obfuscation. Yet they refuse to leave me alone. Roughly once a week I get a solicitation from each company. Typically, they come in the mail, but now and then, they also come attached to my door handle. Verizon has lately been very uppity, sending salespersons to my door to pitch their FiOS service. That was one strike against them; I hate door-to-door salespersons and by implication any company that would send me one. Moreover, I have an unlisted phone number. You would think Verizon would take this as a signal not to call me. You would be wrong. They have given me several calls pitching FiOS. Cox at least has neither knocked on my door nor solicited me over the telephone.

Now that we are HDTV owners it was time to consider their various offerings. As we soon discovered, analog TV on a HDTV looks ridiculous. Either much of the screen is black or if your TV is fancy like ours is, you can put it in a zoom mode. The screen fills up, but suddenly the picture looks fuzzy.

Both Verizon and Cox had mid-tier bundled service packages for $99.99 a month that combined telephone, digital TV and Internet service. At $99.99 a month, either looked like a good deal. Either deal appeared to be about $25 less than we were currently paying. The question became which one to choose? Which was better?

Naturally, both providers claimed they had a superior network, superior content and lower prices. Both though delight in obfuscating the consumer’s real costs. It is almost impossible to determine what you are actually buying and how much the service will cost you. I spent a couple hours on Verizon’s site trying to pick through the details of their bundles. Eventually I gave up. There is probably no way to know for sure without hiring a lawyer to decipher the fine print. Verizon though did have three strikes against them. First, they annoyed me by having salespersons knock on my door and call me unsolicited on the phone. Second, was their stance on network neutrality. Third and probably most importantly, like with their cell phone service if you select one of their bundles they want to lock you in for a couple years. I mean for such a steal as they are giving you they have to make up the difference somehow! I am old fashioned enough to think that if their service is that great it will be obvious to me, so I should not have to be locked into it.

Cox Communications had a few strikes against them too. About a year ago, I inquired about one of their bundles. I asked many questions and I did not like what I heard. I politely said no thanks, not at this time. A few days later one of their digital receivers arrived on my doorstep. That raised my dander. A phone call confirmed that I had not subscribed to their bundle. However, I still had to take an hour out of my life to return the box they sent me. They would not pick it up.

Nevertheless, between their latest brochure, reading their web site and a long conversation on the phone with their sales office, I was able to get a sense of what my bundle would actually cost me. Still, the devil is in the details. Did their $99.99 a month bundle include the rental cost of their digital receiver? Negatory. That was $4.50 a month, so the bundle was really $104.49. Did it include any HD channels? No except for the local HD broadcast signals. However, they did offer 31 HD channels. If I wanted them on top of our digital cable, they were $1.44 a month. What is this free digital tier that comes with the bundle? Apparently, the ones listed in the brochure were incorrect, but I could get the equivalent of their Variety Tier. This is what my wife wanted because she wants to see the latest Torchwood episodes on BBC America. Would there be an installation charge? Not if I install the digital receiver myself. They have to come out to the house to install the telephone interface, but there is no charge for that. Can I get extended local long distance like I have with Verizon? In other words, can I call my father who lives across the Potomac River toll free? No, but you can call the District of Columbia for free. Oh, and to get the bundle you have to choose Cox as your local long distance, long distance and international provider. Long distance rates are fifteen cents a minute, or more than three times what I pay Pioneer Telephone, my current long distance provider. However, this is not much of an issue since we hardly ever call long distance. We do email instead. Moreover, to maintain my unpublished telephone number I have to cough up another $1.71 a month. All totaled with taxes my $99.99 a month bundle would cost me $123.09. Hey, but at least I will only have to cut one check.

In short, I may save a few bucks a month but I will not be supplementing my retirement income with their fabulous bundled savings. On the plus side, we will no longer be stuck with analog TV signals. Digital signals will no longer be interlaced. The picture on these channels will not make them much bigger, but will make the picture smoother. Their 31 HD channels are expected to double soon and there will be no extra fee. We will get channels we do not get now, but that does not mean we are likely to watch them. In addition, as best I can tell I am not locked into a two-year contract.

In fact, the differences between Cox and Verizon are rather marginal, but I chose to go with Cox for these reasons. I may end up regretting my choice. Their eight-hour battery will keep my landline working during a power outage, but what if the outage lasts nine hours? While many of our TV channels will soon be in HD, I am still not sure I will watch any more TV. I largely gave up TV years ago. On the other hand, our daughter will be pleased.

Our next purchase will probably be a Bluetooth compatible DVD player. Apparently, regular DVDs are not good enough for a modern HDTV, which means that we will want to buy some of our favorite DVDs again so we can have a more proper theatrical experience.

Well, someone has to pull this country out of recession.

 
The Thinker

The price of incompetence

(This post is sort of a continuation of this one, which if you have not read it, you should.)

I was wondering if this year I could report that my wife and I were millionaires. It looks like we may have to wait a few years. In fact, given the fallen dollar, deflated house prices, deflated stock prices, rising unemployment and what looks like the return of stagflation, maybe we need to wait a couple of decades to celebrate our seven figure net worth.

Thanks to inflation, being a millionaire these days is no longer that a big deal. However, if we get there we cannot, like Jed Clampett, go buy a mansion in Beverly Hills with a “cement pond”. In the intervening forty years, one million dollars today is worth $164,000 in 1968 dollars, which was when The Beverly Hillbillies was at the top of the Nielsen’s. To reach Jed Clampett’s lofty income we would need about $6.3 million in today’s dollars, a total we are unlikely to achieve.

In fact, our portfolio is down rather sharply. I am trying to keep this unwelcome news in perspective. The reason our net worth was approaching a million dollars was because much of our portfolio was overvalued. Even so, at the end of 2007, Quicken calculated my net worth at $910,000. Today, just ten weeks later, it said our net worth is $860,000. What happened? Who took away $50,000?

Well, there was a drop in the assessed value of my home that I received recently. When the country assessed it last year, it was worth $511,000. This year, even though I put in new energy efficient windows, it is worth $479,000. In 2006, though it was worth $552,000. In two years, the value of my house has dropped 14%.

At the end of 2007, which had already seen the beginnings of a bear market, our investments were worth $479,000. Today they are worth $455,000, which amounts to a drop of five percent in a little over two months. What happened? The subprime mortgage mess kept happening and its effect is rippling across stocks and mutual funds worldwide. Between the losses in my mutual funds and the lower value of my house, since the start of the year, I have lost $54,000. Fortunately, I reduced debt and added income and that cut my total loss to about $50,000.

I am very mindful that we are some of the fortunate financially. Our house cost us $191,000 when we bought it in 1993, so even at $479,000, it has been a good investment, returning on average about $19,000 a year, if you do not factor in the costs of mortgage interest, taxes and upkeep. If we had been a first time homebuyer in 2006 when housing prices reached their peak, we might well be embroiled in the mortgage meltdown now. Most likely the net worth on our house would be negative. We would resent paying against a mortgage for our house when the loan value exceeded its value. We would be hoping we could keep up on my mortgage payments in our uncertain economy. Of course if we had been one of those reckless buyers who purchased a home with no money down and a variable mortgage interest, we would be likely be screwed. I doubt we could pay the higher interest rates and with our house’s value decreasing. We would be inclined to walk away from the whole mess.

There’s the rub of course. It did not have to be this way. There could have been regulations in place that ensured that only people who were reasonably solvent could buy houses. That has not been the governing philosophy of these last eight years. To quote the fictional Gordon Gekko from the 1987 movie Wall Street (and by implication the late Ronald Reagan), “Greed is good”. If you can earn a fast buck, it does not really matter so much how you earned it as long as you made the quick profit. This is the downside of laissez-faire capitalism. It is a primary reason why Republican ideology just does not agree with me. None of the current economic mess had to happen. Instead, we let it happen. We did not so much turn a blind eye to it as we opened the doors and let the bull into the china shop. As crazy as this sounds, we let the bull in because we thought it was good to have a bull in the china shop.

If Democrats had been in charge these last eight years it is likely much of this mess would have been prevented. Had Al Gore been president, his administration would have had an eye on the subprime mortgage problem and likely, it would have been nipped in the bud. Congress, being in Democratic hands, would likely have had oversight hearings, resulting in prudent regulations on the housing and financial industry to preclude these sorts of problems. Unquestionably, we would not now be embroiled in a winless war in Iraq, draining the economy of three billion dollars a week in direct costs and pushing the down the value of the dollar.

Instead, we have a Republican president and a largely Republican rubber stamp Congress. Whatever the President wanted the Congress went along with it. Congressional oversight became a joke. We had a government of, by and for the corporation and very rich people. Not surprisingly, it reflected the values of corporations and very rich people who, unsurprisingly, want themselves to get a lot richer and the expense of someone else. Tax cuts went disproportionately to the richest people. When wealth trickled down at all, it trickled down to shareholders, not to the laborers who sustained the economy. Moreover, all this additional wealth did little to improve the commonweal. Our infrastructure deteriorated. The resulting detritus is easy enough to see around you: homes foreclosed, gas prices going through the roof, a crumbling infrastructure, the recession that we know is upon us, and the return of stagflation.

My real financial concern is more personal. With the failure of the Wall Street investment firm Bear Stearns, the question is really, “Who is next?” Our portfolio is reasonably diversified, but we have over $150,000 in various Vanguard funds in a retirement portfolio. If Vanguard goes the way of Bear Stearns, will our portfolio be safe? In other words, just how safe is our financial system right now?

Doubtless, I am not the only investor deeply troubled by these events and wondering if there is a severe recession or even a depression around the corner. It is evidenced by $111 a barrel oil and gold priced at over $1000 an ounce. It is clear that savvy investors are lining up by the exit doors. It will take just one little jolt to have them bolt out of the room. The Federal Reserve is trying to preclude this possibility. That is why is took the nearly unprecedented step of offering Bear Stearns a line of credit of $200 billion.

I am irked because this financial crisis was completely avoidable. I am outraged though because I am paying the price for government incompetence. I can see it in my net worth, where $50,000 has disappeared from my portfolio since the start of the year. Multiply my small misfortune across the United States and we have a huge financial meltdown that could be catastrophic.

This is not business as usual, unless you expect incompetence. This is government abdicating its job. This is the White House and Congress largely asleep at the switch, reacting to events instead of preventing them. In case it is not clear to you, we have governments to protect the interest of its citizens.

Who will win the White House race in 2008? Who will win the Congress? There is no doubt in my mind. Democrats will win. You can see it in poll numbers, where self-described Democrats outrank self-described Republicans by more than ten points. You can see it in the primaries and caucuses where Democrats are participating at rates unseen in a generation. You can get a preview of the election by looking at the results of a special election held last week in Illinois to fill former House speaker Dennis Hastert’s vacated seat. A Democrat won it.

For eight years, we have seen what happens when Republicans order the government and the economy the way their principles dictate. What we have is a financial mess not seen since the Great Depression. That event was another completely preventable economic event that was brought to us by Republicans. Will we ever learn? Will Republicans ever understand that their economic principles are not just fundamentally bankrupt, but fundamentally wrong? I doubt it. They are clueless folk. They are looking at the mirage of Reagan’s shining city on the hill, while ignoring that America is falling apart around them.

At least the American public is now fully, painfully and nervously awake. I can only hope that we can get the government we need before our current economic danger devolves into an economic catastrophe.

 
The Thinker

Is the U.S. Post Office obsolete?

Recently I wondered if cash was becoming obsolete. After reading this story in the Washington Post, I get the feeling that America’s oldest public institution, the U.S. Post Office, is nearing obsolescence too.

The milkman became obsolete in the middle of the 20th century. Analog TVs will become collector’s items after February 19, 2009 and most will quickly end up in landfills. The incandescent light bulb is on a ten-year death march, thanks to recent energy legislation signed into law. Why should the U.S. Post Office not see the handwriting on the wall?

There is little doubt about it: the U.S. Post Office survives largely due to the largess of bulk mailers. They just love inundating our mailboxes with junk. If you are like me, virtually all of it goes into the trash. Now consumers want the same freedom from junk mail that they have from telephone solicitors. They are pressing the Post Office and Congress to let this new freedom ring. Since it sounds good for the environment and I hate bulk mail, I know I would be among the first to sign up. Such an action though would untie the Post Office from its financial moorings. It is bad enough for the Post Office that first class mail is drying up. I pay about half of my bills online and I expect that I am one of the technology laggards. Most of my other creditors just have not graduated to the 21st century. These include our lawn service and a number of physicians. I expect they will catch up soon. They will find it is much less expensive to collect money online and wonder why they did not do it years ago.

The personal letter is virtually obsolete. Once upon a time, my siblings and I sent around a chain letter. Since I have many siblings, it took about two months for a new batch of letters to reach you. About ten years ago, at my insistence, we gave it up. What was the point when we all had email addresses? A bimonthly bundle of letters at least had the virtue of making me sit down and write my siblings regularly. Today, we shoot out emails to each other all the time. Yet I can go three or four months before I trade much in the way of actual news. I still have one technologically phobic sister, but her husband does email so he makes sure she gets copies (as in “printouts”) of our emails.

As I remarked a couple years ago, the Christmas card is another tradition that is becoming obsolete. We still send them out, but I am not sure we will this year. Most of my siblings did not bother to send us one last year, but they did send us holiday email newsletters. It certainly was quicker and there was nothing to stamp. It did not quite have that personal feel to it though.

I still “mail” most of my packages through the Post Office, but that is largely from force of habit. My wife typically chooses FedEx. It is not that she chooses them because she needs overnight delivery. She chooses them because they tend to be cheaper than sending packages through the Post Office.

If the Post Office went out of business, magazine publishers would have to adapt. I am not sure they would survive. How would we get our copies of Time, National Geographic and Reader’s Digest? I bet publishers would find a way. Perhaps they would make deals with Starbucks and tell subscribers to pick up their copies there. It is hard to find any community so remote that it does not have a Starbucks. It would also increase their coffee sales, which have been slumping a bit lately. On the other hand, perhaps magazines would use pizza delivery firms. Dominos is also ubiquitous, and their drivers are probably in your neighborhood once a day. They could deliver magazines too, for a small fee.

Increasingly, the whole business model of the U.S. Post Office looks shaky, as evidenced by the expected $1 billion budget deficit this year. Junk mailers (excuse me, “bulk marketers”) pay a hefty premium to clog up your mailbox. I notice that many local businesses avoid using the Post Office. Instead, they work with companies that wrap their fliers inside other fliers, or with local free newspapers that stuff them inside their newspapers. Some companies simply pay people to walk through neighborhoods and leave them on doorsteps or door handles. Even my church is going electronic. It is part of their green strategy. I get my church newsletter in PDF format. They have not yet figured out a way to receive my monthly gift electronically. That will come.

According to the article, the U.S. Post Office is looking at unorthodox ways of paying its bills. If it can get Congress to change the law, you may see a Starbucks in your post office lobby soon. Who knows, maybe there will be a Subway there in time too. My suspicion though is that these are half measures that will not reverse the long-term trend. The Post Office already has gotten periodic bailouts from the government, but it is supposed to be financially independent. I expect that the Post Office will either become like Amtrak and depend on subsidies, or Congress will just pull the plug on this most venerable American institution. It had a good, long ride.

Its death knell may be postponed for a while. The U.S. Post Office still has a few features that cannot yet be met electronically. Email has no guarantee of delivery. Even if the email reaches an inbox, there is no guarantee it will be read. The same is true with junk mail, of course, but at least you have to look at it to determine whether it is a legitimate piece of mail before throwing it in the trash. There is no legal equivalent of registered mail in the email universe. I suspect in time that mail protocols will be upgraded to provide equivalent functionality. Email programs will be required to present the electronic equivalent of registered email. Moreover, since Congress will probably require it, email programs will probably be required to present any unsolicited mail that you agree to be paid to receive. Most of us might supplement our income with revenue from viewing email from bulk marketers. Most likely, our internet service providers will demand a cut of this revenue too. In any event, the financial winner will not be the U.S. Post Office.

Unless, the U.S. Post Office wakes up. About a decade ago, the U.S. Post Office had a program where it offered the electronic versions of registered and certified mail. It quickly went nowhere. It might be an idea worth reviving. If emails sent through the U.S. Post Office network were required to be presented in email boxes of U.S. owned ISPs, both ISPs and computer users would probably sign up because, like registered mail, it would have the odor of being “legitimate” email. For example, if you knew that some email carried a U.S. Post Office digital signature, which meant that the bulk emailer paid the U.S. Post Office for the privilege to send it, you might be inclined to allow such mail through, particularly if you got a small rebate to read the email. Similarly, if you needed assurance that a financial transaction was legally electronically delivered to a creditor on a certain date, you might gladly pay a small fee.

This might be a new business model for a 21st Century U.S. Post Office. Otherwise, I believe it will go the way of the milkman.

 
The Thinker

What’s a horny politician to do?

Ack! Another politician is caught with his pants down! Just what we needed: a little jolt of scandalous cappuccino to wake us up. After all, the presidential campaign has gotten a bit boring of late. Even political junkies like me are beginning to nod off. What we needed was a distraction. Fortunately, New York Governor Elliot Spitzer provided just what we needed. We learned recently that on Valentines Day of all days he hoofed it down to the Mayflower Hotel in Washington D.C. and had an extremely expensive sexual experience with a very high priced 25-year-old prostitute with the doubtlessly assumed name of Kristen.

Sexual tourists of the nation’s capital will now have to add room 871 of the Mayflower Hotel to their list of destinations. It is about equidistant anyhow from the Tidal Basin (where stripper Fanne Fox and Arkansas Congressman Wilbur Mills were found drinking and driving in 1974) and the Capitol steps (where Rita Jenrette and Congressman husband reputedly made whoopee back in the 1980s). The Mayflower Hotel is also not that far from the Vista Hotel, where back in 1990 former D.C. Mayor Marion Barry, married at the time, was famously caught smoking crack cocaine while his “long time female friend” observed. Doubtless, if D.C. hotel rooms could talk, they would be deafening.

I had no inkling that Elliot Spitzer was dealing with a few personal demons. However, I am not surprised. Someone as popular and successful as Spitzer probably deserved a comeuppance of some sort. This man after all was such a phenomenal Attorney General of New York State that to many Americans he was a household name. Unlike some recent U.S. Attorney Generals, he was obsessed with ensuring that the law was vigorously enforced, especially against the powerful. He took on price fixers, securities firms, insurance companies, the record companies and even police corruption in the town of Watkill in upstate New York. If he appeared on the floor of the New York Stock Exchange, he need not worry about the thunderous applause, just a chorus of boos. No wonder he was elected governor with almost 70% of the vote.

His record as governor thus far has been a disappointment. With these scandalous revelations, it is an open question whether he will remain in office. Still, Bill Clinton had a rocky start as president too. He eventually won a second term. In spite of his own moral failings, he retired with near record high approval ratings. Perhaps Spitzer’s hesitancy to leave office is that he hopes that some of Bill’s luck will rub off on him. Republicans in Albany who want to impeach him might want to review the political implications of Bill Clinton’s impeachment first. Most Americans feel that moral failings while in office that are not illegal are politically excusable. Thus far, Spitzer has not been charged with any crime.

Why did Spitzer do it? I cannot read his mind but as a man a few years older than he is, I think that I have a good idea. I believe that he did it because like many married men he was not quite satisfied with what he was getting at home. Obviously, I have no idea what his sex life is like. His wife is quite attractive. I think in Spitzer’s mind, once you have made the dubious decision to step out on your wife, having sex with a prostitute seemed the lesser of many evils.

Ironically, if Spitzer were a Shi’ite Muslim in Iraq, he could come to an agreement with a local woman to be his wife for a day, get his rocks off and the clerics would bless it. Alas, he lives in America where unless you are polyamorous or have an open marriage, such options are closed to married people. Having sex with a prostitute can have some advantages. First, you cannot be accused of having an emotional affair. Some women will overlook a sexual affair but will string you up by your heels for having an emotional one. If, like Elliot Spitzer, you spend $4300 for an encounter with a down payment on a second one, you can be accused of being a cheater and wasting a lot of money, but you can at least escape the emotional affair rap.

The sad reality is that if you are a horny married politician your options are very limited. You could come on to that buxom secretary or filing clerk but such dalliances usually turn into steamy emotional affairs that go toxic and then public. That will not do for an ambitious politician, particularly one that looked like presidential material in 2012 or 2016. Besides, you have an image to maintain in the workplace so showing this side of yourself is very risky. You can have an affair with your right hand but that feels like second-class sex. A high-class hooker may cost a ton of money, but they tend to be discreet. That is in part how they command such extraordinary fees.

I hope Elliot Spitzer at least had a trusted partner in crime. I hope he was not dialing for escort services on his cell phone or finding them on Craigslist. I hope he had a way of funneling the money through a third party. Even so, there are risks in these contractual affairs and for a change, he got stung.

I will probably draw the wrath of wives everywhere (and many husbands too) by wishing New Yorkers would cut him a little slack. I felt sorry for Hillary Clinton when her husband’s tawdry oral affair with Monica Lewinski made the light of day a decade ago. At the same time, I did not feel that it diminished Clinton’s competency as president. Like most Americans, I saw his impeachment as a manufactured hullabaloo. If Spitzer ends his political career over this scandal, New Yorkers and Americans will probably be the poorer. His hypocrisy is evident, but we are all hypocrites, just generally in different matters and in different degrees. All of us make mistakes. I think this is a forgivable political mistake. His wife will have to figure out whether it is a forgivable marital mistake.

As I once outlined, there are many reasons for infidelity. This transgression has the hallmark of being one of the more forgivable transgressions. It appears that Spitzer had powerful sexual needs that his wife would either not accommodate or he was too embarrassed to express. I remain skeptical that either sex is naturally inclined toward monogamy. Wives who expect monogamy from their husbands had best recognize that they are fighting Mother Nature. They can reduce the odds by exceeding expectations in the bedroom. If you are a once a week type and he is a once a day type, you might want to find a way to be a twice a week type. If you refuse to do X, Y and Z because you think they are kinky you might want to do your best to do X, Y and Z at least occasionally. Otherwise, particularly if he has a very high sex drive, he may go find X, Y and Z somewhere else. Sexual kinks can have this sort of power and if press reports are correct Spitzer had a few.

As for politicians and sex, while it seems that they go together like bread and butter, I am willing to bet they are no more inclined toward infidelity than the rest of us. Sexual sins seem to be non-discriminatory. If infidelity made people deathly ill, you could not get a room in a hospital due to the shortage of hospital beds. Men like Spitzer who avail themselves of a call girl are bucking the odds. The truth is that while prominent men caught with their pants down make the papers regularly, for a man to cheat, he generally needs a woman. Since most men avoid prostitutes, roughly as many women are having lapsed periods of virtue as men.

Spitzer deserves a political slap on the wrist, perhaps a censure by the State Assembly, and then, like with the Larry Craig scandal, everyone should move on. This is a matter between the Mr. and Mrs. Spitzer. Politicians who actually work for the benefit of the people they serve are rare enough creatures. Spitzer was one of these public servants. There is no point in making them an endangered species for these truly minor kafuffles.

 
The Thinker

Review: No Country for Old Men

Sometimes the judgment of the Academy of Motion Picture Arts and Sciences leaves much to be desired. That appears to be the case this year. The motion picture No Country for Old Men somehow won Best Picture. Either 2007 was a terrible year for films in general or the 6000+ members of AMPAS were high on something. This movie is certainly suspenseful but unworthy of its Best Picture status. In fact, it does not come close.

It is not that this movie is bad. It is just that the Coen Brothers have done much better work that has garnered far fewer awards. So what is so special about No Country for Old Men that it receives Best Picture when its far better cousin, the 1996 Fargo, did not. (Fargo did win two Oscars, for Best Screenplay and for Best Actress in a Leading Role.) No Country for Old Men though not only won Best Picture, but also earned the brothers Oscars for Best Directing and Best Screenplay, as well as a Best Performance by an Actor in a Supporting Role to Javier Bardem. Bardem plays a crazy psycho killer whose quirky means of dispatching people to their reward is to use a compressed air cattle gun. Hey, at least it is quick death. Maybe states will adopt it for condemned prisoners instead of lethal injection.

The story takes place in West Texas in 1979. Hollywood has short shrifted this is a part of the country. The Coen Brothers at least do us a favor by giving that area of the country its overdue screen time. As you might expect it is desolate yet pretty in its own way. If it were not for its many amoral residents, it might be a nice place to retire. You could certainly stretch your retirement dollars with all the illegal immigrants running around. The Coen Brothers portray that part of Texas as half-lawless. Unfortunately, its citizens do not give the sheriff much money, so it is hard to rustle up a posse to track down psycho killers like Anton Chigurh (Javier Bardem). One thing for sure: if you find two million dollars in drug payoff money surrounded by a bunch of dead or bleeding people at a remote location in West Texas, you had best resist the temptation to abscond with the loot. You do not want Chigurh to track you down because he is focused, relentless and utterly amoral.

Male hunk Josh Brolin plays Llewelyn Moss, the taciturn guy who first discovers the drug loot. Apparently, drug deals gone badly are par for the course out in West Texas. He does have enough sense to send his wife Kelly Jean to visit her mother, and to make sure she takes a Greyhound bus to get there. To a killer like Chigurh, tracking his wife and mother in law down is straightforward stuff. Llewelyn’s life quickly becomes one of a man constantly on the run. In Chigurh’s nutty mind, anyone he is intimately involved with is fair game for murder. Llewelyn has his Texas wiles to give him strength and his stoical nature to carry around two million dollars as if it were no big deal. Nonetheless, from Chigurh’s trail of carnage he quickly infers that he will be dead meat unless somehow he can kill him first.

Tommy Lee Jones plays Sheriff Ed Tom Bell, the old man of the movie’s title. Jones is an excellent actor. His quirky and craggy face makes him a natural for the part of sheriff of this remote part of the country. As sheriff, he has the dubious privilege of bringing Chigurh to justice. Given Chigurh’s innate ability to find people and plug them with slugs from his compressed air cattle gun, viewers can sensibly ask how much time the sheriff has left on his life clock. It is time for the sheriff to take a sudden retirement, if he knows what is good for him. He should definitely stay far away from people carrying around oxygen canisters.

I am not sure why Javier Bardem won an Oscar for his role. His part required him to be a one dimensional, slightly philosophical psycho killer and little else. Similarly, the men in this movie are too low key by nature to break into much of a sweat, even when death is very close. This results in a movie that is far less suspenseful than it could be.

In fact, Coen Brother movies are becoming increasingly formulaic. You know there will be one or two characters that are exceptionally odd in some way, and Bardem gets to play him this time. Surrounding the odd character is a menagerie of regular scruffs like us trying to deal with the weirdness of the events happening to them. A Coen Brothers movie is like looking at the world through a distorted glass. Few do it better but their formula may have become played out in No Country for Old Men.

Some would argue (and I am one of them) that the movie is ruined by Sheriff Bell’s rambling philosophical dialog at the end of the movie. As best I can figure out it is a bunch of nonsense. It is unclear exactly who is still alive at the end of the movie including Chigurh. If he is then Sheriff Bell will not have long to enjoy his retirement.

No Country for Old Men is certainly not a bad movie and it will engage your attention easily enough. Its violence is realistically portrayed, but it was not too bloody for my normally squeamish stomach. In short, it is average Coen Brother fare, worthy of renting but nothing all that special, with an ending that is likely to disappoint.

3.0 on my 4.0 scale.

 
The Thinker

The war taxes you are already paying

Doubtless, you have noticed rising oil prices. At closing today, a barrel of light sweet crude oil was selling at $105.15 on the New York Mercantile Exchange. In my neighborhood, this translates to a price of $3.15 to $3.25 a gallon for unleaded gasoline. Diesel was priced at $3.95 a gallon at a gas station I passed today. In fact NPR reported today that gasoline is now more costly in constant dollars than it ever has been, including during the first Arab oil embargo in the 1970s.

Some investors are seeing crude oil as the new inflation hedge. An NPR analyst estimated that these investors are driving up the cost of oil by about $20 a barrel. Whether their investment will be the inflation hedge they are looking for remains to be seen. These investors may be fooling themselves. At some point, oil may become so overvalued that the price of oil returns to what now seems like reasonable levels, $80 a barrel or so, or even less. I will not shed too many tears for these speculators, but $80 a barrel oil still strikes me as expensive, since it typically results in gas prices of about $2.60 a gallon.

One thing is clear, as these graphs in today’s Washington Post point out. A good portion of the cost of oil is not because the commodity is in greater demand, but because its price is tied to the price of the dollar. If the demand and supply of oil are relatively constant as is currently the case and the value of the dollar diminishes, oil will cost more dollars per barrel.

In case you have not paid attention, the U.S. dollar is reaching record lows too against most major currencies. Last September for the first time since 1976 when we were in the midst of a stagflation epidemic, the Canadian dollar and the U.S. dollar were worth the same amount. Oil prices went up 75.6% since the beginning of 2007, according to the Washington Post. Because the Canadian dollar is in better shape than the U.S. dollar, oil prices went up a more modest 46.6% in Canada. If you bought your oil in euros, prices rose 49.6%. The price of our relatively weak currency means that we pay considerably more for oil than some of our closest trading partners with better-managed governments and economies. As you can imagine, we pay extra for many other things because of our fallen dollar. Oil is an easy one to quantify because it is tied directly to the dollar.

Perhaps you are thinking that our government is doing something to stem the drop of the dollar. If you think this, you are sadly naïve. No, the situation is quite the opposite. Ben Bernanke, the Chairman of the Federal Reserve, told Congress recently that the Fed would drop interest rates again to stimulate the economy. This will undoubtedly drive the dollar even lower. It will also put more upward pressure on the cost of oil and cause inflation to rise, likely adding to the likelihood of the stagflation we saw in the 1970s. In addition, sometime around May you will get a fat check from the government. The government wants you to go out and spend the money to stave off a recession that looks like it arrived in the end of 2007. Where is the money coming from? The government is borrowing it. Who is loaning their money to the government? While many of us do this by buying bonds and treasury bills the bulk of this money will come from foreign governments and creditors. To make sure we have the money now we will raise interest on U.S. treasury bills until it becomes worthwhile for creditors to buy all the bonds we need to sell. Not surprisingly, rates on treasury bills are up.

When the time comes to pay creditors for loaning them their money, the government will not pay them in assets like military aircraft or wheat surpluses. No, it will pay them off in dollars. The problem is that the government has no spare dollars sitting around in a teller’s drawer to give them. The government will not hold up an investment group like Vanguard Securities until they cough up $100 billion. Instead, they will print more money. They are doing this today to pay off creditors who bought securities years ago. Because the economy is not growing fast enough to keep up with our spending, this means there is more money in circulation chasing the same relative assets. Creditors know what this means: their investment is worth less. Thus, the dollar loses value against other currencies and investors require higher interest rates. Prices for everything become comparatively more expensive but the effect is worse for prices pegged to the dollar, like oil.

In short, deficit financing drives down the value of the dollar and is inflationary. Granted sometimes it is hard to tell. When the economy is doing well it may seem that there are no inflationary effects from deficit financing. This is an illusion. Of course, there are times when you have to borrow for an important need. I borrowed money recently to replace the windows on my house. I did receive some value from it. My house is much more energy efficient, our rooms are less drafty and we use fewer kilowatt-hours of power. Unlike the government, I have been paying off my debt. The way our government works, it only very rarely pays down the principal. Instead, it keeps borrowing more and more money. All that matters is whether the government can meet its interest payments. If it can, creditors keep loaning us money. As Dick Cheney reputedly said, “Reagan proved that deficits don’t matter.” Oh, but they do. They do.

While there were many reasons for the prosperity of the 1990s, I think that it was mostly due to the government living within its means. Steadily decreasing deficits gave investors confidence that government was being run by rational people. No recession stimulus could provide that kind of boost. Like a savings account, the interest started compounding, resulting in true wealth that affected all income levels.

If we can stop our addiction to deficit spending, real prosperity is likely to reemerge. However, it will not be easy. Deficit spending cannot be cured by trimming the fat in a few government departments. I do not believe we will have real prosperity again until we end our War in Iraq. It is paid by foreign creditors, many of whom do not have our best interest at heart. It is like a chest wound to the national body. We are losing a lot of blood. We must stanch the wound. Waging a hundred year war, like John McCain has suggested, will simply bankrupt the country. If the country is bankrupt then in some way the terrorists have won because whatever is left of our country will sure not resemble the America we know today.

We should not throw good money away on a bad investment. Iraq not only a bad investment, it is increasing your costs of living. The Iraq War costs us about three billion dollars a week. Those are the short-term costs; the long-term costs of the war are truly frightening. When you factor in costs like caring for our disabled soldiers, paying interest on the debt (but never the principle) the real cost of the war will reach at least three trillion dollars.

If you think you are not already paying a war tax, you are mistaken. If you are applauding President Bush for not raising taxes, you are naïve. You pay the war tax every time you go to the gas station and fill up your gas tank. You pay it in $3 a gallon milk. You pay it in high credit card interest rates and in huge tuition costs. You pay it every day but you do not necessarily associate these costs with the war because the money is not going through the U.S. Treasury. The falling dollar and the inflation it brings is the price of a country living way beyond its means. It is the price of financing a war that we cannot afford but chose to start anyhow. These indirect taxes though do not buy you any additional prosperity. It goes to oil companies and foreign governments, many of whom we do not like. In fact, much of this war tax simply provides the financial means for us to become embroiled in more wars, because we give the money to states that do not like us. It gives them more capital to carry on their animosities. This money does not build new bridges. It does not improve the educational standards of Americans. They are in effect squandered dollars, and squandered wealth — your wealth.

We will leave Iraq and sooner than we think simply because we cannot afford to finance it must longer. What point do gas prices have to reach for us to pull the plug? My guess is about four dollars a gallon. Perhaps at that threshold we will reach national consensus and end this pointless and foolish war.

 

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