2008:What did we learn?

Economic pundits are working overtime this week to convince us all that the current stock market free fall is not in any way a repeat of 2008. The need us to keep the faith. They cite several differences from 2008 and always conclude their arguments with the much repeated phrase “the markets have learned their lesson.”

A lot of companies that have lost significant value in the last two weeks may wonder what that lesson was and if it was learned why is so much of their value gone?

The Great Recession of 2008 was caused by too much debt. Primarily represented by loans to borrowers who bought homes that did not remotely have the ability to pay those loans back. Institutions invested in those loans because they offered high rates of return when nothing else did. They were not worried if those loans could be paid back, they only wanted the money they supposedly generated. When it became obvious those loans could not be paid back, the banks and institutions that invested in them stood to lose a lot of money and many would have gone bankrupt, along with our entire economy if not for the Federal Reserve and their ability to print money, also known as Quantitative Easing.

How is that different than today?

Let’s look at some facts.

Currently there is 9.8 trillion dollars of corporate bonds issued to non banks that are located outside of the United States. Yes, that is trillion with a “T”. In 2008 this number was 5.3 trillion. This is not quite the same as sub prime residential mortgage debt, as I am sure this debt has the ability to be paid back as agreed upon. Right?

Our government debt is currently 101% of our gross domestic product, compared to 63% in 2008. The most current budget bill passed into law in December of 2015 increased spending by 80 billion dollars over the next two years, totally ignoring the sequester spending caps that Congress had set upon itself.

One of the factors contributing to the Great Recession of 2008 was an investment vehicle called a “Synthetic Collateralized Debt Obligation.” Basically, rather than this being a debt obligation backed by a pool of loans, it was really just an investment in an investment based upon a pool of loans. Or in other words a bet against a bet that the original loans would be good or bad. This investment vehicle greatly contributed to the severity of investment losses in 2008 and we were told would be prohibited from being utilized as an investment going forward.

In December of 2015 Fannie Mae and Freddie Mac, (two government sponsored entities responsible for expanding the mortgage market by issuing or backing collateralized debt obligations, or CDO’s), announced they would now again be using synthetic CDO’s to transfer their risk from the taxpayers to investors. The American taxpayer had to bail out these two entitles in 2008 after it was discovered they were bankrupt due to improper lending and structuring insolvent investment opportunities. Now in order to relieve the taxpayer of this burden they are again structuring investments that are backed up with nothing other than the taxpayer whom they are trying to unburden.

I have never claimed to be the smartest person in the world. Nor do I have the corner on common sense.

However it has become painfully aware to me that the current market collapse offers up a sense of déjà vu all over again. This may not be the big one, nor the correction that will change all of our lives. But then again it may be just that. The markets can not tell a lie and can not tell the difference between now and 2008. All they know is that in our current environment of low interest rates, the Federal Reserve printing money and way too much debt, people will do what they always do.

The same as my characters in THE REASON, my fictionalized version of the Federal Reserve and the disastrous effects of their attempt at control.

Make bad fiscal decisions.

Until they are stopped.

By having the Federal Reserve change our current economic policy.

Or by…………..losing a lot of money.

Trillions. With a “T”.

 

 

Debt and Trouble

Sam would do anything for money. Well, almost anything. But he found the easiest, least dangerous way to get it was to borrow. It didn’t require effort, other than a few lines on a piece of paper, it didn’t require sacrifice and everybody seemed thrilled to always give him more.

Sam didn’t have a gambling problem. He didn’t have medical bills. He had a good job. But he loved to spend. It wasn’t so much what he bought, just that he did buy. It made him feel good. It made him feel productive.

Sam also loved to give. Spend and give. That’s what made him happy. People praised him when he gave. He was never in need of friends. Sam gifted his way to popularity. He was loved by many. It made him feel important.

Borrow, spend and give.

Except the borrowed money had to be paid back. With interest.

Sam didn’t have the principal, let alone the interest.

So Sam had an idea. If borrowing worked for spending it had to work for other things too. Like payments. Pay back the debt with more debt. Nobody seemed to care why he was borrowing the money, so he didn’t either. As long as he made the payments, who cared where it came from. His lenders sure didn’t.

Sam knew the day of reckoning would come. He knew he probably couldn’t borrow forever. But in the meantime the recipients of his money and gifts didn’t turn them down. They loved them and him.

Sam needed to be loved. He needed popularity. His family and friends could never find out he had no money of his own. Then they would discover that he went in debt way over his head just to act like a big spender and a charitable person. He had to prevent being uncovered as a fraud.

Then one night as he lay in bed worrying, he hit upon it. Brilliant. He would create a charity. Non profit. He would ask the people he gave to, to pay it forward. Give back a small percentage out of what he gave them. Of course they would do that. They would still be ahead of the game and it would make them feel good. Just like he felt.

The money Sam took into the charity, he would use to help people, and he could also make his debt payments. Since people were only giving back a fraction of what he had given them, he knew he would still have to borrow. More. More and more.

He had to borrow more to give more, to get more, so he could make the debt payments. It was a vicious circle.

Who cared? Everybody would be happy. And Sam would be the hero.

Until his creditors found out.

Sam was borrowing money to help people that should have been able to help themselves.

Sam was requiring them to give back just to support his habit of spending and giving.

Sam was not fiscally sound.

It was not a matter of if, but when his creditors caught on, he would be in trouble. As would the people he had given to. They had become dependent on him. They couldn’t get by financially without him.

Sam was their lifeline.

Sam is our lifeline.

He was once a great man, and will be again.

When we learn to live without his money.

He is our uncle.

Uncle Sam.

 

Terror is Judgment

Merriam Webster defines terror as: Violent or destructive acts committed by groups in order to intimidate a population or government into granting their demands.

How does a group come to the decision that terror is the tool of choice in order to achieve what they think they need? Having researched and followed terrorists for many years, I would say it usually comes from them thinking they have not been heard. Nobody is listening to them and what they want. Other countries and governments are not answering their call for action. They then resort to violence to intimidate their opponents into hearing them and doing what they want. Force becomes a terrorist’s modus operandi.

What if they are being heard, but what they are asking for is simply impossible? At least right now. Or they are asking for something that will directly contradict the stated beliefs of the population they are requesting it from. Maybe it will even steal some freedom from those who do not have it in their power to give. How can this be resolved? Without terror? With nobody getting hurt?

Let’s look at a real world example of two neighbors.

Fred and Pete share a common area. A little park that adjoins both of their backyards. Fred worships at church X and Pete at church Y.

Fred wants to put up a shrine to his church X on the common area, but Pete does not want that, since he worships at church Y. If any shrine is put up in the common area, then Pete wants it to be to his Church Y.

These two neighbors are having a religious disagreement.

They have a meeting about it. They try to come up with a mutually acceptable arrangement. Pete proposes an option, like maybe a shrine to both of their churches.

Fred finds that offensive. The meeting digresses. Angry words are exchanged, and they almost come to blows. Both neighbors walk away angry, disheartened and more determined than ever not to allow their neighbors demands.

They have no place to turn to resolve their dispute. It is not a police matter and the courts will not touch it.

Fred feels that Pete is not listening to him. Pete feels he is listening but needs to protect his freedom to not view a shrine to Fred’s church on common ground.

Fred ups the ante. He is extremely angry and determined to get his way. At any cost. Religious fervor blinds him.

Fred kidnaps and kills a daughter of Pete. He then calls Fred, saying that the common ground is now mine, and if you don’t agree and allow the shrine to my church I will kill the rest of your children.

Pete is distraught, fearful and determined to protect the rest of his children. He tries to leave it to the police but with no hard evidence that Fred killed his daughter they will not prosecute. He only knows one way.

Pete kills Fred. Threat eliminated. It wasn’t about revenge, payback or anything else. It was only about protecting his family. Pete leaves the common ground empty. Out of respect for the family of Fred and because it is common ground, not for his personal use. He knows not all neighbors are bad, and is determined to not let his dispute carry over to the rest of his neighbors.

How could this neighborly dispute, ultimately leading to murderous violence, been avoided? They tried negotiation, listening to each other and compromise. But in the end Fred was asking for something from Pete that was not in Pete’s power to give. Fred was asking for Pete to give up his rights inherent with common property. If Pete had acquiesced to Fred’s demands, where would it have stopped? Pete had to stand his ground. His freedom demanded that.

The only way for this dispute to have not ended in despicable bloodletting, would have been for Fred to respect Pete’s rights. The right to religious freedom for both of them on common ground, the right for Pete to express his views and the right to life for Pete’s family.

Even though I believe that Fred was wrong in killing Pete’s daughter, I also believe we must never judge people, even people that do very bad acts. The legal system may judge people, but we should only judge their acts.

Merriam Webster defines judgment as: to determine or pronounce after inquiry and deliberation.

Fred judged Pete, but Pete judged Fred’s act.

Fred judged Pete guilty of not allowing what could not be allowed. The sentence was the life of Pete’s daughter. Fred was judge, jury and executioner. He used terror to attempt to get Pete to grant his demands.

Pete judged Fred’s act as threatening his security and his freedom. Pete responded with violence. Necessary for preservation.

Terror judges those that it does not have a right to judge.

This type of wrongful judgment kills.

Violent preservation saves.

Our freedom, our rights and our lives.

Terror is the Problem. Violence is the Solution.

Violence has a negative connotation. It has often been associated with evil and mean people. Violence to prove a point has rarely worked out. Just ask Osama Bin Laden.

Yet, violence does serve a purpose, as I point out in my new book “The Reason” which is available on Amazon.

Tim Larkin said it best, “Violence is seldom the answer, but when it is, it is usually the only answer.”

That adage has historically been proven time and time again. Mom was wrong, violence does solve problems. If you disagree, just ask any Jewish person living in Europe between 1939 and 1945.

The question becomes, when does violence become the only answer? Had we anticipated correctly the true nature of Osama Bin Laden, or Adolf Hitler, and imposed a violent solution upon them, before they did upon us, would we have saved the world from their tormented delusions. Or would we have been just as evil as them, and driven their fanatical followers to new levels of depravity?

The same question can be asked of any violent encounter, or fight. If I am in a situation and become aware of a potential physical threat, when should I respond?

Preemptively, or post first strike?

There is no question that the best defense in a fight is a good offense. If I can hit before I am hit, the chances of a successful conclusion to the fight go up tremendously.

Success being defined as me leaving the altercation with no injury.

So, the question remains. If we are in a situation, on a personal or global level, and we anticipate that violence will be the answer, when is it the answer? Before or after we actually know? Which one is morally correct, and will violence only beget more violence?

I believe the answer always lies in the intentions of the aggressor. I also believe we can always correctly assess those intentions.

We knew Hitler wasn’t going to stop, until somebody stopped him.

We knew it was only a matter of time before Osama Bin Laden took the terror to a new level. World Trade Center level.

It is true that violence can produce more violence. But if that violence is inevitable, we can certain lessen its impact by blunting the strike with one of our own. Contain Hitler before he rampaged throughout Europe and Russia. Fight the Taliban on their turf before they took the fight to ours.

In a personal confrontation, the same holds true. If we have been trained, and know that this bully, this aggressor, will most likely take this to a violent level, and we can’t extricate ourselves, we are certainly in our rights to act first. If we have not been trained and do not know this confrontational bully’s intentions, we then are required to wait.

Preemptively or not, my point still remains, that there are times that violence is the only answer. Violent acts, violent people, regrettably only understand more violence. If we can agree upon that, then we must ask, how much? What will it take to make this bully understand that I will fight for what is mine. I will not be walked on. I will not let you hurt others.

Of course the answer is, only what is necessary to take them out of the fight. No more and no less.

In a personal encounter, if the aggressor takes a swing at me, which I avoid, and I react by a mild slap in their face, I will guarantee you that their next strike will be more violent with a much greater chance to cause me bodily injury. If I had reacted instead with lets say a quick palm strike to their solar plexus, taking their wind, or maybe a knee to a man’s groin, their ability to respond with more violence would be greatly impaired. We must be sure they are out of the fight.

The same holds true on a world level today. If the ISIL, Al Qaeda, or any other terrorist organization must be dealt with, preemptively or post first strike, they must be taken out of the fight. If we truly believe their intentions are evil, and they mean harm, as proven by their statements and actions, we must remove them. Not with 50, nor with 100, not depending upon others to do what only we are obligated to do.

Why would we respond with a slap, when we have been gut punched.

Take them out now.

Before it is too late.

 

 

Terror is the Problem. Violence is the Solution.

Violence has a negative connotation. It has often been associated with evil and mean people. Violence to prove a point has rarely worked out. Just ask Osama Bin Laden.

Yet, violence does serve a purpose, as I point out in my new book “The Reason” which is available on Amazon.

Tim Larkin said it best, “Violence is seldom the answer, but when it is, it is usually the only answer.”

That adage has historically been proven time and time again. Mom was wrong, violence does solve problems. If you disagree, just ask any Jewish person living in Europe between 1939 and 1945.

The question becomes, when does violence become the only answer? Had we anticipated correctly the true nature of Osama Bin Laden, or Adolf Hitler, and imposed a violent solution upon them, before they did upon us, would we have saved the world from their tormented delusions. Or would we have been just as evil as them, and driven their fanatical followers to new levels of depravity?

The same question can be asked of any violent encounter, or fight. If I am in a situation and become aware of a potential physical threat, when should I respond?

Preemptively, or post first strike?

There is no question that the best defense in a fight is a good offense. If I can hit before I am hit, the chances of a successful conclusion to the fight go up tremendously.

Success being defined as me leaving the altercation with no injury.

So, the question remains. If we are in a situation, on a personal or global level, and we anticipate that violence will be the answer, when is it the answer? Before or after we actually know? Which one is morally correct, and will violence only beget more violence?

I believe the answer always lies in the intentions of the aggressor. I also believe we can always correctly assess those intentions.

We knew Hitler wasn’t going to stop, until somebody stopped him.

We knew it was only a matter of time before Osama Bin Laden took the terror to a new level. World Trade Center level.

It is true that violence can produce more violence. But if that violence is inevitable, we can certain lessen its impact by blunting the strike with one of our own. Contain Hitler before he rampaged throughout Europe and Russia. Fight the Taliban on their turf before they took the fight to ours.

In a personal confrontation, the same holds true. If we have been trained, and know that this bully, this aggressor, will most likely take this to a violent level, and we can’t extricate ourselves, we are certainly in our rights to act first. If we have not been trained and do not know this confrontational bully’s intentions, we then are required to wait.

Preemptively or not, my point still remains, that there are times that violence is the only answer. Violent acts, violent people, regrettably only understand more violence. If we can agree upon that, then we must ask, how much? What will it take to make this bully understand that I will fight for what is mine. I will not be walked on. I will not let you hurt others.

Of course the answer is, only what is necessary to take them out of the fight. No more and no less.

In a personal encounter, if the aggressor takes a swing at me, which I avoid, and I react by a mild slap in their face, I will guarantee you that their next strike will be more violent with a much greater chance to cause me bodily injury. If I had reacted instead with lets say a quick palm strike to their solar plexus, taking their wind, or maybe a knee to a man’s groin, their ability to respond with more violence would be greatly impaired. We must be sure they are out of the fight.

The same holds true on a world level today. If the ISIL, Al Qaeda, or any other terrorist organization must be dealt with, preemptively or post first strike, they must be taken out of the fight. If we truly believe their intentions are evil, and they mean harm, as proven by their statements and actions, we must remove them. Not with 50, nor with 100, not depending upon others to do what only we are obligated to do.

Why would we respond with a slap, when we have been gut punched.

Take them out now.

Before it is too late.

 

 

Control

People hang on my every word. Not every person, but the ones with the money. Sometimes it is more important what I don’t say than what I do say. I am not political but my decisions are. I am appointed by the President and confirmed by the Senate. Along with my committee of seven, we set economic and monetary policy for the United States and to some extent even the world. While I do testify before Congress and oversight is mentioned, in reality I report to no one. I confer with other economic leaders and policy makers, but my decisions are my own and those of my committee, who will follow where I lead.

I move markets. I set rates. I regulate banks. I move money. I can even print money.  I have the economy in my hands. I will not err. I cannot fail. Can I?

People have begun to call for more public disclosure of my decision making process and oversight of our policies. But what do they know? Who do they think they are? More importantly, who am I?

Published by Quentin Brent as a thoughtful question. Who do you think this is?