I’ve been in a real funk lately and unwilling or maybe uninterested in writing. So I’m trying to work my way out of it.... The funk, that is....

Here’s an example of what I mean. A recent story on Reuters.com by Andy Sullivan.

Now, let’s be clear. I don’t know Andy, or have any particular opinion about him. What I am doing is using his story as an example of what I feel is why many people are so unhappy with the media. Not just with the news itself, but with the way that ‘News’ is presented these days..... I mean does anybody ‘think’ any more, or have we become that dumbed down.

Here’s some examples of what I mean - from the article:
“The U.S. government must craft a plan next year to get its ballooning debt under control or face possible panic in financial markets, a bipartisan panel of budget experts said in a report on Monday.”
Q: What bipartisan panel? consisting of what experts? Experts by whose opinion?

“Without action, investors could lose confidence in the United States, driving down the dollar and forcing up interest rates, said the former lawmakers and budget officials who crafted the report. That could cause a sharp decrease in the country's standard of living.”
Q: 'lose confidence in the United States'... These kinds of comments are so fraught with politics and bs that they would be funny in a different context.... Think about it... If people lose confidence in the US, where will they turn to invest their funds???? England, France or Germany, Russia, Japan or China, or some place we've never heard of before..... Where, exactly....????? There isn’t any other place.....

“We will be less free if we don't tackle this," said Jim Nussle, a Republican member of the commission who earlier served as a White House budget director and chairman of the budget committee in the U.S. House of Representatives.
Q: Less Free ? ?  Is this the same Jim Nussle who served under GW, who helped pass the Patriot Act... Which nearly negated the entire Constitution of the United States.... Less Free, are you joking ? ? ? How stupid do these pols think we are ? ? WE are already 'less free... the real question should be: What will you do about it ? ? ?

Then there is my favorite:
“The commission did not issue specific prescriptions but said tax increases and spending cuts would probably be needed.
Q: This means that they really had no idea on how to FIX this mess, only that it's a problem..... so my comment is: 'Do Ya Think'..... Any monkey could have done as much as these people did... (NOTE: when you look at news stories, ask yourself this question: Does this news story state a situation or problem and then offer answers or at least a suggestion on how to fix the problem that is being discussed. If not, then don’t tell me that the sky is falling, that a commission of experts (experts in whose opinion?) says so, and that they have no answer to the problem.... Just tell me the facts, and let ME (I’m an expert) decide what course of action should be taken...

Otherwise it should be in the Opinion pages... Where everyone with a nose (or opinion) can post whatever they want.....

Is that too difficult for the media to understand?

ALL countries manipulate their currency to their perceived advantage. ALL COUNTRIES. End Of Story.....

Many elitist economists, with far too many initials behind their name, are using the same old, tired excuse that some emerging countries (namely China) are manipulating their currency, and should allow it to ‘float’ in the open market. In other words, the same old, tired answer that always makes Britons and Americans feel better about themselves.
They want China to allow their currency to rise, just as they insisted Japan do, some 20 years ago. What they are truly ‘demanding’ is that China experience a decade of low growth, high unemployment, and stagnation just as Japan has experienced since the US ‘insisted’ that the Yen appreciate. However, Chinese citizens (not just the government) have suffered enough under western mandates, and are tired of ‘kowtowing’ to western demands.

Yet the bigger truth is, the US is the one who has always manipulated their currency. It is the US who wrote the book on manipulating currency that everyone on the planet has read and now follows.... When the Fed raises or lowers interest rates, either to control inflation or to encourage more borrowing to stimulate the economy, it is in fact manipulating the currency. (See Economics 101 blog entry). When banks are allowed to create money (see Banking 101 blog entry), they are manipulating the currency.

In a recent Reuters story Glenn Somerville and Simon Rabinovitch ask:
“WHAT WOULD HAPPEN IF CHINA LET ITS CURRENCY APPRECIATE?”

“Theoretically, the cost of Chinese-made products would rise for consumers around the world. If prices rise sufficiently, other countries' goods might be substituted for those China now makes.... If Chinese consumers were empowered with a stronger currency, they might become more aggressive importers, perhaps even swinging China's trade surplus to deficit.” (emphasis added)

These writers, who have probably never been to China, ask “What would happen if China let its currency appreciate? I’ll tell you.... There would be massive unemployment, that would surpass even the Great Depression. With the US Labor Force, estimated at 153.7 million in 2007, an unemployment rate of 10% equals 15 - 16 million unemployed. A 10% unemployment figure in China equates to nearly 100 million unemployed. Lets all say that number again. 100 MILLION.

What these writers, and many other so called China experts fail to recognize is that the spending habits of Chinese citizens were formed thousands of years ago, not by the current regime in Beijing. When the ancestors of these authors were guarding against demons by wearing a garlic necklace and still hiding out in caves, Chinese traders were already practicing their economics along the original 'silk road', and these johnny-come-lately Keynesian's (and/or supply-siders also) don't have a clue....
Additionally, the Chinese are not stupid, and they have witnessed the economic problems that occurred in Japan since BOJ allowed its currency to appreciate, and as mentioned they really aren’t interested in reliving these same disastrous problems.

Everyone wants the Chinese consumer to increase their consumption rate, including the bosses in Beijing, but allowing the RMB to appreciate overnight would cause much more harm than any perceived good that may come in 30 years.
Many people in China want to be more like the west. Many elitist US economists want China to be more like the west.... I ask “why?”   Is it so that China can experience all the same economic problems that prevail in the west. Which currently include financial meltdowns, high unemployment (which BTW is going to get much, much higher in the US) with the long term potential for growth gloomy at best.

So who manipulates their currency? Every country.... and frankly, this is one time I am hoping the Chinese do NOT "want to be like Mike"....

In October, 1929, the New York Stock Market collapsed, which was then repeated in markets around the world, in what became the foremost financial crisis in history. However, it wasn't until late 1930 or early 1931 when the real damage began to happen. During that year (15 months), governments enacted lots of stupid laws meant to mollify the general population, (which was generally under-educated) with the thinking that by saving a job here at home, saves the country. Which of course it did NOT do. The unemployment numbers began to grow, and grow.....

People with bad agenda's led the fight for these laws in the 1930's and they are out front again in 2009, with their no-win strategies. Because much worse than the prolonged economic crisis that was fed by these bad policies, is the political upheavel that occurs in unstable regions. So it will be this year and into the next couple of years, as it was in the early 1930's, that bad politicians everywhere will try to protect their hides and mollify their scared and ignorant constituencies. The unemployment numbers continued to grow, and grow....

In times of fear and uncertainty, men (and women), do terrible things to each other, and unfortunately we are now in possession of this double edged sword that has NO good side. If politicians don't 'play' to these uneducated masses, then those masses rise up and throw off these very pols and install a fanatic dictator who promises to save the jobs at home, and purge those who caused their problems (See history of Adolf Hitler and the Holocaust 1932-1945, and history of rise of Japanese Militarists and conquest of China and the Pacific Rim 1930-1945).
If the pols do pass laws to protect workers and groups in their own areas, they not only give a greater purpose to the dictators mentioned above, but also suppress their own work force for longer periods by keeping prices artifically high and wages artifically low (see US history of the Great Depression, and the rise of labor unions 1930-1950). In 1937 the unemployment figure reached 25% of the workforce......

So here we are again, left with the damage to be repaired, and the confidence and jobs to be regained. The last time, it took a decade of being poor and a world war to pull the US out of a depression, and a horn-locking cold-war of nearly three decades before world trade truly started to flow again. Is this the near term future you want for your family ? Yet unemployment is growing to near 10%....

I don't pretend to have the answers, but I'm confident that in today's world, a replay will prove neither 'instant' nor necessarily provide us with the same winner. In the words of Edward R. Morrow: "Good Night, and Good Luck."

Next up: Who is really manipulating their currency ? ?

'What!' said the master at length, in a faint voice.

'Please, sir,' replied Oliver, 'I want some more.'

Over simplification? ? ? Perhaps, but I believe it’s really just that simple.... Whether your name is Oliver Twist, or Oliver Barrett III (the rich son in the movie ‘Love Story’), you want more. This is true if you live in the London’s Brixton ghetto, the Barrio in New York or East LA, or along the railroad tracks leading into Mumbai or some not-so-nice neighborhoods in Chongqing, or Shanghai. This is also true if you live on Park Avenue in New York, or Hillsborough Hills, California, or the French Concession area of Shanghai.

How many ways do I have to say it ? We ALL want more... It’s in our DNA.

Also, don’t confuse ‘more’ with always meaning ‘money’..... While money is certainly a big part of the equation, sometimes prestige, influence, and/or power (things that money ‘can’ buy) are bigger factors. Sometimes we seek respect - it’s certainly arguable if money can actually buy this or not.... Yet, no matter what language, or how it’s translated, we all want to get ‘ahead’.... We all have ‘greed’ within us.

If we didn’t want to get ahead, there would be no gambling - farewell Las Vegas. No stock markets - do I really expect or care if company X is going to sell more widgets in the future? I wouldn’t be looking for a better job - along with about 6.5 billion other people, and I certainly wouldn’t need a bank to keep my money safe. In short, if we didn’t want to ‘get ahead’, we would all still be living in caves, cowering from our predators and wondering about the movement of the sun, moon and the stars in the night sky.
Sometimes getting ahead just means getting a minimum wage job. Sometimes it means getting a million dollar bonus, and sometimes it means pooling the resources of an entire village to send one of their smartest youngsters to medical school, so that they will return home and provide much needed medical care for those villagers. So let us not forget that there are certainly differing degrees of greed. Yet again, we all have some form of greed within us.

At no time in this dissertation have I said that greed was ‘bad’.... Au Contraire, mon ami.
Greed is in fact a major driver of social advancement, and has greatly contributed to the advancement of mankind as a whole. But my father used to say that extremism in anything is bad, and that moderation in nearly everything was acceptable.
So while I admit to being somewhat ‘greedy,’ I also work hard to limit my greed to acceptable norms. I don’t have to have more money than Bill Gates, or Warren Buffett, nor do I want the power of a Barrack Obama or Hu Jingtao. Some clean air to breathe and clean water to drink would be nice though.....


Next up, lets go back and add a few more Economics 101 items.
 

What is the reason and purpose of banks? It’s an easy question really....

Banks have several reasons to exist, and they all have to do with the government wherein the bank resides. Banks fill a vital economic role, which explains why they are either government regulated or government owned in every country. In every country on this planet there is one immutable fact: banks exist at the pleasure of the government. While some countries regulate banks more heavily than others, NONE (I repeat, NONE) allow their banks to be ‘un-regulated’. . . End of story.
 
OK - so banks are regulated by their governments.... So what is the purpose of these regulations? Chiefly they fall into three categories. One, they allow the government to control the supply of money in the economy - by creating money and keeping it safe (notice I said ‘create money’ - I didn’t say ‘print money’). Two, they control the ‘source’ of their citizens money by acting as ‘clearing-house’ for financial transactions between parties. And finally three, they control the flow of the respective currency in and out of the country. I’ll expand on all of these categories later, but our object for now is to keep it simple.
Now if you ‘google’ banks, you’ll find a whole lot of propaganda about an array of ‘services’ that banks provide. But you shouldn’t confuse ‘services’ with ‘purpose’ or ‘function’. So if you boil all the noise away, you’ll find that their basic ‘function’ is to fulfill these roles in any country’s economy.

Looking at Wikipedia, it says that a main function of banks is to loan and borrow money. Well this leads us into my first category. What happens when a bank ‘loans’ money to someone (business or people). The bank doesn’t give you the currency (cash) when they loan money. They create an account (at their bank obviously) that makes some money available for you to buy something - the purpose of the loan. Even when you complete your purchase, that currency may not even leave the bank. An amount of money is transferred into the account of the entity from which you purchased the item - allowing them to pay their bills, etc., etc...

The result is that the economy has grown (by the amount of the transaction) and the supply of money in the country has increased. That bank just ‘created’ money..... Now this is normal operations and not something illegal or unethical. It’s all apart of Economics 101.
In this example, if the amount is to be paid to someone who has an account in a different bank, the two banks get together and clear this transaction between themselves. As I indicated in category 2, banks ‘clear’ transactions between themselves on a daily basis, and this is also nothing new or extraordinary. However, take some ‘cash’ into a bank and try to open a new account. If the amount is over $1000 or so, you’ll be required to prove where it came from, and if any further deposits are to be made, where they come from as well....
In category 3, where do you go when you are about to travel overseas? You go to the bank to get your money exchanged..... The alternative is illegal and I don’t encourage you to participate in anything like that..... Yet, the ‘rate’ at which your money is exchanged into the foreign currency, is ‘set’ by your bank. Plus any amount you ‘exchange’ is reported to the government, and you are only allowed to ‘exchange’ so much. So much for ‘free trade’ huh....

Next up... Let’s add a pinch of human nature to this soup.