Sunday, August 30, 2009

Rant of the day

If the government needs to bail out homeowners and banks that participated in cash out refi's should the wealth that is withdrawn be treated as income?  

Friday, August 28, 2009

Government Salary Freeze

As the country struggles with the "Great Recession" private sector employees continue to get at best the same salary year over year.  Many more private sector employees have taken pay cuts or worse yet, lost their job.

Which brings us to Nevada.  The July unemployment rate in Las Vegas was 13.1%.  If ever there was a city, county, and state where people are suffering economically, it is Las Vegas, Clark county, and Nevada.  Lets take a look to see if government employees are enduring the same hardships.

The firefighters gave up a cost-of-living increase in the current budget year, but other city unions only agreed to a reduction in that increase. The COLA savings is about $1.5 million.

The new firefighters contract also obligates the city to pay more toward employees’ retirement contributions and health care costs, which leads to an increase of $1.75 million.

In the 2009 budget, firefighter personnel costs were $102.7 million. In 2010, those costs will be $107.2 million, according to a city presentation, an increase of 4.4 percent.

Without the changes in the new contract, those costs would be about 5.3 percent higher, or $108.1 million, according to the presentation.

According to the article the firefighters did give up their cost of living increase in exchange for an even larger payment to their retirement fund.  In short, in a city with declining population that is being ravaged by a recession personnel costs still increased 4.4%.

Next time you hear about cuts to the departments are cuts to services, just remember a true salary freeze would protect 4.4% of all services.

Wednesday, August 26, 2009

Bernanke and the end of the Great Depression

Congratulations to Ben Bernanke on being reappointed.  

Listening to CNBC I was led to believe this a great thing because, "Bernanke is an expert of the Great Depression".  Lets just say I am disappointed this "expert" was not able to foresee the "Great Recession".  Remember subprime was "contained" several years back.

The other news is Bernanke and others (Krugman) continue to worry about a W shaped recession and a repeat of 1937.  In order not to repeat 1937 it is believe that monetary policy must remain loose and there needs to be more fiscal stimulus.  Interesting these students do not remember what ended the Great Depression.  What ended the Great Depression was WWII.  While no one recommends a war to end the recession lets think about what occurred because of WWII.  WWII was one of the greatest production and savings events in the history of the country.  The saving was due to rationing, but regardless there was savings.  

The cures floated for the "Great Recession" have been quite the opposite.  The first was the $1,200 stimulus checks under George Bush.  Obama followed this with a smaller check in 2009.  Bernanke continues to buy up ABS.  There was cash for clunkers and there are first time home buyer credits.  The FHA and Ginnie Mae continue to lower credit standards.  In other words the proposed cure for the Great Recession is government sponsored debt and spending.  The opposite of the cure of the Great Depression, production and savings.

Perhaps in order to end the Great Recession we need new Blue Laws not government sponsored debt.       

Saturday, August 22, 2009

Born on the 23rd of August

I have been reading multiple blogs on economics and real estate for a while, sometimes even posting comments.  I have decided to share my opinions.  

I do not have any financial or career goals associated with starting this blog, but rather I am just hoping someone will want to read what I write.  I guess thinking anyone will want to read what I write is rather egotistical, but at this point I am joining the crowd.  

Speaking of joining the crowd that is basically the impetus behind me starting this blog.  In particular the mob mentality that has taken over almost any asset available in the US.  These assets include real estate, commodities, and equities.  I continue to be dumbfounded that in a country has one of the lowest savings rate in the world that "investors" continue to believe that we are moments away from an economic recovery that will increase prices of houses and commodities to levels that can never be afforded.  In short, if anyone believes if you do not buy now you never will be able to should ask themselves, "If no one can pay the higher price, will that higher price ever exist or persist?"