Glenn BECK: REASONABLE QUESTIONS for AN UNREASONABLE TIME

www.glennbeck.com ^ | Monday, August 24, 2009 | Glenn Beck

[Yosemitest]

Reasonable questions for unreasonable times
Monday, August 24, 2009 - 18:05 ET

Am I hateful if I ask:



- Our unfunded liability for Social Security, Medicare and Medicaid is close to $100 trillion.
Is there any way to pay for these programs without bankrupting America?

- We are in so much debt,
why spend more borrowed money on cap-and-trade and healthcare programs
before we stop the flow of red-ink?

- The stimulus package funneled billions of dollars to ACORN.
How does giving billions of dollars to ACORN
stimulate the economy?

- If it was so important for congress to pass the stimulus bill
before they even had time to read it
why has only a fraction of the stimulus money been spent 6 months later?

- Bush said
he had to abandon free market principles in order to save them,
how exactly does that work?

- Why won’t member of Congress read the bills
before they vote on them?

- Why are citizens mocked and laughed at
when they ask their congressman
to read the bills before they vote on them?

- Was the cash-for-clunkers program meant to save the earth or the economy?
Did it accomplish either?

- How did Van Jones, a self-proclaimed communist
become a special advisor to the president?

- Did President Obama know of Van Jones’ radical political beliefs
when he named him special advisor?

- The Apollo Alliance claimed credit for writing the stimulus bill—
why was this group allowed to write any portion of this bill?

- If politicians aren’t writing the bills
and aren’t reading the bills,
do they have any idea what these 1000 page plus bills actually impose on the American people?

- If the ‘public option’ health care plan is so good
why won’t politicians agree to have that as their plan?

- If town hall meetings are intended for the politicians to learn what’s on our mind—
why do they spend so much time talking
instead of listening?

- Politicians are refusing to attend town hall meetings
complaining, without evidence, that they are scripted.
Does that mean
we shouldn’t come out and vote for you since
every campaign stop, baby kiss and speech you give
is scripted?

- Why would you want to overwhelm the system?

- Is using the economic crises to rush legislation through congress
what Rahm Emanuel meant
when he talked about not letting a crises go to waste?

- What are the czars paid?
What is the budget for their staffs/offices?

[1010RD]

He is just using double entry accounting and correctly. We don’t think of it this way because we’re being tricked.

Think - trade deficit. The entire concept is missing the other side of the ledger.

[conservativebuckeye]

You don’t love your country, you love the state. I know this because you said on April 28 of this year, “Screw the Constitution.” Your posts always demonstrate a contempt for the average citizen. If you’re such a great economist, I think I would have heard of you. Your arrogance is astounding. Anybody who supported TARP and is against our interrogaton techniques has no business on the premiere conservative website in this fine republic. You also never answered the question as to whether you are a Christian. Have you ever read the book of Revelation?

[tacticalogic]

Think - trade deficit. The entire concept is missing the other side of the ledger.

I'm still not seeing the connection. He says none of the money ever goes to foreign countries. How does traded deficit enter into it?

[JasonC]

Yes, I love my country. I merely respect a few parts of the state, notably the military and the upper reaches of the professional civil service. You won't detect a whole lot of respect for the congress or your average politician in anything I write.

As for the context of screw the constitution, it was the higher law that limits even patriotism. Anyone trying to appeal to positive law of any kind to justify gross injustice will find me entirely unmoved. The constitution is good because it is largely in accord with justice (there being no emenations from penumbras to the contrary anywhere in it), but it cannot justify gross inhumanity. Which isn't to say there is any these days; it was a point of principle. Consider historical slavery if you want an example of the application of this point.

As for my arrogance, it ain't boosting if you can do it. Rand taught me to be proud of intellect and ability, and the world screaming otherwise all the time only makes me despise the world for it, the more. As a theoretical matter, I can agree that pride can be a weakness, when it blinds. When it comes fully sighted though, it is a simple acknowledgement of a reality.

As to being a Christian, I don't recognize anyone else's right to tell me what that is, and by my own lights I'd say yes. I've no doubt you'd say no, but frankly I don't give a damn. As for what I've read, you can just safely assume I've read it, as a general principle. It applies to anything as common as every scrap of the bible as a matter of course. Have you read all of the church fathers for the first six centuries, cover to cover? Then we'd be talking about reading.

As for what I *think* of the book of revelation, though, not very highly is the answer. There is more piety and wisdom in any square mile of American suburbia today.

Now are we done talking about me? Always changing the subject...

[JasonC]

Didn't say none actually, just not a material amount, and only when we choose not to save much ourselves, and we get something in return that may be worth more than the money we paid. Money not being wealth, you see.

But if you want to see the main point, consider the following figures. Here is the assets, debt, and net worth of the US household sector in 10 year snapshots going back to 1949. Entries are year, assets, debt, net worth. Source is the Fed's Z.1 data set, figures are in trillions of dollars.

2009, 64.5, 14.1, 50.4
1999, 48.9, 6.8, 42.1
1989, 23.3, 3.5, 19.1
1979, 9.6, 1.3, 8.2
1969, 3.7, 0.5, 3.3
1959, 2.0, 0.2, 1.8
1949, 1.0, 0.05, 0.95

The last 2 are particularly unflattering as to timing, with the stock market near its peak in 1999 and at its lows in this measurement (1Q2009). The asset and net worth lines have since moved up about $5 trillion as the stock market recovered. We get the details in mid September.

Every decade, US household assets owned goes up by huge amounts, and every decade a portion of that larger pool of owned assets is carried by debt - but the net worth line goes up by large amounts, always. Is some of that increase just prices, yes roughly half, the other half is a sustained increase in real wealth.

Even near record highs in 1999 and at bear market lows in stocks and real estate both today, over the last 10 years US households have added over $8 trillion to their net worth, less than half of their $15 trillion in net new assets being carried by new debt. It is perfectly normal for US households to add a trillion a year to their net worth, even with $700 billion a year in new debt.

Debt flat isn't negative net worth. The mistake is that simple.

[marbren]

You won't detect a whole lot of respect for the congress or your average politician in anything I write.

Does this include republican as well as democrat?

[marbren]

Are you talking about debt management?

[marbren]

Is gold a good investment?

[JasonC]

"The FDIC is out of money"

Scaremongering nonsense, it has a $500 billion line of credit from the US treasury. No depositor has lost and no depositor is going to lose one dime in any of it.

"solvent banks already took a huge hit on increases in their FDIC insurance"

Hardly, the increase was 15 basis points, while their net interest margins are over 20 times that. Short term interest rates being a quarter point lower has a bigger effect on bank profitability.

"The number of mortgates that are "under water" continues to increase"

Mortgages issued in 2005 and earlier have loss rates under 1% still. Only the 2006 and 2007 vintages have any serious problems, and loss rates on all loans are running around 2%. No category of loans has loss rates equally the interest charged on them, besides the original epicenter of subprimes, which have long since been written off to insignificant levels.

All of the losses the major banks have booked since the summer of 2007 have been non-cash losses, from additions to loan loss reserves and marking traded securities to lower market prices. Their actual losses charged off have been under their net interest earned throughout. High loss provisions were necessary certainly, and they needed to rebuild their capital. But since the bond market began recovering around the turn of the year they have been doing so. All that mark to market stuff has been running in reverse for their corporate loans.

This was predictable, and it was predicted, by me among others. I told everyone who'd listen including on this site that the Fed's actions would cure the bond market, and that as soon as it moved up the banks would show profits again. Which they dutifully did - they just didn't have quarterly earnings showing such upticks until announcing their first quarter results in early April. Not coincidentally, the market thereupon took off like a rocket.

"unemployment numbers keep going up."

Lagging indicator, 6 months behind at every single turn in the economy, and already visibly topping.

"Huge amounts of the TARP money appears to have been "invested" in uncollectible debt."

$135 billion of the stuff lent to banks have already been repaid, plus $7 billion in dividends. The Citigroup stake, about a third of the remainder still out, has a $13 billion profit after converting into common near the panic lows. The other remaining large credits are Bank of America and Wells Fargo and both are money-good.

The only obviously uncollectable stuff is the UAW giveaways to the autos, and the amounts there are smaller. The treasury might lose $50 billion on them. AIG it isn't obvious either way, but conceivably there could be a loss that big, or nothing. The mortgage agencies had $400 billion set aside to cover them, but have only drawn $75 billion of it, and their loss reserves grew that much. They will earn it out, only a matter of how long it takes. The treasury will earn in the meantime marginally more than it pays on its own debt.

None of the small banks that might actually fail matter a tinkers darn. Just not enough money involved for any of them, they are there purely for political pressure and fairness reasons.

"looks like a situation that could very easily end in bankruptcy"

The treasury pays under 4% for money and men are lined up 3 deep all around the globe to lend to them, to the tune of $1.5 trillion in just the first 8 months of the year. Know a lot of bankrupts who can say that? It is an absurb concern.

[JasonC]

Pretty much. There are honorable exceptions certainly, but they are exceptions and not very effective as a group. I'd heartily like to support them more, but honestly they make it pretty hard. How? Caves on key issues of principle, strident partisan stands for ignorance, focus on the wrong concerns, timidity before a hostile press, personal corruption, etc. Can they be effective if they get on the same page on a good issue, like stopping Obama-care? Yes, and good for them. But there isn't a Reagan among them, there isn't even a Gingrich.

[JasonC]

Not particularly. It is just a fact that US households take on large debts mostly to buy real estate, and the rest of their debts tend to be modest. They then pay off their real estate debt and are left owning real estate free and clear. They also save in stocks and bonds. Not everyone is a first time homebuyer just starting out and buying at peak prices. Something like half of homeowners have already paid off their mortgage, and plenty of others are roughly half way through doing so.

The net result of all of that is that debt shows up on household balance sheets along with assets that are worth more than that debt, and then the debt shrinks while the assets keep on growing. There are improvident exceptions to refinanced up to near-zero equity at the wrong time, but exceptions aren't the rule. The rule is somebody bought 10-15 years ago when prices were lower than now and has paid off a large part of the original price. Some older, some younger, etc.

[marbren]

I do agree with you on this analysis.

[JasonC]

Not in my opinion, not at these prices. It was a useful hedge in the immediate past, but had a nice run up, and there isn't sufficient reason to expect that to continue or redouble. Long term, it can make sense to have a modest position in gold for diversification. But I wouldn't run out and buy lots at today's prices.

Instead I like intermediate term corporate bonds right now. You can find 7% interest rates on them, and it is quite unlikely we'll see inflation anything like that over the next 10 years. I also don't think we will see many outright defaults - there was a risk of that last winter, when they couldn't roll over their debts, but it has basically passed.

I've been telling people since last autumn that the thing to do is buy corporates (and preferreds) and put the coupons into stock. You can use a bond fund instead if you like, just avoid those that are loaded up on low rate treasuries or on mortgages. Find one focused on corporates.

I also think it is a good time to buy real estate if you need any that you'll actually live in. Prices are down a lot, rates are low and other terms pretty easy. In the long run, this will prove to have been a good time to buy, and in my opinion real estate bought at fair prices is a better long term hedge against inflation than flightier commodities. But your mileage may vary.

[marbren]

What happens if New York is uninhabitable for 10000 years due to nuclear war?

[marbren]

How do align your faith in the Fed and your faith in conservatism.

[JasonC]

Thanks. And fine questions by the way...

[JasonC]

If there is a nuclear war, stocks will fall - lol. But it will be the least of our problems.

More seriously, the only place to worry about such things is the middle east, specifically Iran and Israel. For those, worry...

[marbren]

Don't worry JasonC I am not going to try to convince you of anything. I am a Christian and do believe we are in the End Times. Our Lord Jesus Christ could appear at any moment. One reason I am intrigued by your Posts is that they are a unique perspective. All I have to do is see how they fit in with my standard, God's word, if at all.

[marbren]

More seriously, the only place to worry

Even if we have nuclear war I am not worried.

[marbren]

More seriously, the only place to worry about such things is the middle east, specifically Iran and Israel.

This war is coming soon. I think Israel will be OK.