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?

[guitarplayer1953]

I’ll tell you what Jason if the system crashes and all of us good ol taxpayers who are in their 40-50 who have been paying into the system for 20-30 will begin to hunt down and carry out justice on every dame federal politician we can find. You can take that to the bank. I was not old enough to vote in the 60’s and those alive then should of said no to making everything into the general fund. But they didn’t and since then it has been going down a rat hole. The house and senate has been Democrats for two or more generations. Kansas where I live we have not had a Democrat house since the 30’s but for some reason we vote in Democrat governors. There is an anger brewing in this country that will make the last civil war look like a Sunday social.

[1010RD]

Where do you get the energy and time to write all these posts? Each one is a detailed explanation, well thought out and reasoned, some contain specific facts. It is impressive. What is your day job? ;-]

[tacticalogic]

You sound like you're reading that out of an economics textbook. You don't seem to have any grasp or consideration of the effects of government dependence, and seem to think that having your financial affairs and decisions handled by big centralized bureaucracies is, more or less, just as good as doing it yourself.

Do you work for the government?

[tacticalogic]

Debt is not negative net worth, it is merely one way in which assets are financed.

If debt is not negative net worth, what is? What are the assets the federal government is financing with that 100 million dollars?

[tacticalogic]

Each one is a detailed explanation, well thought out and reasoned, some contain specific facts. It is impressive.

It looks that way at first, but I'm starting to wonder. The idea that debt is "just another way of financing assests" makes sense in some contexts, but I'm having a hard time getting that to fit into the context of going into debt paying for entitlement programs.

[JasonC]

You and everyone else is free to demand the reform of social security into a truly funded system. Bush proposed it at the start of his second term and crickets chirped. Newt proposed it in the 90s and was labeled "mean"; he balanced the budget anyway. Reagan reformed it enough to buy time but didn't get more done.

As for anger, you've no monopoly on it and it impresses me not one tiny little bit. And no, there isn't going to be any civil war in this country. As usual, hyperbole and hysteria tries to pass itself off as effective argument. Nobody gives a damn how mad you are, nobody is afraid of you, no reason anyone should be.

[JasonC]

Programming. I can type this stuff at output speed...

[Joya]

http://www.focusonthefamily.com/popups/media_player.aspx?LatestDaily=1

Go to the link above, click on “Being Salt and Light”

[JasonC]

No, I don't work for the government. As usual, bankruptcy ends in a wild ad hominem stab.

Nor am I reading out of a textbook, though I could write one if you see a need.

It isn't me that thinks having economic decisions centralized by government was desirable last winter, it was the market. They oversubscribed t-bill auctions at zero percent interest four times, while AA rated corporates yielding 15% went begging. The free market that is supposed to allocate capital so efficiently efficiently chose to throw every dollar it had at the treasury and sold every scrap of corporate anything.

Panic is like that. No I don't want it to continue and neither do the authorities. That is why they bent over backwards to support the private banking system and have restored it to solvency. I much prefer Wall Street allocating capital, but sometimes it abdicates that responsibility. And somebody has to do it even then.

Well, TARP worked and the Fed's actions worked and the economy will recover this year as a result - also as a result of a lot of hard rationalizing work inside US companies, and a lot of pain for US workers and household finances. But predictably so, knowably so beforehand, while the populists all cried doom, doom to the rafters.

We still have to stop Obama's tax increases. We will.

[JasonC]

Negative net worth, aka insolvency, means that the value of assets an entity owns, including the value of its income stream, amount to less than the value of all of the liabilities it owes. This is not equivalent to "has any liabilities", which is all debt means.

If I own a house and have a mortgage on the house for half its current market value, having debt does not mean I have a negative net worth. Or, if I have a reliable income stream of $10000 a year, borrowing a sum whose interest cost to me is $1000 a year doesn't mean I have a negative net worth. I've only borrowed a tenth of my income stream.

There is no economic difference between them, other than some details about the effects of future changes in interest rates. Every reliable income stream is convertible into a capital sum and vice versa.

As for assets in the recent government actions, let's take a few of the entities in turn, shall we?

The treasury bought $250 billion of preferred stock in the nation's banks begining last October. This was actually quite a good time for it. $134 billion of that has already been paid back, plus with $7 billion in interest and warrant profits. They converted a $45 billion preferred stake in Citigroup into common under $3 a share, and have a $13 billion profit on it as of today's close. All the remaining money in these will be paid back on the nail with interest.

Less sound credits were AIG, Fannie, and Freddie. The AIG position bought them 80% of it for $80 billion. That may end up being generous by half, we'll have to see. But the rallying bond market certainly helps them; the operating parts of AIG are giant profitable bond funds with $500 billion in insurance "float" (free money for the period of time between insurance premiums paid in and claims paid out). AIG market cap before the crisis was north of $100 billion, but it wouldn't fetch that in today's circumstances. But it is hardly money thrown away.

With Fannie and Freddie, they set aside $400 billion in TARP money for them, $200 billion for each. But the combined draw from both, to date, is only $75 billion. It owns 80% of both at least. All invested in their preferred stock. The treasury has also bought $170 billion in mortgage securities those guarantee. They will run off their assets into cash about 10% a year. It is conceivable the treasury might lose $40 billion on them all told, it is equally conceivable it might cost nothing in the end. But not $400 billion, that's for sure.

The dumbest investment so far in the program has been the autos. For $15 billion they wound up with only 8% of Chrysler, which won't cover more than $2 billion of that. GM they got 60% of for $63 billion, also clearly overpaying and giving away tens of billions to the UAWs pensions, pretty much.

There are a few other minor bits and pieces, forced on them by populist congressmen at the last minute. Mortgage modification stuff they have put in $23 billion and lost about 5% of it. Lending on various auto receivables to help GM suppliers while it was bankrupt was only about $7 billion and broke even.

By then we are down in the rounding error stuff.

The Fed meanwhile lent $1 trillion to the short term money markets in the smash. $500 billion to banks, with 45% of it repaid by now; $250 billion in commercial paper and other such direct to corporation items, with 65% of it repaid by now; and $250 billion in swap lines to foreign central banks, mostly to support dollar liquidity in Europe, 70% of it repaid by now. It has allowed $200 billion of that to extinguish, shrinking its sheet 10% since its April peak, and rebuilt its 2007 treasury position with half of the rest. The other half has bought mortgage backed securities of the agencies, building that position to over half a trillion. They plan to buy as much of that stuff, again.

What'd we get from all of that support for the banking system, money markets, and bond markets? When they started, banks charged each other 4.5% for overnight loans, now it is 0.45%. When they started, major regional bank debt traded for 60 cents on the dollar to yield 15-20% and new issuance halted completely. Now it is near par, around 6-7% tops, and US corporations have been able to issue $900 billion in corporate debt so far this year. When they started, commodity prices were collapsing as no positions could be financed, dropping 75% at the bottom. They've retraced half that move and can be financed, so inventories aren't being dumped anymore. When they started, stocks were dropping like a rock and $15 trillion in asset values evaporated; now $5 trillion of that has come back.

When they started, the economic was contracting at a 5% annual rate. Now it has stabilized, and this quarter we will see the first modest uptick.

If they speed things up by only 2 quarters on that slide-halt, let's do the math on what it is worth just to the US treasury, ignoring for a second how much it helps all the rest of us. A 2.5% additional drop in GDP before the bottom would mean $350 billion a year. The treasury gets about 20% of GDP in revenue, so its share is $70 billion a year. The treasury can borrow at 2-3%, but call it 3.5% the rate on the 10 year note. Then an extra $70 billion a year is worth $2 trillion one-off to the US treasury.

The Fed didn't spend in the sense of lose, anything. OK, it might have loan losses on the order of $10 billion one-off on some of the Bear and AIG stuff, nothing material. Their profits run $35 billion a year before they expanded the sheet. An extra half trillion in mortgages may increase their float income by $30 billion, maybe $20 billion net of loan losses.

The treasury and Fed are entirely businesslike institutions. Congress is a pack of children handing out candy to buy votes, sure, but the treasury and Fed are not.

[JasonC]

Do you find any support for Obama care anywhere in anything I've written, in this or any other thread, on FR or anywhere else? No.

The usual context of breathless doom mongers proclaming that the debt economy will destroy us all focuses on the debt of US households - mortgage, credit card, auto, other installment credit, etc. The argument typically made is that American consumers having debts implies they cannot possibly spend any more, as though their debts mean net indebtedness aka negative net worth.

There are two cures for this journalist level notion. One, using the secret weapon of common sense, think of your own finances and whether you can or do arrange them around a permanent negative net worth. Two, using the secret weapon of homework and the World Wide Web, go look at the Z.1 data set from the Federal Reserve, which gives the balance sheets for the US household, corporate business, and unincorporated business sectors, every quarter clear back to 1945, in exquisite line item detail. The Fed knows because of its role in clearing; everything that touches the banking system, it tracks.

Well the net worth of the US household sector is about $50 trillion as of the 2nd quarter of 2009. The next release is mid September and will probably show that number up something like $5 trillion (because of the market recovery etc). The ruinous leverage of the US household sector is 5 to 4, at the asset line's bottom reading for the cycle.

Now go look back at the sheets for every 10 years. You will find the asset line and the net worth lines both rising 7% a year, doubling every decade, through thick and thin. High tax rates, low ones, inflation, recession, stock market crashes, oil shocks, wars, Democrats, booms in this and crashes in that. Makes no difference on a full decade time scale, it comes out in the wash.

We are rich and we continually get richer, we are not broke and we are not going to become broke.

It is dead simple to see the fallacy involved. Nobody can owe a dollar without someone else being owed it. All the real assets, the buildings, houses and offices and shops, all the small businesses, all the giant corporations, all the factories, every scrap of it - is owned, and owned once, and is owned free and clear. If any of it is mortgaged or lent on, someone else holds that mortgage or note, in equal amount. Net, all the real stuff is owned once and everything else comes out in the wash.

[Quix]

Ahhhhhhhhhh programming!

That would explain all the

pseudo-tidy-little-boxed

constructions on reality.

Impressive.

soooooooooooooooo impressive.

So your primary representational system/modality is also

AUDIO/DIGITAL?

[marbren]

JasonC are you a Christian?

[Mrs. B.S. Roberts]

ping

[tacticalogic]

The FDIC is out of money, and there are apparently more bank failures on the way. The remaining solvent banks already took a huge hit on increases in their FDIC insurance to pay for the first round of bailouts. The number of mortgates that are "under water" continues to increase, and unemployment numbers keep going up.

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

Given the numbers that are in play here, and translating it to your mortgage analogy it looks like this: You've been getting about 14K/year in income, but business is bad and you may not be seeing all of that again for awhile. You've been making ends meet with your credit cards, and you've currently got a balance of a few thousand dollars and expect that to go up another 9k in the next few years for expenses you're already committed to. You've got a 100K mortgage to pay off. You had a savings account you were supposed to be putting money into in the years when your income was better, but you've already spent that.

That looks like a situation that could very easily end in bankruptcy to me.

[Thermalseeker]

The transformation of America is scheduled to be largely to destroy her beyond recognition.

With the goal of ushering in Marxism......

[guitarplayer1953]

The reform that Bush seeked were for younger people whom I was all in favor for. As far a the civil war hide and watch.

[JasonC]

Same here, on the first. On the second, I'm not hiding and I am watching, and ain't diddly happening. Nor going to. Grass roots feedback can stop Democrat tax increases and I expect it will, which is great. That isn't civil war or anything like it.

If you haven't figured it out yet, I detest hyperbole and hysteria. Conservatives have their feet on the ground and love their country; the term for those lacking in either respect is "radical", and they are opposites. Leave doom mongering and panic to cowardly leftists who hate their own country.

[guitarplayer1953]

Lets put it this way not civil but a revolution, the tree of liberty has needed to be watered since the early 20th century it is long over due. There are more and more people who see the entrenchment in DC and see no way that the lazy people who have voted in to office those who promise to tax the wealthy to pay for all their needs are going to change and that the politicians are not going to change. We had a tax revolt of what a penny on a pound of tea? And now I pay almost 60 percent of my income into federal, state, city and county taxes. The revolution is coming and BO will be the straw that becks the tax payers backs.

[JasonC]

The "lazy" folks who vote for all of it will not support your attacks on them by violence, any more than they bow to your wishes at the polls. If you convince them that present policies are bad for them, those can be changed. If you do not, reaching for a gun will just get you stomped on, and rightly so.