Monday, August 31, 2009

How Many Financial Crisis Can We Afford?

Last night I watched 60 Minutes. The piece they did on credit default swaps was excellent. I know not enough people watched the show, but that should not be a surprise. The financial crisis that this nation experienced recently was not only man made, it was created by the passage of legislation by our Congress that made it legal for the credit default swaps to exist. There is a big difference between hedging a position, or buying a futures contract so you can have a commodity you need at a future date and lock in your price, and making a side bet that your neighbor will default on their mortgage when you have no reason to be betting on your neighbor defaulting on their mortgage. And yet, that is exactly what happened when Congress permitted Wall Street to create and trade credit default swaps. As the program last night correctly put it, credit default swaps was like buying an insurance policy on a bet that your neighbor would default on his mortgage. When the sub-prime mortgages defaulted, the people that sold the insurance contracts did not have reserves (money) to cover the insurance contracts they sold. AIG sold credit default swaps and owed several companies a lot money. The Federal Government loaned them $180 billion to cover those credit default swap contracts. Goldman Sachs got $12 billion from AIG because they had bet that the mortgages would go into default. They also were the sellers of the mortgage-backed bonds that eventually went into default as well. So, they made money selling the mortgage-backed bonds and they made money on the credit default swaps that they bought from AIG, when AIG was bailed out by the U.S. Treasury. Nice work if you can get it.

Congress did not know what they were doing when they passed the legislation to exempt credit default swaps from normal insurance regulations. But, there were people that did, and they were not listened to. Money talks and bull shit walks is the way Washington runs and Wall Street knows that only too well. The lobbyists that got the necessary legislation passed so Wall Street could sell credit default swaps did their job, but the rest of the country suffered. This country will continue to suffer until enough people understand what is going down and stop it. Congress can not know everything, and they don't. But the people must try to elect men and women that will read the legislation before they vote. We also need to get more money out of politics. How many more financial crisis can we afford?

Stay tuned.

Sunday, August 30, 2009

Sunday Is For Sunflowers

This picture is from August 19th, when I borrowed my old camera to take a few pictures. The sunflower leaves are turning brown now and it will not be long before they will all need to come down. I am planning to take a few more pictures before that time arrives. I guess this is it for my favorite three months of the year. They just go by so fast, and every year they feel like they go by faster. There are three months out of the year that I would like to change my location on the planet, and they are January, February and March. I guess without those three months, there would be no contrast, and we all know that a picture without contrast is not much of a picture to look at at all.

Saturday, August 29, 2009

Saturday Is For Art

The expression "level playing field" is something we hear almost everyday on TV when the talking heads or the politicians are talking about making something more fair or equal. In 1990, I painted the first of my level playing field pictures. I gave to a good friend that I have known for over 55 years now. The second level playing field painting I completed in 1994 and gave it to a fund raiser for the Cincinnati Art Museum/ Art Academy. It sold and hangs in a private collection in Cincinnati. The third level playing field I completed in 1995 and I gave it for a fund raiser in Dayton. It sold too and hangs in a private collection in Dayton. All three were painted in oil on board. The last two were painted on wine box lids that were reinforced in back and then covered with gesso. I have posted these three paintings before, but now you get to see them again.

Everyone have a safe and nice weekend.

Stay tuned.

Friday, August 28, 2009

My Canon Camera Is Fixed And Ready To Ship

I should have my camera back P.D.Q. now, they are sending it FedEx. I will post some sunflower paintings when it arrives.

Everyone have a nice weekend.

Stay tuned.

Thursday, August 27, 2009

Where Are The Sunflower Paintings?

Normally, I would have posted the two paintings of sunflowers that I am now working, but my camera broke. It is the truth. It is not like the dog ate my homework. Yes, I know I could have borrowed a digital camera or had someone else take a few pics and send them to me to post, but all those ideas take work.

On August 8, I mailed my little Canon Power Shot SD 1100 to Elk Grove Village, IL. I sent the little box first class mail and insured the package. It was a little box, about the size of a pair of sunglasses and the case. In fact, that is exactly what the box was. Well, I hadn't heard anything from the Canon Factory Service Center, so I called them on the 25th. They had not received the package and it was not in their system. Then I called the one eight hundred number on my post office receipt. After a few calls and talking with a computer and getting nowhere, I found out from a friend, that if you hit the zero key you will get a live person to talk to. I spoke to a very friendly woman about my package and found out right then that my little box had been delivered on August 24 at 11:20 am. It had only taken the U.S. Post Office 16 days to get my little box from Cincinnati to Elk Grove Village, IL, just two states west of Ohio where I live. My question to the Post Office was: how can you compete with Fedex and UPS with that kind of service. If and when we get universal health care, I hope the hospitals do not use the Post Office to deliver organs for transplant. A few seconds later, I got an email from the Canon Factory Service Center with a quote for repairs. It was in their system, but they did not know it. Well, the camera was less than one year old since purchase date, so I am hoping they will take care of it for free. If they don't agree with me on this, I may have to go to Japan and discuss it with the CEO of CANON.

So, now you know why I haven't posted any pictures of the two paintings that I am working. When I get my camera back, I will take a few pics and post them.

Stay tuned.

P.S. I heard back from the Canon Factory Service Center this morning, and I will not have to go to Japan.

Wednesday, August 26, 2009

Edward M. Kennedy 1932-2009

Senator Edward M. "Ted" Kennedy, born February 22, 1932, died August 25, 2009.

The struggle for the common man does not die, but lives on.

Tuesday, August 25, 2009

Thinking The Right Way

Today President Obama gave Ben Bernanke four more years as Chairman of the Federal Reserve Bank. I, like a lot of people, think this was a good idea. Why change guys in the middle of an economic recovery?

My problem with the way we run monetary policy in this country is that too much responsibility is placed on our central bank for economic growth. That is not, in my opinion, a responsibility of the central bank. The bank should concentrate its energies on running monetary policy and protecting the integrity of the U.S. dollar.

Congress and the Obama administration should develop policies to encourage economic growth, not the Fed. But Congress enjoys having a whipping boy should their policies cause a financial crisis. Most people in the United States do not understand a word I am writing, and so Congress is free to play these games.

The Fed did not cause the financial crisis. I can fault them for playing politics with the integrity of the U.S. dollar, but the era of deregulation and the tearing down of those protections for the consumer of investment products must be put square at the door of the Congress. Reagan, Bush 41, Clinton and Bush 43 simply signed away the protections by pen or other means. The financial crisis was man made and the people that made it were in Washington, D.C.

The argument that government is the problem and not the solution is, in my opinion, a sick joke. Regulation of the economy is as necessary as the NFL officials that take the field every Sunday to control the game. We need regulation with real teeth and we need enforcement that is for real. We can fill a book or two with the stories of greed and dishonesty on Wall Street. Our problem is to get a Congress and President that will protect the consumer of investment products. The large pension funds around the country should find their voice, but the governors and trustees of these pension funds do not know which end is up either.

In the final analysis, it is the people that will have to find the muscle and the influence to make change happen. It can happen, we just need to get a few million people thinking the right way.

Stay tuned.

Monday, August 24, 2009

Whose Inflation Is It?

The article below helps me make my point as to why we need better regulation of commercial banking, investment banking, securities information and laws, and investment products sold by the underwriters of securities. I am willing to accept that inflation is a reality in a system where the central bank (monetary policy) and the federal government (fiscal policy) combine to expand the growth rate of the domestic economy. Some things are just too big to change, and the reality is, our economy and its growth are of primary importance to the well being of this nation of 300 million people. But, if inflation is a by product in some years and not in others, seniors are going to have to dip into savings and investments for those years when no increase in the C.O.L.A. is taking place. Unfortunately, many many seniors and soon to be seniors have taken a "bath" in the recent financial crisis. All I have been trying to explain over the last several months, is that given the system of central bank, our Federal Reserve Bank, and our fiscal policy, whose primary concern is the expansion of our domestic economy, should not investors, large and small, be protected by a set of regulations as it pertains to the securities and investment industry? Read the article below and pay particular attention to the fact that a group of trustees are making the decision that no cost of living adjustment will be made over the next two years. This may help the federal government with the deficit, but this is going to make getting by even more difficult for millions of seniors on social security. Read on.

Social Security checks: No cost-of-living increase projected for next 2 years
Payments tied to inflation, which is negative compared with last year.

By Stephen Ohlemacher
Associated Press
August 24, 2009

WASHINGTON - -- Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise.

The trustees who oversee Social Security are projecting there won't be a cost-of-living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."

Cost-of-living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.

"For many elderly, they don't feel that inflation is low because their expenses are still going up," said David Certner, legislative policy director for AARP. "Anyone who has savings and investments has seen some serious losses."

About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.

More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.

Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law the increase cannot be larger than the increase in Social Security benefits for most recipients.

There is no such provision for drug premiums.

Kennelly's group wants Congress to increase Social Security benefits next year, even though the formula doesn't call for it. She would like to see either a 1 percent increase in monthly payments or a one-time payment of $150.

The cost of a one-time payment, a little less than $8 billion, could be covered by increasing the amount of income subjected to Social Security taxes, Kennelly said. Workers only pay Social Security taxes on the first $106,800 of income, a limit that rises each year with the average national wage.

But the limit only increases if monthly benefits increase.

Critics argue that Social Security recipients shouldn't get an increase when inflation is negative. They note that recipients got a big increase in January -- after energy prices had started to fall. They also note that Social Security recipients received one-time $250 payments in the spring as part of the government's economic stimulus package.

Consumer prices are down from 2008 levels, giving Social Security recipients more purchasing power, even if their benefits stay the same, said Andrew Biggs, a resident scholar at the American Enterprise Institute, a conservative think tank.

"Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt," Biggs said. "Congress has to be able to tell people they are not getting everything they want."

Social Security is also facing long-term financial problems. The retirement program is projected to start paying out more money than it receives in 2016. Without changes, the retirement fund will be depleted in 2037, according to the Social Security trustees' annual report this year.

President Barack Obama has said he would like to tackle Social Security next year.

Copyright © 2009, Chicago Tribune

Inflation may be negative the way the trustees calculate inflation, but for seniors who use more health care services and medicine, perhaps inflation is not negative at all. The Congress eliminated the protective laws that protected the large pension funds and the individual investor for decades. The Congress and Presidents all had a hand in making the financial crisis a reality for millions of Americans. It is time to level the playing field and do the decent thing and put real and meaningful regulation back in place.

Stay tuned.

Sunday, August 23, 2009

Sunday Is For Sunflowers

Having fun with my sunflower paintings. This should keep me out of trouble for a while.

I will be back tomorrow with answers to all our economic problems, just kidding.

Stay tuned.

Saturday, August 22, 2009

Saturday Is For Art

Yesterday I started painting 2 of the 7 pieces that will make up the Sunflower Series. I put together a color chart for this project, but I don't know at this time whether it will be of much help. I bought a few brushes and one more large tube of acrylic paint this week, so, now I think I have everything I need. The Sunflower Series is not going to look like anything I have done before. This is like almost everything I do, an experiment. I am in no hurry to complete this project, as I have as much fun thinking about what I am painting as actually painting it. For those that missed the good news earlier this week, one of my political satire paintings was accepted in a juried art show. The opening is September 12, at the Cincinnati Art Galleries at 225 East Sixth Street. There will be 40 pieces hanging for this show called The American Spirit 2009.

As you can see from the photos of my sunflowers, the end is near for them. I cut down a few that had fallen over and saved the heads for the seeds and perhaps to do some drawings in the winter. They have an interesting shape. Planting the sunflower seeds, watering the plants, photographing them, drawing them from the photos and now painting them has made my summer fly by even faster than usual. But, because of them, I can take my summer in to the fall as I paint them. Summers just go by too fast.

Have a nice weekend.

Friday, August 21, 2009

Dinosaurs & Political Debate

Many of us are disappointed at the level of political debate in this country. If you take a look at American Political History, you can find examples of things said many years ago that were just as bad as things that are being said today. One common comment we hear is, "but, it is 2009!!!, why are we hearing such nonsense in this day and age?"

Yes, there still is a lot of nonsense out there. Across the Ohio River from my home is a park. This park is called the Creationist Park. They show little children playing with dinosaurs in the dioramas in this park, and the people behind this park are very serious about this. When geologists talk about the prehistoric periods, with dinosaurs and flying reptiles, these people that believe in their creationist park think these geologists are wrong. That their dating of the earth and life that once lived here on the earth is in error. If people in 2009 will debate the age of the earth and when dinosaurs lived on the earth, and use the bible as their evidence, how can we have a rational debate about anything?

I believe in the freedom of religion, and that people don't need facts to have faith, but when science and the scientific method are pushed aside in favor of nonsense science, it is important for people that know better to speak up. The same is true when it comes to political debate, people need to speak up when they know something is dead wrong. Comparing Obama and his administration to Hitler and Nazism is dead wrong, and more people need to speak up. For those that died and suffered under Hitler and Nazism, this analogy is an insult to the memory of those people that lived under the oppression of that government. It is time for people that know better to speak up, too many politicians lack the spine to say and do the right thing, Eric Cantor.

I wish everyone a nice weekend.

Stay tuned.

Thursday, August 20, 2009

Barney Frank Was Right: FOX NEWS Is Wrong

The above link is to a story about a woman who asks Barney Frank, at a town hall meeting, why he supports Obama's Nazi policies. Frank answers her question with a questions and says, "on what planet do you spend most of your time?" It is about time Democrats stop treating such nonsense with respect. This tiny population of idiots are portrayed as if they are intelligent individuals. FOX News commented that Representative Frank should have treated the woman with more respect. Personally, I am happy to see one Democrat stand up for what is right and put down the lunatic fringe. As for the news people on FOX, I would like to take each one on with a padded stick at both ends, the kind I trained with in the U.S. Army 45 years ago to stimulate bayonet training, and try to knock some sense into their thick heads. They can disagree with Obama and his policies, but to defend a woman who compares Obama to Hitler is just plain nonsense. Stating that she should have had her question treated with respect, only shows how uneducated and morally depraved they are. Hitler and Nazism is not something to be tossed around lightly. Any decent person, that knows their history, knows that this is a piece of history, for many, that is so serious and filled with such suffering, that it is off limits to such nonsense. This woman did not deserve to be taken seriously, she got what she deserved.

They can put Rupert Murdock to the front of the line, as I would like to knock some sense into his head first. Rupert and FOX news need to get real and raise their level of news reporting.

Stay tuned.

Wednesday, August 19, 2009

The Dominos Of The Financial Industry Started Falling

We all know that several books will be written about the mortgage-bond market meltdown, the financial crisis and finally the economic crisis that followed, but I certainly hope the writers of these books will not be talking with the talking heads on TV or radio. These people, that are on the air waves, are so ignorant of economics, and yet they talk as if they knew what they were talking about. It is not necessary to name names, but without the occasional professor of economics giving some serious commentary, the stuff we generally get from these talking heads is pure crap.

The system failed because the tools were not used properly. What do I mean? Let us take one tool of the investment industry, the credit ratings that are placed on debt instruments. The three major credit rating agencies will rate new debt obligations for the investment underwriters for a fee. This is pretty straight forward. The credit rating agencies inspects the new debt issue and check the coverage numbers, the ability and willingness of the borrower to pay principal and interest in a timely manner. Then after doing a fair amount of research into these factors that govern the final rating that is placed on the bond issue, the rating agency gives the new debt obligation a rating. The highest rating a credit rating agency can give is the Triple-A rating. There is not Triple-A plus or minus when it comes to Triple-A. With the Triple-A rating in hand the underwriter of the new bond issue then offers these bonds to investors. A large number of these investors are pension funds, mutual funds and some individual investors. Bond portfolio managers buy and then sell bond issues as they anticipate the movement of interest rates and the change in the credit rating of the bonds they hold in their portfolio. Credit ratings are live. Credit ratings are periodically reviewed and sometimes raised or lowered depending on the financial outlook of the borrower.

The mortgage-bond market meltdown came about as a result of the lack of research that was applied to the obligations that received the Triple-A rating from the credit rating agencies. The fact that these corporations were more interested in their bottom line than their responsibility to the investors that bought the bonds lead to the collapse of the mortgage-bond market.

This is a failure of the system. The concept of rating the willingness and ability of the borrower to pay back principal and interest in a timely manner is sound. The system has existed for many years and for the most part the credit rating agencies do a good job. The people that do the actual research on the borrowers are trying to do the best job they can, just as any professional tries to take pride in their work. The problem here arose when these credit rating companies became corporations where growth in earnings per share became the sword by which the CEO's salary and bonus cake would be sliced.

The failure of the regulatory bodies to realize that oversight of the greed factor was necessary lead to the passing out of the Triple-A ratings for the sake of profit. If the credit rating agencies did not come forth with the Triple-A rating for the new mortgage-backed bond issues, the underwriters would then shop the rating to another of the major credit rating corporations.

Eventually, the house of cards collapsed. Then the dominos of the financial industry started falling. The failure of the credit default market, the collapse of AIG and the general meltdown of the credit markets can, in my opinion, be traced back to the lack of regulatory oversight of the credit rating agencies. The system of using credit ratings for debt obligations can work, but only when the tool is used properly. Oversight is necessary to check the greed factor on Wall Street. There is no way around that.

Stay tuned.

Tuesday, August 18, 2009


Yesterday, I got an email telling me that one of my paintings was accepted for an art show in Cincinnati at the Cincinnati Art Galleries for September, 2009. The name of the art show is The American Spirit 2009. The painting that was accepted for the show is MOTHER & CHILD: LEVEL PLAYING FIELD OUT THE WINDOW.

I am going to take a day off from writing about the economy, but will be back tomorrow.

Stay tuned.

Monday, August 17, 2009

A Public Option Makes Economic Sense

Where has the public option gone? I thought the point was twofold: reduce costs of health care because it is eating up so much of our incomes and give 46 million people without health care an option they could afford. The economics are pretty straight forward, if anything is straight forward when it comes to Washington. Containing the amount of money the nation spends on health care, must, in my opinion, see some money spent to educate Americans about a healthier life style. Many dollars are going towards treating things that could be prevented if we gave people the education necessary to live a more healthy life style. Second, do we really care about the 46 million people that don't have health insurance? Why should we? If they can't make enough money to buy their own health insurance, why should we care? The answer is anyone of us that is working can lose their job and with it their health insurance. One day you are middle class, and the next day you are homeless. What does that say about us as a people? I think people will still strive to make a better life for themselves and their families, but what do we do with those that can't afford health insurance for themselves, or can't get it? Letting them go to emergency rooms is economically an expensive answer. It would be far better for people to have good health care year round, not just when they are sick. What happened to that old saying that "an ounce of prevention is worth a pound of cure"?

I don't think the insurance industry or the securities and investment industries are policed enough. People in any line of business where there are big bucks to be made need regulation, oversight and transparency. If fixing health care was easy, it would have been done a long time ago, is a common phrase, but the real issue is money. The politicians need money to run an effective campaign for re-election, so, the American people wind up with the best government money can buy. Somewhere they need to throw a bone to the masses in the form of a public health care option. It makes economic sense to do it now.

Stay tuned.

Sunday, August 16, 2009

Sunday Is For Sunflowers

I am now transferring my drawings to the painting surfaces. Then I get started painting. I hope everyone has had a nice and safe weekend.

Tomorrow it is back to economics.

Stay tuned.

Saturday, August 15, 2009

Saturday Is For Art

Sometimes, it just starts with a pencil, or a pen. A boring business meeting (is there any other kind), or a night at the art club sketching. These are some old pieces I dug up from the past. Have a nice weekend.

Friday, August 14, 2009

We Need A Public Health Care Option Now

My father had a comment when he would hear people on TV talk about labor saving devices. He would ask, "whose labor are we saving?"

I find a common thread running through the health care debate and the need for better regulation, transparency and enforcement of the banking and investment banking industry. The insurance companies that sell health care policies are run by a few large companies. After going on Medicare, I received sales literature from, I think, everyone that sold a health care policy. The banking and investment banking industries are dominated by a few large companies. These large companies have the resources to lobby Congress and make their positions known about any health care reform that would hurt their business. Selling healthcare insurance is a business for profit. What about all the people that buy health insurance? Who speaks for them? Not only can these insurance companies pick and chose, they are even helped by the fact that the consumer can not shop for a better bargain outside his or her own state. Where is free enterprise when it comes to shopping for a cheaper health insurance policy?

But, the big companies that want the game to remain the way it is, on a playing field that is tilted in their favor, have put out so much misinformation and lies that the people that are the most fearful are their biggest tools of support. Yes, health care in America is the third rail of politics right now, but I am hoping that the economics of health care for our nation will cause even those that can not put themselves in the place of others less fortunate, to see and understand that a solution to our problem of the uninsured is costing all of us unnecessarily. Our country needs a national health care option, and we need it very soon, in fact, we need it right now.

Stay tuned.

Thursday, August 13, 2009

Political Art For Sale

Today, I am in a selling mood. Perhaps this is a good day to promote my art. While there are paintings that I am working towards, I have a number of pieces of political art for sale right now. These are all painted on black paper envelopes that measure 9" by 12" or 10" by 13", and are painted with acrylics. Some are already framed. All prices quoted will be for framed paintings, and will include shipping. If you go to:

you can see several pieces from The Envelope Collection. Anyone interested in buying an original painting, not a print, please contact me either through a comment on Moneythoughts, or on Facebook, under Frederick D. Zigler. Do your holiday shopping early. August could be your month to own an original piece of art.

Stay tuned.

Wednesday, August 12, 2009

The Final Dumbing Down Of America

I have been watching and listening to TV and in particular, the health care "debate". Not much of a debate when you have people screaming at each other. Our society needs a dose of civility very badly. The dumbing down of America is complete. And, what we see of the health care "debate" only reinforces my opinion. Those that are clever and with money to spend, can mobilize people to turn what should be a serious debate into a circus of clowns.

Moneythoughts attempts to explain what has happened here in the United States with regards to money and banking, investment securities, securitzation of mortgages and other bundles of debt, the credit rating agencies, monetary policy, the mortgage-backed bond market meltdown, the inelasticity of the price of gas, the financial crisis and finally, the economic crisis that followed. There are a few followers and perhaps a few others that read these posts. But, the number of people making up shit about what is in the health care legislation is overwhelming. How can we expect to bring about change in the financial and investment sectors of our economy when there are so many people shouting things like "death committees" to deny care to the elderly? The accusations by the rowdies are too much to believe. The politicians that exploit this nonsense are playing with fire with little or no regard for the theater we all are in. Health care and its costs need to be contained. And, the best way to contain them is to offer a government health care plan as another option. You don't see anyone burning their Medicare card?

The great inventions of talk radio and FOX TV have been the catalyst to the final dumbing down of America. Travel across the Atlantic and Pacific oceans moves both ways, and it would not surprise me to see smart people pack their things and moving away from the crazy shit that goes on in this country, and that passes for enlightenment. I need to get back to my sunflower drawings.

Stay tuned.

Tuesday, August 11, 2009

How Is Monetary Policy Run In The United States?

Why do we need a central bank? For what purpose, or, more to the point, for whose benefit do we have a central bank? These are the kind of questions people in the United States should be asking themselves. What does your money look like? Have you ever examined it? What does your paper money say? Does the words "Federal Reserve Note" ring a bell? What does that mean, Federal Reserve Note? What is behind the "Note"? What is a Federal Reserve Note backed by? Does it need to be backed by anything? If a Federal Reserve Note is backed by nothing, what form of nothing are we talking about? These and a trillion more questions need to be answered before we can explain what a central bank means to us. Who determines how many Federal Reserve Notes are printed? Is it a matter of ink and paper, and when the ink or paper runs out, the Bureau of engraving stops printing money?

Money in the 21st century is credit. Paper money is a small piece of the pie. Without a central bank, there would be bank panics like we had in the 19th and early 20th centuries. Aren't we glad that we have a central bank so we don't have to experience bank panics in the 21st century?

Monetary policy was developed to insure that commercial banks are run properly, but what is the definition of "properly" when used in the same sentence with the words "commercial bank"? Remember in the film "Cool Hand Luke" when the warden of the prison came out on the porch and said to the prisoners, "what we have hereee, is failure to communicate!." Well, the Federal Reserve Bank, the body that runs monetary policy had a failure to communicate with the commercial banks they are suppose to supervise. Unfortunately, the chairman, Alan Greenspan, was no Georgia prison camp warden. Perhaps, he should have been.

Monetary policy is, in my opinion, to be run for the benefit of all the people, not just those trying to make lots of money using leverage. Leverage is another word for borrowing. For the good of a very, very few, the whole economy of the United States was put at risk. There is no other way to explain the meltdown of the mortgage-backed bond market, the financial crisis that followed and the resulting economic crisis that has affected the whole nation. Bottom line, the men and women that were responsible for running monetary policy along with the ineffective personnel of the Securities & Exchange Commission sealed the fate of our country economically speaking.

While the thought of an economy of our size existing without a central bank may be too much to imagine, the thought of a poorly run central bank or a central bank run for the benefit of a very, very exclusive few, is not much better. What happens to your money should be of as much interest to you as making it. Inflating the currency for the benefit of the few is not an answer. The challenge of health care costs in the future is directly tied to the way monetary policy is run in our country.

Stay tuned.

Monday, August 10, 2009

Destroying Wealth Of This Nation

Today, feels like just one of those days. I have nothing new to write about the economy. I have summarized where I am on the need for better regulation of the securities industry and investment products. I would think that the 50 governors of the 50 states might get together and ask themselves, "should our pension funds be at such risk so a very few can make a killing for themselves and marks out of us?" But, my experience in Ohio demonstrates that governors are simple caretakers that usually do not have a creative idea in their head. When you stop and think about the trillions of dollars invested in private sector and public sector pension funds, IRAs, 401-Ks, endowments and foundations and the fact that Congress stripped away the protections that had been in place for many years, you realize how stupid Congress and the Presidents were, and how evil Wall Street and their lobbyists efforts were to destroying wealth of this nation. When people educate themselves to what took place, and how to correct being made a mark, then we will have change, not before.

Stay tuned.

Sunday, August 9, 2009

Sunday Is For Sunflowers

Here are a few photos of my sunflowers. The next part of my project is to take these photos and create drawings.

Saturday, August 8, 2009

Saturday Is For Art

The above "canvases" are the prepared surfaces that I plan to paint my sunflowers. Several are old wood windows that I have collected. I removed the glass and stripped the paint. Then I cut 1/2 inch MDO plywood to replace the glass. The plywood is held in place by a few brads. Then I cover the front a back with gesso to give me a prepared surface to paint. If I was a minimalist artist, in some circles, I might be considered done. (For minimalist artist check out Ellsworth Kelly, a very successful American painter.) But, for me, I am just getting started. I thought those interested might like to see the "canvases" before I start to paint. The second picture is an old frame I found, and the last picture is a cabinet door. I will not try to explain why I enjoy taking old wood windows and use them to either frame my art work, or, in this case paint on. My next step is to develop drawings on brown wrapping paper, the size of the canvases, before transferring them to the surfaces.

Friday, August 7, 2009

Despite Your Hard Wired Limitations...

Friday, and I think I will give it a rest. A rest about writing about our domestic economy and all those interesting pieces that make it what it is. The political debate from the right is disappointing. There is nothing wrong with good political debate about policy or changes in policy, but the level of "debate" with regards to the Obama administration's policies by the right is not healthy. Calling President Obama a Hitler, or trying to find similarities between the Nazis and his administration is nonsense and dangerous. People that draw such parallels do not know their history, or, are liars with no regard for the truth, or what is good for this country. Let us debate our differences of ideas, but let us maintain a level of decency and intellectual substance. Not everyone can be a liberal, and that is acceptable, but on the other hand, do not let those you listen to turn your brain into mush. Read and think, despite your hard wired limitations, you may surprise yourself at how analytical you can become.

Have a safe weekend.

Stay tuned.

Thursday, August 6, 2009

Place The Triple-A Rating With The Fed

MSNBC this morning mentioned that President Obama's approval rating is now down to 50%. I am not sure what that means, except that it is moving in the wrong direction. The health care bill may never get passed by Congress, and that will leave millions of people twisting in the wind as far as their health care is concerned. The economy is coming back if we can use the DOW Index as an indication that the stock market players think corporate earnings are coming back. But, who is going to tell President Obama that structured debt financing is a necessary ingredient if we want to see housing, manufactured housing, campers, cars and truck financing back on its feet. In order to do this, securitization of debt is the simple answer. But, who is going to buy securitized debt obligations now? Banking in the 21st century requires that debt obligations be bundled and sold. There is every day billions of dollars sitting in money market funds because fixed income portfolio managers are not ready to invest in structured debt obligations. It will come down to whether this President is going for one or two terms. My advice, take the triple-A rating and place its responsibility with the Fed. When the market can trust the process, the economy will take off. Not before.

Stay tuned.

Wednesday, August 5, 2009

A Culture Of Greed Is Hard To Change

Economics is easy, changing our culture of greed is hard.

Cheating manifests itself in many ways. Bernie Madoff was a cheat. The insider traders of the 1980s were cheats. Filming practices of an opponent against league rules is cheating. Gaining certain advantages through legislation, or having safe guards eliminated so large numbers of citizens can be taken advantage of is also a form of cheating. While completely legal in the eyes of the law, ethically it leaves a lot to be desired.

The financial crisis was brought about through the passage of legislation that left individuals and institutions vulnerable to abuses that had been checked more than 60 years before by a post Crash of 1929 and Great Depression Congress. The photographs of our nation's suffering during the Great Depression were ignored and labelled irrelevant by the Congress of the United States.

Greedy people have no need to remember, be concerned or think about the needs of others. They only care about themselves. Bernie Madoff is not the only greedy person in the financial industry that we need to deal with. There are others just as bad, we just have not uncovered their crimes.

Stay tuned.

Tuesday, August 4, 2009

The Ball Is In President Obama's Court

There is another book on the market for me to read entitled In Fed We Trust - Ben Bernanke's War On The Great Panic - How The Federal Reserve Became The Fourth Branch Of Government - by David Wessel. As I am retired from the world of finance, I doubt that I will buy a copy on My new book budget was destroyed by the total meltdown of my dividend checks. Besides, I am a painter now, and must use my resources to paint.

The Federal Reserve Bank became the fourth branch of government when Congress created our central bank in 1913. When Paul Volcker was chairman of the Fed, he took control of monetary policy and wrung inflation from the economy and set this country on a stable course. Alan Greenspan, the idiot savant, replaced Paul Volcker as chairman of the Fed, and set the stage for the Great Panic that followed. Chairman Greenspan did not do this all by himself, he had plenty of help from Congress, Presidents Bush 41, Clinton and Bush 43. Let us not forget about the lobbyists supported by Wall Street's commercial banks and investment bankers, for they were pushing for the deregulation that left our economy vulnerable to the abuses that would follow.

As I have written too many times over the last 18 months, the meltdown of the bond market, the financial crisis and the economic crisis that followed were man made events that could have been avoided. In fact, the safe guards had been in place and then were removed by Congress!!! This stuff is not rocket surgery. If people will just take the time to learn a few economic terms and read and think, they will understand the complete picture. But, something "new" is on the horizon.

The Presidential Elections of 2012 is in the near term future for President Obama and his administration. If they want to keep their jobs, they must secure the re-election of President Obama. The domestic economy will be the number one issue again in 2012, and by then, the state of our economy will be owned by President Obama, his administration and Congress.

The movement of credit is essential to the economic recovery of the United States. The structured debt markets play a major role in financing the growth of our economy, and without this segment of the capital markets, our domestic economy will not fully recover. The single biggest challenge standing between full economic recovery, and creeping along at less than full employment, is the credit rating agencies. This very small piece of the puzzle is as necessary as yeast is to make bread rise. Without addressing the integrity question of the major credit rating agencies, the future for structured debt finance and the investors that buy the product (bonds), will remain a major problem, in my opinion. Portfolio managers are not ready to trust the bond ratings from the major CRAs so quickly after this most recent fiasco.

So, the ball is in President Obama's court, so to speak, his administration needs to level the playing field so that investors are not taken to the cleaners. Simple. Let us see what they choose to do.

Stay tuned.

Monday, August 3, 2009

Our Economy Is Not Going Anywhere Until The CRAs are fixed

There is a debate going on in Washington, D.C. as to whether the economy is coming back, coming back fast enough, or isn't really coming back at all. Politics employs just a handful of people, nevertheless, they have the attention of the media whether they know what they are talking about or not.

The domestic economy of the United States is coming back, but it is going to take some time. The problems associated with our financial markets, money & banking and the general state of the economy did not happen over night and can not be expected to be fixed in a few days, a few weeks or even a few months. The problems, if they are truly going to be worked on, will take a few years. In the mean time, I am not holding my breath because I know the politicians will not do the right thing unless pressed to do the right thing.

As I have written before, credit in the 21st century is, in my opinion, the most important form of money. Without credit, our style of economy does not grow. The few people, relatively speaking, that control credit and the formation of credit, come from the bottom of the ethical spectrum. Not surprisingly, as the problems with the capital markets, commercial and investment banking did not happen because of the weather.

The Federal Government, the politicians and all the king's horses and all the king's men have a hard time doing the right thing. Where is Spike Lee when we need him? Doing the right thing is so hard. There are always "reasons" for not doing the right thing. This time it is the credit rating agencies. The credit rating agencies are a failure, and without clearing that wreck from the economic highway, little if any movement will take place in our structured debt markets. In order to get the debt issuance side of the capital markets moving again, the wreck of the credit rating agencies needs to be cleared from the road.

The triple-A rating is the bright "green light" for so many bond portfolio managers and now that "green light" can not be trusted. Just when you pull out into the capital market's intersection, you get hit by a driverless semi broadside and your bond portfolio is trashed. To get the credit markets moving again, we need to correct the problems that existed in the first place. The conflict of interest between the credit rating agencies and the investment bankers has not been dealt with by the new regulations. Until someone has the guts to fix the problem, our domestic economy is not going anywhere.

That is my opinion, so we will see.

Stay tuned.

Sunday, August 2, 2009

Sunday Is For Sunflowers

I have a few more pictures of sunflowers. Hope I do not repeat any of the pictures. The prep work is moving a head. The drawings come next.

Saturday, August 1, 2009

Saturday Is For Art

The rain and wind caused the sunflowers to fall over, so I roped them back up. They are changing with time as their shape and colors change. I continue to do prep work on the boards with gesso. I need to round up some brown wrapping paper for my sketches. There are seven surfaces to paint and each one is a different size and shape. More prep work today. I am having fun.