Thursday, December 30, 2010
20-10 is almost history, so today I would like to review a little economic history. Not all history is political history, but because there are taxes to be paid at so many levels, it is more accurate to refer to past events as a political-economic interpretation of our recent history. Many years ago, when I was an undergraduate studying American History at the University of Cincinnati, I wrote a paper titled "An Political-economic Interpretation of the Louisiana Purchase of 1803". I discovered after reading old newspapers in the basement of the Cincinnati Public Library that there were strong economic reasons for President Jefferson to make the Louisiana Purchase. The importance of the Mississippi River was no small part of the consideration as the farmers in the interior states needed the Mississippi River to get their produce to market. This all takes place before the internal combustion engine, and yet the movement of goods on the water was a life and death situation for the producers in the interior.
The American economy runs best on inexpensive oil. Oil and our dependence on foreign oil has brought us to where we are today. Back in 1973, (I know this is ancient history to some people, but please bare with me) when the first oil embargo took place, the United States was put on notice that oil was now a political-economic weapon. From 1973 to the Gulf War of the early 1990s, the United States continued to grow its dependency on foreign oil, and its dependency on oil to move goods and services around the country became greater not less.
When Saddam Hussein attacked Kuwait and took control of their oil fields and appeared to be headed to over run Saudi Arabia, the United States was forced to take action. The American Armed Forces pushed Saddam and the Iraq army out of Kuwait and then stationed troops in Saudi Arabia to protect their production of oil. Oil plays a key role in the political-economic life of nations in the 21st century, as it did in the later half of the 20th century. Without oil, nothing moves, and when nothing moves there is no commerce and when there is no commerce there is no life. Oil is pivotal, it is the blood of commerce.
The cost of a barrel of oil has been going back up. For each penny a gallon of gas goes up in the United States, over a years time one billion dollars is taken out of our domestic economy. Taxes are not just collected by governments, money that leaves our domestic economy is a form of a tax. The future does not look good for the price of oil or gas to come down. Many economies around the world are growing more dependent on oil to grow their economies. We need to do one of two things: We need to take someone else's oil over and own it ourselves, or, we need to reduce our dependency on oil and gasoline. We have spent billions of dollars on wars that are directly related to our need for oil, and yet for all our sacrifices, we have no inexpensive oil to show for our efforts. I am not going to continue to connect the dots. Those of you who understand where this line of thought takes you can connect the dots yourself. We all are paying a higher price at the gas pump, and that higher price is taking the life blood out of our domestic economy. Think about that for a moment.
Monday, December 27, 2010
Sunday, December 26, 2010
Next week at this time, we will be starting a new year, and with the new year comes new ideas for my next art project. Actually, the idea for this new project came a few days before the new year, but that is close enough for government work. However, the first project is going to be finishing the apartment in the 2-family. When that project is completed, I will start on the construction of my next art project. The dimensions will be 42" in height and 28" in width. It will be made out of MDO plywood and pine. Once the case is completed and gessoed it will be time to draw and paint. There will be 4 paintings. One on the outside, and 3 on the inside. I plan to take photos along the way and post them periodically on my blog as the work progresses. What can this new art project be? The silk screen project that I started this past year, may also get up and going in 20-11. In that the print is from a painting completed in 1991, 20-11 seems appropriate enough. The ink is on the way so here is hoping actual prints will not be too far behind.
20-10 has been a good year for creating new art and finishing old pieces, and I am hopeful that 20-11 will be a good year for my art work too.
Friday, December 24, 2010
The Ohio State University has made its way into the news this holiday season, and it is about their football players accepting discounts on tattoos and selling their own personal memorabilia. Now I understand the problem with accepting discounts on the tattoos, but I don't agree with the NCAA that the players don't have a right to sell what is theirs if they own it. But, first let us take a look at the economics of Ohio State football and the administration.
The head football coach at The Ohio State University is reported to make a salary of $2.6 million a year. The president of The Ohio State University makes $1.6 million a year, and is reported to be the highest paid university president in the country. The Ohio State University's stadium seats just over 100,000 people on game day, and takes in enough money to help other college sports that don't have 100,000 fans. The players that provide the entertainment make no money. Yes, they get a college education in exchange for their services as a football player.
TV and the advertising revenue has made college football what it is today. When I was a kid, all the bowl games were on the TV New Year's Day at the same time. But, today there is too much money at stake and the bowl games are spread out so that college football fans can watch them all. Bowl games are money makers. With tickets and TV advertising, bowl games are no small part of a university's revenue stream, and for this reason universities sometimes even put the expected revenue from a bowl game in the budget.
The NCAA is going to penalize The Ohio State University football players for 5 games in the 2011 season, but they are going to let them play in the Sugar Bowl in just a few days. How thoughtful of the NCAA. The Sugar Bowl and its advertisers would take a hit if The Ohio State University's starting quarterback was not permitted to play in the game. Perhaps the advertisers would not be too happy with the NCAA's decision to scuttle their advertising plans for the Sugar Bowl. Bottom line, this is all about money. Money for the universities, their athletic staffs, the bowl game host and sponsors to say nothing of The Ohio State University fans that are known to "travel" well for bowl games.
I think college football players should receive payment for their services over and above their scholarships. There is millions of dollars being made by everyone but the players that put on the show. I think the time has come for the NCAA to revisit this issue.
Thursday, December 23, 2010
At the end of my street, in the neighborhood of Northside, is a beautiful old Victorian house. The people that live there decorate the windows each Christmas with lights. The above photo I took on Christmas eve in 2007. As you all know, the Leg Lamp is from the movie A Christmas Story that has become a classic. I would like to wish all my blogging buddies and FB friends a Merry Christmas and a Safe, Healthy and Happy New Year. If we get all that in 2011, we will be prosperous too.
Enjoy and Stay tuned.
Saturday, December 18, 2010
The above painting is from The Envelope Collection. For those that don't know about my envelope collection of paintings, let me give you a little background. When I was working for the State of Ohio, I received investment reports every month from the 100 plus money managers that managed a piece of the State Insurance Fund. One manager in NYC, Daruma Asset Management, sent their monthly reports in black paper envelopes. The paper had a texture that I liked so I decided to start saving them. The problem was how do you draw on a black envelope with a pen or pencil. At first I took these black envelopes and spread white acrylic paint over the back of the envelope and then after the paint was good and dry, I would draw on them with ballpoint pens. After a while, I decided I would just buy some acrylic paints and paint on them. Up until then, I painted in oils. But, acrylics were easy to clean up and I could paint as much as I felt like painting and then wash my brushes and put everything I was working on away. It was not unusual for me to be working on more than one painting at a time. After I retired, I took all the black envelopes that I had saved with me. Over the years, I have used these envelopes to create The Envelope Collection. I like to recycle old and used surfaces and frames. Old wood windows, I have found work well for picture frames, and I have framed a number of drawings and paintings using old wood windows. I simply remove the glass and insert paperboard with a drawing surface or, if I am painting, I cut MDO plywood to the size I need then nail into place and gesso. Some of the fun of creating a piece of art is using a "canvas" or "frame" that has been thrown away and giving it a new life. There are several pieces from The Envelope Collection that are framed and for sale. Check with the Collector's Art Group during the Holiday Sale if you have any interest.
Thursday, December 16, 2010
Wednesday, December 15, 2010
Dear President Obama: The Credit Rating Agencies Need to Be Repaired So The Economy Can Grow At A Faster Pace
Dear President Obama:
When you discuss what it will take to get our economy growing at a faster pace, please take a moment to discuss the broken credit rating system in our country. Yes, I am talking about the credit rating agencies that caused the housing bubble that resulted in the mortgage-backed bond market meltdown. The credit rating agencies act like a gatekeeper to the buy side of the fixed-income market and as such they can control the flow of credit and credit has a lot to do with the rate of economic growth. Fix the credit rating system and economic growth will take off. The Fed needs to take an active role in giving creditability to the credit rating agencies and their rating system. Triple-A ratings need to mean something and stand for the highest quality of credit. I have written several words on how to make this happen, and I am sure there are men in the White House that know this to be true. Ask Paul Volcker for his help as he understands the capital markets as they relate to fixed-income securities.
Great American Contemporary Artist
Tuesday, December 14, 2010
I am happy to hear that Elizabeth Warren is working towards a more level playing field for consumers of financial products. I wish she would go after the credit rating agencies too. Besides credit cards and mortgages, consumers also need some help with the credit rating agencies that give letter ratings to fixed-income securities.
The credit rating agencies claim that they are protected by the First Amendment of our constitution - Freedom of speech. Well, I take exception to this line of thinking. The credit rating agencies are not just writers, but they are Nationally Recognized Statistical Rating Organization "NRSRO". That means that the Securities & Exchange Commission (SEC) permits financial organization to use their ratings in carrying on their business. The credit rating agencies are not merely journalist writing about what they think.
Some of you may be aware of a symbol that can be found on the label of food products that are sold around the country. I am talking about the letter "U" inside the letter "O". This symbol tells the buyer that the contents inside the jar, can or box is kosher. A food manufacture can not put this symbol on the label of their food product unless the manufacturer has met certain standards overseen by a rabbinical authority. The symbol stands for Union of Orthodox Rabbis.
Putting a triple-A rating on a financial product, to my mind, is the same thing. The triple-A rating means that certain statistically measurable standards have been met and that the mortgage-backed bond meets those standards. No, that doesn't mean that the bond is kosher, while that may not be a bad idea, but it does mean that credit quality behind the bond has been reviewed and found to meet a very high level of security.
Perhaps it is time for Elizabeth Warren to check out what kosher means, and see if we can't get our financial products to stand for something.
Monday, December 13, 2010
Where do I start to give you a holistic approach to money, investment banking, monetary policy and inflation? Paper money, like a casino's chips, rely on confidence. Confidence is the thread that connects everything together and without it, the system falls apart. When confidence leaves, panic fills the void, and a financial meltdown occurs.
For many months, I wrote about the bond market, in particular the mortgage-backed bonds, and the credit rating agencies, that in my opinion, set in motion the great damage that was done to the whole structured finance market.
The credit rating agencies that passed out their highest credit rating, the triple-A rating, to mortgages that were securitized into mortgage-backed bonds by the investment bankers, and then sold to investors, both public and private portfolios around the world were bogus triple-As. As long as there was confidence in the credit ratings, the mortgage-backed bond market performed well. However, once it became general knowledge among market participants that the investment bankers were betting against the very mortgage-backed bonds that they put together for sale around the world, known as credit default swaps, the game was over and the mortgage-backed bond market meltdown ensued.
People in government, on TV and in coffee shops around the country debate what it is going to take to get the economy moving again. I can tell you why I think there is still a defect in the way the capital markets operate and for me, that is why our economy, while there is much cash on the sidelines, is not growing at a faster pace.
There continues to be trillions of dollars sitting in private, public and sovereign portfolios around the world waiting to be invested in fixed-income assets. Fixed-income assets is just another name for bonds and notes. But, the lack of confidence, the word that I started with at the beginning of this talk, in my opinion, is still the main obstacle. Without confidence in the credit rating agencies the system is broken.
I suggested that the Federal Reserve Bank take a role in passing on the efficacy of what constitutes a triple-A rating, in that the Fed specifies that banks must hold triple-A paper in reserves. Again, I go back to confidence in the system, without it the movement of capital from the investor to the borrower is stymied.
But, there are those that like the game the way it is. Shooting fish in a barrel is not sport in my book and it should not be sport in anyone else's book either. We need a level playing field where the investor has a chance and the tables are not rigged in favor of the investment bankers. When this becomes clear, the game will be changed and the economy's growth rate will speed up. Or, we can wait for a new generation of players that will not have seen the last meltdown and be none the wiser.
Sunday, December 12, 2010
These photos are for all my contemporaries who live in Florida or have the good sense to spend their winter months in Florida. These photos are especially sent to my friend Mickey with love, enjoy your swim. The top photo is my Sunday New York Times which infects my mind with all kinds of liberal/progressive ideas. The last two photos are from my back yard. It appears that golf for 2010 in Cincinnati is over.
Saturday, December 11, 2010
This is a sculpture of Mr. Oranda. Orandas are a type of goldfish. They have a unique mass on their heads called a wen. Why I decided to buy an Oranda I do not remember. I had a fish tank so I bought a goldfish to keep me company while I lived and worked in Columbus, Ohio. The first Oranda I bought wasn't an Oranda, but just a plain goldfish. I had gone to the wrong pet store and got taken for the price of one goldfish. Later, I went to a real nice pet store that had the real Oranda goldfish and I bought one. Mr. Oranda had political power with the State government while he was alive. While he lived I enjoyed living and working in Columbus. I ate in several nice restaurants, played golf and went to football and baseball games. After Mr. Oranda died, things started to fall apart, but that didn't happen right away. During my tenure in Columbus, I made this sculpture of Mr. Oranda from metal hangers, pieces of screening and paper mache'. I saved my old Wall Street Journals and after several years of working on the sculpture, Mr. Oranda was completed. I still have Mr. Oranda the sculpture. He is a reminder of those years I spent in my state capitol working with the capital in the state insurance fund. Then I retired and became an artist. The end.
Sunday, December 5, 2010
Winter has arrived early in Cincinnati, and while I could do without the cold weather for a few good reasons, there is nevertheless much beauty to be found. My Cone and Sunflowers are trimmed with a little white stuff, and while their glory days are gone, they still can put on a show. Talking about shows, the Cincinnati Bengals play the New Orleans Saints this afternoon and given the way the Bengals have been playing, they don't have a prayer's chance of beating the Saints.
Stay warm and stay tuned.
Saturday, December 4, 2010
Here are four paintings done in the shape of postage stamps. The top stamp was inspired by the cover from VANITY FAIR a few years ago. The second stamp was part of the design for a poster I designed for a fund raiser in Dayton, Ohio for The Other Place. The last two stamps were painted in oil on gesso covered paper and were done before May, 1992. (The reason I know that is because they were in my first art show in May, 1992 at the Carnegie Art Center in Covington, KY.
I first started collecting postage stamps when I went on a cruise on a Norwegian freighter out of New Orleans in the summer of 1964. I wanted to collect something from each country I visited and not having any room for objects of any size, I decided on postage stamps because I could put them between the pages of the few paperbacks I took with me. Later in 1964, before going into the army, I started a stamp album of American postage stamps. I like stamps because they are like a very small piece of art. And since at 21, I did not have the money to collect bigger art, I collected the art of postage stamps. I still have my American stamp album and I even have a few foreign stamps that I have held onto along the way. I still have the first stamps I bought at the post offices in Maracaibo, Venezuela, Columbia, and the Dominican Republic.
Wednesday, December 1, 2010
I love my little TV room and I receive a great deal of pleasure watching news, sports and films relaxing in what may be referred to as my "man cave". But, someone would be doing me a big favor if I could no longer watch the cable news shows. Listening to some of these politicians in the morning is becoming too much for me to take. This morning I watched Congressman Mike Pence (R) Indiana talk on Morning Joe. He wants to maintain the Bush tax cuts, but he says we can't afford anymore unemployment compensation, but then he goes on to say that his heart goes out to those families that are unemployed. Then Pence goes on to say that they are unemployed because of the Obama's administration handling of the economy. The Obama administration handling of the economy? What about the financial meltdown, financial bailout for the banks, rising unemployment and the recession that occurred during the Bush administration? This country experiences one of the worst recessions since the Great Depression of the 1930s and the present administration is blamed? Well, I guess that's politics. Blame the other party is the way things are done, but at the very least, shouldn't your arguments hold water, make sense? I guess if things made sense I would turn off the TV and paint.