President Obama: Meet Fannie Lou Hamer

Tonight, I will complete my seventh decade living in America, and I have seen and been a part of its history. The inauguration of President Obama in January of this year was a most remarkable thing when you consider our history and the story of full civil rights for black Americans. That the Republican Party does not want a Democrat in the White house to score any points is nothing new. America's history is filled with examples of political fighting between the parties. But, this time it is different. At least for this historian it is different. Let me explain.

In the summer of 1964, after graduating from the University of Cincinnati with a bachelor's degree in American History, I decided to hitch hike to New Orleans. There I got a job on a Norwegian freighter and took a cruise to Venezuela, Columbia and the Dominican Republic. After my cruise, I tried to get a job on an American freighter, but the economy was slow in the summer of 1964, so I hitch hiked to Atlantic City. In Atlantic City I found a job developing black & white film for United Press International (UPI) in the basement of the Democratic National Convention.

Up stairs on the convention floor was a woman by the name of Fannie Lou Hamer. She was from Sunflower County, Mississippi and she was black. In 1964, the Democratic delegation to the convention was all white and anti-civil rights. But, this was about to change. Fannie Lou Hamer was a member of the Mississippi Freedom Democratic Party, also know as "Freedom Democrats". As Vice-Chair of this delegation Fannie Lou Hamer pressed her case to be seated as part of the Democratic delegation from Mississippi. They won two seats to the consternation of President Johnson. This cost the Democrats the South for many years as Nixon's Southern Strategy opportunistically took advantage of the racial hatred that manifested itself during the Civil Rights movement.

While I was developing black & white film in the basement, Fannie Lou Hamer was making black & white history on the convention floor. She died on March 14, 1977 in Mound Bayou, Mississippi many years before she could see our country elect its first black president. But, she is not forgotten by those of us who where there in the summer 1964 and remember her words, "I am sick and tired of being sick and tired."

So, knowing the American History that I lived through and the battles that were fought for racial equality in America, I am not surprised by the attacks on President Obama. President Obama, Fannie Lou Hamer had it a lot worse.

Stay tuned.

Corrupt Politicians Make It Difficult

Moneythoughts has a lot of stuff to take care of today, so, if you feel like it, go back and read some of the posts that I have written over this last year. As I have said many times, this financial stuff is not difficult to understand once you know the terms - the language of economics and finance and the capital markets.

Difficult is manipulating proteins in the human body to stop the blood flow to tumors. That kind of work and research is difficult, not the work that goes on in the world of finance and the capital markets.

Moneythoughts believes that if we are going to use the capital markets to grow our economy, then the government should see to it that investors, both large and small, are treated fairly. This then requires a Securities & Exchange Commission fully staffed and financed to do the work that is before them. Without regulations of the capital markets and financial products, the greed factor takes over and we all get the financial crisis, bond market meltdown, and the bursting of an economic bubble. The credit rating agencies must be regulated and better yet, the Federal Reserve Bank should be the arbiter of what constitutes a triple-A credit.

As I have said many, many times, this stuff is not complicated or difficult. Politics and lobbyists and corrupt politicians make it difficult.

Stay tuned.

The Way Business Is Done In The USA & Congress

Yesterday's blog had a lot of stuff crammed into a few lines. Today, let us move on from there. With Monetary Policy in the United States geared towards economic growth, which also leads to the creation of new jobs, we can understand that there is a national purpose in our central bank's desire to see to it that there is enough money in the banks to grow the economy. By keeping interest rates (Fed funds) low and by not raising the reserve requirement for commercial banks, our central bank can help the large corporations, that borrow on a daily basis, have the necessary financial environment in which to grow. With all this said, is it necessary that they also get Corporate Welfare as well?

What is Corporate Welfare? Corporate Welfare in my book is any special legislation from Congress that gives a corporation or a group of corporations an advantage that otherwise, without the special legislation, would not be there. Take for example Health Care Insurance Companies that are exempt from anti-trust laws so they can control a piece of the insurance business. The fact that the consumer can not shop outside his or her state for a better and cheaper insurance product is a form of Corporate Welfare. The weakened laws regarding the sale of financial products and a weakened Securities & Exchange Commission are also another form of Corporate Welfare, in my opinion.

The history of the capital markets in the United States is one of trying to control greed and unethical behavior. The Congress knows this only too well. Until they suffer huge financial loss, the Level Playing Field is only going to be an idea. But, more importantly, Congress must be made to suffer for their lack of concern by being voted out of office. Only when the electorate wakes up to the fact that Corporate Welfare in this country has come before the security of the family, we will see some meaningful change.

The TV news shows are not going to educate the masses to what ROI, IRR, EPS and Corporate Welfare have to do with the economic crisis and the fact that so many people have lost their job, or their retirement. The American people are going to have to get this themselves, and want this themselves, if they are going to see a change in the way business is done in the United States and in Congress.

Stay tuned.

ROI, IRR, EPS vs The Level Playing Field

For several months, MONEYTHOUGHTS has discussed the concept of the Level Playing Field as it relates to Monetary Policy and Investment Securities Regulation in the United States. Because of the way Monetary Policy is implemented by the Federal Reserve Bank, along with the deficits and borrowing that is done by the Federal Government, Monetary Policy in the United States is decidedly for the benefit of corporate America. The bottom line is, that over a period of 20, 30 or 40 years, loss of purchasing power due to inflation is an economic fact of life in the United States.

You have a choice: 1.) you can put your savings in a bank and earn interest; or, 2.) you can invest your money in the capital markets and try to hedge yourself against inflation and the loss of purchasing power of your money. We all know that we have long term responsibilities to ourselves and our families. Whether it is investing for our own retirement or a child's college education, we recognize that over an extended period of time, our money will not be worth what it was when we placed it in a savings account 20, 30 or 40 years ago.

I do not believe that Monetary Policy in the United States will change with regards to its second duty - put enough money into the economy to further economic growth. In my opinion, the Fed's first duty of protecting the integrity of the dollar is in reality a distant second. As such, investing, not saving, for retirement is really the only way to get from point A to point B.

I have asked this question before. For whose benefit is Monetary Policy in the United States directed? My answer is economic growth. There is nothing wrong with that answer as we need our economy to grow if we are going to survive as a nation.

That brings me to the role securities regulations play in our quest to meet our financial responsibilities to ourselves and our families. Securities regulations and the credit rating agencies are the weak links in the system.

Corporations exist to make money. Profits is the name of the game. Without profits a corporation has no purpose to exist. Publicly traded corporations produce a lot of financial information for their shareholders like Earnings Per Share (EPS). But it is the Return On Investment (ROI) that moves EPS. Corporations look at many ideas before they decide to invest in a new project. The project they decide on is usually determined by something they call the Internal Rate of Return (IRR). The Modified Internal Rate of Return (MIRR) takes into account the cost of capital. Borrowing money is leverage for a corporation and can propel its earning per share. Earning Per Share is what many CEOs have their salary and bonus based upon. As a result, EPS are very important to them and their Board of Directors. The ability to borrow in the capital markets at low interest rates gives the corporation the ability to have a higher Return On Investment (ROI).

The Federal Reserve Bank serves business first and the family second. I challenge any economist to prove me wrong. If, the Fed is going to place the interest of the corporation before the interests of the individual and his/her family, then does it not make sense that the regulation of the capital markets should be sincere and if tilted at all, should be tilted in favor of the investor, be they individual or institutional?

Stay tuned.

Sunday: Time For Pro Football & The New York Times

The Bengals need to win this afternoon. They play the Kansas City Chiefs at Paul Brown Stadium at 1 pm. With home field advantage, this should happen, meaning the Bengals should win. Does not have to be pretty, just get it done. Good Luck Bengals!!!

On Monday, MONEYTHOUGHTS gets back to talking about those economic factors that influence our monetary policy here in the United States, in my opinion. There is a lot of material to cover, lots of terms and concepts to understand, but I will try to keep it simple. MONEYTHOUGHTS is written for everyone, not just the economist or the banker. We need more people involved and literate with the terms and the concepts of monetary policy and financial products and the regulation that I think is needed.

Stay tuned.

Saturday Is For Art & Literature Too

Today, I want to put in another plug for a book I received as a gift this season. THE FAMILY by Jeff Sharlet is turning into a even better book than I could have imagined from just reading the cover and a few pages. Those of you that are interested in American Social and Intellectual History, this book is a MUST!!!

I know, many of you think history is boring, but that is not true. An American History textbook can be boring, but a well written and researched piece of history, any history, can be a very rewarding experience. I re-new my recommendation of THE FAMILY - THE SECRET FUNDAMENTALISM AT THE HEART OF AMERICAN POWER, and I believe that this is a key piece of American historical literature.

Mother & Child: An American Icon No. 2, styrofoam, cardboard, cereal boxes, paper mache, gesso, acrylic paint, 2007-08. Artist: F.D. Zigler, designed and constructed.

Merry Christmas & The Level Playing Field

Here in the United States, today is a holiday, Christmas Day. Hopefully, for many, it is a time of family and friends, joy and warmth of the season. Enjoy the day, the weekend, the next week, if you don't have to go to work.

But for me, I will take the day off from writing about the Level Playing Field for only a short time. There is still work to be done. The process of educating the masses is never finished. While the lesson is not difficult to comprehend, repetition is the key. There is a balance I am trying to get across to those that read this blog.

The balance is: 1.) reduce inflation and make saving money in a savings account a viable alternative to investing in the capital markets; or, 2.) regulate the capital markets with enough regulations to make an investor's portfolio reasonably safe from fraud. In that, it is reasonable to expect that there will be those that will battle against both points #1 and #2, with huge piles of money, the masses will have to learn what they don't know to survive. This is the balance I put forth.

There will be no meaningful change to protect the financial welfare of the masses until the masses understand their choices. While the Level Playing Field may only be an abstract idea, for millions of families, their financial security is no abstract question.

Stay tuned.