America: The Band Keeps Playing as the Great Ship Sinks

Our government is telling us that our nation is in a financial crisis because of too much borrowing and spending. The solution that they are implementing is more borrowing and spending at the highest levels in history.

What is really amazing is that most people are not challenging this solution which clearly defies reason, commonsense and personal experience. It seems like our leaders are purposely trying to destroy the American economy.

It seems that America's population is suffering from a collective "mental disorder". Today's popular culture seems to be in denial about many "plain truths" that seem so obvious to me, but most people are oblivious to. I feel like I am the only sane person in an insane asylum. This is scary because I know that I am not "normal" myself.

Today's America is reminiscent of the Titanic as she sank. The band kept playing as the great ship went down.

This was the feeling that I got when I recently toured the country. I was suprised to find that many huge, massive casinos had sprung up everywhere, even in the middle of rural areas in Kansas, Iowa and Wyoming. The reckless abandon that these casinos represent, seem to be a metaphor for the behavior and attitude of today's government and culture.

These casinos were filled with "senior citizens" who were happily squandering their life's savings and their children's inheritances for a few moments of joy and thrills in their remaining years.

The Spiritual Root Cause of America's Economic Woes

Why Bail-Outs Don't work

The Quintessential definition of insanity is to repeat the same mistake and expect different results.

In a free market, companies will not take on undue risk, because it will eventually come back to hurt them financially. The main reason why the real-estate market took on so many risky loans, was because Fannie Mae and Freddie Mac were empowered to buy these risky loans, freeing the banks from their risk. The only reason why Fannie Mae and Freddie Mac bought risky loans, was because the federal government guaranteed the solvency of Fannie Mae and Freddie Mac. When the government guarantees that a company will not be allowed to fail, no matter how risky its behavior, this promotes more risky behavior without restrictions or limits. As a result, Fannie May and Freddie Mac, bought up 50% of all home mortgages, mostly the riskiest ones. This was no longer a free market, because the risk has been taken out of doing business. If the financial risk is taken out of any business transaction, money is bound to be lost, because there is nothing to stop any deal from going through. The reason why most banks carefully check out a clients credit worthiness before making a loan, is that they will lose money if the loan is not repaid, not because of regulations. If enough loans are not repaid, they will go out of business. Fannie Mae and Freddie Mac had no such constraints. Commissions were made, every time a mortgage was bought or sold and the company was making lots of money while the real estate market was on the rise and they were protected from failure, should the market fall.

Liberal politicians and community organizers, pressured banks into making risky loans to minorities, poor people. Banks were inclined to acquiesce, because Fannie Mae and Freddie Mac were there to relieve them of their risk. When Fannie Mae and Freddie Mac eventually became insolvent, banks were stuck with the risky loans that they had on hand. Also, Fannie Mae and Freddie Mac, had been repackaging many of these risky loans into a financial instrument called "Mortgage Backed Securities" and they sold them on the securities market. This is how these risky loans circulated throughout the financial industry and eventually put many financial institutions at risk.

The lesson to be learned here is not that the markets require more regulation. The lesson is that the government will distort any market by guaranteeing any business from failure. That guarantee, guarantees risky behavior on the part of that institution. It will inevitably lead to insolvency.

The current trend toward government bail-outs, government acquisitions and loan guarantees is exactly the same behavior that caused these financial institutions to fail in the first place. I can see no other outcome than the eventual failure of more businesses and financial institutions resulting from this increased government interference in free markets.

Joe the Plumber

I had written the following article just prior to tonight's third and final presidential debate. The name of an Ohio plumber was mentioned 20 times between the two candidates. I was very disappointed as the debate progressed, to find that neither candidate was able to truly understand the perspective of plumber Joe and the strengths of capitalism Vs. socialism.

Last week, at a recent Obama campaign event, an unscripted question was asked by an ambitious hardworking plumber named Joe Wurzelbacher. This ambitious plumber says he works 10 to 12 hours per day and lives in a modest 90 to 140 thousand dollar home. He asked Obama: "I'm getting ready to buy a company that makes $250,000 to $280,000 a year, Your new tax plan is going to tax me more, isn't it?"

Obama's surprising response was: "It's not that I want to punish your success, I just want to make sure that everybody who is behind you, that they've got a chance for success, too ... When you spread the wealth around, it's good for everybody."

Click on the video below to hear the entire exchange between Obama and "Plumber Joe"


Obama's response is wrong on many levels. What is worse is that Obama does not understand what motivates this plumber to work so long and hard, sacrifice for so many years and risk everything he has for a chance at success.

This plumber has clearly sacrificed for years, in terms of his time, effort, lifestyle and the saving of his money to purchase the company that he now works for. His motivation is clearly that if he works hard, long and honestly, and sacrifices fancy cars, clothing, houses, fancy meals and expensive vacations, he has a chance to become wealthy. Of course the chances are just as good, that after all of his sacrifices and hard work, he loses it all, and must start over from square one. This is what is meant by "risk Vs. reward". This is the fundamental principle of capitalism. Our capitalist system often rewards those who are motivated to offer their customers better service and value than their competition, and accommodate their customers by finishing jobs on time, even if it means working evenings and weekends and charging less than their competion. Democratic capitalism is capable of motivating people to do “the extraordinary”, while providing jobs, innovation and wealth for their community and their country. American capitalism has led to innovations that have truly raised the standard of living worldwide. Risk Vs. reward is at the core of American capitalism.

Innovation, honesty, hard work and excellence in service are used by a motivated individuals, in order to surpass their competition. Obama clearly showed his ignorance about American capitalism as well as human motivation when he said: "It's not that I want to punish your success," I just want to make sure that everybody who is behind you, that they've got a chance for success, too ... When you spread the wealth around, it's good for everybody."

The last thing that this plumber wants is for his competition to have an advantage that he never had nor needed. He got where he is today by working harder, smarter, longer and better than those behind him. He wants them to continue to be behind him, that's how he gets ahead. Staying ahead is what motivates him to get up earlier than his competition, work longer than his competition, and offer a better value than his competition.

If the guy behind “Joe the plumber” wants a chance at success, all he has to do is to wake up earlier than Joe, work harder than Joe, be more innovative than Joe, hire better employees than Joe and offer his customers a better value than Joe. Joe knows this, and that is what motivates him to “walk the extra mile”. Millions of people like Joe, who walk the extra mile, is what has brought America the prosperity that we now enjoy. Obama is asking people like Joe to share the wealth, without asking others to share the risk, sacrifice, talent and priorities. Taxing a man's sacrifices, hopes, dreams and ambitions and giving the money to those who are less ambitious and averse to risk, is tantamount to larceny. It can also crush one's spirit.

When you “spread the wealth around”, you de-motivate people like this plumber to do extraordinary work, come up with extraordinary innovations, and demand excellence from employees in exchange for better wages.

By taking from the successful people and giving to people who “haven't made it”, you are rewarding mediocrity and punishing excellence. It is extremely clear to me that there can only be one end result. That result is more mediocrity and less excellence. This is exactly what you will get with socialism.

Democratic capitalism leads to innovation, high wages, efficiency, motivated workers, high rates of employment, good wages, excellent products, opportunity and greater wealth for all classes of society.

Socialism promises equality, which has never been attained. But more importantly, socialism guarantees mediocrity in goods, services, pay rates, employment opportunities and individual motivation. Most importantly, when you take from the rich and give to the poor, you end up with less rich people and more poor people.

Democratic capitalism provides greater wealth for all classes of society. People all have the opportunity to find their own way to the top if they choose to make sacrifices by spending their own money, time, effort and their natural God-given talents to improve their own lot in life. Most people do not choose this “tough row to hoe”, but those who do, have a chance at success. This is the very definition of freedom. The best, brightest, most innovative and hardest working people will rise to the top. Any system that leads these type of people to the top, will lift up everyone in the system. They have provided wealth for all of the people who work for them and the companies who they purchase goods from in the course of business. When a plumbing company succeeds, it also helps the company that manufactures and sells pipes, toilets, water heaters, etc. When a plumbing company succeeds, it also helps all of the people who enjoy the goods, services and innovations that it provides. Not that long ago, plumbers invented and made available, toilets, water heaters and indoor plumbing.

Each and every advancement was made by people like Joe, who were striving to get ahead by staying ahead of their competition. Obama says that Joe should want to help the people behind him. In fact, people like Joe, spend every waking moment trying to stay ahead of the people behind him, not trying to help them. Obama does not understand capitalism, business nor human motivation.

It is paramount that we educate all Americans to these truths. Unfortunately, many schools and universities are teaching our children that capitalism is corrupt and unfair but government regulation and social engineering programs, including “spreading the wealth”, is fair and helps the little guy. In this sense, our educational system is harmful to our economic well being and the future of our nation. Politicians use this theme to win elections because there are more little guys and less wealthy people. There have always been more common people than wealthy people. This is the way it is, and the way that history shows it has always been. Outcomes will never be equal because human motivation, passion, competency, priorities and desires vary among all of us. History has shown that human passions and motivation can only be stifled by government. Our individual abilities, passions and desires are given to us by God and are boundless when left unfettered by government regulation and taxes. Democratic capitalism, restrained and tempered by religious morals as exemplified in the Judeo-Christian ethic, is what has led to America becoming the freest, most prosperous and most powerful nation that this world has ever seen. America's wealth, innovation and compassion has improved the lot of people worldwide. Obama's socialist ideas of “ spreading the wealth around”, actually insures that there will be less wealth for everyone and will create regulations that breed corruption, waste and inefficiency. Our individual and collective prosperity can only increase, if government stands clear of plumber Joe's noble passions. Government may be able to redistribute existing wealth, but only motivated people like plumber Joe can create it.

Click on the video below to hear Neil Cavuto interview "Plumber Joe"

Bailouts Vs. The Old-Fashioned Way

Last night I happened to catch radio talk show host, David Ramsey, as a guest on a new talk show on the FOX TV news channel, hosted by Mike Huckabee.

Dave Ramsey has a nationally syndicated radio talk show that probably ranks within the top 20 nationwide. I occasionally listened to his show while driving across the country. His theme is always the same. The slogan of his show is "Around here, the paid home mortgage has taken the place of the BMW as the status symbol of choice". Ramsey is a practicing Christian who has a talk show about personal finance. Ramsey believes that everyone should make being "debt free" their financial goal. Of course this is completely contradictory to most popular wisdom in the financial and political world. He encourages listeners to pay off all of their debts, including home loans, car loans, student loans, credit cards, etc. During each program I have listened to, several callers proudly proclaim that they are now totally debt free. Often these callers are of modest income. They explain how they achieved this goal over a period of years while paying off their various creditors, and are now living in a home that is totally paid off, drive an automobile that belongs to them with no lien-holders, have education accounts for their children and retirement accounts for themselves.

In many ways, Dave Ramsey's advice is similar to the way previous generations of Americans have led their financial lives. Dave often recommends that people sell their luxury cars privately (not as a trade in to a dealer) and purchase an economy car in it's place. Often when people are stuck with one or more homes that they can not afford, he recommends that they forget about the cheese and "get out of the trap". He tells them that they have now become motivated sellers and they must sell immediately, even if it is at a loss. Ramsey recommends that families write out a budget for the following month so that they know where each and every dollar will go. If something is not on the list, they simply can not afford it that month. He recommends a 10,000 dollar emergency fund, should unexpected emergencies arise. If a decline in income should occur during a month, the list should be written with priorities on top, such as food, rent, gasoline, etc., sometimes circumstances call for low priority items to be sacrificed. Ramsey's followers are happy, content and enjoy all of the luxuries of the 21st century, however, they have learned to live within their means and become debt-free.

If you compare Ramsey's tried and true recommendations, with the way the our federal government does business, you will see a stark contrast. Ramsey's recommendation is to maintain the prosperity of our nation by putting the government's financial house in order. First we must drastically cut the size of government by listing our priorities in order of the most important, and only fund what we can afford as a nation each year. He also recommends that we pay off the national debt, and that we encourage business investment by eliminating capitol gains taxes. We should let the markets self-correct themselves without government intervention. This will leave the strongest institutions standing and will eliminate businesses that have become burdensome and corrupt. This will also clear the financial dead wood out of the economic forest and make room for new, young, vibrant and effective new players. On the other hand, to prop up what has already proven to be a failure, will leave no room in the market for the necessary changes, improvements and growth to take place.

Everything that the federal government is recommending with their 700 billion dollar bail-out program will exacerbate the financial difficulties that we find ourselves in today. A bailout will reward all of the players who have caused this economic downturn, including the politicians.

The politicians unwittingly encouraged the current downturn in financial markets with the Community Reinvestment Act, so called "Fair Lending Laws", and other well intentioned but misguided programs. The government and community activist organizations, pressured banks to give mortgages to people who had no down payment and who could not afford to make the payments. Politicians did this in an effort to make home ownership possible for all Americans. Unfortunately, in the booming economy of the 90's, the reasons why many people could not afford to own their own homes, was usually due to lack of income, lack of discipline or lack of a sound economic plan. Either way, the Community Reinvestment Act did not address these concerns and was doomed for failure from it's very inception.

However, banks were encouraged to make many loans that were not likely to be paid back. The government offered banks incentives for lending to poor people and minorities. The banks were protected against loss from risky loans, because two investment banks were chartered by the government, that would buy these loans from private banks. These government chartered investment banks were called Fannie May and Freddie Mac. It was understood from the start that the government would not allow these institutions to fail.

This made the entire mortgage industry ripe for corruption, because the risk was taken out of the free market, because it was understood that Fanny May and Freddie Mac would not be allowed to fail. "Risk vs. reward" is the foundation of our capitalist system. When risk was removed by Fannie May and Freddie Mac buying up theses risky mortgages, providing government bail-outs and not allowing certain critical businesses to fail, the entire economic system became corrupted. This is where we stand now.

In 1995 and 1999 laws were changed that permitted investment banks to purchase mortgage backed securities on margin, with a very small cash reserve. This encouraged speculation in the real estate market. Also, many families who did not qualify for mortgages in the past, were now qualified, thus the demand for housing rose sharply. Home prices rose sharply as a result of increased the demand, and speculation. As long as real estate prices were rising, everyone was making money. However, since investment banks were so highly leveraged, a small drop in real estate prices would wipe out all of their equity. Common sense dictates: "what goes up, must come down", and that is exactly what happened.

The laws that they changed, that now allows small cash reserves, were originally enacted in 1930, in order to protect against future devastating stock market crashes. If the definition of insanity is: "making the same mistake and expecting different results", our lawmakers are truly insane.

The government has already bailed out Fannie May and Freddie Mac to the tune of 300 billion dollars. This in itself is corrupting to our economic system. If the government guarantees additional mortgage backed securities, to the tune of 700 billion dollars in the pending bail-out, we will no longer be a capitalist society. The government will have ownership and control over much of our financial industry. Centralized government control of industry has never worked over the long run. This is what led to the fall of the Soviet Union and caused poverty in Cuba, North Korea, China and other communist nations.

This bail-out plan is nothing more than politicians trying to maintain their power and stave off investigations, when what is needed is a correction in government and the financial industry. Our entire group of lawmakers in Washington has become so misguided by their own self-interest, that they can no longer govern effectively. They feel that it is in their own self-interest to gin up a financial emergency, that was years in the making, a month before a presidential election. If passed, this bail-out, will only buy some time before a more serious consequences will take hold. This plan only offers more of the same policies that created this economic turmoil in the first place. Since our federal government is operating at a deficit, they will either have to borrow or print over a trillion dollars to pay for this bail-out. This is sure to have unintended negative consequences.

Politicians are using emotion to sell their bail-out plan. They are forecasting unprecedented worldwide economic failure if they don't get their plan passed this week. This is the most blatant example of fear-mongering that I have ever witnessed. I am suspect of anyone who pressures me to buy now, or else it will be too late. Common sense and experience tells me that a bill that calls for 700 billion in spending, should not be rushed through the Congress in one week. They are also ginning up angst against executives of troubled firms for their high level compensation. Executive pay packages had nothing to do with the predicament that we find ourselves in today, yet the media and the politicians spend much time chastising these executives for high pay, bonuses and golden parachutes. They are using jealous emotions in order to sway the public's opinion, while keeping our attention diverted from the actual reasons why our financial systems are in turmoil.

The current meltdown in our financial institutions is the direct result of the unintended consequences of liberal social engineering policies, the inevitable corruption that followed and the gutless inaction of intimidated conservatives.

Conservative radio talk show hosts have varying opinions on what to do about the current meltdown of the financial markets. However, they all seem to agree on how we ended up in this predicament in the first place. I found an excellent music video which sums up the conservative prospective about how we arrived at this place. This video has few spoken words. It is mostly printed words and newspaper articles flashed on the screen that describe the history that led to the current financial mess in our banking industry. Rock and roll music is played in the background. The name of the video is "Burning Down the House".




This video names only Democrats as culprits, and describes how some republicans tried to bring about reform, but failed. Of course, I think that this video is overly one-sided politically. Republicans too, were obviously complicit in allowing this to happen. Republicans controlled the House, Senate and the Presidency between 2000 and 2006. I'm sure that some republicans were also corrupt, and many other republicans have been intimidated into silence. As I have written in previous articles, the left often uses intimidation and demonetization to stifle opposing views. In this case, politicians who called for reform and investigation, were labeled as heartless bigots and racists who cared only about the rich banks and not the poor people. To fight the Democrats on this issue would have been political suicide. In a society that places emotion above reason, I see no other outcome possible.

In my opinion, the only plan that will see us through this economic and moral crisis, is the one that Dave Ramsey recommends. It is unlikely that Ramsey's plan will be considered because it requires sacrifice, self-discipline, courage, and patience. Although these spiritual principles are what made our country great, I'm afraid that they are no longer revered in today's America.

Black-Jack, Jacked-Up Cars and Jacking Us Around

Yesterday I was at Hollywood Florida's Hard Rock Hotel and Casino for the first time in over a year. They moved the "poker room" to a separate 2 story building in the "shopping mall" out the back door of the main casino. In the main casino, they added numerous black-jack tables located in about five clusters scattered throughout the casino. They also have three card poker and baccarat. The minimums on the new card-games are ridiculous. The cheapest black-jack tables have a 15 dollar minimum, followed by many 25, 50 and 100 dollar tables. The 25 dollar tables seem to be the most popular, but most all of the tables were filled. The parking lot was also filled, I had a hard time finding a parking spot in the parking garage.

The patrons were a curious mix of silver haired seniors and young hipsters showing off their bold tattoos, enhanced breasts, weirdly colored hair styles, pierced lips, brows, noses and navels. The most common symbol tattooed on the bodies of the youth, printed on their clothing and molded in their jewelry and belt buckles was the "skull and crossbones". I would estimate that 25% of the young hipsters sported this hideous symbol which represents poison, death, degradation and decay. Printed prominently on the wall of this magnificent casino was a quote from an idolized rock star and drug addict Todd Rundgren. It read: "I don't want to work, I just want to bang on these drums all day". While the young and the old alike were mesmerized by their hopes of thrills, fortune, good times, and euphoria, I could not help but notice how spiritually bankrupt our materially wealthy society has become.

How can the politicians claim that we are in a recession that has caused total economic devastation if so many people are gambling (and mostly losing) at such high stakes at the casinos? Apparently the gas prices, now down to $3.70 per gallon in FL, are not stopping people from driving their huge pick-up trucks and SUVs that were clogging the roads on a Sunday, when few people needed to get to work or drive out of necessity. Many of the vehicles on the road had expensive, yet frivolous modifications such as custom wheels, some costing up to $1,000 for each wheel, custom sound systems with huge sub-woofers, also costing thousands, custom paint jobs, also costing thousands and of course, modified exhaust systems that also draw attention to their vehicles costing hundreds of dollars to install.

Of course you may argue that there is a huge disparity between the rich and the poor. However, the casino hires thousands of workers and the custom auto industry is mostly run by small independent businessmen. What I see with my eyes greatly varies from what I hear on the news and from the democratic candidates. Most people I see, have plenty and are living and gambling above their means.

Politicians are also talking about the masses of people who were duped into taking out home loans that they couldn't afford and are now facing foreclosure and homelessness due to the mean, cold-hearted banking industry. They fail to tell you that all of the foreclosures that I personally know about are due to people using the real-estate market like they use the Hard Rock Casino's high priced black jack tables. Due to congressional legislation that encouraged home loans to be made available to poor people (people who have a track record of being unsuccessful at earning and managing money), many loans were issued to people who were irresponsible with their own money and their own financial future.

I personally know of several cases of people who were issued huge mortgage loans, with little or no down payment, based on documentation that was fraudulent and false income levels that went unchecked. Salesmen, who were more interested in their monthly commissions, rather than the future of their industry, were only too happy to bend the already lenient rules. Salesmen, mortgage brokers and loan officers also looked the other way by not checking accuracy of loan applications and accepting or encouraging inflated home appraisals.Of course the banks should have checked their applications for accuracy, but how can individuals blame the banks because they lied on their applications and the banks didn't bother to check. Illegal aliens were even granted home loans with fraudulent ID and social-security numbers. When they were unable to repay their loan, the bank refinanced their loans and gave them several hundred thousand dollars more, based on the increase in the appraised value of their home while the market was soaring. Instead of using this money to build their future and/or stabilize their economic future, most high risk homeowners, with few exceptions, spent this windfall on vacations, cars, trucks, custom wheels, paint jobs, sound systems and exhaust, and living living above their means. When the real estate market stopped rising, they were unable to pay their loans and blamed their misfortune on the banking industry for taking advantage of them.

The entire real estate debacle has been cause by spiritual depravity on many levels. Just like the hard Rock Casino lures in its unsuspecting customers with the promise of something for nothing; the government, the real estate industry and the banking industry dangled the same "carrot" in front of millions of spiritually bankrupt folks who thought that greed and luck would solve all of their problems. The unspoken truth is that hard work, responsibility, discipline, sacrifice, selflessness, humility, gratitude, honesty and integrity is what creates material wealth as well as spiritual growth. These principles build individual character, promote peace and prosperity, reduce crime, as well as improving our eternal souls. Why don't I ever hear this from our political leaders and activists?

Currently, our economy is based upon borrowing from our future instead of building our future. Our entire economy, including government and individuals is borrowing for luxuries instead of saving for necessities of the inevitable rainy day. Cities are building new sports arenas while bridges and other infrastructure decay in disrepair. Most Americans are living beyond their means in order to seek thrills, show off and keep up with the Joneses. Our government is in the hole for 55 trillion dollars including the unfunded liability of our Social Security and Medicare programs.For the first time in American history , personal borrowing is larger than personal savings. Chasing greed and hoping for luck will inevitably bring our economy and our high standard of living down the the level of struggling for our very survival. What has taken twenty-four decades to build up is being squandered before my eyes in only a few decades. All that is needed to reverse this alarming trend, is to return to the spiritual principles that this nation was founded upon and made us the wealthiest, freest, most powerful nation on earth.