Tuesday, December 1, 2009

Fritz Henderson Resigns GM Post

GM CEO Fritz Henderson abruptly resigned this afternoon. No explanation was given.

From Reuters:

"General Motors needs to explain why chief executive Fritz Henderson is resigning. Replacing the group's driver could well be a good thing. After all, Henderson belongs to the old guard who drove the carmaker into bankruptcy. And as Fiat and Ford have shown, new blood from outside the industry helps power a turnaround. But the lack of an explanation from GM sends some worrying signals.

Granted, it should come as no surprise that there were growing tensions between the chief and his board - Henderson, for example, was more publicly optimistic about an initial public offering next year than chairman Ed Whitacre Jr."

Huffington Post reports that Henderson's daughter made an obscenity laced post on Facebook claiming that Henderson was fired.

Ed Whitacre , the current chairman, takes over for the interim. Whitacre(friend of Rahm Emanuel) was appointed by the government as Chairman of the Board earlier this year.

Friday, November 6, 2009

Unemployment Rises to 10.2%

Just in this morning from BLS:

"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm
payroll employment continued to decline (-190,000), the U.S. Bureau of Labor
Statistics reported today. The largest job losses over the month were in con-
struction, manufacturing, and retail trade."

"In October, the number of unemployed persons increased by 558,000 to 15.7
million. The unemployment rate rose by 0.4 percentage point to 10.2 percent,
the highest rate since April 1983. Since the start of the recession in
December 2007, the number of unemployed persons has risen by 8.2 million,
and the unemployment rate has grown by 5.3 percentage points."


"the unemployment rates for adult men (10.7 per-

We were assured that the stimulus bill that was passed earlier this year would keep unemployment at 8% and save 3 million jobs. There's been a loss of 3 million jobs since then. You sure have to love keynesian solutions....

Tuesday, November 3, 2009

Goldman Sachs Under Fire

There's been a spate of articles within the last week investigating Goldman Sachs role in the financial crisis.

From McClatchy:

"In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk. "


More from Matt Taibbi on the AIG fiasco:

"The important thing to remember about all of this is that just because Goldman was buying “insurance” from Cassano, that doesn’t mean they were being responsible. On the contrary: Goldman was creating well over ten billion dollars worth of exposure to a guy that they must have known was an absolute idiot. Now, in a world where actual capitalism existed, Goldman should then have been highly invested in making sure that AIG did not go under. A dead and bankrupt AIG should not have been good news to a company like Goldman Sachs, which had billions of dollars riding on AIG’s financial health.

But if anything Goldman behaved throughout the runup to AIG’s collapse like it couldn’t care less if the company died. In fact Goldman accelerated AIG’s demise by making margin calls against AIG, for both the CDS deals and for deals it had done with Win Neuger, who was running AIG’s securities lending business. What really sank AIG was the fact that the downgrade of its credit rating permitted companies like Goldman to demand large sums of money from AIG in the form of these margin calls, and AIG could not get its hands on enough cash to meet its demands, resulting in the death spiral situation we all witnessed last September. Of all the firms making such demands against AIG, Goldman was the most aggressive (I have more on this coming out in a forthcoming book) and my sources who were involved in the AIG bailout bunker scene of a year ago almost to a man report that Goldman and its chief Lloyd Blankfein took an extremely hard line with AIG.

Why would it act like that? Well, in a normal capitalistic situation, it wouldn’t. But Goldman, it turned out, had an ace in the hole. It seems that when the state stepped in and decided to bail AIG out, its former director, Stephen Friedman, was among those making the decision that AIG’s counterparties should be paid 100 cents on the dollar for its CDS debts. It never made sense that AIG/AIGFP would decide on its own to pay its creditors 100 cents on the dollar for its debts, but now we know, thanks to reporting from Bloomberg, that it wasn’t AIGFP and its CFO Elias Habayeb who was making that decision."

From Janet Tavakoli:

"The government’s 100% payout to AIG’s counterparties was a gift, and the negotiations were done in secret. The monoline insurers were in a similar situation with a variety of deals from a variety of counterparties. (Structured Finance Pp. 405‐427) For example, in 2008, Citigroup Inc. accepted about 60 cents on the dollar from New York‐based bond insurer Ambac Financial Group Inc. to retire protection on a $1.4 billion CDO. Ambac said the underlying “super senior” was worth about zero, and the protection payment would otherwise have been near the full $1.4 billion. Citigroup got a relatively huge payout, since other “high grade” deals have been settled for as low as ten cents on the dollar.

The irony is that Goldman Sachs may not have been involved in the worst of the deals, but its officers had unusually high profile in AIG’s damage control. Goldman’s deals with AIG may have all been completely proper, but deals like GSAMP Trust 2006‐3 indicate that Goldman should not be exempt from the general fraud audit of mortgage securitizations that all of the former investment banks [Lehman, Bear Stearns, Morgan Stanley, Goldman Sachs, Merrill Lynch, and some foreign banks doing business in the U.S. (DMB Pp. 97‐107.)] should undergo."

The fact that there's been a revolving door between government and Goldman employees doesn't seem to get enough major media attention. Couple that with a list of politicians who have been on the receiving end of GS campaign contributions and connect the dots with legislative activity and appointments. A scandal of huge proportion looms, if anybody bothered to look into it. Of course, all the t's crossed and i's dotted may be perfectly legal but ethics and morality are noticeably absent.

Thursday, October 29, 2009

GDP Posts 3.5% Gain In Third Quarter

The US GDP(gross domestic product) rose 3.5% for Q3 according to the Bureau of Economic Analysis.

" The increase in real GDP in the third quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), exports, private inventory investment, federal government
spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP,

The upturn in real GDP in the third quarter primarily reflected upturns in PCE, in private
inventory investment, in exports, and in residential fixed investment and a smaller decrease in
nonresidential fixed investment that were partly offset by an upturn in imports, a downturn in state and
local government spending, and a deceleration in federal government spending.

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after
adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.11
percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from
the second-quarter change."

However, at least half the gain was due to temporary government stimulus schemes. The market is reacting well to the news and the pundits are claiming this marks the end of the recession.

It's too quick to claim this is the end. As Barry Ritholtz points out his Big Picture

"The 1st question to ask about GDP is the degree of inorganic/artificial gains. As the above paras suggest, much of the improvement is where the government is spending, incentivizing, or bailing out various sectors: Autos, Residential RE, and Fed spending. As expected, Inventory reduction helped, and unexpectedly, increasing imports hurt.

A large chunk of the gains — 1.66 percentage points — came from Car sales in the form of cash for clunkers; this will not be in the Q4 data.

Home building soared 23.5% — reflecting a combination of zero percent interest ratyes (ZIRP) and 1st time homebuyers tax credit. That was good for another 0.5 percentage points of GDP.

Well over half of the gains are therefore government related.

Also of note: Nominal GDP was below forecasts, thanks to a surprise 0.8% gain in the deflator (That also added to the REAL GDP figure). Hence, a chunk of the gains are pure inflation."

Claims that the recession is over are premature, at best. The Q4 Christmas shopping season will be a huge test. Credit card companies have jacked up interest rates and decreased credit limits on millions of people. It's extremely likely that it will have a negative effect on sales.

Monday, October 26, 2009

Chris Dodd: Bankster's Best Friend

Senator Chris Dodd says he will introduce legislation to freeze interest rates on credit cards. That's nice. This, after the major credit card companies have already screwed everybody. Does anyone remember the term "loan sharking"?

I hope Peter Schiff slams this duplicitous moron to the high hills.

Here's Dodd's top 20 campaign contributors over the last five years:

1 Citigroup Inc $265,694
2 SAC Capital Partners $262,800
3 United Technologies $255,800
4 Royal Bank of Scotland $223,700
5 Bear Stearns $190,500 $190,500 $0
6 American International Group $183,700
7 ActBlue $144,800
8 Merrill Lynch $129,950
9 Goldman Sachs $127,950
10 Credit Suisse Group $114,800
11 Morgan Stanley $110,600
12 Travelers Companies $104,700
13 JPMorgan Chase & Co $103,550
14 The Hartford $94,550
15 Hartford Financial Services $90,300
16 St Paul Travelers Companies $88,750
17 General Electric $81,700
18 Bank of America $80,350
19 Ernst & Young $80,250
20 FMR Corp $78,950

Wednesday, October 21, 2009

What Recovery?

Larry Summers says the economic recovery is on track.

From Reuters:

"The U.S. economy is firmly poised for a recovery from its deep recession but growth may be moderate and the job market will not revive immediately, senior White House aide Lawrence Summers predicted on Wednesday."

"It will be some time before unemployment starts to decline. Once it declines it will take a long time to return to normal levels, given how elevated it is," he said."

RIGHT...How does an economy that is 70% consumer spending revive if 10%(really20%)of it's citizens don't have an income? "For a long time" according to Summers.

""The question of what will propel growth throughout the expansion is still a crucial one," Summers added. "But that's always the case at the beginning of expansions."


"On the economy, Summers said the $787 billion stimulus package and inventory rebuilding by businesses were among the "dominant drivers" lifting the economy."

WHAT STIMULUS? STATES GETTING MONEY TO BALANCE(NOT) THEIR BUDGETS? Does anybody see stores restocking their shelves? Is shipping and rail up? NO.

"Summers said the oil price, which hit a one-year high above $81 a barrel on Wednesday, did not risk throwing the U.S. recovery off the rails.

"I think the increase in oil prices is probably ... more a reflection of recovery and the expectation of continued recovery than a threat to recovery," he said."


Well, what would anybody expect. They can't come right out and tell us we're in uncharted waters and they're just winging it.

TARP Recipients Ordered To Make Big Salary Cuts

It looks like the natives are getting restless about reported big bonuses to the Banksters prompting the government to take some action. Not enough, soon enough...

From Detroit News:

"The Treasury Department will announce as early as today that it is slashing the pay of the top executives at seven companies, including General Motors Co. and Chrysler Group LLC, that received government bailouts.

In June, the Treasury Department imposed a number of restrictions on automakers and financial institutions that took government loans under the $700 billion Troubled Asset Relief Program. But Citigroup, Bank of America and the American International Group expected to see their pay and benefits cut much greater than the automakers', government officials said.

The Treasury Department's special master, Kenneth Feinberg, has been reviewing the compensation of the highest paid executives at the TARP recipient companies.

The New York Times reported that the seven companies that received the most assistance "will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year. For many of the executives, the cash they would have received will be replaced by stock that they will be restricted from selling immediately."

And for all executives, the total compensation, which includes bonuses, will drop on average by about 50 percent, The Times said. A government official said the Treasury Department didn't dispute the report.

Total compensation for the top executives at the seven firms will decline, on average, by about 50 percent, the Associated Press also reported, attributing the information to a person familiar with the administration's decision."

Friday, October 16, 2009

Greenspan: Break Up Big Banks

From Bloomberg:

" U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.

Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.

“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”

At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc. "

Well, it's about time a big government official starts to call it as they see it. Too bad nobody currently in office is entertaining the same thoughts.

Friday, October 2, 2009

Unemployment Rate Hits 9.8%

Figures released this morning show the highest unemployment rate since 1983. Some are putting a spin on it saying the increase was only .01% from august.

From BLS:

"Household Survey Data: Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8 percent. (See table A-1.)

Unemployment rates for the major worker groups–adult men (10.3 percent), adult women (7.8 percent), teenagers (25.9 percent), whites (9.0 percent), blacks (15.4 percent), and Hispanics (12.7 percent)–showed little change in September. The unemployment rate for Asians was 7.4 percent, not seasonally adjusted. The rates for all major worker groups are much higher than at the start of the recession."

Here's another interesting tidbit:

"The preliminary estimate of the benchmark
revision indicates a downward adjustment to March 2009 total nonfarm
employment of 824,000 (0.6 percent)."

That means, of course, that another 824,000 people are unemployed that previously reported.

What does all this mean? As always, it's hard to predict the future and when this will all top out but considering the lack of economic activity and credit conditions it will take a long time to get back to the 5-6% range which is considered acceptable and normal.

Thursday, October 1, 2009

Auto Sales Tank In September

Auto sales tanked in september which means the "cash for clunkers" program provided just a temporary sales increase. Not unexpected.

GM sales fell 45%, Chrysler 44% and Ford 5.1%. Among imports, Toyota fell 13%, Honda 23%, and Nissan 11%. Oddly enough, Hyundai posted a gain of 27%. Total of all vehicles sold was 745,997.

The interesting thing is the huge drops in GM and Chrysler compared to Ford. This trend has been ongoing since the bailouts. Perhaps people are more willing to buy Fords because of some resentment against the other two automakers and the fact that Ford is still solvent(for now).

The perception of Japanese auto quality doesn't seem to have made a difference either. Hyundai is doing well. That may be the result of their warranty and the recent program to insure payments against job loss. On the other hand, GM's 60 day no questions asked return policy seems to have had no effect so far.

Of course, people are reluctant to take on new car payments in the current economic climate. If the old car is still running, they're more inclined to keep it or get it fixed if there are problems. With so many people unemployed and credit tight, the days of trading in for a new auto right after the old one is paid appears to be a thing of the past. At least in the numbers.

Wednesday, September 30, 2009

High Frequency Trading: The Truth

Mass confusion and conspiracy theories abound about high frequency trading. What exactly is it and how and who drives it? Does Goldman Sachs have secret software to manipulate it?

Here's a few good primers gleaned off the web:

From Wharton:

"It sounds like science fiction -- something from I, Robot or The Terminator, where the machines take over. But totally automated "high-frequency trading" is part of the stock market right now -- a big part.

According to some estimates, high-frequency trading by investment banks, hedge funds and other players accounts for 60% to 70% of all trades in U.S. stocks, explaining the enormous increase in trading volume over the past few years. Profits were estimated at between $8 billion and $21 billion in 2008.

Some market observers, members of Congress and regulators are worried. Are those profits coming out of ordinary investors' pockets? Is Wall Street's latest qet-rich-quick scheme going to harm innocent bystanders? "I don't think it would hurt people to become educated as to the intent of these strategies," says Wharton finance professor Robert F. Stambaugh. "What is their effect on the markets? There is a little sense of 2001: A Space Odyssey [in that it] does kind of create an air of mistrust."

Its defenders say high-frequency trading improves market liquidity, helping to insure there is always a buyer or seller available when one wants to trade. And so far, high-frequency trading doesn't look threatening, according to several Wharton faculty members. Indeed, it may well provide benefits to mutual fund investors and other market participants by reducing trading costs. But at the same time, several note that not enough is known about how trading at light-speed works, whether it can be used to manipulate markets or whether benign-looking moves by different players could interact to produce a new financial crisis."

From Advanced Trading:

"What we learned amazed us. HFT was now accounting for as much as 50-70% of the volume. And under every rock we turned, we found HFT engaged in: (1) what clearly looked like a questionable practice that cost institutional investors money, or (2) raised questions whether HFT was enjoying an unfair advantage versus classic institutional investors.

In response, we alerted our clients to what we learned. Eventually, others began to raise questions, too, including Senators Kaufman and Schumer. The SEC proposed banning the practice of flash orders, and has begun to look into other areas, such as dark pools, co-location, and how technology and automated trading have changed the market. HFT is categorized by the rapid trading of thousand of orders systematically and automatically, by computers analyzing instantaneous changes in prices and quotes. We have three issues with HFT."

From Bloomberg:

"The U.S. Securities and Exchange Commission is reviewing stock-market practices that use advanced technology to determine whether they give some traders unfair advantages, SEC Chairman Mary Schapiro said.

The agency is examining topics including high-frequency trading and instances where brokerages put computer servers close to exchanges, Schapiro said in a Sept. 10 letter to U.S. Senator Ted Kaufman. The SEC is also scrutinizing rules that let securities firms set up trading systems that compete with stock exchanges, she said.

If the interests of “long-term investors and professional short-term traders conflict,” the SEC’s “clear responsibility is to uphold the interests of long-term investors,” Schapiro said in the letter, which Kaufman released today.

Kaufman, a Delaware Democrat, and Senator Charles Schumer, a New York Democrat, have pressed the SEC to rein in computer- driven strategies that they say benefit hedge funds and may be harmful to retail investors. The SEC on Sept. 17 will propose banning so-called flash orders, which allow some traders to see information about stock transactions a fraction of a second before they are routed to other platforms."

Things get more interesting by the day. There seems to be no end to schemes to shave money. I sometimes wonder if all these financial wizards got their training from watching the movie "Office Space".

Ken Lewis Leaving Bank of America

Ken Lewis is leaving Bank of America at the end of the year. The search for a successor is underway. Lewis says the decision was his.

Lewis has been under fire this year for the Merrill Lynch takeover. Shareholders of BofA were upset that they were not fully informed of the losses that ML had been suffering. In addition, Lewis is the subject of a probe by New York attorney general Andrew Cuomo.

It was alleged earlier this year that Lewis was pressured by former treasury secretary Hank Paulson and fed chairman Ben Bernanke to take ML despite his hesitation. The facts remain to be clarified.

More from Bloomberg

Thursday, September 10, 2009

Consumer Credit Toast?

"The market has been on a tear since March precisely because the banks have been able to cover up their insolvency and are gambling with that Federal "put" to them but in doing so they have further damaged the consumer's balance sheet. Not only have interest rates spiked higher on consumer revolving credit (credit cards) but in addition the banks have plowed money into commodities (oil in particular) doubling its price over the last few months and putting a further twist on the thumbscrew of consumer budgets via gasoline prices!

This is now showing up in the outstanding credit numbers - the consumer's balance sheet and health is deteriorating fast as consumers simply are unable to afford their existing debts, say much less taking on any new ones. There is zero evidence of stabilization in this regard, irrespective of Geithner's claims to the contrary."

Read the rest at Market Ticker

Thursday, July 23, 2009

Is Health Care A Right?

Notice: The following article is Copyright 1993 by Leonard Peikoff and is being distributed by permission. This article may be distributed electronically provided that it not be altered in any manner whatsoever. All notices including this notice must remain affixed to this article.
Health Care Is Not A Right

by Leonard Peikoff, Ph.D. Delivered at a Town Hall Meeting on the Clinton Health Plan. Red Lion Hotel, Costa Mesa CA. December 11, 1993

Good morning, ladies and gentlemen:

Most people who oppose socialized medicine do so on the grounds that it is moral and well-intentioned, but impractical; i.e., it is a noble idea -- which just somehow does not work. I do not agree that socialized medicine is moral and well-intentioned, but impractical. Of course, it is impractical -- it does not work -- but I hold that it is impractical because it is immoral. This is not a case of noble in theory but a failure in practice; it is a case of vicious in theory and therefore a disaster in practice. So I'm going to leave it to other speakers to concentrate on the practical flaws in the Clinton health plan. I want to focus on the moral issue at stake. So long as people believe that socialized medicine is a noble plan, there is no way to fight it. You cannot stop a noble plan -- not if it really is noble. The only way you can defeat it is to unmask it -- to show that it is the very opposite of noble. Then at least you have a fighting chance.

What is morality in this context? The American concept of it is officially stated in the Declaration of Independence. It upholds man's unalienable, individual rights. The term "rights," note, is a moral (not just a political) term; it tells us that a certain course of behavior is right, sanctioned, proper, a prerogative to be respected by others, not interfered with -- and that anyone who violates a man's rights is: wrong, morally wrong, unsanctioned, evil.

Now our only rights, the American viewpoint continues, are the rights to life, liberty, property, and the pursuit of happiness. That's all. According to the Founding Fathers, we are not born with a right to a trip to Disneyland, or a meal at Mcdonald's, or a kidney dialysis (nor with the 18th-century equivalent of these things). We have certain specific rights -- and only these.

Why only these? Observe that all legitimate rights have one thing in common: they are rights to action, not to rewards from other people. The American rights impose no obligations on other people, merely the negative obligation to leave you alone. The system guarantees you the chance to work for what you want -- not to be given it without effort by somebody else.

The right to life, e.g., does not mean that your neighbors have to feed and clothe you; it means you have the right to earn your food and clothes yourself, if necessary by a hard struggle, and that no one can forcibly stop your struggle for these things or steal them from you if and when you have achieved them. In other words: you have the right to act, and to keep the results of your actions, the products you make, to keep them or to trade them with others, if you wish. But you have no right to the actions or products of others, except on terms to which they voluntarily agree.

To take one more example: the right to the pursuit of happiness is precisely that: the right to the pursuit -- to a certain type of action on your part and its result -- not to any guarantee that other people will make you happy or even try to do so. Otherwise, there would be no liberty in the country: if your mere desire for something, anything, imposes a duty on other people to satisfy you, then they have no choice in their lives, no say in what they do, they have no liberty, they cannot pursue their happiness. Your "right" to happiness at their expense means that they become rightless serfs, i.e., your slaves. Your right to anything at others' expense means that they become rightless.

That is why the U.S. system defines rights as it does, strictly as the rights to action. This was the approach that made the U.S. the first truly free country in all world history -- and, soon afterwards, as a result, the greatest country in history, the richest and the most powerful. It became the most powerful because its view of rights made it the most moral. It was the country of individualism and personal independence.

Today, however, we are seeing the rise of principled immorality in this country. We are seeing a total abandonment by the intellectuals and the politicians of the moral principles on which the U.S. was founded. We are seeing the complete destruction of the concept of rights. The original American idea has been virtually wiped out, ignored as if it had never existed. The rule now is for politicians to ignore and violate men's actual rights, while arguing about a whole list of rights never dreamed of in this country's founding documents -- rights which require no earning, no effort, no action at all on the part of the recipient.

You are entitled to something, the politicians say, simply because it exists and you want or need it -- period. You are entitled to be given it by the government. Where does the government get it from? What does the government have to do to private citizens -- to their individual rights -- to their real rights -- in order to carry out the promise of showering free services on the people?

The answers are obvious. The newfangled rights wipe out real rights -- and turn the people who actually create the goods and services involved into servants of the state. The Russians tried this exact system for many decades. Unfortunately, we have not learned from their experience. Yet the meaning of socialism (this is the right name for Clinton's medical plan) is clearly evident in any field at all -- you don't need to think of health care as a special case; it is just as apparent if the government were to proclaim a universal right to food, or to a vacation, or to a haircut. I mean: a right in the new sense: not that you are free to earn these things by your own effort and trade, but that you have a moral claim to be given these things free of charge, with no action on your part, simply as handouts from a benevolent government.

How would these alleged new rights be fulfilled? Take the simplest case: you are born with a moral right to hair care, let us say, provided by a loving government free of charge to all who want or need it. What would happen under such a moral theory?

Haircuts are free, like the air we breathe, so some people show up every day for an expensive new styling, the government pays out more and more, barbers revel in their huge new incomes, and the profession starts to grow ravenously, bald men start to come in droves for free hair implantations, a school of fancy, specialized eyebrow pluckers develops -- it's all free, the government pays. The dishonest barbers are having a field day, of course -- but so are the honest ones; they are working and spending like mad, trying to give every customer his heart's desire, which is a millionaire's worth of special hair care and services -- the government starts to scream, the budget is out of control. Suddenly directives erupt: we must limit the number of barbers, we must limit the time spent on haircuts, we must limit the permissible type of hair styles; bureaucrats begin to split hairs about how many hairs a barber should be allowed to split. A new computerized office of records filled with inspectors and red tape shoots up; some barbers, it seems, are still getting too rich, they must be getting more than their fair share of the national hair, so barbers have to start applying for Certificates of Need in order to buy razors, while peer review boards are established to assess every stylist's work, both the dishonest and the overly honest alike, to make sure that no one is too bad or too good or too busy or too unbusy. Etc. In the end, there are lines of wretched customers waiting for their chance to be routinely scalped by bored, hog-tied haircutters some of whom remember dreamily the old days when somehow everything was so much better.

Do you think the situation would be improved by having hair-care cooperatives organized by the government? -- having them engage in managed competition, managed by the government, in order to buy haircut insurance from companies controlled by the government?

If this is what would happen under government-managed hair care, what else can possibly happen -- it is already starting to happen -- under the idea of health care as a right? Health care in the modern world is a complex, scientific, technological service. How can anybody be born with a right to such a thing?

Under the American system you have a right to health care if you can pay for it, i.e., if you can earn it by your own action and effort. But nobody has the right to the services of any professional individual or group simply because he wants them and desperately needs them. The very fact that he needs these services so desperately is the proof that he had better respect the freedom, the integrity, and the rights of the people who provide them.

You have a right to work, not to rob others of the fruits of their work, not to turn others into sacrificial, rightless animals laboring to fulfill your needs.

Some of you may ask here: But can people afford health care on their own? Even leaving aside the present government-inflated medical prices, the answer is: Certainly people can afford it. Where do you think the money is coming from right now to pay for it all -- where does the government get its fabled unlimited money? Government is not a productive organization; it has no source of wealth other than confiscation of the citizens' wealth, through taxation, deficit financing or the like.

But, you may say, isn't it the "rich" who are really paying the costs of medical care now -- the rich, not the broad bulk of the people? As has been proved time and again, there are not enough rich anywhere to make a dent in the government's costs; it is the vast middle class in the U.S. that is the only source of the kind of money that national programs like government health care require. A simple example of this is the fact that the Clinton Administration's new program rests squarely on the backs not of Big Business, but of small businessmen who are struggling in today's economy merely to stay alive and in existence. Under any socialized program, it is the "little people" who do most of the paying for it -- under the senseless pretext that "the people" can't afford such and such, so the government must take over. If the people of a country truly couldn't afford a certain service -- as e.g. in Somalia -- neither, for that very reason, could any government in that country afford it, either.

Some people can't afford medical care in the U.S. But they are necessarily a small minority in a free or even semi-free country. If they were the majority, the country would be an utter bankrupt and could not even think of a national medical program. As to this small minority, in a free country they have to rely solely on private, voluntary charity. Yes, charity, the kindness of the doctors or of the better off -- charity, not right, i.e. not their right to the lives or work of others. And such charity, I may say, was always forthcoming in the past in America. The advocates of Medicaid and Medicare under LBJ did not claim that the poor or old in the '60's got bad care; they claimed that it was an affront for anyone to have to depend on charity.

But the fact is: You don't abolish charity by calling it something else. If a person is getting health care for nothing, simply because he is breathing, he is still getting charity, whether or not President Clinton calls it a "right." To call it a Right when the recipient did not earn it is merely to compound the evil. It is charity still -- though now extorted by criminal tactics of force, while hiding under a dishonest name.

As with any good or service that is provided by some specific group of men, if you try to make its possession by all a right, you thereby enslave the providers of the service, wreck the service, and end up depriving the very consumers you are supposed to be helping. To call "medical care" a right will merely enslave the doctors and thus destroy the quality of medical care in this country, as socialized medicine has done around the world, wherever it has been tried, including Canada (I was born in Canada and I know a bit about that system first hand).

I would like to clarify the point about socialized medicine enslaving the doctors. Let me quote here from an article I wrote a few years ago: "Medicine: The Death of a Profession." [The Voice of Reason: Essays in Objectivist Thought, NAL Books, c 1988 by the Estate of Ayn Rand and Leonard Peikoff.]

"In medicine, above all, the mind must be left free. Medical treatment involves countless variables and options that must be taken into account, weighed, and summed up by the doctor's mind and subconscious. Your life depends on the private, inner essence of the doctor's function: it depends on the input that enters his brain, and on the processing such input receives from him. What is being thrust now into the equation? It is not only objective medical facts any longer. Today, in one form or another, the following also has to enter that brain: 'The DRG administrator [in effect, the hospital or HMO man trying to control costs] will raise hell if I operate, but the malpractice attorney will have a field day if I don't -- and my rival down the street, who heads the local PRO [Peer Review Organization], favors a CAT scan in these cases, I can't afford to antagonize him, but the CON boys disagree and they won't authorize a CAT scanner for our hospital -- and besides the FDA prohibits the drug I should be prescribing, even though it is widely used in Europe, and the IRS might not allow the patient a tax deduction for it, anyhow, and I can't get a specialist's advice because the latest Medicare rules prohibit a consultation with this diagnosis, and maybe I shouldn't even take this patient, he's so sick -- after all, some doctors are manipulating their slate of patients, they accept only the healthiest ones, so their average costs are coming in lower than mine, and it looks bad for my staff privileges.' Would you like your case to be treated this way -- by a doctor who takes into account your objective medical needs and the contradictory, unintelligible demands of some ninety different state and Federal government agencies? If you were a doctor could you comply with all of it? Could you plan or work around or deal with the unknowable? But how could you not? Those agencies are real and they are rapidly gaining total power over you and your mind and your patients. In this kind of nightmare world, if and when it takes hold fully, thought is helpless; no one can decide by rational means what to do. A doctor either obeys the loudest authority -- or he tries to sneak by unnoticed, bootlegging some good health care occasionally or, as so many are doing now, he simply gives up and quits the field."

The Clinton plan will finish off quality medicine in this country -- because it will finish off the medical profession. It will deliver doctors bound hands and feet to the mercies of the bureaucracy.

The only hope -- for the doctors, for their patients, for all of us -- is for the doctors to assert a moral principle. I mean: to assert their own personal individual rights -- their real rights in this issue -- their right to their lives, their liberty, their property, their pursuit of happiness. The Declaration of Independence applies to the medical profession too. We must reject the idea that doctors are slaves destined to serve others at the behest of the state.

I'd like to conclude with a sentence from Ayn Rand. Doctors, she wrote, are not servants of their patients. They are "traders, like everyone else in a free society, and they should bear that title proudly, considering the crucial importance of the services they offer."

The battle against the Clinton plan, in my opinion, depends on the doctors speaking out against the plan -- but not only on practical grounds -- rather, first of all, on moral grounds. The doctors must defend themselves and their own interests as a matter of solemn justice, upholding a moral principle, the first moral principle: self- preservation. If they can do it, all of us will still have a chance. I hope it is not already too late. Thank you.

Copies of this address in pamphlet form are available for $15 per 100 copies or $125 per 1000 copies from: Americans for Free Choice in Medicine, 1525 Superior Ave., Suite 100, Newport Beach, CA 92663, Phone (714) 645-2622, Fax (714) 645-4624. Copies of Dr. Peikoff's lecture, "Medicine: The Death of a Profession" may be purchased in pamphlet form for $2.50 each (catalog number LP04E) from: Second Renaissance Books, 110 Copperwood Way, P.O. Box 4625, Oceanside, CA 92052, Phone (800) 729-6149. (Quantity discounts are also available: $1.85 each for 10-99 copies, catalog number LP66E, $1.50 each for 100-499 copies, LP77E; $1.25 each for 500-999 copies, LP88E; and $1 each for 1000 copies and over, LP99E.)

Also available from Second Renaissance is the pamphlet "The Forgotten Man of Socialized Medicine: The Doctor," containing articles by Ayn Rand and Leonard Peikoff. (Catalog number AR10E, $2.95)

Additional information on why national health care programs don't work is available from: Objectivist Health Care Professionals Network, P.O. Box 4315, South Colby, WA 98384-0315, Phone (206) 876-5868, FAX (206) 876-2902. This organization publishes a newsletter on health care and distributes a copy of it in their health care information package.

Almost ten years ago, Leonard Peikoff predicted that our medical system would be dismantled. Looking at the young people in the crowd, he remarked:

"If you are looking for a crusade, there is none that is more idealistic or more practical. This one is devoted to protecting some of the greatest [men] in the history of this country. And it is also, literally, a matter of life and death---YOUR LIFE, and that of anyone you love. Don't let it go without a fight!"

From "Medicine: The Death of a Profession" by Leonard Peikoff from concluding remarks from 1985 presentation with Dr. Michael Peikoff.

Dr. Leonard Peikoff, author of The Ominous Parallels and Objectivism: The Philosophy of Ayn Rand was a long-time (30 year) associate of the novelist/philosopher Ayn Rand and upon her death in 1982 was designated as her intellectual and legal heir. He received his Ph.D. from New York University in 1984 and taught at Hunter College. Over the years, he has served in the capacity of professor of philosophy, lecturer and chairman of the board of the Ayn Rand Institute and is currently one of the principal lecturers and instructors of the Objectivist Graduate Center. He has lectured extensively at such prestigious speakers' forums as Ford Hall Forum in Boston on several topics including philosophy and current events. Additionally, outside of academia, he has taught courses on philosophy, rhetoric, logic and Objectivism audio version of which are available from Second Renaissance Books listed above.

Wednesday, July 22, 2009

Chrysler Cash For Clunkers: They'll Match It

Chrysler,which is now out of bankruptcy(thanks to our tax dollars), has a new program in which they will match the government's new cash for clunkers program or offer 0% financing for up to six years. It really is the old rebate or zero finance ploy which the auto companies have used in the past. Reworking it to coincide with the government rebate is a pretty smart marketing ploy. It remains to be seen if it will cause a substantial increase in sales.

There's a few caveats with the government program and it sure will be interesting to see car salesmen working deals with this one. If anyone is considering this be careful you don't get screwed. Learn everything you can about the program and make sure you do your homework on how much your old vehicle is really worth(check Edmunds.com for that).

Here's a good resource with interactive tools that will guide you through the new program: Cash For Clunkers Facts

Tuesday, July 21, 2009

Bernanke: I Don't Know

It's The Economy, Stupid!

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"It's the economy, stupid" was a phrase in American politics widely used during Bill Clinton's successful 1992 presidential campaign against George H.W. Bush. For a time, Bush was considered unbeatable because of foreign policy developments such as the end of the Cold War and the Persian Gulf War. The phrase, coined by Clinton campaign strategist James Carville, refers to the notion that Clinton was a better choice because Bush had not adequately addressed the economy, which had recently undergone a recession.

In order to keep the campaign on message, Carville hung a sign in Bill Clinton's Little Rock campaign headquarters that said:

  1. Change vs. more of the same
  2. The economy, stupid
  3. Don't forget health care.[1]

Although the sign was intended for an internal audience of campaign workers, the phrase became something of a slogan for the Clinton election campaign. Clinton's campaign used the recession to successfully unseat George H.W. Bush. In March 1991, days after the ground invasion of Iraq, 90% of polled Americans approved of President Bush's job performance.[2] Later the next year, Americans' opinions had turned sharply; 64% of polled Americans disapproved of Bush's job performance in August 1992.[2]

The phrase is repeated often in American political culture, usually starting with the word "it's" and with commentators sometimes using a different word in place of "economy." Examples include "It's the deficit, stupid!"[3] "It's the corporation, stupid!"[4] "It's the math, stupid!"[5] and "It's the voters, stupid!"[6]