You hear all the time that the war in Iraq is costing us upwards of $10 to $12 billion a month. When people against the war talk about the cost of the war in monetary terms, they make it seem like this money disappears into thin air.
I want the war to end, and I want a stable Iraq. I want the government to stop spending so much, but I want us to win the war the right way. To many people the cost of this war is troubling. It is now the second most expensive war, though the cost of World War 2 easily trumps the cost of the Iraq war. But, have you considered where this money goes?
A large percentage of the cost of the war is the pay and care of our troops. This money is spent by our troops when they come home and by their families at home. This money is used to pay mortgages, buy groceries, eat at restaurants, buy retail products, etc. In other words, it is pumped back into our economy.
Another large percentage of the cost of the war is for government contracts. We pay American companies (this is why the Boeing v. EADS Tanker deal is so controversial) to build tanks, Humvees, and military weaponry. We pay companies to supply uniforms and protective gear. In other words it is pumped back into our economy.
Thus, a lot of the money we spend does not just disappear into the economy but being pumped back into our economy by providing jobs and American goods. So, it is a bit misleading when people say we are wasting $10 billion a month in Iraq.
I am a bit confused as to why we have not learned from WW2 and the Allied Occupations of Germany and Japan. We spent $5 trillion in WW2 (inflation adjusted $) and we spent another $45 billion or so in economic reconstruction. Our full out occupation of both countries was 6 years for Germany and 7 years for Japan. It took continued assistance and time before Germany and Japan were fully ready. It has been 5 years in Iraq and we are far from finished. Why?
For all the time and money we have spent in Iraq we have lacked direction, leadership, and a good plan. We need a Marshall Plan type plan. The situations of the wars and the situations of the countries are different between WW2 and Iraq, however, it does not mean something similar can't work.
Let's do a little studying of history and try to come up with a plan that will have such success as we had in WW2; success that lead to the creation of the #2 and #3 economies in the world. In the long run, the Japanese economy and German economy have contributed trillions of dollars to the world. If that can happen in Iraq then all the billions we spend will be worth it.
Thursday, October 2, 2008
Sunday, September 28, 2008
The Economic Bailout
There is so much ignorance and misinformation out there as you watch the news and as you listen to politicians. There is a huge controversy concerning this Economic Bailout by Congress.
Let's get one thing straight here. This is not a bailout of Wall Street.
This is a bailout of the U.S. Economy. The Treasury Department will be utilizing the allotted money to buy mortgages and the securities tied to them. They are not bailing out Wall Street firms.
Yes, along with the American People as a whole, Wall Street firms will stand to benefit from this plan. In fact, they may be the largest beneficiaries of this plan, or at least the largest immediate beneficiaries.
This money is going to be used to take bad assets off the balance sheets of struggling financial firms. Don't categorize them as 'Wall Street.' That is misleading. We are talking about your banks. The banks you bank at, the firms you invest with, and the stocks and bonds you tie your financial future on through personal portfolios, pensions, and 401k plans.
This is not a Wall Street Bailout but an Every Street Bailout. This is the best idea people could come up with to save a crumbling global financial market. Even Warren Buffett agrees with this. He's the greatest investor of our generation. I would trust him with my money, wouldn't you?
People are angry, and they should be. It has been decades of mismanagement by Democratic Administrations, Republican Administrations, Wall Street executives, Institutional Investors, and yes, even regular citizens. We are all to blame.
1) Government turned a blind eye as illicit or risky actions were being taken. Regulation was lightened, and new laws permitted and even required riskier loans (ex. Community Reinvestment Act)
2) Wall Street's greed took advantage of lenient government oversight and regulation to participate in risky lending, creation of risky and unregulated products (Credit Default Swaps and Mortgage Backed Securities), as well as practice predatory lending especially among lower-income individuals. In order to increase profits and reduce risk they created the risky products that we are talking about, but what happened instead is the castle of cards came tumbling down faster than it took to build it all up.
3) Institutional Investors, those who run the big mutual funds, pension funds, and hedge funds hold great power. These big investors are trying to increase their returns to their mutual account holders (aka: all of us who invest via 401k and pension plans as well as mutual funds). They demand more and more from the companies, better and better quarterly profits. Wall Street caved into their demands and found alternative ways to shore up their balance sheets and announce better and better returns. One of the ways was these risky products with high profitability.
4) Even as regular ordinary citizens we are to blame. For some of us it is our investment accounts. We want them to go up, 10% or 20% a year. We demand it of our brokers and of the companies whose stock we own. Also, it is the American Dream to own your own home. Instead of the prudent and traditional way of hard work and savings to accomplish this, Americans in the millions wanted to buy their home quicker, taking risks with Adjustable Rate Mortgages and no down payments. America has an infatuation with debt. It was no longer okay to rent for a few years so save up for a down payment. Now any American regardless of employment status (yes even the unemployed), salary, or credit history could buy into the Dream. The belief that real estate prices would go up and up and up, so that they could sell their homes in a couple of years for a profit became prevalent. People did not think that buying a home with no job or income was a dumb move. Instead of being prudent, cautious, and intelligent, American got greedy. Just as greedy as Wall Street.
So, we are all to blame for this mess. It is easy to target Politicians or Wall Street executives, but it was the new culture of America that is to blame, and it is this culture that we must mend.
Let us look at this Bailout as a positive action and a corrective action. It will hopefully result in a return of Government oversight to protect our country (that is their main responsibility after all). It will hopefully give a fresh start to these financial institutions, allowing the lending process to begin again so all people and all businesses can resume their everyday lives.
Remember, without this plan financial institutions would continue to fail. Eventually the FDIC may not be enough. Credit markets will continue to dry up, reducing the opportunities for us to get loans for homes, cars, credit cards, etc. It will make it difficult for small business to borrow capital to meet payroll or growth. It will create panic in the financial markets, and it may well result in another Great Depression. We all know that it started on "Wall Street' but affected 'Main Street."
May we learn from history and understand that this bailout must be done, and we must all pray that it will do the trick. Otherwise....
Let's get one thing straight here. This is not a bailout of Wall Street.
This is a bailout of the U.S. Economy. The Treasury Department will be utilizing the allotted money to buy mortgages and the securities tied to them. They are not bailing out Wall Street firms.
Yes, along with the American People as a whole, Wall Street firms will stand to benefit from this plan. In fact, they may be the largest beneficiaries of this plan, or at least the largest immediate beneficiaries.
This money is going to be used to take bad assets off the balance sheets of struggling financial firms. Don't categorize them as 'Wall Street.' That is misleading. We are talking about your banks. The banks you bank at, the firms you invest with, and the stocks and bonds you tie your financial future on through personal portfolios, pensions, and 401k plans.
This is not a Wall Street Bailout but an Every Street Bailout. This is the best idea people could come up with to save a crumbling global financial market. Even Warren Buffett agrees with this. He's the greatest investor of our generation. I would trust him with my money, wouldn't you?
People are angry, and they should be. It has been decades of mismanagement by Democratic Administrations, Republican Administrations, Wall Street executives, Institutional Investors, and yes, even regular citizens. We are all to blame.
1) Government turned a blind eye as illicit or risky actions were being taken. Regulation was lightened, and new laws permitted and even required riskier loans (ex. Community Reinvestment Act)
2) Wall Street's greed took advantage of lenient government oversight and regulation to participate in risky lending, creation of risky and unregulated products (Credit Default Swaps and Mortgage Backed Securities), as well as practice predatory lending especially among lower-income individuals. In order to increase profits and reduce risk they created the risky products that we are talking about, but what happened instead is the castle of cards came tumbling down faster than it took to build it all up.
3) Institutional Investors, those who run the big mutual funds, pension funds, and hedge funds hold great power. These big investors are trying to increase their returns to their mutual account holders (aka: all of us who invest via 401k and pension plans as well as mutual funds). They demand more and more from the companies, better and better quarterly profits. Wall Street caved into their demands and found alternative ways to shore up their balance sheets and announce better and better returns. One of the ways was these risky products with high profitability.
4) Even as regular ordinary citizens we are to blame. For some of us it is our investment accounts. We want them to go up, 10% or 20% a year. We demand it of our brokers and of the companies whose stock we own. Also, it is the American Dream to own your own home. Instead of the prudent and traditional way of hard work and savings to accomplish this, Americans in the millions wanted to buy their home quicker, taking risks with Adjustable Rate Mortgages and no down payments. America has an infatuation with debt. It was no longer okay to rent for a few years so save up for a down payment. Now any American regardless of employment status (yes even the unemployed), salary, or credit history could buy into the Dream. The belief that real estate prices would go up and up and up, so that they could sell their homes in a couple of years for a profit became prevalent. People did not think that buying a home with no job or income was a dumb move. Instead of being prudent, cautious, and intelligent, American got greedy. Just as greedy as Wall Street.
So, we are all to blame for this mess. It is easy to target Politicians or Wall Street executives, but it was the new culture of America that is to blame, and it is this culture that we must mend.
Let us look at this Bailout as a positive action and a corrective action. It will hopefully result in a return of Government oversight to protect our country (that is their main responsibility after all). It will hopefully give a fresh start to these financial institutions, allowing the lending process to begin again so all people and all businesses can resume their everyday lives.
Remember, without this plan financial institutions would continue to fail. Eventually the FDIC may not be enough. Credit markets will continue to dry up, reducing the opportunities for us to get loans for homes, cars, credit cards, etc. It will make it difficult for small business to borrow capital to meet payroll or growth. It will create panic in the financial markets, and it may well result in another Great Depression. We all know that it started on "Wall Street' but affected 'Main Street."
May we learn from history and understand that this bailout must be done, and we must all pray that it will do the trick. Otherwise....
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