There are a multitude of complex issues to grapple with which separate and as a whole are unprecedented.
Great minds and scholars have been hard pressed for solid answers amidst the crisis.
So the few relevant words from a man who has barely cobbled a career from giving advice on real estate, mortgages, and finance is probably pretty low on any priority list, let alone item on the agenda.
Yet here in my own fantasy world known as my blog, I first have to point out this item from June 26th, which clearly defines some of the precipitous issues as it relates to market speculation and its forthcoming consequences as warned in other articles.
Next I would like to point out this article/commentary from 2007 which illustrates clearly the point of view of a humble and honest broker well before the Fannie-Freddy debacle.
And as this is my first commentary on economics and policy since the events of September 15th (a day which will live in infamy), please let me first make plain my assessment of the outgoing W administration, and secondarily the up shot of the Republican's as leadership:
1. The Soviet Union was founded upon less of a Nationalization of private wealth than as what has occurred in the "bailout" package.
2. Unlike the Soviets overtaking means for Production, this is similar to the mulligan that Enron took (Bankruptcy protection) after siphoning off billions of dollars from consumers and state purchasers (notably California).
3. If I was to make the argument that the solution(s) posited by the W administration's Paulson to Republican/Conservative people any time in my life starting in 1970 through to the "Bail out package," I would be considered a 'Commie,' 'Pinko,' or at best 'Looney Liberal.' Luckily I dont believe this is the best solution, although a necessary minimum of confidence was restored to the capital markets.
4. Although anti-free marketers are quick to assert this is proof that its a failure of free market concepts, unfortunately its not quite that simple. True free market principles would then suggest that we allow Wall Street to shatter into a million pieces, and allow the Phoenix of the Invisible Hand to rise from those ashes. The risk of Anarchy, Revolution, and War should not be a hinderance to those stoutest in defense of these principlea.
Rather what has happened is that the curtain has been unveiled upon the Wizard of Oz. Or more accurately Wizards: Power Elite; Ultra Rich; Super Rich; and their operatives... and as Gomer Pyle would say, "Sooprize sooprize," the W administration fits neatly into that last category (if not others).
The doctrine known as "free market," and, often as not, ascribed to as "trickle down," has been a fallacy waiting to happen since I took Economics in 1986 from my perspective. The fallacy is that the pitch (or soccer field to define the metaphor more readily) is absolutely not level (a lack of transparency of markets, trades, and companies-- let alone parity amongst status of trading parties), everyone knows this, but the referees (power elite) assure us that indeed the market is trading at a free clip, and they are doing their best to weed out the inept and destructive government (singular as in government is bad) in order to get back to those players to whom that unfair pitch advantage works against.
It is, like many convincing fallacies, a perfect ecosystem of utter nonsense.
What was revealed when the Wizard came out from behind the curtain?
The rules of the road were designed to insulate power elites from those market forces that every small business owner (not suckling directly from the teat of one or more of the power elite) faces yearly, monthly, daily, hourly, and even at a moment by moment level, wherein one bad decision can have the whole house of cards tumble down on them, their employees, and their families.
Perfect capitalism for 96% of the business owners in America, and pure communism for the ~4% that retain ~92% of the wealth and direction of capital.
The main difference here? That fallacy of "perfect" and "free" markets has been unmasked. For me it doenst make me less of a Keynesian or Miltonian (of which I am only some part in either case), rather confirms the sound logic of truth found within the mathematical models.
For all practical reasons, it wasnt the theories that were flawed, rather the implementation of those theories. You dont go golfing with Tiger Woods, and on holes 3, 7, and 12 receive a "0" on your score (an impossibility), then go on to say you bested Tiger Woods at Augusta for the Championship!
For lack of a simpler explanation that is what Corporate America has been doing for decades!
My Miltonian Tax suggestion of reducing tax paperwork to the size of a postcard, is premised on the fact that massive corporations with armies of lawyers can end up getting paid by the government, whereas the business owner will typically pay between 12 and 44% of GROSS EARNINGS in a profitable year to the Government!
LEVEL THE PLAYING FIELD, PLEASE!!!
So, what are my suggestions?
A. Simple, Fair, and Flat Tax for individuals, businesses, and everyone and everything in between. I think if you make annually inflation adjusted exemption provisions for the first $22K individually, $38K jointly, $6K per child, and $40K for business plus $6K per employee, then a 13% flat across the board on first moneys and profits tax should suffice to amply maintain the Federal treasury. Double tax only counts in certain specific cases, but honestly the concept of a "double tax" is in itself a product of the Labyrinthine tax laws themselves. Simple, plain, and honest: You earn money, invest it and make more... you are taxed on the money you earn. So called "death" tax is a myth, and any exemption should be put onto a matrix which allows for inflation and number of legatees, but otherwise massive fortunes do need to have the same 13% (a lowering of current complex statues) flat tax after expemptions upon transfer of estate.
B. All regulation needs to be put into Plain English. There needs to be a rule book for all people that everyone who speaks a 7th grade level of English can understand, but moreover, each field of employ and oversight needs a smaller and comprehensive annual rule book for the relevant profession(s). If you are a Stock Broker, for instance, the SEC needs to publish a Plain English Guide to all relevant laws (including definitions of crime and punishment) which is the basis for testing and licensure. How do we expect companies to follow laws their people couldnt understand without a law degree? This will facilitate whistleblowing, self governance, and enforcement. (On that note free markets if given clear straight, and bright lines do have the ability to self govern.)
C. International Harmonization. Its well time to beat our swords into plowshares. NATO can also be an economic body which assists in (a la Bretton-Woods) harmonizing economic functions. Why limit it to NATO? Trade Areas can work, and do work. However, just as we need to (for lack of a better word) admit that NATO is also an economic force, we also need to create Fair Standards in order to proceed honestly with our Trading Partners-- applying that standard basket of goods (environment, civil rights, and labor standards) as a preset disposition for negotiations. If any free trading regions partners can all agree to certain basic workers rights, then there is no price advantage to using slave or child labor in order to queer the productivity quotients and balances. This esoteric set of ideas (which I have simply called Fair Standards) is the nutshell of why we have lost so many jobs over seas-- not just "tax advantages" as certain groups would have you believe.
D. Mortgage Relief. I will be writing a more defined explanation of this soon, but here it is in the nutshell version. There are many of the steps necessary to implement a comprehensive relief in place under the current "bailout" plans passed, but my addition would be EVERYONE NEEDS TO FEEL SOME OF THE PAIN. Borrowers should still be on the hook for the full amount of the mortgage when enjoying payment reduction, Lenders should be on the hook to not get their money back in time, and all the middlemen, servicing agencies, and investors need to accept such bi-lateral intervention (as negotiated in mathematical formulation by the FFT [Fannie-Freddy-Treasury] guidelines and agents) regardless of how much money they stand to lose-- BECAUSE THEY ARE JUST MIDDLEMEN! Investors, sorry, but tough turkeys, you put money on those bets, were told the money was at risk, otherwise the SEC and FBI can arrest the brokers for non-disclosure... that said I think most licensees put investment disclosures on their business cards (a financial industry joke). The Government should tread very lightly in using its power to "renegotiate" existing agreements, and that said it is the Lenders right to refuse a renegotiation and foreclose... otherwise we strip Rule of Law (and contracts).
E. Stimulus. See my article on what we can do with the money we save by ending the War. more... more....
Just my two cents.... you can pay me later.
