Moral Hazard

With this weeks revelation that we now have the ability to grow computerized synthetic cells the question can now be asked, have we as a nation passed the threshold of moral hazard?. We seem to be on an accelerated path that is unsustainable in so many ways. I believe our unadulterated greed and desire for short term gain is the underlying problem in making the poor decisions we see by our government, and contributing to the decline of our economy, environment, educational system and society as a whole . As World leaders other countries have mimicked these shortcomings and are now feeling the effects of systemic damage just as we are. Our leaders have looked away as an elite group of speculators known as Quants have used a system of high frequency trading to wreak havoc on our markets and the result has fostered an environment of bubble creationism and wealth evaporation at unprecedented levels. We have deregulated our system so that petro-dictators are able to pollute our shores, illegal immigrants are able to pilfer our resources and come and go as they please. This type of situational thinking must somehow be changed and be replaced by a sustainable mindset if we are to correct the negative inflection point we are at today. Would it be such a bad thing to return to the roots of common sense that our fathers and their fathers taught us. Just as our World War Two Veterans will undoubtedly go down in history as the generation that saved the World, let us go down as the generation that changed it for the better. We can begin by mitigating our current problems and embracing the renewable energy market as a World leader in Education and innovation again by exporting our sustainable ideas for a brighter future for our children and their children.

The Madoff Effect

Now that disgraced fund manager Bernard Madoff has been sentenced to 150-years in federal prison, and must return 171-billion dollars for running the largest ponzi scheme in history by bilking thousands of investors worldwide of their retirement accounts, its high time to shine the spotlight on the hundreds if not thousands of fellow rats within the walls of Wall street. This would be the perfect time to bailout the taxpayers in our country by disclosing the means and funds in which an elite group of mainly hedge fund managers worldwide manipulated the stock market, destroying our banking system and sending the U.S. economy into a tailspin. The CREDIT DEFAULT SWAP market and other mechanisms have enabled these fund managers access to TRILLIONS of dollars at our country's expense. By establishing a National Economic Security Council, and labeling all trades made within the last fourteen months as subversive activity, in which it can be PROVED that institutions or corporate entities were brought down by these individuals. Transparency and an audit of these stock trades would put several trillion dollars back into a depleted economy and revitalize a scenario desperate for solutions. All offenders could still keep their jobs and assets made outside the fourteen month time frame. The National Economic Security Council would of course RE-REGULATE the process that caused the damage to these entities, as to prevent any future occurrences.

Prime Time

As we move towards one hundred percent burn through in the sub-prime mortgage market, another wave is mounting as it approaches the shores of banks balance sheets in the form of prime loans, these loans were eerily similar to those loans made to individuals with bad credit in there qualification and adjustment structure, but these clients had good credit scores. The mortgage industry labeled them as JUMBO loans, or PAY OPTION loans referring to the typically sizable loan amounts usually exceeding the six hundred thousand plus range. Who wouldn't be attracted to the NO MONEY DOWN, NO INCOME VERIFICATION pitch on a million dollar mansion in the unprecedented appreciation wave of just two years ago. The fact is that just as many people fell victim to the predatory practices of these unscrupulous individuals within the mortgage industry, all the while the enabler, the U.S. GOVERNMENT turned a blind eye in the form of mortgage deregulation instituted in the late 1990s. The majority of these loans adjust upward in the next twenty four months A trend of defaults occur due to income parameters and unemployment figures leading to foreclosure, the loans land as toxic elements on bank balance sheets. This drives down the price of financial stocks instigating a sell off and market volatility. The government throws massive capitol into the banking system in an attempt to absorb these bad loans, and the cycle repeats itself. why not just implement the strategy of the 1980s savings and loan fiasco where a bad bank is established to harbour or de-leverage this bad debt, it worked well in the past and could work again in the future.

A Future Of Bubble Creation

As we speak the Government is quite possibly working on implementing new and aggressive strategies that will create new artificial bubbles within the stock, credit, and real estate markets, in a desperate attempt to drive us out of this relentless recession. The problem is that we have been there done that, and will undoubtedly return at some point to the negative feedback loop and systemic economic problems we are experiencing presently. It is now clear that the stimulus programs have made little positive impact in their intention of freeing up capitol for loans within the banking industry, in addition job creation, and loan modifications have all but failed and the stock market continues its highly volatile path. This administration will have to artificially re-inflate real estate values, deleverage massive debt loads, and somehow inflate the credit scores of those with bad credit in order to right this economy. Even stable consumers are now hording capitol and savings are the highest in decades. The net result of all this activity will cause one of two effects deflation or hyperinflation neither of which is a desirable scenario. It is now time for the fed to look at common sense indicators such as GDP, EARNINGS, UNEMPLOYMENT, and other core economic data before it throws more liquidity in the form of TARP money at the all consuming toxic mortgage market. Recent stock prices in steel, aluminum, durable goods, and diesel supplies show continued contraction not expansion, even an individual without any formal education as myself can figure that out.

State Of Emergency

The actions of California's highest elected official Arnold Schwarzenegger are not only irresponsible, they lack common sense and display several other unenviable traits all at the expense of California's weakest and most vulnerable citizens. To think that children's services, the disabled, homeless, and education will feel the brunt of this economic tsunami that Arnold is leveling against them is inconceivable. Those that elected this individual will also suffer from the lack of essential services such as fire protection and law enforcement. The Sacramento sheriffs department alone plans to cut patrol officers by over fifty percent, and is now endorsing the concept of concealed weapons permits so that citizens can protect themselves. The Governor also believes that the legalization of marijuana is a viable solution in solving the states deficit problems. This guy makes Grey Davis look like a genius and a saint to boot. But the fact that a bad motion picture actor from Hollywood has HOODWINKED Californians into believing that he was capable of performing the tasks of his office is no reason to except his incompetence.

Shame Of The Nation

Arnold Schwarzenegger Will undoubtedly go down as the most disliked governor in California state history after implementing his plan of budget cuts that were announced recently. California residents should feel some sort of responsibility for placing such an insensitive individual in public office, for it is the weakest and most needy individuals that will become collateral damage in this financial debacle. President Obama just announced NO BAILOUTS FOR CALIFORNIA, so help from the feds should not be expected. The cuts go as follows, elimination of welfare to work programs effecting approximately 500,000 family's, terminating health care for 1-million children statewide known as healthy family's, and Medi-Cal for residents 65 and older, no emergency health care for undocumented immigrants, phase out the Cal-Grant college aid program for students with enough audacity of hope to believe a college education is still important, cutting general fund support for state parks in half, releasing criminals a year early, borrowing 2-billion from local municipal budgets, lay off 5,000 state workers, cut K-12 school funding, this does not even include projected cuts to the disabled, and elderly, fire protection, law enforcement, those cuts will come later down the line.

Bulls To The Slaughter

With the recent run up of some bank stocks exceeding the 30% mark, you would tend to believe that all is well on wall street and a reemergence of the bull market is occurring. For those that study the markets history and take into account such fundamentals as real earnings, unemployment figures, GDP, exports, and other factors, you could make the case for what some have called a SUCKERS RALLY happening recently. The reality is that an estimated 1-Trillion dollars in toxic assets are yet to be realized in the next 8 years do to resets on interest only loans in the commercial and residential real estate market. Why these factors remain ignored is pure conjecture. One could assume that this administration now needs to project a constant stream of positive sentiment so that the market moves upward. The net result is that the formula on these assets goes as follows, the resets occur causing defaults and foreclosures, toxic loans fall on banks balance sheets causing downward pressure on bank stocks instigating a sell off. A more sensible solution is to create a BAD BANK to harbor these toxic assets, so that financial institutions are freed up to loan money on transactions that are responsibly structured, thus increasing their rate of success. This strategy has worked well in the past and there is no reason that it couldn't work in the future.