Thought for the Day

"It does not take a majority to prevail... but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men." ---Samuel Adams

Keep this thought in front of your eyes as we, as the minority opposition, work our way through the next two years. While many people are rightfully irate as the Porkulus package has been stuffed down our throats, to be followed by a soup course of Auto Bail Out Deux, and a dessert of TARP II and III, followed by what will likely be a second helping of Porkulus to follow, we have to be tireless in our opposition to programs that are irresponsible and reprehensible. So keep it up and keep the pressure on whenever and wherever the chance arises.

A Cautionary Tale

Today the housing market is down, the government is bailing out banks and considering extending this courtesy to a host of other industries. Wealthy AIG executives take a taxpayer bailout and then flaunt it with bonuses and extravagant trips. The consumer is the fall guy and prices are rising at retail outlets everywhere. The financial pundits are calling for a bleak Christmas shopping season and Black Friday may actually be awash in red ink this year. The pundits are calling for rough economic times ahead. There is talk of soon increasing credit card interest rates to 27-30%. Our government is printing money to keep up with our windfall spending and economic IOU's and promises to everyone.

Young people today do not remember the 4 year term of President Carter when home interest rates were 20%, there were gas lines everywhere and energy conservation included wearing a sweater and turning down the thermostat! The history taught in our public schools is a watered down revisionist version of what happened, so it is no wonder that young adults today have a disconnect between the past and the present. If you never learned history, then you cannot learn from the mistakes of the past.

In March 2003, Brian Trumbone wrote an article for StockandNews.com that I would offer as a cautionary tale for today's economic turmoil. In this article he described the conditions of the Weimar Republic in the decades between the end of World War I and World War II.

On January 11, 1923, French and Belgain troops (against the advice of the British) occupied the Ruhr, a region which furnished 4/5's of Germany's coal and steel production. The miners refused to work for the enemy and the Germans simply printed more money with which to pay them not to, allowing inflation to spiral completely out of control. The economy was strangled and the free fall in the mark was incredible. Following is the historic slide in the value of the German mark.

July 1914 4.2 marks to the dollar.
January 1919 8.9 marks to the dollar.
July 1919 14.0 marks to the dollar.
January 1920 64.8 marks to the dollar.
July 1920 39.5 marks to the dollar.
January 1921 64.9 marks to the dollar.
July 1921 76.7 marks to the dollar.
January 1922 1919.8 marks to the dollar.
July 1922 493.2 marks to the dollar.
January 1923 17,972 marks to the dollar.
July 1923 353,412 marks to the dollar.
August 1923 4, 620,455 marks to the dollar.
September 1923 98,860,000 marks to the dollar.
October 1923 25,260,208,000 marks to the dollar.
November 1923 4,200,000,000,000 marks to the dollar. YES TRILLION!

By late 1923, the German government required 1,783 printing presses running around the clock to print money.

Germans wheeled shopping carts filled with literally trillions of marks to pay for a single loaf of bread. Employees asked to be paid their wages each morning so that they could shop at noon before merchants posted the afternoon price rises.

Spiraling inflation also wiped out people on fixed income along with the small savings they had put aside for retirement.

"Annuities, pensions, proceeds of insurance policies, savings accounts in the banks, income from bonds and mortgages--every form of revenue which had been arranged for at some time in the past, and which often represented the economy, foresight and personal planning of many years--now turned to nothing. The middle class was pauperized and demoralized."

William Shirer in The Rise and Fall of the Third Reich, adds: "What good were the standards and practices of such a society, which encouraged savings and investment and solemnly promised a safe return from them and then defaulted? Was this not a fraud upon the people?" But not everyone suffered in Germany.

Again, Shirer:"Big industrialists and landlords goaded the government to deliberately let the mark tumble in order to free the State of its public debts, to escape from paying reparations and to sabotage the French in the Ruhr. The destruction of the currency enabled German heavy industry to wipe out its indebtedness by refunding its obligations in worthless marks. The fall of the mark wiped out war debts and thus, left Germany financially unencumbered for a new war. The masses of the people only knew that a large bank account could not buy a straggly bunch of carrots, a few ounces of sugar. In their misery the Republic was made the scapegoat for all that had happened.

At the height of the currency crisis, an interested spectator commented: "The government calmly goes on printing these scraps of paper because, if it stopped, that would be the end of the government. Because once the printing presses stopped--and that is the prerequisite for the stabilization of the mark--the swindle would at once be brought to light. Believe me, our misery will increase. The scoundrel will get by. The reason: because the State itself has become the biggest swindler and crook. A robbers State!? If the horrified people notice that they can starve on billions, they must arrive at this conclusion: We will no longer submit to a State which is built on the swindling idea of the majority. We want a dictatorship." Thus spoke Adolf Hitler.

Gloomy Days

Ever have one of those days when you wanted to curl up in a ball and retire from the human race??? Well, this week had several of them. Watching Wall Street move like a car on the Screaming Eagle made me alternately want to cheer and vomit. Then at the end of the week, came the incredible salvage of "everything imaginable" and I am not sure that I can wrap my head around the implications of it.

A year ago I had someone go over my financial plan for my retirement and they said that they would not change anything, that I had charted a fiscally sound plan for my future and to keep up the good work. I have no credit card debt and had chuckled at the nest egg and "my number" ads on TV as I thought that I was among them with a retirement plan at work and a couple of other side investment accounts that I opened when there was a bit of spare change lying around. I had always pretty much known that I could not rely on Social Security for my retirement (most probably because it would not be there for me) and I felt so proud (and even patriotic, Joe Biden) that I was doing what I needed to do to provide for myself for the future so that I would not be a societal burden.

Now I am not so sure and am wondering what effect this week on Wall Street will do to my "best laid plans". I am now thinking that it would have been better if I had stuffed my mattress with the investment contributions that I made and bought gold bars.

I found this quote earlier this week when I was trying to put what was happening before my eyes into some perspective. "The gloom hanging over Main Street America stems largely from rising price levels, high interest rates, failure of new plant and equipment expenditures to stimulate a new wave of production, failure of housing construction to pick up and the failure of Congress and the President to make much headway on development of an energy policy tax revision program, private capital program, international economic plan and on the establishment of an inflation reduction effort.........Given the unbalanced conditions of international relations and vital resource use patterns however, the possibility of a serious recession in the United States...cannot be entirely discounted........Nevertheless such things as OPEC decrees on the price of oil because of its uneven distribution in the world and the use patterns of industrialized nations will cause the rate of inflation to rise...A determined effort to cut the federal budget deficit will fall short of significant favorable price consequences. Thus price rises will be steadily reinforced during the year ahead." Does this sound familiar?? Well, this is a quote from an article in the Columbia Missourian by Robert Paterson, Professor of economics and public administration in the College of Business and Public Administration at the University of Missouri. The date of the article.....January 7, 1979.

In 1979 I did not know/realize that things were so bad. I did not have the 24-hour media telling me at every turn that the sky was falling. I had not yet had my first child. I did not yet have a 401k because I was still finishing my education. I had student loans to pay and was already in my second new home. My bills were paid and I was able to save a bit each month, so how was I to know that the sky was falling? Is this just more of the same today only with a constant barrage of nay sayers beating it into my head 24-7? Or have we really fallen over the cliff this time and it is no longer "crying wolf"?

On one hand I want to remain optimistic and weather the rough times as I have done several times in the past, but on the other hand, as I get older and know that my retirement SHOULD be getting closer, I feel that I will no longer be prepared or that all my hard work and preparations will disappear overnight. I have listened to the different talking heads this week and I know several things for sure:
1. There is no agreement about what should be done.
2. There is no guarantee that this will work out.
3. I am on the hook for the liability of the past week's activities in some way or another, though I don't exactly know or understand what form this liability will take.
4. This has been a long time coming and my government has sold me out.
5. I am ready to clean out the money lenders from the temple and I DO NOT want to replace them with more entitlements, hand outs, bail outs and nationalization schemes to put a hand in my back pocket and give away what I have earned fair and square!