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Thursday, April 28, 2011

Good and Bad -- We're in this thing together!!!

I wrote this article 26 months ago on February 23, 2009. It is even more relevant today because of the time factor. I know that my message has reached some and others are still in denial or LaLa Land or whatever. Time for preparation is drawing to a close. At the time, Gold was selling right at $1,000 an ounce and silver was $14.50. Tonight Gold is selling at $1,532.30 and Silver is selling at $48.49. 26 months ago the Gold to Silver ratio was right at 69x, today it sits at 31.6x. What other investment has offered the sort of returns precious metals have over the last 2 years? There are some commodities that have risen dramatically, but not 234% like Silver.

I am not giving you investment advice. I am giving you preparatory advice related to self-preservation. Fools will think that the growth of commodities means that there is a recovery under way, because they just look at aggregate, end justifies the means, numbers. Common sense will show you that the replacement costs of goods is not returning a profit. This means that there is not a recovery. It does mean that their is inflation.

People just don't understand the role of money in an economy. Money is a store of value that creates liquidity (a flow) in the exchange of goods and services. Money, in and of itself, holds no value. It is the economy (the marketplace) that it represents that creates money's value. Our economy is deplorable, because we have not taken care of it. We allowed Bankers and Politicians to take care of it and they have taken care of the economy to the extent that it suits their own purpose. This holds true at every level of our governance. The dollar is supposed to be a store of value for the public trust of the United States of America.

When our nation was strong and our people were strong, then our economy was strong and thus the Dollar represented the prestigious stature of this nation. We built respect based upon our values that were represented by the Revolutionary War, World War I, and World War II. That is what earned us the right to have our nation's store of value become the World's Reserve Currency, because people trusted the United States to be a nation of its word to go along with its strength, power, perseverance, and most of all its benevolence; but all of that has changed now.

We have been stripped of our stature by the Confidence Men who sold us the bill of goods that we could have everything we wanted and not work for it. We can have trinkets up front and never pay for them or pay for them on our own time. We can expect to retire at a decent age and not worry about how to save for it. Someone else can pay for our healthcare and other social needs. They promised that they were going to take care of everything and we didn't need to worry about the details or pay attention; Just Trust Them. And in the end who is to blame for the economic debacle laid before our feet? It isn't the Confidence Men that sold us lies that we never should have believed. They just sold us what we wanted to buy. We were the fools who bought it all and stood by and watched our birthright and legacy be pillaged and plundered in short order. How shameful to have wasted what took generations of sacrifice and perseverance to build. The Bills are coming due and the Confidence Men won't be the people paying them. It will be you and I.

We can right this wrong eventually, but not if we never recognize and rectify the wrong. Oh yes, there will be pain, but it will only be worse the longer that we fail to act. Most people still don't even recognize the financial trouble and instability that we are in. Have you bought gas or been to the grocery store. What do you think is going on?

I wish that I didn't know what was going on, because it is depressing. But, I believe there is a reason why I am here and I am doing this. I hope that I am reaching a few people who can help make a difference and soon we can turn the tide. I need help. I need your help. You can help. Read below to see what I wrote over two years ago and see if it doesn't make sense and if it does, then please speak up and spread the word, because we are in this together, whether you like it or not. And may God's Peace be with you!!!

8 Suggestions for the Road Ahead -- Self Preservation

I do not propose to be some sort of expert on survival, but we can all see that these are not normal times and it is time to prepare for the worst of times and pray that we never reach that destination. I have compiled some information about personal finance and personal responsibility. You can move as close to these targets as possible or you may ignore the advice. I only give you this advice, because my soul moves me to. In the end you are responsible for your own countenance.

1) Get out of short term debt - You should be in no more short term debt (credit cards) than what you can pay off immediately. I believe that 5% of your take home pay would be about the Maximum amount of debt you should be carrying in this recession. If you get laid off, then you can easily pay that off.

As inflation rises, the adjustable interest rates on short term debt will also rise. You could very well see 20%+ interest rates on credit cards (if not way higher than that). How would you ever pay these debts off, if that were to happen?

2) Keep cash on hand and tuck it away somewhere that no one can find it. I am not saying that banks will go bust like they were in the 1930s, but on March 5, 1933 Franklin Roosevelt (the day after being sworn into office) called a 4-day bank holiday. The banks were closed and people could not withdraw cash from their accounts. Some people say that this same scenario nearly played out last September. What would you do if the bank was closed for a week or two? Remember the gas shortage last September and how everyone panicked?

3) Put some of your money in precious metals. Most of us can't afford $1,000 an ounce gold, but we can afford $14.50 an ounce Silver or even cheaper Copper. These metals will hold there value during inflationary times. In 1980, during the last inflationary period in the U.S., the price of gold spiked to $850 an ounce in 1980 (an equivalent of $2,178.05 in today's dollars). The same year Silver spiked to $48.70 (an equivalent of $124.79 in today's dollars). U.S. Inflation Calculator Link

I am not saying that we will see those levels in the coming year, but unless our government gets its spending under control, I believe we will burst through those levels by the end of Obama's first term. At the end of the year 2000, the Dow Jones Industrial average was trading at 39.5 times the price of Gold and 2,345 times the price of silver. Today the DJIA is 7.17 times the price of Gold and 494 times the price of Silver. This has all been brought about by the tanking of the U.S. Dollar. Until our government starts reigning in the ridiculous spending and comes back towards fiscal sanity, it is time to get out of our currency and into something real.

4) Be Thrifty and quit wasting your money - Don't throw things away unless they have no value. Eat at home, use coupons, share meals with your friends and neighbors, look for cheap entertainment, turn that heat down, use the fan (instead of the AC), and consolidate you trips when driving. This is not the time to throw money around. It is time to spend wisely.

A good investment would be to buy dry and canned goods in bulk. Remember the price increases last year during the fuel run up? Buy these goods and store them for the rainy day. If that day never comes, then you can use them; but if a truly inflationary period does hit, then you will have bought yourself some valuable time.

5) Grow a garden. The only thing that this will cost is the money for a few tools, the cost of some seeds, and some labor. You will be handsomely rewarded. You'll have something to eat to get through the summer months and you can can, freeze, or dry this stuff to get through the winter. This will help you get outdoors and get some exercise. You can be basic or elaborate. That is up to you. The deal is that this will save you money, when your budget gets tight, and that is money that may be needed elsewhere. You can also barter these vegetables for other food or maybe to get something else. Growing a garden creates value.

6) Secure your house. Crime is naturally going to increase. You need to get deadbolt locks for the doors and hide your valuables in safe, secure places. Don't flaunt what you have. You need to be humble and thrifty. Be aware.

7) Get to know your neighbors and look out for one another's well-being. This goes hand-in-hand with number 6 and maybe even number 5. One thing that we have lost in the age of gluttony is that sense of community. Neighborhood Watch will be very important if times get tougher and we will need to look out for the elderly, who will become very vulnerable as their fixed incomes are attacked by inflationary dollars.

8) Pay attention to what the Government is doing - It is time that people figure out that the condition our economy is in today is a direct reflection on the economic choices that have been made by our leaders and the bureaucracy over the last 40 years. No one expects perfection, but we also should not expect utter incompetence and/or corruption either. It is time for accountability.

Wednesday, April 27, 2011

Economic Recovery? Here's a Second Opinion

The Following is a summarization of the U.S. Economy from Bob Chapman's newsletter The International Forecaster from April 23, 2011. You can subscribe to the International Forecaster at The newsletter is always interesting and usually runs about 40 pages. It is released on Wednesdays and Saturdays every week. The reason why I am releasing this portion of the letter is because it conveys much of the message I have been exposing to this audience over the last 2 1/2 years plus. In my opinion this analysis is dead on and Mr. Chapman has a deeper knowledge and experience than I have and he shows exactly what I have felt and tried to convey to you. I hope you will take time out to read this important message:
Economic recovery does not seem to be taking effect in spite of more massive expenditures by Congress and the Fed. The IMF says financial stability has improved, but then again their vision is almost always clouded. US tax revenues are not increasing in a meaningful way, manufacturing struggles to expand and Wall Street flourishes in a cascade of mega salaries and bonuses. In another six months the US will be three years into what the government, the media and Wall Street call a deep recession. We call it an inflationary depression, which has existed for 26 months. After eight years of increasing money and credit, and the creation of a real estate bubble, the Fed has been fighting off asset destruction with ever more money and credit accompanied by debt deflation. Part of the Fed’s policy has been zero interest rates, which has helped Wall Street and banking and to a limited extent real estate, but has destroyed the purchasing power of retirees and has driven funds into speculation, which in many cases has ended in ever more losses and less buying power.

The policy left conservative investors no place to turn to other than to join Wall Street and bankers in speculation, something they were not prepared for nor could they compete with. Borrowers have had a field day with virtually free money for which the result has been higher inflation and really major unemployment. You might call this the true Keynesian corporatist fascist model. This has left us with ongoing malinvestment, ridiculous illusions, which have led to the de-capitalizing of the US economy. In that process these interest free loans have given the big hitters the opportunity to enhance their fortunes at the expense of everyone else.
These rates and QE2 at least for the moment have been so powerful that deflation is nowhere in sight, except perhaps in job creation. In fact net inflation has moved up to 9-1/2% and we believe this year it will attain 14%, as government eventually admits to 5-1/2%, as we saw three years ago. If you think we are wrong look at producer prices that are up almost 11% over the past six months. Government and mainline economists are not paying attention. Either the higher costs are passed on or the profits will disappear. Just like in years past, over and over again, the excessive expansionism of monetary and fiscal policy will produce excessive inflation, more inflation than the so-called experts are anticipating.
The bailout of financial institutions by American taxpayers, both in the US, UK and Europe, won’t be allowed to happen again. In the next go-around they will go bankrupt. Those in the US and other stock markets with the exception of gold and silver shares, those in bonds, derivatives and hedge funds, will be wiped out as well. Few will be spared.

Inflation - A year from this June inflation should be near 20% and that is where panic will set in. The 10-year T-note should be yielding 5-1/4% to 5-1/2% and the 30-year fixed rate mortgage should be 6-1/2% to 6-3/4%. After that interest rates and inflation will more than double, as they did in the late 1970s.

An example that is easily understood is that due to foreclosure and lack of job creation, rents should increase 10% over the next 1-1/2 years. That is known as Homeowner’s Equivalent Rent, which is 23% of total inflation. We believe that is a conservative figure. We won’t deal with core inflation, because it is just a method of obscuring real inflation. That 10% increase would add 4% to net inflation, which is currently about 9-1/2%, not 1.9%, as your faithless government would have you believe.That would put real inflation at 5-1/2%, not to mention increased prices for fuel and food.

That is why our estimates are 14% to 25% over that time frame. Don’t forget interest rates will be rising as well. This only includes QE and stimulus 1 & 2. If QE3, by that or some other euphemism occurs, which we believe has too, then 50% inflation and hyperinflation is attainable. Readers have to remember that even if oil prices stopped increasing at $120.00, and food prices stayed at 10% higher levels, it would still rob consumers of $300 billion in purchasing power. That would drop consumers as a part of GDP from 71% to 69% easily. That means GDP growth even with the Fed adding $2.5 trillion to the economy, would at best stay even and may reflect as low as a minus 6%.

You have to get the feel of the dynamics of this. Raging inflation, plus perhaps hyperinflation, a falling economy and 30% to 40% unemployment, U6 was 37.6% at the top of the great depression and the birth/death ratio didn’t exist at that time. Presently wages are stagnant, and they have been so for three years. Wages will finally start to rise so you can add rising wages to the inflationary explosion. As this transpires we have the Middle East and North Africa, which are now a frightening further calamity waiting to happen. Any further violence there could take oil to $150.00 or higher. Will there be war with Iran? Perhaps and if that develops oil could  escalate to $200 to $300 a barrel. Such developments would knock the foundation out from under the entire world, except for those fortunately producing oil.

Another factor is the plight of municipalities and states in the US. We have seen a small reduction in employment in these sectors, but the biggest layoffs are yet to come, as well as more than 100 municipal bankruptcies. We will also see debt default by states in relation to their bonds and other debts. Some states, such as Illinois, New York and California could cease functioning. This is not a pretty picture....

The Banks & The Government - Then there are the banks, all of which are close to insolvency already, which are facing massive bond losses, which will put them out of business. These are the loans they made that they should have never made, from funds created out of thin air. Iceland has rejected paying off British and Dutch depositors, who had funds in Icelandic banks, which went bankrupt. The depositors do not have a leg to stand on and the citizens of Iceland are correct in their refusal. It was the Icelandic bankers who screwed the depositors....

We normally do not editorialize regarding silver and gold. As you know we have recommended being long gold and silver shares, coins and bullion since June of 2000. Now that story is getting even better. Not only has gold and silver been a safe haven asset all those years, but is finally again becoming a shelter from inflation. The US, UK and Europe are in serious financial and economic trouble. Over the past 11 years, nine major country’s currencies on average have fallen more than 20% each year versus gold and silver. That is quite an extraordinary return and from our mail our subscribers are quite happy they followed our advice. Our run, including our market shorts, has simply been unbelievable.

Silver prices are on a tear and as we write they have risen to $46.30. In spite of these price levels the mining industry is not increasing production in any meaningful way. About 70% of production comes as a by-product of other types of mining, such as copper. There are no new sizeable projects in the works, and thus it is expected that production could fall 5% annually for the next ten years. The easy finds have already been exploited and new large projects are harder to find. In fact, current mines have only been able to increase production by a paltry 2.5% or so. In 2009 Argentina was the only outstanding exception and that could be a one off occurrence.

As we write gold has broken out to $1,509.30 even as the “Plunge Protection Team” fights viciously to suppress both gold and silver prices. Despite the mantra on Wall Street and in government there is 9-1/2% inflation affecting the US economy and the professionals and the public are finally catching on. In spite of the greatest bull market in gold and silver history, they still do not get it. Less than 1% of Americans own gold and silver related assets.

The QE1 and 2 and stimulus 1 and 2 have done their damage. The inflationary results are in the pipeline. QE and stimulus being reflected this year and the results of QE2 and stimulus 2 next year. We believe we’ll see the results of QE3 the following year, 2013, but it will be called something else. A falling dollar and few buyers of US debt has again set the stage for the Fed taking down 80% or more of Treasury and Agency debt. If they do not do that the whole system will collapse. These programs are like booster rockets aiding an underlying positive fundamental condition for gold and silver. The flip side is the debasement and denigration of the US dollar. As an aside even though the European Central Bank has just raised interest rates they and the UK will continue their own versions of QE, because if they don’t their economies will collapse. That will put even more inflation into the world financial system.

As the possibility of QE3, or its equivalent, lurks in the wings the very solvency of America hangs in the balance. Those who have studied financial and economic history know that the course that is being followed is unworkable, and that certainly includes the staff at the Fed and the Treasury Department. In fact, Mr. Bernanke pointed out that in his and Mr. Baskins’ writings in 1988 after the market collapses of 1987.

At the heart of America’s problems are the insolvency of many financial institutions and the failure of either the Fed or the Treasury to have them liquidated. What the banks have in mind is the liquidation of bad debt held in suspension over the next 50 years. Supposedly as conditions and profits increase part of those profits will be used to lower debt. The problem is that these corporations are bankrupt. There access in the creation of inside information allows them to produce illegal outsized profits, such as 90 days of propriety trading without a loss. We were traders for 25 years and know under normal legal circumstances that that is impossible.

Then, of course, there are the giant profits, really theft from other investors, that are used in part to offset previous losses and provide outsized salaries and bonuses to the crooks that run these banks and brokerage firms. These results are aided by the creation of money and credit and zero interest rates. The ability to borrow money created out of thin air at almost no cost. As a result the Fed now has a balance sheet of some $3 trillion loaded with Treasuries, Agencies, toxic waste and if they decide to create more money and credit to keep the government and the economy functioning for another year that figure will become $5.5 to $6 trillion. That is some monetization. There is unfortunately no other way for the Fed to do it, when at best they can only expect 20% to 30% of buyers for Treasuries, as the dollar falls in value. The situation is dire as the US dollar has just fallen 5% versus the Mexican peso, as the Mexican economy grows 4.5% a year, inflation is 3.7% and unemployment is 5%, and they haven’t used stimulus.

What are we missing here? Nothing except the Fed and Treasury, as well as Congress and the President are out of their minds as were their predecessors. How bad is it when the largest bond fund in the world, PIMCO, not only sells all its US Treasuries and Agencies, because they see no value and then they proceed to short them? It’s certainly a sad day for the solvency of America. Who can blame PIMCO when government is projecting $1.6 trillion deficits as far as the eye can see. In addition, all the funds paid by Americans for Social Security and Medicare have been squandered by government. Now there is no way to pay the promised benefits. That is $100 trillion that has been stolen, or should we say misappropriated. It is so bad that the US government credit rating may soon be lowered. It was just 1-1/2 years ago we picked August 2011 as the possible time for a downgrading of that AAA credit rating.

The number of states in serious financial trouble has now risen to 40 and unfortunately that number is still climbing.

We wonder what the American public is going to think when the Fed bails JP Morgan Chase and HSBC out of their naked silver short for $100 billion or more? This is called corporate welfare in a corporatist fascist society. They gamble and lose and you get to pay the bill. They get to keep the profits as our retirees starve as their SS is frozen or reduced. Then when they get ill a government panel tells them that their treatment will be too expensive, so they’ll have to die on their own. This is what bankers and Wall Street and their organizations have planned for the elderly. They are considered useless eaters now that their contributions to society have ended. That is what you have allowed America to become – a country run by terrorist, criminal syndicate.

The dollar no longer has stability because few believe that the government possesses more than 8,000 tons of gold. It is called a collapsing fiat currency. The result of profligate fiscal  management and monetary madness. The result is in the process of becoming raging inflation that will become hyperinflation. As we write gold and silver have established new highs at $1,505.70 and silver at $46.69 respectively with no top in sight. This is a reflection of dollar and all currency debasement. Do not forget for the past 11 years, nine major currencies on average have fallen more than 20% annually versus gold and silver. As you can see this is not only a dollar policy, but also a policy being pursued by many nations called corporate, fascist, Keynesianism. The result is rising inflation worldwide that is a reflection of rising commodity prices, which are a result of a flight to quality. The same manifestation has been visited on gold and silver as well. Yes, inflation makes gold and silver rise, and that is important, but the real propelling force is the flight to the only real money in the world and those are gold and silver.

Sunday, April 24, 2011

Economic Stories of Relevance in Today's World -- April 24, 2011

Poll shows Americans oppose entitlement cuts to deal with debt problem - The Washington Post - By Jon Cohen and Dan Balz, Wednesday, April 20, 2011 - The survey finds that Americans prefer to keep Medicare just the way it is. Most also oppose cuts in Medicaid and the defense budget. More than half say they are against small, across-the-board tax increases combined with modest reductions in Medicare and Social Security benefits. Only President Obama’s call to raise tax rates on the wealthiest Americans enjoys solid support.

The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going - ProPublica - Jesse Eisinger and Jake Bernstein - April 9, 2010 - In late 2005, the booming U.S. housing market seemed to be slowing. The Federal Reserve had begun raising interest rates. Subprime mortgage company shares were falling. Investors began to balk at buying complex mortgage securities. The housing bubble, which had propelled a historic growth in home prices, seemed poised to deflate. And if it had, the great financial crisis of 2008, which produced the Great Recession of 2008-09, might have come sooner and been less severe.

And This is How the Republic Will End… - TheNoisyRoom.Net - Terresa Monroe - Apr 20th, 2011- Hamilton - We see that 7 out of the 10 tax avoiders were big contributors to Obama: 1 is leaving the U.S. (the global elites are undoubtedly happy the de-industrialization of America is moving right along), 1 sells its assets (more de-industrialization) and 1 has a Board Director that receives a co-chair appointment by Obama. Looks pretty cozy, but Obama’s comrades are the ones who are calling these companies out.

BRICS poised to pick up the pieces from the rubble of America’s collapsed empire - Strategic Culture Foundation - Wayne Madsen -  4/18/2011 - The American empire is faltering from within and abroad. In an attempt to preserve its empire, the United States has adopted an aggressive military posture, starting a war in Libya and continuing its military occupation of Afghanistan and Iraq. Washington’s military planners are stepping up drone attacks in Pakistan and using NATO forces to extend America’s hegemony over resource-rich Africa, not only in Libya but also in Cote d’Ivoire. U.S. Special Operations forces are engaged in military adventures from Colombia and Honduras to Yemen and the Philippines... With the collapse of America’s imperial global empire, there will be a new “multi-polar” world order.The term “multi-polar” and “economic independence” was on the lips of every BRICS leader and their advisers in Sanya. And Chinese Deputy Foreign Minister Wu Hailong said in Sanya that many other countries have signaled an interest in joining BRICS. Nations around the world want to get as far away from the sinking United States lest they get pulled down by the drowning empire.

Pick your poison: A look at Dem, Repub budget plans - Both offer more borrowing, skyrocketing debt, not cuts - WorldnetDaily - Posted: April 23, 2011 - While the White House claims its budget plan will cut $4.2 trillion in spending and the Republicans claim a $5.8 trillion reduction, neither proposal cuts anything from the national debt – in fact, both plans increase it from $14.3 trillion to at least $23 trillion by 2021, some 10 years from now.

A Morally Untenable Corporate System - Truthout - Jim Hightower - April 20, 2011 - Now, after the collapse, what has changed? Nothing. One survey of nine of the big banks we taxpayers bailed out shows that two-thirds of their failed board members are still there, and once again, they are shoveling inexplicably huge bonuses at the same old CEOs, who have returned to playing the same old casino games that caused the crash.... A system that enriches executive elites while crushing the middle class is worse than an embarrassment -- it's morally untenable.

An "Oh Please!" Moment: Is S&P Running Interference for the Right to Help Crush Social Security and Medicare? - Truthout - Dave Lindorff , This Can't Be Happening - April 20, 2011 - The problem will come when the dollar starts to seriously erode against other currencies because too much of the currency has been put into circulation. When that happens, there may be a shift away from the dollar as the world’s “reserve currency.” Looking further, one could then imagine the US being unable to issue debt to foreign investors, because they would no longer want to be left holding dollars, and the US would have to either drastically reduce its debt, or borrow in foreign-denominated debt--say Yen or Euros or Renminbi.

That future may come, but what S&P is talking about--a risk of default on current US debt--is simply absurd, and does raise questions about behind-the-scenes pressure from some nefarious actors on the right anxious to do away with Medicare and Social Security before today’s Baby Boomer population becomes the biggest retirement and Medicare-entitled voting bloc--both numerically and proportionally --in the nation’s history.

Oil lifted by weak dollar in volatile trade
- Reuters - Robert Gibbons - April 21, 2011 - Investors bought oil as a hedge against a tumbling dollar as the dollar index .DXY hit its lowest since 2008 against a basket of currencies and had its all-time low in sight... Disappointing reports on factory activity and U.S. initial jobless claims cast doubt on the pace of U.S. economic recovery and energy demand growth, limiting oil's gains.

Friday, April 22, 2011

Newsletter about the City Council meeting of April 19, 2011

This newsletter is about the Hickory City Council meeting that I attended this past week. City council meetings are held on the first and third Tuesdays of each Month in the Council Chambers of the Julian Whitener building.

At right of this page under Main Information links is an Hickory's City Website link. If you click on that link, it takes you to our city’s website, at the left of the page you will see the Agenda's and Minutes link you need to click. This will give you a choice of PDF files to upcoming and previous meetings.

You will find historic Agenda and Minutes links. Agendas show what is on the docket for the meeting of that date. The Minutes is an actual summary of the proceedings of the meeting of that date.

Here is a summary of the agenda of the 4/19/2011 meeting. There were a couple of important items that were discussed at this meeting and the details are listed further below:

Please remember that pressing Ctrl and + will magnify the text and page and pressing Ctrl and - will make the text and page smaller. This will help the readability for those with smaller screens and/or eye difficulties.

Invocation by Rev. David E. Roberts of Morningstar First Baptist Church

Special Presentations:
A. Proclamation Presented to Michael Blackburn, CEO of Frye Regional Medical Center in Honor of the Centennial Celebration of Frye Regional Medical Center and Dr. Glenn Raymer Frye - Mayor Wright recognized the CEO of Glenn R. Frye Regional Medical Center Michael Blackburn.

Whereas Frye Regional Medical Center marks its 100th year in 2011, celebrating a century of fulfilling its mission of mercy and healing to the people of the City of Hickory and beyond; whereas Frye has devoted itself to have preserved the history of the hospital through the publication of “Exceptional Care, A Century Strong” an illustrated history book and companion history exhibit at the Hickory History Center. The City of Hickory and its residents join Frye in the celebration, because it has been made possible only through a close collaboration between the hospital and the people of Hickory; whereas the success of the hospital in its earliest day was due in large part to the entrepreneurial spirit of its founder, Dr. Jacob Shuford, and his successor Dr. Glenn Frye; whereas, Dr. Frye was born April 29, 1894 (117 years ago). Demonstrating leadership skills in his days in Hickory, while a student at Lenoir College, upon completion of his studies at the University of North Carolina and the prestigious Jefferson Medical School in Philadelphia, Dr. Frye returned to Hickory August 21, 1922 and practiced medicine for more than 51 years until his death in 1973; whereas Dr. Frye served as a model of community and civic service through his involvement as a physician, as a Rotarian, and a trustee of Lenoir-Rhyne College and as a devoted husband and father in the years of service provided by Dr. Frye led to the renaming of the hospital in 1974. Whereas the hospital honors Dr. Frye's legacy through its commitment to excellence as evidenced by its recognition as the number one Hospital in North Carolina in 2011 for cardiac surgery by Health Grades an independent ranking organization; whereas Frye provides millions of dollars annually in charity care, discounts for the uninsured, to numerous local charities consistent with the example set by Dr. Frye; therefore on the behalf of the Hickory City Council and all of the residents of Hickory. I am proud to proclaim April 29, 2011 as Frye Day in the City of Hickory.

Mr. Blackburn next made a few comments thanking the City and Community. He stated that there was a legacy of support and promotion for each other and that the City has given unwavering encouragement to Frye as it has expanded and improved to meet the needs of the patients. He talked about the relationships that the hospital has with the fire and police departments. He stated that Frye could not be the safe environment that it is without their support. Frye has over 1,600 employees, 350 doctors and hundreds of vendors, suppliers and affiliated contractors. Frye is a major employer and creates economic energy in support of Hickory. Frye has provided over $30 million of charity care for patients and supports the community’s local governments paying over $3 million annually in taxes. He talked about all of the former doctors, nurses and clinicians of the past who provide exceptional care; a century strong as a career, a way of life, and culture of caring that lives on.

The Mayor stated that sometimes it's just nice to be reminded of what corporate Hickory does for some of us, and it is good to have a private hospital as well as a not-for-profit hospital. They compete in many ways, and they cooperate in many more ways. We have tremendous quality of care and together they have attracted tremendous physicians to this area.

The Hound likes the city to be proud of an institution that has had an indelible impact most everyone's life in the area. Most of us have utilized its services, had family members who had to stay there, and had family work there. The City is right to honor this landmark and be proud of what it has been and is and the impact it plays within our lives.

B. Announcement by Doug McClew, Rally Coordinator that the 2011 NC State H.O.G. Rally Event Will Be Held in Hickory on August 18 - 20, 2011 - Doug McClew the rally coordinator made the presentation for the Harley Owners Group. This entity was started in 1983. The term came from the racing circuit in which winners of contests were given a pig. In 1983, the group had 33,000 members and now there are 1.2 million members worldwide. There are 5,000 members right here in North Carolina. He wants the community to understand that this is in no way a Myrtle Beach or Daytona Spring break event. The average age of this group is 42 years old, and they are all working professionals.

In December 2009, a local group started to talk about having the event in this area. They won the right to hold the event here in June of 2010. This rally is run like a business. All of the contracts have been done, except for the airport. The motorcycles will be allowed to ride on the airport runway at unlimited speed. This has not been done at any other rally. That is one of the great draws to th9is event. He stated that there are a lot of contracts involved.

He showed the Logos and talked about the activities of the event and why people would want to come here -- the weather, the mountains, the events, the destinations and the ability to make new friends. Registration will open on Thursday, August 11, 2011 and the event will officially begin on August 13. There will be various rides through the hilly terrain around this area. There will be a welcoming party at Blue Ridge Harley-Davidson here in Hickory. There will be various events and games held during this rally. There will also be a dinner dance. There'll be vendors, games, and recognition. That is part of what this event is about.
What will this mean Hickory? They estimate that 2,500 people will show up to the event. A rally held in Mt. Airy, in 2009, had participants spending around $750 per day. This is estimated to bring about $6.5 million into the local economy. They expect to fill all 2,100 hotel rooms in the area.

What can the public do? He wants the public to help with public relations on the event. He stated that the Chamber of Commerce has already agreed to start putting it in their newsletter. It will be in the papers and there will be all kinds of radio interviews and such to let the City know that they are here to have a good time, but they are not here to be crazy. He wants the public to attend the rally. There are just certain portions of the rally that are closed. There will be lots of vendors and food.

The Hound thinks this is a good event for the city, because it brings people (and their dollars) from all over the country  to spend money here. This is a value event. We certainly need more of these types of events.

Consent Agenda:

A. Voluntary Contiguous Annexation of the Property of Glenda Presnell Located at 3630 16th Street, NE (Authorize Public Hearing for May 3, 2011)

B. Call for Public Hearing to Consider Entering Into an Economic Development Incentive Agreement With Turbocoating Corp USA In The Form of a Grant Based Upon Seventy- Five Percent of Ad Valorem Taxes and the Creation of 80 New Jobs (Authorize Public Hearing for May 3, 2011)

C. Certificate of Sufficiency and Preliminary Resolution Relative to Street Improvements Along a Portion of 5th Street, SE – No. 01-11 (Authorize Public Hearing for May 17, 2011)

D. Proclamation Declaring May 5, 2011 as “National Day of Prayer” in the City of Hickory

E. Request From the National Day of Prayer of Hickory Committee for Use of Union Square for the National Day of Prayer Event on May 5, 2011 from 9:00 a.m. to 2:00 p.m.

F. Proclamation Declaring the Week of May 1 – 7, 2011 as “Municipal Clerks Week” in the City of Hickory

G. Approval to Award a Community Appearance Landscape Grant to Jack Sipe Construction Co. for Non-Residential Property Located at 844 Highland Avenue, SE in the Amount of $2,500.00 - The subject property is owned by Jack Sipe Construction Co. and it is their desire to improve the visual appearance of the property by planting new trees, shrubbery and improving landscaping on the property. The cost of the improvements is estimated to be $6,300.00. On March 28, 2011 the Community Appearance Commission unanimously voted to recommend funding in the amount of $2,500.00.

H. Citizens’ Advisory Committee Recommendations for Assistance Through the City of Hickory’s Housing Programs - Mr. Boyd Barker of 1134 13th Avenue, NE is being recommended for approval for assistance under the City’s First-time Homebuyer’s Program for an amount not to exceed $6,500.00. Funds are budgeted through the City’s former Rental Rehabilitation Program income received in FY 2009 and/or program income received through the City’s Community Development Block Grant Program. The Citizens’ Advisory Committee recommends approval.

Budget Ordinance Amendment -
1. To budget a $200 International Council donation in the International Council line item. This donation will be used to conduct the 2011 International Springfest event.
2. To budget $4,700 of Parks and Recreation donations in the Parks and Recreation Departmental Supplies line item. These donations are designated for the Unifour Senior Games which is coordinated by the City of Hickory's Park and Recreation Department. Donations include Bayada Nurses ($150), Kingston Residence of Hickory, LLC ($300), Gorham, Crone, Green & Steele, LLP ($250), Humana ($1,000), Catawba Valley Medical Center ($1,000), Tenent ($1,000) and Western Piedmont Council of Governments ($1,000). These funds will be used to conduct the 2011 Unifour Senior Games.
3. To transfer $2,022 from the Hickory Police Department Uniforms line item to the Bureau of Justice (BJA) grant project Uniforms line item. The cost of purchased Vests exceeded the approved price therefore an amendment is necessary to cover the overage.

Informational Items:
A. Report of Mayor Wright’s Travel to Meet With Representatives and Lobbyists in Washington, DC on April 7, 2011; airfare - $713.90; per diem - $25.50
B. Report of Alderman Guess’s Travel to Meet With Representatives and Lobbyists in Washington, DC on April 7, 2011; airfare - $713.90; per diem - $25.50
C. Attendance by Mayor Wright to the NCLM Regional Legislative Meeting Held in Newton, NC on April 14, 2011; registration - $20.00

New Business - Departmental Reports
1. Quarterly Financial Report - Warren Wood delivered this presentation This is nine months into the budgeting process. He stated that when looking at last year’s budget compared to this year’s that he believed that we would see good news. Through the first nine months of the year, the City is less than 1% below budgeted revenues compared to the 5-year trend (80.85% vs 81.82), last year at this time the City was 4% below the 5 year average. He believes the cuts that were made were pretty much what were needed to get the budget back on track. They are above the 75% revenue at this point of the year (75%), because most tax revenue comes in in December, January, and February. Expenses in the General fund are slightly ahead, but mostly in line. Revenues are $5.9 million over expenditures, the five year average is $6.6, but it is $400,000 better than last year. Monies spent on the Clement Blvd project account for being below the 5 year average. Without those project dollars the 5 year average would be right in line. Warren states that he runs a model and he believes the City will be putting a couple hundred thousand dollars in the bank at the end of the year. Last year the City ran a $600,000 deficit in the General Fund Balance.

Looking at the water-sewer fund, he stated that he is very pleased with how the water and sewer numbers have held up. The projections are fairing better than the General Fund and running ahead of the 5 year average as far as revenues go. The City has received 69% of budgeted revenues while the 5 year average is 68% at this point of the year. April may and June are big water usage months. The City has had expense of 65.5% compared to the 5-year trend of a little over 60%. A lot of money has been moved into capital reserves (revenues over expenses). The numbers are in line.

Warren went back into the issue of Property Tax Assessment values and people challenging assessed values. The City will lose $78 million in value, which will equate to $380,000 in revenue. Alderman Seaver asked about the business versus citizen side. Warren stated that in Catawba County the residential side saw a $42 million gain in assessed value. The decrease in value came from the Commercial side. The percentage of collection is down ever so slightly.

The most concerning issue is the lack of construction activity. He also talked about problems with the losses of revenue from loss from lack of new equipment and depreciation of existing equipment. The last time we went through a recession we saw a drop in the tax base between 2003 and 2005, if the trend holds true it will effect future budgets. Only 20 building permits have been issued thus far this year compared to 25 last year (July to March). 64 were issued in 2005-2006 in the same time period. Warren stated that there is instability in our Property Tax Revenues.

Warren next moved into Sales tax Revenues and stated that we have seen improvement there. There has been some growth from tax revenues of 3%. He stated that there has also been improvement in the employment picture.

The Hound is glad to see that the city has control of its finances. As always we must appreciate the work of the financial team at  the City. The only thing I question is the rosy scenario related to sales taxes. If one realizes that inflation has caused prices to rise, then surely one can extrapolate that the taxes associated those products will also rise. By all accounts, except the thoughts of the Federal government, inflation is rising between 8 and 10% currently and rose around 5% in 2010. That means if you see a 3% rise in sales tax, then you actually see no growth, because you lose it through the devaluation of dollars. I see this all the time. people are spending the same amount as last year, but trying to stretch the money more. People are stretched. They aren't going to expand their consumption, so there isn't going to be any increase in government revenues until the business model is addressed. It would be interesting to cost out revenues, expenses, and budgetary numbers versus inflation to see where we truly stand. 

2. Project Update and Approval of Change Orders No. 1 and No. 2 to the Midasco Inc. Contract for the Traffic Signal Upgrade Project in the Amount of $79,435.00 - The North Carolina Department of Transportation (NCDOT) has approved both Change Order No. 1 for $58,200,00 and Change No. 2 for $21,235.00, totaling $79,435.00 regarding the Traffic Signal Upgrade Project. Midasco Inc. is the contractor for this project. Change Order No. 1 is for the site license of the City intersection and Change Order No. 2 is for field ether net switches. This project is paid for utilizing 100% of Federal/State Congestion Mitigation Air Quality funds and has been approved by the NCDOT. No City of Hickory funds are required. - Chuck Hansen made the presentation. The signal timing project will help 155 signals out of the 196 signalized intersection in Hickory. The goal is to be completed by August. This is construction mitigation – air quality money.

3. Presentation by Hickory Police Chief Adkins Regarding the Success of the Catawba County Gang Initiative (CCGI) and the Recent “Call In” Held on March 3, 2011 - CCGI is a collaboration of all nine Catawba County Law Enforcement Agencies to create an environment that helps reduce gang/group related violence and crime. A “Call-in” is a notification meeting for seasoned offenders identified with a history of gang/group related violence and crime where service providers, faith-based leaders and members of the criminal justice system give a concise message to those offenders that violence and crime will not be tolerated in our community. The funding to launch this comprehensive strategy was provided by the North Carolina Governor’s Crime Commission. Chief Tom Adkins made the presentation.

The Purpose
1) Identify gang and grew violent crime offenders
2) place offenders and their associates on notice about the countywide initiative
3) Direct offenders who want to change their lives to community resources
4) Aggressively respond to acts of violent crime against our citizens and community
5) Tenaciously prosecute continued offenders in state and federal court
6) Continue our community partnerships and effort to reduce violent acts, while improving the quality of life

Chief Adkins mentioned a program, such as this, that is being coordinated in High Point, North Carolina and has been utilized in several other large cities. The High Point program is used as an interdiction method to stop drug trafficking. Hickory’s Project is directed towards gang activity, violent activities towards other persons, but from what he stated the two programs sound very similar. The goal is to stop criminal activity and give those who are participating in such illegal activity a chance to reform themselves before having to seek harsher remedies against these people.

On March 3, 2011, all nine law enforcement department heads came to Hickory to the Council Chambers; including the assistant district attorney, the chief probation officer of the district, agents from the DEA and FBI, and the US District Attorney's Office was represented. The Law Enforcement message was sent to those who participated in gang activity and were invited to attend. Law enforcement officials stated that they have these crimes that are occurring in this community and they are going to stop tonight. Law enforcement is going to work together as a county and community to prosecute people who participate in these illegal activities.

After the statements were made, it was explained that there are resources available to help these people. Hank Guess represented the elected officials of Catawba County and made a statement. Rev. Anthony Spearman made a faith-based presentation to the group. And Chris Johnson of the young men of integrity, made a presentation in which he stated that they could help with drug addiction problems and with anger management issues, but the offenders have to reach out to the organizations for them to help.

Addie Shuford spoke to the participants about the loss of her son to a homicide/act of violence a few years ago. She also had another son who is spending time in prison as a result of drug activity. She told the participants that they had three options. You can continue to offend and be locked up, you can risk your life and be killed, or you can change your life around.

There were 17 people that were invited. Out of the 17, 14 showed up. Chief Adkins mentioned the violent of offenders and some of the crimes that they have been charged with or committed and their past histories. All of these 17 people were on probation at the time that they were invited. One man showed up late and he was refused admission. Chief Adkins stated that if you cannot change your life by showing up on time, then obviously you are not ready for this program.

The Catawba County Sheriff's Department brought a metal detector to ensure that there would be safety. The participants were also patted down. They wanted to be sure that to keep safety amongst these people who might belong to different gangs and they weren’t sure how they would react. After an hour and a half briefing, five people stayed behind and they completed registrations. The next day two more offenders had shown up. As of today, three of the 14 men are attending the Young Men of Integrity program. What they wanted do is get the message out that there are options. And these people can change their lifestyles. The goal is to reduce violence in Catawba County.

The Hound likes this effort and believes that this effort to be upfront with people completely out of control, who are involved in the something wreckless,leaves no excuses. This is a positive way to approach a problem that might not be as bad here as elsewhere, but do we want to let it grow. This is the right way to do things.

Tuesday, April 19, 2011

I am the Media - I'll let you know when we have an Economic Recovery

The Standard and Poor's Index yesterday gave notice that they are changing the rankings of the United States as an investment:. (S&P sounds alarm on US debt - By Robin Harding and James Politi in Washington and Michael Mackenzie in New York)
The agency kept America’s credit rating at triple A but for the first time since it started rating US debt 70 years ago, cut its outlook from “stable” to “negative”. A negative outlook means there is a one-third chance of a downgrade in the next two years.

The Hound has shown the momentum that our nation has been in for the last several years and it is not good. I believe in accountability and if I could see signs that I was wrong about what has been called a recovery by our government and their supporters in the Mainstream media, then I would be glad to admit that I was wrong. Who seems wrong today?

I choose not to ride shotgun on the Titanic. I'm getting in one of those lifeboats, because I did not cause this economic catastrophe that we are in and it is not my job to put on a smiley face and sing kumbaya as the water fills my nostrils.

I am not saying that all is lost. This is not the end of the world. It is however time for us to recognize that we have a major malfunction happening with the economy. Gold does not run to $1,500/ounce and Silver does gyrate to $43/ounce because people suddenly have decided "Gee those shiny objects are neat." They have multiplied in value, because the world recognizes that there are major inherent risks associated with the United States Dollar and its stability, which had earned it "Reserve Currency" status is gone. This exponential growth in prices of hard assets and commodities comes from the fact that investors just don't have faith that the Powers That Be in the United States know what the Hell they are doing!!!

The worst part is that some of those people, who are investing in other interests in a so called "Flight to Quality," are the same people who have helped cause the problems that we currently see with our economy. Instead of trying to shore up the problems we see with the systemic issues we face with our economy, they are knocking people out of the way to get to a lifeboat themselves. The problem is that the Global Lifeboat they are trying to get into is going to be pulled down in the wake of the United States' Colossal Economy.

The problems are simple to assess, but the remedies are going to be tough, and they will be tougher the longer that you fail to heed the warning signs. 1) The Global structure set up the last two decades-plus has been a failure and needs to be reassessed. 2) We have systemic fraud that has been built into our economy that has become top heavy to the point that even though it is a relatively small part of the economy in size it has a huge impact on the scope of the big picture and it has permeated every crack and crevice of the financial aspects of our economic and social structure. It is time to get real about accountability and justice related to what we have seen with the financial state of our economy. 3) It is time to realize that the viability of this nation rests upon the focus of the well being of the nation's citizenry as a whole. We cannot have a robust economy, much less a recovery, by focusing on the fat cats at the top of the food chain, while allowing everyone else to sink to the bottom and languish.

It is time to get past the Left-Right paradigm that has choked the governance of this nation. And those are not just words. I mean what I am saying. I remember someone that I care deeply about buying into Obama's speech the night he was elected. I told her that she didn't even know what she was talking about. That all he was chattering about was grandiose superlatives that had no direction. Well, needless to say that conversation went nowhere, because she was emotionally invested in Obamamania to the point of Obamagasm.

Obama has always spoken in such generalities that his minion attach their personal desires and ride some wave of personal euphoria towards what they desire for his teleprompted words to mean. Folks, Obama is as much a puppet as Howdy Doody. He is an empty suit. Where has he shown intelligence? He has no personal convictions or core principles. He is only a vessel, a conduit, for the people who control him. The mad scientists who are polluting this world, poisoning us, and who are ruining our chances of living peaceful, fruitful, and sustainable lives. Objectively, one has to admit that this Presidency has been a complete and utter failure. What has he been successful at? I guess being a NCAA Bracketogist in Chief? Blowing money this nation doesn't have on jaunts for himself and his family?

I don't say this to support what the Republican Party is doing. John McCain would have been no better. He is a progressive too. One minute he is for Immigration amnesty and the next he is against it and then he is for it again. All centered around Horse Race politics. He voted for the TARP bailout, after initially saying he was against it, of the "Too Big too Fail" Financial Institutions.

When the GOP talks about shared sacrifice, they don't include the Fat Cats on Wall Street. We need them to be untouchable mega billionaires so that they can tinkle down on us and we should all be subservient and feel blessed to receive crumbs. Most of the Republicans still believe in the low tax, trickle down policies that have been an abject failure. There is always an argument that lumps the upper middle class making a couple hundred thousand dollars a year in with those making $1 million, $10 million, or multiples of that per year. It has become abundantly obvious that the mega-rich are not creating jobs in this country. If they were, then we wouldn't have U-6 employment of 17.1% , only 45.4% of the people of this nation currently holding employment, and stagnant wage growth.

In order for our nation to move back towards a viable economic system, these issues will have to be addressed. We are going to have to see the Opportunity Playing Field become more level once again. This will only be done by stopping the Least Common Denominator attitudes towards the middle class that pervade the mindsets of our so called leaders.  We cannot cut costs to achieve prosperity. Revenues have to be part of the equation, not government revenues, GDP. We have to grow the pie and get the Economic Engine built upon the principles of Ingenuity, Innovation, hard work, and perseverance built back into the system. We must reward good and punish bad. And we need to protect the interests of the United States within our own borders and get out of these foreign entanglements created by these never ending wars.

When we do this, then we won't need used car salesmen posing as politicos to sell us a lemon recovery. The recovery will be undeniable and it will sell itself. If you have to run around telling everyone that we are in a recovery, then it's not an economic recovery.

Sunday, April 17, 2011

Economic Stories of Relevance in Today's World -- April 17, 2011

Simon Johnson Explains "What The Banks Did To Us" And Why "Seriously -- Goldman Sachs Can't Fail" - Business Insider - Courtney Comstock | Apr. 11, 2011 - "What's the public loss? Larry Summers said from this podium yesterday that the TARP money would be repaid from banks and that's probably true, but that's not the cost. Is it 8 million jobs lost? Is it a 6% fall in unemployment and we're still 5% down below the peak? Is it the increase in net federal government debt held by the private sector in the United States?

In Financial Crisis, a Dearth of Prosecutions Raises Alarms - New York Times - By GRETCHEN MORGENSON and LOUISE STORY - April 14, 2011 - It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted? ...

As nonprosecutions go, perhaps none is more puzzling to legal experts than the case of Countrywide, the nation’s largest mortgage lender. Last month, the office of the United States attorney for Los Angeles dropped its investigation of Mr. Mozilo after the S.E.C. extracted a settlement from him in a civil fraud case. Mr. Mozilo paid $22.5 million in penalties, without admitting or denying the accusations... Historically, Countrywide’s bank subsidiary was overseen by the comptroller, while the Federal Reserve supervised its home loans unit. But in March 2007, Countrywide switched oversight of both units to the thrift supervisor. That agency was overseen at the time by John M. Reich, a former banker and Senate staff member appointed in 2005 by President George W. Bush... Robert Gnaizda, former general counsel at the Greenlining Institute, a nonprofit consumer organization in Oakland, Calif., said he had spoken often with Mr. Reich about Countrywide’s reckless lending... “We saw that people were getting bad loans,” Mr. Gnaizda recalled. “We focused on Countrywide because they were the largest originator in California and they were the ones with the most exotic mortgages.” ... In a January 2010 memo, Brad Bondi and Martin Biegelman, two assistant directors of the commission, outlined their recommendations for investigative targets and hearings, according to Tom Krebs, another assistant director of the commission. Countrywide and Mr. Mozilo were specifically named; the memo noted that subprime mortgage executives like Mr. Mozilo received hundreds of millions of dollars in compensation even though their companies collapsed... However, the two soon received a startling message: Countrywide was off limits. In a staff meeting, deputies to Phil Angelides, the commission’s chairman, said he had told them Countrywide should not be a target or featured at any hearing, said Mr. Krebs, who said he was briefed on that meeting by Mr. Bondi and Mr. Biegelman shortly after it occurred. His account has been confirmed by two other people with direct knowledge of the situation...

A year later — with precious time lost — several lawmakers decided that the government needed more people tracking financial crimes. Congress passed a bill, providing a $165 million budget increase to the F.B.I. and Justice Department for investigations in this area. But when lawmakers got around to allocating the budget, only about $30 million in new money was provided.

Former JPMorgan Executive Llodra May Face SEC Suit Over 2007 CDO Marketing - Bloomberg - Joshua Gallu and Jody Shenn - Apr 12, 2011 - The SEC has been probing whether JPMorgan, the second biggest U.S. bank by assets, and Steffelin’s former firm, GSC Group, misled investors about hedge-fund Magnetar Capital LLC’s possible role in selecting underlying assets in the $1.1 billion Squared deal, according to a person briefed on the matter who spoke on condition of anonymity because the probe isn’t public... The probe is part of the SEC’s wider investigation of how banks packaged and sold mortgage-linked investments as the housing market unraveled in 2007. The agency has targeted firms at various stages of that process, ranging from loan originators such as Countrywide Financial Corp., to underwriters including Goldman Sachs Group Inc. (GS), which agreed to pay $550 million last year to resolve claims it misled investors in a subprime-linked CDO.

Goldman Traders Tried to Manipulate Derivatives Market in '07, Report Says - Christine Harper and Joshua Gallu - Apr 13, 2011 - Company documents show traders led by Michael J. Swenson sought to encourage a “short squeeze” by putting artificially low prices on derivatives that would gain in value as mortgage securities fell, according to the report yesterday by the Permanent Subcommittee on Investigations. The idea, abandoned after market conditions worsened, was to drive holders of such credit-default swaps to sell and help Goldman Sachs traders buy at reduced prices, according to the report...  Goldman Sachs traders abandoned the short-squeeze attempt after discovering on June 7, 2007, that two Bear Stearns Cos. hedge funds that specialized in subprime-mortgage investments were collapsing. Salem e-mailed Swenson and another colleague to suggest trying to buy short positions, known as “protection,” on collateralized debt obligations, or CDOs, from hedge fund Magnetar Capital LLC, according to the subcommittee’s report. 

IMF warns US to make a 'down payment' on deficit - Richard Blackden, US Business Editor - Apr 13, 2011 - The US should make a 'down payment' this year on tackling its budget deficit, the International Monetary Fund has warned, as it emerged that the world's biggest bond investor is shorting the country's bonds... "Without attacking entitlements - Medicare, Medicaid and Social Security - we are smelling $1 trillion deficits as far the nose can sniff," Mr Gross (Pacific Investment Management Co (Pimco)) said in the firm's monthly outlook.

More Americans leaving workforce - USA TODAY - By Dennis Cauchon - April 14, 2011 - Only 45.4% of Americans had jobs in 2010, the lowest rate since 1983 and down from a peak of 49.3% in 2000. Last year, just 66.8% of men had jobs, the lowest on record.... The bad economy, an aging population and a plateau in women working are contributing to changes that pose serious challenges for financing the nation's social programs... "What's wrong with the economy may be speeding up trends that are already happening," says Marc Goldwein, policy director of the Committee for a Responsible Federal Budget, a non-partisan group favoring smaller deficits.

Corrupted!: 5 Shocking Examples Of Government Corruption That Will Blow Your Mind - The Economic Collapse Blog - $38.5 Billion In Budget Cuts Is Really Just $352 Million In Deficit Reduction? ... The Federal Reserve Sent Billions In Bailout Aid To Millionaires and Billionaires In The Cayman Islands ... Mitt Romney Declares That He Will Not Be Going After Ben Bernanke Or The Federal Reserve ... Nancy Pelosi Declares That "Elections Shouldn't Matter" ... 6 Year Old Girl Molested By The TSA

Friday, April 15, 2011

Economic Secession by Jay Adams

This nation is dealing with issues that are quite remarkable. Our economy has been severely compromised by the policies of the past which have restrained the ability of American labor to compete in the global market place, created debt that simply cannot be repaid within the context of our existing economic capabilities, nurtured an entitlement class that resolves with violent intent to preserve its 'nouveau rights', a fourth estate that has largely abrogated its fundamental responsibility to act as a counter to political mischief and a religion that has targeted our nation as the 'evil' that must be cleansed from the earth.

This represents quite a daunting scenario, but the most insidious and perhaps greatest threat is the loss of control of the Federal Government by the people. Government is spending at a rate that is simply disastrous according to many credible economists, but there appears to be little that can be done in the context of the American political system as it functions today. I am contemplating an abstract method of regaining control. It involves a concept of 'economic secession', that is a departure from the economy that operates exclusively on the US dollar. There is evidence that this is already underway.

As this is written in the spring of 2011 I have observed that Utah has adopted a policy of allowing taxes to be paid in precious metals and North Carolina legislation has been introduced that would create an intrastate currency. This is an indication that some folks are concerned that the US dollar is in peril and rightly so. (This is confused by the fact that people like Robert Reich and Paul Krugman claim that the concern is misplaced and the National Commission on Fiscal Responsibility and Reform appointed by, and ignored by, 0bama; chaired by Erskine Bowles and Alan Simpson say we are in a crisis situation, and in spite of the overwhelming evidence there is still a debate).

In this confused environment it is a daunting thought for a state to set up a credible currency and maintain it in a manner that preserves its integrity. However, the Federal Reserve is in the process of ruining the credibility of the US dollar and against that backdrop, perhaps there is a way of creating an improved means of trade on a local level. First off, I don't see a single state pulling this off, but perhaps a state that is well resourced like Texas might. However, a coalition of states might form under a set of stated principals. This is where things get interesting…..

Our country is deeply divided between Blue States and Red States (Left and Right). There are a small group of 'purple' states like NC that tend to switch back and forth. This proposal would establish criteria for states that wish to participate in a 'Red State Currency', if you don't meet the criteria…you use the US dollar exclusively. The criteria would, in effect, establish a set of principals that are felt to be economically sound. Much like other governing documents this 'Declaration of Economic Principals' would be similarly modified by the participating states. Through this exercise the participants would blend recognized Constitutional governance with a set of Economic Principals that focus attention on the essential activities that create and sustain a sound state in the economic sense. In the context of the 'red state'-'blue state' dynamic, this would be a unilateral action.

Of course the Federal Government would react very vigorously to block such an idea. No doubt the Feds would use all manner of tactics such as withholding all manner of Federal funds. So this plan would have much to overcome and must be developed in such a fashion that the component states are, in effect, more powerful than the Federal Government! Is this possible? Well the 'economic state of the union' is composed of many states like California, Michigan, Illinois, New York and others that are effectively bankrupt. There are other states that are troubled simply by the Federal mandates they must fund. If the relatively healthy states, which tend to be 'red' states, ban together would this coalition not be more economically healthy than the 'whole'?

If states were to follow Utah's lead and recognize precious metals as currency and establish a method of preserving and regulating the use of same, how will the public react to this option? If the public should embrace this "new currency" how will the Federal government react? Since the Federal Reserve is a separate entity, how would it react? How would such a move be regarded in the global economy? I am not an economist but I would think that countries would see this as an attack on the US dollar, although an internal one. This could weaken the dollar in their eyes and might erode its desirability. But how would the global economy view the emerging currency? How would the speculators react? I wonder about these things… and I am seeking illumination… Help me!

This concept might accomplish another needed action. Our country is deeply divided philosophically with regard to the purpose of government. On the Left the Constitution is openly rejected as a governing document (except when it serves their purpose, for example, the ACLU, ACORN, etc.). They use the notion that the Constitution is over 200 years old and is no longer completely relevant to the operation of a contemporary government. It is fairly clear that the Left is moving toward a global government and there is certainly a growing effort to position the US for that merger. I won't enumerate the events that suggest this as fact, but at this juncture the evidence is abundantly clear. This concept is extremely divisive to those on the Right (that are paying attention) and as more evidence emerges it has the potential to polarize the nation in a way that is truly hard to imagine. It appears that the Left is fully aware of this and is attempting to create a circumstance that effectively "springs a trap" rather than allows a decision. This isn't going to work… there are many folks on the Right that see the "light" and are going to shine it everywhere. The Left is pretty clever but they are not nearly as smart as they think (They 'deem' themselves intelligent). The Right must patiently overcome the guile of the Left. This proposition may create a useful counter action to the efforts of the Left…

By actually promoting a form of "economic secession," through the adoption of state by state economic principals, the states that adopt the fundamentals of conservative fiscal policies would strip away many of the entitlement programs required by the Federal Government. By weaning themselves from, or minimizing the use of, the US dollar the states could establish programs that use the "state currency" and theoretically disenfranchise themselves from the US dollar. This is a reversal of the mechanism I observed when my alma mater, The Citadel, was required to accept women because the school had accepted Federal funds. In my proposal, if The Citadel were to (in some form or fashion) operate without US dollars it would regain its autonomy as would all other entities that are under the gun of the Federal government through the poisonous use of its money. Of course this would be a compelling reason to use the "state currency".

Using the premise that this would segregate fiscally conservative states from the more liberal states, over time this would tend to 'move' the more liberally minded folks to the blue states and the more conservatively minded folks to the red states. As this occurs the red states would develop a "cultural fabric" that would be quite different from the blue states. Perhaps this might result in highly developed arts and culture in the blue states and more business development and wealth accumulation in the red states (which would no doubt, lead to more artistic endeavors and cultural development). In my opinion this would "segregate" the states along economic ideology. Segregation is ordinarily considered a bad thing, but in effect this would allow a form of "free market" for each philosophy.

What we have today is a Federal Government that has abrogated its responsibility to maintain a credible currency. There are a variety of arguments with regard to the Federal Reserve's actions and policies. Because of the uncertainty that has resulted in the circumstances of the past decade there have been calls for auditing the Fed or outright elimination of the Fed. Many believe that the US dollar on a trajectory toward collapse in the global marketplace. My proposal offers an alternative method of trade that would originate within the various states but may be extended by reciprocity or other agreement to allow some interstate use of an alternative currency.

This concept would, over time, create a competitive environment where the policies that govern the use of the US dollar would have to compete with the policies of the "state dollars". If the blue states have entitlement programs that require relatively severe redistributive tax and fee structures, the businesses and residents of those states may find a more favorable environment in a 'Red State'. If a person or business sees value in the entitlement programs of a blue state rather than the more Spartan programs of a 'red state,' they would go to the more favorable environment. As you can see this would uncouple the existing mechanisms within the Federal Government that transfer wealth from 'red states' to 'blue states' and, moreover, consolidate the citizens that embrace entitlement policies from folks that rely on and embrace free market policies.

This proposal may appear fanciful, but it is certainly less radical than the outright secession that some contemplate. The Federal Government is out of our control and it seems that our political system is incapable of coping with the economic reality we seem destine to realize. What I have proposed here is not a 'sweeping plan' to restructure the present economic system, it is intended to be an incremental 'movement' that will create economic pressures to clarify policies that are sustainable, and illuminate policies that are not, to identify economic realities with regard to health care, defense, unemployment insurance, minimum wage, building codes, workman's compensation, highway construction and all of the myriad of activities that state and local governments fund with the Federal government as the "rich uncle" that picks up the slack. Rather than continuing the academic debate this proposal creates an environment where these practices can be tested in the real world at the individual state level.

A state may elect to adopt a completely "lean and mean" profile of nearly pure capitalism, while another chooses a package of governmental amenities that provide various levels of support and services, while another may choose a higher level of services. If the state can provide its "package" at a level of efficiency that keeps costs at an appropriate level, that state will enjoy economic success. If a state cannot operate as efficiently it will have to change its practices or reduce its services. Over time the state will achieve "equilibrium" that matches its natural features (coastline, weather, natural resources, available infrastructure, cultural amenities, etc) with the underlying "cost of operation". In effect this would "re-boot" the economy/culture, which is better than outright "destruction & creation".

Of course there would be monumental 'push-back' to such moves and I am surprised that the Feds haven't taken exception to Utah's legislation regarding the use of precious metals. Recently a gentleman in NC was found guilty of (I'm not sure of the charge) manufacturing coins made of gold and silver. The judge even remarked that he was a 'terrorist' for producing these coins. Apparently the fellow gave notice to all of the agencies he could identify that he intended to do this without objection. He then produced something like $7.5 M of these coins and folks began buying them and using them for barter. The Feds have now found him guilty of something and now they want to confiscate the coins!

So, the Federal Reserve is printing money that has no intrinsic value and we use that money for exchanging value. The Feds are reducing the value of those dollars every day they print more of them. A person creates coins that are made of 99.9% pure gold and silver to be used as barter and he is a terrorist….. what is wrong with this picture?

This is intended to pique your imagination…. Whatdayathink?

The Train that hit us in 2008

Shell, I know about the political conspiracy aspect of your outlook, but answer this for me:
M = money supply, V = velocity of money, P = price level, Y = real GDP Assumptions:
* V is constant
* Money has no effect on real variables (so ΔM has no effect on Y)
* Y is entirely determined by the fixed stock of labor, capital and technology

Note that each side of the equation equals the Nominal GDP (including the inflation)

If the the money supply times the velocity of money = the price level times the size of the real economy , why did the Federal Reserve not do right thing when credit seized up and quit spending money (ie velocity slowed requiring an increase in the money supply to keep prices from falling or the economy from contracting or both). And if the money supply, BmV=PY (where B is the monetary base, m is the money multiplier, V is velocity, P = price level, Y = real GDP, and PY = nominal GDP) showed that the velocity and money multiplier fell like the proverbial t**d in the well, why come  Bernanke ain't the man. Peace HH


The money went to the banks. There was a bubble. It began with the 1990s and the internet revolution and then the growth and speculative stocks that bubbled up and burst. There was a lot of pent up demand associated with those stocks and people invested and took a beating in late 2000 when Enron and various other stocks were thought to be cutting edge at that time and were found to be fronts for fraud.

That Tech Bubble along with the 9/11 should have put us into a deep recession, but the Fed decided to create this liquid money paradigm. Banks were allowed to use less and less reserves to make loans. When I was in school we were told that is was imperative under the fractional reserve system that banks hold a 10% reserve on capital deposits. That means you can loan 90% out. That is a 9 to 1 ratio. During the Real Estate Bubble, Banks were keeping around 2% of those reserves and loaning out 40 to 1+.

Then you saw the end of Glass-Steagall and I thought that was good, because in school we were brainwashed that this would be good. But what we failed to realize is that regulations and fiduciary responsibilities would be ignored and manipulated and the banking system would be turned into a rigged casino.

The Derivatives Financial Instruments related to this situation were the Collateralized Debt Obligations and Credit Default Swaps. Those are what took down Bear Stearns and Lehman Brothers. Money and Capital were created by those enterprises and all of the enterprises that were associated with the mortgage bubble. It was trillions of digital dollars of convoluted money that was traded in the markets and it was basically fraudulent, because there is essentially no paper trail, because of how these instuments were divied up and traded multiple times. That is what the fraudclosure and robosigner issue is about, because mortgages are supposed to be secure instruments. Do you understand secure. Don't you hope that your mortgage is secure and that you are paying your mortgage fee to owner of the mortgage and they are properly recording it.

When the housing boom slowed and the more risky borrowers started defaulting, then Bear Stearns had trouble and they were going to have to eat the CDO's and it was hundreds of billions of dollars, but they didn't have that much in assets. Henry Paulson let them go down and it caused a cascading effect, but much of this was hidden by the surging oil futures game going on in 2008. When Bear Stearns went down it started pulling money out of the system, because all of these Financial Institutions have tentacles in one another, they are invested in one another, but this was hidden by the money in the economic system related to petroleum resources and energy, but that wasn't sustainable and people were having a hard time meeting their mortgages, because they overpaid what the market would bear for their houses and they hadn't taken into account the need to have a cushion in case the economy slowed. 

The United States has become a consumer based economy. So you saw a further cascading as the economy slowed down, because energy was eating a huge chunk out of individual household budgets. And this money was going to the oil companies and the government and not staying in people's pockets for them to invest as they saw fit. This further slowed down the economy, because people cut down on driving and participating in the marketplace. What did that do to the velocity of money?

So all of these banks and investment houses had been buying oil futures and CDO's and both markets collapsed under their own weight. That pulled money out of the system at a rapid rate. That created negative velocity of capital, because all of these financial institutions were invested heavily in these derivatives. they couldn't loan money out, because they were racing to meet their obligations on all of the derivatives contracts. So the Fed and the Treasury conspire to race in and shore up these banks by essentially paying these obligations with fresh digital money.

Remember TARP was essentially created under the auspices of helping mortgage owners to meet their obligations, but a few days after it was passed, Paulson gave the money to the banks for capitalization. It was so that they could use it as a revolving door on these derivative contracts that they needed to purge from their books, but the problem is that they can't, because there isn't the demand for these toxic assets.

So basically that is what the Ponzi system is for. M3 is the entire amount of all money in the U.S. Dollar system and the FED has created all of this for financial institutions to use at basically 0% interest (which is a negative lending rate due to inflation) for a carry trade and to make profit off of it with the hope that they can eventually make enough profits to cover the toxic assets that they need to purge from their system, but I don't think that is even possible, because in the end these assets are worthless (and continuing to deteriorate) and all they are doing is creating a capitalization bubble and that will eventually pop too. Because when the inflation really kicks in, then interest rates are going to have to rise, causing our nation's debt to spiral. A debt, by the way, that has been exacerbated by all of this digital money. Then after the Ponzi scheme collapses, there will be a deflationary depression the likes of which the United States has never seen.

Currently, these financial institutions are playing in the markets buying tangible assets (food, energy, precious metals), because as you can see they lost their @$$3$ on the convoluted derivatives. This monster is feeding off of itself and it isn't going to stop until the people that perpetuated this are brought to justice and the toxic assets are written off, which is what should have happened to start with. We can do this now or wait until the total economic collapse and by that time the crooks will have left the country and be holed up in some guarded community in the Grand Cayman's, while we deal with the wreckage.

And they definitely need to separate holding companies from financial institutions again, because people need to have a stable, reliable  place to put money they need for necessities (mortgage and current living expenses).

Whew!!! Don't make me do that again!


Wednesday, April 13, 2011

April Rant - Governance (Link)

I had started the article on governance before the Bobby Lutz article so it is chronologically listed before that article, because I did not cut and paste it into a new form. So that this article is easier for those to find who have come straight to The Hickory Hound, I have listed it in the link that you can click below.

April Rant - Governance

Monday, April 11, 2011

Catawba County's Bobby Lutz helping restore basketball Tradition at NC State

I think in reading this blog that most of you understand that it was no secret that I wanted Hickory's own Rick Barnes to take the challenge of bringing NC State's rich basketball tradition back from the doldrums. Well as most everyone knows, it wasn't meant to be and Coach Barnes decided to stay in Texas. The chances of Coach Barnes ever coming back to our state to coach have finally been extinguished, but I hold no animosity towards him and I wish him the best of luck at the University of Texas, except when his team faces the Wolfpack in the future.

Coach Mark Gottfried decided to accept the challenge of becoming NC State's next basketball coach and it is a feel good story. Coach Gott was a freshman All-American basketball player at Oral Roberts where he met Debbie Yow, NC State's current athletic director and a North Carolina native, who was the women's basketball coach there at that time (She is the sister of NC State legendary women's coach, the late Kay Yow). Due to a coaching transition, Mark Gottfried transferred to Alabama where he led the program to three consecutive Sweet Sixteens as a player in the mid-1980s. Gottfried was an All-Southeastern Conference competitor, but he just didn't make it as a professional.

Coach Gott began his assistant coaching career at UCLA. Everyone understands that UCLA has won the most national basketball titles of any school in the nation and during Gottfried's time as an assistant under Jim Harrick they won their last National Title in 1995, which was their 11th. Coach Gottfried has long stated the importance of the wisdom that he attained from the Legendary John Wooden during his years in Los Angeles. He went on from that National Title team to become the Head Coach at Murray State for three years before joining his Alma mater Alabama.

Gottfried had success at Alabama, but he himself admits to making mistakes during the latter part of his tenure; he was named the Coach of the Year in the SEC in 2002, he led Alabama to five consecutive NCAA tournament appearances (2002-2006), he took the team to an Elite Eight appearance in 2004 (the furthest an University of Alabama Basketball team has ever been in the NCAA Tournament), and he had the team ranked Number 1 in the nation during the 2001-2002 season. Alabama is first and foremost a Football school and basketball has always been an afterthought, but through most of his tenure there Coach Gottfried drew attention to that program. Towards the end that attention became negative; with team goal underachievement, NBA defections, and others walking away. This led to Coach Gottfried's awkward resignation in the middle of the 2008-2009 season.

Coach Gottfried was given a second chance by NC State and he has fully acknowledged that at his introductory Press Conference and in the subsequent articles written in local and national publications. During his press conference he stated that he learned a lot of things from the end of his tenure at Alabama and during his subsequent two years away from college basketball coaching that he spent with ESPN as a color analyst. One of the issues that he addressed was his desire to bring in the best assistant coaching staff in America to help with his weaknesses and strengthen the overall basketball teaching and fundamentals of the players in the program.

One of the hires was made today. It is Bobby Lutz from right here Catawba County. This should be an exciting prospect for the people of our area, especially those from Sherrills Ford, because this gives us a high profile tie-in to a program that is marketed and branded nationally. It may not have the savoir faire that the hiring of Rick Barnes would have brought to the area, but it is something that Catawba County and Bandys High School can definitely hang its hat on.

Bobby Lutz was a very solid coach at the University of North Carolina at Charlotte. He played basketball under the late Bill Bost at Bandy's High School in the mid 1970s, graduating in 1976. At one time Bill Bost was the winningest Boys Basketball Coach in terms of total wins in the State of North Carolina. And Bill Bost not only coached the Boys team into being a powerhouse, he also coached the girls team to the same stature.

Bobby Lutz was named the coach at Pfeiffer College at the age of 28 in 1986. During his nine years there, he won right at two-thirds of his games, made the NAIA tournament every year, and took the school to one NAIA National Championship game. From there he went to coach as an assistant at UNC-Charlotte under Jeff Mullins and Melvin Watkins before becoming the head coach in 1998.

Lutz was the head coach at UNC-Charlotte for 12 years, appearing in 5 NCAA tournaments and 1 NIT in his first seven years. The University also won two Conference USA championships and a Regular Season Championship during that time. In 2005, UNC-Charlotte was forced to move to the Atlantic 10, because so many top quality basketball programs left Conference USA (University of Cincinnati, Depaul University, Marquette University, and Louisville University) and moved to the Big East Conference. The Charlotte program has struggled making the transition and has since only made two National Invitational Tournament appearances in the subsequent years. It is my opinion that UNC-Charlotte should have stayed in the Conference USA or moved to the Colonial Athletic Association where they would have endured much less traveling and had UNC-Wilmington as a natural rival. But because of the struggles, Bobby Lutz took the fall for the programs lack of success.

I just think it is exciting that Bobby Lutz will represent our State and our area as a part of the largest University in the North Carolina system's basketball program. He is someone who has always represented our area well. I think he will be an aggressive recruiter in the North Carolina area and help keep many of these guys home here in the State, whereas Duke and the University of North Carolina at Chapel Hill concentrate on being national entities and looking outside the state for talent first. As the North Carolina State press release states:

A native of Catawba, N.C., Lutz led Charlotte to a school-record five 20-win seasons, averaged over 18 wins a year and won three league titles (1999, 2001, 2004) in his tenure with the 49ers. He had four top-20 national recruiting classes and tutored 10 players who earned first-team all-conference honors. Five times in his career a Lutz-coached 49er squad knocked off a top-10 opponent, including a win over No. 3 Cincinnati in 1999. Five of the eight wins over top-10-ranked opponents in Charlotte’s history came under Lutz's watch. In 2005, Lutz was a finalist for the Jim Phelan National Coach of the Year Award.

It will give me extra pleasure seeing someone from the area work diligently to bring North Carolina State's basketball program back to prominence. These kinds of connections and stories are important to our area or any area. Success breeds success. Coach Gottfried and Coach Lutz are already working hard in Raleigh and building a rapport with the locals, before long they will be appearing here in Catawba County and the surrounding area to meet and greet the Wolfpack faithful.

Hey, it's only college sports and in the tumultuous times in which we live it isn't life and death; but even if you aren't a Wolfpack supporter, it should be exciting times for the State of North Carolina. The Atlantic Coast Conference isn't what it once was in basketball and this has pretty much coincided with the demise of North Carolina State's program a generation ago. Those of us old enough to remember, truly know what ACC basketball was all about. Today's brand is an emperor who wears no clothes. Duke, Carolina, and the dwarfs has not worked.

It used to be that an ACC with 7 or 8 teams would have five teams in the top twenty in the nation. The last several years it has been hard to fit in two and that is with twelve teams in the conference. It has become hum-drum and television ratings and revenues prove it. My prediction is that the resurrection of NC State's basketball program would go a long way towards the resurrection of the Brand that we all grew up with and cherished in the 1970s and 1980s and the kids today don't really have a clue about. Wouldn't it be something to have ACC basketball back. Wouldn't it be something to have the Big Four mean something again. One can only hope. One can only hope.... A Saga... To Be Continued