Galgonov - World in Trouble

[jbg]

No question, these are scary times. Some see the glass half-empty, some half-full. I see a largely mixed bag, but thing that the people who ought to benefit

The rather alarmist article excerpted below (in patches, link to article) and my interspersed responses illustrate my views, but I'd like to hear competing ones, without too much cursing, if possible. Galganov's text in yellow, mine unhighlighted.

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That the world’s in very big trouble is a fact.

What’s happening in the Moslem world is going to explode like an atomic bomb, sending toxic clouds of Islamo-Fascism throughout the planet.

But that’s not my greatest fear, since I truly believe we can contain and defeat Islamist militarism once we decide to do it.

My fear has much more to do with our economy.

As a Canadian, watching our dollar rise to $0.07 above the value of the US Greenback, I have to shudder. If our Canadian dollar becomes too expensive, Americans will no longer purchase Canadian made products. They won’t even visit as tourists.

Since the US is the single largest consumer of Canadian made goods, and virtually 100% of our international trade surplus (about $100 billion) comes from south of the 49th parallel, our strong Canadian dollar is no gift to us.

We keep reading about the AMERICAN sub-prime investment fiasco, I emphasized AMERICAN, because that’s where this disaster was created, but it’s not ONLY the fault of the Americans, since greedy investment houses including banks worldwide couldn’t wait to get their hands on this “investment” crap in search of making a quick buck.

Who we blame for this disaster is irrelevant. What’s more important is, what can we do about it, since there might be hundreds of billions of investment and pension dollars at risk?

The scary truth of this - is that this could easily become the largest financial debacle since the Crash of ’29. Bigger than the Dot Coms. Bigger than the silver and gold scam of the 80’s. Even bigger than the S&L’s.

The "sub-prime" debacle is both more serious and less serious than meets the eye. The immediate problem is caused by the politically connected bleatings of people who wanted something, i.e. risky returns in a risk-free environment, for nothing. I have no sympathy for them, or for the 27 year old multitasking milliionaire "geniuses" that put the Citigroup and other toxic combinations together. They all sought to create "shareholder value" out of thin air, by borrowing on the assets of acquired companies in order to create empires, and the implosions are well-deserved.

What is more serious than meets the eyes is the root problem; the bidding up of the housing market to insane levels. Back when I moved into Scarsdale, we paid $41,000 for 2 Continental Road. We sold it for $81,000 in 1974, and now it's "worth" slightly more than 10 times that. Over that period the overall price level is up about 4 or 5 times, about in sync with incomes. Thus, this rather, by now, rundown house, needing major repairs, is unaffordable other than by means of adding installment debt on to meet monthly debt service. This will take a 33% correction in prices, which will occur, to fix. That will put many non-subprime mortgages "under water"; which is why the crisis is also more serious than meets the eye.

Another terrifying prospect is the rising cost of energy, and how North American oil-greed can murder the golden goose.

One of the questions we should NOT be asking ourselves is this: Will the cost of oil reach $100 US per barrel? The real question should be: Will the cost of a barrel of oil stop at $150 US?

The most important question of all should be: If Canada and the USA are not members of OPEC, why in the hell are our oil barons matching OPEC prices?

It is unconscionable greed that is spurring our oil industry to charge so much for a product they do not create, that their unabated greed will put North America into a Great Depression.

</span>

I happen to like Galganov but an economist he's clearly not. Oil is a "fungible" commodity, i.e. one that trades in a seemless market. What Galganov is advocating is Trudeau's 'NEP, but he doesn't realize it. Trudeau, of course, had no jurisdiction over resources, which are under provincial control under BNA. So he imposed export controls in order to "isolate" Canada from the then-soaring world market.

Eventually, NEP was repealed when the floor price couldn't be maintained against a plummeting world market. When the real estate and "China" boom both inevitably unravel, oil should be down to $40/bbl, maybe even $20-$30. That problem solved, but with lots of wreckage along the way.

We have to deal with the Islamists. That’s a fact.

</span>

Damn straight.

What we really need is a great American leader who will stand-up and say the world is broken, and this is how we are going to fix it. Do you see that leader anywhere on the horizon?

He should be careful what he wishes for. Knowing our country he'll probably get it; and like the bargain as much as Diefenbaker and Trudeau (remember the elephant and mouse analogy) did.

Edited November 7, 2007 by jbg

[M.Dancer]

Your formating makes the article all but unreadbale....

[jbg]

Your formating makes the article all but unreadbale....

Good point. Let's try that again.

[M.Dancer]

His point about Canada being the largest supplier of goods to the states is in error. I believe it was about two weeks ago that China surpassed Canada.

[Pliny]

That the world’s in very big trouble is a fact.

Someone's world is in trouble? I thought we were in heaven.

If he means that my life is going to be negatively affected by bozo politicians then he speaks sooth.

Life will present challenges to us that we will either meet or succumb to. We may even destroy ourselves. Do we need challenges from ourselves? Life would be dull without challenges.

[jbg]

Life will present challenges to us that we will either meet or succumb to. We may even destroy ourselves. Do we need challenges from ourselves? Life would be dull without challenges.

Certain things, called crises, are really not. I am not moved by the fate of someone who bought more house than they need or can afford. I have worse off people to weep for.

[Pliny]

Certain things, called crises, are really not. I am not moved by the fate of someone who bought more house than they need or can afford. I have worse off people to weep for.

I agree.

Governments are notorious for ignoring challenges and responding to crises. Some individuals also ignore challenges in their lives and then turn to government in their crises. Some, I suppose, are totally dependent on others and when they are abandoned are left in crisis. I think we need to learn to handle our challenges instead of ignoring them or relying upon government or someone else to meet our challenges. We cannot stupidly blunder through life and vote ourselves entitlement when crises occur.

[jbg]

We cannot stupidly blunder through life and vote ourselves entitlement when crises occur.

Let me make it real simple. I live in a relatively affluent Jewish, upper middle class community. I make a decent amount, but between special ed expenses for my younger son, the mortgage and property taxes there isn't much left over. I pay about $22,000 per year for mortgage, $9,000 per year for property taxes and $3,000 per year for homeowners' insurance on a house "worth" about $600,000. I financed mine when I bought it for $300,000, and in my refi's, have at most returned the mortgage to its original amount of $236,000 and I now owe $180,000 on the house. I drive a 2000 Camry with about 86,000 miles on it.

Many of my compatriots are so-called "financial advisors" who live in houses "worth" double mine, with mortgage burdens about triple mine (because they financed their houses more recently, at times for 100% of value). They routinely talk of incomes about quadruple mine, and of buyout packages, if they get fired, for $13,000,000. While I know they are blowing hot air on a lot of this, they don't find people like myself who aren't in the same category worth talking to.

When their so-called "income" dematerializes because suddenly deals aren't closing, and employers aren't cheerfully writing checks for $13,000,000 to people more than a bit full of themselves, they are in a major financial bind. That is what a lot of this so-called "mortgage crisis" is about. Both the mortgage borrowers are in trouble, and the financial geniuses who thought they could earn 10% returns on "safe" investments are in trouble.

And I'm smiling.

[Pliny]

Let me make it real simple. I live in a relatively affluent Jewish, upper middle class community. I make a decent amount, but between special ed expenses for my younger son, the mortgage and property taxes there isn't much left over. I pay about $22,000 per year for mortgage, $9,000 per year for property taxes and $3,000 per year for homeowners' insurance on a house "worth" about $600,000. I financed mine when I bought it for $300,000, and in my refi's, have at most returned the mortgage to its original amount of $236,000 and I now owe $180,000 on the house. I drive a 2000 Camry with about 86,000 miles on it.

Many of my compatriots are so-called "financial advisors" who live in houses "worth" double mine, with mortgage burdens about triple mine (because they financed their houses more recently, at times for 100% of value). They routinely talk of incomes about quadruple mine, and of buyout packages, if they get fired, for $13,000,000. While I know they are blowing hot air on a lot of this, they don't find people like myself who aren't in the same category worth talking to.

When their so-called "income" dematerializes because suddenly deals aren't closing, and employers aren't cheerfully writing checks for $13,000,000 to people more than a bit full of themselves, they are in a major financial bind. That is what a lot of this so-called "mortgage crisis" is about. Both the mortgage borrowers are in trouble, and the financial geniuses who thought they could earn 10% returns on "safe" investments are in trouble.

And I'm smiling.

So you are telling me you are financially conservative and not the Liberal you pretend to be.

Luckily you can write off your mortgage payments against your income tax. We are not so lucky here in Canada.

Your friends are working the system to live a lifestyle they wish to live. You see it as financial folly. Unfortunately the system is designed to be used that way and people are encouraged to do so. You are not playing the game properly. Certainly, you appear to be in great financial shape.

You know what though I myself struggled with your concept of not living beyond your means for most of my life and it was a struggle because you are not supposed to remain out of debt. It is designed to keep the majority on the treadmill. It is only with in the last few years that I realized that. Most people will not take too much of a financial risk and thus remain on the treadmill but if you wish to escape the treadmill you must be willing to take those risks. Borrowing heavily to do so. The people around you that have over-financed themselves must understand that it can all come to an end some day. They maybe simply ignoring that fact or think they are too smart and even if they did wind up penniless could always bounce back.

Do you know why the economic system makes it necessary for you to take risks?

Taxes and inflation are the primary culprits. Inflation is the reason that social security fails. It is a longterm program that never took into account inflation. At it's inception a person could live on social security annual payments. They were probably around a few thousand a year. Of course, the payments remain the same but no one can live on $2000/yr anymore. Inflation has eaten away at it. The purchasing power of money has been grossly affected by inflation, and the longer savings are held the more worthless they become. Of course you attempt to make more money but the more you make the more taxes you pay. You may as well just stay on the treadmill where you are. Professionals don't escape this anymore either. They often finish their education heavily in debt.

Those, that are not on the treadmill, are the very affluent. Your friends in the neighborhood are not the very affluent. You have to be able to hide avoid taxation and employ lawyers and accountants in order to do so. Once you have reached that level you are on e of the affluent. It is a whole different arena.

You are smart enough to be able to live a comfortable life on the treadmill and that makes you happy. I was content to do so as well but am not as smart as you so I don't live in an upper middle-class Jewish community.

Edited November 12, 2007 by Pliny

[guyser]

$9,000 per year for property taxes and $3,000 per year for homeowners' insurance on a house "worth" about $600,000.

I,m still choking on the taxes and the insurance.

Let me guess......Westchester?

[jbg]

I,m still choking on the taxes and the insurance.

Let me guess......Westchester?

As I've told you privately, yes. I wish you didn't post that but oh well.

Those figures are very common for heavily Jewish areas, because of the emphasis on spending for quality public schools (unlike Ontario with its separate religious schools).

[jbg]

So you are telling me you are financially conservative and not the Liberal you pretend to be.

My finances are extremely conservative, even if my politics would make Che Guevera blush.

Luckily you can write off your mortgage payments against your income tax. We are not so lucky here in Canada.

Actually, the only effect on that is to bid up house prices relative to rents.

Your friends are working the system to live a lifestyle they wish to live. You see it as financial folly. Unfortunately the system is designed to be used that way and people are encouraged to do so. You are not playing the game properly. Certainly, you appear to be in great financial shape.

And their sense of entitlement is amazing when I see them as they contemplate bankruptcy when the worm turns.

You know what though I myself struggled with your concept of not living beyond your means for most of my life and it was a struggle because you are not supposed to remain out of debt. It is designed to keep the majority on the treadmill. It is only with in the last few years that I realized that. Most people will not take too much of a financial risk and thus remain on the treadmill but if you wish to escape the treadmill you must be willing to take those risks. Borrowing heavily to do so. The people around you that have over-financed themselves must understand that it can all come to an end some day. They maybe simply ignoring that fact or think they are too smart and even if they did wind up penniless could always bounce back.

Or, they grew up comfortable and subconsciously thing Mommy and Daddy could bale them out. My Dad died when I was 15, I am determined to leave behind assets and not debt for my next generation.

You are smart enough to be able to live a comfortable life on the treadmill and that makes you happy. I was content to do so as well but am not as smart as you so I don't live in an upper middle-class Jewish community.

You seem smart enough. And are most Jewish communities where you are "upper middle-class"?

[Pliny]

Jewish Communities? Don't think we have any here. I know there are Jewish people as there are synagogues but I am not aware of a Jewish community. Montreal and Toronto have Jewish communities.

In keeping on topic, you should be quite happy with Galgonov's article. It sounds quite leftist at least economically - he understands the economics of the left which means, as you say, he is not an economist. To be a leftist is to not understand economics. Economics is something they shun - it is about capitalism - blech!

You, being a leftist, cannot possibly understand economics either. It is apparent you do understand what you have been taught about it though, admitting you are fiscally conservative.

[jbg]

You, being a leftist, cannot possibly understand economics either. It is apparent you do understand what you have been taught about it though, admitting you are fiscally conservative.

Are you saying no Leftist understands economics? Or trying to say I'm not a Leftist?

[Pliny]

Are you saying no Leftist understands economics? Or trying to say I'm not a Leftist?

Both are true. I haven't read anything you have posted that would make me consider you a leftist other than your claim to being a leftist.

[jbg]

Both are true. I haven't read anything you have posted that would make me consider you a leftist other than your claim to being a leftist.

My membership in Campus Trotskyites and Americans United for Che Guevera?

[Pliny]

My membership in Campus Trotskyites and Americans United for Che Guevera?

Paperz, pleaze!

[jbg]

Paperz, pleaze!

And that word means?

I also left off my support for Seminoro Luminoso (Shining Path) and the ideas of Islamic Jihad of Tuktuyotok.

[ScottSA]

I too am a leftist in search of a leftist cause I can believe in...even a little bit. But I do save up beer bottles to throw at the homeless. They like to return them for beer money, you know, so I feel I'm doing my part as an interim measure till I find that elusive leftist cause; one that I can embrace with the same passion as any good leftist; enough to make me throw rationality to the winds and soar into pure emotive bafflegab, tenuous strawmen, and abject universal/particular confusion.

[Pliny]

I too am a leftist in search of a leftist cause I can believe in...even a little bit. But I do save up beer bottles to throw at the homeless. They like to return them for beer money, you know, so I feel I'm doing my part as an interim measure till I find that elusive leftist cause; one that I can embrace with the same passion as any good leftist; enough to make me throw rationality to the winds and soar into pure emotive bafflegab, tenuous strawmen, and abject universal/particular confusion.

This is getting confusing and I know it is the current political spectrum that is the source of my confusion. I could be called a traditional or classical liberal but no one would recognize that as being a liberal today.

Scott, I haven't seen you being too "liberal" on this forum.

I will tell you that I am for limited government, as were classical liberals, you two (yourself and jng) do not sound like classical liberals you sound more like contemporary conservatives.

What's up with that?

[jdobbin]

delete.

Edited December 23, 2007 by jdobbin

[jbg]

This post is cross posted here:

http://www.bloggingtories.ca/forums/topic4720.html

You are spamming.