Americanly Yours

How exactly did we get to the point where government owned banks started charging credit card holders fees for paying off their balances every month?

The government passed laws like the Community Reinvestment Act which essentially mandated banks to loan to people who would not have been able to obtain loans otherwise.  Then, the government and the Federal Reserve created money out of thin air and lent it to banks at absurdly low rates.  Flush with new and cheap money, these banks massively increased their lending to “sub-prime” borrowers (begin bubble).  With the money supply growing at unprecedented rates in the 1990’s and this decade, there was always enough money for banks to make loans.  Borrowers were able to take out second mortgages at very low rates.  Home builders rapidly built houses to meet soaring (bubble-induced) demand.

As with all bubbles, this one burst, leaving home builders unable to sell newly built houses and borrowers unable to meet their obligations.  Banks had sold off the rights to their lender’s payments so they would have more money to make new loans.  This left the banks in the same boat as homeowners who could not make their payments.  But, while homeowners and home builders had to file for bankruptcy and sell off their assets to pay their debts, the banks used their lobbyists, fear, and their ownership of the Federal Reserve to convince our government to bal them out.

The government and the Federal Reserve then printed up a bunch of money–they simply created it out of thin air–and gave it to the banks in exchange for ownership.

This happened on October 3rd, 2008.  I can understand the government’s perverse rationale that led it to bail out these banks.  What I can not understand is why, over a year later, the government continues to own large stakes in these banks.

The government has now taken to regulating the salaries of banking officials, as well as the actions and practices of these banks.

So, it comes as no surprise to the observant that the government would use its power and control to create perverse incentives.

Bank of America and Citigroup–two firms now under the ownership of the federal government have begun implementing new fees.  These fees are not on late payments, gong over one’s credit limit, or cash advances.  Instead, these government owned banks have announced fees for customers who regularly pay off their balances.  Customers who leave monthly balances on their cards will not be charged the fees.

A fee is similar to a tax (especially if t is levied by a government owned entity).  Both taxes and fees use pricing to create incentives to change behavior.

Because Bank of America and Citigroup are owned by the government, a fee on those who pay off their balances regularly can be viewed as a tax on them.  Because those who leave monthly balances on their cards are exempt from these fees, this can be viewed as a subsidy for those who leave balances.

Our government is creating perverse and dangerous incentives: they are incentivizing debt and discouraging good and proper financial habits.

But, you cant hardly be surprised by this.  After all:  our perverse government’s perverse actions do tend to lead to perverse incentives.

Americanly Yours,

Phred Barnet

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I have rarely praised President Obama or even agreed with his policies.  This is not because of a knee-jerk partisan reaction, but rather because of genuine economic and philosophical opposition to nearly every policy enacted and/or championed by this administration.

As I dont hesitate to criticize the President’s bad policies, I must also praise those that I do agree with.  This week, President Obama announced this week that his administration will no longer prosecute violators of federal marijuana policy unless they are violating federal as well as State laws.

This is a big step in the right direction.  For decades now, the federal government has perpetuated a “war on drugs.”  This war has criminalized substances and by this action has created a new class of criminals.  It has forced the production, distribution, and use of these substances underground, contributing greatly to the rise in gang violence throughout the nation.  This war has led to the arrest of millions of Americans, violating their individual liberties and often their property rights in the process.  This war has shattered families.  Finally, this war has cost billions directly (through increased policing and incarceration costs), as well as indirectly (by incarcerating members of society and therefore removing their productive capabilities).

Many States now allow the use and sale of marijuana for medical purposes.  It is simply morally wrong for the government to outlaw any substance which has the potential to ease the pain and suffering of people with chronic illnesses including cancer.

I am pleased that President Obama is following the 10th Amendment on this issue.  The 10th Amendment reads as follows:  “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” There is absolutely no provision in the US Constitution which gives the federal government the power to regulate drugs, meaning that control over this issue rests with individuals or the States.  President Obama has decided not to uphold an unconstitutional law.  I support this.

However, I would urge President Obama to reread the 10th Amendment, and then take further action.  Rather than not enforcing federal law, President Obama should immediately call for the repeal of all federal laws involving the using, cultivation, or distribution of marijuana within one’s own State.  These laws are unconstitutional and violate the spirit, as well as the letter of the Constitution.

Furthermore, President Obama should repeal all federal drug laws involving the using, cultivation, or distribution of any drug within one’s own State.  Let the people decide what should be allowed in their own areas.  A national one size fits all policy for drugs is not only unconstitutional, but it also violates the rights of individuals and communities to decide what is appropriate for themselves.

Additionally, it appears that there may be some confusion about the President’s new policy.  Just yesterday, the DEA arrested 18 Americans in California for violating federal laws regarding the cultivation of marijuana.  I know that the President’s policy was just announced this week, but this arrest seems to be in violation of this new policy.  Federal laws regarding marijuana must be repealed if this type of confusion is to be avoided in the future.

I also urge the President to use his pardoning power to grant full pardons to anyone who has been arrested and incarcerated for violating the laws that he is no longer enforcing.  I would also urge him to go further and pardon all people who have been arrested under federal laws for any drug crime which was non violent and did not involve selling these substances to minors.

Finally, I must once again praise President Obama for adhering to the 10th Amendment of the Constitution on this issue.  However, I must urge him to respect and follow the Constitution and the 10th Amendment on more issues in the future.  It is unreasonable for President Obama to respect the legally defined distinction between State and federal powers on this issue while ignoring them on a slew of other issues.

Americanly Yours,

Phred Barnet

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For the first time in almost 35 years, there will be no cost of living increase in Social Security payments.  In the predictable “something must be done about this [so called] problem” mentality of this administration, President Obama has proposed sending $250 checks to over 50 million seniors to help them cope with their financial woes.

The problem here is that there is a very good and simple reason why there is not going to be an increase in Social Security payments: prices have dropped by 2.1% since the fall of 2008, meaning that the money that seniors already get from Social Security actually buys more goods and services than it did last year.  On top of this, the Social Security Administration has already given seniors a large increase in their payments this year: in January, seniors received a 5.8% boost in their payments, the largest increase since 1982.

Once again, President Obama is using misguided “logic” to support his own political goals.  Social Security payments are indexed to price inflation, however, they are not allowed to be decreased, meaning that a decrease in prices actually makes seniors much better off.

I understand that many seniors are suffering in this recession.  Many have lost a great deal of their savings due to the collapse in stock prices.  However, Congress decided over three decades ago that Social Security payments would be linked to the cost of living.  Besides the obvious reason of guaranteeing seniors a livable income, Congress likely had another reason for guaranteeing the benefits: they wanted to take the decision out of the hands of the political process.  Right or wrong, it will be very difficult for members of Congress to vote against the $250 payment for seniors.  For one, seniors are a vulnerable group, many of whom are living only on their fixed Social Security payments.  Seniors also vote–a lot.  As a group, they historically have the highest rates of voter turnout.

I firmly believe that this bill should be voted down.  For one, President Obama’s proposal to send checks to seniors  is addressing a problem that doesnt actually exist: seniors can buy more for their money than they could a year ago.  Additionally, these payments will cost roughly $13,000,000,000 [$13 billion] in money that the government does not have.  The money being spent on this non-existent problem will have to be expropriated from hard working citizens or printed out of thin air (devaluing the savings and earnings of anyone who does not receive a payment).

This “something must be done” mentality is flat out wrong.  Many supporters of the bailouts, stimulus, and other interventionist policies defend them not on moral or economic grounds, but rather defend them by saying that “at least they are trying something.”  This mentality has brought this once great Nation to the brink of bankruptcy and has brought government regulation into nearly every single aspect of daily life.  We can only hope that enough members of Congress will do the right thing and oppose these payments.

Americanly Yours,

Phred Barnet

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We are making good progress towards getting this bill more support.  We have to keep up the effort!  The Senate is still preoccupied with the health care debate, but a vote is expected on that issue soon, meaning that there will be more time for Senators to focus on passing S 604.

In case you didnt notice, I put up an entire section devoted to this bill.  You can find it right under the Americanly Yours logo, or by clicking here.

If you use Facebook or GMail, please consider adopting the following messages as your “status” daily.  Even if you are not willing to make these messages your status, please consider calling the Senators.  This is very important!

Status for Monday, October 12:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Mary Landrieu (LA) (202) 224-5824. Republican: Michael Enzi (WY) (202) 224-3424. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Tuesday, October 13:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Kristen Gillibrand (NY) (202) 224-4451. Republican: George LeMieux (FL) (202) 224-3041. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Wednesday, October 14:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Tim Johnson (SD) (202) 224-5842. Republican: Richard Lugar (IN) (202) 224-4814. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Thursday, October 15:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Tom Udall (NM) (202) 224-6621. Republican: Olympia Snowe (ME) (202) 224-5344 . It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Friday, October 16:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Jay Rockefeller (WV) (202) 224-6472 . Republican: Susan Collins (ME) (202) 224-2523. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Americanly Yours,

Phred Barnet

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Congratulations to President Obama for being awarded the Nobel Peace Prize.  This is truly an honor and there is no person more deserving of winning this prestigious prize than our Beloved President.  In winning the Nobel Peace Prize, President Obama joins other deserving and peaceful winners of this prize such as Henry Kissinger, Woodrow Wilson, and Yasser Arafat.

Clearly, ordering an additional 17,000 Americans soldiers to fight in Afghanistan less than a month after assuming office is a major example of just how peaceful President Obama can be.  The President is also considering major troop increases for the Afghan War–perhaps as many as 30,000-40,000, another sign of just how committed to peace this man is.

Remember that other War, you know–the one in Iraq that you heard about daily when President Bush was in office?  Candidate Obama pledged to withdraw all of our troops from Iraq within 18 months.  We are now about half way to the 18 month timeline, and President Obama has made major progress towards his goal of a withdrawal (at his inauguration, 142,000 American soldiers were in Iraq–we now have ONLY 124,000).  Major troop withdrawals like this provide just another reason why President Obama deserved this award so much.

I for one am glad that the Nobel Prize committee chose to award the prize for rhetoric, rather than actions.  I for one am so tired of people who actually make the world a more peaceful place.  Its about time that someone was rewarded just for talking about problems, instead of doing something about them.

Nominations for this award had to be received by February 1st, 2009.  President Obama was inaugurated at noon on January 20th, meaning that he was awarded this prize for12 whole days of rhetoric.  If sending 17,000 more troops to war and 12 days of rhetoric can win a man a Nobel Peace Prize, is there any way that sending an additional 30,000-40,000 troops off to war and an additional year of rhetoric can prevent President Obama from winnning a second Nobel?

And get ready:  The Nobel Prize Committee will announce the winner of Nobel Prize in Economics on Monday.  If a man who sends thousands of soldiers off to die can win a prize for peace, the same man who’s economic policies have pushed the Nation to the brink of bankruptcy (while recreating the bubbles which just burst–thereby putting the economy at risk again) ought to be a lock to win the Nobel Prize in Economics.

Americanly Yours,

Phred Barnet

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