Say it Ain't SO!

Nobody ever said that Somalian Pirates were brilliant, and an article in the UK’s Daily Express today shows that they are pretty certainly anything but bright. After spying what they thought would be a likely target to plunder, they raised the mizzen mast, hoisted the ‘Skull and Crossbones,’ and took after what turned out to be the FGS Spessart. This vessel is part of the NATO forces in the region sent there specifically to find and eliminate Somali Pirates.

A pursuit followed, and a good time was had by all but the Somalis. When it was said and done, several nations had a chance to send their forces with the chase and the pirates were duly apprehended.

Several things come to mind. First and foremost, do Somali Pirates get and/or read newspapers? The fact that there were ships in the area that were crammed to the poop deck with armed sailors, cannons and commandos is old news. The fact that they had nothing to do but fish or chase and catch Somali Pirates is also old news. This was a catastrophic lack of planning on the part of the pirates, but it speaks well of NATO. After all, while the UN has allowed tens of thousands of Africans to die in Dakar while they watch, and Tibet has been stomped into oblivion under Chinese boots, NATO knows what to do with armed forces. In 1996, the UN sat on their collective hands while Rwanda exploded into genocide. After at least a couple of decades of mouthing meaningless threats, forming committees while the innocent perish, and berating the US for actually following through with its threats, the UN still has done nothing. NATO, on the other hand, had finally seen enough oil and trade goods ransomed by the poorest people in east Africa to take decisive steps.

Do not take this the wrong way. I am, by no means, voicing support for piracy. The trade lanes that go by Somalia are very important, and the need to protect trade on the high seas has been an international priority since the first dug-out carried flint and mammoth tusks to trade with a neighboring tribe. I can only speculate why the rampant piracy in the South China Sea has not received a similar response, but I suspect that it has to do with the Chinese Navy and the fact that the Chinese consistently deny that there is a real problem there. The Chinese also consistently maintain that Tibet is much happier now that their history, temples and way of life have been permanently destroyed. But, I guess that the Red Sea is far enough away from China and Southeast Asia that they care about piracy.

The other thing that strikes me is that now there are a group of pirates that are being held on a ship until they can be tried. Now, I guess that holding people on board a ship is somehow a lot different than holding them in a pen in Cuba. I must also suppose that those people are being treated with the best medicine, being fed the best Muslim foods, being given new copies of the Koran, and are not in any way being interrogated except over afternoon tea with a polite game of “Truth or Dare.” Is it really impertinent of me to say that there is a measure of hypocrisy here when NATO forces detain and try international criminals but the US is castigated for doing the same thing? Maybe instead of Guantanamo Bay the US should have just put out a few boats and held terrorists in the cargo bays? Where is the clamoring that these international terrorists should be held in a sovereign nation’s jails somewhere and given all the rights and privileges of that nation’s citizens? Does the international community really believe that those that take and ransom an oil tanker are worthy of this treatment where those that pirated airliners and killed thousands of Americans with them are not? Those that kill the innocent and attack American forces in Iraq and Afghanistan should be given the same rights as Americans while Somali Pirates are subject to this treatment based on the fact that they threatened commerce?

I applaud NATO for ridding the east coast of Africa these scum, and I support their right to hold them, try them and imprison them. At some point I would ask that our nation be given the same consideration as NATO. Arrrrrrr…..matey…….

Wizard of Id...Got it right!

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How to Fix the Economy

Let's start with the obvious. Throwing a trillion dollars at big companies and Senator's pet projects isn't going to get us where we need to go. Yes, some small portion of it will really help, and some of the psychological shock and awe may help get things going. Other than that, meh.

Fixing the economy is a bit complicated, since it's hard to agree on exactly what's broken. For example, for years we had economists up in arms at our dwindling personal saving rate. In 2005 the average American spent more than he made. It was an outrage, bankrupting the next generation by leaving them no inheritance.

Fast forward four years to 2009. People are changing their spending habits, and have begun once again to save money. The economists (one would hope not really the same ones) are up in arms about how we need to spend money to stimulate the economy, and are outraged that people would be so thoughtless as to save their money in these dire times.

Now, about defining the term "fix." Do we really want to put the economy back where it was in 2006 and 2007? That's like rebuilding a car that flew off a cliff, but putting it back on the top of the cliff with the accelerator held to the floor. No, we don't want to put things back the way they were, or we will end up right back where we are.

The government is currently trying to keep companies from collapsing by subsidising, supporting, and in some cases buying them. Is this necessary? Sime of that help could very well be necessary to get the economy going quickly because of the large part some of those companies play. But the big question is whether it is sufficient. There we get a resounding "no."

Let's take a look at the environment that these companies need to survive. Unemployment is up. Pay is down. Spending is down, with part of that loss in spending going to savings.

Now, just like following puppet strings back to the puppet master, you can follow the money to see what's really going to happen here if we don't jump in.

Is saved money being taken out of the economy? Um, no. Not unless it's going under the mattress. Okay then, where does it go by and large? It goes to banks, credit unions, and brokerage accounts.

What do banks and credit unions do with their money? I mean under normal circumstances. They loan it back out to people and businesses, which is a way of them investing it. Currently they are too scared to loan money like they did in the past. This is good. The government is pumping billions of dollars in, and it's not really helping much. Why? Because they only want to invest where there's a chance of getting their money back! Duh!

They're looking at billions of dollars of losses due to loans they were encouraged to make so everyone could have their own roof over their head. Guess what? Some people are incapable of paying for their own roof, and some of them were speculators that got suckered into buying at a bad time. Not giving them loans is an improvement. So what happens if you stop giving loans to those incapable of making their payments in the long run? More money becomes available to those who have managed their finances properly. I bet those with credit scores over 750 have a lot less problem getting loans, so long as they continue their trend of only buying what they know they can actually pay for. That's how they got the score in the first place.

So now we have lots of people who are losing their houses. Everyone's sad about that. What do we do to "save the children" and feel good about ourselves? Do we put them right back into another mortgage and set them up to fail again like last time? NO! Wrong answer! How about this. Let them rent a place from the guy with the 750+ credit score, who has been out buying up foreclosed properties at discount prices, pulling bad debt from the banks.

Let's summarize so far. We have the foreclosed properties being bought up at a reasonable price by financially responsible people. We have the folks who got foreclosed being housed in rentals or mom's basement until they can get back on their feet. We have banks and credit unions slowly building up their cash reserves. The savings that isn't going into low interest accounts goes into the stock market or other investments where it will have a stablizing effect.

Unfortunately the car companies are in for a hard stretch. The've become used to selling luxury, such as the third or fourth car in a two-driver family, or selling the Hummer when a Civic will do. Americans have tightened the belt and been forced to face reality on personal budgets. That means people will make due with what they're driving for a lot longer, and consider buying from the glut of used cars rather than going for something new as a first choice. But you know what happens when people make their cars last longer without upgrading, and don't have a 2nd or 3rd spare? Maintenance and repairs go up as the cars age. It's not a cure-all, but I'd think seriously about investing in that service department.

Jobs are still missing from my list, so I'll pontificate on that subject next. Did you know that India has begun pricing themselves out of the outsourcing market? It turns out that they caught the entrepreneureal bug in a big way, saw a huge opportunity, bid really low, then discovered they were in competition with each other. Prices increased due to competition, pay increased as they fought for the most qualified employees, and we're now to a point where it's not as economical to hire foreigners to answer your phones or write your software.

So with foreign labor costs higher, there's more incentive to hire locally. Unemployment will go back down. Still, those jobs won't pay as much since labor costs go down whenever unemployment has gone up. Still, since we're going to be paying less for rent and mortgages, and other prices have held reasonably steady (other than gasoline and its whipsaw ride), people can get by on a little less. As they gain experience and seniority, pay goes up gradually over time.

So there are several of the major facets of our current economic crisis. The goal here is that when we put the rebuilt economic car back on the mountain, we point it along the road that goes up the hill and set it up to start out in first gear, rather than perching on the cliff zooming along at full speed.

So, allow me to summarize on how to fix the economy in five easy steps.

1. Continue to save money and increase your savings rate wherever possible by reducing unnecessary expenses. Trimming the fat goes for both companies and people.
2. Invest savings in good deals, such as discounted real estate or let the bank invest it for you.
3. Borrow only when it is responsible to do so.
4. Accept reduced-cost labor as a part of the cycle.
5. Wait and watch as we rebuild based on good principles rather than unrealistic expectations.

I'll even throw in another item, although it won't apply to most. It's another one of those 750+ credit score kinds of things. If you're able, now is the best time in recent history to start a business because that will make you the one that is doing the lending, hiring the reduced cost labor, and building up to reap the long term rewards of success through responsibility.

Sorry for such a simple answer. I feel like the doctor telling the fat guy that the answer to all his problems is diet and exercise. It's always easy to say, but hard to do.