There is an excellent article by John Steele Gordon in today's Wall Street Journal about the history of banking regulation. The article originally appeared in Commentary. Gordon traces a brief history of banking regulation from the age of Jackson to the present. One of his points is about the origination of redlining, which in turn led to white flight to the suburbs and the segregation of the inner cities. Gordon writes:
"...historically there was also a class, made up mostly of American blacks, for whom home ownership was out of reach. Although simple racial prejudice had long been a factor here, it was, ironically, the New Deal that institutionalized discrimination against blacks seeking mortgages. In 1935 the Federal Housing Administration, established in 1934 to insure home mortgages, asked the Home Owner's Loan Corp.—another New Deal agency, this one created to help prevent foreclosures—to draw up maps of residential areas according to the risk of lending in them. Affluent suburbs were outlined in blue, less desirable areas in yellow, and the least desirable in red.
"The FHA used the maps to decide whether or not to insure a mortgage, which in turn caused banks to avoid the redlined neighborhoods. These tended to be in the inner city and to comprise largely black populations. As most blacks at this time were unable to buy in white neighborhoods, the effect of redlining was largely to exclude even affluent blacks from the mortgage market..."
This federal government-created, racially-linked lending policy was compounded by the urban renewal policies of the 1950s, the archetypal example of which was due to New York's Robert Moses. Under urban renewal, business and factory districts were destroyed or made unworkable by building expressways through the hearts of dozens of working class neighborhoods and direct condemnation of factories and privately owned residences. New York State continues to lead the nation in private use eminent domain and is close to the top in income inequality to this day. It also has the most government intervention and regulation. "Liberals" who claim that regulation will "solve" income inequality would do well to look at New York's "progressive" history.
As much as any other force, federal government mortgage, real estate and urban renewal policy segregated African Americans and deprived them of job opportunities. Coupled with drug illegalization and the institution of union-sponsored regulatory systems that made "blue state" industry uncompetitive, African Americans were frozen out of the primary economy and forced to live in red-lined districts whose economic development was directly attacked or crippled by left-wing and liberal regulation, making economic opportunity unavailable.
Friday, November 14, 2008
Thursday, November 13, 2008
Increasing Value of Dollars Offsets Stock Declines
Many people, including myself, have been suffering from declining stock values. Those of us who track our account values may forget that the value of the dollar has increased, and to a surprising degree given the Fed's weak dollar policy. At this point in time, people who have a diversified portfolio that includes a dollop of cash should take heart from the fact that their dollars have increased in value and that this implicit increase, which does not appear on your statement, offsets the declining stock market. This increase in value may offer an additional reason to consider investing the cash in stocks and commodities over the coming year.
Since the summer, the dollar has increased against the Euro by more than 20%, and against the Australian dollar by about one third. Thus, if you are holding a portfolio that includes 1/2 stocks and 1/2 short term money market or treasuries, your decline is not nearly so bad as it seems.
The Dow topped at about $14,164 in October 2007 and is currently at 8,308, a decline of 41%. If you were holding 1/2 short term treasuries and 1/2 stocks, your portfolio has declined by a little less than half that adjusting for interest on your bonds. For instance, if you had $250 in stock and $250 in cash, your portfolio looks like it declined by 41% x 250 - 3% (interest on bonds) x 250 = $95 / $500 = 19%.
But in that calculation you're excluding the gains in the dollar, which are not reflected in your financial statement. The dollar gained about 20% against the Euro, so you've gained 20% x $250 = $50. Subtracting the $50 implicit gain in the dollar from the $95 paper loss gives you a loss of $45. So if you were diversified in cash you suffered a loss of $45 / $500 = 9% net of the dollar gain.
Although a 9% loss is unpleasant for all of us, it is hardly earth shattering to anyone who's been around the stock market via a 401k, mutual fund or brokerage account for the past ten years.
Thus, there is no need to panic. Rather, John H. Cochrane, a professor at the University of Chicago, gives some fascinating advice in today's Wall Street Journal. Cochrane, like Warren Buffett, argues that smart investors should be buying now. Cochrane suggests that the ratio of dividends to price or dividend yield indicates that current valuations are mediocre and that in light of recent history, this may be a buying opportunity, although not an excellent one. Whether to buy depends on your personal circumstances, cash flow, risk preference, time of life and the like. Cochrane argues that when the dividend yield is high and reaches six or seven percent, the market is low and stock prices historically have increased during the ensuing seven years, but when the yield is low and falls to below 2% as it did around 2000 the market is high and stock prices have declined during the ensuing seven years. Currently, yields are middling.
However, Cochrane's analysis does not contemplate money supply policy, which influences both the dividend/price ratio and stock prices. When the Fed is increasing the money supply, as it has, then yields are going to be relatively low and stock prices are going to increase over the ensuing period. The Fed has pumped money into the system repeatedly during the past 35 years, so Cochrane's chart shows a secularly declining dividend/price ratio since 1950. Moreover, the chart suggests that average returns since 1971 have been greater than average returns between 1945 and 1971. The lowest returns occurred around 1967, several years prior to President Richard M. Nixon's removal of the international gold standard. The highest returns occurred around 1946, not long after World War II and around 1982, upon the advent of President Ronald Reagan's "supply side" economics. Increasing money supply may be the causal variable that both reduces dividend yield and increases future stock returns.
Thus, the cyclical ups and downs need to be interpreted in light of the long term trend. What are the political ramifications of the stock market's depending on perpetual injections of money and what are the policy implications?
In order to reach 1981 levels, a huge amount of liquidity will need to be injected into the system. But there is already much waste in the economy in terms of bad real estate investments, unworthy purchases on credit and the like. To compensate for these the Fed will need to give the economy much testosterone. This would cause the dividend/price curve to continue to decline. However, there is the risk of intensifying the above-average inflation rates that have characterized the recent past. If Americans are willing to live with a declining stock market, then perhaps the Fed will restrain inflation and stop the dividend/price trend from following its 63 year long downward pattern. If the main point of American society is to increase the stock market, then more injections will be needed, and increasing welfare transfers from cash earners to stock holders will ensue, likely intensifying the already massive inefficiencies in the American economy.
Which will it be? Paper wealth? Or real wealth? Further monetary expansion? Or deflation and permitting the termination of badly managed firms?
Since the summer, the dollar has increased against the Euro by more than 20%, and against the Australian dollar by about one third. Thus, if you are holding a portfolio that includes 1/2 stocks and 1/2 short term money market or treasuries, your decline is not nearly so bad as it seems.
The Dow topped at about $14,164 in October 2007 and is currently at 8,308, a decline of 41%. If you were holding 1/2 short term treasuries and 1/2 stocks, your portfolio has declined by a little less than half that adjusting for interest on your bonds. For instance, if you had $250 in stock and $250 in cash, your portfolio looks like it declined by 41% x 250 - 3% (interest on bonds) x 250 = $95 / $500 = 19%.
But in that calculation you're excluding the gains in the dollar, which are not reflected in your financial statement. The dollar gained about 20% against the Euro, so you've gained 20% x $250 = $50. Subtracting the $50 implicit gain in the dollar from the $95 paper loss gives you a loss of $45. So if you were diversified in cash you suffered a loss of $45 / $500 = 9% net of the dollar gain.
Although a 9% loss is unpleasant for all of us, it is hardly earth shattering to anyone who's been around the stock market via a 401k, mutual fund or brokerage account for the past ten years.
Thus, there is no need to panic. Rather, John H. Cochrane, a professor at the University of Chicago, gives some fascinating advice in today's Wall Street Journal. Cochrane, like Warren Buffett, argues that smart investors should be buying now. Cochrane suggests that the ratio of dividends to price or dividend yield indicates that current valuations are mediocre and that in light of recent history, this may be a buying opportunity, although not an excellent one. Whether to buy depends on your personal circumstances, cash flow, risk preference, time of life and the like. Cochrane argues that when the dividend yield is high and reaches six or seven percent, the market is low and stock prices historically have increased during the ensuing seven years, but when the yield is low and falls to below 2% as it did around 2000 the market is high and stock prices have declined during the ensuing seven years. Currently, yields are middling.
However, Cochrane's analysis does not contemplate money supply policy, which influences both the dividend/price ratio and stock prices. When the Fed is increasing the money supply, as it has, then yields are going to be relatively low and stock prices are going to increase over the ensuing period. The Fed has pumped money into the system repeatedly during the past 35 years, so Cochrane's chart shows a secularly declining dividend/price ratio since 1950. Moreover, the chart suggests that average returns since 1971 have been greater than average returns between 1945 and 1971. The lowest returns occurred around 1967, several years prior to President Richard M. Nixon's removal of the international gold standard. The highest returns occurred around 1946, not long after World War II and around 1982, upon the advent of President Ronald Reagan's "supply side" economics. Increasing money supply may be the causal variable that both reduces dividend yield and increases future stock returns.
Thus, the cyclical ups and downs need to be interpreted in light of the long term trend. What are the political ramifications of the stock market's depending on perpetual injections of money and what are the policy implications?
In order to reach 1981 levels, a huge amount of liquidity will need to be injected into the system. But there is already much waste in the economy in terms of bad real estate investments, unworthy purchases on credit and the like. To compensate for these the Fed will need to give the economy much testosterone. This would cause the dividend/price curve to continue to decline. However, there is the risk of intensifying the above-average inflation rates that have characterized the recent past. If Americans are willing to live with a declining stock market, then perhaps the Fed will restrain inflation and stop the dividend/price trend from following its 63 year long downward pattern. If the main point of American society is to increase the stock market, then more injections will be needed, and increasing welfare transfers from cash earners to stock holders will ensue, likely intensifying the already massive inefficiencies in the American economy.
Which will it be? Paper wealth? Or real wealth? Further monetary expansion? Or deflation and permitting the termination of badly managed firms?
Mairi Responds to Sup. Ct. Clerk Dan Bickell
Hi, Mitchell,
I don't know about you, but I have found this story to be quite infuriating. Mr. Donofrios states the clerk tried to stop and dissuade him from the get-go. Then, to misguide his case, and label it as something entirely different in an apparent attempt to stall, if not completely lose it in other work, just once again adds more fuel to the fire. How DARE a clerk misdirect a filing they personally disagree with. I HOPE Justice Clarence Thomas ORDERS the information to be sent to his desk IMMEDIATELY.
It makes one begin to understand why the legal system seems to be derailing. If "no account clerks" (my own label for this person Dan Bickell) can play games with legitimate filings to make them "disappear", how can anyone hope to have a chance in the system unless they have a very knowledgeable attorney with the fortitude to fight tactics employed by the opposition. There shouldn't even be "opposition" in the Court system itself. The Courts are supposed to be the People's platform.
This is frightening if true, and I have no reason to doubt what Mr. Donofrios' claims. Those of us determined to have answers to the very legitimate question of confirmation of eligibility of a candidate are shaking our heads in disbelief, wondering HOW we will ever find the person who will accept the responsibility, whether in the Courts, or with another entity.
I guess we will have to keep chipping away at the system until we are finally heard, and ANSWERED.
Mairi
I don't know about you, but I have found this story to be quite infuriating. Mr. Donofrios states the clerk tried to stop and dissuade him from the get-go. Then, to misguide his case, and label it as something entirely different in an apparent attempt to stall, if not completely lose it in other work, just once again adds more fuel to the fire. How DARE a clerk misdirect a filing they personally disagree with. I HOPE Justice Clarence Thomas ORDERS the information to be sent to his desk IMMEDIATELY.
It makes one begin to understand why the legal system seems to be derailing. If "no account clerks" (my own label for this person Dan Bickell) can play games with legitimate filings to make them "disappear", how can anyone hope to have a chance in the system unless they have a very knowledgeable attorney with the fortitude to fight tactics employed by the opposition. There shouldn't even be "opposition" in the Court system itself. The Courts are supposed to be the People's platform.
This is frightening if true, and I have no reason to doubt what Mr. Donofrios' claims. Those of us determined to have answers to the very legitimate question of confirmation of eligibility of a candidate are shaking our heads in disbelief, wondering HOW we will ever find the person who will accept the responsibility, whether in the Courts, or with another entity.
I guess we will have to keep chipping away at the system until we are finally heard, and ANSWERED.
Mairi
Obama Birth Certificate: Turner Responds--Martin Counter Responds
Neil Turner Writes:
Andy; You asked us to let you know what we think about your column (below) and your arguments against Berg. My comments follow your statements:
‘Mr. Berg did file his loony case, and it began to attract a lot of attention. My initial reaction was sadness at the gullibility of the public. People obviously had no idea that the form and forum of Berg's lawsuit were totally deficient.’
My comments: Berg’s lawsuit got Obama to publish a blatantly fraudulent and doctored (rendering it invalid) COLB, thereby implicating himself (Obama) in what may be the biggest attempted fraud in the history of our Constitutional Republic.
‘Berg's lawsuit was promptly dismissed, as I had anticipated before it was even filed. Berg was ready with an explanation: there was a conspiracy to deprive him of justice. No such conspiracy existed.’
My comments: Berg filed on 8/21/08, and his suit was ‘Dismissed’ for ‘lack of standing’ on October 27, 63 days later (not promptly dismissed as you state). This ‘unprompt’ ruling gave enough time to claim admission of the charges due to non-response by Obama (et al), and got him to produce his self-implicating blatantly false COLB.
‘When I asked Berg in August how he was going to prove Obama was born in Kenya, he said "I saw it on the Internet." Not good enough for a federal judge.’
My comments: C’mon Andy. Crappy argument, especially when you now know that Jerome Corsi went to Kenya and confirmed it with his detailed research.
‘To be sure, my Committee also receives donations, but we have funded two trips to Hawai'i for Obama research and investigation, and a birth certificate lawsuit scheduled for a hearing on November 18th in Honolulu.’
My comments: A lawsuit? Against whom? Isn’t it just a petition to the court to release ‘alleged’ documents, that most assuredly will not be released, since no one believes that they actually do exist. Time is lost, nothing gained, and you start again.
You dismissed my suggestion that we get thousands of people to request any documents concerning this issue (under the Freedom of Information Act), instead relying on your single person request – which obviously will go nowhere, and will get no press coverage (like the refusal of thousands of requests probably would).
‘Finally, is Berg really an Obama operative? Berg's behavior is so far outside the normal confines of legal practice that his conduct is aberrant as well as abhorrent. To date, only Obama has benefited from Berg's misbehavior.’
My comments: Your bashing of the only person who has gotten our concerns into 2 courts as an actual lawsuit (one being the SCOTUS) seems aberrant as well as abhorrent to those of us who sincerely want this issue publicized nationwide until justice (and our Constitution) is served!
And now, for you to ask the Supreme Court of Pennsylvania Disciplinary Board to investigate the conduct of Mr. Berg, seems most aberrant and abhorrent indeed.
Although I am not an enthusiastic believer of the Berg-for-Obama explanation for Berg's behavior, it still makes a lot of sense.
My comments: It makes no sense whatsoever!
At some point Berg could face sanctions for his misconduct and abusive behavior.
My comments: Which are???
‘So we are left with no clear explanation for why Berg is acting out: (1) is he "crazy" or ill? (2) is he an Obama saboteur? (3) is he a financial flim flam artist using false claims to collect money?’
My comments: What false claims? A $90,000 ‘Open Letter to Obama’ ad in USA Today will reach millions more people than a single-person FOIA request for non-existent documents in Hawaii, I would proffer. (3,000 people sending in $30 should just about do it. Please send yours today).
CLICK HERE to make your secure, (tax deductible) donation to the WTP Foundation.
Click here to see how much money we have raised so far. ($14,000 as of 11-12-08)
So what is Berg's game? Let me know what you think.
My comments: I think that your arguments stink!
Please try to bury your hatchet for Mr. Berg (no matter what you think about him) and help us finish the work of keeping this ILLEGAL ALIEN POSEUR and IMPOSTER Obama from trashing our Constitution and our Nation. The job at hand is too big for this dissention in the ranks of our Patriots. (We saw this with the traitor Jim Gilchrist - co-founder of the modern-day Minutemen movement – and it did us no good).
Sincerely,
Neil Turner
Carlsbad, CA
Andy Martin Responds
Your letter is so fallacious as to be unworthy of serious response. Your claim that Berg's lawsuit got Obama to release a birth certificate is complete nonsense. Obama released his document months before Berg. Had Berg actually accomplished what you claim, he would have taken credit for it. Did he make such a claim? No.
With many Obama opponents in your state of mind, is it any wonder Obama won? The inability of his opponents to confront and admit reality is what helped Obama get elected.
Sadly, you refuse to admit the facts even when they are biting you in the nose. What will your excuse be when Berg is kicked out of the Supreme Court? Another conspiracy?
Andy Martin
Andy; You asked us to let you know what we think about your column (below) and your arguments against Berg. My comments follow your statements:
‘Mr. Berg did file his loony case, and it began to attract a lot of attention. My initial reaction was sadness at the gullibility of the public. People obviously had no idea that the form and forum of Berg's lawsuit were totally deficient.’
My comments: Berg’s lawsuit got Obama to publish a blatantly fraudulent and doctored (rendering it invalid) COLB, thereby implicating himself (Obama) in what may be the biggest attempted fraud in the history of our Constitutional Republic.
‘Berg's lawsuit was promptly dismissed, as I had anticipated before it was even filed. Berg was ready with an explanation: there was a conspiracy to deprive him of justice. No such conspiracy existed.’
My comments: Berg filed on 8/21/08, and his suit was ‘Dismissed’ for ‘lack of standing’ on October 27, 63 days later (not promptly dismissed as you state). This ‘unprompt’ ruling gave enough time to claim admission of the charges due to non-response by Obama (et al), and got him to produce his self-implicating blatantly false COLB.
‘When I asked Berg in August how he was going to prove Obama was born in Kenya, he said "I saw it on the Internet." Not good enough for a federal judge.’
My comments: C’mon Andy. Crappy argument, especially when you now know that Jerome Corsi went to Kenya and confirmed it with his detailed research.
‘To be sure, my Committee also receives donations, but we have funded two trips to Hawai'i for Obama research and investigation, and a birth certificate lawsuit scheduled for a hearing on November 18th in Honolulu.’
My comments: A lawsuit? Against whom? Isn’t it just a petition to the court to release ‘alleged’ documents, that most assuredly will not be released, since no one believes that they actually do exist. Time is lost, nothing gained, and you start again.
You dismissed my suggestion that we get thousands of people to request any documents concerning this issue (under the Freedom of Information Act), instead relying on your single person request – which obviously will go nowhere, and will get no press coverage (like the refusal of thousands of requests probably would).
‘Finally, is Berg really an Obama operative? Berg's behavior is so far outside the normal confines of legal practice that his conduct is aberrant as well as abhorrent. To date, only Obama has benefited from Berg's misbehavior.’
My comments: Your bashing of the only person who has gotten our concerns into 2 courts as an actual lawsuit (one being the SCOTUS) seems aberrant as well as abhorrent to those of us who sincerely want this issue publicized nationwide until justice (and our Constitution) is served!
And now, for you to ask the Supreme Court of Pennsylvania Disciplinary Board to investigate the conduct of Mr. Berg, seems most aberrant and abhorrent indeed.
Although I am not an enthusiastic believer of the Berg-for-Obama explanation for Berg's behavior, it still makes a lot of sense.
My comments: It makes no sense whatsoever!
At some point Berg could face sanctions for his misconduct and abusive behavior.
My comments: Which are???
‘So we are left with no clear explanation for why Berg is acting out: (1) is he "crazy" or ill? (2) is he an Obama saboteur? (3) is he a financial flim flam artist using false claims to collect money?’
My comments: What false claims? A $90,000 ‘Open Letter to Obama’ ad in USA Today will reach millions more people than a single-person FOIA request for non-existent documents in Hawaii, I would proffer. (3,000 people sending in $30 should just about do it. Please send yours today).
CLICK HERE to make your secure, (tax deductible) donation to the WTP Foundation.
Click here to see how much money we have raised so far. ($14,000 as of 11-12-08)
So what is Berg's game? Let me know what you think.
My comments: I think that your arguments stink!
Please try to bury your hatchet for Mr. Berg (no matter what you think about him) and help us finish the work of keeping this ILLEGAL ALIEN POSEUR and IMPOSTER Obama from trashing our Constitution and our Nation. The job at hand is too big for this dissention in the ranks of our Patriots. (We saw this with the traitor Jim Gilchrist - co-founder of the modern-day Minutemen movement – and it did us no good).
Sincerely,
Neil Turner
Carlsbad, CA
Andy Martin Responds
Your letter is so fallacious as to be unworthy of serious response. Your claim that Berg's lawsuit got Obama to release a birth certificate is complete nonsense. Obama released his document months before Berg. Had Berg actually accomplished what you claim, he would have taken credit for it. Did he make such a claim? No.
With many Obama opponents in your state of mind, is it any wonder Obama won? The inability of his opponents to confront and admit reality is what helped Obama get elected.
Sadly, you refuse to admit the facts even when they are biting you in the nose. What will your excuse be when Berg is kicked out of the Supreme Court? Another conspiracy?
Andy Martin
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