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Monthly Archives: April 2009

Deflation is a horrifying idea.  There is less demand for goods and services and, in order to keep up with these changes, producers are forced to cut prices.  For the consumer, this does not sound bad.  But we all know from the past 6 months that such downward pressures on prices have adverse effects on confidence, wages, and employment in general.  The withholding of purchases in anticipation of further prices declines can  result in a downward spiral.  Which brings me to my favorite vending machine.  The vending machine is, no doubt, one of the simple pleasures during a workday that provides nourishment for a (relatively) small amount of expenditure.  In fact, on days where energy levels are lagging (this is frequent), one needs to supplement their diet with a higher caloric intake or risk being caught in the act of drifting into a daydream so sweet that only the high ring of an Outlook calendar can provide the needed jolt back to reality.  So imagine you walk to your most cherished of work locations to suddenly find a sharp increase (7%) in prices across the rows of chocolately and nutty goodness.  What would your most likely reaction be?  I would hope shock and dismay and also expect you, if a rational consumer, to realize that such an increase in prices does not (likely) reflect your financial condition at the current time in that you have not received a 7% increase in your wages overnight.  But, in reality, consumers (myself included) do not act this way.  Even if you were to notice such a onerous change in the price of your sweet tooth-craving treat, a 7% change in the price of something priced less than $1 (USD) would not likely cause you to change habits as it will not make a bit of a difference in your bottom line.  In fact, if you were to do this day in and day out, your overall standard of living will remain the same and you could still afford a couple of brews when your best buddies from college come into town to visit.  That is the utter nastiness that inflation brings.  While we all are in an economic maelstrom and deflation is the name of the game right now, food prices have steadily increased.  If you look at national data from the Bureau of Labor Statistics, you will see that if you look at the CPI Index for only food prices as I have using the years 1982-1984 as your base period= 100, the most current index value stands just under 219.  The year previously (Mar ’08) the index gave a reading of 209.  Going back to March 2007, the index stood at 200.  And why not revisit the wonderful year of 2006 when the times were good, Hummers and condos were selling, and the champagne flowing.  In March of that year, the index stood at 194.  So, from the Age of Bling to the Age of Bailout, there was an increase in overall food prices in this country of approximately 13%.  In the same period, the unemployment rate has doubled.  Obviously the increases in price did not come as drastically as exhibited by the much heralded vending machine.  But the relatively small increases that accumulate over time could have real effects on a person’s bottom line.  And, as spending on discretionary items has rapidly declined, the percentage of personal income spent on food must rise.  Add to that, a marked increase in these prices, it becomes even a larger piece of the pie.  Psychologically, it doesn’t really seem as if anything has changed.  When one sees the prices of washing machines dropping on a daily basis, one thinks they could get a great deal in the marketplace.  But what gives if your favorite light turkey breast costs another quarter per half of a pound.  Unless you are really a cranky individual and the frugality that has developed inside you over the years can make you easily pass for Scrooge on crack, these extra coins here and there are chunk change.   Which brings me to a temporary conclusion (oxymoron??)  When prices for goods and items excluding food once again begin to rise, and the exporting countries of the world realize that they have far more bargaining power with the world’s leading consumer than they ever have, what then will be the price of that ever so delectable mix of sugar and fat to be found in our favorite vending machine?  And let us not forget, the upward pressure on prices coming from demand in developing and emerging markets with burgeoning populations and larger consumer bases.  Further, when will we (the hapless consumers) finally rebel against this ugly brand of pricing power and once and for all reverse the trend? 

Please, comments are desired.  Whether it is about your favorite brand of potato chip or the oligopolistic tendencies of food producers, it doesn’t matter.  What matters is a forum for all of the things you may think but do not say (within reason).  This thread will continue…..

PS:  I apologize to everyone waiting for the D.O.W. as it is being delayed once again this week- I just was thinking about this had to go with it.   Poll to come Thursday afternoon….

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With the recent switch in ranks of the Senator from Pennsylvania, Arlen Specter, to the Democratic side, the GOP once again faces its doomed influence within American centrist politics. One of the last few voices of clarity and moderation from the Republican minority in the Senate, Specter is also aligning himself with the political realities that he is up against. His party has diverted from its emphasis on strong defense, effective government, and individual rights. In order to remain politically viable, such a move reflects the notion that moderate Republicans have far less significant voice than once before in the Party. Long gone are the “Rockefeller Republicans,” of whose base was largely the Eastern Establishment- policymakers and Wall Street investment bankers/ lawyers. Although this political “elite” drew up much consternation in the public, they were able to effectively agree upon private and public lines of demarcation had been held as standard for the last half of the twentieth century. We have now moved to the unique position in that the old Democratic party that once represented labor interests, large government, and held a decidedly anti-big business credo,  now represents a party more reminiscent of the Republican Party of Old. The professional classes have now in large numbers moved to the Democratic side in our previous presidential and congressional campaigns. If we have any chance of regaining the spirit that captured the Republican Party in its original days as when Lincoln held the highest office in the land, we must seek in every way to hold on to the few stalwarts, such as Arlen Specter, who manage to inject a refreshing tinge of decency, now and then. Away from the ideologically inflexible majorities in congress and in the Senate to a degree, we need leaders who will challenge, as did our current President, the status quo and work together to bring this great union to its best days ahead.

I guess someone has been reading KargBlog overnight.

Most of you have heard the latest reports of the spreading swine virus, causing fears of a worldwide pandemic.  Besides the obvious human toll that such a disease can bring, this has the possibility of making a world economic recovery more difficult.  For one, Mexico remains one the United States’ largest trading partners.  Even if the disease does not reach the levels of infection that have been feared by public health officials, this illness will nonetheless create a barrier to both commerce and travel.  In a time of severe economic stress, such a health scare could have serious ramifications.  Personal productivity, for one, can be negatively affected.  The sheer mental distractions caused by threat of illness could keep enough people’s minds on something other than work, to make a marked difference in productivity.  Think of the further delays at airports and checkpoints should this virus continue to spread.  Just when economic confidence appears to have hit bottom and has no where to go but up from here, such a random event can have unexpected consequences. 

So, the time has come for the banks to spill their beans.  By the end of the day tomorrow, our country’s leading financial institutions will have their fates discovered.  Is this really, though, a discovery?  Since the virtual stakeholder ownership of these institutions by our taxpayers occurred last fall, the element of discovery through price mechanisms is long gone.  Replacing market principles, arbitrariness now leads the day.  Washington ultimately decides the fate of these institutions.  They must, therefore, make one of two decisions.  One, the Fed could declare a blanket green light for these institutions by stating that their financial health is both current and sustainable.  This, however, would largely de-legitimize the bank stress test concept.  The primary reason for the test was the need for toxic assets to be revealed on bank’s balance sheets.  Even after the Fed’s massive purchases of mortgage debt and the TALF, which almost guarantees bad assets, there is still no wide agreement on what remains and how to price the remaining assets held on the books of these institutions.  Could several banks suddenly, over the previous few months, really have re-structured their activities as to remain profitable?  They could bring about a second scenario:  Allow a major bank to fail.  Without naming names, one could envision a major entity not having the wherewithal to continue with their previous business model, which could mean certain formal re-structuring and an utter disaster for common shareholders.  This second scenario is much scarier.  First, such a failure would be a likely catalyst for an extreme market reversal, especially in the financial sector.  Just as confidence has started to rebuild (S&P Financials are up almost 20% in three months) and investors are chattering about taking gradual steps into more risk, a scenario such as the one described would almost assuredly take the heat out of the recent rally.  Volatility, which has been on the decline this year in both equity and foreign exchange markets, will take hold once again.  This scenario, I would argue is quite possible.  Would the administration, taking fire from taxpayers over the recent bailouts, want to risk once again being seen giving a lifeline to this industry?  Letting one institution fail would be just enough to appear as if they are not handing out to the oh-so-derided bankers.  Letting more than one too-big-to-fail bank to fall would mean almost certain systemic risk elements to once again enter into play, which has been delightfully absent in the past few months.  Cynicism aside, the Obama administration, rightly so, will not want to risk damaging an economy trying to get its footing. 

So, what is the right decision from an overall moral hazard standpoint?  Should we guarantee the soundness of bank’s books even though, deep inside, we know that this is impossible?  Or should we let a bank fail and try to let whatever residues are left of a rational market to determine the outcome?  I would argue, although I am eating my words, that they (the administration) should decide on the first scenario.  Really, its a modest proposal.  We have, up to this point, bailed out entire industries on the verge of the collapse, in order to ensure that the entire world does not collapse before us, and the Greatest Depression to begin.  We have added, quite speedily, a monstrous increase in the overall debt that this country owes with the recent budget and stimilus packages.  Why, then, deviate?  At least, with the recent rally, we have seen markets better understand the relationship unfolding between the private and public sector, with former lines of demarcation suddenly blurred.  Perhaps, it is that we could excuse a little intervention now and then if that means more stability.  Allowing a too-big-to- fail bank to go under, would erase any future success in initiating clarity and calm to the world economy.  Maybe it would be a bit more freakishly Orwellian.  This is the moment the administration must truly use a little of bit of creativity and boldness.  The expedient route would be to allow a single failure.  The irresponsible route would be one that would allow several failures.  The wisest route would be to signal the “Loud and Clear!”

Please post what route you think is the best one for our future.  Lets watch this most interesting next week.  And hold onto our hats!

Douchebag of the Week

Douchebag of the Week

It is an honor to be writing this douchebag of the week post. What are some of the qualities that people think of when they think of a douchebag? I tend to think of someone who is smug. Someone who has an over-inflated sense of self worth, compounded by a low level of intelligence, behaving ridiculously in front of colleagues with no sense of how moronic he appears. When I think of this, I think of Scott Hartnell, or myself, but for the sake of not writing about myself, Scott Hartnell has been named this weeks “Douchebag of the Week”. Anyone who has watched any of the series between the Pittsburgh Penguins and the Philadelphia Flyers can testify that his actions throughout the course of the series have been ludacris and in some situations, outright foolish. Off the top of my head examples of this include but are not limited to running our goalie, taking a series of ill-timed penalties, and just by looking at his appearance we can all agree that while he played a brilliant role on the Simpsons, he does not play such a dynamic role on the ice. Using David’s prior post about standards for athletes as a template, I believe that Scott Hartnell perfectly fits the bill as douchebag of the week.

To the devoted readers of the Kargblog…I am embarassed. I let my personal opinions of a fanbase be portrayed as an entire city. That is irresponsible. If there is anything that Kargblog is about, it is responsible, eloquent, and fun. My last post about Philadelphia was irresponsible, inappropriate, and not fun at all to read. For this, I apologize to anyone who read that piece and was offended. It was not my intent to offend any of the readers of this glorious blog. I merely meant to entertain and my latest post was off the mark. I apologize to the city of Philadelphia. I lumped an entire city in with a few thousand patrons at a hockey game and that was also irresponsible. I’m sure there are many lovely things about the city of Philadelphia that I have not experienced and many tremendous citizens. I will not apologize to Flyers fans who pack the Wachovia Center. They are dirt. To everyone else, the readers, the city, I truly apologize. Sincerely, Heater.

When I think of Philadelphia, I think of scum. And not the friendly soap scum that you can get rid of with a little elbow grease and “scrubbin bubbles”. I mean the kind of scum that you should just take a good look at, say “f@*k it”, set the bitch on fire and start over. That’s what I think of when I think Philadelphia. Is this uneducated? Absolutely. Do I care? F#$k no. I’ve been to the city. To be bland about it, I do not care for it.

 

I have friends who were born and raised in Philadelphia who are nice, decent, and fun loving people. But I have sat in the stands in the Wachovia Center, been hit with items that I didn’t know people would be willing to spend $9 to throw at me. I’ve been called things in those stands that would make the average person’s face melt. I’ve been propositioned to fight by a restroom full of Philadelphia’s finest. These people boo’d Santa Claus at an Eagles game for God’s sake. Not everyone is a terrible person who is in Philadelphia but my experiences have been less than pleasant.

 

And its not just the behavior, but what they say….Example. “Crosby Sucks”….If you’ve watched any of this first round series, you will hear that echoed over and over again during game 3 and game 4 in Philadelphia.  I disagree with that statement. Philadelphia disagrees with me. My ignorant and uneducated response to Philadelphia as a whole is “I will give you something to suck on you trash of society, f&@k all of your mothers right in the ass.” However, being that I went to school and received a diploma, I will argue logically….3rd in the National Hockey League in points. Behind a Flyer you may ask??? No…F!$k no. Sidney Crosby has been to the Stanley Cup. Youngest captain in league history. Won the League MVP 2 years ago. He has routinely punished Philadelphia for the way they have treated him. In the regular season, Crosby has played Philadelphia 26 times. He has 46 points. Yep, I guess he is pretty bad. I am disgusted that there is not a cage around the city to keep these people away from the rest of society. The Wachovia Center is a zoo and it should be treated as such.

 

Here we are now 2 periods into tonights hockey game….HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA…..Eat s&*t Philadelphia. I laugh because everything bad that is happening is deserved. Have your coach talk about our goalie to the media, through 2 periods Marc-Andre Fleury has been the best player on the ice by far. Suck my ass.

 

In a game like this, the “best young captain” in the game steps up…Where has Mike Richards been? Maybe Pierre McGuire literally sucked the life out of him over the weekend….literally.

 

John Stevens looks like Bob Saget. Suck a c!#k. Preach discipline to your team and get a goalie. Without those two items you’ll continue to be golfing before the Pens.

 

Fleury just made another big save. So big I got an erection. I typed this with my penis…I’m kidding….or am I?

 

This kind of discussion is had a lot whenever these two teams meet. This isn’t just Flyers vs Penguins. Its Pittsburgh vs. Philadelphia. Good vs. Evil. I really don’t care what your opinion is on Philadelphia. I don’t like it. If you like it, good for you. I don’t care. In my opinion it is a terrible city full of awful people. I have personal experiences to back it up and nothing is going to change my opinion. My personal opinion’s shouldn’t change your views. If they do, good. Welcome to the bright side of life. If they don’t, you’re Darth Vader.

 

Daniel Briere may have a vagina.

 

With 10 minutes left in the game I’m still very hesitant to look past this team and chalk this up as a win…So I will continue to talk about my disgust for Philadelphia. Lets now talk about these jerseys. They are creamsicles. I’m off the jerseys as the suddenly quiet crowd attempted to chant “Crosby sucks” as he wasn’t on the ice and again punished them by scoring the first goal of the game. I love beating Philadelphia. I really do, but I love it more when their whipping boy, a top 3 player in the world, not just the league but the f*#$ing world, scores. It must really suck to not recognize greatness when its right in front of you.

 

Philadelphia scores….shit.

 

I’m done with this shit for the night. Too big of a game. If I walk in happy tomorrow, you’ll be able to figure out how this game went, if not, use your best judgement. Regardless, Philadelphia is still abject filth. 

Robert Shiller, the economist credited for correctly predicting the collaspse of the technology stock bubble in the late nineties as well as the housing bubble, noted the recent fear and resistance to a massive stimulus/overhaul to combat the ills of a creeping deflation which will ultimately chain our retirement accounts as well as our hopes for future prosperity.  It is understandable that a great number of our country’s citizens have negative feelings toward our future with the sheer wealth destruction that has taken place in the past year as well as the freefall in our labor markets.  However, there will be greater freefall ahead undoubtebly should we resist the need to get credit flowing again to our businesses and consumers.

As a follow up to my previous blog post on the advantages to implementing a full-scale high speed rail system in this country, I must comment on the President’s support this week for such a plan.  His vision is certainly a bit high-minded to the degree that this project could take years before any real overhaul of the previous rail network would be realized.  Nonetheless, a step in the right direction.  California appears to have taken the lead in initiating any real effort to get the ball rolling on a project, designing a network connecting both Northern and Southern Ca.  The question of its real success in the future depends on the receptiveness of our population to a new way of gettting from destination to destination.  Given the angst experienced every day at our nation’s airports and our clogged highway system, it is easy to imagine demand meeting expectations of these proposals.  Low-cost, efficient travel will make it easier for both those living in highly populated areas commuting between cities and those in the interior regions, as well.