ECONOMIC STIMULUS

Let’s talk about economic stimulus. Is there really such a thing and why would it be good? Economy is the way we support ourselves so we can live an obedient, disciplined life. The basics are food, clothing and shelter. Every thing after that is not a necessity.

What is the real current economic situation in the country? …in the world? I would suggest that we are about where we should be. A year ago we may have been living in a fantasy situation. I suggest that since 1935 in this country the real economic condition has been growing at about 2.5%/yr, (about the same as the population) Since 1985 we have been in a falsely created situation. We have been living “higher” than affordable. We have been living on “borrowed” money. The FED and others have been maintaining that by manipulating interest rates and other factors to “stimulate” unrealistic borrowing. The condition is sustained by borrowing more. Now we are at the point of the, so called “Credit Crunch”. We don’t have a credit crunch. We have a debt problem. We are borrowed up to our eyeballs and higher and there is no place to turn. Te bubble has burst. The house of cards is falling down. How far will it fall? …a little below the real sustainable commerce level. We are almost there. I think a Dow of 4000 will bracket the situation. The DJIA is made up of 30 good industrial companies. (well, mostly good) Their current earnings levels have stabilized the index at the 8500 mark. But, earnings in the next quarter and the next year will be 20 to 30 % lower. So, I expect the index to decline further. And, people have to get their finances back in order. They must reduce their debt levels. They have to get back into a positive savings mode. They needs three to six months of living in their checking accounts. They need four to five years of living in their savings accounts. The price of homes has to get back to realistic. Used home prices should be at or 30% below the building costs. What are the prices in your community?

To reach this stable situation reveals discomfort for some and disaster for others. We need to make provisions for those who are out of work and out of their home. Eighty or eight five percent of the people are and will be okay. But, fifteen to twenty percent are going to need some help. Some of these need help indefinitely. Others will eventually find employment and get back on their financial feet. It will take two or three years to sort this out. Obama is talking about a “Stimulus Package” aimed at 2,5 million people. He wants to spend whatever it takes and create jobs for this number. The current estimate is $1 trillion. I think that is two few jobs and too much money. And, it is an ineffective way to inject growth into our economy. We don’t need “made up” jobs. We need “real” productive jobs. We need purpose. Most of the efforts proposed and tried so far are aimed at getting us back to an unrealistic condition. We need to recognizes the folly of our previous ways and get on a new path with purpose and righteousness. We should talk about that another time. Right now let’s talk about stimulus.
How many people are in trouble? The size of our workforce is elusive. But, let’s say we have 100 million who can and should be working. So, if 85% are okay, then 15 million are not okay. That’s a bit more than the 2.5 million jobs Obama wants to create.

How much money? Let’s say we have to help all of them for a year and half of them for two years. Then there is the 5% that always need help and we already have “adequate” provisions for them. So, that means 10 million for one year and 5 million for one more year. At an aid level of $20,000/yr each that is about $200 billion the first year. … about half that amount for the second year or $300 billon for the two years. The Obama estimate is $1 trillion for 2,5 million jobs. Once again I say, too few people helped too much money spent.

SATURDAY THOUGHTS

Saturday December 6, 2008

AUTO BAILOUT

So, we are going to grant big loans to the auto companies. There are some good aspects to this and some bad.

Good

1. Keeps more jobs.
2. Takes sales away from foreign carmakers.
3. Provides stronger customers for parts and other suppliers.
4. Gives relief to public shareholders of GM and Ford.

Bad

1. Interferes with free enterprise system
2. Enables bad management practices in domestic companies
3. Sets bad example for citizens who are already leaning heavily on the federal government.
4. Bails out financial speculators i.e. Owner of Chrysler.

NORTH DAKOTA:

Things are booming in this state. Maybe our DC lawmakers should take a trip up there. Might get some sensible ideas about fixing problems elsewhere. We need to have some tough decisions made and some good examples set. I would like to see some unselfish courage exhibited by our lawmakers.

CRIME IN THE U.S. AND THE WORLD:

The rapid growth of Internet crime is an indication of the rapid growth of crime in the world. White-collar crime is condoned, sanctioned even encouraged in the corporate/political arenas of the world. Clever business people and lawyers are busy finding ways to justify legal methods for gaining in a greedy fashion from unsuspecting or ignorant organizations and people. This may include lobbying of powerful political figures.

The God of creation has told us by way of His prophets and apostles that legalism will not work. It is not possible to legislate morality. None us, being born of Adam, are capable of becoming righteous through our own efforts. It is only by the death and resurrection of Christ that we can become righteous. When we know and believe that we have been crucified with Christ and that He now lives in us, we will become righteous.

How will Christ deal with the unbelievers? Since, the soul does not die but lives on in eternity. There are only two choices. Live with Christ in joy or be condemned to eternal damnation. Christ saves, we choose.

What are the believers to do? Live in faith trusting the Lord Jesus Christ. Go to work for Christ and don’t worry about tomorrow.

GOD AND MONEY

Study Genesis and see the lesson for money management in The Garden of Eden and with Cain and Able.

Adam ate from the tree of the knowledge of good and evil and was banished from the Garden. Cain and Able each had a farm and were required to work it (toil). Able did a good job and was being rewarded by God. Cain did a bad job and became jealous of Able. He eventually could stand it no more and killed Able.

So, what was Able doing right and Cain doing wrong? The first part of the answer is to trust only in the Lord. Trust not in our own understanding. 1Chronicles 16:8, Proverbs 3:4-6.

Listen to the Lord and He will direct your steps. A tithe goes to God because He is God. And, we learn to live on less than we receive putting away the remainder to build up Treasure in Heaven. This is required because everything we receive and have belongs to God. We are His workers and Stewards. We are asked to plant some of the seed corn every year that it might grow into a bountiful harvest. Then ever year (season) after there will be a bigger yield and the amount of heavy toil required will be reduced.

If you are given a goose that lays golden eggs, you must feed the goose and save some of the eggs. If you don’t feed the goose she will not lay as many eggs. And, with too little food she will eventually die. If you feed the goose she will lay many golden eggs. And, if you get more geese you Will have plenty. But, remember it is all God’s. He will tell you how to use it. Short selling golden eggs leads to ruin.

November 19, 2008… It appears this economic “downturn” is not missing very many places. One or more of the ”Big Three” auto manufacturers will not survive. How many people will be affected? These companies have had many warnings. They have made some changes in their organizations. But, as we hear their pleas in trying to get financial aid from the Federal Government we can read between the lines. GM especially seems to believe they are special and deserve some handouts. This kind of support is dangerous in many ways. First, it places more and bigger burdens on the public. It puts the people of the United States at jeopardy. It reduces the resources of the country and puts us at risk in the world. Money doesn’t grow on trees. Theses gifts have to be paid back and if they are not, the people pay in the form of taxes. Some one has to create the wealth. The capitalist system places that responsibility on the businesses it supports. GM, Ford and Chrysler have in a sense pledged themselves to be part of that wealth building community. If their businesses lose money, they are not fulfilling their responsibility. I would expect them to make and sell cars at a profit. I would expect them to be able to do this better than Toyota or any European manufacturer. GM has been chasing Toyota since 1960. And, they are falling further behind. GM has been eating their dust. GM needs to get out in front and make dust. GM’s leader sounds arrogant and looks to be ignorant of his responsibility.

I feel sorry for the people working for GM. They have been hoodwinked. GM cannot afford to pay them the level of compensation promised. GM cannot support their suppliers and dealers. When I was in business I did not want to work with suppliers or customers who failed to make a profit. Businesses that are not profitable are like drugs. They sap our economy and live like vultures. We should not support businesses who do not contribute to the welfare of our country. Check it out. Make sure you are spending your hard earned money wisely. Just buying cheap is not the whole answer. Buying foreign produced goods hurts the country. I include cars, oil & prescription drugs in the “it’s a mistake to buy foreign” category. But, what do we do when our own companies can’t or don’t compete? Your voice is heard by where you buy. In the case of cars, we don’t have to buy. We can repair. We can find other means of transportation. Let you voice be heard. GM workers ought to be able to change jobs and work for companies in the U.S. rebuilding and refurbishing old cars. We’re Americans. We’re creative and resilient. We can find alternatives. We are survivors. The government cannot fix these problems. But, we can. This can be a time of renewal. Now is the opportunistic time. Let’s grab it and go. Solutions are out there.

THE WORLD TODAY

Everyone in the world is now being visibly touched by the hand of God. Thirty nations report being in a significant world recession. Divine providence will not be thwarted. The world and its nations cannot create any sustainable economy beyond the providence of its creator. Wealth is wealth by the definition of the creator. False wealth and false hope will not be achieved much less sustained.

Think about China trying to grow their economy at a double digit rate. Where are they going to find the people who will be able to manage the new business efficiently. At this time factories are closing because they are running out of cash. I don’t know of any businesses that can sustain a growth rate greater than about 8% because they are unable to generate enough cash to sustain the growth. In order to grow they need outside cash infusion which they will be unable to pay back. In the U.S. that has recently been called the credit crunch. However, it is more aptly termed “having too much debt”.

GM FORD & CHRYSLER

What do you think? Bail these guys out. They’ve known about their problems for more than ten years. And, now we get another warning about the problems of the nation. Much of the problem is brought on by the leadership ( or lack of ) in our nations capital. But, what’s the matter with the Detroit guys. Trying to get someone else to solve my problems is a cop out. The first big warning came in 1960 when the Japanese first showed there face. Gm said “ Let them have 10% of the California market.” Another warning came with 911. Instead of looking inward at our problem we elect, overwhelmingly I might add, to go after the terrorists. And, now we are looking to throw more government and more money at the problem. Where will the money come from. Aren’t we about out of money?

Let’s send the car guys back to the motor city and tell them to fix their own problem. Let’s see three cars from each of them that will complete with a Toyota Camry in all quality aspects including fuel mileage and can be priced profitably $5,000 below the Camry. The big three might have to clean up their respective houses. New alternate fuel cars can come later after the basics are in place.

We in the United States need to look inward and build ourselves into a true 800 pound guerrilla. Then, the terrorists won’t hate us so much. We need to earn more jobs as a result of our businesses, both large and small, being better than the foreign competition. We should be ashamed and we should be angry. I challenge all readers to pray, encourage, do whatever to work toward a more productive America.

CONSERVATION OF MASS AND ENERGY

CONSERVATION OF MASS AND ENERGY written by Frank 11/1/08

Sorry about the science. But, I just can’t get away from the idea that the God who made the universe made it consistent. There is no deviation from the principles of the creation. Every thing that goes up here must come down. There are no exceptions.

The current “situation” with the Global economy follows the same rules. Wealth is not created out of nothing. If there is no foundation there is no wealth. Since the birth of derivative in about 1985, people around the world have been deceived. The world stock markets have been trading stocks at values not representative or the true values. I tend to think the value of financial investments should be measured by the return on the investment. Ten percent return is a good number. That is a P/E ration of 10 for a stock. A five percent return is a P/E ration of 20. I like a return in the 7-8 % range. That is equivalent to a P/E range of 12.5 – 14.2. So with this simple formula, I would buy stocks that are lower than 12.5 P/E ration and sell them when they go above 14.2. Right now there are some available below 12.5 P/E and with a dividend payment of 65%. That would seem to be a good buy except that we have not yet seen the effects of rising unemployment. I am still waiting. The market will go down further.

The same principles apply for carbon dioxide concentration in the atmosphere. God created the universe containing the earth using the same principles. It’s the only way that there can be enough stability to support life for the period intended. So, the atmospheric conditions that support life as created have to hold constant for a period long enough to accomplish the purposes of the creation. Let’s over simplify the situation. Animals and reptiles need oxygen to live. Plants, grasses and trees need carbon dioxide to live. They help each other. Animals use oxygen and give off carbon dioxide as a waste product. Plants use carbon dioxide and give off oxygen as a waste product. To make a long story short, animals and plants use each other to survive. If there is not enough oxygen then the number of animals must go down. If there is not enough carbon dioxide, then the number of plants must go down. The quantities of atomic carbon and oxygen stay pretty much the same all the time. This is consistent with the principle of mass and energy being conserved. However, the form of the carbon and oxygen can and does change to maintain the required equilibrium. If another factor is introduced into the situation then an equal and opposite change in the equilibrium process will occur. If some forests are destroyed, then the remaining plants and animals have to react accordingly. In any case, changes will occur to maintain the required ratios of carbon dioxide and oxygen.

These cycles have held up and proved to be reliable for centuries and millenniums. I think it is reasonable to expect them to continue. I believe it is folly to think that man can outmaneuver God.

CREDIT CRUNCH???

The country did not run out of credit for loans. The country has loaned us to above our eyeballs. What did the financial institutions expect? We have been sponsoring this kind of debt culture since about 1965. Our payment balance on import/exports has been negative for 40 years. It is like we think money grows on trees. Most of our businesses are focused on capturing money from someone they think will continue to pay them. It is like the Carnival games that used to come to rural American in the 40's and 50's. The prizes were always worth less than the fee to play the game. If you want to be richer, you need to create more wealth than you use. It goes for people. It goes for business. It should go for government as well.