Another Article About Goldman Sachs

Economics is a vast field that today is very often reduced to numbers, but there is another side to economics that is more than just numbers. There are the people. I have been writing this blog, MONEYTHOUGHTS, since February 13, 2008, and while I have enjoyed having this small piece of routine every morning, I am also hoping that more people might take an interest in the events surrounding world of finance as it pertains to and influences each of our lives. There is a lot to learn. Information and terms to understand is just a part of it, but the people making the bets and taking the risks are at the heart of what is happening.

I received my copy of VANITY FAIR yesterday in the mail and sure enough there is another story about Goldman Sachs. What will VANITY FAIR do if Goldman Sachs would disappear? In the January 2010 issue of VANITY FAIR, starting on page 82, is THE JOB by Bethany McLean. Those interested in getting a little better feel and understanding of what went on at Goldman Sachs during this period will, I think, find this article interesting. This is an article that talks about people, not just numbers or dollars. It is not the last word on the subject, but just another piece of the puzzle.

We, those of us living in a post industrialized society like the United States, live in a very different world than the world for us only 50 years ago. We do not walk or drive around with a lot of cash in our pockets. Most of us have a credit card or two and we use these to execute the transaction for the goods and services we need. Pay checks, pensions and Social Security checks are now directly deposited into our bank accounts. We have faith and confidence that the dollars that show up on our computer screens will be there when we need them. But, in this fast changing world of finance, we need to understand some, and perhaps most, of the machinations that go along with our way of life. This stuff, in my opinion, for us today is more important than knowing the earth is round or that the earth travels around the sun. Those items are nice to know, but understanding finance in the post modern world may keep you alive. Spread the word, people need to understand money and banking.

Stay tuned.

Poor Misunderstood Bankers

Bankers, commercial bankers specifically, are a poor misunderstood lot. They are so different from their cousins the investment bankers, who are a totally different breed of cat. Bankers in the early days of this country were not a well liked group either, because I would say, they are such a misunderstood group.

Banks in the early days of this country started up with a few dollars in gold or silver, or even copper as a reserve against the paper money, bank notes, that they issued. In the early days, there was no central bank such as the Federal Reserve Bank. Banking had very little if any regulations. People that accepted bank notes on any given bank were saying that they had confidence in the people that ran that bank. They also felt that if they presented those bank notes for gold, that the bank would meet their demand because the bank would have gold on deposit in the bank's vault. But, like all things human, some banks issued more bank notes than they had gold on hand to back up. A loss of confidence in a bank could mean a run on the bank and if everyone demanded gold for their bank notes, well you can see what would happen.

Now let us jump forward about 200 years to the present. The banking system in the United States consists of a central bank, the Fed, and several National and State chartered banks. The situation in 2007-08 when the Fed came to the rescue of the commercial banks prevented what might have become a run on the banks. But, what would have that meant in 2007? If everyone went to their bank to withdraw cash money, bills, so they knew they had their money in their hands, the banking system would almost certainly collapse, in my opinion. Banking and confidence go hand in hand.

The Fed did not have much of a choice in 2007. The first order of business was to prevent a run on the banks and maintain the confidence of the people, and hope that they would leave their money, in the form of savings and demand deposits (your checking account) in the banks.

So, is it any wonder that the banks would be the first to be made whole and the rest of us to lag behind in the present recession. I have nothing wrong with this scenario, except, all the banks that were "saved" were not commercial banks. With the end of the Glass-Steagall Act in 1999, banks were permitted to enter other businesses like securities brokerage and insurance. Goldman Sachs and Morgan Stanley became banks so they could keep their heads above water in 2007. The Fed permitted this and now we have banks that are not banks, but they can borrow at the Fed's window. The ability to borrow at the Fed's window means you are a commercial bank.

I realize I have run a lot of history into a very few words, but I hope you get my drift. Helping commercial banks from going under to stabilize the economy and prevent a run on the banks is understandable. But, the misuse of the word bank in the present era, I do not go along with, and it still leaves this country and our economy at risk. Unfortunately, our Congress does not have a clue about all this, and so, we are headed down the same road again.

Stay tuned.

John Boehner Does Not Understand The Stimulus

If we listen to people like House Minority Leader John Boehner, we would believe that there is no such thing as a lagging economic indicator. Representative Boehner and the rest of the Republican tribe would have us all believe that if the Stimulus Package that Congress passed earlier this year does not hit the economy like nitro hitting a heart patient, and giving immediate results, then it does not work. Well, as usual, I think they are all wet.

The Stimulus will work, just as the stimulus worked in bringing us out of the Great Depression. World War Two was in effect a stimulus. What Republicans do not understand is that a stimulus does not have to be for tanks and planes to work. A stimulus to rebuild our infrastructure as a country will have the same, if not a better effect. And, while we are at it, we need to rebuild the electric grid of the whole country. Talk about National Security, I can not think of anything as important to our National Security as our electric grid. Money spent on the grid will pay off big time as we move into the 21st century.

Keeping police, fire and teachers on the job by helping the states with their budgets is also part of the stimulus and, in my opinion, part of our National Security as well. The more people we can keep working at jobs that already exist the faster we can come out of the recession.

Credit remains a key factor to bringing the economy out of the current recession. Credit is money in the 21st century, and without credit businesses and consumers are reduced to paying for everything with cash. A cash economy does not grow as fast as a credit economy. The banks need to be encouraged to lend, but they also need to be put back into the banking business, only. If they do not have any other means of earnings, they will lend money.

The Stimulus will work and it is working, but it is going to take more than a year for it to be really felt. An economy the size of the United States' economy does not react like a Kool-Aid stand on the corner of Main Street on the 4th of July.

Stay tuned.

Sunday: Time For Pro Football & The New York Times

First, I want to congratulate the University of Cincinnati Football Team for winning the Big East title for the 2nd year in a row with a 12-0 record. I have to admit I could not watch the Pitt game as I did not want to jinx them. I saw part of the first half and thought the fix was in as the refs were doing everything they could to see to it that Cincinnati was not going to go undefeated. The thrilling ending would have been too much for me to watch, but I am very happy for them. Now, the big question is: Will Brian Kelly stay in Cincinnati? I like so many Bearcat fans hope he will stay. The Bearcats by winning the Big East go to a BCS Bowl. Great job Bearcats.

The Cincinnati Bengals just got by Cleveland last Sunday. I think the game was too close when the Browns' overall record this season is considered. But, a win is a win. This afternoon the Bengals play the Detroit Lions. Good luck Bengals and lets see some offense today. The Bengals have too many good offensive players to be just scoring 16 points. I, like a lot of fans, hope they light up that scoreboard this afternoon at Paul Brown Stadium with lots of points.

Stay tuned.

Saturday Is For Art

A few years back, when I was reading The Wall Street Journal everyday, there was an article about Andy Warhol's estate. In the thirty some years I read the Journal, there was not a lot written about art and artists. Naturally, this article caught my eye as I was interested in how the Andy Warhol Foundation and a major art auction house in New York were trying to cheat the executor of Andy's Will out of his rightful fee by undervaluing the art in his estate. Art meets big big money and a conspiracy is hatched. Well, when I got my copy of Art In America, they too had their own article about these events surrounding Andy Warhol's Will and his executor. That did not happen too often, if ever at all before. What I mean is having a story in the Journal and the same story in my art magazine. So, where is all this going? Well, now I read ARTnews. Personally, I like it better than Art In America, but that is my opinion. In the December 2009 issue of ARTnews is an article about the artwork that was picked out for the Obamas' White House. And, can you believe that there are people writing about their picks. First, they only got to pick from a selected group of artworks as many pieces were not available to them from the Smithsonian museums, yet, critics of the Obama administration found room to criticize them for what they hung on the walls of The White House. If anyone is interested in reading this short article it is titled Critics Nix Obamas' Pix Mix by Robin Cembalest, pp 42-43. To what lengths people will go to criticize our first black president, I guess, will never cease to amaze me.

Today's piece I think must be Tribute to Jackie Robinson: Leveling The Playing Field 1947-2007 in acrylic on a black envelope and now in a private collection in Houston, Texas.

Stay tuned.

Northside Holiday Art Sale Dec. 12, 2009

Next Saturday, December 12, I am going to participate in the Northside Holiday Art Sale. See the above poster for time and location. Northside is a neighborhood in Cincinnati not too far from the downtown and close to the University of Cincinnati. Many young families live in Northside as property in Clifton is more expensive. I will take several pieces of my political art to this sale, and a few prints of my work as well. I hope to have a few prints of the sunflowers available too. This is my first Holiday Art Sale and so I don't know what to expect, but for six hours, 11 to 5 pm, I am sure I can have a good time.

Stay tuned.

Afghanistan: Why We Are There

The press reports just about everything and anything. Some reporting is good and some is terrible, but in a democracy almost everything gets reported. One Senator stands up and talks about the President and his policies and naturally it is reported. But, I guess it is up to us, the listener, to decide whether what they have said makes any sense.

Senator John McCain has decided that to tell the world we will remove our troops by 2011 is a bad more. Why tell the enemy your plans? Personally, I don't think there is a muslin in that part of the world that would bet his turban that the American Forces will be out of Afghanistan by 2011.

How many years is it since the end of WWII? 64 years? 64 years and we still have bases and troops in Germany and Japan. Yet, we are worried we are telling the Taliban that we are leaving in 18 months. The Taliban are praying we will be out by 2011.

As I wrote Wednesday, the important thing about this region of the world is the fact that Pakistan has nukes and nuclear material. The last thing the west needs is for al Qaeda to get their hands on nukes or nuclear material. While we do not have troops in Pakistan, the presence of troops in Afghanistan along with the mission to bring more stability to the Afghan people and their government, is enough of a reason to be in the region. True, al Qaeda does not have to be in Afghanistan to operate, but with Pakistan right next door, it is imperative that we stop al Qaeda from getting their hands on nukes or nuclear materials.

I realize that the Republican Party has now seen their Southern strategy run its course. It played well for them for many years. They would be smart if they would say Kaddish for their Southern strategy and light a candle after they bury it, and then start thinking about a new strategy. Beating on our black president day in and day out is getting old, and the majority of the people, remember it takes a majority to win, see through it now.

Stay tuned.