Saturday, January 7, 2012

Assumable Loans, Mortgages and Transferability

The world you live in has changed because some rules changed, some of the patterns in law and practices changed.  Up until about 200 years ago, transferability was not allowed.  What is that?  Say I buy a house form you and we agree that I will pay you $500 a month for 30 years.  I know you, we like each other. We agree.  And I start paying you.  At some point along the line, you decide to buy sell this contract to someone I do not know and when I meet I do not like.  I do not want to be "in business" with the new person.  Today, such an arrangement is possible, in fact, common.  It is called the secondary market.  A few hundred years ago, it was not allowed (unless all parties agreed.)  Much of the high fiinance mischief today comes from that change in law.

About 30 years ago, mortgages were common.  This is no longer the case.  As is usual, the term mortgage is still used, but almost no one gets a mortgage.  You have a deed of trust.  The difference is a mortgage is grounded in complex law that protects the homeowner from the bank.  A deed of trust gives a bank a fast track to throw you out of your home.  You still pay for the advantages of a mortgage, but you get none of the benefits.  This change contributed greatly to bank profits.  At the same time, it allows for robo-signing and mass eviction of tenants in bad times.

At the same time, bankers ended the practice of "assumable loans." before about 30 years go, it was common to write into mortgage contracts that the loan was assumable, that is to say, anyone who met the credit criteria could take over the house and payment.  As long as the new person was of the same credit standing as the original buyer, what did the bank care, the money kept coming in.

An assumable loan allowed elderly parents to pass a house on to the kids before the house was paid off, it allowed someone in a jam to get out from under a house he could not afford and other unusual circumstances.

Well, with assumable loans there is no sale and resale, no new mortgage fees, no excise taxes, all sorts of revenue opportunities do not emerge.  So that option disappeared, like mortgages about 30 years ago.

Those options disappeared during the savings and loan crisis of the 1980s.  It was a crisis that did not go to waste.  I recall watching those changes and thinking, this is not good.  20 years later, deeds of trust and non-assumability are playing a big role in the housing crisis.

It does take about 20 years for the bad effects of awful policy to take full bloom.  In 2012 Obama signed  The National Defense Authorization Act (NDAA) for Fiscal Year 2012...

In about 20 years we'lls see the full horror of that law.


Friday, January 6, 2012

Ron Paul And Donations

Ron Paul's average campaign contribution is something like $38, and Mitt Romney has over quarter million donation from Goldman Sachs so far.  Who are Ron Paul's top three sources of donations?  Active duty Air Force, Army and Navy, in that order.  Watch what happens when a soldier expresses his views on government owned (CNN) TV...


Thursday, January 5, 2012

Earlier I noted the who and how of oppressive government, but not the how come.  People need a narrative, and organizing principle, to rationalize they why of their actions.

National myths are popular, Virgil provided one for Rome and a particularly motley crew came up with the Teutonic master race idea of Nazi Germany.  People need a why or a how come or a raison d’etre for their actions.

Domination of others is a pretty raw excuse, both sides need a cover story, something that allows them to feel good about what they are doing, the system in which they participate.  

The modern state was ruthlessly efficient, and could expand and conquer far afield.  These voyages and expeditions opened a strange, and to many, a terrifying world.  Colonialism disrupted traditional free markets, and much suffering followed.

Malthus became convinced that modernization would lead to population outstripping food supply and wrote convincingly of his fears in the late 1700s.  In time his theories would prove nonsense, but nonetheless a belief in overpopulation is a conditioned reflex worldwide today.  There is no evidence of overpopulation, just a widespread premise that it exists.

Yes, there is famine and starvation, but never a shortage of food, merely a failure of government policy to properly distribute the food.  In fact, any policy will inevitably have winners and losers, the obese poor in USA and the starving poor in Darfur.  Either way, these are the losers in government policy.  Free markets never treat people thus.

Given the modern state’s relationship to violence, government policies can become genocidal, as in Germany, Cambodia, Soviet Union, USA, etc.  Starvation is policy failure, not market failure.

Given the putative problem of overpopulation outstripping supply, Darwin arrived at the theory of natural selection, and it fell to others to take it a step further to “survival of the fittest.“  One is not responsible for those who abuse their writings, but genocidal racists did depend on Darwin as their intellectual fountainhead.  We are told overpopulation is kept in check by natural selection (survival of the fittest) but sometimes people like to hurry up the process. hence genocide.  Here one of our best playwrights offers his ideas.

No where is it written as a premise in law that there is overpopulation, but everywhere people proceed as if this is a truth.  Forbes Magazine relates that the primary concern of the Gates Foundation is overpopulation.  Planned Parenthood gets a half billion a year in taxpayer support.  You no doubt believe the world suffers from overpopulation.  We are overwhelmed with conditioned reflex presuming overpopulation.

 It is probably more widely held worldwide than any other belief system, when you calculate how many Christians believe it to be true.  Both theories, overpopulation and natural selection, are core curriculum in any school at any level, and our society proceeds from these two premises in considering public policy.  It is just the way things are.

I am doubtful of overpopulation hypothesis since I fly a lot and see most of the earth is uninhabited.  It seems to me anyone experiencing “overpopulation” may remedy it rather easily for himself.  Move. It is quality of life, and that is decided by the individual, in freedom, not be central planner.  But the central planners use the threat of violence to keep people form exercising their human right to move.

But back to the problem, overpopulation, and the solution, natural selection.  Much government policy worldwide is ordered to assisting natural selection.

Here is a series on Soviet experiments with population control, and indeed the advanced form in which man is transformed through the process.


Note how the National Socialists are widely reviled for targeting a racial group in entirety, whereas the Soviets get a pass since they did not.  The Soviets picked on a class, not a race.  We do this in the United States too.  We have a system that defines the right people, and then advances them to the commanding heights.  You find people of all races and creeds in top positions, but they all think alike.  It is both self-selection and survivorship bias in action.  Hold these views, move on up.  One fundamental view is that the world suffers form overpopulation, and we can do something about it.

We have a wonderful construct in USA, wherein we have a truly classless society, acknowledged by one and all.  Except the people in the commanding heights privately see themselves as a separate class.  Politicians commonly exempt themselves from the laws they pass.  Government workers are given exceptional benefits.  There is a dividing line, and it is roughly along educational attainment.  Community College and below are expendable and takes orders, BA is in doubt, but advanced degrees and  above are the ruling class.  

This all sounds so harsh, but look around you, the world is a very harsh place.  How come?  Because Arab terrorists hate our freedom?  Because women do not have access to reproductive health care in some countries?  Because of overpopulation?

No, it is harsh because of violence.  The violence is fundamental to the modern state.  The people who subscribe to the state employ violence to maintain their advantages.  They rationalize their position by claiming there is a problem, and they claim they work within the scientific field of natural selection to solve the problem.  You may never actually hear anyone speak in those terms, but it is what drives policy.

Think about the line of reasoning for our economic troubles:  bank failures due to toxic assets from subprime (poor people) loans, and USA jobs going overseas to where overpopulation leads to cheap labor.  Banks made bad loans because they knew they would be bailed out.  USA sources overseas to escape govt regs on employees, to launder money and escape taxes. the masters made bad rules, and then they blame the poor for the bad results. Our economic problems are due to bad policy, not overpopulation.

Wealth is not money, but access to a range of goods and services.  There are no government services people prefer to private services.  Even the US Military top officers prefer to be protected by private contractors rather than their own soldiers. Anyone who can afford private goods and services prefers those.  And the free market makes more, better, cheaper, faster more affordable to so many more.

Self employment is a process of personal transformation.  Stepping aside form destructive nonsense is part of the process.


Wednesday, January 4, 2012

Chomsky On Capitalism

Chomsky is a socialist, and he probably would not object to marxist, and as I have said many time, they get their facts straight  Here is is saying something I've argued for a while, and he seems to be arguing for free markets.


Monday, January 2, 2012

Why Police Cannot Be Reformed

The US Justice Department has completed a review of Seattle Police Department practices and concluded that there is systematic violation of civil rights in Seattle, especially targeting minorities, and that the violations are concentrated on relatively few officers.  

I spent eight years assisting a retired Seattle Police detective in writing his memoirs and I came to the same conclusion.

A previous Seattle Chief of Police, Norm Stamper, claimed in his autobiography that all Police Departments need reform every twenty years or so. What other organization needs to be fixed so often?  Municipal police departments have only been around about 150 years, before that there were many other mediating institutions to keep the peace.

Within weeks of this scathing report on Seattle Police, a citizen finds that while his life was in debate after being struck by a truck, “first responder” police officers were mocking him for stupidity and mimicking the foreign accent of the truck driver.  Police officers have no concern regarding the Justice Department review.

One has to step way back to see why police departments cannot be reformed. 

A society has an organizing principal, of some sort, which emerges out of an organic process of contending people and factions, strife and worry, and ultimately some kind of compromise.  That is a prĂ©cis of any history of any culture. 

In the worldwide times of strife circa 500 BC there were many schools of thought as to how to order society.  It is a recurring artifact of history that the philosophy that orders society in a manner consistent with oppression, complimenting both those infected with libido dominandi and those who clamor to be oppressed, a perfect match, is the philosophy that wins out.  It is  matter of time.  It has always been thus.

History shows time and again how at critical junctures ideas of a good and just society are proffered by such philosophers as Mo Ti, but it is the ideas of rivals such as Confucius that win out.  Inevitably,  the philosophers who come down on the side of freedom are rejected, the ones who advise putting a halo on oppression are the ones who win out.  

The lesser philosophies win out for the simple reason most people want to be oppressed, desire to trade a wee bit of freedom for a whole lot of avoidance of responsibility.  This is well illustrated in 1 Samuel 8, where God Almighty Himself found his offer for peace, freedom and prosperity rejected by His people.

After a degenerative system gets established, there are times of respite, of sorts, for some, and a writer will observe the status quo, explain it, and be considered seminal, or at least celebrated.  These writers are not authors, they are merely explicators, observers, messengers.

Max Weber was one such social observer. He noted the end of struggle regarding the divine rights of kings vs the divine right of the church, and the triumph of the divine right of the state.  Where the church had its clerics, and the kings had their lawyers, the state has the bureaucrat.  This was a burgeoning profession, one in which the new mega-state of Nazi Germany and Stalinist Russia, and their imitators in the democracies, offered plenty of opportunity.  (China is fairly unusual inasmuch as a latecomer to modernization, it still has vestiges of the mediating institutions that allow it to be ruled by relatively few people. Mao tried to end that with his policies, but he did not have time for total destruction of Chinese society.)

 And there are more than enough people who will take on the task of being Pharaoh, in ways small and large. Aquinas called this condition libido dominandi, or lust for power.  We all went to school with people whose thrived on dominating others, both bullies and charismatics. And their followers.

In his advice to young people who seek power, called Politics as Profession, Weber defined the state as a territory with a monopoly on violence.  Whatever the game of the state happens to be, it is to be protected by its monopoly on violence.  

It is this very definition that attracts certain people to this kind of power, the violence, or as Mao put it, “"Political power grows out of the barrel of a gun”.  Aquinas also noted the condition of superbia vitae, pride of life, that conceit that “my life is more important than yours.”  Hillary Clinton touched on this ambition in her graduation address to students at Wellesley in which she noted:  “We're searching for more immediate, ecstatic and penetrating mode of living.”

At 22 yeas old Hillary was signaling not so much that she wanted change, and her personal history since then bears this out, but merely that she wanted to be in charge.  She and others went on to pursue careers in politics, and assemble like-minded followers behind themselves.  You’ll find these people in any society, their motivation is clear enough.

But it is not enough to be motivated, one must have the means to concentrate and exercise power. In the capitalist countries, the game is capitalism.  It is played by fractional reserve banking, and concentrates power in the hands of a few, while at the same time constricting the freedom of people who borrow money at interest.

The idea was so odious to the freedom loving founders of this country that the man who championed this method of oppression, Alexander Hamilton, was shot and killed by the Vice President of the US at the time, Aaron Burr. People took their freedom seriously back then.  Hamilton is loved by the Capitalists, who pay for the History books, so American hero Aaron Burr gets a frown if he is mentioned at all.  

Thomas Jefferson noted in the declaration of independence

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shown, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.

Jefferson’s adversary, indeed, the enemy of all freedom loving people, Alexander Hamilton noted:

“Safety from external danger, is the most powerful director of national conduct. Even the ardent love of liberty will, after a time, give way to its dictates. The violent destruction of life and property incident to war; the continual effort and alarm attendant on a state of continual danger, will compel nations the most attached to liberty, to resort for repose and security to institutions which have a tendency to destroy their civil and political rights. To be more safe, they, at length, become willing to run the risk of being less free.” The Federalist No. 8, p. 33.


This was not warning from Hamilton, but a game plan.  He was offering an explanation of why his policies would win out in time, and they did.  His most ardent proponents today are the followers of Lyndon Larouche, the fringe group eager to take over the system we have in place. The warfare/welfare state.  Oppression through usury.  

But is is an unholy construct, that works for some by necessarily harming others.  In time, people begin to resist, and their political betters must push back.  For a polity with a monopoly on violence, resistance is to be met with violence, especially resistance to political initiatives.  As Mao said, "Political power grows out of the barrel of a gun."

The first line of defense of this system is the police officers.  Under no circumstances is a police officer to be discredited, not even for murder.  The police officers know this, and all of the reform in the world will not address the underlying problem, and that is a system that is grounded in violence, and the people who are attracted to that kind of work.

Now people will complain that most police officers are law-abiding, decent individuals.  This may be the case.  But as I learned from assisting a retired police detective in writing his memoirs, there is an active program to recruit and corrupt officers who will do the dirty work necessary to keep the powers that be free of resistance.    A small group of officers who are ready willing and able to lie, cheat, steal and even murder to protect the powers that be.  All other police officers, decent or not, do the indecent thing and support these officers when they do evil.  The fact is, a police officer’s life depends on it, because when there is a  situation an officer cannot handle, he can count on back-up to come in and make it a win for the police, whatever it takes.  if you do not utterly submit to the friendly smiling cop, there is a cruel and stupid cop to whom you will submit.  They are on every shift.

A favorite line is “you may beat the rap, but not the ride.”  This means although you may be found innocent in a trial, between the arrest and trial is a dreadful process you cannot escape.

Let me give one example, and not even the worst.  There was a fellow the police did not care for, and the police get a warrant to search his home for drugs.  Judges hand out warrants like confetti, so no problem there.  A search is conducted, and no drugs are found.  And then again.  Finally, a sergeant will pass on the word this fellow must be busted.  Among the officers hearing this is one of those who “gets things done.”  As the officers make their dynamic entry serving the warrant, an older officer tosses a kilo of cocaine into a closet as he passes the closet on his way to another part of the house.  Eventually a young officer, on his first dynamic entry search, very exciting times, finds a kilo of coke in the closet.  Attaboy!  The young officer is very pleased with himself, he is good at this police work.  He found dope where previous, more experienced officers found none.

Now, the subject of the warrant will truthfully tell his lawyer the cocaine was not his, it was planted.  The defense lawyer will demand and have his own polygraph test performed on the young police officer who found the cocaine.  That young police officer will answer truthfully he did not plant the cocaine.  The defendant is convicted.  Another innocent person is off to jail in the war on drugs.

In a system that is inherently unfair, where winner and losers are arbitrarily picked by the powers that be, most people keep their head down.  Over time things get worse.  More and more people are disaffected, and what goes around comes around.  Violence erupts and there is an overthrow of the system.  But the new people in charge are worse than the old.  The American Revolution saw the victory of Alexander Hamilton’s vision over Franklin and Jefferson.  Jefferson went on to be president, as as such was as arbitrary as any despot.  He reformed himself after serving as president, again demonstrating power corrupts, even if only temporarily.

There is an alternative to all of this, and it is freedom.  USA was designed to be a collection of small and independent states, but has become a monstrous, terrible place. The solution is to get back to where we went wrong.  Small independent states, where people are jealous of their rights, and refuse to turn them over to others.  Like Hong Kong, where 500,000 people hit the streets in 2003 when their government debated some constrictions on the Hong Kong people.  For a comporable protest in USA, there would have to be 33 million people hitting the streets.  Saturday night the president signed into a law a program where the military can arrest and indefinitely detain USA citizens, without due process.  Exactly no one took to the streets to protest this heinous act.

Why would police bother to reform for people like this?  I wouldn't.  But I am in a constant state of reform for my customers.  The trick is to have free markets, like in Hong Kong.


Costco And Order Out of Chaos

The fellow who created and built Home Depot is notorious for claiming today it would be impossible to do what he did in 1979, for new constraints on free business practices.  Today, in USA, 40,000 new laws went into effect that further constrain freedom.

In the current issue of the Costco magazine, retiring CEO James Sinegal traces the growth of Costco.  He and other top Costco people started at a company called Fed-Mart as boxboys, cashiers and stockers, etc.  That company famously went bust and out of the ashes one worker and his son started Price Club in San Diego in 1976, a members only warehouse concept.  In 1983 ex-Fed-Mart boxboy Sinegal and others started a version called Costco in Seattle, and all of these players, in a scene reminiscent of The Return of The Magnificent Seven, merged Price Club and Costco into one business named Costco in 1993.  The rest as they say is history.  The new CEO of Costco is also a veteran Fed-Mart boxboy who wandered aimlessly for a decade after the Fed-Mart immolation.  The moral of the story is this crew learned good habits and sound business principals while working at those other gigs.  They are now centimillionaires.

I recall the demise of Fed-Mart, and those times when it seemed the world was coming to an end.  The endless, pointless war in Vietnam, Boeing apparently going out of business, housing prices plummeting, rare opportunities, terrorism, and a paranoid, criminal government under Richard Nixon.

Yet these people saw clear opportunity, carefully tested and grew businesses, that in time became staples of the economic landscape.  Apple computer comes out of these times.  While many others failed, a new, different, better IBM emerged, after a wrenching process.  Protected industries, such as auto and defense became truly awful.

An aspiring politician once said "We're searching for more immediate, ecstatic and penetrating mode of living.”  Can you think of anyone who has better lived such a life than the founders of Costco and Apple? Or the countless unheralded businesses who have done likewise?  Such a life is not possible in politics, so I am afraid that acolyte will find disappointment at the apogee.

Yes, starting a business has been made much harder by pointless regulation, but even worse is a lack of people who see business as a route to a better life.  When I mentioned to a 20-something 1 in 6 Americans needs food stamps, she noted many of her college friends use them.  CNN reports only 55.3 percent of people ages 16 to 29 have jobs, although I'd like to see the source of that. Perhaps they need the food stamps.  But the problem is the lack of opportunity, not food stamps.

Gone are the days, due to pointless regulation, where in my youth I could have a job within a few days of starting to look for one.  When "help wanted" signs were posted outside of small businesses, and one could work one's way up, where a job at Fed-Mart or countless other businesses were plentiful.  Education was better, a high school diploma was comparable to a bachelors degree today, so an employer knew if you graduated from high school you could read, write and think.

Now, although the regulations are pointless, the regulations serve a purpose.  By driving small business into the ground, and preventing new businesses from forming, the collectivization of where you get health from the government, home furnishings from IKEA, food from Safeway, clothes from Macy's, your home from Pulte, your job from homeland security, your loan from BofA, schooling from the government, etc.  Although there is nothing inherently wrong with big business and low prices, in practice big business promotes and then co-opts big government.

For my part, I will continue to encourage people to start businesses, emphasizing lifelong process for younger people (innovation) and teaching and writing for older people (conservation).  In extreme times people call for extreme solutions, but it is simply good habits and sound business principals, which one learns by doing, that leads to more immediate, ecstatic and penetrating mode of living.  Encourage people around you to make the revolutionary act of starting a business.