Wednesday, August 10, 2011

The debt ceiling fears (Watt Thoughts)

Just over a week ago congress passed and President Obama signed a bill to raise the debt ceiling of the USA. In the debate leading up to Tuesday we heard many stories on what was going to happen if the debt ceiling was not passed. It has been 8 days now, so lets look at some of them and what has happened.

The biggest one spread all over was if the debt ceiling was not raised the stock market and economy was going to tank. Lets look what happened in 6 days of trading since. Five of those six days the stock market has not just closed down but 100s of point a day. Wonder what it would have been if this was the good?

We heard from commentators and politicians that if we did not raise the debt limit that the AAA rating the USA had would fall. Notice I used the word had. It fell on Friday when S&P cut it. If you had listened to the rating organizations they were not threatening to cut because debt ceiling was being hit, but that we have possibly out borrowed our ability to pay our bills. So one agency did cut and the others put out stronger language that a cut is possibly imminent.
We heard the economy would fall apart. Now we have heard all week that the risks of another recession (called a double dip) is now rated as about 25% possible by economists, much higher than before.

We heard that interest rates would go thru the roof if we did not raise the ceiling because we would lose the AAA rating. Well we lost the AAA rating and we find people and institutions are doing like always when stock market goes bonkers and buying gold and US Treasuries which has run the rate down

What do we need to do now? Get the federal spending in control. First that means actually doing a budget. (ask anyone who counsels individuals with debt problems and this is step 1). Second we need to pass real spending cuts but spending cuts that will take place in 5 or 10 years. Cuts now will take effect. Cuts in 5 or 10 years will be ignored by Congress and the President then. Look at cuts that were put in some medical programs on payments to medical providers but were to start a year or two down the road. Each year congress votes to kick the can down the road and to delay implementation. It does no good for me to say that I am going to reduce my budget in 2012 or lose 40 pounds in 2012 now. When 2012 gets here I will say lets just wait to 2013. Congress is the same.

The choices are cutting spending and raising taxes. We need to look at what the government needs to do and start cutting wants to do or would be nice to do. It needs to be real cuts now. We need to look at our tax structure and simplify it. We can probably get more revenue from it by cutting the different deductions (called loopholes when someone else uses it) and cut rates at the same time. Make it more fair. We hear Social Security is headed fro going broke and what did our leaders do. This year they cut payroll taxes, which are individuals contributions to Social Security and now I hear they want to keep the cut. If you are not collecting enough to make it solvent how does cutting amount you collect help, This is not part of the normal cut tax rates and we will get more. That argument is if we reduce the tax rate people will produce more to earn more. This was simply a case of cut the payroll taxes to give people more money. The group that most vocally passed the payroll tax cut are anti tax cutters.

Now the good news. Since we raised the debt ceiling oil prices (September futures) and wholesale gas prices (September futures have fallen about 15% to around $80 a barrel.

The deficit and debt crisis is real and we must get them under control.

Sunday, July 31, 2011

Debt Limit

The debt limit debate continues today with possibilities of agreement today (Sunday).

Couple of things to consider on all you have been hearing on the debt limit.

First we keep hearing the dollar will decline and interest rates will go up if the ceiling is not raised. Has anyone noticed that for 3 years the dollar has gone down? It will probably continue to fall some in future particularly if the US government does not control the deficit spending.

In 2002-2007 the deficit ran 250-400 billion annually. Since 2007 it has been over a trillion dollars. This was supposed to be a one year increase in FY 2009 but here we are in 2011 and headed to 1.4 trillion.

Pay attention to deficit and debt. The debt is how much does the US owe. The deficit is how much more are we spending in a year than we take in. They are different although many stories and people mix them

Interest rates will rise whether the debt limit is raised or not. The Federal Reserve has had the benchmarks at about zero now for several years to try to encourage growth. Many of us are concerned this will cause hyper inflation. Somewhere in the near future the Federal Reserve will begin raising the interest rate benchmarks.

Why is it that when congress and the president talk about budget/deficit reductions they can only talk in goals fro 10 years and not how much to cut now. It is like me saying that I will cut my gasoline usage over the next ten years instead of talking about now. We can talk on that but unlikely when then gets here we will do it.

The credit rating of the united states is not being threatened by the debt limit being met. The rating agencies are concerned the US has gotten to much debt. Raising the debt limit will not prevent them cutting the rating. Cutting the deficit will.

Congress and the president are the only organization I know that decides how much they can borrow. If I decided to raise my debt limit ceiling to one million dollars and went in the bank tomorrow do you think my friendly bankers would tell me they are glad to loan me one million dollars since I raised my debt limit ceiling to that? No they would sit there and go that is a good joke you came in and told us today Dwight, have a good day.

Saturday, June 18, 2011

IBM celebrates 100 years

Today, June 16, 2011 , IBM celebrated its 100th birthday.

IBM has been a leader in technology for over 100 years. From being a leader in punched card technology, to original computers, to the various components to major breakthroughs in the 60s to the first large scale use personal computer in the 1980s to other machines like the AS/400 and the ATM and the self checkout register at the grocery store to over 5000 new patents in just a recent time period.

IBM for most of that time has been considered the benchmark of technology although it has had its ups and downs. Well known for the dress code of the 60s and 70s and into 80s of long sleeve white shirt, dark tie and dark pants and coat. A relaxed code today.

However IBM goes before June 16, 1911 . That was the day that several companies merged (Computing Tabulating Recording Company was the resultant name) and made what became IBM in 1924. In 1924 the company was renamed to IBM (Internation Business Machines) In 1911 when the merger of several companies took place one was a business machine company who had the roots in punched cards. A number of computer companies we know today or did up to the late 1990s trace back to then with punched cards and adding machines. Burroughs and NCR to name two.

Tabulating Machine Company was the company on working with punched cards. It was founded by Herman Hollerith in 1896 after he had invented the punched card (80 column and the size of punched cards used until recently, which was the size of the dollar bill then, yes the dollar really is not as big as it used to be)while working for the census bureau in 1887 to do the census in 1890 as it had been by hand until then and was expected to take more than 10 years to compile the data. He also made the original card punch and reader. He had left the government and created a business for his invention.

So although IBM traces their 100 years to 1911 and had a major birthday today, it really is an older company and is really 115 years old.

Happy 100th or 115th birthday and hop you continue to lead in finding new technology to improve the world.

Monday, January 10, 2011

Observations on various stuff (Watt Thoughts)

Observations from recent events

During the holidays Walmart sold small round bottles of Coke looking line ornaments. They had them in large display boxes with a large picture of the bottle on each side. On one of the panels it stated in large letters that "Can contains 140 calories". Two problems: 1. it was a bottle not a can even in illustration and 2. the bottles themselves said contained 160 calories.

We have been hearing that the Social Security system is going broke so what does Congress do before Christmas but cut the contribution rate by employees about 30% (2 point reduction in the rate from just over 6% to just over 4%. No arguments like income tax cuts that this would cause more people to contribute more money to SS but just reduced income for a year. Sure way to bring a system back in balance that is losing money.

One of the ads fro the drugs on TV always catches my attention. The ad says if you are a loved one have suffered death or other things while taking it you may be entitled to a settlement. I am glad that i don't work for their call centers. It would be scary when people who have suffered death start calling.

Wasn't it odd the tax bill in December. They claimed it extended unemployment benefits and cut income taxes. The truth was it kept income tax rates the same as fro last 10 years and it allowed people to collect the same number of weeks of benefits as had been occurring. Both were expiring.