Why do we need derivatives?

In large part, financial derivatives caused the meltdown of the world financial system. Do you know what a derivative is? If you found a derivative on your doorstep, would you recognize it? Do you think your local banker knows what a derivative is well enough to describe it to you? Could your financial advisor educate you to where you could truly understand them? Do you think Alan Greenspan understood derivatives when he had a chance to do something about them? Do you think anyone in the world really and truly understands derivatives? The answer to all these questions is a resounding NO! So, do we need them to survive? Does our economy need them? The answer to that may not be so clear cut.

A derivative is an investment for the sake of investment with pretty much nothing behind it, basically a gamble. A derivative is an investment in another investment. Many derivatives are based on another derivative which very likely is based on yet another derivative, on and on. It’s not at all unlike those Russian dolls, one doll inside another inside another, sometimes dozens, even hundreds deep. Derivatives are about as useful as Russian dolls too.

Why we may need derivatives at all and why you don’t hear many national leaders calling for their elimination is that our entire economy has become a Ponzi scheme based on the banking sector that is little more than the worlds largest casino now largely reliant on these bogus securities. If we tried to undo the Ponzi scheme overnight, calamity would ensue, and of course already had. The calamity we saw in 2008 is just the tip of the iceberg.

The total value of all derivatives as of 2007 was around $516 trillion. The  gross domestic product of the US economy is about $15 trillion. The size of the derivatives market shot up from $100 trillion to $516 trillion in just five years leaving little doubt that there was anything at all underpinning the sector. It’s not as if the value of all assets upon which such investments are based shot up by 500% in five years, it’s just the most massive con ever perpetrated on mankind.

I mentioned Alan Greenspan and the fact that even he, arguably the number one economist in the world, didn’t understand derivatives much better than you or I. Over ten years ago, the danger of these investments was brought to his attention, and he had to do battle with Brooksley Born who tried to regulate them in order to allow derivatives to spiral out of control. Had Mr. Greenspan had a clue as to how dangerous and fraudulent these investment vehicles were, perhaps he’d have at least given the American public fair warning as to what he was going to allow the banks to do to us all. He knowingly allowed what happened in 2008 to happen. He’d seen the effects of derivatives gone bad when one of the wealthiest counties in the United States, Orange County, California; declared bankruptcy, mostly from derivatives . This was the late 1990 when derivatives were about $25 trillion. As far back as 1993 derivatives cost Proctor and Gamble big as well, and took down Long Term Capital Management (LTCM), a trillion dollar hedge fund, over ten years ago.  Even today, derivatives are completely unregulated and are still the scariest thing in our economy.

So, do derivates have a positive side? Only if you happen to be the guy peddling the damn things and perhaps if you get in and out before the bubble bursts. Its a scam, period. I won’t venture to say that you’d be better off at your local casino, but you can understand what your odds are there and there is far more regulation over any casino compared to Wall Street.  One report states that even Alan Greenspan stated that he had no interest in preventing fraud on Wall Street, that he’d leave self-regulation to the industry and the market. In other words, he’d allow investors to get burned so they’d know enough not to invest a second time. The main problem with this theory is that now that he and Larry Summers and the other heavy hitters that for the most part are still calling the shots have allowed our entire economy to be mostly based on the false value and false usefulness of the investment banks. Once upon a time these banks were the means of funding industry, now its a shell game, hiding the decent investments based on something concrete amongst a sea of faux investment, derivatives. You and I and sophisticated investors and bankers and government officials and just about anyone in the world had no idea how solid any investment is. You may think investing in a blue chip stock might be a sound investment, yet as we’ve already found, solid companies get sucked into some of the $516 trillion dollars worth of crap, potentially killing a healthy company and your investment. It happened to governments all over the world, it happened to blue chip companies, and it harmed tens of millions of investors of all sizes. There is no transparency in this business, the banks and brokerages dealing in these things know they are screwing their investors and are quite proud that we are all such suckers and that government is so incredibly corrupt and compliant.

So what are we to do? Who knows? The banking sector won’t allow Washington to protect us, our economy needs investment and most people need to do something with their savings other than watch inflation erode its value. I guess what we need to do is simply wait for the inevitable to happen, the Ponzi scheme to go bust and a new system of investing to emerge. It will be painful, but so far nobody has a better plan.

There is another significant problem exposed by derivatives. We have all assumed that the guy running the asylum know what they are doing, yet they don’t. They understand more than you and I, to be sure, but they are either corrupt or simply do not have the ability to control the monster they created. Dr. Frankenstein knew enough to assemble body parts, but he had no idea as to how to deal with the create he had created. So too is the problem faced by all of Wall Street and the Federal government, and worse yet, they are concentrating their efforts on how to take thier profits before this whole nasty mess collapses, and it will collapse. It must.

Look at the guys running the show. At one time Bernie Maddoff was the chairman of the NASDAC stock exchange. Doesn’t that say it all? Robert Rubin, a key Clinton era player, key to the complete deregulation of Wall Street and a top play at Citibank at the time the government was required to hand over $100 billion to keep them afloat. What does that say about the brains making the rules.  We should all be scared, very scared. Maddoff wasn’t an anomaly, its just that he was caught. He wasn’t primarily involved with derivatives, but he was indicative of the lack of oversight and the fact that the people we revere and place in high positions are like the king with no clothes, we simply choose to ignore what are own senses are telling us.  By 2007, the derivatives market shot up to $595 trillion, then to $684 trillion in June of 2008 and back down to $592 trillion at the end of 2008. Be scared, very scared. This crisis isn’t over.

Is the War in Afghanistan Winnable?

This is just an opinion of a person that has never been in the military and has no inside information, so it is anything but an expert opinion. It seems pretty clear that if we really, really, really wanted to win the war in Afghanistan, we might be able to pull it off, but what does really, really, really mean? It means trillions of dollars, it means killing hundreds of thousands of people, tens of thousands of American lives, killing anyone that got in our way. It means getting the rest of the world to hate the US more than it already does, and it means a sustained commitment for decades, or as John McCain once said, a hundred years if thats what it takes. Anything less than that and it doesn’t seem like a winnable battle. I’m not advocating this, but I believe thats what it would take despite the political rhetoric that if we could only get them to love us enough by winning their hearts and minds, we’ll win by default.

The reason we can’t win and why the Russian couldn’t win and nobody can win is that its nearly impossible to figure out who you are fighting. For the U.S., there are two wars being waged, the one the enemy is fighting and the one the US are fighting. They aren’t even the same battle. We are trying to use expensive technology, harm no civilians, garner a positive world opinion, and essentially play nice. The enemy is actually trying to terrorize the population, doesn’t give a damn about killing anyone and everyone and often does, and literally wants the world to fear and hate them. The U.S. wears uniforms that practically have a bullseye on them, the Taliban and the rest of the zealots on the other team look just like civilians, and that is because, when they aren’t shooting at us, they believe they are civilians and go back to their farms. Many of them are paid to plant roadside bombs and do so willingly, paid with money from the heroin trade, and the U.S. is even afraid to destroy the poppy crops because it would harm the already miserable Afghan economy. It’s insane!

If we wanted to win the war, we’d spray their fields with defoliant, we’d bomb the piss out of any village where there was even a single enemy fighter, we’d pull out all the stops and turn the country which is already pretty much rubble into smaller chunks of rubble. We’d make it so that even though the beleaguered villagers that are under threat from the Taliban would be more afraid of the U.S. Don’t get me wrong, I’m not advocating this, but the reality of Afghanistan has always been that the most oppressive regime has always come out on top because most of the country is simply unable to stand up to tyrants and has always been unable to fight back.  When we watch the nightly news many of us ask why, if the Taliban is so awful, don’t the people being oppressed by them kill everyone that looks like they might be Taliban. The answer is simple, they are unable to. It seems clear that Afghanis are willing to kill at the drop of a hat, but if a village has a stick and their tormentor has an AK47 and is wiling to behead everyone in the village in retribution for even a single one of their own being killed, its sort of a no-brainer.

I have taught US history and even though the American Revolution wasn’t an easy fight, the main difference was that the American people at the time fell into two camps, ones that wanted to remain under British rule and the ones that didn’t. There were individual states that had their own concerns, but it was fairly clear they all saw themselves as having more in common than not. Afghanistan could not be more different. The country has never has any form of strong central government and it is more similar to the street gangs in the U.S. than the colonies back in 1776. The U.S. hasn’t been able to stamp out the Crips and the Bloods and Chicano gangs and hundreds of other in our own cities, but we somehow think we can do something similar in a vast country clear on the opposite side of the globe when 98% of the country doesn’t necessarily want democracy or anything more than to be left alone by all parties involved.

Is failure in Afghanistan any sort of inditement of the American fighting forces? No, not at all. A war such as this is un-winnable without the sorts of draconian measures we are unable and unwilling to undertake. During World War II, the U.S. pulled out all the stops. We bombed civilian population centers, we dropped nuclear weapons and firebombs; we are not going to do that here. Losing World War II was not an option, losing in Afghanistan is unpalatable, but it is acceptable if the alternative is bankrupting the U.S. economy or getting drawn into a larger war. With Pakistan an even more scary problem and the bulk of the Pakistani population strongly anti-American, it seems clear that if we stay in Afghanistan we could end up at war with all or part of Pakistan. It is an impossible situation that likely will not get better as long as we are seen as an invading force, especially a largely impotent invading force.

We don’t have the money or the commitment, and even though we will probably regret pulling out of Afghanistan, we will also regret staying even more. In my opinion, with the information I have found from the news, we simply cannot win even if we do stay 100 years, so we should cut our losses and try to fix the bigger problems such as global warming, energy, water supplies, health care and on and on. If we pulled out of Afghanistan and took the trillions it will take to fight that war, we could easily afford universal health care or a good start on 100% renewable energy. That doesn’t address the issue that perhaps we can’t afford to be spending trillion on anything, but that’s a different discussion.

Is the Recession and the Financial Crisis Almost Over?

If you watch the nightly news or read the news on the web, it sounds like things are getting better. The stock market is up 40% over its low, the banks appear to be stable, job losses are tapering off, real estate sales are up 6% from the month before, and on and on – all good news, right?

Job loses are slowing as measured against new jobless claims, but there are still millions of people that are unemployed and unaccounted for, either dropping out of the system or never signing up in the first place. There are people that have taken an early retirement, burning through their savings a decade earlier than they were expecting, counting on dying before their money runs out. Not only will they not be earning more toward their retirement nest-egg, they are taking it out before it had a chance to increase in value due to compound interest. Add to that, much of their savings may have been invested in the stock market which of course tanked, and the value of their house is now half what they were hoping for. For these people, the recession is permanent; their remaining lifetime is one of diminished expectations if not poverty.

Unemployment doesn’t include kids just out of college or high school since they are not eligible for unemployment since they were never employed. These kids are living off their parents, making their parents less prepared for retirement and the kids themselves are put in a holding pattern before they can start their careers and start earning. Add to that, those kids and all the generations behind their parents will be saddled with trillions in national debt.

The stock market has soared in the past 8 months, but would that have happened without the trillions in stimulus and trillions of infusions into the Ponzi scheme we call Wall Street? In other words, the gains in the stock market are an illusion and not any sort of sign of a more stable economy. For that matter, using the stock market as a judge of a sound economy is buying into the whole ludicrous game that has become our system for investing. I put investing in italics since what we have today is no more investing than taking your paycheck to the local casino or race track. Some people consider gambling investing, most don’t, but slick marketing of Wall Street has many people convinced that the recent melt-down was just an aberration and not a sign of more to come. If you believe that, think again. Consider Goldman Sachs, the average paycheck for every employee for the entire company, janitor on up, was $700,000 this year. That money came from you, the investor and wasn’t invested in anything but individual yachts and mansions. I worked in the gaming business where we considered such investors, suckers. Wall Street has so little to do with investing that you needn’t go any further than the front page of any prospecting where they will tell you you stand a very real chance of losing your entire investment. The only people in such transactions that don’t lose are the guys running the con, just like casinos, the house always wins; perhaps not on every bet, but far more often than not. The primary difference between a casino and Wall Street is that casinos are fairly honest about your chances of winning. So, is a recovery in the stock market a good thing or simply a sign that people are incredibly gullible.

The real estate market recovered for a few months in a row, but housing prices are still way, way, way down. Don’t forget, that if your investment or house drops in value by 50%, it has to increase in value by 100% to get back to where it was. As incredibly gullible as people are, they will likely take a long while to forget that they lost their home to foreclosure, were unemployed for years and years or will likely never be able to retire. Perhaps the recession will taper off as these people start to forget.

This recession is different than all those many recessions and stock market crashes that happened between the great depression and this, and there have been plenty, and there will be more. Recessions are a perfectly natural occurrence. Investors get nervous and pull back, others see those around them panicking and it becomes a chain reaction. It has happened ever since there has been money and any form of investing, but as I said, this wasn’t investing, it was 100% gambling and the banks gamble cost us all to lose and they somehow managed to get us to cover their losses and they are still riding high. We see it all around us and we are helpless to do anything about it. As long as between 15 and 20% of our people are unemployed and under employed and tens of millions unable to ever retire; this recession will persist.

We are counting on the government to tell us when the recession is over, yet this is the same government that has repeatedly manipulated the accounting to make a national deficit look less shocking, the same government that shipped our jobs overseas by conning us into believing that globalization and outsourcing nearly all our manufacturing was a good thing. This is the same government that encouraged banks to do what they did to collapse the world economy. This is the same government that has ignored our energy and environment and global warming and population problems so now these problems could very well kill off millions if not billions of people in the coming decades, perhaps make the planet close to uninhabitable. We had the opportunity to take one last desperate stab at dealing with global warming and energy, using the stimulus to jump start a new energy industry, but no, we allowed the existing energy infrastructure to derail this one last possibility. That’s not to say we won’t eventually deal with energy and global warming, but it will cost many times more and will only come once the energy companies have taken the current game to its inevitable conclusion while ignoring the futures of 7 billion people.

The recession is only beginning. We will shortly have a hundred million people counting on the government to support them because the rich and greedy  managed to run off with their retirement, or at the very least, made it worth significantly less. The government may not call the persistent misery heaped upon people for decade upon decade a recession, but those people might tend to disagree. If your parents are set to retire soon and can’t work and can’t count on the government, you may find them living in your spare bedroom. That will diminish your life and theirs. If you end up paying significantly higher taxes for the rest of your life to pay for the trillions of additional debt caused by Wall Street’s ineptitude and greed, you’ll have every right to call it a recession. If energy bills shoot through the roof as the oil companies and the coal companies play their end game and suck up even more of the national wealth, you can call that a recession too. As your health care bills suck up 25% or 30% of your income because congress bent over for the insurance industry, you can all that a recession too. Keep in mind, 60% of all bankruptcies are caused by medical bills because the system is entirely out of whack, and 78% of those medical bankruptcies were from people with insurance.

If you look around things seem fairly okay. Most people still have jobs, people take vacations, businesses still operate, and stores still have customers; so perhaps all that I have said is wrong and things aren’t so bad. That would have to operate from the assumption that we have solved the energy problems, we have solved global warming, that medical insurance won’t continue to eat up more and more of your paycheck, that government will start working for the people instead of big business, that the wars will magically end tomorrow, that terrorists will collectively turn nice overnight, that the stock market will stop being a con and return to the business of investing in the economy. Perhaps this is a depression since it sure seems pretty depressing to me.

A Truly New Idea for Paying for Catastrophic Illness

My plan is called the 100% rule.

Today when most people without insurance and many who do end up in the hospital with a catastrophic illness or from an accident, their hospital bill is more than their net worth (total of all assets, car, house, cash, stocks, pensions, etc).  If your net worth is just $100,000, it’s not hard for one illness in the family to take everything. Even if your net worth is $1 million, a nice lingering case of cancer can suck it all up in just a few years. So here’s the deal, we make the hospital bill relative to one’s net worth.

Right now if your child needs a heart lung transplant and your net worth is $350,000, you get to decide, your money or his or her life, because it will take every nickel to save your child, possibly more. So let’s do that to everyone. If Bill Gates brings his kid into the emergency room, the bill will be $64 billion. If Fred the auto mechanic shows up they’ll take everything and fix his kid, even if everything is just $15,000. Seems fair, right? We’ll make it so everyone is treated the same, rich and poor alike will be equally financially devastated by our current medical system, that way, the next time we have a debate on the medical system we’ll all be on the same page.

Health Care System Needs a Radical Change

Everybody hates something about all the healthcare proposals out there, so here’s another one to hate.  How about if we have the government provide a system whereby it provides a basic level of healthcare below which the patients pays nothing, fills out no paperwork, needs no adjudication, it is just there and available to all – NO INSURANCE COMPANIES WHATSOEVER.  This level of care would provide all office visits, basic prescriptions, maintenance meds, most basic surgeries, emergency room visits, and most ongoing treatment regimens.

The level of healthcare would be sufficient for 90 to 95% of most medical issues. If you want coverage for the rest, you buy it just like you do now. This does several things quite readily.

(a) Immediately costs drop like a stone since nearly all of the billing and paperwork associated with adjudication and approval and so forth disappears for 90% of all medical services. They do it this way in many parts of the world.

(b) The government is now free to negotiate drug prices, saving, by some estimates, $135 billion a year.

(c) Everyone is covered and encouraged to get treatment early on when it is usually relatively easy and inexpensive to treat.

(d) Eliminates all the wrangling over pencil pushers determining what treatment you get.  Anything outside of the scope of this plan must be overed by private insurance which is entirely up to you to purchase or not.

(e) Gets the doctor out of the business of fighting insurance companies and lets them do medicine

The level of care covered under this plan would need to be determined, and it would certainly raise taxes but lower overall costs to patients and taxpayers alike.  I pay $1,200 a month for myself and my wife and I just went to the doctor to get an allergy shot. I waited over an hour, paid a $50 copay and was told the shot itself is no longer covered, just the visit. The doctor billed the insurance company $150 for the visit. I doubt that in my entire life of 58 years the total to the insurance company cost for everything I’ve ever used hasn’t totaled over $10,000, yet I have shelled out in excess of $450,000 in premiums and they won’t even pay for a lousy shot. I broke an ankle and had a hernia repaired and take one prescription for allergies; all of which I would guess would be covered under the plan I propose and much more. I carry insurance in case I get in a car wreck or some other calamity.  I don’t wish to have my life prolonged for even a second if I’m brain dead or have both legs chewed off by a shark; yet there are those that would. They can buy insurance for the extraordinary care, but we all shouldn’t be forced to pay for it. My taxes may go up by thousands of dollars, yet my insurance premiums would likely drop by even more.

This sort of plan allows those that wish to live life on a ventilator to pay premiums to ensure they can do just that.

I asked a neighbor that is a surgeon why he thought medical costs kept skyrocketing and have been for all of my adult life, far in excess of inflation, typically 3x inflation. He said it was because of the cost of the equipment and new treatments and exotic options, and also because of end of life care costs – accounting for 30% of all medical costs for the last 6 months of life. He admitted that the bulk of the costs benefit a very small percentage of the population, There was the case of Terry Schaivo that lay in a vegetative state for 15 years at a cost of about $100,000 per year. There aren’t many people like this, there are even fewer that given a choice would choose to live that way, and it should be up to the individual or their family to plan for such things by buying appropriate insurance. Currently I am paying for such care yet I simply don’t want it.

We need to develop a system that provides the most help to the most people at a sustainable cost, not a system that focuses so much attention on so few and makes the rest of us pay for it. We all paid that $1.5 million to keep Ms. Schaivo alive through higher premiums, let alone the costs of all the legal wrangling. I’m not saying that those people that choose to live with feeding tubes and round the clock attendance not be able to get that sort of care, they just need to pay for it – either through premiums or out of pocket. Sure this will exclude the poor, but they are already excluded. With this plan, the poor now get to see a doctor and hopefully avoid the need for the really expensive treatments they won’t ever get under either plan.

Bottom line. A plan such as this should cut costs all around through less paperwork and a healthier overall population. Many people would choose not to have insurance, accepting the provided level of care, others could pay for various optional levels of care all the way up to the promise of a bedridden life on feeding tubes if that’s their wish. Not being allowed to negotiate fair drug prices is a scandal, we should squeeze those bastards for everything they are worth – they’ve been doing it to us for the better part of a half century. The insurance companies will fight such a plan, but they fight everything but the status quo, and that’s because the status quo has made them fabulously wealthy and impoverished most of us and will eventually bankrupt us. It’s time for a change!

I’m So Sick of Rampant Greed

I have been ranting and raving about the greed that collapsed the world economy, but that’s old news (sort of).  Everything in American society is just mired in greed.  Ryan Seacrest just signed a deal for $45 million to say about 200 words once a week on American Idol for the 4 months the show runs between seasons.  He seems like a nice guy, but where’s the talent in what he does?  Can’t just about anyone do that?

I recently tried to find a domain name for a new business venture dealing with schools.  Nearly every reasonably close name has been gobbled up, not by people that need them, but by greedy as?hol?s that simple hope someone else will be desperate enough to pay them for tying up tens of thousands of names that encompass anything to do with the words in the english language.  There is no value added here, just greed, greed, and more greed. How do these jerks sleep at night?  They should have the word scum-bag burned onto their foreheads so people could avoid them like the vermin they are.

Remember last summer when the price of oil shot up toward $200 a barrel. Did you assume there was an oil shortage? There was no shortage, every barrel of oil traded 27 times by greedy f#^@e^s helping to set the stage for a collapse of the world economy. You can expect to see more and more of this sort of thing as natural resources of every stripe start to grow scarce.  Some say this is just smart business, I say it is greed and damn near immoral.

CEOs and executives think they deserve tens of millions a year for what they do. Maybe the next time one of those people rushes their kid to the hospital for life saving medical attention, perhaps the doctor should demand a hundred million or he’ll let the kid die.  Fair is fair, right? Supply and demand, right.  The CEO has an immediate and urgent demand, the doctor is the only game at the right time and place, pay up of kiss your child goodbye.  Thankfully doctors don’t play by the same rules, but the time may come…

I used to be a pretty big fan of capitalism, but if what happened and is happening on Wall Street, if what happens in every store in America, if Enron, Tyco, Worldcom, and Goldman-Sucks 2.72 billion in profits, and if the shoddy products of nearly every company from Microsoft to the automakers to toy manufactures and on is what capitalism is all about, perhaps we need to modify our form of what should be a pretty decent system.

Goldman Sachs Reports 2.72 Billion in Profits

Does this headline bother anyone else?  Forget about the fact that the taxpayers had to bail these guys out and then they were allowed to repay the bailout, essentially depriving the taxpayer of any profits from its investment; but consider where those $2.72 billion in profits came from.  Those $2 billion in profits are $2 billion in “investments” that didn’t make it to the investment itself.  I always had this naive idea that when one invested in stocks, you were investing in the company those stocks represented.  Apparently not since it appears much of each investment goes to the Goldman-Sach’s executives and brokers and the ponzi designers.  If Goldman gets to keep $2.72 billion for a single quarter’s “efforts”, it seems to me that something is terribly wrong.  If the reports are correct, Goldman will be handing out an average of over $600,000 for every one of its 28,000 employees at a time when their actions and the actions of the rest of Wall Street bankrupted millions of people and left tens of millions more unable to ever retire.

We can blame Goldman-Sucks for their greed, but we also need to blame the investing public just as much since it is they that are helping to rebuild the same illusory house of cards that created the whole mess in the first place.  It’s sort of like losing your paycheck to the guy playing 3 card monty on the street corner one week and returning the next even though you know you can’t ever win.

The taxpayer loaned money to Goldman and other as if they were preferred borrowers, yet they were the riskiest type of borrowers, ones that were clearly on the ropes.  Admittedly Goldman was the best of the sheer crap we called Wall Street, but that is faint praise indeed.  If you and I showed up to borrow money in the financial straights that these clowns were, we’d have to find a loan shark and pay rates upwards of 150% interest, compounded by the second and backed up by someone named Guido.  Goldman got to pay a few million in interest and now is back to handing out bonuses as if the crooks on the other end of the phone were actually doing something worthwhile.  Check out the article entitled “The Great American Bubble Machine” in the July issue of Rolling Stone, it points out how Goldman is screwing the world to make these billions.  Its worth reading.

Google Chrome OS May be the Answer

When I read that Google will be introducing an open source operating system that may some day go toe to toe with Microsoft, I let out a sigh of relief.  Ever since the first Windows operating systems I was disappointed in the Microsoft offering (to say the least).  It was a piece of junk then, and although there is no comparison in terms of complexity, features, stability, and so much more; Windows Vista is still a piece of junk, just junky for a different set of reasons. It is still unstable, much of what it offers doesn’t work (my other PC is “not responding” at this very moment). It doesn’t work reliably, and that’s an understatement, and while the Mac OS is quite good and stable, there needs to be something that will run on PC hardware and give the world an alternative to the outrageously expensive and oppressive Windows dominance.

I am sure Microsoft will deny this vehemently, but I swear they made Vista so unstable and incompatible and all around unusable just so they could sell upgrades to Windows 7.  Wouldn’t it be nice if Google had their operating system ready today and it was everything we might need in an operating system.  Alas, Chrome OS will take years, perhaps decades to do all that some people need, yet hopefully Google will stick to it and eventually unseat Microsoft as the 900 pound gorilla.

School Software – Learning Management, Testing, Content Creation

We are developing an entirely new software system for schools and are just about ready for the first round of testing the software and at the same time are looking for suggestions for desirable features.  Shortly we will be asking for volunteers to help us test the system.

We aren’t prepared to announce all of the features we already have, but we have identified who our competition is and they include some solid players such as Moodle, Sakai, Blackboard, Edline, and others; so you might infer that we hope to be able to do much of what they do better and at less cost.  We recognize that Moodle, Sakai and others are free open source projects, yet there is a cost to them nonetheless.  Our system is intended to be easy to maintain, easy to use, and if we have succeeded will encourage faculty and students to wholeheartedly embrace the system.

We have several innovative features built into the system that we hope will encourage users to contribute and collaborate on course content, research projects, creative writing tasks, and news stories.  It will integrate the many aspects of school life including classes, schedules, homework, reading, books, sports, images, audio, video, testing, grading and more.  We plan to allow content to be loaded from our system to electronic devices such as the Amazon Kindle and the iPhone so users can read course work, grade essays, retrieve any of the thousands of free titles from project Guttenberg or download electronic books from Amazon or other e-retailers. The system will be web based and start from any web browser, yet will not use a web interface, instead being a desktop application for a more responsive look and feel as well as less tedious user interaction.  From a user standpoint, there is no setup, they simply locate the web site, click on a link, wait for the software to load and go.  Returning users avoid the initial delay since the software is already loaded on their system.  Should updates to the software be available, they are installed automatically.  Unlike many applications, the system will not corrupt a user’s computer by installing incompatible drivers, dlls, or libraries; operating autonomously from other applications.

The system is intended for middle school on up with our initial focus on middle and high schools, although there is nothing in the system to preclude colleges and universities from using it just as they might use Moodle and other systems.

Our pricing has not been set but we expect it to be minimal, and taken in context of a lower learning curve, less reliance on support staff, and less overall hassle, it is our belief that our offering will be attractive and compelling.

If you are interested in offering suggestions, becoming a tester, or just wish to check it out when we release the software during the summer of 2009, please let us know.  Also, we are considering releasing some of the unique features of the system as standalone offerings so schools that are already heavily committed to another system might be able to avail themselves of those features.

Reply to this post if you have an interest.

The California Economy in Crisis

I left California for Nevada about 15 years ago because I felt that, despite a robust economy at the time, the State of California was doomed.  I felt that there were too few taxpayers paying for too many services and there was a swelling number of people paying little or no tax yet expecting the world.  Apparently I was right since that’s in large part the main problem in California.  

I read one article that ties the current economic mess in California to Proposition 13 that capped property taxes so people couldn’t be taxed out of their homes by ever escalating home values and along with them, ever escalating taxes.  I’ve always viewed property taxes as a form of confiscation since a person that is retired or unable to work will eventually be forced to sell their property as taxes take a larger and larger share of whatever income they do have.   California can’t increase property taxes because of Prop 13 and so many state and local governments look at a simple bump in the property tax rate as a quick fix to irresponsible fiscal policies that simply assumed there would never be an economic downturn.  The same article states that taxes in California are unfair, which is true, but so are nearly all taxes.  Taxing one person at 39% and another at 10% isn’t fair.  Taxing one person $12,000 a year for property tax and another nothing, yet their kids go to the same schools, share the same police and fire, drive on the same roads and use the same parks isn’t fair.  The only fair tax is a sales tax and perhaps California should scrap all other taxes and impose a single across the board sales tax on nearly everything except perhaps food staples, rent on low income housing, and medical care.  This would eliminate the Pop 13 restrictions on property tax by eliminating the property tax, existing sales taxes, excise taxes, income taxes, corporate taxes and any and all other taxes and replace them all with a single state wide tax that can be adjusted up and down as the state’s budget requires.

With an across the board sales tax such as this, every person would feel the pinch of expanded services and tax hikes.  Some claim such a tax would disproportionately affect the poor, yet the poor pay these taxes anyway by paying more for goods and services that have all the other taxes built into the price and into the many hidden taxes.  By making all taxes a single percentage at least we all get the benefit of full disclosure.  Our entire maze of complex taxes is designed to obfuscate just how much we really pay in taxes, and it is an enormous burden.  If I am in the upper income tax bracket and pay all my taxes, I can pay as much as 39% in federal income tax, 11% in California income tax, 5% in property tax, 7% in sales tax, 10% in excise taxes, 5% in fuel taxes, 10% in corpoate taxes built into products we buy, and on and on.  Most of the truly wealthy, the ones that are supposed to be paying 39% and 11% rarely do and if they do, they simply demand even more outrageous compensation to make up for the higher taxes which of course gets passed on to you and me, rich and poor alike.

Part of the current California economic crisis is the state’s inability to quickly raise more revenue.  With a state wide sales tax in lieu of all other taxes, raising revenue to balance the budget would be a no-brainer and it would also get everyone paying their fair share, illegal aliens, executives, service workers, and so forth.  The sales tax would apply to homes and yachts and restaurant meals and cars and skateboards and all but the basics, with the basics being excluded to spare the poor that spend a disproportionate amount of their income on just food, rent, and utilities.

I love California but will likely never return there because I grew tired of paying for everyone else.  I had friends that used to grouse about paying $600 in federal income tax and $500 in property tax and 6% sales tax, yet they felt that they weren’t getting enough in return; yet their kids went to good schools, used the nearby parks and worried little about crime.  They, like most taxpayers, were receiving many times more in services that they put into the system, expecting everyone else to pick up the slack and still thinking they were paying too much.  With a sales tax, if they wanted more services they’d see the cost every time they bought something.  If they wanted a tax cut, they could simply ask for cuts in state services.  This tax system will never happen because politicians are counting on the current shell game to hide just how much money they are lifting out of our wallets.  Americans, perhaps people everywhere, don’t pay much attention to things like taxes when times are good, and when times get tough like they are now, they expect government to come to the rescue and show them just what their taxes have been paying for.  Few realize that past taxes had been spent long before they were every paid by the taxpayer and our entire economy and government has been operating on a spend now pay later basis for the better part of a half century and we are seeing just how precarious the whole system is as we watch states like California slowly sink in the quicksand of debt they’d been ignoring for far too long.

Should California be unable to meet its obligations, perhaps declare bankruptcy, the entire world will feel the impact as the 10th largest economy in the world stumbles.  Millions more jobs would be lost in California and that would have a ripple effect causing even more job losses nation-wide and world-wide which would feed on the cycle.  The idea of a national sales tax has been bandied about for decades, yet each time some fool decides that instead of all other taxes, a sales tax should be added on top of all the other taxes.  That won;t do.  Like so many things with the current problems facing the states, the nation, and the world; any solution is going to require that everyone forget about their own self-interest and start doing what’s right for the greater good and in turn benefiting themselves.  We usually only see this in war-time, otherwise we all fight to get something for ourselves even if it harms society.  We can no longer afford to do this and unless California can fix their budgetary problems and soon, we all will suffer dearly.  With a sales tax as the only tax, the state can act quickly to set a rate and then adjust it until they are receiving just what is needed to bring revenues in line with expenditures.  Right now they are talking about cutting back on vital services including education, highways, energy projects, water and all sorts of things that will have dire consequences in as little as a decade.  It’s time everyone starts to pay into the system and for taxpayers to decide how much government they want.  When it was just the top few percent paying for everything, the majority were glad to ask for more and more since it cost them little or nothing, but if we all paid the same percentage on every purchase, we’d all have an interest in keeping government lean and manageable.  We should have a national sales tax as well, but that too will never happen just like we’ll probably never fix the energy problem or global warming since it will require that we all ask for and start doing what’s right for the country and the world and not necessarily what will enrich us over the next guy.