What Do Banks Produce?

Bernie Sanders says banks have assets equaling sixty percent of the Gross Domestic Product (GDP). Bloomberg says banks are bigger than the GDP. But what is GDP? Well, according to Investopedia “The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period. You can think of it as the size of the economy.

GDP is the size of the economy. Why would banks representing 60 percent or more than 100% of the economy be important? Well, the economy is the total dollar value of goods and services produced over a specific period of time. If GDP is used to gauge the health of the economy then it should follow that if banks are bigger than the economy then their health reflects the health of the economy. Anything that negatively affects banks negatively affects the economy. We felt that effect in the 2008 recession.

When you think of banks, what goods and services do you see them producing? The only thing tangible I ever see coming out of a bank is money. But banks don’t produce money, the federal reserve does right? That is partially true. The federal reserve prints paper money and the treasury mints coins. So the banks don’t physically produce anything. But how can they represent more than the GDP?

That’s where things get interesting. Again, according to Bloomberg banks are not required by U.S. accounting standards to record the full amount of derivatives and mortgage backed securities on their balance sheets. If they were required to then they would be twice as big as they are because derivatives and mortgage backed securities are considered assets. That’s where we may get to the difference between Bernie’s assertion and Bloomberg’s. Bernie might just be looking at what is recorded on the balance sheets and Bloomberg is looking at the additional securities that are not recorded.

What are derivatives and mortgage linked securities and why are they so important to the health of our economy? A derivative is a contract between two or more individuals based upon a specific asset. It’s total value is determined by the price of that underlying asset and has absolutely no ownership interest in that asset. So you have an asset like JPMorgan which closed at a price of $78.83 this last Friday and you have a derivative of JPMorgan. Let’s say the derivative is a call option at a strike price of $79 with an expiration date of December 2, 2016. The last traded value of that option was $.63. Now that call option gives me the right to buy JPMorgan stock for $79 and it costs me $.63 to buy that option. It’s cheaper to me to buy the option than it is to buy the stock but if the stock goes down then I lose my $.63. In order for me to make money the stock has to go above $79.63.

But why would anyone buy an option like that? Say the stock went to $80. If I bought the stock I would have made a dollar. If I bought the option I would make $.37. Not that great of a deal right? But if you look at it in terms of the return on my investment, investing in the option has afforded me a greater return, 58.7% vs 1.2%. In order to buy that option you have to pay JPMorgan’s market maker $.63.

So you have the stock’s intrinsic value and you have the value of the derivatives of that stock. To give you an idea of how large that derivative market is let’s look at just JPMorgan’s call options. The strike prices available range from $50-$115 in increments of $.50 for a total of approximately 120 different strike prices. Multiply that by 15 different expiration dates and you have 1800 different options you could invest in.  Now consider that JPMorgan can offer 50,000 of each of these 1800 different options for sale and you have significant amounts of money being gambled on the price of JPMorgan stock alone. Now multiply these numbers by 3831 which is the number of optionable stocks and you begin to see that Bloomberg is probably right when they say banks are bigger than the US economy.

But what does that mean for you and me? It means that as long as we invest in any of those 3831 optionable stocks there is a chance that once again our investment could be halved by a recession. My suggestion? You’ve heard it before buy local, buy used, compare prices, give yourself a raise, do your research and change the world by directing where your money goes.


Snake Oil Salesman Unite

The Medicine Show in Washington has begun. Snake Oil Salesman of any ilk will be coming out of the woodworks. That means that they will be vying for our hard earned dollars. What does that mean for us? If we look at who’s on the Trump transition team we can take steps to keep that hard earned cash to ourselves. Ron Nicol is director of agency action. His focus has been telecommunications and airlines. Keith Kellogg who is in charge of defense has worked for a variety of defense and homeland security contractors. Cindy Hayden, Jim Carafano and Ronald Burgess are responsible for national security. Combined these individuals have expertise in the areas of tobacco, defense and national security in a social media age. David Malpass assisting with economic issues was an economist at Bear Stearns which failed in the 2008 market crash. Myron Ebell, Mike McKenna and Steve Hart. Combined these three represent climate change skeptics, Dow Chemical and Koch Industries lobbyists and de-regulation.

What this tells me is that in years ahead the following industries should benefit greatly by de-regulation and tax incentives: telecommunications, airlines, defense, military and police contractors, tobacco, internet security, spyware, investment banking, oil & gas and food production. That de-regulation will mean higher costs to us and the environment. The easiest way to defend against higher costs in these areas is to reduce our dependence on these industries. Again, I advocate getting involved in your local economy and eat organic. Talk to your neighbors, visit local businesses, stay away from national chains, support the people who live and work in your community. If we do this then they will support us as well.

Your Spending Drives the Economy

Economics, specifically microeconomics is the study of how consumers and producers make their decisions. This includes three major players: the consumer, business and the government. All three of these players are important in making the economy run smoothly and efficiently. When one or another of these players does not spend money the economy comes to a halt. This happened in 2008 with the real estate bubble. Because banks had not reflected the true value of their real estate assets the market crashed and consumers saw 1/3 of their wealth evaporate. With this reduction in wealth consumers couldn’t spend. That left it to business or the government to spend money. In 2008 businesses did not step up to the plate and spend the money that needed to be spent in order to keep the economy rolling. That left it to the government. If the government had not spent the money they did at the time, then the economy of the entire globe would have come to a screeching halt. You remember this right?

Business could have spent the money. Banks could have spent the money. They didn’t. The bailout money the government gave them to help spur the economy, they kept. All this is said to emphasize what power the consumer has to direct the economy. Where we spend our money. Where we keep our money. These decisions affect the direction of the economy. Why do you think you get ads on your computer, on your FB page, in your email, on your phone, on the radio, on billboards? It’s because businesses are vying for your money. They need you. If you don’t spend your money they don’t survive. So spend it wisely.

Spend your money at those businesses that support your values, that support your community, your region of the country. You want to know why the Rust Belt voted for Trump? It’s because he identified with the reality that nobody is spending money in those regions. No businesses are spending money in those regions. You want your region to come back economically? Quit waiting for someone else to fix it. Take the money you have and spend it in your community. Quit shopping at Walmart, they’re based out of Arkansas. You want your money to go to Arkansas? Quit buying Budweiser. That money goes to St. Louis. Quit buying from Amazon. That money goes to Seattle. Get to know your community. Drive around. Stop in those businesses. Find out what they sell. Buy from them. Don’t shop online.

Stop Trump

You want to do something to prevent Trump from taking office or rolling back all the progress Obama has made? Then you have to do your research. Find out what political process, civil means including disobedience and class actions that will allow that to happen and organize.

As of today we have not elected a president. We have elected an electoral college. On December 19 they will elect a president. And they can elect who they choose. One elector has already chosen not to vote for Trump. We must convince them to elect someone other than Trump. You can find more about faithless electors, Robert Satiacum, Bret Chiafalo, Baoky Vu and Chris Suprun, in this Time article. Here is a list of the presidential electors for 2016 by state. They are the ones who will elect the president. We must convince them we don’t want Trump.

In the event that doesn’t work then we can attack Trump on other fronts. We can help those Trump has sexually assaulted file a class action suit against him like Zalkin Law Firm in California did against Baylor University.

We need to support those who uphold our values. We can do that by writing our congress people and by making sure that every cent we spend goes only to those who support those values. We can do that by supporting each other and by taking care of ourselves, by eating healthy food, boosting our nutrition and growing our own food, it’s easy it’s cheap and it’s super nutritious. We’ll need it for the fight. We can do it by buying used because most of the money we spend stays in your community with the people who support what we believe in.

You remember what it was like in 2008.  The recession can happen again? But we can prevent it. We do that by identifying every business that supports Trump and the uber rich, then boycotting those businesses. Do your homework. Find a way. Let me know what I can do to help. We can stop this from happening but we’re going to have to work together to get it done.

Change Our World

In the light of the recent election there are many people who are dissatisfied with the result. The good news is we can change our world. We do that by supporting those who have the same beliefs that we have. We do that spiritually, emotionally, physically and financially. The energy we give to our causes, causes them to grow. If we engage every minute of our day with thoughtfulness and mindfulness then those things we hold dear will grow. Here are a number of ways that we can support our community. When we spend our money we are giving our energy to a bigger community. We choose that community by deciding where to spend. We need to be aware of where that money goes. Read the labels. Every product has a “made in” or “distributed by” label. If we want to change our world we need to support the communities we believe in. There are people in our neighborhoods, in our communities who have the skills and connections we need to satisfy our daily wants and needs. Find these people, support them. Give them your business and they will reciprocate. It doesn’t matter if you’re African-American, Latino, Native-American, Asian-American or any other american. When we do business in our community our community grows. That’s how we change our world.

All the Time in the World.

Back in the mid 2000’s I discovered how to manipulate time. I was coming out of an abusive marriage. My youngest had gone off to college. I realized that she most likely wasn’t going to be living at home any more. So, I decided to embark on an experiment. All my friends in Denver were accustomed to me being with “She who will not be named” which made it hard to start anew. The first thing I had to do was divest my image of that other person. I had a couple of friends in NM and they weren’t that accustomed to me being with the other so I felt pretty confident I could have a fresh start. One of the things my divested partner was consumed with was more and bigger. I decided to go a different direction and see how little I could actually live on. So I packed almost everything I owned into a storage unit and took off to New Mexico. The hardest thing for me to get rid of was my hot tub, so I brought it along.

My first residence was a small adobe on a farm near San Juan Pueblo. It was a beautiful place but my landlord had it in her mind that I would become her farm manager. Tending to animals and crops are not one of my better skills so my time there was limited. My next two houses were small adobes. One was in Villanueva where the closest sports bar was 30 minutes away and where people were dumbfounded that anyone would want to watch hockey. The next was in Albuquerque’s south valley. The cockroaches drove me out of there. Fortunately I had made friends with a guy who let me park an RV in his junk yard for $10 a month. I was there for three months in the summer of 2009. That was as small as I could go.

What I learned those three months in the junkyard is that after a 150 square foot RV an efficiency apartment is like a castle. But more importantly, I learned that the less I have to take care of the more time I have to do what I want. In effect I learned how to manipulate time. Couple a spartan existence with F*ck You Money and I had the time and resources to follow my dreams. My true friends, those who liked to spend time with me regardless of what I owned, are still my friends.

Paying TOO MUCH for internet?

According to Reviews.com the US lags behind the rest of the developed world in both internet speed and affordability. In Tokyo, Paris, and Bucharest, $40 will get you around 300 Mbps; in Kansas City and most of the US, it’ll buy you 30 Mbps, according to New America’s The Cost of Connectivity 2014 report. So what do you do? Well, the best thing to do is figure out just how much bandwidth you need. To do that go to the FCC’s Broadband guide. Don’t ask your provider. Their first line of customer service is to sell you more product. As an example, my family is a light to moderate user according to the FCC. When I signed up with Comcast they didn’t even ask me any usage questions. They went ahead and signed me up for the Blast which is about ten times what I need.

Now figuring out what package you need from your provider is a little trickier. Take Xfinity for example. The way their website is set up you can’t just go there and find out what package gives you X amount of Mbps at what price. You have to talk to one of them. Why do you ask? It’s because the few telecommunication monoliths have created local monopolies. Your options from the major providers will depend almost completely on where you live. And in order to take advantage of that local monopoly and charge you the most that they can they don’t publish national rates. Check it out. Go out to Xfinity and try to find a price structure before you put in your address. You can’t.

You can do an internet search on “internet speeds” but be prepared to search. The information isn’t compiled in a specific area that I can find as of yet. Here are some of the speeds: Comcast Xfinity, CenturyLink. Once you’ve purchased a package you can make sure you get what you pay for by periodically checking your upload and download speeds. You can do that at Speedtest. The nice thing about Speedtest is that after you’ve checked you speeds you can answer a survey that allows them to track those speeds.

Your internet provider can also do something that is called “throttling.” This is where the ISP slows your download speeds for whatever reason. How many of you have been watching a movie on Netflix when all of a sudden the movie begins to buffer? This could be a case of your ISP throttling you. Lifehacker addresses the issue and tells you how to measure whether you are being throttled by using Glasnost.

My partner had her car broken into a few months back. When talking with the sheriff about it afterward his advice was “don’t be a victim.” When choosing an internet provider don’t be a victim. Do your research first. Broadband Now will help you find the internet providers in your area.