Time for big techs to pay up!

Powerful, perspicacious, insights Mickey!

Some sea-changing shocks will come somewhere — that much seems assured.

Thank you for the book suggestion.

IMO you are not overstating the risks to the standing orders around the world. If anything, just like the risks to the Economic Order were unrecognized before the Crash, the risks to the Social and Political Order are now similarly being under-recognized.

The economic quakes to come will indeed tear and crumple existing views, cultures, and social arrangements, much like the Great Depression did. It could be far worse. I fear (phony) easily-manufactured disputes which will lead to major conflicts. The idea is for the governing elites to take the minds of the populace off of the problems created on their watches. It seems we cannot try to solve current problems without digging even bigger holes for our future selves to try to get out of. Oh well, that is the same madness in using the phony technique of using more Debt to get out of current Debt.

Manufactured Economic Landscapes? I don’t think so. No one who would want some controlled outcome would take the chance of going through the coming quake of The Annihilation of The Prevailing Weltanschauung. Weimar Germany did not want Hitlerism, but got it nevertheless. To what good? Hyperinflation in the end solved nothing. Neither did the next political rearrangement in Germany solve anything.

I have a great deal of respect for people like you who challenge the status quo views of the existing ‘fabric’. And who laugh at easy explanations for things like the inaptly-named “Savings Glut”.

I don’t know how so many smart people can come up with so many inane ‘explanations’.

Too many rebels to name here but in economics some might be Mike Shedlock, Doug Noland, Martin Hutchinson, and Milton Friedman (with his colleague Anna Schwartz).

I have to laugh at the fact that we are in the middle of the so-called Credit Crunch and no one much talks about the fact that when you get too much Debt, that’s what happens —- a “Credit Crunch”.

Instead they serve us the same soap-soup of blaming Asian ‘over-saving’. This is mind-putty. This is madness, an illness of self-serving hypocrisy — do these people really think their pitiful attempts at excusing past ineptitude will stand the test of time? They are not that stupid. Sadly, it is too much to expect them to deal with the public honestly. Dishonesty is a political imperative, otherwise professional survival becomes less likely.

So many insolvent previously-made ‘economic’ arrangements no longer are economic. Guess what we all do as societies? Pay down debt? Nah — we pile on MORE debt. Some solution! It won’t work. I would guess the Obama Administration knows, but it, like others, has to mollify public opinion. It has to go through the expected motions. The cost will be high IMO.

You are right —- something is going to give and in a severe earthquake it is usually everything that is built on the assumption that the earth is NOT going to move. In other words, most everything that we are familiar with, that we rely on, that we stand on. Our undergirding has not yet started to give way — or at least not yet for most of us.

http://www.prudentbear.com/index.php/commentary/creditbubblebulletin?art_id=10204

http://www.prudentbear.com/index.php/commentary/bearslair?art_id=10208

http://en.wikipedia.org/wiki/Anna_Schwartz

Virlaid:

I don’t put much stock in conspiracy theories as they tend to give too much credit to the conspirators. Instead I see this as the cumulative effect of 30+ plus years of radical neoconservative – not CONSERVATIVE – thought/policies coming to fruition.

It has been nothing less than the dismantling of the New Deal piece by piece. The two remaining vestiges – Social Security and Medicare – are too popular to dismantle by means of the electoral process. Moreover, Americans pay taxes – FICA and OASDI – to fund these programs. And in this respect they are not entitlements. But the fact that political discourse refers to them as entitlements testifies just how far to the RIGHT radical neoconservative thought has moved this country over the course of the past 30 years.

To dismantle Social Security and Medicare will require a fiscal crisis of some sort… An ever growing mountain of debt that leads to bankruptcy just might be the catalyst for such an event. What would it take to dismantle the Canadian healthcare system?

Right now the Obama Administration is living on borrowed time. It cannot spend like a drunken sailor forever. Nor will its successor be able to do so. This kind of spending is not SUSTAINABLE. At some point one of two things will happen. Either massive cuts in spending will take place because of fiscal insolvency or there will be a broad-based tax increase to pay for these expenditures. The former will tear the social fabric to shreds once and for all. The latter will be no less wrenching as it would signal the denouement of NEOCONSERVATIVISM. Either way, politics in this country will be different.

I would recommend Naomi Klein’s The Shock Doctrine: The Rise of Disaster Capitalism. Not because it’s the answer but because it synthesizes much of the past 30-40 years with a provocative thesis. It’s worth reading…

Wishing you well.

Mickey, I said I would not write.

But you raise a point I too have thought of.

That maybe the conservatives’ intention was to basically ‘bankrupt’ the government.

Knowing that they would not likely be in power, they decided to hand such a mess to the Democrats, that the Dems could not even conceive of implementing their more socially-oriented agenda. Like a poison pill. Whatever they did, ‘failure’ would be virtually guaranteed. Hence back-to-power in 4 years for the Republicans. Maybe in the House and Senate even sooner during the mid-terms?

Trouble is, looks like Obama’s administration is intent on spending money that is not there (and will not be there) in order to implement their agenda anyways.

We’ll see — when the rubber hits the road it should be interesting over the next few years.

Massive Health Care agenda, Green agenda, education agenda, welfare benefits, and so on.

Could it be that the conservatives did not want there to be ANY money in the till to pay for all this?
That it would fail?

You are right — Cheney is not stupid.

Makes me wonder. Maybe he is a genius.

How can the Dems realistically hope to go ahead with everything on their plate. Does not seem possible.

Yet they are not turning back (yet).

Can they just print the money?

Virlaid:

The irony of the presumed failure of supply-side [Reaganomics/Chicago School] economic theory is that it may have succeeded beyond its proponents’ wildest dreams: the BANKRUPTCY of the US FEDERAL GOVERNMENT!

Cheney is far too intelligent to know that “Deficits don’t matter – in the short term.” But when his comment is considered in the above context, it’s result will likely be the same, requiring massive cuts to Social Security and Medicare – two of the last vestiges of the New Deal so despised by Milton Friedman and many a supply-side adherent.

If the intended result is the same, historians can argue over how the United States got there…

And yes our childrens’ children will pay for this consumption-driven profligacy in a much reduced standard of living. That much would seem to be certain. What a pity…

Take care.

Agreed. And good luck to you too. We will meet again.

I am not as negative on Bush as my use of his name for the example might suggest.

I have a bad feeling that I will end up in 4 years being FAR more negative regarding Obama’s administration than I ever was on Bush’s.

As you said, the tragedy of Germany’s Weimar Republic’s hyperinflation happened on European soil. Please see the Czech prime minister condemning US President Barack Obama’s economic recovery plans as “a way to hell” at http://news.bbc.co.uk/2/hi/europe/7963359.stm

Where I am very negative on Bush has to do with Cheney’s comment to former Treasury Secretary Paul O’Neill. IMO this comment “You know, Paul, Reagan proved that deficits don’t matter” was one of the lowest points of what should have been a fiscally conservative administration. It ended up being the furthest thing from that. http://www.cbsnews.com/stories/2004/01/09/60minutes/main592330.shtml

The effects are still playing out today. Generations will pay.

Take care.

Virlaid:

“We can both probably agree that there has never been pure communism or pure capitalism in practice. That is the often the reason adherents of either system will excuse Stalin or Mao or George Bush or whomever is the topic of the discussion.” [To be fair to Bush, he should not be lumped with Stalin or Mao. We are talking apples and oranges here.]

This comment by you is spot on! The assumptions underlying “pure anything” are usually flawed in some way and can be demonstrated as such via rational discourse. Simply put, fundamentalism of any kind – secular or religious – is DANGEROUS.

Such theories are often predicated on assumptions about human nature and flow from there. Since human beings are neither completely “good” nor completely “evil” and capable of both, it would suggest a more mixed view. And to the extent that the “market” is merely a metaphor for the aggregate, collective result of individual, human beings’ decisions and subsequent behavior, it’s most likely result is a mixed economy where government is present to both promote and restrain certain forms of human behavior – necessary evil. How it does so in the face of ever changing circumstances is the art of statecraft. Just wish there were more practitioner’s of the latter as I share your sentiment that the “debate” has become much too shrill with both sides often shouting past each other.

That said, it may be Bernanke’s Achilles’ Heel that he is a student of the Great Depression, fighting the current political economic crisis with a strategy designed for the last one. That he may lose this “war” may not come as a surprise to future economic historians looking back on this period. I doubt if Bernanke has a malicious bone in his body but “the road to hell is paved with good intentions.”

But there’s something fundamentally different between a goods-producing society predicated on production and a service-producing society predicated on consumption. The dynamics underlying both are fundamentally different. Hence my trying to get beyond the economic heavyweights of the PAST. I just wish I had more success in doing so. For I too am beholden to “the deadweight of past generations.”

See you down the blogging road.. Take care.

Thank you Mickey.

I do agree with you.

In fact I think we can agree to now part on terms where we see mostly eye-to-eye.

I look forward to meeting you again on some of Paul’s future blog postings to further discuss these issues.

To respond to your last comments:

We can both probably agree that there has never been pure communism or pure capitalism in practice. That is the often the reason adherents of either system will excuse Stalin or Mao or George Bush or whomever is the topic of the discussion.

They will say (as even I might) that such people practised a perverted form of whatever ‘pure’ system they were supposedly preaching.

This makes easier the argument that “of course that implementation failed because the interpretation was wrong and thus how could anyone EXPECT that ‘bad’ way of running the system to succeed?”

I will entirely agree with you that The FED (and governmental regulatory agencies, like the SEC) completely failed to do the job already prescribed to them by existing law. I am the last person to defend Greenspan or Bernanke.

There is little or no daylight between your reading of Bernanke and mine — we are in agreement.

Class warfare? Maybe, maybe, but IMO not consciously. Of course, I agree, many people at the ‘top’ can easily be ‘unconscious’ about the pain of those below them. Care must be taken not to paint everyone with the same brush (not that you do).

Dr. Ben Bernanke actually believes that he can ‘reverse’ the inflation before it becomes a problem. The question I would have is how do you, Dr. Bernanke, do that?

In normal times, the assets that the Central Bank acquires can be injected back into the economy, because they have intrinsic worth. The FED would thus draw down money from the system. It would ‘nip’ inflation in the ‘bud’… the same price inflation it had earlier instigated.

What assets exactly has The FED acquired as the pawnshop of last resort? Who knows what these ‘assets’ are worth? The FED won’t tell anyone. And if they are worthless or worth less, then they won’t have any use in reversing incipient inflation.

The thing is that Bernanke’s take on our current economic situation is not malicious IMO. He is not out to establish one-world government. There is no conspiracy. The most tragic thing is that he has studied The Great Depression to Death. To what end we might well ask?

So we have here IMO a person who is not out to hurt anyone. Thus the double tragedy. He will do harm with the pure intention of doing good.

I wonder if he too will one day end up like the tragic figure Montagu Norman, the governor of the Bank of England during the Great Depression.

Will this next quote then also apply to Ben Bernanke?

Montagu Norman himself poignantly, devastatingly, described the consequences. Once the most powerful central banker in the world, as Mr. Lanchester puts it, Norman came to believe that his life’s work had accomplished nothing. In his memoirs, he confided: “As I look back, it now seems that, with all the thought and work and good intentions … nothing that I did, and very little that old Ben [Strong] did, internationally produced any good effect at all except that we collected money from a lot of poor devils and gave it over to the four winds.”

Please see the corresponding review of Liaquat Ahamed’s new book, Lords of Finance: The Bankers Who Broke The World, a history of central banking in the early 20th century at

http://www.theglobeandmail.com/servlet/story/LAC.20090225.REYNOLDS25/TPStory/TPBusiness/

On your last point, you are right IMO; such a system does not exist.

One thought-provoking article I read today was “China wants dollar dumped as global currency” at http://online.wsj.com/article/SB123780272456212885.html

Or at

http://www.theglobeandmail.com/servlet/story/RTGAM.20090324.wchina0324/BNStory/crashandrecovery/home

The point of providing the links above is to expand on your question of where to go from here — the idea of using something like a world currency or SDR-s (Special Drawing Rights) may be a step in the right direction.

We need something to keep our world trade from getting so out of balance that one country can go deep into debt while another can run almost endless surpluses. I don’t know if we’ll go in this direction, but to fix our money-systems, we well might. You are asking the exact correct questions, IMO.

Without a rule-based system of some kind, we will likely repeat the mistakes of the past. (Of course you still need a Greenspan-like Central Bank that is so out-of-touch with reality — along with the absence of a rules-based system — to actually accomplish what we have done to ourselves over the last 20 years! I agree with you — They FELL DOWN!)

“Import Certificates” to accomplish the same objective was Warren Buffet’s idea at his FORTUNE article back in 2003 — “America’s Growing Trade Deficit Is Selling The Nation Out From Under Us. Here’s A Way To Fix The Problem–And We Need To Do It Now” can be found at

http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/10/352872/index.htm

I hope Paul does not mind these other links for you to examine (last time I promise Paul! — you have been very patient with us, I must agree with Mickey.)

Niall Ferguson’s scary take on the future is at
http://www.theglobeandmail.com/servlet/story/RTGAM.20090223.wferguson0223/BNStory/crashandrecovery/home

And one last sad story — things are apparently so tough in Finland that the government has to raise money by selling its stake in Santa’s home!

http://business.theglobeandmail.com/servlet/story/RTGAM.20090324.wFinlandSanta0324/BNStory/Business/home

Virlaid:

But you have given me an answer: “Capitalism is not necessarily the best economic system; it is only the best one that has ever been found.” [Friedman]

Without further qualification, however, the implication is the Galtian Nirvana of which you speak is it not? Friedman et al. are unapologetic adherents of laissez-faire capitalism are they not? I have yet to see where you make it clear that this type of capitalism will not work… for long or for the bulk of the citizenry. If it requires regulation/government intervention to prevent “animal instincts” from prevailing and destroying the entire edifice, then it is not laissez-faire capitalism is it? A repudiation of Freidman et al? I emphasize this point because ideas have consequences and those of Friedman et al. and subsequent policies based on them are responsible for much of the economic crisis we find ourselves in. The lack of governement oversight and disinclination to regulate – Greenspan and Bernanke – are a direct result of such economic theory/policy. Do you agree or not?

As for Bernanke and where we are headed. [I did read the piece - thank you] From an earlier post of your’s a while back, we are in agreement that aggregate demand is/remains the problem and Bernanke is turning on the printing press to inflate that demand which is contracting… in an effort to prevent DEFLATION/DEPRESSION. But the lontern consequence would surely suggest hyper-INFLATION which, and here we agree again, is clearly one way to impoverish the populace. [Class warfare from above?] Here my historical reference point is WEIMAR Germany and I need not elaborate. It also explains why the Europeans aren’t so keen on Bernanke’s approach. They know where this leads. Too bad his focus is so short-term, mere fire-fighting without seeming concern for its long-term consequences.

A while back I postulated that we were in uncharted territory groping for answers based on incomplete theoretical models. The ideas of Smith, Ricardo, Marx, Schumpeter, Keynes, Friedman, Von Mises, and Hayek may no longer be relevant – too many anomalies. As disconcerting as this may be, we have no choice but to think outside the box of orthodox/neoclassical economic theory. Whether you agree with my assessment or not is irrelevant as my sole purpose is to provoke thought. The old is dying, but the new cannot yet be born… The new THEORETICAL model must be SUSTAINABLE, EQUITABLE, and PROFITABLE. If it already exists point me to it.

I wish you well, thanking CNN/Paul for the opportunity to respond.

Hi again Mickey.

No, of course I don’t condone.

But neither do I condone the seeming inability of The FED to learn from its own history and its own mistakes.

The FED apparently does not have a very effective Culture, Constitution, Rule-Set, Playbook, or Archive-History Library or whatever they use for Reference Material.

Either that or their top man ‘has all the answers’ and does not ever have to refer to the available material. IMO he obviously seems to think he has all the historical bases covered.

All you have to do IMO is to read Ben Bernanke’s 2002 manifesto at http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

I have read it more than once. You will see laid out in gory detail everything that The FED is doing today, and is planning to do.

IMO this is simple confiscation of the wealth of the citizenry. Is that why the European Central Bank looks askance at Dr. Bernanke’s ‘medicine’ and declines to prescribe the same drug to its national economies?

I hope you have the inclination to read Dr. Bernanke’s speech “Deflation: Making Sure ‘It’ Doesn’t Happen Here”.

Again, to reiterate, I am not hung up on searching for some John Galtian nirvana.

You, in contrast, seem somewhat hung up on expecting me to give you an answer to a question I have not even raised. Where did I say I promised you or anyone else a Rose Garden? Let me repeat — it does not exist.

As Milton Friedman has often pointed out, Capitalism is not necessarily the best economic system; it is only the best one that has ever been found.

Please see his 2-minute video at http://www.newsmax.com/insidecover/milton_friedman_inflation/2009/03/19/193738.html?s=al&promo_code=7CA1-1

My main concern here is that what Dr. Bernanke has delivered will be followed by the proverbial foreign currency exchange, control and ownership restrictions, limitations to foreign investing, and the banning of gold ownership by Americans. It’s happened before and we are well down the same road to repeating this very same history.

If you study economic history (and it would appear that you have) when governments (of any nation) both create an economic calamity, and then cannot fix it, they inevitably blame the population… as in “they’re not spending enough” and “evil-doers like Made-Off did it” and “it’s an event that comes once in a hundred years as an act of God” and “Capitalism has failed” or “The Market has shortcomings”.

Uh?

My only original point was about Negative Dividends. Inflation is an indirect tax, very regressive, hurting those most who have no means to protect themselves. Surely you cannot be disagreeing with that?

Virlaid:

No concrete HISTORICAL example, heh? The Holy Roman Catholic Church? Spoken like a true Burkean CONSERVATIVE!

If not for the Protestant Reformation – Luther and Calvin – it is likely that neither limited, constitutional governemnt of which you speak nor CAPITALISM would exist. The HRCC had little tolerance for dissent. Witness the Albigensian Heresy or its treatment of Galileo… Surely, you don’t condone either?

Yes, I hope Paul can indulge us a little bit here —— the only connection to Dividends in my response below, is in regard to the continuing valuable dividends that a good Constitution can pay, throughout history, to a grateful nation and to her citizens.

Dear Mickey of Akron, Ohio —— thank you for your reply.

Utopias exist in our hearts and minds  —— one more reason why true happiness comes from within.

I am not on such a quest here.

Indeed I do acknowledge that a constitutionally limited republic can be a good form of democratic government.

But the important element for such a government IMO is the undergirding provided by rules.

Any long-lasting institution or one which aspires to be long-lasting will have a firm underpinning provided by its own rule set —— if you like, by it’s own Invisible Hand and by its own Cultural Fabric.

The Holy Roman Catholic Church, as an example, has through history, often painfully, developed such a culture and rule set.

Individuals frequently challenge these rules for their own Consequentialist reasons and discover, to their feigned surprise, that the Church is very conservative —— even ‘backwards’ in the (humble?) opinions of such individuals.

This is not to say that the HRCC cannot change —— but She generally does do so slowly and with much deliberation.

There is good reason for this.

Such an institution (pick your own) has accumulated its wisdom —— as manifested in its own rule set —— over centuries and over the lifetimes of countless members, and sadly, often by paying the ultimate price of many lost lives.

So it should not be a surprise to us (for whatever institution we choose to examine) that rules play a critical role, even though in their manifestation, these rules tend to enforce ‘conservative’ behavior. The idea is to learn from past pain and to not repeat historical mistakes.

Such rules or ‘constitutions’ embody wisdom that a single individual cannot realistically expect to collect, or even fully understand, within the relatively short span of a single lifetime. Hey, ‘free’ love seemed like a good idea to me too, until I found out it was most definitely not free, and was not even love.

So it is with the institution of government (or ought to be). So it is also why amendments to the American Constitution are so very difficult to enact. This difficulty is quite intentional.

There are exceptions.

In wartime there can arise challenges to the very survival of the Republic.

So, in such situations, special powers can be made available that are usually not casually accessible to our governmental authorities.

But such powers should be reluctantly activated and only under extreme oversight IMO.

The current period may indeed soon qualify as such an ‘extraordinary’ occasion. (Even though IMO it was entirely brought on by the earlier economic mismanagement by those very same authorities.)

In fact, if 2011 arrives with no marked improvement in our economic circumstances, a national, and perhaps international, emergency may be declared —— if we are not already in the midst of world war.

My point is that such powers should not be activated in an ad-hoc manner as they are today. What is being done now is entirely experimental. These experiments are inappropriate and very dangerous.

Such “quick and dirty” experiments will deliver far more hardship than they alleviate —— relief after all is the stated objective.

And no one, except for Ron Paul and for a few others, has even recognized what the FED is up to —— most politicians don’t even understand the rudiments of our Money System. Please witness poor John McCain —— “I don’t really understand economics”.

But at least he was honest. Given the policies that the others are now implementing and have already implemented, it is clear IMO that most of them don’t understand either. “Stimulus” legislation —— please.

There is a good chance IMO that when The FED’s abuse of power is eventually recognized and seen for the harm it has done, a Constitutional amendment will finally be enacted to severely curtail the powers of this institution —— the Federal Reserve System of the United States.

But then that is the function of autopsies and post-implementation reviews —— find out why things went so horribly wrong and then correct our processes so at the very least we don’t repeat the very same errors in the future.

Virlaid: Your latest bit of erudition has finally goaded me into asking you and those of similar views – free-market utopian anarchists – one simple question: Provide me with one HISTORICAL example of this idyllic, self-regulating free market? Just one… Then explain to me why it no longer exists? What factors/forces led to its demise?

Indeed, if the enforcement of contracts is fundamental to free markets then why hasn’t it been left to private interests to regulate such contracts. Why not leave it to the “invisible hand”? And since you’ve cited Adam Smith, what does good old honest Adam have to say about the consequences of the ‘DIVISION OF LABOR’ in manufactures? You know the rendering of those subject to this division of labor STUPID and unable to perceive their “enlightened self-interest” – whatever that means.

Could it be that the VISIBLE HAND of the state played a much larger role in the formation/continuation of capitalism than you want to admit? Please don’t take me back to the state of nature. Been there with Thomas Hobbes in THE LEVIATHAN where life was brutish and all too short. No point focusing on Rousseau either. Because his condemnation of private property – “C’est mien” – would preclude free markets, right? Even Hayek would allow for more state intervention than you would seem to want to admit…

Give me one HISTORICAL example? Just one… Is contemporary Saipan, the capitalist paradise of which Tom DeLay spoke so highly, what you’re talking about? Enlighten me and others on this post – if it will be allowed. We all tend to go off topic now and then.

No. Use any spare money to shore up the company and make it strong.

Every mature, large company should pay a dividend. Going forward, I think stockholders are going to demand shares that have real value in their portfolio. Paying a dividend means your company is expecting to be around for a long time.

The technology business is pretty fickle, so I don’t think a tech company would be wise to pay a large dividend. They should use a dividend more as a psychological tool to remind investors that their stocks have real value.

I don’t know if I’d call Google and Apple “mature” companies. Google has only been around for 12 years and Apple was on the brink of failure before Jobs became CEO again. Google and Apple need a little longer, in my opinion, to establish a consistent performance level. I think they need to sit on their cash for a rainy day.

Cisco, though, has the network infrastructure marked locked. I think they’re the best candidate for paying a modest dividend.

as a matter of policy, I would be opposed to these tech firms paying dividends.

Dividends result in taxable income to the person who receives them when they are paid and prevents them from managing the timing of their tax payments.

I see no reason whatever to increase the government’s tax take at a time when we should be trying to shrink to outrageously bloated earmarks and pet projects so beloved by Congress because they buy votes.

=)

[Google and Yahoo are advertising companies, not techs. They have not been able to charge for the technology that they have.]

As technology companies like Apple and their industry mature, their growth slows so much that they are no longer growth stocks. They need to do something to return cash to shareholders; dividends and share buybacks are the most likely candidates. They should buy back shares when they’re cheap, like now, and pay dividends when shares are expensive, some day.

Most tech mergers fail, so I would not advise this course for ‘extra cash’.

Talk about NOT paying dividends.

How about an entity that INSTEAD pays all of us “Negative Dividends”?

That’s even worse than NOT paying dividends, right?

And what if you did not even knowingly own shares in such a company? You’d feel pretty bad, right?

You never signed a single thing, and some entity just ASSUMED the right to do this to you!

So how would you feel if a company — in which you did not really even own shares, so far as you knew — decided to collect ‘dividends’ FROM you, without your explicit permission?

Would you like it if a smart-alecky company could just go into your bank account and just collect cash from you?

Or better yet, leave the cash there but just reduce its value by a little itty bit, time after time.

So in nominal terms if you had $100 it would still look like $100, but after a little time, could not buy you what you thought $100 could buy you?

I am talking about your friendly, local Central Bank (known as the Federal Reserve Bank of the United States) that just yesterday decided to start doing this very same exact thing TO YOU.

It decided to “Monetize the Debt”.

How?

By printing money.

Simple.
Clean.
Beautiful.
No fingerprints.
No accomplices.

Not even a list of “The Usual Suspects”.

Anyone in the world who has American money is affected by this FED that pays us “Negative Dividends”.

How long will the Chinese stand by and allow this? They have huge holdings of Treasury Bonds denominated in U.S. currency. So do others.

How long will these other holders of U.S. debt put up with this?

IMHO, Dr. Ben Bernanke has now completely lost his professional ‘marbles’.

When a so-called Central Banker buys back his own government’s Treasury Bonds, then that Central Banker IMO is no longer ‘independent’ nor at “arm’s length”. That banker is in bed with his government. There is no polite way to put this. This is fraudulent in my opinion.

There was always a sacrosanct relationship between Central Banks and their governments. Why has this relationship so badly broken down?

There was good reason for this earlier very real separation. It kept politicians from devaluing our money. There was always too much temptation. That is the reason for the need for this independence. This separation should not be discarded so casually.

Such money-printing action is essentially confiscation of the money of the American people.

This is being done on the sly, like a thief who slips into your bank account or into your wallet at night. This thief takes a few percent here and there, now and then.

It is also known as “taxation without representation”.

It is debasement of the American currency.

Furthermore, IMO, it is worse-than-useless, criminal and illegitimate, and also extremely ill-conceived.

The FED is counterfeiting the currency it prints — this is the very same currency it is sworn to uphold.

I know Dr. Bernanke is not a thief — or at least not consciously so.

But what the FED is doing is BAD, really BAD, and really, really BAD.

Just because Bernanke REALLY thinks that what he is doing is for the GOOD of the country and economy, does not make it so.

Should we just sit by and let this happen?

The Boston Tea Party was held to protest much less.

Our dear FED Chairman cannot magically activate idle factories, and auto-magically effectively allocate goods and services with the prospect of improving the economy.

Neither can the Federal Government do this. There is no more effective allocation method than the Invisible Hand of Adam Smith.

The government has to step aside at some point. Some of the facilitation it has done has been useful.

But the FED and the government both need to understand that not all of our current problems are amenable to solution by their hand. Some problems are time-dependent.

The solving of other problems are in fact jeopardized by the U.S. government’s (and foreign governments’) heavy hands.

At best, their efforts might break even. Most likely they will instead grievously waste precious resources that we so desperately need elsewhere.

This is like using the current from a battery to try to recharge that very same battery.

Money dropped from helicopters cannot like some abracadabra chant activate animal spirits that are too quiescent for the liking of our politicians and central bankers. That quiescence is there for a reason.

But our dear authorities won’t believe their own relative inadequacy IMO until they eventually see how ineffectual (and even harmful) their efforts actually are.

How can people who profess to believe in the free market think that this market is suddenly so defective that it now has to have its hand held like a child who has to be helped to cross the street?

There are improvements that can be made and will be made. But printing money is not one of them.

This “negative dividend” presumes that the American people cannot be trusted to spend their own money in a way that is helpful to the Economy.

But what is the Economy?

IMO it is this collective system that reflects the will of ALL Americans.

To short-circuit this system is to assume that one man knows better than ALL of those Americans, in their collective manifestation of that will.

Can this assumption really reflect reality?

I agree with Sacto Joe of Sacramento, CA.

A sign of a declining company, or at least a mature one, is that it can no longer use its accumulated cash in a way that is more productive than the way in which its average shareholder can employ that cash.

That is to say, on average, such a company no longer expects to grow much more quickly than the general economy.

It is essentially a sign that such a company has thrown in the towel on striving to create further outstanding, mind-blowing, “insanely great” innovations — and thus no longer needs its cash to do that.

To think companies like Apple and Google fall into such a classification is a bit harsh, by my observation.

Once these companies fail to (let’s say, over a 7-year period) demonstrate that they can employ their in-house resources in a manner that returns more than what the average investor can make in Treasuries, then it would make sense to have them pay something out.

But assuming that they are not taking any inordinate risks with their shareholders’ assets (that is, with those companies’ net worths) then why not let those companies continue to employ their cash holdings for their own internal expansion and new projects?

If I got any dividends back I’d just plough them back in anyways.

The taxman would want to take his share and do we really think the government will employ that paid-out share more productively? Ha-Ha, sorry the question is so absurd it isn’t even fair.

What these companies — that is, those with huge cash hoards — do have to worry about (and thanks to the question from Paul) is how to hedge against the humongous coming American dollar devaluation.

It sure looks like the FED led by Dr. Ben Bernanke is on the warpath against the value of the U.S. greenback (and thus indirectly against anyone who has American cash).

So some such diversification steps are probably prudent for everyone, including these companies, to move partly into Euros, Yuans, gold, and other assets which are not as likely to depreciate as quickly as American dollars or as quickly as long-term U.S. Treasury paper will decline over the next couple of years.

Pay dividends? Are you kidding? Why don’t they just check into the old folk’s home? It means we are cash cow and don’t plan on going anywhere in future. Thanks for buying our stock here is some money back. What is Google going to do give people 10 dollars for buying the stock at 600 and change? They might as well put a gun to their heads. Greedy Greedy Greedy. You guys just don’t learn

No, and I speak as a long holder of Apple stock. Now is the time for growth, and they need to husband their resources for that. I fully expect that Apple will “top out” in five or six years (when they should dominate their various market sectors), and see its stock price begin to decelerate at that time. When that occurs, I think dividends will be worth considering as a way to keep the stock attractive.

NOTE: The last year’s drop in Apple stock is purely attributable to the economic super-recession. As it ends, Apple will go back to its earlier highs (~$200/share), and accelerate from there. I would not be surprised to see it at the equivalent of $600/share in three to five years.