The Binary Circumstance

I’ve been having a problem with my 2002 Mazda B4000 truck.

When I would move the automatic gear shift lever through the gears, it would blow the #2 fuse. At first it was intermittent and I could just replace the fuse with a cheap 10 amp fuse. But then it got so it happened every time I put it into drive. The #2 fuse controls the backup lights, the O/D switch, the passenger airbag switch, and the blower for the heater, defroster and air-conditioner.

I researched the problem on the Internet and found my solution at Sparky’s Answers, a blog devoted to electrical problems in various makes of cars and trucks. The post refers to a 2001 Ford Ranger but a Mazda truck is basically a Ford Ranger in Mazda skin.

Problem solved!

According to the Seattle-PI, the FBI was aware of fraud in the mortgage industry as far back as 2002. They could not tackle the problem because resources were diverted to fight terrorism.

The FBI was aware for years of “pervasive and growing” fraud in the mortgage industry that eventually contributed to America’s financial meltdown, but did not take definitive action to stop it.

“It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes,” said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002.

The problem, according to the two FBI retirees and several other current and former bureau colleagues, is that the bureau was stretched so thin that no one noticed when those lenders began packaging bad mortgages into bad securities.

“We knew that the mortgage-brokerage industry was corrupt,” the first of the retired FBI officials told the Seattle P-I. “Where we would have gotten a sense of what was really going on was the point where the mortgage was sold knowing that it was a piece of dung and it would be turned into a security. But the agents with the expertise had been diverted to counterterrorism.”

The FBI not only lacked the resources, but also never got the tips it needed from the banking regulatory agencies. The Securities and Exchange Commission, the Office of Thrift Supervision and the Office of the Comptroller of the Currency also failed to detect the securities issue, said the first retired FBI official.

This is ironic because the bad mortgages were the foundation for securities and derivatives that Warren Buffett called “financial weapons of mass destruction” in 2003.

But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system. This FBI failure echoes revelations that as early as 1999, the SEC had been made aware of Bernie Madoff’s Ponzi scheme, yet they did nothing to stop it.

The federal Securities and Exchange Commission said Tuesday that allegations against Bernard Madoff and his securities firm had “repeatedly” been brought to the attention of SEC staff as early as 1999 but were not recommended to the commission for action.

My own personal view is that government is so dependent upon taxes that they turn a blind eye to how corporations and individuals are making their profits. When the government profits from fraud, they are unlikely to put an end to it.

According a report yesterday, some government workers are also too busy watching pornography to do their jobs.

When you look at the global financial chaos that has been facilitated by these examples of government incompetence and corruption and the pain and suffering that will follow, it’s amazing that so many people think the solution to all our problems is more government.

With all the billions that the government has already printed and the billions they intend to print well into the future, we must consider that hyperinflation is part of our future. What is hyperinflation?

Wikipedia:

In economics, hyperinflation is inflation that is “out of control”, a condition in which prices increase rapidly as a currency loses its value. Formal definitions vary from a cumulative inflation rate over three years approaching 100% to “inflation exceeding 50% a month.” In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.

[...]

Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply (or drastic debasement of coinage) usually accompanied by a widespread unwillingness to hold the money for more than the time needed to trade it for something tangible to avoid further loss. Hyperinflation is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.

Two analysts on CNBC say that the dollar is “absolutely doomed.”

With promises of more U.S. government intervention, we are going to be in a situation of hyperinflation and a dollar that is absolutely doomed, warns Kirby Daley, senior strategist at the Newedge Group. Daley & Dodge Dorland, CIO at Landor Capital Management discuss more, with CNBC’s Martin Soong.

In a CNBC article [from Reuters], billionaire George Soros says that the stimulus is not enough and that TARP has been misused. He also warns that the government may not be able to put the breaks on inflation once it begins.

Soros said the United States needed “radical and unorthodox policy measures” to prevent a repeat of the Great Depression of the early 20th century that include recapitalizing banks and writing down the country’s accumulated debt.

Also, he said, it should create more money to offset the collapse of credit and then rapidly pull that cash out of the system when inflation emerges. The government would have to be very nimble in the timing of such moves, he said.

“If they are successful…the deflationary pressures will be replaced by the specter of inflation and the authorities will have to drain the excess money from the economy almost as quickly as they pumped it in. Of the two operations the second one is going to be, politically, even more difficult than the first,” he said.

As an individual investor I’m finding it very difficult to decide how to manage my own funds given how quickly market values can shift based on the ever-changing government actions related to the economy.

Not to be outdone by Boston, Seattle and Washington State politicians have decided the solution to the Alaska Way Viaduct rebuild is a four lane tunnel going under downtown. The viaduct is six lanes and the tunnel will have only four.

The price tag is expected to be $4.24 billion and the project is expected to take nine years. I guarantee you that price will go way up before the project is completed if it ever gets started.

Gov. Christine Gregoire wants the jobs.

“Building a deep bored tunnel will support a strong economy today and in the future,” Gregoire said. “This decision will improve public safety, help ensure Seattle is a 21st Century international city, and generate thousands of new family-wage jobs in the Puget Sound region.”

Mayor Nickels said the agreement will help ensure that the city of Seattle remains economically competitive.

I don’t see how pouring billions into a hole in the ground will keep us competitive, especially when it provides less lanes of traffic than we currently have. Yes, there will also be a surface street on the waterfront but it won’t be very useful to people who want to zip through the city quickly. And the tunnel can’t be exited while in the city, like the viaduct.

Money would be better spent fixing existing roads and sidewalks which are in horrible shape.

They should just tear down the viaduct and replace it with a surface street.

When San Francisco tore down the Embarcadero Freeway along its waterfront after it was damaged in the 1989 earthquake, people said it would be disaster and create all kinds of traffic problems. It didn’t. All it did was connect the city with the waterfront again and created a beautiful promenade.

There’s got to be a better solution than this. Building more and more roads just leads to more growth and more congestion.

If Seattle really wants to leap into the future they should follow the lead of Abu Dhabi which is building a green city in the desert called Masdar.

The leaders of Abu Dhabi have declared that petroleum belongs to the 20th century, so they are making an investment in the 21st century by building Masdar, the world’s first zero-carbon, zero-waste city, powered almost entirely by the desert’s plentiful sun.

I know we don’t have much sun but there are other alternatives I’m sure. Why not do something really visionary for a change? There’s nothing original about digging a big tunnel under the city at huge expense to create jobs and more traffic congestion.