Calling Our Bluff…I Mean Our Debt

It's very much in fashion these days to say "What if the Chinese or Europeans (et al.) call the American debt? What if they suddenly demand immediate repayment of American Debt?"

This is a topic that has been talked about in the financial and political news for decades. But it is even more imperative today as our illustrious President Obama has set the United States on a course for crushing debt that can only be financed through massive foreign support (and HUGE domestic taxation, but that's for another article).

By this it is meant that foreign investors who bought U.S. government Treasury bonds suddenly demand the bonds to be repaid back in full on the spot rather than wait until maturity. The concerns being first we don't have the money to repay all the debt (or even most of the debt) Johnny On the Spot. Secondly, these foreign investors won't buy any more U.S. government issued Treasury bonds and therefore the U.S. government will be hard pressed to finance operations, much less the grand schemes and programs we have come to know and love(?!) as well as new ones.

The latter is because the reality is that taxation simple does not collect enough money to pay for all the government programs, both at the Federal level as well as the state/local level. Issuing bonds is the only way these government programs and functions can get funding. Why it's grown to this bloated state is a topic for another article.

It is to the former point, however, this article is addressed – the demand for immediate repayment.

To explain why this is technically impossible we need to review some basic concepts that I'm sure are not taught in school finance unless you take very specific courses (which is yet another failing of the education system).

A "bond" is simple a loan. In financial technical terms it's known as "evidence of indebtedness". The bond itself describes what the load is for (in often general terms), who is asking for the loan, the amount of the loan (the principle), how long the loan is for (the term of the loan), when the loan is to be repaid (the maturity of the bond), and most importantly for the buyer of the bond (the bond holder) the terms of the repayment of the loan including the interest rate to be paid. Therefore, the person who buys a bond is making a loan to the person who is issuing the bond. So if you buy a $1,000 U.S. Treasury bond you are making a $1,000 loan to the U.S. treasury department (i.e. the American government).

Most bonds pay the buyer interest periodically (some bonds – zero coupon bonds - don't but that's a different subject) as well as principle. In terms of Treasury bonds the bond holder gets interest paid twice a year and the principle paid back at the end of the loan when the treasury bond matures.

"Calling" a bond means the issuer - not the buyer! – repays the principle of the loan early (i.e. pays back the loan early). The bond contains a "call schedule" which is a list of dates when the bond issuer can (but not required to) call the bond and repayment amounts the bond holder will receive if called on the dates. In general call features are uncommon in bonds and rare in government bonds.

To the point of this article: U.S. Treasury bonds are not callable!

Technically speaking it is impossible for the Chinese, Europeans, Russians etc. to call our debt (i.e. demand immediate repayment)! This is one of the biggest falsehoods being spoken of these days. The best they could do would be to sell the bonds in the market but that transaction doesn't involve the U.S. Treasury (bonds are bought and sold all the time).

(I say "technically" because in the world of politics any things is possible!)

What can happen, however, is these foreign Treasury bond holders can choose not to buy new U.S. Treasury bonds when their current bonds mature. In other words, when the bonds they are holding now mature, instead of using the proceeds of the maturity to buy new Treasury bonds they take them money off the table and go out it else where. That would be major trouble for the U.S. if no one (at least not enough) bought our government's bonds. The pool of money to finance the American government would dry up fast!

Can anyone spare a dime?

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Kayak No-Win Scenario: Speed vs. Stability

I love my kayak!

I love fishing from my kayak!

I love how it handles both rough and calm waters!

I've never tipped over in my kayak!

(Ok, I did tip once at Montauk but that was coming back in and a breaker hit me from behind. Any yak would have tipped.)

I have a 14 foot Heritage Marquesa (basically the same as the Heritage Redfish).

But truth be known, if I had it all to do again I would have most likely gotten a different model yak. This is based on share experience over he last 3 years of using and fishing from it. No advice or review or demo/test ride would have helped. I just had to take a chance, buy one, and see how it worked.

Why do I feel differently about my yak?

To answer that let me list what I see as the Pros and Cons of this model:

Pros

It's very stable. Supposedly I can stand in it without needing pontoons. I've tried but felt too unsteady. Anyway, I didn't buy it to stand in it

The cockpit is deep and roomy.

Good back well storage.

Thick hull. Handles the scrapes and dings of use well.

Very reasonably priced.

Easy to add most accessories (like my fish finder – yes, I have a fish finder on my kayak!)


Cons

It's heavy! People who help me lift it can't believe how heavy it is. The box specs say 60 pounds But I don't think that's right. Can't be.

It's slow. My normal "cruising speed" according to my GPS is 2.9 knots. If I pump hard at paddling I can get to 3.7 or so but that's about it

The front storage well is very small and the hatch cover too small to put much through it.

And there in lies the paradox scenario I have come to learn: The factors that help make a kayak stable are the direct opposite of the factors that help make a kayak fast on the water.

To be sure, all kayaks have an element of stability. But certain factors in the design contribute a lot to help (or hinder) that stability.

For example:
- A wide kayak is more stable than a narrow yak. The side-to-side roll is much less.
- A heavy kayak is more stable than a narrow yak. The weight means more effort needed to make it roll.
- A deep cockpit kayak with high gunnels is more stable than a low gunnels/shallow kayak. More of the yak is in the water adding to the stability.

But these stabilizing factors are exactly the kinds of the things that slow down a kayak in the water.
- A wide kayak means more resistance as it moves through the water.
- A heavy kayak means it takes more energy to get it going and keep it moving.
- A deep kayak also adds to water resistance.

So what's the answer?

I don't know.

Speed is definitely important. Not that you're often in a rush to get somewhere in your yak. But speed means you can get out to the fishing area more quickly or get back to the launch site quickly too incase of bad weather, an emergency etc. And speed means you can cover more area and/or travel further for the same given amount of time. You also to exert yourself as much for the same distance traveled.

But stability is not to be short changed either. I feel very confident in my yak. I've taken boat wakes across the side and bow and never felt I was going to tip. I've launched in very rough conditions where water filled the cockpit continuously (until I got under way and it could do some self-bailing) and never felt uncomfortable. (Common sense is always to be exercised too!)

So, like most things in fishing, it comes down to personal preference.

Speed vs. Stability.

Choose your goal.

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The Power of Failure – It's Not Such A Bad Thing!

Who wants to fail?

I certainly don't.

So much of our culture, our society, is based on glorifying and extolling success while impugning and shunning failure.

Surely some fields and professions have a tight margin for failure.

You don't want your doctor to fail in the operation about to be performed on you resulting in your death!

You don't want your home builder to fail and have the house you just purchased collapse on you!

And you wouldn't want your lawyer to fail least you end up in jail for something you didn't do!

We are taught as kids that our fear is nature's way of warning us that something we are about to attempt is potentially harmful and we shouldn't try it. Sometimes we listen, sometimes we don't. Sometimes we pay the price for not listening, sometimes everything comes out fine in spite of our fear and the risks.

But not everything in life has such immediate and dire consequences for failure. Yes, the results of failure can be costly in both money and time. But failure, specifically the risk (rational fear) of failure, is a good thing.

The risk of time and cost failure helps guide us, both as individuals and as a society, from going off on wasteful endeavors or flights of mere fantasy. These things still happen but the majority of people weight the risk and choose courses of action with greatly likelihoods of positive outcomes.
And there in lays the danger.

As we see now our government is moving to bail out all sorts of industries that are on the verge of failure. On a more personal level we have all kinds of social programs as "safety nets" to help people up after they fall.

Conceptually, these are pleasant ideas. But the real risk of injury from failure is a powerful motivation. Many of these businesses and individuals might not be in the bailout/safety net category if they had weighed the risks more.

But why should they?

When government is there to catch you when you fail why exercise caution at all?

If you can go off and do whatever you want and if you fail society via government will restore you to your prior good state, where is the incentive to have been cautious in the first place? Where is the motivation for doing the right thing the first time?

Risk of failure and the consequences thereof are a powerful force for driving people to think before they act, and providing good examples to others as to what not to do.

But remove that risk, provide government (i.e. society) "safety net" for everything then doing the right thing the first time becomes irrelevant.

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Setup to Fail (or, He Never Had A Chance): The Story of Bob the Analyst

Once upon a time at there was a systems analyst we will call Bob.

Bob worked in the IT department of a large company.

Bob was pretty good at what he did. He came to work every day, is quiet in his non-descript cubicle, does doest he was assigned, completed more or less on time, and so on. Bob always received average reviews, sometimes above average.

One day one of the senior managers calls Bob in and tells him to start working on a new project. This new project would require him to research many different sources and options.

He would need to call many service providers and vendors.He will have to look into integrating different outside systems into the in-house systems.He will have to get tech specs and pricing.He will have to check with the programmers, network engineers and DBAs to ensure the in-house systems can work with all these new outside systems with a minimum of reprogramming.And he will have to keep this project quiet as management doesn't want word leaking out to competitors.
But also don't let all the other projects you're working on slip. And Bob still has to respond to production issues/emergencies.

So analyst Bob does as his is told and starts contacting vendors, programmers, network engineers etc. while trying to stay up to schedule on his current projects too.

Analysts Bob quickly runs into road blocks:

He can't really explain to the vendors or staff what the goal of the project is.
He doesn't have a budget or even an idea how much is available for paying for these resources.
His title is simply systems analyst and many vendors (as well as in house people) don't want to bother speaking to someone who isn't a manager with management decision powers.
Plus, current projects and new projects keep getting added to his plate, as well as spending many hours a week on production issues.

Several months go by. Not a lot of definitive progress is made. Management isn't happy.

When analyst Bob tries to describe the resistance he is getting and ask for direction or management involvement he's told "That's your job!"

After a year analyst Bob has gathered some information but it's still slow going.

Frustrated with analyst Bob' perceived lack of progress management decides to hire an expert at this kinds of capital projects.

They hire Project Manager Mike as the lead person for this project.

PM Mike is PMI trained and certified.
PM Mike is an expert in these kinds of big multi-sourced projects.
PM Mike has many years experience doing just these kinds of projects.
PM Mike's only job in the department is to work on this one project.

When PM Mike is brought in management calls a staff meeting and introduces him to everyone.

Management explains in full detail what the project is, what PM Mike's roll is, how crucial the project is to the department and the company, and that management expects everyone to give PM Mike their complete support and high priority to his requests.

PM Mike is immediately brought in for several days of intensive behind-closed-doors meetings with management and senior department staff to discuss the project, resource availability, budget etc.

PM Mike is given his own office with a door to have private discussions with vendors, senior staff etc.

PM Mike is given an assistant to do the grunt work of phone calls, writing up documents and filing etc.

Whenever PM Mike calls everyone drops whatever they are doing and throws full resources at the request because management said so.

With in a couple of weeks several preliminary sources are identified and initial contracts are written up.

A few weeks later, development work begins.

After a few months a prototype is in testing.

And with in 6-7 months from the start of PM Mike's work the project is installed, up and running.
PM Mike is given a big fat bonus$ and a sweet raise$.

Meanwhile, people ask analyst Bob "How come PM Mike could finish the project in just 6-7 months and you couldn't get it off the ground in over a year??"

Analyst Bob is given a poor review and told to start looking for a new job.

He is dismissed 2 weeks later.

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Resumes: Defending Your Life?

To say that job hunting in today's economic conditions is harder than ever is an understatement. Nothing newsworthy on that front. But even before the downturn for many years the professional white collar job hunt was going down hill fast.

Way back when I started my [so-called] career interviewing as just that. A discussion between the candidate with skills and experiences talking with an employer with a position that needed to be filled because there was work to be done. They described the work, you related how your training/education/experience/skills would be able to accomplish the work. Seems simple enough.

The "calling card" document was always your resume.

The American Heritage Dictionary defines "resume" as: A brief account of one's professional or work experience and qualifications. In other words, a resume is your list of what you see as your qualification for the job being applied for.

Unfortunately, today too often your resume is taken as a chronicle or journal of your life.

For example, on the interview the interviewer just goes down the list of positions you've held, what you did, and why you left. Heaven help you if there's a gap in work history! Even in this day and age where you could be laid off at any moment and take months to find gainful employment again interviewers – even supposed professional headhunters – don't seem to recognize this.

Another aspect is having to defend why you did some work this way and not that way. It is reasonable to ask how something was accomplished and why it was done that why. But the reality is that as an employee you have to work with in the limitations of the resources, tools, and policies your employer has. There may be other ways, perhaps better ways, to accomplish a task. But if those other ways involve tools your employer doesn't provide, costs your employer won't pay, or just policies your employer isn't flexible about there's little you as an employee can do.

The point is, very quickly the interview can degenerate into having to defend your life with your resume as State's Evidence exhibit #1.

I don't blame interviewers (too much). Interviewing skills for managers just aren't talk in business school or trained by employers. Most managers are just regurgitating the same dumb questions they are asked when they interview. Or they do a quick Google search for interview questions and go down the list.

I also think there is an element of frustration in there too. Frustration at not being able to find the mythical "perfect candidate" with all the skills, experience and knowledge they think they want in a candidate. Funny thing: Even if they did find such a person they are likely to pass on them think the person will want too much $$$!

And unfortunately as the economy worsens and more and more people are looking for fewer and fewer good jobs employers and interviewers can get away with making you defend your life.

I don't have an answer. If anyone does, let me know too.

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Kayak No-Win Scenario: Speed vs. Stability

I love my kayak!

I love fishing from my kayak!

I love how it handles both rough and calm waters!

I've never tipped over in my kayak!

(Ok, I did tip once at Montauk but that was coming back in and a breaker hit me from behind. Any yak would have tipped.)

I have a 14 foot Heritage Marquessa (basically the same as the Heritage Redfish).

But truth be known, if I had it all to do again I would have most likely gotten a different model yak. This is based on share experience over he last 3 years of using and fishing from it. No advice or review or demo/test ride would have helped. I just had to take a chance, buy one, and see how it worked.

Why do I feel differently about my yak?

To answer that let me list what I see as the Pros and Cons of this model:

Pros

It's very stable. Supposedly I can stand in it without needing pontoons. I've tried but felt too unsteady. Anyway, I didn't buy it to stand in it.
The cockpit is deep and roomy.
Good back well storage.
Thick hull.
Handles the scrapes and dings of use well.
Very reasonably priced.
Easy to add most accessories (like my fish finder – yes, I have a fish finder on my kayak!)

Cons

It's heavy! People who help me lift it can't believe how heavy it is. The box specs say 60 pounds But I don't think that's right. Can't be.

It's slow. My normal "cruising speed" according to my GPS is 2.9 knots. If I pump hard at paddling I can get to 3.7 or so but that's about it.The front storage well is very small and the hatch cover too small to put much through it.

And there in lies the paradox scenario I have come to learn: The factors that help make a kayak stable are the direct opposite of the factors that help make a kayak fast on the water.

To be sure, all kayaks have an element of stability. But certain factors in the design contribute a lot to help (or hinder) that stability.

For example:
- A wide kayak is more stable than a narrow yak. The side-to-side roll is much less.
- A heavy kayak is more stable than a narrow yak. The weight means more effort needed to make it roll.
- A deep cockpit kayak with high gunnels is more stable than a low gunnels/shallow kayak. More of the yak is in the water adding to the stability.

But these stabilizing factors are exactly the kinds of the things that slow down a kayak in the water.
- A wide kayak means more resistance as it moves through the water.
- A heavy kayak means it takes more energy to get it going and keep it moving.
- A deep kayak also adds to water resistance.

So what's the answer?

I don't know.

Speed is definitely important. Not that you're often in a rush to get somewhere in your yak. But speed means you can get out to the fishing area more quickly or get back to the launch site quickly too incase of bad weather, an emergency etc. And speed means you can cover more area and/or travel further for the same given amount of time. You also to exert yourself as much for the same distance traveled.

But stability is not to be short changed either. I feel very confident in my yak. I've taken boat wakes across the side and bow and never felt I was going to tip. I've launched in very rough conditions where water filled the cockpit continuously (until I got under way and it could do some self-bailing) and never felt uncomfortable. (Common sense is always to be exercised too!)
So, like most things in fishing, it comes down to personal preference.

Speed vs. Stability.

Choose your goal.

MasterPo says: If you enjoyed this article make sure to subscribe in a reader (one of the last good free things in life!)

Demonizing: The First Sign of Totalitarianism!

Demonizing. Where would a despot and totalitarian government be without a demon?

No, I'm not talking paranormal or occult. I mean demonizing a group or class of people (their own citizens!) as being the #1 source of all the problems the country faces.

Bolshevik Russia had the Czar.
Stalinist Russia had the "Great Purge".
Nazi Germany had the Jews.
Imperial Japan had anyone who wasn't Japanese.
Joe McCarthy had the Communists.

The list goes on and on.

Today in America, our demons are "the rich". And according to our President Obama "the rich" is now anyone making over a mere $75,000/yr (gross of course).

And if you check history, many despots and totalitarian governments always start by targeting "the rich" in the name of helping the "working" people. Yet these countries always fail in the end!

Why?

Because you can't have a growing prosperous economy without people getting rich and keeping it! Life is not a board game where all the pieces go back in the box at the end of the day. No nation has ever succeed (and no government has ever stood the test of time for very long) by destroying "the rich" class in their society. If anything, history proves that attacking "the rich" just leads to greater disparity between economic classes and greater political corruption as those who are truly "super rich" buy the favors of those in government at the cost to everyone else.

It's an easy answer: The problems you face are because of your greedy "rich" boss. I don't argue that putting profits before people has hurt some. But that's the purpose of a business – to make money for its owners. Period. I've discussed that at length in other articles.

President Obama says we are all responsible for each other. So I suppose government policy now is I am my brother's keeper.

But you can't force me to care for my brother at the cost of caring for myself and my family. That's virtual slavery.

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At What Price Being My Brother's Keeper? (or, Being Pulled Down By a Drowning Man)

In recent years more and more we are being told that it is the responsibility, even obligation, of "the rich" (which is being ever more defined down, currently standing at a mere $75,000 per year) to care for and give more to the poor and those less fortunate. More over, so we are told, it's government's job to make "the rich" care for the poor even if it hurts "the rich"! The philosophy being that even a cut in standards to "the rich" is still more than whatever the poor have.
I'm not going to debate rich vs. poor. That is yet another topic well beaten up in other people's blogs (and usually wrong too).

he purpose of this article is simple:

At what price do want to help the poor?

Or

Just how fair is it hurt Peter so that Paul may have more?

***SPOILER ALERT!***

The rest of this article refers to a modern classic (of sci-fi) book and movies. If you haven't read the book or seen the movies based on it the following will be a spoiler. You've been warned!
While this is a re-occurring topic of philosophic and political discussion, a shot-in-the-arm came to me recently as I was watching the BBC mini-series "Triffids". The 6 part mini-series is based on the book "The Day of the Triffids" in 1951 by the British science fiction author John Wyndham and was later made into the classic horror movie "The Day of The Triffids" along with several other movie and made-for-TV movies. However, the BBC mini-series was much more accurate to the original book.

Like all good writings, the book (and the BBC mini-series) is less the monsters and the events, and more about the people and the characters reactions to the events that are thrust upon them. The reader/watcher is given some basic information about the Triffids and a couple of possible explanations for the events but the focus is on how the people have to coupe with the collapse of society and all hordes of survivors.

Specifically, the story ties into this article in that according to the story the vast majority (95%+) of the world's population goes blind literally over night, allegedly due to seeing the light from an unusual comet or as in the first movie it was a meteor shower. (I say "allegedly" because near the end of the story the idea that perhaps it was some kind of super secret satellite weapon that malfunctioned is also proposed as a reason for the mass blindness.) The precious few who still can see are suddenly faced with a moral dilemma: Stay in the cities and towns and try to somehow care for the throngs of panic stricken blind people who can't do a thing for themselves or help their own survival in any way, or, abandon the blind in favor of their own survival (and ultimately the survival of humanity and civilization)?

Throughout the story the characters we follow again and again come face to face with this issue. Sometimes it is individual blind people who try to capture the seeing and hold them as virtual slaves for their own use. Other times it's do-gooders who capture and force the seeing to care for troops of the blind even to the point of shackling the seeing to the blind! Then there are the religiously pious who see it as their job to care for the blind when it is quiet clear even their own survival is in doubt. And there is the ever present danger of para-military groups and rouge military/police trying to organize feudal-like communes with the seeing forced to supervise vast bands of the blind in hopeless labor endeavors.

I highly recommend the book and the BBS mini-series to all my readers!

But it is this underlying theme of taking by force the talents and means of the few (in this case the seeing, in our society taxation of the wealth and fruits of labor of "the rich") in order to help the poor and yet the poor are still poor with no end in sight (and no pun intended to the story).

If taking "the rich" to give to the poor was the answer then with the literal trillions of dollars$$$ spent in welfare and food stamps and public assistance in housing, education, drug treatment, counseling etc. over the last 40 years then we would be living in Utopia by now.

But we're not!

So, how much do you impede and even hurting those who are working and succeeding in order to try (because it obviously isn't working) to help those who aren't?

Would it be fair for a race runner far out in the lead, maybe on a record pace, to slow down to let the rest of the racers catch up?
Would it be fair for a sports team far out in the lead in their league/division/whatever to be forced to give up their star players so others can have the chance to do well that season?
Would it be fair to take someone's house, force them to live in an apartment, so that someone with no room at all over their head has one?
How far are you willing to handicap yourself and your family so that others can maybe have something?

It is absurd to think that all people will move forward at the same pace and same level.It is absurd to think that if someone is further a head than someone else that person "owes" something to the other who isn't as far along.

When people advance so does the society.

A society can not advance, grow and prosper when those who are advancing are forced to stop and give up their advancement in order to give it others.

Lowering the top never raises the bottom.

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