Friday, March 31, 2006

It Will All Hit the Fan in 2007, Part 4, Addendum

So I found this Federal Reserve report that shows the percentage growth of M1, M2 and M3 as of 03/16/2006 (the last report before M3 was discontinued).

Here is a summary of Table 2 from the report:

Note how M3 is, by far, the fastest growing measure of money supply.

Now go back and read my previous post.

Wednesday, March 29, 2006

It Will All Hit the Fan in 2007, Part 4

So the Fed ceased publication of the M3 money supply measurement last Thursday, March 23.

You might ask, "Why should we care?"

What you should ask is, "Why did they do it?"

According to the Fed:

"M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years."

I don't believe it.

Before I get into why, let's talk about money supply and M3.

The different measures of money supply are (thanks, Wikipedia!):

M0
The total of all physical currency, plus accounts at the central bank which can be exchanged for physical currency.

M1
M0 + the amount in demand accounts ("checking" or "current" accounts).

M2
M1 + most savings accounts, money market accounts, and certificate of deposit accounts (CDs) of under $100,000.

M3
M2 + all other CDs, deposits of eurodollars and repurchase agreements.

It's obvious from the above definition that M3 is the broadest measurement of how much U.S. money exists in the world. (
Eurodollars are U.S. dollars on deposit in non-U.S. banks. Our massive trade deficit is causing the supply of overseas U.S. dollars to skyrocket.)

The new Fed chairman, Ben Bernanke, has
admitted "U.S. dollars have value only to the extent that they are strictly limited in supply."

The corollary of that statement is, the value of the dollar will go down if dollar supply increases.

And M3 money supply has
grown precipitously in the past 6 years (as shown in the graph below).


And what's happened to the value of the dollar in the past 6 years?

Surprise, surprise, as M3 has increased, the dollar has lost value against all major currencies (this graph shows dollar weakness relative to the Canadian dollar).


As the dollar loses value, inflation rears its ugly head. And the Fed has admitted they are afraid of inflation, as proven by their 15 consecutive rate hikes. Yet, at the same time, they try to convince us inflation is low by using their "core CPI" measurement that excludes food and energy costs.

So why would the Fed discontinue M3?

In my opinion, the Fed is afraid. They know we have to fund our massive budget and trade deficits. The easiest way to manage these deficits is by devaluing the dollar. The Fed can devalue the dollar by increasing dollar supply.

M3 money supply is the easiest way to track dollar supply growth.

But, oops! Now it's gone. We can no longer see what those pesky Feds are doing to our M3.

Hmmm ... it all sounds pretty fishy to me ...

Coming soon, Part 5!

Here are links to the earlier parts of this post:
Part 1, Part 2, Part 3

More French Protest News

I just re-read the Washington Post article mentioned in my previous post and I especially liked the subtle Marie Antoinette/French Revolution allusion:

"Later, as screaming demonstrators ran from police water cannons and clouds of tear gas, men in business suits and women in fur coats watched from the balconies of luxury apartments high above the fray. Gray-haired diners at Les Freres Blancs restaurant sipped wine by candlelight, ignoring the frantic scenes unfolding outside the front windows."

Nice. Show the contrast between the underpriveleged, rioting masses and the upper class sitting in fancy restaurants eating cake.

So much for journalistic objectivity.

French Utopian Dreams

Larry Kudlow has a great column on National Review Online about the failure of France's socialist utopian economy.

French students have been joined by powerful labor unions in
their protest against a proposed revision to French law that would allow companies to fire non-performing workers during the first two years of employment.

New employees currently receive 5 weeks of paid vacation, a 35-hour work week, and, because it's so difficult to get rid of a bad employee, a de facto guarantee of "employment for life". As a result, French businesses aren't willing to invest in growth and new employees. The costs are too high.

France is a true socialist nation, creating a populace dependent on "the state" to provide for their wants and needs, which results in a dearth of innovation and personal ambition.

Tuesday, March 28, 2006

The Catholic Church and Illegal Immigration

The Catholic Church has suffered a lot this past decade. Membership is down and their public image has been tarnished by allegations of covering up sexual abuse within the church.

So where do they stand on this illegal immigration brouhaha?

I'll give you a clue: The fastest-growing (probably the only growing) and most loyal segment of the Catholic Church is made up of Hispanic illegal immigrants.

Cardinal Roger Mahoney of Los Angeles has told his Archdiocese to ignore
a proposed federal law that would require churches to check residency documents before administering help to immigrants.

He's catching a lot of flak. Most articles that criticize him don't mention the part about "checking residency documents before administering help."

Mahoney's taking a position any Christian should take. You should help those in need, regardless of their immigration status. I agree with what he says, "As disciples of Christ, 'we are called to attend the last, littlest, lowest and least in society and in the Church.'"

However, I also agree with Los Angeles County Supervisor Michael Antonovich, who says, "Mahony's support for illegal immigration is a slap in the face to our county's legal immigrants who follow the law and contribute to our communities and our nation."

It's not just Mahony's support, but any U.S. citizen's support for illegal immigration, that is a slap in the face to our country's legal immigrants.

It's interesting to see how this whole immigration thing is developing.

For the record, according to this article, the official position of the U.S. Catholic Bishops is advocating "a guest-worker program and amnesty for illegal immigrants."

Also for the record, my position is that we should "
save the sinking ship" by sealing the leak first, then dealing with the water later.

U.S. Immigration Policy or How to Save a Sinking Ship

If you're ever at sea and your ship springs a leak, how would you save it?

According to the
U.S. Congress, you should:

1) Ignore the leak.
2) Accept the fact there's a lot of water in your ship.
3) Give the water quasi-amnesty or "passenger status".

At least that's how they're approaching our
illegal immigration problem.

Being a logical engineer-type, my approach would be:

1) Seal the leak so no more water gets on board.
2) Bail the water out of the ship.
3) Make sure there are no more leaks.

But, of course, I'm just a U.S. citizen, so who cares what I think?

Monday, March 27, 2006

More on the Los Angeles Demonstrations

Check out Michelle Malkin's blog

Great photos. This is my favorite:


Anybody Ever Hear of Aztlan?

I hadn't until I read Michelle Malkin's blog today.

And no, I'm not talking about the lion from Narnia.

What is Aztlan?

It's the imaginary "Mexico" that includes lands that were "stolen" by "U.S. agression".

According to
Wikipedia, Aztlan also: "...refers to the irredentist struggle for independence or reunification with Mexico for those southwestern states colonized and occupied by the USA after the Mexican-American war and the Treaty of Guadalupe Hidalgo of 1848"

What Southwestern states?

Colorado, California, Arizona, Texas, Utah, New Mexico, Oregon and parts of Washington.

I couldn't make this stuff up. It's too wacko and scary.

Listen to this excerpt from this
Aztlan website (in reference to the recent massive demonstrations against new immigration legislation):

"What does the immense success of 'La Gran Marcha' mean to Mexicanos and other Latinos? It simply means that we now have the numbers, the political will and the organizational skills to direct our own destinies and not be subservient to the White and Jewish power structures. It means that we can now undertake bigger and more significant mass actions to achieve total political and economic liberation..."

And this:

"Eventually labor union power can merge with the immigrant civil rights and 'Immigrant Sanctuary' movements to enable us to either form a new political party or to do heavy duty reforming of the existing Democratic Party. The next and final steps would follow and that is to elect our own governors of all the states within Aztlan."

Here's another excerpt from their website:

"There is a Mexican-American activist that use to be a radio talk host that would broadcast in English, 'Wake up and smell the refried beans!' and 'We are reconquering Aztlan without firing a shot, house by house, block by block!'"

Am I being paranoid? Am I turning into a conspiracy nut?

Before seeing the demonstrations in Los Angeles, I would have said "Yes".

Now, I'm not so sure.

The Silent Invasion

Check out this photo:



"If you think I'm 'illegal' because I'm a Mexican, learn the true history, because I'm in my HOMELAND."

That's why many illegal immigrants don't care about our immigration laws. They believe that California, New Mexico, Arizona and Texas are historical parts of Mexico.

They have silently invaded our country and taken back what they believe is rightfully theirs.

And we've done nothing to stop them.

Foreign Nationals Wield Influence Over U.S. Government

There is a group of foreign nationals doing everything in its power to influence the U.S. Senate and House. Their influence is so strong that the will of American citizens is in danger of being ignored.

Who are these people?

Illegal immigrants.

Until the recent
demonstrations against new immigration legislation, we haven't been able to visualize how many illegal immigrants are in this country. Now we know.

Just look at the
photos of the Los Angeles demonstrations.

Here’s an excerpt from the Washington Post article linked above:

“In Los Angeles, a city that is 47 percent Hispanic, the march was a blunt reminder of Latino power in this city -- illegal or legal.”

We have allowed illegal immigration to go on for so long that illegal immigrants have become a political force. They have silently invaded and taken over Los Angeles.

Why aren’t we afraid when 500,000 foreign nationals crowd the streets of a U.S. city waving Mexican flags?

They look more like an invasion force than a demonstration.

They sort of act like an invasion force too - threatening our government.

“(Reverend) Rodriguez (president of the National Hispanic Association of Evangelicals) cautioned members of the Republican Party who back the tough House bill. ‘More and more Hispanics are voting, and more and more are voting conservatively,’ he said. ‘But if we are abandoned by the Republicans on this issue, it will nullify the possibility of a Republican winning national office.’”

I know a lot of illegal immigrants are nice, hard-working people. But it bothers me that they believe they should have some say in our government’s decisions.

They are not citizens.

Would you allow me to come to your family meetings and make decisions that would affect your kid’s lives?

Of course not. In the same way, we should not allow foreign nationals to make decisions that influence our nation.

According to this
article, “Polls indicate about 60 percent of Americans oppose guest-worker programs that would offer illegal immigrants an avenue to lawful work status, and three-quarters of the country believe the government is doing too little to secure the nation's borders.”

And yet the Senate dithers.

There is an old story about how to boil a live frog.

You don’t drop a frog into boiling water, because he’ll jump right out.

Instead, you put the frog in a pan of cool water. Put the pan on the stove and slowly turn up the heat. As the water heats, the frog’s body will regulate its temperature accordingly. It will actually sit in the pan until it boils to death.

We have ignored the problem of illegal immigration too long. Now illegal immigrants are numerous enough they have taken over our Southwestern cities.

We need to take action, but it may be too late.

The frog is boiling.

Sunday, March 26, 2006

Scott Adams is Brilliant

One of my favorite places to visit on the Web is Scott Adams' blog (he's the Dilbert guy, in case you didn't know). It's always fascinating and extremely entertaining.

Scott's posts show that he is very smart, very logical and very level-headed.

In
today's post, Scott answers a bunch of random questions posed by his fans.

I'd like to highlight two of the questions and his answers.

Question #1

"Q. Do you think that a great goal in life is to leave the world a better place than it was when you arrived?

A. I think you should live your life so that the maximum number of people will attend your funeral."

An excellent answer (assuming the people went to your funeral to pay their respects and not because they're glad you're dead). We should all strive to positively touch people's lives so they will miss us when we're gone.

Question #2

"Q. So do you think George Bush is really an idiot, or incredibly smart and just plays an idiot on TV?

A. I think he is smarter than 90% of the public. But many politicians are smarter than 99% of the public, so the difference can seem disturbing."

Good stuff. Now go read the
rest.

Here's What a Welfare State Can Lead To

So what is the future of a welfare state?

Check out France and the
current student protests against a change in employment law that would allow companies to fire unproductive employees.

"Generous" Motors

Here's a great Washington Post article about the continuing downfall of General Motors.

The article supports my earlier
post about how the UAW has driven up costs for GM and helped drive the company into the ground:

"They called it 'Generous Motors.' If you were lucky enough to get an assembly line job at one of its plants -- or those of Ford, Chrysler and some of their major suppliers -- you could earn half again as much as neighbors with the same skills and education, along with 'free' health insurance; a month's paid vacation; and, after 30 years on the job, a generous pension and whatever health services were not covered by Medicare. At some point, the company even agreed to guarantee all workers full pay and benefits, even if there wasn't enough work for them to do."

The benefits sound like the same ones that are demolishing the
socialist French economy and its ridiculous policy of "employment for life".

But the UAW is not the only ones at fault. GM management must share the blame. They have long focused too much energy on being a finance company and not enough energy on being a car manufacturing company.

Also, any attempts to improve have been destroyed by corporate politics. GM created a truly revolutionary car brand, Saturn, then allowed corporate in-fighting to starve Saturn of the funding required to improve and expand.

Either way, GM and Ford need to join the other American manufacturing companies who, by embracing Six Sigma and other "lean manufacturing" processes, are making themselves competitive in the global economy.

Saturday, March 25, 2006

The U.S. Was Built on LEGAL Immigration

I'm tired of the hackneyed argument that cracking down on illegal immigration is hypocritical and un-American because the U.S. was "built on immigration".

Our country was built on LEGAL immigration, not illegal immigration. Why can't people understand the difference?

In the late 1800s and early 1900s, when immigration was at its peak, immigrants who came to our country had to sink or swim. They had to work or starve. They didn't place a burden on our society because there was no government "safety net" of welfare, food stamps and free health care.

Compare that to today. Illegal immigrants are eligible for welfare, food stamps and free education. Who pays for all of this?

You and me.

I'm sure most illegal immigrants are nice, hard-working people. But they are still criminals. When they come into our country, the first thing they do is willingly break the law.

And how do we know we're only letting in nice, hard-working people? We don't because we don't control our borders.

Most Americans choose and control who they let into their houses. We don't leave the doors unlocked and open so anybody can come in, eat our food, sit on our couch and watch our TV. Yet somehow, many Americans are OK to leave our country's doors unlocked and open so illegal immigrants can come in and partake of our welfare, food stamps and free schooling.

Are Americans so blind and illogical that they can't see the analogy?

I'm afraid the answer is probably "Yes".

Friday, March 24, 2006

Is Islam Truly the "The Religion of Peace"?

So the government of Afghanistan may put to death a former Muslim who converted to Christianity.

So much for the belief that Islam tolerates other religions.

If you aren't Muslim (and never were) you're an "infidel".

If you were once a Muslim and changed your mind, you're an "apostate".

Either way, they seem to want you dead.

For many Muslims, it appears that "peace" means the peace of death - for all "infidels" and "apostates".

Proof of a Deeper Relationship Between Saddam and Osama?

Apparently, the treasure-trove of documents captured during the Iraq invasion is full of useful information. Of course we wouldn't know it based on the lack of urgency with which they're being translated and released.

It wasn't the CIA, but ABC News who translated some of the captured documents to find this
gem. Apparently there was a deeper connection between Saddam's regime and al Qaeda.

One of the translated documents "was a handwritten account of a February 19, 1995, meeting between an official representative of Iraq and Mr. bin Laden himself, where Mr. bin Laden broached the idea of 'carrying out joint operations against foreign forces' in Saudi Arabia."

Interesting. Why didn't the White House make these documents a higher priority to translate and release? It should have been done within months of the invasion.

With regards to these new findings, Bob Kerry, former Democratic senator and member of the 9/11 commission said, "I personally and strongly believe you don't have to prove that Iraq was collaborating against Osama bin Laden on the September 11 attacks to prove he was an enemy and that he would collaborate with people who would do our country harm...It does tie him into a circle that meant to damage the United States."

Does this provide the "justification" for the invasion that so many people desire?

Maybe not yet, but I'll bet there's all kinds of juicy stuff in those captured documents that has yet to be revealed.

Did Russia Intelligence Help Saddam Against U.S. Forces?

Check out this interesting story from the AP:

Iraqi Documents: Russia Had Sources In American Command, Fed Saddam Information During Invasion

"Tis Unions Killed Detroit

For anyone who hasn’t seen Peter Jackson’s version of "King Kong", I recommend that you drop what you’re doing and find a theater where “Kong” is still playing, preferably a theater with a huge screen.

Well, maybe that’s asking too much, but you should see it. The movie is fantastic. Seeing it on DVD won’t do it justice.

Naomi Watts plays Ann Darrow, the beautiful blonde with whom Kong falls in love. I have always thought Naomi Watts was pretty, but in this movie, she was unreal. Her walk down a deserted New York street dressed in a shimmering evening gown, as Kong watches in fascination, is unforgettable.

What is it with these Australian actresses? A country that produces Naomi Watts and Nicole Kidman? I must visit there someday.

But I digress.

So what does any of this have to do with my topic-du-jour: The Collapse of the American Auto Industry?

GM is in
deep trouble. They lost $10 billion in 2005. $10 billion! The entire company is only worth $12.5 billion.

Two of the reasons GM can’t compete in today’s auto market are:
1) Retiree benefits add $1,500 to the price of each car.
2) There are 3 GM retirees for every active worker.

And we wonder why they’re not doing well? And Ford’s in the same boat.

During the boom years, the
United Auto Workers squeezed concessions out of Ford and GM. Ford and GM agreed, partly because the UAW had them over a barrel, but also because they were making a lot of money.

Now that times aren’t so good, those concessions are killing the companies. Where else can a worker with no college education and maybe not even a high school diploma make $20, $30 or $40 an hour with super-generous benefits?

So the companies are going out of business.

It’s going to be a long, drawn-out, painful affair, but it will happen. Ford and GM will both go bankrupt and that will be the end of the American auto industry.

The government is already circling the wagons. The
Pension Benefit Guaranty Corp (a government agency that takes over pension plans from bankrupt companies) is investigating its options should GM declare bankruptcy.

Unions had their purposes. But their time has passed. They have changed from helping the common worker to being giant greed machines. They add cost without increasing productivity.

At the end of “King Kong”, after Kong has fallen from the top of the Empire State Building and is lying dead on the street, a man stands besides his body and says:

“Tis Beauty Killed the Beast.”

I hope it doesn't happen, but one day, we may stand next to the dead body of the once-great American auto industry and say:

“Tis Unions Killed Detroit.”

Has “The Shield” Jumped the Shark?

I don’t watch a lot of television. There is only one show I watch regularly, and that is “The Shield” on FX.

“The Shield” is good character-driven story-telling. It’s not politically motivated like a David E. Kelley show.

However, in the season finale on Tuesday, I think the show has “jumped the shark”.

In the finale, the loose cannon of the Strike Team, Shane Vendrell, kills another Strike Team member, Curtis “Lem” Lemansky, by dropping a grenade in his car. I won’t go into the story that leads up to this event, because it’s waaayyy too involved and complicated. However, we sort of understand why Shane does it.

But Lem’s murder was over-the-top. The foundation of the show and the reason I am compelled to watch, is the tight relationship among the 4 members of the “Strike Team”, whose leader is Vic Mackey, a morally ambiguous police detective. The Strike Team has been split by differences in the past, but there was always the option of reconciliation.

Shane’s murder of Lem destroys any possibility of reconciliation. He also didn’t tell anyone what he did. Lem is dead and can’t be brought back.

The Strike Team is destroyed, along with the main reason I watch the show.

Too bad. “The Shield” was the last of “Must Watch Television”.

Saturday, March 11, 2006

It Will All Hit the Fan in 2007, Part 3

In Part 1, I described a change in bankruptcy laws and implied that it will have a negative effect on the U.S. economy.

In Part 2, I showed how, in 2005, the savings rate in the U.S. was negative for the first time since the Great Depression.

I will now describe several other things that recently occurred and bode ill for our economy:

1) On January 1, 2006, a change in federal law took effect that requires minimum credit card payments to double from 2% to 4% of the outstanding balance.

All of those people who could barely make the minimum payments on their credit cards before the change are going to be in deep trouble.

2) The yield curve inverted.

What the heck does that mean?

An inverted yield curve means that short-term interest rates are greater than long-term interest rates. It usually presages an economic recession. The last time we had an inverted yield curve was 2000 and we all know what happened then.

3) Our federal trade deficit exceeded $700 billion.

It’s hard to envision exactly how much $700 billion is.

Maybe this will put it in perspective:

Iowa and Kansas have the most productive farmland in the world. The combined value of all the farmland in those two states is around $210 billion.

Last year, our trade deficit was more than 3 times the total value of all the farmland in Iowa and Kansas.

We are trading away the core of our wealth for Chinese-made electronic gadgets and trinkets.

Using a similar theme, Warren Buffet, arguably the greatest investor of all time, has equated the trade deficit to a family who owns a lot of land. They consume more than they produce and pay for the difference by selling land from the outermost borders of their holdings.

There isn’t a happy ending. Eventually, they’re going to run out of land to sell.

A direct consequence of our huge trade deficit is foreign economies accumulate massive amounts of dollars. They use those dollars to buy dollar-denominated U.S. assets, such as U.S. companies.

An example is the recent $18.5 billion offer to buy Unocal by Chinese-government-owned oil company CNOOC.

CNOOC didn’t succeed, but its bid is a precursor of future Chinese acquisitions of U.S. assets.

We are consuming more than we produce and selling our "land" to pay the difference. The problem is, the difference is now so large, we are seeing and feeling its effects.

And it’s only getting worse.

Coming soon: Part 4 – Bad News on the Horizon

Thursday, March 09, 2006

I Sure Hope the White House Doesn't Screw This Up

So President Bush has been handed a gift-wrapped "get out of jail free card".

Dubai-owned Dubai Ports (DP) World has
agreed to transfer operations for 6 U.S. ports (New York, Newark, Philadelphia, Baltimore, Miami and New Orleans) to an American-owned "entity". Now the President can stop insisting that he'll veto any attempt to block DP World's acquisition of British firm Peninsular & Oriental Steam Navigation Co.

The White House must be
breathing a sigh of relief on that news. It has been facing opposition from both sides of the aisle.

However, with how the White House has been screwing up its PR lately, I wouldn't be surprised if port operations are transferred to the American-owned "entity" called
Halliburton.

Wednesday, March 08, 2006

The United States of Islam

This map shows the long-term goals of, well, at least the guy who drew the map and put it on the web.

Another Masterpiece From VDH

VDH eloquently explains how our former policy of "realpolitik" (which we pursued in response to the threat from the USSR) is responsible for some of our global problems today. A fascinating column, as usual.

It Will All Hit the Fan in 2007, Part 2

In Part 1, I told you about how bankruptcy law were revised last year and hinted that the change may be a fulcrum event for the U.S economy.

Something else happened in 2005 that bodes ill for our economy.

The U.S. personal savings rate was negative for the first time since the Great Depression.



People are spending more than they earn.

Since our government is of the people, by the people, and for the people, I am not
surprised by federal deficit spending since we, the people, also practice deficit spending.

Coming soon - Part 3!

Monday, March 06, 2006

Does Eddie Vedder Even Want Republican Fans?

If I’m ever stranded on a desert island with a solar-powered iPod HiFi, and I was allowed to have just one album, I would probably choose Pearl Jam’s "Ten".

In my opinion, “Ten” is the perfect album. When it first came out, the primal power of its music and the raw, beautiful sincerity of Eddie’s lyrics transformed me every time I listened to it. And I listened to it a LOT.

I was a
Mother Love Bone fan before there was a Pearl Jam. Sometime after the demon Heroin took Andrew Wood, and Stone and Jeff's demo tape found Eddie surfing on some windswept California beach, I discovered Pearl Jam.

I bought their debut CD before their legendary CD release party at the Off-Ramp (which I unfortunately missed). And I listened. And I listened. And I listened.

I saw them live several times. What a show! Eddie’s a whirlwind onstage, barely containing his energy. The freewheeling improvisations of Jeff, Stone and Mike are unbelievable.

But then something happened.

Eddie drove me away.

You see, I’m a Republican. I voted for George W. Bush. Twice. I voted for W because I preferred him over Al Gore and John Kerry. I don’t agree with everything the President does. But I voted for him.

And Eddie doesn’t like George.

Which is fine. That’s his right.

Except Eddie’s hatred and anger seems to extend to anybody who voted for Bush or anybody who’s a Republican.

That includes me.

It would be different if Pearl Jam's anti-Bush opinions were expressed in a thoughtful manner that was inclusive of Republican fans. But it's not. It's expressed in the same way Eddie smashed a George Bush mask on stage in 2003 - all rage and no tolerance for differing opinions.

I can’t listen to Pearl Jam any more. Their albums have all become
anti-Bush screeds.

But we’ll always have “Ten”.

Sunday, March 05, 2006

It Will All Hit the Fan in 2007, Part 1

October 17, 2005 is a day that will live in infamy.

Something happened on that day that bodes ill for the U.S. economy. Most people didn’t notice, but it will have huge implications in the near future:

Federal bankruptcy laws changed, making it more difficult for individuals to file for Chapter 7 bankruptcy protection (which eliminates people’s debt).

A bunch of people tried to beat the deadline and filed bankruptcy before the new law took effect.



Why was this an important event?

Consumer debt is skyrocketing in our country: mortgage debt, home equity loans, car loans, credit cards. People have been extracting equity from their homes and spending it like sailors on leave; buying cars, boats, Jacuzzi tubs, fancy vacations, plasma TVs and stainless-steel kitchen appliances.

Now, when people run into financial trouble, they won’t have an easy way out. They’ll actually have to (gasp!) pay back their debts.

I think the change was the right thing to do. Hopefully, it'll be much more difficult for the perpetually undisciplined to skip out on their financial obligations while allowing Chapter 7 bankruptcy for those who are truly in need.

Unfortunately, the timing was terrible.

In Part 2, I will tell you about something else that happened in 2005 and how these seemingly minor events may have ominous overtones for our economy.