Wyvern Dreams

Economics of the Crunch

Mark Vargus — Mon, 20 Aug 2007 15:22:58 GMT

There is an old saying of “Things are going to get worse before they get better”. Today, I think many movers and shakers on Wall Street are forgetting this fact and viewing much of the current crisis with rose-colored glasses.

The problem I see is that too many Wall Street investment guru’s are forgetting some simple economic facts, and the issues concealed behind this lapse are going to turn the economy even more upside down.

Let me explain.

We all know that houses have become much more expensive in many markets. A home that sold for $80,000 can now cost $200,000, and in some markets the “starter” homes run $500,000 or more. And this upward rise in prices was fueled by a combination of low interest rates and easy credit to even marginal buyers. Throughout 2003-2005, a home put on the market often sold within days and received multiple bids as happy homebuyers chased their dream homes. Of course this had the effect of driving up the price homes sold at.

But, this also created a huge bubble in the economy. For years conventional wisdom was that a person should not purchase a home if it cost more than 3-4 times his annual salary. So a person making around $50,000 per year would be cautioned to only pay at most $190,000-$200,000 when purchasing a home. But during the real estate frenzy of the last few years, people were encouraged to purchase homes that they could not afford based on their salary. The encouragement was based on a suggested method of financing the purchase. First, it was assumed that the home would most likely increase in value allowing the overextended buyer to either sell for a profit, and purchase another home at about the same price, (using the profit to reduce the effective purchase price), or to refinance every few years, using the equity to reduce the overall monthly payments. These solutions can work, but only when buyers can be found to guarantee that prices continue to rise. Should prices fail to rise, many who purchased homes will either find themselves facing foreclosure, or will find themselves trapped in a home they expected to resell after two years, and forced to continue working and making payments for little gain until the market starts growing.

And the market will struggle to grow in the near future. Banks are going to head back towards the 4X salary rule, which means that even in 2 earner families the effective maximum house price will usually be less than $400,000. (based on 2 people earning just about the national median salary of approx $45,000). People who purchased more expensive homes, or who have a home at the high end of this range may find it difficult to receive their asking price. This has already started to occur in many markets which are reporting that houses are staying on the market much longer and that when they do sell, its often at a considerable discount against the original listing price. What had been a strong sellers market has been routed and buyers have almost complete control of the current market.

But Wall Street ignores this. They will talk as if once the current bank credit crisis is dealt with people will again see the economy roar along without any aftereffects from the collapsing of the housing bubble. If they do acknowledge some damage they talk about the construction industry.

The economy isn’t quite as isolated though. Right now we are seeing some families hurt by foreclosures and others struggling to meet mortgage payments they cannot escape, but we have to consider the economist view of the broken window parable. In it we consider the shopkeeper who has a window to his store broken. The optimists will say that “at least the glazier was given employment by the window breaking, so there is no harm to the economy”. But the economists note that the shopkeeper had many other uses for the money he had to spend on repairing the window. That lost opportunity could prove to be far more significant than the one day’s work given to the man who repaired the window. Today we face the same situation. Wall Street is talking about “well, only a few people are losing homes and the others are able to make the payments.”, but a good economist is asking, “how much economic opportunity is being lost because people have too much of each paycheck going to maintain their mortgages?”.

Its part of an old economic equation. In economics payment of a loan has no economic value, just as in accounting the payment will actually reduce both the credit and debit sides of the ledger. The interest is a recognized cost, but the payment on the principle is merely a transfer of money against a sale which occurred in an earlier time period. As variable rate mortgages reset their rates and many people find themselves having to put more money into paying their mortgage, it will have the effect of reducing consumer “spending” and the economy will find itself fighting the drag this creates.

Going to a show

Mark Vargus — Sat, 18 Aug 2007 17:31:34 GMT

I know I didn't post this morning as I have been trying to, but that was because I was throwing things into a car to go to a rabbit show.

Yes, my rabbits (some of them) got a chance to be seen and be judged on their appearance and how well the conform to the standards of excellence established by the American Rabbit Breeders Association.

4 rabbits competed, and all did fairly well. (although the competition wasn't the best. Only 26 rabbits showed up to compete in the Netherland dwarf "open" shows so some of my rabbits were in classes by themselves.)

And since I'm in the mood I'll give you a bit of information about how all the bunnies did. Bear with me. I had fun.

Sodapop - Senior Otter Buck - He was the only otter to show up so won variety immediately, but he also won against all the other "Tan Pattern" group in both the A and B shows. He gets dinged for being a bit long for his overall size, but he's only 7 months and still growing so he'll probably improve.

Gremlin - Junior Smoke Pearl Doe - (and the photographed bunny on this site) - sadly she was disqualified by one judge because her toenails were too light for her variety. The other judge that viewed her gave her best of variety and best of group for the "Shaded" color group, but she was eliminated when it came to best of breed. She's got the body and color, but the toenails will probably be an ongoing problem with her.

Ciron - Junior Black Buck - he was in a class by himself as the only junior black buck, but there was a senior black buck that in the A show was Best of Breed and in the B show was Best of "Opposite" Breed (this means that there was a Doe that won Best of Breed and he was judged the best male Netherlands Dwarf Rabbit). Ciron needs to get fatter.

Roshin - Junior Chestnut Doe - she lost the Best Chestnut to a senior buck, but was the best female chestnut and best female with an "Agouti" coloring in both shows. She's another who could do well in the future.

I did end up coming home with 2 new rabbits. A young male Silver Marten who will in the future be paired with Gremlin. And a "Lionhead" who was picked up in a raffle. Lionheads are impressive rabbits, they have what looks like the mane of a male lion. Its a new breed and only just starting to appear in shows. I'll try to get you a picture of him tomorrow. Right now he's looking like a rabbit that travelled far.

As I've said before shows are a lot of fun if you like rabbits and don't mind spending a day around several hundred rabbits. I compete in only one breed, but more than 20 breeds were represented at the show, and there have shows specifically for kids if you want your kid to work with rabbits. Just check around and find a show in your area. Its worth the time.

Self Interest & Greed v Liberalism

Mark Vargus — Fri, 17 Aug 2007 04:25:26 GMT

We often hear liberals calling for more government control of people's lives and that a communal approach to life is the key to universal happiness. But if you start to argue with your average liberal and try to get them to defend their policy prescriptions with logic and facts rather than emotion, the defense of their positions is often weak and disjointed. They seem to not know themselves why they are supporting a particular cause or position, just that it must be right.

I cannot say if the positions they take really are correct, but I do know that if we look at everything without passion. Taking a view that an economist might understand. We can show that much of the liberal "agenda" is backed by the same "self-interest and greed" that they so often cry out against.

So lets divide this into two possibilities and ask, could the "liberal" position be based on false promises born out of their own personal self-interest and greed?

Self-interest

This basically is the "What's In It For Me" factor. We all have experienced it at some point. We are offered an opportunity to help someone else and ask silently. "Is this really worth it?" or "Will I get something out of it." Heck, I'm sure most of us has looked our significant other in the eye and asked "What do you want" after they are especially nice to us, based on the assumption that they are acting that way because they think they will be rewarded. And in some cases the possible reward is obvious.

Professors clearly think they should be in charge, but in our current political and economic environment they lack the power to force others to listen. But if they can create a communistic system, they will drain all the power from the "captains of industry" and vastly increase their power and influence.

Environmentalists are also looking to gain power over others, and over land. Long ago most wars would be fought over even the meanest least productive parcels of land available simply because the land itself was valuable. Now in our post-industrial world the land is perceived by many to be less valuable, but there are still those who fight for control of the land, hoping that having such control will lead to greater economic and political power.

Even the politicans who push liberal dogma see opportunity for greater control and power. If people are not free and independent of government than they have to listen more closely to those that represent the government, and I'm sure the thought of turning most people back into the serfs of the middle ages warms many a politicans heart when he thinks of the pure power that would represent.

Greed

Let's be honest, liberalism pays good money. You can petition the government for grant money, or subsidies. You have the opportunity to shake down corporations for blood money and scandal repair based on their lack of "empathy" for the common man. You can even declare your organization a "non-profit" and take donations from
the masses. Working to take advantage of their lack of understanding of the costs of your agenda.

Results

But in truth, most of this is poorly thought out. I once read that more than nine out of ten people who lived in Europe during the middle ages were peasants. Today, with the ability to centralize command and control functions through computers and telecommunications its likely that a cadre that represented less than 2% of the population would be capable of making all the relevant decisions necessary to run a communistic economy. So most likely very few liberals would actually become members of the new Politburo. Most would be thrown back into the mass of serf-slaves who would be nothing more than mouths and h ands to the completely inhuman machine that is a communistic government. And that power would be fleeting. Since 1900 there have been several "revolutions". Of the nations that have overthrown their original government and established personality cults of communism, only North Korea, Cuba, Zimbabue, and Venezuela still have completely unchanged governments. Cuba, Zimbabue and Venezuela still have their original Leader. The man who founded the new government still reigns over a population that is kept disarmed and helpless. North Korea has seen the power pass from the original leader to his son and again has a population that is kept helpless. None of these nations is free, or open, and none is likely to survive the death of its current leader.

The other nations that changed over have all fallen away from true "communism" into a new government that is much less militant and controlling.

Russia - fell after the generation that conducted the revolution started to die off, government control has returned, but as despotism not communism.

China - after the passing of Mao and other leaders, the government implemented reforms intended to pacity the populace by raising the standard of living. Despite this government control continues to suffer as corruption becomes endemic.

Vietnam - the communist government collapsed after a generation

Laos - the communist government collapsed after a generation

Eastern Europe - Once the Soviet Union stopped propping up their governments the nations of the Warsaw pact saw their governments fall to popular revolutions and reopened their markets and borders.

Communism and Liberal policy go hand in hand. They are two sides of a coin that is dipped deep in the greed of personal power and political domination. They rely on having people become slaves of the government rather than the government serving the people as an arbiter of justice and source of peace.

Until this false promise of communism is finally repudiated by all honest citizens, we will see the liberals attempt to push a bad policy on the world.

Seductive Danger of Government Handouts

Mark Vargus — Thu, 16 Aug 2007 04:29:14 GMT

Many people seem to expect the government to have an infinite supply of money to hand out. In the US we have programs like Social Security, Medicare and the Farm subsidies which represent good examples of government giveaways of funds. Unfortunately such handouts often can be extremely dangerous and result in great harm to the economy.

What is rarely covered is the danger that government spending ends up representing. The money that governments spend has to be taken from the people in some way, and the way it is returned often results in inflationary pressures on the economy. Now in the US Social Security avoids the second part of this equation, but the farm subsidies clearly push prices upwards, and government handouts in natiosn with less stable economies are often much more inflationary.

This arises from a simple fact. Government handouts do not generate any goods or services naturally. There is no economic transaction where a product is created in exchange for the money being disbursed. Inflation is created when there is more money available to the economy than there are goods available to be purchased. Any government program that results in money being handed out without there being production to offset the increased purchasing power available to citizens will create inflationary pressures.

This is also a danger when high levels of deficit spending begin to appear. Once again you have money entering the economy without any goods or services balancing the equation. Worse, any deficit spending means that money that others would like to borrow will instead be borrowed by the government. This has a tendency to increase interest rates which will increase costs to businesses seeking to expand. Again this apparently free money comes with costs. The trick is that government have managed to hide the costs.

Mortgag4e meltdown

Mark Vargus — Wed, 15 Aug 2007 04:18:39 GMT

The financial world has been shocked by the sudden crash in the so called “Sub-prime” lending market. For years major investment funds had freely purchased bonds that paid interest based on the repayment of subprime mortgage loans and now many of those outstanding bonds are in default. Now the market is trying to predict how the sudden default of millions of dollars of bonds will change future investment decisions.

Now I’m not an investment advisor, and I don’t follow any particular stock or bond, however, I do try to follow the macro-economic world and what I’m seeing and hearing suggests that Wall Street is still in denial about the extent of the damage to come.

The reason we will see extensive damage is rather simple. The money that has left the economy cannot be magically made to reappear, and companies which have found themselves to be holding worthless bonds are watching sizable amounts of paper wealth vanish. As this happens the remaining bonds end up with a very questionable value. Investors cannot be confident that the investments will pay as promised, and are reluctant to invest more until they have a more definite value. This will force banks to be much more careful in their loans and appraisal values will now have to be much more conservative. This is going to drive down house prices because banks are no longer going to assume that a buyer who cannot pay the loan will still be able to sell the house at a high enough price to repay the loan.

Banks hate to foreclose. While it is an option for them, it’s a costly one and ends any payments. To a company that makes its money based on the interest from loans this is unacceptable. Especially if the then foreclosed house cannot be resold for the original loan amount. With housing prices dropping banks are going to have to tighten the requirements they set for loan acceptance, and this is going to make it more difficult for anyone to get a loan at a good interest rate.

Now I know some people are thinking that the Fed can reduce interest rates to help fix the problem. Now its true that making the interest rate lower will reduce the pressure on banks and allow them to keep the interest rate lower on people who have borrowed money. However, the current federal reserve bank governors rightly recognize that lowering interest rates could end up doing as much if not more harm than good. There is a reasonable argument that the boom in subprime lending and in the irresponsible use of mortgage backed bonds to provide the funds to keep the loans going was directly related to Alan Greenspan’s failure to raise interest rates quickly during and after the dotcom bubble burst in 2001.

The other option we are hearing about is a possible “bailout” where the government puts up money to guarantee the loans currently in default. This would be a horrible use of government money, and would only generate a great “moral hazard” where those that made irresponsible investment and lending decisions discover that the government will protect them from the consequences of their own actions. Yes, this does mean that many people who purchased homes might find themselves foreclosed on, or trapped in a home they don’t really want, and cannot sell. But right now all options leave someone holding a rather empty bag. There will be economic pain. The key should to be focus the pain on those that made the bad decisions, either by purchasing a house they could not afford, or those that loaned money to feed the borrowing frenzy. Those that stayed out of the housing market should not have to pay for the excesses of others.

Daily Rabbit

Mark Vargus — Tue, 14 Aug 2007 06:25:55 GMT

Today's photo is of Lain, the largest and oldest rabbit in my little rabbitry.

This photo does not do a good job of showing her comparitive size to the true dwarfs like Sodapop and Gremlin, but you can see she fills the seat of the chair.
Also note that her ears are up. Lain is a very mellow and calm rabbit and actually seemed to enjoy the photo session. Her ears stayed up throughout the session.

Reading your Rabbit

Mark Vargus — Mon, 13 Aug 2007 12:38:02 GMT

if you own a rabbit after a while you'll begin to learn about its individual moods and habits, but there are a few distinctive signs that all rabbits seem to use. This will be a quick primer in how to tell the mood of your rabbit.

"Thump"

Anyone who owns a rabbit will someday hear their rabbit Thump. Now this isn't the sit down while pounding the ground thuimping that appeared in Disney's movie Bambi. Instead to Thump a rabbit will put both front paws on the ground and then hit the ground with both of their hind legs. It creates a very distinctive "Thump" sound. (although if done on the bottom of a metal lined cage you get a ringing sound.)

Its speculated that in the wild rabbits use this to warn other nearby rabbits of potential danger. Now your average pet rabbit doesn't have predators to warn others about, so this thump usually becomes a method of expressing displeasure or annoyance. Witht he rabbits I have had Arimi used to thump any time she was returned to her cage after. Lain has been known to thump if there is a high level of stress in the air. I've also seen the rabbits thump when smoke from a nearby fire entered the apartment through an open window and they detected it. Being thumped at shouldn't be a signal to be concerned. If you respect your rabbit they won't make this a major issue.

Ears

The ears are a quick way to telling how your rabbit feels. If a rabbit is relaxed the ears will be held upright. However a frightened or upset rabbit will lower the ears until they are flat against the back of the neck. If you are handling your rabbit and you see this happen, it might be time to return them to their cage. They need a break.

Eyes

This is one of the simpliest ways to tell how a rabbit feels. Frightened rabbits will roll their eyes. If at any time you can see the white part of your rabbits eyes, you have a very frightened rabbit and you should return them to their home to rest.

Lying down

A very relaxed rabbit will lie down and stretch its legs out. This will only happen if the rabbit feels safe and secure. If your rabbit is lounging it often is best to allow it to relax. If you have a new rabbit, or have just moved it into a new cage, you can tell that its becoming accustomed to the new environment when it first lies down to relax.

***

These are all rather basic actions that rabbits take to show you their moods, but they are significant. Rabbits are not very expressive animals, so you have to watch carefully and get to know your rabbit in order to learn mroe abuot them. But these few simple actions are a good way to begin that process.

Why government "spending" is an oxymoron

Mark Vargus — Mon, 13 Aug 2007 05:36:50 GMT

I think one of the easiest mistakes most people make when looking at government is the misinterpretation of government actions involving the distribution of money. All too often it gets labeled "spending" but in an economic sense its no more spending than if you took $20 out of your wallet and handed it to your 6 year old child.

This is a dangerous problem because it allows the government and those that support having an oversized government to continue to act recklessly in regards to obtaining and distributing the income of hard working citizens. Government does not have a requirement to produce concrete results, nor to insure that any outlays of cash reach their desired destinations, and the current culture in most national capitals reflects that lack.

But to look at this question, we need to examine what government really is and why they exist. If we look at what historical records we have there definitely was a time where people didn't have or need large governments watching over how well labeled their food was, and if their health care was provided for them through a system of government transfers. We can surmise that early man mostly lived and worked within family or clan bonds and other than having a patriarch or matriarch to bring disputes to for settlement, there was little central control. Of course once you start to settle and farm fertile valleys, those same tribes often found that other tribes wanted the same valley, so military leaders appear and the family had to develop a system of military service. Also since the family wasn't moving as much, there would have developed a need for a more structured dispute resolution process. If you can remember anything about the "Code of Hammurabi", one of the first written examples of law ever found, you get an idea that this system tended to be brutal, and simple, but was also an attempt ton bring order to communities.

But that was your first "government". It wasn't a huge system like we see today. Instead it was a simple structure, built from a need to provide defense from outside enemies and to bring order to the community.

Health care? not as a government program
Retirement? who retired back then.
Government funding of the "arts"? no, there wasn't a surplus to provide for that

What money the government did spend was usually for something tangible. It paid the military. It paid for the judges and police. It built the roads and markets. And unfortunately, corruption paid for palaces for the rulers. But everything was tangible. The money the government "spent" produced goods and services for the citizens.

but now a lot of government spending, is not spending. Social Security isn't a spending program. The money is taxed from currently working citizens, but it is then blindly given to other citizens with no requirements or stipulations. The recepient can spend, save, throw away, hide, or even give away that money without any concern of what the government is going to do. But, that means that the money "spent" isn't producing anything at the time the government writes the check, expect perhaps a dependency on those government checks. This kind of spending does not create growth in the economy. Growth relies on profit and investment, and neither is a product of government transfers.

"pork" spending is another area where this problem manifests. We see government outlays going to research projects, grants, or to extremely specialized buildings which otherwise would not receive investments. The business world avoided these projects because they view the risk as excessive and the reward as inadequate, but since the government does not have to produce results, money is throw out like candy to undeserving projects in an endless quest to purchase votes. Sadly, once again economic illiteracy means that few voters understand the damage done by this process.

Government is necessary. There are things which an individual cannot be expected to provide, but which become possible if the community all works together to provide the necessary will and funds. But governments are power, and all to often they become corrupted by their ability to tax and distribute the earnings of hard working citizens. Today we have a government which finds "spending" far too easy, and in the end it will be up to us, the community that backs the government, to make the changes necessary to reverse the process.

Trackposted to Mark My Words, The World According to Carl, DragonLady's World, Pirate's Cove, The Pink Flamingo. The Bullwinkle Blog. Leaning Straight Up. High Desert Wanderer. Pursuing Holiness, and The Yankee Sailor, thanks to ,Linkfest Haven Deluxe,

Movie Review: Stardust

Mark Vargus — Sun, 12 Aug 2007 17:26:47 GMT

I try to avoid writing reviews of most movies I watch and books I read. I don't want to spoil the experience for others who might not have had the opportunity to enjoy the experience yet.

However, after watching Stardust, I want to post a few thoughts as its an excellent movie that will probably be missed by many people.

One thing I noticed about Stardust was taht while it was heavily advertised on the Scifi Channel and on other channels showing series that might appeal to the scifi and fantasy crowd, there wasn't a lot of advertising directed to the general public. This is rather unfortunate. Admittedly the movie is a marvelous romp of high fantasy with a definite appeal to those that already love science fiction, but the story was a lot more.

I noticed the following basic plot lines during my viewing of the move.
Replacing a dying king
Young boy becomes a man
A quest to prove ones worth
An evil witch attempts to steal power
Star-crossed lovers
and a journey into the unknown.

the premise is actually very basic, but the writing is extremely good and there are characters you will fall in love with. The previews were well done, in that while they hinted of many of the best scenes they gave nothing away. But for those actually reading this I will say that Michelle Pfieffer is sinfully wicked as the evil witch, putting on a performance rarely seen coming out of Hollywood. And Robert Deniro does a marvelous job in his role as well bringing a level of pathos and humor to his character, and the movie in general.

Stardust is one of the few movies I can honestly say impressed me. The humor was perfect and the characters had a charm that helped you relate to them and their trials.

Even if you aren't a great lover of fantasy, try giong to this movie. its worth the ticket.

a review? (Flash Gordon on SciFi Channel)

Mark Vargus — Sat, 11 Aug 2007 06:57:54 GMT

And now for something completely different from bunnies and bucks. I am a fan of most science fiction and fantasy. Movie or book it doesn't matter, as long as the storyline is strong and the writers show a modicum of imagination. So it was with some hope that I watched the new SciFi Channel pilot for Flash Gordon last night.

I was disappointed.

Now I'll admit that I went in prepared to compare this new series not only with the 1980 movie, which set new highs for camp and frivolity when it came out, but also to the old serials. I had the pleasure of encountering the serials in reruns a few years ago, and they impressed me with their acting and writing. Back then you couldn't try to hide an inadequate story behind special effects and scantily clad women, so the scripts tended to to have a lot more attention paid to them.

And that is where the new Flash Gordon fails in both the beginning and the end. Its a perfect storm of little mistakes that build up to become an empty shell of a story.

To start with the rewriters of the story decided to go away from the formula that had Flash as a well known sports star who stumbles into a world he can barely understand and has heroism thrust upon him as he attempts to save the earth from Ming and his minions. Instead they have Flash as a live-at-home semi-failure who's only claim to fame is having won the local "marathon" 3 years in a row. His heroism ends up being much more forced as well. Rather than having a great tie to humanity in general and Dale Arden in particular this Flash is obsessively concerned with his missing/dead father who was declared dead after a fire 13 years before. It makes him much less sympathetic a character and I felt a bit let down that we weren't going to see the same heroism that Buster Crabbe managed to show in the serial.

Then you have the romance with Dale Arden. I have to wonder why the writers felt it necessary to add the soap opera touch of Flash and Dale being high school sweethearts before Dale left for college. Or why they had Dale be engaged to a police officer. Unless they thought it would make Dale seem like some independent woman. I'll admit that back when Flash Gordon was first written, women weren't necessarily the most free and indiependent characters in most stories, but Dale always seemed to hold her own in the serial and movie. Now, she comes across as kind of flat and cold. I know after watching the first episode that if I had to choose between the 3 female characters introduced she would be my last choice. There just wasn't enough chemistry there.

And Ming... what can I say, but someone needs to have their eyes checked. I'll admit that the original Ming definitely seemed to be a direct attack on Asians, and that to attempt to keep the look of the comic book Ming would have been rather offensive to some people. But you still need someone who fits the moniker "The Merciless" and this Ming seemed less threatening than your average Oakland Raiders fan. I remember Ming as a cold blooded, emotionless killer who cared only for his own power and pleasure, but still managed to have a commanding presence in any room. John Ralston might be a great actor, but he cannot project the villian "gravitas" necessary to fit the part of Ming.

Now, I've looked at a few other reviews, and one thing I disagree about a bit is Zarkov. Many people seemed to have a huge problem with the casting and protrayal of this part, but I thought that this was well done. My memories of Zarkov always was of the mad scientist who tended to stumble along while giving Flash the information and backup necessary to perform his heroics. Zarkov was the bookish sidekick who helped save the day. They changed the basic premise some, and now Zarkov might not be as knowledgable about all science as he was in the original, but if they continue to have these "rift" portals as a key feature than Zarkov should grow into the role.

And of course, there is the "eye candy" factor with Aura and Baylin. well, I will admit that both ladies are attractive and managed to make their roles fit. And with a series like Flash Gordon you definitely expect some eye candy, as Flash spent a lot of time rescuing either Dale or Aura in the original stories. (and with the miscasting done with Dale, they needed some attractive ladies to provide this.) But they again tried to pretty up the series and the costumes seemed a little sedate. I'll admit that when Baylin first appears she seems a bit over the top, but that outfit wasn't as outragous as some I've seen worn in real life, and it again made the story seem forced.

that's the final and biggest problem. And I have had similar issues with the rewrite of Battlestar Galactica. Many of the older stories that came out during the days of Pulp Fiction and B-movies actually can make excellent movies or TV series, but they do because of the quirky humor and insightful issues they manage to raise without becoming a bludgeon of issues and political correctness. The issue has to be "suspension of disbelief". When I got to a movie or turn on the TV, I know I'm going to be watching a fantasy, something that has never happened, and is unlikely to ever happen. but I want the writers and actors to draw me in, and convince me that "it could happen". The have to make me like the characters and to want to see the characters succeed or fail. I should manage to hate the villians and cheer for the hero while hoping that the right couples join together and the evil seductress ends up failing to steal the hero away from his love. The writers can try to influence these relationships, but they have been used for years because they work. To change the formula to meet some unspoken need to "improve" the story tends to destroy the magic that makes a show watchable.

But that's my view. I'm sure others will feel free to disagree.

Turning Surpluses into Shortages

Mark Vargus — Fri, 10 Aug 2007 12:56:00 GMT

One ability that government has, but that is rarely remarked on is its unfailing ability to turn any surplus into a shortage through misquided regulations. Today we are hearing that the US Corn harvest will be a new record. But anyone who follows the price of corn will notice that the price of corn is still going up, as is the price of corn "futures".

The problem is artifical, government caused shortages. For corn, we have the new ethanol subsidies and quotas which have given companies like Archer Daniels Midland a huge incentive to purchase large quantities of corn and convert it into ethanol. However, the economy had already created a large market for corn, as it is a primary component in many food items, as well as a source of cow, pig and corn feed. So the end result of these new subsidies was a huge increase in demand. Supply has increased, but it has failed to keep up with demand and now shortages have developed, driving prices higher.

This isn't the first time that government regulations and policies have generated shortages. Go to the city of Berkeley in California, or to New York City and ask around about the price and availability of an apartment. Both municipalities established strict price controls on rents, supposedly as a way of guaranteeing affordable housing. However, the effect was to remove many apartments and buildings from the rental market and shortages have resulted. I remember being a student at UC Berkeley and while I found a good boarding hose to live in during my time at the university, many of my friends told stories of having to pay huge "finders fees" in order to find apartments available.

This is a simple situation to understand. Picture a graph comparing price (on the vertical axis) against quantity (on the horizontal axis). We are going to draw 2 lines. The "supply" line will start at a low quantity where prices are low, but increase as price increases. The "demand" line will be high quantity when prices are low, but decrease as price increases. If you draw these as straight lines on a graph, you will have some price and quantity where the two lines cross. This is the theoretical "market price", where all supply can find a demand. Now lets introduce a government regulation limiting the maximum price and set it below the market price by $2.00 per unit. Draw a horizontal line across the graph at this level. You should notice that at this point the demand is greater than the supply. That shortage has been caused by the government interference in the market, and in the end many people will not receive the good or service they desire because of that change.

The corn situation is similar, although in this case its a price floor driving the shortage. The subsidies on ethanol effectively created a minimum price that's actually above the market price for ethanol. That encourages an artifically high supply, and to reach that level of supply corporations like ADM will purchase higher quantities of corn, the shift in the demand for corn is naturally driving the price up.

So today we have a government mandate regarding energy impacting food, exports and farming, all without any outcry from the consumers who are being charged a premium by a market that is no longer working "efficiently". Think on this and consider. Are those government regulations and mandates that they say you aren't paying for really "free"?

TANSTAAFL

Handling your Rabbit

Mark Vargus — Fri, 10 Aug 2007 12:57:04 GMT

By now I'm sure someone reading all the wonderful posts about rabbits here is considering purchasing one. However, I should warn that owning a rabbit isn't always easy, and one of the biggest dangers for both you and your rabbit is how you handle them.

Remember that rabbits are "lunch on the go" in the wild for many predators, and because of that, rabbits are adapted and accustomed to certain things.

Rabbits can see in an arc that spans almost a full 360 degrees, although they cannot see directly behind and above

Rabbit hearing is exceptional

The rabbits feet have claws that do not retract and which are designed to help increase traction while running. This allows rabbits to make extremely sharp turns at high speeds while running.

All of these are natural defenses, but they are joined by some behaviours that can make handling a rabbit tricky.

First, most rabbits will try to avoid being picked uop. The easiest way to pick a rabbit up is to approach from above and behind and aim for the back, just behind the ears. If the rabbit knows your hand is coming they will move to avoid your hand.

Second, if a rabbit cannot put its hind legs on a solid surface it is likely to panick and kick. Once you have lifted the rabbit up, put a hand under the rabbits behind to comfort it and prevent this panick. A rabbit that is kicking whildly can severely injure itself.

Finally, although once you have the rabbit secure it may not fight, be prepared for the rabbit to decide that it doesn't want to be h eld anymore and for it to kick and claw in an attempt to get away. I don't have any pictures of the damage a rabbit can do, but there have been days where I have had long scratches down one or both arms from wrist to elbow that were caused by a rabbit that had decided it didn't want to be held.

Blaming the rabbit for attempting to escape being held is wrong, and useless. The rabbit is only acting on instinct which tells it that A) you are going to eat it, and the only option is to fight to free itself.

Now it is possible to work with a rabbit and handle it enough that it stays calm, as long as it recognizes the holder. Also you can look for a rabbit that is naturally calmer. larger breeds, Lops and Male rabbits all are options for those who want to find a calmer rabbit. Small females seem to be the most willing to fight. (this is not scientific fact, but is generally agreed on by the rabbit loving community.

If you remember to treat your rabbit with love and respect and to pay attention to its moods and habits, you will over time win its trust and have a much easier time holding it. Do remember to let them feel safe by holding them so their hind legs have support and you can build a partnership that will last your rabbits lifetime.

UPDATE: I am going to try to obtain a series of pictures demonstrating the proper way to pick up a rabbit and some suggested ways of holding a small rabbit. Look for these to appear Monday or Tuesday.

Wisconsins Health Care Experiment

Mark Vargus — Thu, 09 Aug 2007 09:16:16 GMT

About a week ago the Wall Street Journal published an article reviewing the new all-inclusive Health Insurance program that has been proposed for the state of Wisconsin called " Healthy Wisconsin". The article was rather unemotional, and rather negative towardst he program, immediately focusing on the costs of the program and the fact that current state tax revenues in Wisconsin were not high enough to pay for a huge new entitlement. Now, I'll admit that the Wall Street Journal tends to accept the business side of the argument often, but their basic point was clear and hard to argue against. They simply point out that there are costs associated with providing universal coverage and that those costs are considerable.

Of course others joined the discussion. John Stossel, a long time columnist who tends to support a conservative economic view had his own review of the article, and the arguments put forth by both sides.

Now I have posted before that no matter how hard people will try to make it so, "There Ain't No Such Thing as a Free Lunch"!. This pollyannish program proposed by Wisconsin is going to swiftly become the next example of how poor understanding of economics will have disastrous consequences.

First, the extimated bill for this "free" health care, is $15.2 billion dollars that the state of Wisconsin will need to come up with every year in order to cover the expected medical and bureaucratic bills. At this time Wisconsin only brings in approximately $12 billion in taxes every year, so this new program more than doubles the states current budget. In order to pay for this, there is going to be an increase in fees or taxes somewhere. (Most states have constitutions that forbid deficit spending, and Wisconsin is included in that group.)

Now, these tax increases have to come from somewhere and the current legislature in Wisconsin has already said that they were hit the "Evil Rich" corporations with tax increases to pay for the new benefits. Of course, they claim that the only effects will be a reduction in lavish executive perks and excess profits.

Short sighted and wrong, as always. Businesses are interesting entities. In some ways they are legal "people" with assets they hold and obligations that they must fulfill, but they are also artifical constructs which exist for one and only one reason. To create income for the investors who provided the capital necessary to establish and sustain the company. that income is profit. No profit means no capital, and no capital means no business. So a business that sees any cost increase, must do one of two things if it is going to survive. It must either cut costs elsewhere, or it must increase the price it charges its customers. I know that liberal/progressive types will argue that the profits are "excessive", however, the investors are expecting and demanding a certain level of profit. Should the company fail to provide that level of profit the capital they supply can be withdrawn which is no different than any other cost increase. The company finds itself needing a new way to increase profit so that it can attract investors and maintain its existance.

But with the new proposed taxes, Wisconsin businesses will be fighting a huge cost increase. So they will have 2 options, Reduce costs or raise prices. Lets look at both

Raising prices will be chancy since outside Wisconsin the competitors to these businesses will not have the increased costs and won't have the same necessity in raising prices. So while prices within Wisconsin are likely to increase, especially on any product that cannot be provided from out of state, the companies will most likely be unable to do much about the price of their products.

But that leaves reducing costs. For most companies, labor is becoming the highest individual cost of the business, and for any company established in Wisconsin, this will be even more true. They will see that they have the option of accepting new high taxes, or "voting with their feet" and moving to a lower tax area. This has become rather common in the US with many smaller manufacturing concerns closing plants and moving them to lower cost areas, either for labor or tax reasons. Wisconsin won't be able to prvent such an exodus, and their wonderful new program will be a central issue in why the companies leave.

Its a sad, but serious issue. Politicans will always pander to voters by promising new programs which spend money on them, and this "Healthy Wisconsin" is a wonderful example, but the money for such programs have to come from someone, and all to often politicans like to demonize the very businesses that provide jobs and income to the people. In the 1980's many people risked their lives to escape from Eastern European socialist "paradises" because the conditions were so dreadful. And yet, today we have the state of Wisconsin trying to prove once again that socialism is the most effective way to create universal unemployment ever discovered by man.

more bunnies

Mark Vargus — Thu, 09 Aug 2007 07:03:49 GMT

Time for another bunny picture. (or 2) I've decided to let you see just how much a rabbit can grow. This first picture is of Gremlin and her sibling that was taken when they were only 3.5 weeks old. This shows just how small a young rabbit is. It also shows just how tiny Gremlin was. In this picture she's visibly smaller than her litter mate.

Now, that picture was taken while the bunnies had their baby fur and were just getting used to moving around. However, rabbits grow up quickly. 7 weeks later, this is Gremlin today.

This is the same chair and as you can see Gremlin has grown up quite a bit. (in fact she's a little heavier than Roshin, the chestnut doe I have shown here.)

Tragedy of the Commons

Mark Vargus — Wed, 08 Aug 2007 07:04:57 GMT

When we watch a debate or listen to politicans speak, it becomes clear that many are willing to profess the belief that having government own something is often preferable to allowing private ownership. However, in 1968 Garrett Hardin took some earlier discussions on communal ownership and noted that when anything is owned communally it tends to be overused. The study itself wasn't entirely new, but it gave a permanent name to a phenomenom that has occured since the dawn of time. And this phenomenom ended up with a name "The Tragedy of the Commons".

What was being examined is a behavour. I've said before here that humans are motivated by perceived self-interest and greed, and nowhere is this more apparent than when there is communal property. The problem is that if there is a finite supply of any resource, it has value to any who might want to use that resource. The question and problem develops where there is no system in place to set a price on the resource, and instead allows individuals to take from a central pool. The result historically has always been that the resource is overworked and depleted.

and this is backed up by study after study. In research for this article I looked and found 2 different class room exercise descriptions involving giving the class a set pile of a resource with a rule on replenishment if any resources are left after a given period. Its clearly defined that a controlled use of the resource will mean many replenishments and be beneficial to all. However, the professors who have run this exercise in their classes say that in the vast majority of tests the resource never gets replenished as their students quickly grab all of the resource they can. One of these studies/exercises is called "The Nut Game"

There even was a website that had a computer game simulation of this phenomenom that I encountered a few years ago. (and which I have been unable to find today.) In this game the resource was rabbits, and the rules were simple. The game would start with a set number (I believe it was 30) rabbits available to the human player and 2 simulated computer "breeders" who could select a rabbit and "harvest" it. After 2 minutes any rabbit still alive would have 1 child, and this would occur again at 4 minutes. Obviously if no one takes any rabbits until after 4 minutes and they are divided equally everyone could receive as many as 40 rabbits, but in practice the 2 computer players start grabbing rabbits right away and by 2 minutes there will be no rabbits around to multiply. The game then would create a new scenario where each player gets a pen of 10 rabbits be begin and the same rule applies. In this scenario the rabbits do not end up depleted.

And this scenario plays out in real life. Fishing is a good example. No one "owns" the fish, so each captain will go out to catch as many fish as possible during the season in order to maximize his current profits. Most captains will complain loudly that there are less and less fish, and blame the other captains for overfishing, but rarely do you hear anyone say, "the means we use to determine who gets to catch what fish are flawed, we need to establish a system were we own the fish." In truth some ports have adjusted the system and instead of having a fishing "season", the captains are sold vouchers allowing them to catch a certain quantity of fish. Captains who felt that it was no longer profitable were encouraged to sell their vouchers to others who wanted to stay in business. Those ports that have tried this method have discovered that there is less overfishing and that the captains will now defend the fishing grounds from poaching and overfishing, as they feel that they "own" the fish, and wish to protect a valuable asset. This is also being attempted in Africa where villages are encouraged to see the local wildlife as "theirs" and to profit from having the animals in the area. although there are still incidents and problems, the villages are now much more willing to tolerate elephant herds because they see the herds as having value to the village.

People are always going to look for the best deal for themselves. If you offer a resource, but don't put a price on it, they will take it, even if they do not need it, until there is no more of the resource. We cannot legislate this behavour away and attempting to is foolhardy.

Yet every day we hear politicans say that they can make a village work together on projects through edict and fiat.

Breeding Rabbits

Mark Vargus — Wed, 08 Aug 2007 06:36:54 GMT

So, perhaps you now have a male and female rabbit and are wondering how hard it is to get baby rabbits. Well, first I will issue a warning.

Rabbits know how to "multiply"

In the wild rabbits are a preferred "lunch on the go" for many predators and like any other "helpless" prey animal they have adapted to their situation. As long as there is enough food rabbits will have kids, lots of kids. So if you do have a male and female rabbit and don't want babies, never allow the two rabbits to be near each other without some kind of barrier between them.

The first part of that is a biological trick that female rabbits do. Unlike larger mammals which can only get pregnant while "in season", a female rabbit can only not get pregnant if she already is pregnant. For her, the act will cause eggs to release from her ovaries. This also means that should a male mate with her the chances of her getting pregnant are high.

And it doesn't take long. If they spent hours at it, a predator might come along, so the male works quickly. I've watched it and I have to say the phrase "we did it like a couple of rabbits" is not extremely funny to me. Since there is no foreplay and the whole act might last 30 seconds. Not exactly romantic, but rabbits don't have much need or time for romance.

After the Breeding
If you have decided to breed and you successfully breed your female rabbit with the male. (trust me, you can tell if the male "succeeded").   You now have about 28 days until the babies are born. However, other than small behavioural changes its difficult to tell that your female rabbit is pregnant. They do not get visibly pregnant like a human.

Most vets and books will tell you that at about 14 days into the pregnancy there is a small window where you can feel the lower belly of the rabbit and see if you feel small peanut sided babies inside the rabbit. This is difficult to do, and most female rabbits are surly when pregnant, so its no something I recommend for a new breeder. The other sign with the 2 rabbits I breed was that they became much more interested in digging than usual. They were trying to create a burrow for their children to be born in.

Either way at about 24 days after the breeding you need to provide some kind of nest box for the mother to give birth in. These are boxes with a small opening at one corner so that mom can jump in and out, but the new born babies will be forced to stay in one place. Its an artifical burrow. KW Cages sells some excellent metal nest boxes as well as nest box bedding at a reasonable price. You do need to fill it with some kind of soft material that will keep warmth in.

When it comes time for the babies to be born, hopefully the mother will give birth within the box, but it is not guaranteed. If she does give birth outside, gather up any living babies and put them in the nest box as soon as possible.

Baby Rabbits
Baby rabbits are born blind, hairless and helpless and will remain that way for about 10 days. During this first week or so they will tend to sleep for long stretches punctuated by feeding about every 12 hours.  A good mother rabbit will spend most of her time outside the next box, resting and eating, but return every 12 hours to let the babies get all the milk they need. She will not sit in the nest box, and will not panick if you pick up or move the babies. I do recommend that you check the nest box every day and make sure the babies are staying in one group. That way its more likely that all are getting fed. Also mother bunny only has the ability to feed 6 rabbits at once, and most likely isn't going to sit long ehough for any additional rabbits to drink their fill. If you have a rabbitry with many breeding mothers you can foster the babies out, otherwise you are going to have to hand feed a baby bunny. (I recommend talking to your local vet about this, but make sure he knows rabbits, many vets put most of their training into dogs and cats and are not expert on rabbit care.)

Eyes open after 7-10 days, and the fur should mostly be in by that stage. by 2 weeks the babies will be actively exploring their nest box, and the braver ones will probably have figured out how to escape the box and explore the rest of the cage, If you do find them out, put them back in the nest box so that mom isn't being bothered too much, but at 19-21 days, you can turn the box on its side and allow the babies to enter and exit at will.

Baby rabbits start weaning by 4 weeks, and can be seperated from mom at 6 weeks.   If you plan on breeding the babies as well, its best to wait until the females are at least 6 months. If you are breeding for sale, please wait until they are at least 8 weeks old before selling them.

And that is the basic breeding cycle of a rabbit. It is very fast, and designed to allow wild rabbits to maintain their population in a world that is hostile to them. If you are patient and willing to learn, it can be great fun.

Disclaimer
While I am breeding rabbits for shows, I am against indiscriminate breeding of any animal. Rabbits do breed very quickly and there are already too many rabbits who wind up at shelters because their owner decided that having a rabbit was too much work. If you do decide to get into breeding please, go slow and do your best to make sure that all your baby rabbits have loving homes with people who will care for them. Also do not breed rabbits thinking you are going to make money. few pet stores purchase rabbits, and except for top show quality rabbits the most you can expect to get in a sale is $20. ($5-$10 in credit from most pet stores)

Rabbitry Statistics

Mark Vargus — Tue, 07 Aug 2007 10:11:33 GMT

I figure that since I've introduced everyone to a few rabbits in the rabbitry, I should finally give the full status on the rabbits in the rabbitry, as well as a few dear pets who touched me, and helped create the foundation for the rabbitry.

Currently residing with me (in the order of their arrival)
Lain (aka Bear) - a six year Silver Marten colored doe. She is the largest rabbit and the oldest. She also is purely a pet rabbit.

Sakura (aka Peep) - a six year old broken white and brown doe of questionable breeding. Sold as "dwarf" she clearly is not a pure dwarf. Another pet rabbit she is the laziest rabbit in the rabbitry and her diet has to be closely watched.

Keiko - she's a 9 month old Siamese Sable Netherlands "BUD" doe. She has had one litter and while not showable is a breeding doe in the rabbitry.

HoneyBear - a 1 year old Otter colored Netherlands "BUD" doe. She had one litter before joining the rabbitry and has had one litter since being acquired. She is the meanest rabbit in the rabbitry and is mostly left alone.

Sodapop - a 8 month old Otter colored Netherlands Buck. He is the only rabbit to have been shown so far and was brought in to be a future mate for Honeybear.

Arin - Buck? and child of HoneyBear from CJ (an arranged breeding). This is the otter colored rabbit in the trio I showed a couple days ago. We aren't sure of his sex (I'm not very good at lifting bunny skirts to see what sex they are). He may not stay as a "BUD" buck isn't breedable for show purposes.

Kiron - Buck? Child of HoneyBear from CJ. He is the all black rabbit from the bunny trio. At 6 weeks he showed signs of not having the right build to be show quality, but he is going to be entered in a show on Aug 18, where we will find out his chances.

Roshin - Doe? Child of HoneyBear from CJ. She is the chestnut colored rabbit from the bunny trio, and is colored much like her father CJ (who was a grand champion chestnut). She also currently is the lightest rabbit in the rabbitry by 1 ounce. She will be entered in the Aug 18 show.

Gremlin - Doe? Child of Keiko from Dagwood. She is the Siamese Smoke Pearl who has been pictured twice on the site. Originally she was very much a "runt of the litter" and there were worried about her survival, but she's now actually heavier than Roshin. She will be the forth entry for the rabbitry at the Aug 18 show.

I should note that the young ones will be getting looked at by a friend and very experienced breeder at the next show. that's when I'll be 100% sure of the sex of the children, but the current guesses are most likely accurate.

Those who have been part of the rabbitry.
Scout - Purchased as a birthday gift for my girlfriend, this poor rabbit arrived already suffering from a severe illness and passed away shortly after being brought home. (B-D 2001)

Belldandy - a very sweet blank and white dwarf rabbit, she swallowed something that got stuck in her throat and had to be put to sleep. (this revealed to me that rabbits cannot vomit to unblock their throats) (B-D 2001)

Arimi - purchased as a gift for me by my girlfriend, this fiesty little orange doe was all about attitude and running around. She also loved to "thump". She died of digestive system failure despite the best efforts of the local vet. Born 2001, died 2006 and still missed.

Kero - male lop who was picked up after he had suffered from an unknown infection this buck was amazing brave, but never seemed to gain weight or size. He was improperly handled by a caretaker who was making sure he had food and water during a weekend trip my girlfriend and I took. The injuries suffered resulted in him having to be put to sleep. Born 2002, died 2003

Rini - a rescue rabbit that joined the household in 2003, but didn't stay very long. She was fostered out to another animal lover.

2 chestnut rabbits from Honeybears litter. Honeybear actually had 5 children, but 2 of them were taken to a pet store once they reached 9 weeks.

1 albino rabbit from Keiko. Keiko only had 2 kits. Gremlin and an albino (Red Eyed White) rabbit. The albino went to the pet store with the 2 chestnuts.

Even the children were cherished while here, and will be missed. One thing that my girlfriend and I try to do is spend a few moments with each rabbit. Gremlin actually tends to sit where she can read my posts as I write them. (what she thinks of this strange habit of humans is anyones guess.)

I will as always provide pictures of the various rabbits as I have time. However, you will find that I do not photograph rabbits in groups very often. Lain and Sakura are both mean old biddies and have acted very hostile to other rabbits when the opportunity has arrisen. (yes, rabbits do have pecking orders, and in this rabbitry there are disputes between the rabbits over who is "Alpha bunny", or there would be, if my girlfriend and I let the rabbits out together.)

a reward for finishing this long and rambling post. This photo is all 5 of Honeybear's kits. This photo was taken when they were about 7 weeks old.

Two Incomes Not Better?

Mark Vargus — Tue, 07 Aug 2007 07:39:42 GMT

On the Volokh Conspiracy site, Todd Zywicki has posted an excerpt from an article investigating why recent studies have revealed that two-income families are more vulnerable to bankruptcy than families where only a single parent works.

The comments are rather revealing as people debate the various dollar amounts and assumptions made by the original writers.

I agree with part of the premise. Which is that two income families are not naturally better off than a family where only one individual works, but I do not agree with the theory as to why.

The writer of this article tried to claim that taxes are the reason most two income families are vulnerable to bankruptcy. He factors in a income nearly double the median and then computes that a two income family faces nearly $17,000 more in taxes than a single earner household. With the other expenses he factors in for a larger house, child care and an additional car, he also argues that the disposible income of a two worker household is no larger than that of a single earner household.

The numbers don't add up perfectly though, and he left out the most significant issue.

In a single earner household, most families understand that they are vulnerable to economic changes and job loss, so there is a natural economy practiced. Most two income household become two income because of an unexpressed need to have more. (natural self-interest and greed). In doing so some households end up spending near their limit, and since the protections for unemployment and disability are geared towards a single income household there is a high risk of bankruptcy should the income flow be disrupted.

Its not taxes
Its a simple factor of income v expenses.

The single income household will naturally tend to have lower expenses, and therefore be more able to adjust to a drop in income, especially with the protections available.
The two income household is most likely to have higher expenses. Should a drop in income occur there is much greater difficultly in matching up the lower income to expenses, and therefore a higher chances of bankruptcy.

Tight Credit in our Economy

Mark Vargus — Tue, 07 Aug 2007 07:18:45 GMT

By now everyone who pays any attention to the business world and Wall Street knows about the issues involving high risk mortgage loans and an ever increasing default rate. However, the investment gurus of Wall Street are for the most part attempting to convince investors that the overall economy is going to remain strong. I remain unconvinced.

The problem is that we haven't really seen the tightening of credit which is going to occur, and that has prevented the market from correcting for the bubble that appeared in housing. What is worse is that the housing bubble has helped drive bubbles in stocks as well as rental real estate, and both markets are going to be hurt if the current issues with mortgage lending spreads.

The main danger that will occur, is going to start in housing. Its now clear to most people that from about 2002 through late 2006 there was a lpattern of high risk behavior amoung lenders which resulted in housing loans being easy to obtain. This allowed people to purchase houses they could not afford on their current income, but predicated those purchases on the assumption that the house would increase in value rapidly and be resold for a large profit in 2-4 years. Now with the mortgage lenders in trouble, the money for loans is becoming harder to find and those houses are in danger of foreclosure.

What happened was a change in lending practices, and a near perfect storm of economic issues that drove money into the housing market and artifically drove prices up. The lenders discovered that after lending out money, they could sell the mortgage, and the expected payments for more than the amount of the original loan, receiving a small profit and allowing them to immediately reloan the money. This sale of the mortgage occur through a bundling of several mortgages together and selling them as securities through Wall Street. the bundling was supposedly a way to reduce the risk of losing money should a mortgage go bad. With bundles often containing 20, 50 or even 100 loans, one bad one in the bundle did not always cause the purchaser of the bundle to lose money. However, because the sub-prime loans are now failing at rates approaching 25%, bundled mortgages are no longer considered an investment property and many mortgage firms are discovering that they cannot sell the paper on their current loans. This means that there is no more money for them to lend out.

And in the housing market, this is causing many houses to have little to no interest when put on the market. The inflated valuations of 2004, and 2005 are coming back to haunt owners who expected to be able to sell in 2007 before the variable rates kicked in. Instead, they have a house that cannot be sold for any amount of money, and which they cannot continue to make the payments on. With foreclosure and bankruptcy looming, they will reduce spending.

Also, other investments will have less money chasing them, as the credit crunch sucks liquidity from the economy and leaves much of the available investment capital tied up in non-performing loans. The hgih returns promised will not arrive, and the high risk will result in these derivatives being unsellable for some time, locking money away as the economy suffers.

I know that Wall Street is attempting to convince everyone that "this too shall pass", and that the economy is strong enough to grow through the problems, but there just isn't going to be enough liquidity and capital to keep the economy going once consumers and investors both cut back. All I can say to everyone watching, is that 2008 is going to be a wild economic ride/

What this blog is about

Mark Vargus — Mon, 06 Aug 2007 09:44:35 GMT

I happened to check and noticed that I've actually been blogging for all of 3 weeks. Not really all that long, but at least enough time to develop a small portfolio of posts that can be perused and pondered. At this point I guess I should put a more complete post describing my goals and hopes.

Honestly, I don't expect to get a huge following. My topics are always going to be a bit eclectic, and while I'll touch on politics when discussing the economy and the effects of political decisions, there are those who are much more knowledgable about the current political atmosphere out there blogging. What I do hope is that I can slowly build a dedicated following who will come to discuss economics and the effects of decisions private and public on the world economy. As well as show off my small, but beloved rabbitry.

For background, I do have a bachelors in Economics, and I have kept reading and learning about the world economy since my graduation from college. I've always been fascinated by the why as well as the how, and in economics often the why is just as important as the method. I do tend to be very anti-Keynesian. John Maynard Keynes may have been a brilliant investor, but his theories were contrived to justify a system of tax and spend politics that do not make economic sense. His attempts to use mathematical equations to prove that government spending has a greater positive effect on the economy than private investment is something I feel is unproven, and requires that one assume a multiplier effect that does not make logical sense.

I do welcome comments and discussion. I do believe in what I'm posting and will be happy to review or argue any of the facts or opinions I post here.

As for rabbits. As my posts have indicated I have a small rabbitry and have breed some rabbits for the purposes of showing them. I do care deeply for my rabbits, and love chatting about and showing them. I will not claim to be an expert at breeding or raising them, but I am willing to offer advice, support and a friendly ear to chat rabbits with. As well as regular photos of the rabbits. I'm working on getting a few more casual ones showing rabbits at play.

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