Is Socialism right ??

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IS THIS MAN A GENIUS?

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Can you think of a reason for not sharing this?

Neither could I.

Shwetal- An Avid writer.

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Senators Move to Create 21st Century Glass-Steagall Act – Money Morning – Only the News You Can Profit From

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Senators Move to Create 21st Century Glass-Steagall Act – Money Morning – Only the News You Can Profit From.

Warren, John McCain (R-Ariz.), Maria Cantwell (D-Wash.), and Angus Kin (I-Maine) introduced legislation that would again separate bank’s traditional activities (like deposits currently backed by the Federal Deposit Insurance Corp.) from riskier activities like investment banking, insurance underwriting, swap dealing, and hedge funds.

Glass-Steagall was repealed by Congress back in 1999.

When the news broke of Warren’s determined attempt to bring back Glass-Steagall last week, it covered front pages across the country and instigated a firestorm of commentary on the future of the U.S. economy.

The problem, of course, is the ability to cut through the hype and understand if financial reform is necessary to fix the U.S. economy.

Rarely do I find myself championing regulatory efforts by the Federal Government, but the financial sector is an entirely different beast from energy, agriculture, and other resource sectors.

But reinstituting key elements of the Glass-Steagall Act is just one step on a long return to sanity for the economy.

The End of Too Big to Fail

In 2008, as the financial crisis unfolded, many in Washington wanted to reduce the size of the banks, because they had grown too large and were considered “Too Big to Fail.” The government was about to throw billions of dollars into the bailout of the Big Banks.

But during the financial crisis, in order to stave off more bankruptcies, the Treasury Department actually made it easier for banks to grow even larger in a swath of mergers and acquisitions that led to a staggering concentration of wealth among the largest banks in the country.

“The four biggest banks are now 30% larger than they were just five years ago and they have continued to engage in dangerous, high-risk practices,” Warren said during a Senate Banking Committee hearing.

Meanwhile, attempts to curb Wall Street excess in 2010 with the Dodd-Frank Bill did little to clean up the system.

In the end, Americans ended up with a piece of toothless regulation. The law was quickly watered down by remarkable lobbying efforts by the financial sector, including an unprecedented effort to limit even the Volcker Rule, which aimed to curb proprietary speculation.

Now, Warren and her colleagues are aiming to create the 21st Century Act. According to our Shah Gilani, this new proposal would “would separate institutions with savings and checking accounts, in other words FDIC-insured depository commercial banks, from investment and trading ‘banks’ engaged in capital markets activities, most of which are on the border between speculation and manipulation.”

Here Come the Lobbyists

The reaction from Wall Street is predictable. The banks will say that increasing regulation on their activities will help facilitate another financial crisis.

Of course, this was also predicted by the banks in 1997 when regulators proposed overseeing the derivatives markets. After they lobbied to kill any regulation, 10 years later these toxic assets facilitated a major crash.

Instead, we should have listened to those who opposed the repeal of Glass-Steagall, because they too predicted a financial crisis would eventually result because of this deregulation.

At the time of its repeal, opponents of repeal argued that unshackling financial companies from regulations would enable them to shift their focus into unchartered areas of banking activity. As a result, these critics said, economic crisis was not just possible, it seemed inevitable.

Perhaps the most chilling prediction came from former Senator Byron L. Dorgan, Democrat of North Dakota just two days after the repeal of Glass-Steagall.

”I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010,” Dorgan said.

”I wasn’t around during the 1930’s or the debate over Glass-Steagall<” he added. ” But I was here in the early 1980’s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”

For many, this statement is a chilling reminder of how vulnerable the U.S. economy had become by deregulation of the banking sector in the late 1990s.

Just a Starting Point

Our Shah Gilani isn’t entirely optimistic that the law or reform will be passed. He cites the obvious problem in Washington that would essentially make it impossible to fix: Lobbying.

Wrote Shah: “The only problem with trying to make banking 21st century safe is that we live in the new old age of robber barons, and they are the bankers and politicians they’ve bought.”

But the another important aspect of the conversation is that other types are reform would be needed as well.

Real financial reform requires more than just reducing the size of the banks and limiting their commercial and investment activities. Canada, for example, had only a mild economic downturn despite having a highly concentrated banking sector.

It also requires the willingness to address other factors that played a key role in the financial crisis and were essentially ignored or gutted from the Dodd-Frank Act of 2010 after extensive lobbying efforts and threats that the sky was falling.

Perhaps it isn’t the size of the banks that matters, but instead the types of securities that banks are allowed to invest in and the amount of leverage they may possess.

Congress seems to be overlooking the fact that it was massive derivative positions that led to this crisis, acting like weapons of financial mass destruction. But Congress also must recognize that banks were allowed to return to pre-Depression levels of leverage in 2004.

While Warren is getting the spotlight, a more important matter is happening in the Senate. Two Senators are looking to pass legislation to reduce leverage and increase capital-holding requirements.

Sens. Sherrod Brown, D-Ohio and David Vitter, R-La., recently introduced a bill that would force “Too Big to Fail” institutions to hold more capital, thus reducing leverage and protecting against significant losses.

This will be a very hard fought battle with a lot of misinformation being spread about the impact that such regulation would have on the economy. Stay tuned, as we continue to weed through the lies in order to deliver the truth on what reform in Washington would really mean to Wall Street.

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5 Warren Buffett tips

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1. Spend wisely

If you buy things you don’t need, you will soon sell things you need. – Warren Buffett

Rule No. 1 : Never lose money. Rule No.2: Never forget Rule No.1 – Warren Buffett

2. Saving: Save for the unexpected

Don’t save what is left after spending; spend what is left after saving. – Warren Buffett

3. Think long-term and be patient

Life is like a snowball. The important thing is finding wet snow (opportunities) and a really long hill (long term). – Warren Buffett

4. Borrowing: Limit what you borrow

I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing. – Warren Buffett

5. Risk

Investing without knowing increases risk. However, instead of shying away from investing one should acquire knowledge to get it right.

Shwetal – An Avid writer

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