Much, if not all, of the current economic crisis has been caused by the government's changing rules on valuation of key bank assets. It can be debated whether these changes were purposely caused in order to seize political control in Washington, but there is no need to comment on that in this article. What does need comment is the incredible power that can be exerted over the entire global financial system through manipulation of accounting rules!
This article is straight-forward: right now, politicians and regulators are wrangling over whether to value bank assets using mark-to-market or mark-to-model. The solution is essentially: "both" and "neither"!
There is one other valuation standard that is amazingly simple to understand: mark-to-performance. This standard simply requires valuation based on the actual income performance of the underlying asset. An asset that is generating income is doing so at a very measurable rate of return. This is a standard that even anyone on the street can understand! Wow!
But, let's not get too simple -- otherwise we will lose all the sophisticated New York bankers, experts, and politicians! The basic problems with mark-to-model and mark-to-market also exist with mark-to-performance. All three, under certain conditions, will not reflect true, long-term value of the underlying asset. But, the three, together, will reflect that true, long-term value of the underlying asset. This makes the solution rather straight-forward.
The solution is to allow banks to value each asset based on the middle valuation chosen from the three standards: mark-to-model, mark-to-market and mark-to-performance.
When there is no liquidity in the market, as we have seen over the past several months, then the mark-to-performance and mark-to-model will provide a higher (and more accurate) valuation. The middle one, probably mark-to-performance, will be the appropriate model to use during these economic times. In times of "irrational exuberance", then the mark-to-market may very well exhibit the highest valuation. In those economic times, either the mark-to-performance or mark-to-model will be the middle ground. Again, that middle model will be the appropriate model to use during such economic times. The examples go on....
So, the only problem with the Mark-to-Performance & Middle-of-the-three approach is that it will leave regulators with little to do and politicians with no red-meat. It does not enable seizure of political and industrial control of entire nations (even ones the size of the United States). It does not create new Hitlers, Stalins, Regans, or Napoleons. So, except for this lonely blog, Mid-3 and Mark-to-Performance will sit in the dark corners of idle thinking.
(c) 2009 Knobloch. All rights reserved. Contact for publication permission. http://www.charlesknobloch.blogspot.com/
Wednesday, March 25, 2009
Thursday, March 19, 2009
Protection from Religious Supremacy Movements
It is interesting that the original Maryland State Constitution is/was the only legal document that provides protection against religious supremacy movements. You can find the exact words in the following Supreme Court Case:
http://supreme.justia.com/us/143/457/case.html Church of the Holy Trinity v. United States, 143 U.S. 457 (1892)
Constitution of Maryland, 1867 (from 143 U.S. 457 at 469-69):
"That, as it is the duty of every man to worship God in such manner as he thinks most acceptable to Him, all persons are equally entitled to protection in their religious liberty, wherefore no person ought, by any law, to be molested in his person or estate on account of his religious persuasion or profession, or for his religious practice, unless, under the color of religion, he shall disturb the good order, peace, or safety of the state, or shall infringe the laws of morality, or injure others in their natural, civil, or religious rights; nor ought any person to be compelled to frequent or maintain or contribute, unless on contract, to maintain any place of worship or any ministry; nor shall any person, otherwise competent, be deemed incompetent as a witness or juror on account of his religious belief, provided he believes in the existence of God, and that, under his dispensation, such person will be held morally accountable for his acts, and be rewarded or punished therefor, either in this world or the world to come. That no religious test ought ever to be required as a qualification for any office of profit or trust in this state, other than a declaration of belief in the existence of God; nor shall the legislature prescribe any other oath of office than the oath prescribed by this constitution."
The key point here is that our US Constitution does not include the words: “…unless, under the color of religion, he shall disturb the good order, peace, or safety of the state, or shall infringe the laws of morality, or injure others in their natural, civil, or religious rights…”
There should be a movement to incorporate these words into our State Constitutions and Statutes, our Federal Statutes and also by Constitutional Amendment.
(c) 2009 Knobloch. All rights reserved. Contact for publication permission. http://www.charlesknobloch.blogspot.com/
http://supreme.justia.com/us/143/457/case.html Church of the Holy Trinity v. United States, 143 U.S. 457 (1892)
Constitution of Maryland, 1867 (from 143 U.S. 457 at 469-69):
"That, as it is the duty of every man to worship God in such manner as he thinks most acceptable to Him, all persons are equally entitled to protection in their religious liberty, wherefore no person ought, by any law, to be molested in his person or estate on account of his religious persuasion or profession, or for his religious practice, unless, under the color of religion, he shall disturb the good order, peace, or safety of the state, or shall infringe the laws of morality, or injure others in their natural, civil, or religious rights; nor ought any person to be compelled to frequent or maintain or contribute, unless on contract, to maintain any place of worship or any ministry; nor shall any person, otherwise competent, be deemed incompetent as a witness or juror on account of his religious belief, provided he believes in the existence of God, and that, under his dispensation, such person will be held morally accountable for his acts, and be rewarded or punished therefor, either in this world or the world to come. That no religious test ought ever to be required as a qualification for any office of profit or trust in this state, other than a declaration of belief in the existence of God; nor shall the legislature prescribe any other oath of office than the oath prescribed by this constitution."
The key point here is that our US Constitution does not include the words: “…unless, under the color of religion, he shall disturb the good order, peace, or safety of the state, or shall infringe the laws of morality, or injure others in their natural, civil, or religious rights…”
There should be a movement to incorporate these words into our State Constitutions and Statutes, our Federal Statutes and also by Constitutional Amendment.
(c) 2009 Knobloch. All rights reserved. Contact for publication permission. http://www.charlesknobloch.blogspot.com/
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