I did not know where to post this information but BBVA Compass bought out Guaranty Bank making it the first time a foriegn bank as bought out a struggling U.S. Bank. Guaranty Bank has 162 branches across Texas and California. 
Interesting stuff here, BBVA is the 13th strongest bank worldwide and has been looking at making an imprint here in the U.S. as of Novemeber they completed the U.S. merger of Compass Bank, Laredo National Bank, Texas State Bank, and State National Bank. It will be interesting to see what they do from here.

Our last post made the point that the Fed govt would become more and more militant in collecting income taxes. Ditto for local property taxes. Those empty car dealerships will take a big chunk of both property tax and sales tax revenue on reduced car sales. Hmm, less tax on non existent inventory come to think of it. 

George Will describes legislation that would return govt ownership to the private sector. Guess what, the first bill failed, will the second also?   We are moving to state control of more and more enterprises, banks, autos, health insurance. If the govt does a better job of running health insurance, is there anything they should not run. Can the govt do a better job of running health insurance?

Professor Elam writes a weekly column for the Andrews County News, an oil based economy in West Texas. It is re printed here. 

Follow the Boomers

Boomers are children born of the returning WW II
veterans.  A demographic bump
occurred, from the drought of baby creation caused by WW II.   The parents and the boomers left
demographic footprints that tracked our economy these past decades. The suburbs
created in Levittown, 
Pennsylvania, the sporty Mustang for boomers of driving age, the move to
stock market driven 401Ks in the 1980s, and now, what was known as retirement
planning.   Retirement
planning is an oxymoron, retirement funds as we have noted here are already
falling behind in their funding assumptions.

Bank America created the VISA credit card about 1968.  Richard Nixon took the US off gold
backed currency in the early 1970s. 
Wilbur Mills tied social security payments to the Consumer Price Index
in a failed bid to become President. That was Change to Believe In.   Congress, unrestrained by a gold
backed dollar proceeded to print and spend dollars. Lyndon Johnson’s first $100
B budget is now in the trillions, a number incomprehensible to most people., especially
 most in Congress.

My parents’ first Houston  home purchased in 1953 cost about  $12,000. Their first house bought in Andrews in 1965 was
$16,000. My first all brick home in Andrews in 1976 cost $22,000.   Two years later I sold it for
$44,000; as George Jones would say, the race was on.  Housing prices in Andrews soared to six digits. We will now
see a return to the mean,  price
will seek its long term average, in everything.  Midland millionaires were created via $3 oil.   Fiat money  has value by the decree of the issuing
government, it is not constrained by the guarantee of gold redemption.  Money supply swelled and the price of
oil zoomed to $36 in 1981, then $12 in 1986, then $145 and $36 (again, see the
pattern?) and now $75. 

The era of volatility has begun.   Prices of oil, real estate, and stocks zoomed as the
boomers stuffed their socks full. Congress was only too happy to oblige with
higher spending driving inflation based prices up and up.

But now the cost of money to banks is near free, interest
rates from the FED are less than 1%. This is the worst possible sign.  There  is simply no constructive use for the money which will return
higher rates, why else would it be near free?  Indeed we now have moved from inflation, too few goods
chased by dollars to deflation,  too many goods floating on a sea of debt.

Even in Texas, major cities feature lots jammed with new
cars, buildings sporting lease signs, stores offering 2 for one everything,
empty strip malls, and houses for sale becoming rentals. Such efforts only back
up the eventual supply of homes for sale. Encouraging speculative home building
at the end of the boomer era was an incredibly wrong headed government move.
Now there is no a demographic bump to buy these new  homes, much less the now 40 year old homes of the
boomers.   Already the rental
market swells. Short term incentive cash for clunker homes or cars is a
magicians’ trick, masking the ever growing unsold inventories behind the
Curtain of Oz.

The price of oil is the collective emotional vote on the
economy. The greatest volatility in oil prices in our lives this past year is a
prequel to the next few years.  Do
not naively assume things will calm down, they will not.  $145 to $34 to $75 is Nightmare on 14^th
Street in Andrews.   As the
government alternately jumps too and fro on favoring various economic sectors,
robbing future sales to buy a vote in today’s opinion poll,  it will only heighten the volatility of
price.

Last summer this column beseeched  everyone to avoid or pay off debt, prices would be
falling.   The $75 barrier for
oil and Exxon remains, markets may poke above it this last week of August, but
that will be short lived.  Like Rudyard
Kipling’s swaying Indian cobra, the August markets lull investors back to
complacency, only to be jolted back by September and October. We expect more of
the same volatility  this fall. 

Much is being said about alternative learning techniques, Professor Cranky posts his weekly rant on these ideas.