For months now Greece has been in financial turmoil.  Why? It’s because they have so much debt they can no longer make their
payments.  In 2009, they elected a
Socialist government which embarked on a big-time spending program.  I love European governments.  They call their parties liberal,
conservative, socialist, communist, whatever they are.  In the U.S. we are Democrats and Republicans.  Over the weekend the International Monetary Fund and the European Union
agreed to a bail-out package totaling $955 billion.

As a condition to the loan, Greece has agreed to cut
the budget by $40 billion and massively increase taxes.  I think we all know that if
you raise taxes the government will bring in less revenue.  Secondly, for months the markets have taken
none too kindly to Greek debt.  There has
been almost no demand for Greek bonds which has resulted in soaring interest
rates.   When the bond issues fail to sell, the
money to pay interest and principal is not available.  Greece is just plain running out of money.  Fearing loss of jobs, the public-employees
unions have gone on strike.

What effect has this had here in the U.S.?  The Dow lost 225 points on Tuesday, May 4.  The Greek strike went national on Wednesday
causing killing and riots.   We also know that Spain and Portugal are at
the tipping point.   The Euro is dropping
like a rock.  Yet today, Monday, May 10th, the markets were off to the races on the news of the massive bailout.

The Greek public debt is currently 113% of GDP, and expected to climb to
149% of GDP by 2013 when the bailout loans are due and payable.  Government spending amounts to more than 50%
of GDP, and their workers are very unproductive.  This just may be one of those cases where a
country is unable to tax and spend their way out of trouble.  Yet for now, the markets are euphoric that the crisis has been abated, (at least temporarily).

From information publicly available on the web I obtained
our deficit, GDP and National Debt for the U.S. as compared to that of Greece as of about one
month ago.  The results are as follows:

As you can see, although we are not in quite as dire straits as Greece, we are approaching
it.  Having said that, our financial
obligations are going to be rising rapidly in the coming years with the health
care plan kicking in 2013-2014 and with the baby boomers just now beginning to
collect Social Security.

There once was a mighty railroad known as the Taggart
Transcontinental.  There was also a steel
company known as Rearden Metal, an oil company called Wyatt Oil,  and the d’Anconia Copper Mines.  All of these were under relentless attack by
the inefficient producers who were politically connected.  Those who created the highest quality
economic goods became the victims of those who were incompetent.  The government slowly took control of the
economy and finally most of the businesses. They even put the great Richard Halley, the composer, out of
business.  One day all the producers, the
inventors, creators and builders of the best products were criticized, taxed
and regulated out of business.  One day
they all just vanished.  Without them
there was no one to pump the oil, no one to make the steel, no one to run the
trains, and no one to mine the copper. Without them being a convenient scapegoat to criticize, regulate, tax
and otherwise, loot, the engine of the economy slowly came to a halt.  The trains stopped running, the steel mills
quit producing, the oil wells stopped pumping. Where had they all gone?  To be
with John Galt, their leader, of course. He was the inventor of a revolutionary new motor which was never
accepted by the government regulators.  He was the first to disappear.  The rest of the story is yet to be told . . .

In truth Keynes was a unique man.  He wrote a book on mathematical probability,
and he also made a fortune in international currencies and commodities.  He was a Cambridge economist, the chairman of
a life insurance company, a collector of modern art and a noted collector of
Newton’s writings.  He ran a theater, and
he became a Director of the Bank of England. He knew Roosevelt, Churchill, George Bernard Shaw and Picasso.  He was born in 1883, and his first real job
was as a government servant in India.  He
stayed on the job for two years and went back to Cambridge where he wrote a
book on Indian currency and finance. Soon he was appointed to the Royal Commission on Indian Currency.    Shortly thereafter he became editor of the Economic Journal, where he stayed for 33
years.  After WWI he held an assistant
Secretary of the Treasury position in France. In 1923 he wrote a Tract on
Monetary Reform  and in 1930 he wrote
a Treatise on Money which dealt with
boom and bust in the economy.  He
believed that prosperity was not a measure of physical assets or past glories,
but of present accomplishments.  He
talked endlessly about saving  and
investment as the cycle of money that produces prosperity.  He noted that in 1929 Americans saved $3.7
billion, but in 1932-33 they saved nothing. He believed that saving was a luxury for the good times.  He also believed that the economy hung on the
amount of investment business made.  The
economy was sometimes helpless to fix itself, so the government had to step in,
he thought.

Then as Roosevelt embarked on his “First Hundred Days of the
New Deal” Keynes began to admire and relate to what was happening.  He saw a flood of social programs to “help”
people.   But more importantly he saw the
government making investments to get
consumption going again.  He never
stopped thinking about the pendulum swinging from saving to investment.  He died in 1946, at the age of 63, and will forever be remembered as the father of government spending.

Herbert Hoover and George W. Bush presided over the two
most severe economic collapses in the history of our nation.  One was in the 1920s and the other was in the
2000s, 80 years later.  The 1920s were
years of great prosperity.  In 1921,
there were 21 millionaires and in 1927 there were 15,000.  The stock market was surging.  Real GNP grew at a rate of 4.2% for the
decade, but by the summer of 1929 the party was over.  Unemployment started the decade at
5.2% then increased to 8.7%.  It finished the decade in
1929 at 4.6%.

What caused the demise of Hoover and the U.S. economy?  First, the United States was carrying a
massive debt following World War I when debt increased from $1.3 billion to $24
billion in three years.  In 1929, the
Smoot-Hawley Tariff act was passed which was a major tariff on imported
goods.  Much of our national debt was
taken on so that loans could be made to foreign governments for the war.  With the passage of Smoot-Hawley not only did
we lose most of our trade, but we also lost any hope of collecting on the
loans.  Smoot-Hawley was passed by
Congress, but signed by Hoover.  He could
have vetoed it, but he chose not to.  The
act killed the auto industry and caused the stock crash.  A bank panic ensued and the rest is
history.

During the decade of the 2000s, real GDP grew at a steady
rate after a slow start in 2001 because of 9/11.  Other than a spike in the third quarter of
2003, growth was steady in the 3% to 4% range. Unemployment was also relatively low and inflation was under control
during seven of George Bush’s eight years. What caused the demise of George W. Bush and the U.S. economy?  It was the subprime loans and the packaging
of those loans into MBS, (mortgage backed securities).  Mortgage loans were being made to people without
verification of their income or assets. The loans were an accident waiting to happen, so when oil prices went up
and inflation spiked forcing rates up, the bubble burst.  Was this G.W. Bush’s fault?  He was at the helm.  It happened under his watch.  Fannie and Freddie were the leaders in making
those bad loans and packaging those rotten securities.  Soon, Merrill Lynch, Lehman Brothers, Bear
Stearns and others followed suit.  George
Bush is a Harvard MBA, and he should have seen this coming and put a stop to it
before it ruined his Presidency and the world economy.  He should have used the bully pulpit to stop it.

Roosevelt felt strongly that the era of the 1920s was
beneficial to the rich and not the average citizen.  This was contrary to the facts.  He felt that capitalism was failing and that
government needed to step in to appoint experts to manage the economy, to
promote spending and to redistribute
wealth.   He felt that the government
had to step in to fix the damage that business had done.  During the 1932 campaign, he promised to cut
government size by 25% and to balance the budget.  As it turns out Roosevelt was not a budget
balancer, he was a government reorganizer according to a book by Folsom.  For example, with his NIRA program four or
five companies from each industry were chosen to set prices and wages for their
entire industry.  In Ohio a small tire
producer almost went out of business because they relied on their business
acumen to produce a better product for a lower price.  Henry Ford was a notable exception.  He refused to cooperate and in the end he and
Ford were survivors, just like they are today.

I count myself as a long-time friend of Tom Cousino, just as
half of Toledo likely does.  We first met as
freshmen at Central Catholic High School. I cannot imagine how a person who has been a pillar of the Toledo
community all his life could possibly be treated like a criminal.  When The Docks were just an idea for Don
Monroe and Carty Finkbeiner, who was first to step up and invest his
hard-earned capital?  Tom Cousino.  I can
remember visiting his father’s restaurant at the foot of the Fassett Street
Bridge on Miami Street.  I can remember
when Tom was a young man he and Paul Krasula worked day and night to make the
Steakhouse what it was to become, an East Toledo icon.  And now after all that, he’s unceremoniously
indicted and portrayed as a criminal because he is in arrears with his taxes!  Do you have any idea how many people are having difficulty paying their taxes?  Why aren’t they all on the news?

I propose that we make the first weekend in June Tom Cousino Weekend.  I want everyone who counts
himself as a FOT to visit one of Tom’s restaurants and pay cash.  This will be a vote against dumping on a
friend who is being unfairly maligned.

This update is brought to you by Robert Domini, MAI, real
estate appraiser and market analyst. Remember that we are a full-service real estate appraisal and market
analysis company.  We serve local banks, law firms, accounting firms and the general public in various capacities.  We also serve governmental
agencies.  For the last ten years
Continental Valuations has worked throughout the State of Ohio on right-of-way
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discuss your options.  Give me a call.

Regards,

Robert D. Domini, MBA, MAI
Continental Valuations, Inc.
President

Certified in Ohio, Michigan and Florida