BERAL, INC.
Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944
E-mail: mlikar@aol.com

A Letter To President Bush

September 7, 2005

President George Bush
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500

Dear Mr. President:

I think it's fair to say that in the last hundred years mathematics have played an important role in formulating government policy and made contributions to the forward movement of the United States of America.

I have in mind Professor Einstein who wrote a six-page letter to President Franklin D. Roosevelt which began the so-called Manhattan Project, the atomic bomb, and the end of the Japanese war, saving some half a million American and allied lives.

In the time of President Reagan, and in fact earlier in the time of President Nixon, a young economist, Professor Laffler, entered the White House and introduced the so-called Laffler Curve which in certain modification led to the "supply-side economics." In your first term, you applied those theories called the supply side economics, and I am gratified to say that you utilized the mathematical theories or modified mathematical theories of Professor Laffler and created an economic boom.

Mathematicians are honored in a restricted fashion, but very rarely are given recognition in politics. This is a tremendous mistake because the complexities of the problems a president, particularly you, are facing are subject to some logical mathematical thinking, to some logical unusual mathematical solution, and benefit the progress of our country. You have, Sir, spent untold man hours, energy, drawn on your political power, to implement a change in the Social Security system. In many respects, I regret to say it but in my mind you haven't as yet succeeded. Also, it is relatively simple to say that no sane person wants instability in the Social Security system, and no sane person who is alive today would like more and not less benefits when it comes to retirement.

I am sixty-seven and a half years old and forty years I spent in the United States. Receiving $1,500 in Social Security benefits, I can honestly say that if I didn't have unlimited working capacity and training, I would be living in greater poverty than would be meted out to me in my native Hungary.

The recent tragic events in Louisiana and Mississippi made me think that the tremendous capital that we have to raise to help our unfortunate citizens rebuild their towns, to rebuild their country, to help the medically disabled, may be a match of discharging our duty to Social Security benefits. From mathematical terms, the basic idea is relatively simple -- we match income with outgo. Politically it is sometimes difficult to present, difficult to explain to the electorate. But this country educates many capable mathematicians, many capable economists, and this is when you can call upon that community for the service of the country.

I hope you remember that when President Reagan was concerned to construct the so-called Star Wars, he made a moving nationwide speech in which he said, "I call upon the scientific community who has given us so much, to put their tremendous talent to work for creating a defense system of antagonistic missiles against this country." As President, you can go before the country and say "Whereas we know that we require tremendous amounts of money, maybe $500 billion, is there a way to raise this cash other than leaning on our overheated Treasury Bill market and at the same time have the future retired people benefit from the reorganization of rebuilding our cities, like New Orleans or other townships, farms, in the battle-ridden countries."

Surely, Sir, if you remember the Second World War, there was what you call the German economic miracle under Professor Erhardt. The Germany of 1956-1960 was more effective, more beautiful, more productive than the Germany under the Third Reich. The rebuilding of Germany has provided a revenue stream that eradicated the memories of the war, not only for the German people but for Europe and, in fact, for the whole world.

Now let's get down to reality. The reality I am advocating is that money we raise today should not hurt the Treasury Bill market, should not squeeze out current borrowers, should rebuild the South and provide new increased revenues for those who invested, and at the same time benefit the Social Security beneficiaries of the not-too-distant future. Is it possible? Well, my answer is you went to Yale and Harvard. I went to Cambridge and London. And we were supposed to learn something.

My proposition is basically as follows.

THE BUSH HURRICANE RETIREMENT PLAN

Issue:

$500B

Retirement Bonds

First 5 years:

5% PIK

$100 ---> $1,340

Second 5 years:

5% cash return

6.7% return on original $1,000

Third 5 years

6% for foreign bonds retired

3% cash Retirement Bonds*
&
3% Hurricane Bonds

Even a 20% effective return is in line.

Rebuilding the country.

Create a high income for the retiree.

There is a 10% sinking fund for non-retiring bonds and retirees can buy those bonds on the open market.

1.

We create $500 billion worth of $1,000 bonds that are going to be listed on the New York Stock Exchange. Every bond for the first five years pays no dividend but increases its value by 5%. $1,000 invested in the year 2005 will have a value of $1,340 at a 5% compounded growth in the year 2010. It will trade in adjusted value except that it doesn't pay a dividend because the money we raise all goes for the reconstruction of our country.

   

2.

2. In the subsequent five years, the total value of the $1,000 bond, which would then be selling at the value of $1,340, would pay a 5% interest in cash which is 5% over $1,340 based on the original $1,000 investment. In other words, at the rate of 6.7%. The value of the bond still will trade on the market the way the market values such a bond, and with a 5% simple interest on the marketplace

   

3.

If we divide up these $500 billion bonds into five parts, three distinct parts,

(a) bonds for foreigners and for non-retired people in the next ten years

(b) retirees within the next ten years, each of the bonds will have three different components which is nothing new because we have hundreds of long-term Treasury bills on the market. The foreign bonds will bring foreign money to the U.S.

The fully and partial retired bonds would bring, as I explained, very big speculative interest in the marketplace. For the remaining life of this half a billion dollar bond, after ten years we can declare that those owned by those sixty-five years or older will receive a 3% cash dividend and 3% of the GNP produced by those states and localities that would be beneficiaries of the original $500 million.

This concept has to be explained to the American people and quite frankly I would be delighted to help. I would point out that what we are talking about is the Volkswagen theory. In 1945, Volkswagen didn't produce any cars but in 1955, Volkswagen was one of the leading companies in Europe. And if 3% of the revenues are distributed to the original capital owners, everybody would benefit. If we rebuild New Orleans, if we rebuild Louisiana, 3% is a lot of money. However, this sum will go to retired American people who will benefit from the fact that they could, without any risk, contribute to the rebuilding of our country and later get a very high income, maybe as much as 20% on their original investment, fulfilling President Bush's plan to put more money in the retired people's pockets.

The non-retired portion, the second portion, would get a minimum of 6% cash income up from the previous 5%, and the privilege of converting anytime their bond into the so-called retirement portion which would mean that they themselves get a potentially higher return and with the elimination of the 6% less burden on the states under consideration. We can lean this issue more to the retirement people. They have, and only they have, the retired people have the right to buy it on the open market either the foreign and the non-retired bonds, thereby increasing the social benefits of this financing.

With all respect to our foreign friends who invest with us, there will be a 10% sinking fund debenture after ten years, which would enable them to recover their money at open market rates. This matter is complicated, colorful, and I think would be understood by the American people. Politically it would bring tremendous benefit to the Bush administration. It would mean that the Bush administration cares to raise the money for the hurricane victims, that the Bush administration cares about the retired people and last but not least, it would bring the benefit of your Harvard and Yale education and prove that educationally background, mathematical background can, in fact, contribute to the solution of the overall pending and everlasting American problem.

Foreign bonds

10 - Sinking Fund, 6%

Non-retired bonds

Purchase by retired, after 10 years

Retired

3% + 3% Hurricane GNP

I for myself, Mr. President, would be more than happy to spend time with your advisors, with the Treasury, and try to make this issue practical. I have had a similar experience in 1981 when I tried to sell the idea to the retired President Nixon as to how we could knock out the Soviet Union by utilizing the American gold reserves and buying up their cash banking liabilities. He sent me to the Treasury and I spent two days and we discussed the issues. I don't know what benefit I had for the Treasury. I don't know how they used it. But one thing I know. The Reagan and Bush administrations used financial pressure to overthrow the Soviet Union.

Who was their biggest intellectual contributor in that process? None other than the late Professor Edward Teller, the father of the hydrogen bomb, who was Hungarian.

Respectfully submitted,

Andrew Racz

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.

 

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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail: mlikar@aol.com

Copyright © 2011 Andrew Racz. All Rights Reserved.

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