Saturday, February 07, 2009

It's Only Money

Possibly four million homes will be lost this year to foreclosure. A lot of those people will have also lost their jobs. The banks get more paper to hang in the executive bathrooms. Of course those who defaulted on their home loans will also be barred from the new car market. It looks pretty gloomy for the car manufactures and the airlines. Gas prices should drop, less consumption; unemployment eliminates the daily commute to work.

With people cutting back on consumption there is the paradox of decreasing consumption resulting in rising prices. Many companies are face with fixed costs that have to be passed on to the consumer; airlines, car manufacturers, gas, electricity, water, cable and phone to mention a few. Those costs are passed on to the decreasing consumer consumption base.

Two spirals are in play here. A foreclosed homeowner, out of a job, is selling assets to feed a family and provide shelter. Converting assets to cash starts a deflationary spiral as more people join in. A person could end up losing everything they ever earned. A byproduct of this, government gets less tax revenues; no income tax, reduced property taxes and reduced sales taxes.

The second spiral is the increasing growth of government entitlements while tax receipts are declining drastically. Government services need to increase to provide for unemployment insurance, food stamps and welfare. There are the addition outlays for Social Security, Medicare and Supplemental Security income. Add to that the government funding of the banks and our bankrupt retirement funds.

Pay no attention to this, it was added for its pretty colors. Double click for a more troubling view.Congress is going to pass a massive bailout spending package using borrowed money. Who could they possibly borrow it from and at the present interest rates? It seems like just last week, the politicians were bitching about the 40 billion spent on the Iraq war. It was too much money. Then, they gave AGI 80 billion in bailout money and no one even got shot. Now we are talking trillions of dollars. They need to check the water supply for Washington DC. At least if it’s lead poisoning, they have an excuse for this madness.

Here are the Federal Governments projected future revenues. Pay no attention to this either. It's not relevant anymore. The guesstimates for 2008 and 2009 have to be off a tad. What's a trillion or two among friends?


Joseph Oppenheim said...

From the last thread Rob wrote, but better answered here:

So if you want to save the banks what do you cut? Social Security, Medicare, Defense, Education.<<<<<<

Although SS has to be addressed, the solution is pretty easy, by upping the retirement age a little and cutting benefits for the well-off. It isn't a true pension plan. It's an insurance program, mostly to protect the less successful, middle class and disabled. Plus, the government subsidizes other retirement programs, like IRAs and 401K. So, look for some comprehensive solution.

Medicare is a bigger concern. However, Obama does have a mandate to reform our whole healthcare system, which is the most expensive in the world, and very inefficient. Plus, Medicare Part D, for RX's, is ridiculous, set up with crony capitalism in mind, to not allow the goverment to negotiate with the drug companies on prices. Look for that to change as part of a massive overhaul of healthcare. Rob, I'd be interested in your take of Canada's health system. I'm still not sure of what is best, though I do favor a single payer system, basically expanding Medicare to anyone who wants it, with premiums based on a person's ability to pay, adjusted gross income.

Defense will be cut. Iraq is winding down. Plus, warfare has changed, and is more asymmetric needing more global cooperation and shared responsibilities. A big challenge, but look for overall cutbacks. But, more troops initially, which should help the unemployment situation.

Education is another matter. Spending must be increased. We need more scientists, doctors, nurses and generally highly educated work force. Education returns more than it costs. Locally, the last economic meltdown in San Diego happened in the early 90's when the defense business was hit and we were almost totally dependent on it. But, the savior was government spending on education, that is the establishment of UCSD as a world class research university, originally started in 1965, but then its professors spun off companies in wireless communications and biotech to make San Diego a world hub in those fields and led to the economic boom in San Diego which followed.

Plus, in the last jobs report, more jobs were created in both healthcare and education. We are the world leader in higher education. People around the world pay premium tuitions to come to our universities. It not only helps us, but can be a profit engine if used right. Plus, distance learning is really taking off. It is amazing what is available and how technolgy is transforming college education.


Anonymous said...


The boomers are all heading to retirement. It is a career killer for any politican to screw with these programs. SS has to be adressed but are you willing to forgo retirement? The money has to come from somewhere to support all this spending. One cannot just use smoke and mirrors to get it done. Once again I ask what would you cut if you were president. Right now Obama seems to be saying yes to everybody.

As for Canada's health system it is better than one on offer in States but still having the same funding problems. You guys think it is all free up here but what Michael Moore forgot to tell you is we are still on our own with Rx drugs. It's great to be able to go to hospital for procedure but if you can't afford the drugs then you are not likely to go and have become uninsured by default.


Anonymous said...

Hey everyone. We are in the first phase of a depression. It is going to get a lot worse. This is the time to face the music, be proactive and be solution-oriented. The only important question at this time is...

What are you doing to prepare for the future?

Please share your ideas.

An Inquiring Mind

Joseph Oppenheim said...

Rob wrote:

The boomers are all heading to retirement. It is a career killer for any politican to screw with these programs.<<<<

The boomers will not be affected by any changes to SS. It will only be changed for younger and all new workers. And, those younger people will be better protected with the overall changes to the system, including IRAs and 401Ks. SS is not a major problem, actuarilly, until maybe 20-40years or so, but what is important now is to create confidence with younger and new workers.

Yeah, RX's are a problem, but what most don't realize, is that most people don't need the newer and expensive drugs. Most can get by with the great generic drugs, many times even safer than new ones, because they have a greater history behind them. Whatever system we come up with, likely we will guarantee a basic level of care, but premium care will cost people more. Most societies with single payer systems still have private systems which exist at the same time.

Think of public education, everyone is guaranteed that, but private schools exist at the same time. Lots of people want to criticize K-12 education, here, but most schools are fine, or better. It is just maybe 10% or so, mostly inner city, and they have to be addressed. Plus, I might add, the last couple of years of high school. Kids compete internationally pretty well until they get to high school.

By the way, I am a big fan of the Canadian, Malcolm Gladwell, and his new book, "Outliers", and I ascribe to his opinions on how to improve education for underachievers.

As for Michael Moore, I think his film, "Sicko", was very good. He was right to attack how the people who do have insurance are being screwed.


Jim in San Marcos said...

Hi Rob

Your spot on with the remark that politicians don't dare mess with entitlements. It's not in their best interest. They won't cut one thing, they'll ride this horse into the ground. It's all or nothing. We get it all now and nothing later.

Our resources are finite, we have to choose, in order to have a solution. We know that isn't going to happen any time soon.

60 Minutes ran a piece on Canadian Health Care a few years back. They were discussing the fact that if you needed open heart surgery, the wait was three months. It seems like people were going across to the US for the procedure--did they fix that?

Anonymous said...


No they didn't fix anything. Right now I don't have a doctor. This is how one gains access to health care system. I'm not saying that I cannot get health care but it makes access problematic. At the end of day it doesn't matter how health care is funded someone has to pay for it.

When Joseph says the Boomers are not going to be affected he is sadly mistaken. I'm a Gen X'er, trust me I'm not working till my dying day to maintain these entitlements. At least not without a fight. The twenty something generation has even less patience with this attitude. Improvements, in twenty years I doubt there will be any money left.......


Jim in San Marcos said...

Hi Rob

I think you're right, the baby boomer like me are going to take it in the shorts.

Things are accelerating at a very fast rate. I was expecting the Euro Dollar to collapse from within from all of the internal economic distress.

Look for international trade to drop drastically. Its hard to gauge one currency against another with everyone printing money like crazy.

I think this will all come to a head in the next 6 months. Congress will have to abandon the banks and try to prop up the state governments. Otherwise the state governments will be forced to discontinue unemployment, welfare and other social programs. That could cause some pretty big riots.

Joseph Oppenheim said...

When Joseph says the Boomers are not going to be affected he is sadly mistaken. <<<<

Rob, I only meant that as for SS. Whatever changes will be made to SS, will remain the same for Boomers.

As for other things about the Boomer generation, they have lots of other issues. Number one, in my opinion, is that I would classify it as the "Me Generation".

I can even see it on this blog, people caring about themselves, looking at government from the perspective of government is no good, because "I" can get more without it.

Fortunately, that mentality was defeated at the polls, John McCain with so many cars and homes, he can't keep track of how many he has, but there still are maybe 47% or so who still think like that, and will fight every step of the way, for themselves, not realizing that everyone does better when the whole does better.


Anonymous said...


Was it defeated I don't see any changes, just the same pork signed by different guy. You can't make a pig moo but it looks like the democrats are going to try.

There is a difference between "me" and "I". "Me" implies that one has world revolving around them. While saying "I" for myself implies that one is taking responsibilty for one's own future. I'd say most people reading this blog would fall into latter category.


Joseph Oppenheim said...

Me" implies that one has world revolving around them. While saying "I" for myself implies that one is taking responsibilty for one's own future.>>>>>>>

Rob, I'd say they are the same, and, that was what this election was all about.

Sure, one must take responsibility for oneself, but also one has a bigger responsibility, too. Both should exist at the same time. It really does take a "village", as Hillary once said. Someone said today, I think it was Chuck Todd on C-Span - discussing his new book, that McCain wasn't the one who finished 2nd in the election, it was Hillary. Either would have beaten McCain.


Anonymous said...

Inquiring Mind,

Survival in a depression is tough if one has never done it before.

To survive it is necessary to slash living expenses to the bone. Dump everything and focus on the bare necessities of shelter & food.

**The key is to own outright a very small house with a yard.** There are livable areas of the country where you can own a house for less than $50k. Maybe there are some close to where you live.

Carry no debt! If you have a large load of debt, flush it down the bankruptcy toilet.

Be prepared transport yourself on foot or bike/scooter. It's good for your health, too. Learn to cook, and learn to grow some of your food. A single adult should be able to live on $100/month or less.

Here's a book called "Possum Living." It was written in the late 1970s and still very relevant today.

Jim in San Marcos said...

Hi Inquiring Mind

I'm glad to see that you're ready. That style might not be of much use to a city dweller, but everyone will have to think this out for themselves.

I think we need to curb the fear element in all of this. In the worse case, we lose all of our savings and the national debt goes to zero. A new government without the debt commitment could pay reasonable retirement benefits. The country could then get on with business. Your home would be debt free and clear and you would have no debts.

It would trash the middle class, and the rich; they get to start over again.

I don't think that this will be as bad as we imagine.

Jim in San Marcos said...

Hi Joseph

Lets keep politics out of this.

Neither candidate had any experience as a CEO of a major company. so don't look for leadership out of this mess.

It irritates me when others point out that one party knows more than the other. Neither one knows a damn thing.

Once you start electing movie stars president, you know the election process is flawed.

In the present situation, if the party in charge does nothing, then what ever happens is their fault. The problem is, they are the problem. They aren't directly responsible for the mess, but by god they had better clean it up.

If they don't, they lose their jobs. So we are going to spend like we have never spent before.

Doing absolutely nothing will work, but it won't get them re elected.

Joseph Oppenheim said...

Neither candidate had any experience as a CEO of a major company. <<<<<

Jim, that is a good thing. The US is not a company. And, shouldn't be.

Being president requires a different set of skills.

By the way, this week's Time has an interesting piece on what would Abe Lincoln do during this mess. It was an interesting read.


Jim in San Marcos said...

Hi Joseph Oppenheim

Your comment "The US is not a company. And, shouldn't be.

Being president requires a different set of skills"

You seem to have a comment for every occasion, explain what you meant in 100 words or less for each one.

Talk is cheap. I get a little fed up with people that make universal statements with absolutely no documentation.

Anonymous said...

Joseph Oppenheim said...

...looking at government from the perspective of government is no good,....

Well government isn't the cause behind natural disasters and pandemics but...

Government is third behind the top two causes of death and suffering for humanity- natural disasters and pandemics.


(I don't really know for sure if pandemics have government beat in death tolls)

Anonymous said...

We can look to Japan's Lost Decade to see what could happen here.

The problems are similar-- crony capitalism, asset bubbles, banking collapse, job losses, etc.

The policy responses too are eerily similar -- massive public spending, zero interest rate, no structural reforms, etc.

The global boom earlier this decade fueled Japanese exports and pulled it out of the swamp. But as soon as exports fell, Japan fell right back into the hole. (They are embarking on their second Lost Decade.)

Through it all, the ordinary Japanese survived but suffered hardships unknown since WW2. Fortunately there were no mass starvation and no street riots.

Japan differs from the USA in some respects. They have a strong safety net - like affordable healthcare. They have strong family and community bonds. They have high savings rates. Their culture promotes a respect for the authority of government.

In the USA we have a weak safety net. Moreover our people are Wild West types who like to work hard, to spend harder, and to go on a rampage if government screws them too much or too long.

What can we expect to see in the USA?

1. Until structural reforms are implemented, we can expect this deep recession to drag on indefinitely.

2. We won't devolve into lawlessness and abject poverty like Russia after the Soviet Union's collapse. Expect widespread hardships, however. Healthcare costs will break the backs of many families, if job losses haven't already.

3. Americans have a short fuse. Expect a movement to clean house by year's end if real reforms are not enacted. At the same time, let's not underestimate the entrenched interests who have much invested in the status quo.

AngryTaxPayer said...


I'm not even sure where to begin... all of your comments are eerily ridden with ADD. But thanks to Jim, he called you out by saying "you have a comment for all occasions."

If you don't mind, please provide a little demographics about yourself so the audience can get a sense of understanding your positions a little better. For example... please provide your age, education level, employment, social status, number of children, living arrangements, etc.

This information may help at me (not sure of the rest) make sense of the complexities behind your banter.


Joseph Oppenheim said...

Talk is cheap.<<<<<

Not all talk, Jim. Mine is, since I offer it for no cost :)

As for documentation for my statement of presidential skills, I think it is worthwhile to take the three top presidents, rated universally by scholars.

They are Washington, Lincoln and FDR.

I think looking into the makeup and the kinds of leadership skills they showed, as indicators for what makes a great president.

Anonymous said...


Ranking leaders is like picking your favorite hockey player. Everyone has an viewpoint but the argument over who's the best is pointless. Reasoned debate is why I search blogs for opinions on issues of the day. If you want to serve up Vanilla flavoured responses to logical arguments it might be better for you to post on the CNN website. They are always looking for this kind of stuff to make it look like they listen to their viewers.


Jim in San Marcos said...

Hi Anon 9:35

I lean towards your thoughts of what happened in Japan might repeat here.

Your statement "let's not underestimate the entrenched interests who have much invested in the status quo" gives us a pretty good idea why this is going to take a long time to work out. The rich have the most to lose.

There might be some big policy shifts in motion right now. Anybody notice how Ben Bernanke has faded out of the limelight? Did they shoot him???

JMS said...

Sorry about the sidetrack.

It looks to me that right now is the best oportunity to implement the fairtax. If the nation shifted to taxing consumption this would bring back the manufacturing jobs that have left overseas. This is because under the fairtax the manufacterer would not have to pay federal taxes. This is all explained in the book "FairTax: The Truth: Answering the Critics". I am under the assumption that many of the readers of this blog have read the book or at least have heard of the concept. I just finished reading the book last week. It is interesting and did clear up a lot of the misconceptions that I had. What do you all think about the fairtax? Any ideas?

Back on track.

An Inquiring mind has asked what people have done in order to prepare for whats coming. Here is what I have done so far. My house and my hot water was heated by an oil fired boiler system. I live in Maryland so the winters are mild. I converted to all electric by installing a heat pump system in order to avoid the oil price fluctuations that have been going on lately. This summer I will be finishing my basement and will be installing a wood burning stove. The stove will be able to heat my whole house. The majority of my heating/AC cost is winter heating. I calculated that the wood burning stove investment will pay itself off in less than 2 years. The electric heat pump will be used as a backup. I do have a free supply of firewood which helps out with the equation. I also had several windows in my house that we not energy efficient. I have upgraded them so that all the windows in my house are rated at least R4. I have a 6x12 ft window in the front of the house that I upgraded from a single pane to an R10. So far my wife and I are concerned with making our house as energy efficient as possible so that we can be less reliant on the energy company. We also plan on adding a vegetable garden within the next 2 years. We both have stable jobs but have some debt. we still have a mortgage but we have been working on paying off our cars. We have one completely paid off and we do not have CC debt. Right now we our hoarding cash and reducing our debt. We are a bit concerned about how to invest the cash we have. I see the shit hitting the fan when the next bailout goes through. Thats when I think the inflation will start up. I'm not sure where we can store out money other than gold and realestate. I am wary of gold since I don't have experience with it and right now I do not have the time to maintain more property or buy a business. Anyways, thats just a bit of my perspective.

This site is great and I have been an advid reader since 2006. Not only is this site an eyeopener but it also provides comedic relief.

Joseph Oppenheim said...

AngryTaxPayer wrote:

please provide your age, education level, employment, social status, number of children, living arrangements, etc.<<<<<<<

Not that I profess to be like, or want to be like Jesus, but imagine asking him those questions.

I choose to stand by my words alone. If I slip in a few bio things once in a while, they are really by accident.


Joseph Oppenheim said...

JMS wrote:

It looks to me that right now is the best oportunity to implement the fairtax.<<<<<

I do like the idea of a consumption tax rather than and income tax.

However, even if such a so-called "fair tax" is enacted (I am always skeptical when advocates of a position try to bias their argument with some prejudicial word, in this case "fair"), it still doesn't keep income taxes from also being added on at some point. We already have consumption - sales taxes. So, I doubt we could ever get to one or the other - sometimes local communities, states, etc have specific needs, etc.

The main problem we have about taxes is that the tax laws are too complicated. Probably, a better first step, then see if that works, would just be to simplify the current tax system. One was proposed in the 1992 election, which I think makes sense, where the tax return could be submitted on a postcard, with lower and low-middle income levels exempted, then only a couple of deductions - major categories, and with only a few tax brackets - but necessary to make the taxing system progressive.


Anonymous said...

I can design an income tax on a 3 x 5 notecard if we just need something simple: people in bracket 'A' pay a% of income, people in bracket 'B' pay b% of income, people in bracket 'C' pay c% of income with maybe 4 or five brackets. No deductions. This is simple and goodbye IRS.

However, if you tax me 30% on what I buy then you can be sure of one thing, I'll buy as little as I can get by with. If I'm in the market for a $30,000 new automobile then I believe that I'll just keep the old buggy and save $9000. I'm not exactly sure where that puts the auto business but I'm sure it isn't exactly going to stimilate its sales.

a concerned anonymous citizen

JMS said...

The consumption tax would not be like that at all. The tax would be embedded into the total price. The taxes the company pays are embedded right now as it stands. For example, Nissan has to pay income tax, payroll tax, and taxes for entitlements etc. This is all rolled up to the consumer. When you buy that car you are still paying the taxes. What you are stating is a common misconception about the fairtax. It is an inclusive tax (meaning it will be incorporated in the product cost) not an exclusive tax similar to state sales tax. The amount of taxes taken out would be adjusted to still fund the government. The cost of the car would probably decrease because the car company would not have to hire people to do its taxes. Anyways, now I'm sounding like a fairtax preacher which I didn't intend to do. The book is worth reading at least.

Anonymous said...

Guys hate to rain in the consumption tax parade but we've had one in Canada for twenty years. We still pay income tax so don't count on government replacing one with the other. They will more likely find excuse to have both.



JMS said...

Eh, thats true. I guess its good to hear other people's experience who have actually delt with it.

I guess we are just more likely to have a federal sales tax added onto everything. Hopefully by then I will have figured out the "Hermit" lifestyle.

Anonymous said...

All the taxes make me want to puke. Human greed, as you already know, is insatiable. Anyone who can gouge the earnings of another, will happily do so.

It doesn't help if half the human race is wiped off the face of this planet. The greed of those remaining would just double to fill the vacuum.

Anonymous said...

Why don't we try something different for a change? Let's adopt the idea that government is not the answer. It never has been the answer. For starters (not necesarily in order of importance):

1. Let's stop trying to be the world's policeman. Let the rest of the world take care of itself. We have our own problems.
a. abolish all foreign aid
b. withdraw from the United Nations and politely, but firmly, tell them to leave our shores
c. abolish all treaties with the United Nations
d. withdraw from NATO

2. We need to rebuild our defense system around the idea that we are not in this to control and manipulate the world any longer. Instead we merely want to defend our nation and it's interests.

a. Rebuild our Navy over the long haul back to a 600 ship Navy. We must not allow women to be in combat positions. This means that our Navy ships will not need to provide quarters for women because no women will be on them. Warships should be no frills afairs and ready for combat. This will save a fortune.

b. Rebuild our nuclear arms capability.

c. Work on a missile defense system.

d. Maintain a small but professionally trained core military.

e. Reinstate the state malitia system made up of local units. These men will meet and train initially for a peiod of 1 year for core training and after that they will meet once or twice a month. Common weopons such as pistols and assault rifles will be maintained at home. Other more powerful weopons will be maintained in regional command centers. This will give us an army in the tens of millions at a reasonable cost and they would be deadly to any invading army. They would also double in the area of civil defense duties. There is also the added benefit of being a check on government which is exactly what the founders intended.

3. Dismantle the National Education Department and return education to the states and to the local people.This will save a fortune that is wasted on social engineering and bureacracy instead of concentrating on providing the young with an education. Instead of trying to indoctrinate the young into being good citizens of the world we need to train them up to be good citizens of the United States of America. Concentration in education should be on the 3 R's and history and science. History should be true history and not a revised version. We learn history to avoid repeating passed mistakes. History that is not the truth has no value at all.

4. Most of the other federal bureacracies should be abolished as well. Whatever regulation that is necessary should be done on the state level where spending on bureacracies can be more easily controlled by the people.

5. The income tax should be repealed. The senators should return to being appointed by state legislatures which means they would be looking out after the state's interest as well as making them less likely to be bought out by large corporate interests.

6. The banking industry should be reformed by abolishing the practice of fractional reserve banking and also by abolishing the Federal Reserve System. This would take the control of our money supply away from the bankers. All people who take up a fiat money supply controlled by bankers eventually end up seeing their money become worthless. People need to understand that fractional reserve banking and the practices of the Federal Reserve System allow bankers to create money out of thin air. What they really need to understand is that a dollar comes into being when a dollar is borrowed - essentially out of then air. This is bad enough; however, when you add to the fact that bankers are able to charge interest on money created out of then air then it becomes an abomination that needs to come to an end. If we must play around with fiat currency then let the system be controlled by the people and for the people through the House of Representatives. We would all have a share in it and would be paying interest to the people, the states, and our government instead of to the bankers. I think it would be best, however, for money to be tied to assets with an intrinsic value. This might could be in combination with fiat currency. Most importantly, however, is control by people through their representatives wich are elected every two years. Anything would be better than worthless pieces of paper with a fancy design on them that require us to pay interest on every one that is created, not to mention the very much bigger problem of paying interest on blips on a computer screen where they are not backed up by any substantial reserves.

7. Free Trade is not free. Free Trade that is controlled by international organizations destroys our national sovereignty and will eventually reduce us to a third world society after destroying our middle class which is the backbone of our nation.

I suppose this would be a good start.

a concerned anonymous citizen

AngryTaxPayer said...

Since federal revenue is part of the topic here and I am an Angry Tax Payer, here are my thoughts...

If taxed at 5% and earned the following, tax revenue generated is...

10k/yr = $500
100k/yr = $5,000
500k/yr = $25,000
10m/yr = $500,000

Regardless of income level each is pulling their own weight in taxes.

Someone please explain to me the BENEFITS of a progressive tax system as currently implemented by our beloved government. Having those with low income pay no taxes and those with high income pay significantly more makes a clear statement. Our government does not encourage us to financially succeed. Why is this?

The answer is why you would never see a "fair", "flat", or "consumption" tax in the US. It is perceived by many of our elected politicians that all are unfair to its lower income citizens. Simply put, a significant number of votes would be lost. They call them politicians for a good reason.

If everyone pays the same percentage rate, regardless if taken from income or through consumption it equally spreads the burden of paying taxes by everyone. What a world we could live in if we could strip class warfare from our society. Until the government seriously addresses the tax structure, I will be the one in front carrying the flag waging the war until we have won.


Jim in San Marcos said...


I haven't read that book yet. But if it's like the VAT tax in Europe (Value Added Tax) it could work quite well. Business really doesn't pay tax in this country anyway it just gets passed on to the consumer (it sure sounds good at election time "Tax big business!).

Rob pointed out that they get nailed both ways in Canada. Congress might just bite on this idea.

I think a big part of any tax system is being able to collect what is owed. It isn't as easy as it seems. Lets face it a copy of Tax Cut used to prepare your taxes probably gets fill out 10 different ways until you get it "right."

As for Angry Tax Payers suggestion of a 5% across the board tax, I would suggest one modification. My neighbor next door is busting his butt making his house payment working 3 jobs. I think the guy only gets 4 hours sleep a night. Why not only tax the first 40 hours of work? If somebody is working that hard, he shouldn't be taxed for his sacrifice to provide a better life for his family.

I favor the old Roman idea. Every man owes one months worth of work to the government. You either show up for work or pay someone to take your place. Everyone pays tax, and it did get a lot of roads built.

The last thing to consider about taxes in a Democracy, is protection of the rich. They have to be charged for the protection of their status. Everyone wants what they have. So they get charged extra.

Joseph mentioned that the taxes are getting more complicated, I would like to add that they are also sneaky. $2 dollar recycle fee for an oil change, $5 tire disposal fee, $16 dollar recycle fee for a flat screen monitor.

Plus while I am at it, I apologize for getting mad at Joseph. It was out of character and I am sorry. I welcome all comments, but give me a reason to support your statements.

Jim in San Marcos said...

Hi Concerned anonymous citizen

I see your point on the 30% value added tax. Here in California, we are approaching 10%. On 30k car thats 3 thousand dollars.My work car cost me 12 K, used, and I tend to keep a car until the paint starts burning off of it.

As for your tax suggestions, bear in mind, it costs less to keep the present system than implement a new one. So very little will really get done.

You do scare me though, no women on navy ships, takes the fun out of a six month cruise.

Thank you for your comments.

Anonymous said...

Ok people I gotta tell ya that possum living site has sooo depressed me :) Help ! I can't live that way:)
Catholic girl

Anonymous said...

I would rather have a high school student, who learned the basic principles of an Economics 101 text and also learned how to balance a checking account, be the Treasury Secretary rather than Geithner.

Allowing big business CEOs who raped their shareholders, crashed their businesses, STILL took huge multi-million dollar salaries and bonuses, to walk away with impunity?

Allowing Wall St. to be so greedy and so complicit in causing the collapse of our financial system and hold no one responsible for it?

Salvaging banks with cash infusions and buying their toxic investments that they knowingly created?

Forcing banks to lend to consumers who are in debt up to their ears, have no savings, are unemployed or threatened with the loss of their job? Forcing banks to lend to businesses that are busy cutting costs, laying off and streamlining and conserving their cash?

This isn't stupidity. This is the intentional destruction of our country.

If you don't realize this, there is a bridge that I'd like to sell you.

Anonymous said...

I'm with you Catholic Girl about that possum living site. Things are going to get tough but I'm not going to be running to hills, too cold and snows too deep anyway.


AngryTaxPayer said...

Hi Jim,

I only used 5% to demonstrate my point, which was each income earner was pulling their own weight. For the sake of debate, the rate would be as low as possible so the US government can provide only the most basic of services to its people.

Your statement... "If somebody is working that hard, he shouldn't be taxed for his sacrifice to provide a better life for his family." I can't agree more! Your example only underscores my position that the government has no business embracing a progressive tax system which penalizes such sacrifices you mention.

Here is another example... Two college kids are working towards the same degree. One studies hard, puts in the time and gets a 4.0 GPA. The other slacks off, parties all the time and ends up with 1.5 GPA. In the end, the school says to the 4.0 student, never mind your hard work... we need to transfer a portion of your average to the slacker so that he can graduate.

What gets me the most Jim, is that some in our country would actually agree with the college's view point on a policy like that and label the hard working student as "self centered, stingy, and a non-team player" for fighting for the right to keep is GPA!


AngryTaxPayer said...


Speaking of the title to your original post "It's Only Money," I can't help but bring up the parting-of-the-sea bailout legislation that just passed the Senate.

What scares me is this is just the beginning of many 12 figure spending bills to come. It was times just like these back in the 30's that brought on massive new government spending and programs by FDR.

Since hope seems to be the mantra of the new POTUS, if what is happening today mirrors our past can we expect to see some major damage from our government to the country over the next several years? I can only HOPE it doesn't lead us to repeat the early 40's also.

Would you agree that once this bill is signed by the POTUS, we can officially mark that date as our country being in a full blown Depression?


AngryTaxPayer said...

ATP said...

"...please provide your age, education level, employment, social status, number of children, living arrangements, etc."

Joseph's response...

"I choose to stand by my words alone. If I slip in a few bio things once in a while, they are really by accident."

Jesus? Asking questions? G-wiz Joseph, your all over the map! Do you even read what folks say before you make comments?


Anonymous said...


Gotta say last post onprevious thread was pretty funny. Gave me a chuckle.



Anonymous said...


Everyone... don't acknowledge or respond to any of Joseph's posts. Better yet don't even read them.

He disrupts this blog constantly and wastes everyone's time.

If this continues and people keep debating with him. I'm leaving this blog and won't participate any longer.

Anonymous said...

Joseph is dysfunctional. Sort of a "lights are on, but nobody is home" case.

Senile? ADD? Alzheimers? Low IQ

Whatever it is, he's ruining this site.

Jim in San Marcos said...

Hi Tom (Angry Tax Payer)

We kind of back ourselves into a corner when accept the politician's cry "Tax the rich." It sounds great because I don't happen to be in that group. It's really "Tax the people who work."

In reply to your second question, I'm guessing about another 3 to 6 months before the reality of the situation sinks in, then we will see the depression (in the rear view mirror). The reason I say that, is that Congress is still thinking that the check book can fix the present problem.

I can see where Congressional support of the state budgets would be a good thing, but spending to employ 4 million people boggles the mind. California is going to lay off 20,000 workers because of budget shortfalls. My only question is what makes everyone think that spending will solve the problem. It was too much spending that got us into this mess. It's a little like trying to spend your way out of bankruptcy. The irritating thing is that Congress is spending tax's we haven't even paid yet. To say I don't like this, is an understatement.

Jim in San Marcos said...

Hi Anon 10:45

I agree with you whole heartily.

The trouble is, they might be dumb enough to buy the bridge you want to sell them, but you might not like their financial arrangements to pay for it.

Thank you for your comments.

AngryTaxPayer said...


I have no choice but to agree with the support for state budget relief, only for the fact that I believe it will stave off possible uprisings that could occur (i.e., dealing with angry unemployment recipients who's benefits dry up prematurely)... but at the same time, its hard to swallow the pill because taking from the masses to cover fiscal irresponsibility of state budgets crosses state and moral boundaries.

Nothing against your state Jim (I lived there for 10 years and it does have its attractions), but to continue funding expensive state social programs that cross state and border lines from federal funds goes beyond reason. For example, California spends millions perhaps billions on providing health care for illegal aliens.

I have not heard one word of congress adding restrictions to states receiving federal aid. Perhaps our government could insist that states can spend the cash only on unemployment benefits, fire, police, and food stamps. At a minimum, the first requirement should be to have sates discard inefficient, over funded programs and cut wasteful spending.

Anything less would never get the states off the government's teet!


Anonymous said...

Your comments on this blog provide a counter-balance to the view of the majority, who not too long ago was in the minority.

We need different views so we won't fall into the "group think" trap.

Jim in San Marcos said...

Hi Tom (ATP)

I agree, a lot of the waste will stop. California can't afford everything that is funded. Many programs will be cut.

I use to hear about budgets where either you spent it or lost it, so they spent it. I think that is going to change.

The lack of funds will change a lot of the programs that people count on for support. The money just isn't there.

Times are tough--And getting worse.

Anonymous said...

Looking past the veneer you can see the reality. It is so incredible that it makes it unbelievable and thus invisible. That is how they function. The globalists are making incredible progress. They've been patient. They've used Greenspan to really set things up over the last 15 years. Clinton, the Bushes and Obama are unwitting pawns in the game. Congress doesn't have a clue. The money masters have pulled the rug out from under us. 2008 began the crash that they've planned out. It is set up so there is nowhere to turn... it's a self feeding frenzy in that every component is bringing the other component downwards. The Fed Reserve is deep into the US government now. Bernanke is covertly implementing policies that Congress and the public can't even understand.

The American public are too anesthesized and uneducated to understand what is happening and will be plundered and pillaged and put into shackles.

Right now the forces of evil are dominating the scene. The forces of good must rise up and overturn them or there will be a modern version of the dark ages.

Realize that it is the incredibleness of this all that keeps it from being believable. Yet what is happening is more real than the head on your shoulders.

JMS said...

In regards to people bashing Joseph about his viewpoints. He does have contrarian viewpoints. I do take the time to read his posts and I think he adds value to our debates. I don't think its wise for us to shun him because of this. We should try to learn from everyones perspectives.

I appreciate your comments Joseph, Hope you don't leave.

Anonymous said...

I agree with you JMS, it's still a democracy even online.


Anonymous said...

Why don't we talk about our money? Why don't we talk about how the FED operates and how banks operate? What is your understanding of the banking system and how it operates?

It is my understanding that the Federal Reserve System is a quasi- governmental agency that is controlled by bankers and the regional FED banks are privately held corporations. Is this so or is it not?

It is my understanding that most commercial banks operate with fractional reserve banking where if they operate with a 10% reserve then they are able to loan out 9 additional dollars for every dollar in reserve. Is this a fact or not? (I'm just using the 10% figure for example purpouses). I'm just asking.

If it is so then it means that money is created when a dollar is borrowed and destroyed when a dollar is paid back. In other words it means that if a man borrows a million dollars to set up a factory then the bank has $100,000 in reserves but then the other $900,000 is simply a checking or drawing account that is set up for the man by the computer in the bank. Then say the man starts paying back $10,000 per month as payments. So in the first month he pays back this money which again becomes reserves and then the bank is able to loan out another $90,000 and so on down the road. Is this one of the ways that money is created or is it not? So when we 'prosper' the money supply grows and during a recession the money supply decreases. Naturally it is a two way street - money is always being created and destroyed on an ongoing basis, i.e. money is being loaned out and money is being payed back in. When economists and financial types talk about monetizing debt is this not one of the things they are referring to? I'm just asking because I have read these things at many places and want to know if it is partly how our money works and is one of the reasons why our money is called fiat money or money by government decree.

One of the books that I have read a couple of times is G. Edward Griffin's "The Creature from Jekyll Island, A second look at the Federal Reserve". Have any of you read this book?

Is another way that money is created through the selling of government securities? I'm asking these questions because I'm not a genious of finance or an economist nor a monetary expert; I'm just an ordinary engineer who has worked hard for most of my days on this earth and may very well loose everything I own in the coming year. Some of you seem to be financial types, and in general a likeable bunch of people so I just thought that I would ask these questions.

If our money is created like this it means that bankers are drawing interest off of money that is created out of thin air when it is borrowed (the checking account money created through borrowing, or a part of it). Also I realize that people, companies, foreign governments buy government securities and that money is not created necessarily in these instances but when not enough are bought then the FED steps in and takes up the slack and when this happens money is essentially created out of thin air or out of debt (government debt) once again. However, banks are also collecting interest on this money as well (many banks are stockholders of the FED regional banks, are they not?).

In Griffin's book he had a summarizing chapter that was entitled the Mandrake Mechanism. He named it this because there was a comic book character named Mandrake the Magician that had a habit of creating things out of thin air. If you google 'mandrake mechanism' you will see several sites which speak of this up near the top, one of which is:

which actually has the whole chapter on a forum post. I just wanted to ask you people what your opinion is of this subject.

(this is the only page I've seen on this site so go at your own risk)

If this is not the case then how does all of our money come into being? I mean if our government created the money out of thin air then why would the government be in so much debt? If the government does not create the money out of thin air, and it doesn't work in this manner, then who creates the money and who is paid the interest?

This is a facinating subject that I would like to get my mind around. It would also partly explain a lot of things. For instance, if the 1913 dollar is the reference dollar, I am told that our present dollar, or at least the dollar of 2006, was worth about 4 cents. Who knows what it's worth now? So, in other words, more money than what the economy actually needs is created every year out of greed or stupidity, or what have you every year and, because of the common laws of economics, we have too many dollars which means the dollar is constantly devalued because of the laws of supply and demand. This would be the correct way of explaining what inflation really is - or at least that is what I am told, and that inflation is merely a hidden tax on the American people which benefits those at the beginning of the money creation process but severely harms those who are downline from them, which are usually those who can least aford it.

If a man, or group of men, could charge interest on money created out of thin air then I would think that man would eventually become very powerful.

So is this all a bunch of crazy hogwash, or partly so, or pretty much factual. It's something I would really want to know and get my mind around.

an anonymous concerned citizen

Jim in San Marcos said...

Hi Rob

I agree, we were all young once --we were poor listeners but we had a message we considered very important for anyone that would listen.

To be young again---

Anonymous said...

BTW, Jim, when I scrolled back up to the top of the page after posting your title hit me square in the eye. "It's Only Money". That's a pretty catchy title when you come to think on it. Once upon a time money was gold or at least backed up by gold. What in the hell is money now? Hot air? I once read that it took a German citizen almost a wheelbarrow of German Marks to buy a loaf of bread near the end of WWII. What in the hell is a loaf of bread going to cost us in a year or so? Do you think we will have hyperinflation and what will it be do you think? BTW, I love your blog and have been coming here for about 6 months.

an anonymous concerned citizen

Anonymous said...

Hey, ya know, if we all had the same opinion and beliefs then we wouldn't have to ask opinions or even discuss anything. There wouldn't be much point in blogs either.

Besides, we still have a certain amount of freedom of speech - for the time being, anyways.

BTW, I prefer the term Republic, for instance, instead of the term democracy. Republic means our rights are spelled out by a covenant with the government called the Constitution, whereas a democracy means our rights come from the will of the majority of the people. Unfortunately, the will of the people can do flip flops in just a generation or less. Ya know, I have sort of detected that everyone started using the term 'democracy' instead of 'republic' about the time that everything in this country started going really haywire. I have a bumper sticker on my truck that says "We have a Republic, not a democracy. Let's keep it that way." Now, it might be more appropriate to have one that says something like "We have a Republic, not a socialist state." I'm really not sure what we have anymore,or at least will have in a year or so.

an anonymous concerned citizen

Anonymous said...

We work for money. We don't work for goods. So when our government defiles money, it turns money into toilet paper. We then work for nothing. That's what slaves do - they work for nothing.

I have been thinking about the size of this crisis. The losses must be in the range of 50 to 100 trillion dollars or more. The private sector has lost $15 trillion already, and yet, that has not taken value down to where it makes sense to invest again. Also, the US government has committed $10 trillion to fight the fire, and yet again, it is not enough to turn things around. So the losses must be much, much bigger – beyond the capacity of the US government to contain it.

The entire financial sector is probably insolvent now – banks, mutual funds, pension plans, insurance companies, etc. This means many of us could be bankrupt without knowing it.

One thing that we do have is the illusion that water will be pumped out of the sinking ship faster than it is rushing in. This gives hope to the people, and it keeps them in their place.

To save the ship, we need wise and drastic actions on a massive scale. I am not seeing that. I see massive actions that are mediocre, perhaps even fraudulent.

We probably won’t die from this crisis, not all of us anyways. We’ll just be a lot poorer. Welcome to 60-hr work weeks.

Jim in San Marcos said...

Hi Concerned Citizen

here is a link to a post from last May 8th titled Bernanke's Hail-Mary-Pass

There are two stories, one with pictures and the other with words. The picture one shows the decline of the German Mark. I had fun putting that one together.

We could have hyperinflation one or two years down the road. The real issue is if the government increases the national debt to say 16 trillion and the interest rates hit 15% we wouldn't be able to meet the interest on the national debt. I'm guessing that we could see two or three countries in that position this year. Examples like that could sober Congress up.

Jim in San Marcos said...

Hi Concerned Citizen

On your question about the Federal Reserve Bank, it is pretty much a clearinghouse for checks and interbank deposits. They can be a lender of last resort, which keeps a run on any bank from really following through. I could be shot for over simplification so take it with a grain of salt.

As for fraction reserve lending, you can lend out $9 of every $10 deposited . Deposit one million and then the bank can loan out 900k using your 10% reserve example.

In good times, fractional reserve lending increases the money supply. In bad times it does the reverse quick and fast. The trouble in this case is, the savings deposits can be withdrawn from the bank within days, whereas the loans might have months or years on them. At that point the Federal reserve would step in and help the bank stay solvent.

Haven't read the book, but I'll keep it in mind. Take care

Anonymous said...

Uh uh Jim.
The Fed Reserve is a non-government, private organization with the names of its shareholders kept secret. It charges the US Treasury to print its money. It controls the central banking system. It intervenes in business by manipulating interest rates and with monetary policies (it prints money and causes inflation or pulls money out of the money supply causing deflation). It came into being in 1913 along with income tax. It was actually income tax and The Fed's and the governments interference in business that caused the Great Depression. The Fed is as federal as Federal Express. They took that name so the masses would think they are part of the government. Rothschild was behind this. He said, "Give me control of a country's currency and I care not who makes the laws."

Wake up everybody.

Until we abolish the Fed and income tax America will continue to sink.

Anonymous said...

cnertesJim, I tend to disagree with you. I believe there is something to this. If the FED was just a clearing house then why does it object to regular audits. The FED has never been properly audited. The system itself is a guasi-governmental organization but the regional banks are privately owned corporations. The member banks own them. However, in essence, this means that large banking interests own them. Obviously we don't have a lot of small independent banks; we have mostly large banking corporations that own most of the banks.

The president and the congress have virtually no control over what the FED does. I wish that you would look into this more deeply and into how the FED came into being and who were the ones behind the creation of it. Nelson Aldrich was the banker's senator, then you had people like JP Morgan, Rockefella, Paul Warburg, and a few others who engineered this. Paul Warburg, incidentally comes from a line of central bankers from Germany and was heavily influenced by the Rothschilds. These men were also instrumental in putting President Wilson in office which led to the passage of both the income tax and the Federal Reserve; Colonel Edward Mandell House was their man in the White House. This information is pretty much an open book and can be confirmed by more than a number of independent sources.

Check out Ron Paul, and check out the Ludwig Von Mises Institute which is affiliated with Auburn University. All of this is pretty much just an open book for all who want to investigate it.

The Constitution demands that our money be backed by something tangible and that it be controlled and regulated by the House of Representatives. This doesn't mean that they just turn it over to a bunch of bankers and walk away.

How do we go from a country whose currency is backed by gold where everyone knows what their money is worth to a country where we have a country whose money is nothing but fiat and might as well be hot air? You would think that Americans would be just a little more interested in how their money works and the history of our country. If recent history teaches us anything it should teach us that we cannot trust these bankers to control our money.

Perhaps if ya'll don't have time to read the book and check into this a little more deeply then at least read the chapter that I have sent you to. They are presently in the process of globalizing our money and instituting a world central bank. Once that happens our money will be totally out of our control. A nation's control of it's money and it's financial affairs are paramount to it's maintaining it's sovereignty. I wish you all well and best of luck in coping with the disaster which is ingulfing us.

a concerned anonymous citizen

Anonymous said...

Sorry, Jim, those few letters before your name were the security letters in the little box that you fill in to make shure that I'm a human and not an internet bot. I guess my cursor was still in the post box. God bless

an anonymous and concerned citizen

Anonymous said...

Jim, you said above, "As for fraction reserve lending, you can lend out $9 of every $10 deposited . Deposit one million and then the bank can loan out 900k using your 10% reserve example."

I'm attempting to find out now the actual pecentage required. However, on the FED bank of Dallas, Texas, they candidly say this:

"How Banks Create Money

Banks actually create money when they lend it. Here's how it works: Most of a bank's loans are made to its own customers and are deposited in their checking accounts. Because the loan becomes a new deposit, just like a paycheck does, the bank once again holds a small percentage of that new amount in reserve and again lends the remainder to someone else, repeating the money-creation process many times

The tricky part of monetary policy is making sure there is enough money in the economy, but not too much. When people have the money to demand more products than the economy can supply, prices go up and the resulting inflation hurts everyone. While in the United States we get concerned when inflation climbs above 3 percent a year, we've been more fortunate than some other countries. Just imagine trying to survive in post-World War II Hungary, for instance, where inflation for awhile averaged nearly 20,000 percent per month!"

This would seem to not indicate anything approaching 90% in reserve. Also notice that it makes clear that money is created in the lending process. The title of the paragraph is "how banks create money". A dollar comes into being when it is loaned. It is extinguished when it is payed back. And, remember, the banks charge interest on the money they create out of thin air. However, in your statement you seem to imply that, for the most part, the banks are loaning out money that is on deposit and are not creating it at all.

I would say that this quote from the Dallas FED is from the horse's own mouth.

Read this paragraph carefully. If what you are saying is true then they wouldn't be creating money at all. They would merely be loanining out what their customers already have on deposit. This statement of the Dallas FED clearly and candidly states that they create money when they loan it and mentions a small reserve. Am I reading this statement wrong?

an anonymous concerned citizen

Anonymous said...

Here's another candid statement:

"Conducting monetary policy is a tremendous responsibility, for the nation's economic health is at stake. You can see why politicians might want to control the money supply for short-term interests. For that reason, the Fed, by law, is not government controlled or funded by Congress. While it is a centralized banking system comprised of 12 regional banks, it is independent in operation."

I will be the first to admit that politicians might operate in their short term interest.

Now, let's be frank. This clearly indicates that the FED operates independently of the government and politicians. It pretty much decides what it wants to do and sets it's own policy. It's meetings are behind closed doors.

Now, are we suppose to believe that we are better off with this system? A banker would never operate in their own short term interest would they? If anybody belives that is true then I've got some swampland down in the Gulf of Mexico I'd like to sell them. At least we can throw out our representatives every two years.

an anonymous concerned citizen