Here are two coins, an old silver dime and the new Presidential dollar coin. Just for a laugh, which one is worth more? Answer; the silver dime is worth about 9 cents more.
To be a millionaire in the ‘1960’s meant something. In today’s world, a millionaire is a piker with 100K in 1964 dollars. Inflation makes people think that they are getting richer. People are making more money and their house and other investments have appreciated. What could be better?
Inflation is the hidden tax. Government spends a little more each year than they take in, probably about 3%. Over a 20 year period, the decimal point moves over one space to the right (i.e. $1,000,000 becomes $100,000). This worked pretty much OK until they passed Social Security.
When you contrast the silver dime with the new dollar, a new problem becomes visible, inflation taxation vs COLA (cost of living allowance) linked retirement benefits. What is different now, is that most of these retirement items that everyone depends on, were locked into the dime that was made of silver. So now benefits have to pay at the old dollar rate, inflation adjusted. As long as the dollar could inflate without COLA's, there was no problem. Once Congress linked the cost of living into retirement benefits, it created a monster that would bite them in the ass with every COLA increase.
Let's add to this, the health care package for seniors. Imagine, at the age of 55, your health insurance cost is $300 per month. What a relief that at age 65 it will be free. We are still talking BUBBLES, and this bubble is bigger than all of the rest, and is not going away. Give it another 15 years before it's visible. The real question to ask; "Is it possible to believe that we, the people (the government) are really going to pay for what, we the people, (as individuals) could not afford to pay?
Well, this kind of gives you an idea of where we are headed. They have super sized the dime and called it a dollar. So size does matter to your Congressman, doesn't everybody deserve a bigger dollar?
The government claims the inflation rate is under 3%, that keeps the COLA's low but kind of ruins their credibility. The real rate is probably closer to 12%, that's if you buy gas, milk, meat and beer. (Who can afford to buy all four at the same time?)
11 comments:
"Here are two coins, an old silver dime and the new Presidential dollar coin."
No coincidence that POS looks like a worthless casino slug.
Snoop-Diggity-DANG-Dawg
I have been saying the government is going to have to allow inflation to increase. They can't raise taxes enough to cover all of the deficits. They can't cut all of the hand-out "Entitlement Programs". They can't reduce the government pensions they now cannot afford to pay. The government in Greece tried to cut these things and they had actual riots in the streets.
Payments will have to be cut for Services, Pensions, and Entitlement Programs. They won't be able to actually cut these things. They will have to do it in a backhanded way ---- keep printing money to force inflation while dragging feet on cost-of-living payment increases. In this way they can make it look like they are not cutting and avoid riots. Everyone will still be getting their handouts and even some increases, but prices on everything will double and out run the increases.
It's coming--- 12% interest rates, $6 loaf of bread, $7 per gallon gas, $95 carton of cigs, $30 twelve pack, $8.00 Big Mac --- with fries and med. drink that combo will be $15.50.
Inflation has no effect on most people who retire from government jobs.
In Calif., a state employee can retire at age 55 or 6o, get 90% of their salary, free medical care for the family, AND annual cost of living increases.
see pensiontsunami.com
Jim,
This is regarding the earlier article. I had said it was PIIGS and you had voiced that Italy was strong and not a problem like the PIGS.
Well... take a look at this:
http://globaleconomicanalysis.blogspot.com/2010/02/italy-bigger-threat-to-eu-than-greece.html
Hi Snoop
I agree I did an article way back on the quality of the new coinage, it is rather pathetic. It's as if some 80 year old with severe arthritis is striking each coin. After 5 years of use, they will all look like blanks with no relief or design left.
I buy the silver mint set each year, the contrast in quality with the regular coinage, is very obvious.
It makes you wonder about the parts of government that aren't so visible.
Hi Ohio Loan Officer
I know what you mean. Potato chips are almost $5 a bag. This new movie that came out Avatar was $12 apiece for my son and his date. Two months ago him and I went to a movie--Senior and Student tickets were $8.
The fact that toilet paper is now a buck a roll, kind of makes me wonder where we go from here.
We might not have to wait long for your predictions to be fulfilled.
Take care.
Hi Anon 8:26
I think you are in for a rude awakening. If your government plan files for BK it isn't going to be a cake walk. Here is a link. The medical drops, and the max amount to draw would be about 54k at age 65, not before.
Plus you can probably figure that they would subtract the Social Security benefits from your entitlements.
So if you are 55 retiring with 100k a year in benefits, you might just want to get a job for the next 10 years.
San Diego may file for bankruptcy within 2 years. They are underfunded for pensions.
Hi AIM
Thank you for the link.
I was just adding some humor in a round about way with Italy.
I tend to be a little more lenient with them, because we import a lot of stuff from them.
If the other four (PIGS) countries pull out of the EU, it is pretty academic what Italy does. At that point the Euro as a currency is toast.
If all of the countries write off their debt, the exporting countries will still be open for trade, whereas Greece, Spain, and Portugal will just corkscrew into anarchy and political rebellion.
This Euro currency is a very hard call. It has to fall apart in my opinion, but I could be wrong.
Sadly, I have no crystal ball. Take care, and thank you for your comments.
In my humble opinion...
A central system and a single currency over 19 or so countries, that doesn't allow each country to individually deal with their fiscal/monetary concerns is doomed to failure. I give the Euro 5 years max before Germany, France, etc. pull out and regain control of their own financial situation.
AIM
Hi AIM
I couldn't have said it better. That's what it is all about. The Euro is a little like a family where two or three people are slaves to all of the rest. The poor countries have to "run away from home" to be free.
I think we could see some rather dramatic military action in some of the poorer states like Greece and Spain in the coming months--the debt slaves will seek liberation. You can't really blame them. What do they have to lose?
Speaking of debt slaves, and pensions, I heard that one can opt out of social security by signing a form. I think that could be a good way for the younger generations to walk away from all of this.
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