Sunday, March 31, 2013

What Seems So Clear On A Personal Level

Each of us if left to solve the world’s problems would have the job done in weeks or maybe a few months at most. The trouble is our solutions are not the same as what your neighbor might offer. What we have in Congress are a bunch of “do gooders” who want to solve world hunger and give everyone Democracy. Each solution to a problem creates new problems.

On a world level, providing food for everyone is a noble gesture, with unexpected results. World population would increase as a result and the demand for resources would be taxed even more. Feed the world now, only to have many more hungry people in the future willing to die for the resources we were willing to share with them in the past (Japan entered WWII in a quest for resources). Of course another problem of not feeding these future starving masses is that they become incubators for diseases not even in existence yet.

Take Obama- care is it really total health care? Is there any mention of dental work, hearing aids and eye glasses? How about rest homes for the elderly? No, we are only covering health care from age 0 to age 65. What is covered right now is pretty straight forward. You get shot by the police, you have no medical bills to pay. New cancer treatment drugs are $2,000 per day (what if you need the drug in order to live another 5 years?). What happens if some new miracle drug extends life another 20 years? The plan in place has no adjustment to what entitlements each individual in his or her life is entitled to over their lifetime.

Social Security was supposed to solve the problem of old people dying destitute. They didn’t have to depend on their kids for support. Of course where does the government get the money from to pay retirement benefits? You guessed it, your kids. Social Security coupled with health care along with advances in health care has created a new problem; old people living past their retirement savings. This is an individual issue. The real group issue that seems far removed from the problem is that these social programs are spending our government into the poor house.

Then there is government thinking verses the group think of providing services to all in need. The government created Social Security in order to be able to tax people through their employers. The initial payouts were small but the taxes raised were huge. Seriously, folks, do you honestly think that employers pay half of your Social Security and offer free health care? If you are self-employed, you know the answer both questions. Obama care wasn’t made to provide health care, it was designed to pay for the health care already in place being paid for by government. In essence, the age group from 18 to 45 will be taxed to cover this new “benefit.” Notice the individual envisions a health care plan, whereas to the government, this is a tax based revenue stream. Remember Social Security and Obama Care are not entitlements, only a promise of future benefits. The Supreme Court has ruled both are taxes.

What we all need to realize, when we talk on an issue of government spending or health care, we are all on a different page, the topic joins us together as a group. Our mental vision of the plan fails us only when our individual expectations are not met. And that’s what happens in a Democracy. The problem is, when you redefine it and make it even fairer, you are now defining socialism.

We know that we are headed off the cliff and each and every one of us has a solution that could stop that from happening. The trouble is, the group solution is to use the processes already in place. It kind of like buying a car with 5 other people; you want a sun roof and someone else wants ashtrays and cup holder for his beer. The car you end up “buying” isn’t the one you had envisioned—in fact, it is far from it.

In a Democracy, we need to define the government’s contract to each individual on an equal personal basis. If we define the contract on need for the individual and consider it a blank check, there is unlimited liability for the government and this smacks of socialism.

To sum it all up, we are leaning to live with inflation and the new government programs. Ask yourself one question, “Are they going to make a larger bill for currency, like a $1,000 dollar bill. The gas pumps still won’t take $50 or $100 bills, maybe it is time for reality to kick in. Where can you go on a twenty dollar bill? What's really intensely clear on a personal level, the advent of a $1,000 dollar bill would confirm our suspicions about what Congress has been doing to us. Of course, forgive me, it's just my imagination running wild again.


AIM said...

Hi Jim,
Responding to this and to your response to me in the last article...
there are a lot of paper claims out there for a finite amount of actual tangible wealth (securitized investments, derivatives, etc.) meaning there is a lot of debt and paper that will have to be destroyed still, and a lot of losers will appear. Wages aren't really going up and won't. We are going the way of Japan (20 years of QE and they are still in deflationary morass). Yes we have the continuing creeping inflation that we've always had (not making the water too hot, too fast, to keep the frog from jumping out of the pot) Inflation can't move into high gear unless there is an increase in the velocity of money and that will only happen when the average American knows he needs to get rid of USD as soon as he gets it and convert it into tangibles (I would think that that awareness and action is still a long time coming). Banks and government are in cahoots. Banks don't want inflation as it would destroy all of their loans and cash holdings. They are trying to recapitalize. I wouldn't completely rule out deflation.

Jim in San Marcos said...


Personal perspective could be something I have overlooked. If we divide the population into three groups; under 20, under 40 and over 40, inflation is perceived differently with each group. The people under 20 have never experienced inflation or deflation. Whereas the people under 40 probably view the housing boom and bust as inflation and then deflation. The people 40 and above are looking at their savings that have lost purchasing power to some degree.

When we were under the gold standard, the bank knew when it lent $20 it would get back the same amount with interest. The gold standard prevented governments from printing money. In my opinion, without that control, it's kind of like turning a pervert loose in a day care center. Your not sure what will happen when, but you have a pretty good idea of the end results.

Presently I have had no cost of living or pay raise for 3 years and I'm not seeing any deflation. My dollars don't go as far as they did before. So through the inflationary process, I'm being paid less in actual terms. So I guess it could be considered deflation of sorts. The employer gets more for his dollar. Kind of a conundrum that cuts both ways.

AIM said...

Your point of perspective is a good one Jim. Of course we know we've been a frog in a slow boiling pot ever since 1913 with the birth of The Federal Reserve and Income Tax... inflation has gradiently ravaged our purchasing power. But there still is the potential for deflation or deflationary periods due to the imbalance between paper claims and real tangible wealth. I believe Nicole Foss, A. Gary Shilling and Harry Dent all make a good argument for deflationary winds to hit us at times.

I'm in the USD now and using it to make money although I know when the indicators of massive inflation hit us (M2, price of oil, wages) I will need to shift out of paper money and into hard assets, in the hope of preserving some of the small amount of wealth that I have.