Saturday, July 13, 2013

Poorly Thought Through Concepts

Many people in the United States think it would be great to give the rest of the world Democracy. Right now, millions of Egyptian Muslims are rioting, who by just voting and winning one election, think that the army has ripped Democracy away from them. If you are uneducated poor and starving, you cannot afford Democracy, it has no meaning. It’s a little like a terminally ill person winning the lottery, the money means little. Democracy has nothing to do with winning an election and then telling everyone around you how to reproduce, live and worship. Hmm— on second thought I could be wrong on that---

Obamacare for everyone including those with extreme health issues and no insurance sounds very noble. There is one problem, Health insurers have figured out that really sick people don’t work, so if they drop individual policies, they eliminate those people who could be their greatest liability. And of course, if the health care insurers raises rates too high, they will be banned from selling insurance—kind of reminds me of the quote “Please Brier Bear, don’t throw me in the Brier patch.” Employers have figured out that keeping the number of employees under 50 does have advantages. And of course keeping the work week short, under 30 hours, keeps benefits low. How all this will help a hamburger flipper get health care coverage escapes me.

Feeding the worlds starving masses seems very noble also. The trouble is if the world population increases another two billion---then, people have to starve and die, in order for your family to have the food they need to survive. Our world is a little like a fruit fly experiment, where you enclose one banana and two fruit flies in a beaker and watch what happens. You end up with a beaker of fruit flies and no banana (assuming the flies are not gay).

Many think the burning of fossil fuels is having no environmental impact on our world. But the catastrophic weather of the last year or two has been very unsettling. Let’s hope it’s part of a cycle that is over for now. We can ban the burning of coal, but we can’t stop the mine owner from selling his coal to China. Also, the idea that the government subsidization of the production of ethanol is going to solve the oil shortage, doesn’t really work. A gallon of gas with 15% ethanol doesn’t produce the gas mileage of the real thing. It does however raise the price of beef (corn fed cattle may be a thing of the past). Converting food to ethanol, to burn in an auto and paying people extra to produce it, is only something that the "Sad Sack" group in Congress could think up.

The thing not realized with all of the above mentioned, is that we have created ways of life that revolve around models that have worked well for us in the past, like the phrase; “Real estate will always go up in value. “ What most people haven’t realized, is that the game is changing, but our thinking hasn’t. It’s often repeated; ”The USA is the greatest country in the world.” It was at one time. Repeating the phrase doesn’t validate it; but repetition is a form of personal validation, and it works quite well. We don’t consider ourselves as fruit flies, but what the rest of the world does, could finish off the banana. Everything is inter-related. The new phrase to repeat is; “Technology will save us.” Start repeating it! If you don't like that phrase, try this one; "I am not a fruit fly." Repetition will be our salvation ;>). Enjoy the banana.


AIM said...

Empires come and empires go. We know that from our written history that goes back about 14,000 years. I think the Vedic Hymns are the earliest writings of man (that have ever been discovered to date). Before that it was just word of mouth and the passing down of events and stories. Who knows how many civilizations have actually existed on this planet. Anything we've been told by "experts" regarding the past is just speculation.

The American Empire will eventually fade and turn into dust as all empires have. Technology may speed its demise along (and I hope it isn't the misuse of nuclear or atomic technology).

There is the missing element, the holy grail, as to why man can't properly function for long term survival in a group or nation. That would be THE important discover of the eons.

Anonymous said...

AIM, the "missing element" as you call it is certainly no secret and it's hardly a mystery. The reason it keeps repeating lies in its own seeds.

Whenever a society becomes too prosperous and entrenched in its ways, the more the disconnect grows between the leaders and the workers. This leads to discontent in the lower and middle classes, but the genius inherent in the system allows the upper classes to retain their bounty and so their control. This is also why, for a time, the focus of the legal system shifts to individuals instead of processes - the law is fundamentally broken but can't yet be changed without risking an upheaval.

Initially, just like in Rome, the lower classes can be bought off with some of the excess bounty that the system creates. This puts an undue burden on the middle and lower part of the upper classes, and eventually the impetus to create that excess disappears. Outlier farmers who were paying huge taxes to Rome but couldn't even get protection from invaders simply tilled up their fields and went on the dole. Leaders became insane and indulged their own degeneracy instead of protecting the republic. In both cases propaganda, both pro and anti-Rome, was rampant and highly exaggerated as tempers flared.

The founding fathers built many safeguards into the Constitution to attempt to try to resolve differences peacefully, but many of those safeguards are being purposefully short circuited in the Judicial branch. Even very ignorant people no longer buy politician promises and understand the law is based off what they can grab. This is not a healthy nor is it a very permanent state of affairs - either we shift into a temporarily poorer state while we transition to the next stage of the nation's greatness or we take a permanent hiatus and end up like Britain in the 19th century, a fallen power who gives the mantle over to the next up and comer.

Anonymous said...


I believe you have previously indicted that you think we will be coming out of the depression we are in around 2020.

I would appreciate your thoughts on the following post which seems to argue that we will be entering the real depression beginning in 2020:


Jim in San Marcos said...

Hi Anon 8:27

We may be splitting hairs here. The great depression started in 1926 and we hit bottom in 1933. It wasn't until 1933 that everyone accepted that fact. Real estate collapsed in Florida with the 1926 hurricane, the stock market crashed in 1929 and more than 4,000 banks failed in 1933 alone.

The graphs suggest "the patient" is on life support

Jim in San Marcos said...

Hi Anon 8:27

Thank you for the link. To answer your question I think that something else could hit the fan in 2020. As long as the rich get richer, there is a concentration of wealth that is too large to be spent. And this is a good thing. The baby boomer's are just starting retirement, so the drain on saving in the bank is minimal. If the stock and bond market take a dive, this would increase the rate of retirement withdrawals.This spending would be additional consumption with no increase in production--inflation. What we could be looking at in 2020 is a worthless currency.

Without a viable currency, a city like LA could starve to death with no food or gas deliveries. It would be a logistical nightmare. You wouldn't be able to leave the city even if you had a full tank of gas.

On the positive side, the national debt would be gone. And all your debts would be gone. And the bad news, your savings would be gone as well.

Anonymous said...

Jim, the stuff you speak of are POSSIBLE but not PROABABLE.

It is possible to be struck by lightening but not probable.

Everyone should prepare for black swan events but it doesn't mean you should expect them to happen. In my honest opinion, after reading your log for years, you are confusing the possible with the probable.
The time to be fearfull was between 2007-2010, now it is time to be profitable.

Time will tell all.

Jim in San Marcos said...

Hi Anon 12:29

I was selling real estate back in 1998 and got out of it in 2001. I couldn't justify telling people that it was a good time to buy a home. I wrote letters to my Congressman and to the head of the Federal Reserve pointing out the real estate bubble and what a travesty it was. Nobody wanted to hear it. That's pretty much how this blog got created, out of frustration.

I have studied the Great Depression for over 20 years as kind of a hobby. What I have learned, is that history is a series of cycles that repeat.

Realizing that the Bond market can't sustain the present low interest rates and stock market can't grow to the sky, leaves opportunity for investing.

I was "wrong" about real estate for 7 years before people started to change their minds.

What I suggest for the future might or might not happen. I am not scared to say what I think for fear of being wrong.

Is there any particular day you would like to be struck by lightening? I'll see if I can fix you up;>)

Anonymous said...


Bill Fleckenstein has made comments to the effect that
folks have no idea how ugly this will all be at some point.
When asked to expand on what he meant, e.g. A recession, depression, or something else, he responded that if the bond market revolts in a big way and stocks crash, we could easily have a depression like event, what 2008 would have looked like with no printing press.

Can I assume you agree?

Jim in San Marcos said...

Hi Anon 7:22

I see the event hurting the super rich and the retired who saved a lifetime. I don't see it impacting the majority of the people who have little or no savings.

We have already had the 90% haircut and haven't had time to figure it out. If you have a million dollars in the bank and your accountant has stolen 90% of it without telling you, you still feel rich. And the accountant is still paying you the interest on the 900k he "borrowed." Substitute "government" for "accountant" and you will see what I mean.

A collapse of the bond market would be considered debt forgiveness. Once interest rates hit 9% the government would be insolvent.

A collapse of stock market values would affect pension plans drastically but even if a stock like IBM dropped to $10 a share, the company will still be functioning perfectly. What happens on Wall Street stays on Wall Street.

The present plan of printing dollars isn't going to work forever. Something has to give, and nobody is sure what it will be.

Iceland was up and about after one year. So it has the ability to be a non event, but with a Congress mired in self importance, doing nothing seems like the plan of action. You can't be blamed for what goes wrong.

The only thing agreed upon by economists is that without government intervention, depressions are short lived. The trouble is, the people demand that the government do something and that can string things out for quite a while.

I tend to agree that it could get worse, but then, our worst case scenario is rarely as bad as we imagined.

That's the best I can do with this cheap crystal ball