I know it’s an election year, but the statements get more ridiculous. “Everyone needs the right to have a college education.” A college education will not in a lot of cases get you a better paying job. It may make you overqualified for the job you’re applying for. Probably at least 70 percent of the jobs in this country don’t require a college education, trade school training maybe. A college degree comes with the automatic assumption of higher wages. That’s not necessarily true.
Congress created a new form of serfdom with the promise of easy money loans for education. Student loan debt is not an issue of irresponsibility with the students, they had no idea of what they were getting into. It was a trap fashioned in Congress that the banks could not say no to. Credit cards and student loans are about the only moneymakers for banks since the Federal Reserve went into the mortgage loan business.
You can’t support a family on $10 an hour, so that justifies $15 an hour? In California, you better be living at home with your mother if you only make $10 hour. Have a kid or two and see what that does to your take home party money-- diapers instead of a 12 pack.
They do have one thing right; the middle class is shrinking. Why? The jobs are being moved offshore. Or worse yet the people with jobs are being replaced by immigrants with H-1B visas. The workers at Disney Studios were shown the door but they had to first train their replacements from India, irritating to say the least. How do you get the jobs back?-- make it more expensive to produce it over there than here. So you put a tariff on every cell phone of $300 and one on shirts and shoes of about $8. Will it be done? Probably not.
The real problems are created by government policies, lawyers and laws. A US company making red plastic gas cans, got sued several times and went out of business. The rest of the worlds labor pool doesn’t have to worry about social security, unemployment insurance, health insurance and worker’s compensation. Overseas production limits the owner’s liability.
Some businesses are trapped and can’t move off shore like food, shelter and services. Many companies that produce a product can successfully make the move. The real trouble is; people earn a living producing product for consumption. If the production moves off shore, the job moves with it. Will you move to Mexico to get your job back at half the price and no benefits? The rest of the world knows how this works, no job in your country, move to one that has jobs. The new people at Disney Studios know that quite well. And computer tech support goes one better. With the phone, the employer can farm out tech support to various companies located in India 24-7.
Current unemployment rate is listed at around 5% here in the US. Estimates place the real figure from 15% on up to 20%. Obama has even referred to the great recession of 2007 to 2010 as being a bad one. So if you carry that one step forward, he is implying that we are no longer in a recession that didn’t exist until after the fact.
To listen to Obama, I’m tired of “We’re not out of the woods yet,” for 8 years running. We are not blaming this disaster on any President. It has its roots back when FDR was president and the advent of Social Security. But the call to bring jobs back to the USA is a little hollow. Very few things that I have purchased in our home have “Made in America” stamped on them. Everything with a made somewhere else tag is a job lost in the US. These jobs could come back, but it would be gradual over decades of time.
The rich people from other countries will silently move here to retire and enjoy our way of life semi-tax free. Of course they will need servants at $15 per hour. And then Drugs, Sex and health care. Retirees’ here do the same thing when they move to Mexico to enjoy their Social Security retirement on a lower income level. Peculiarly if you are a foreigner reaching retirement age here in this country legally, you qualify for Supplemental Security Income and Medicare. So this road to citizenship for illegals could be the real road to hell for Social Security. I complained about the disparity to Social Security and they were very indignant pointing out that SS and SSI were two different programs. To me it’s kind of like the wife buying the new TV instead of the husband, it’s the same bank account.
Congress increased our unemployment numbers by cutting the military budget by 20%. Of course Congress will argue that, they only cut the military budget; the commanders had to figure out what they could cut and it wasn’t the weapons Congress forced them to buy, it was men. Budgets determine what you can do next year. So when the VA falls short on promises to veterans, it's the Congress you need to blame, they have the checkbook.
Congress tells private employers what they have to pay to employees and dictates their benefits. Any wonder why businessmen move their factories off shore?
The real problem is not the promise to fix, but rather the will to provide the funds necessary for these government institutions to perform as expected. And if you want to stem the flow of production overseas, read the writing on the wall; am I going to pay you $5 for something that I can get for $2 somewhere else. The minimum wage is set by laborers in Asia, not by the US Congress.
What we need to realize is, we have a bunch of old farts in Congress using a 20th century mindset that used to work well, but is severely outdated today. The laws no longer fit the times. It’s kind of like the right to bear arms. You wouldn’t rob a bank today with a flint lock pistol made in 1792. IMHO we need younger people at the helm, that can think outside of the "outdated box."
Wednesday, February 24, 2016
Thursday, February 18, 2016
The Golden Age of Mankind Is Behind Us
Here is a comment written by Anthony Tan to my last article, his words are well thought out and deserve review. Not everyone reads the comments section of this blog.The golden age of mankind is behind us. We live in a finite world with finite resources, man kind should be looking at sustainability instead of growth and GDP. Our current financial system (usury and debt based money) is simply not in line with reality. It's also why all governments are so obsessed with growth, the moment you can't have growth, it all collapses.
Throughout the world, you'll hardly find a nice, humble and wise ruler/government. Nice people work behind the scene to better the lives of people, they are not interested in the limelight and power. Psychopaths crave it, and will do anything to get into power. For democracy to work, you'll need a well educated, wise and hardworking citizenry. This is not in the interest of the psychopath and they would rather have a dumb down and distracted citizenry and reduce the society to bread and circuses.
Technology will improve, but we've already reaped most of the benefits years ago. An inkjet printer and a car is a good example. After thousands of new improved models, it is still essentially the same as a decade ago. Technology has reached the point of diminishing returns and you won't probably see any major changes unless you are part of the elites.
I recall seeing a sci-fi show called "Space 1999" in the 70s about a moon base, this is 2016 and a moon base is still a distant dream. At the rate we've burning and wasting resources, I doubt if humankind can ever get their act together to go beyond Earth and spread out to other planets. Hopefully it'll be a slow crash and I'll be long dead before we reach the Max Mad scenario.
Sunday, February 14, 2016
Unintended Consequences
About 50 years ago, the UN showed farmers in northern Africa how to more effectively farm the land and use fertilizer. It worked great. Farm production doubled and because of the abundant food, the population doubled overnight. There was one little thing that no one noticed. Each family needed firewood to warn their huts and cook their meals. It doesn’t seem like a very big thing, to be concerned about, but the area was running out of trees. Then the rains came. With no trees to control the runoff, the farmland washed away. Starvation ensued.
A solution to one problem can create unforeseen problems. Raise the minimum wage to $15 per hour and you bump into the term “Shadow Labor,” like self-serve checkouts where you ring it up yourself and bag it. I was at Ralphs supermarket a while back waiting for the cashier to ring me up and a store clerk told the gentleman behind me that the self-serve island was open. He must have been a union man because he cracked me up when he said, “No thanks, I already have a job.”
The 15 dollar an hour wage increase was to give the worker a better standard of living, the net result, less employees. Even worse, with mandatory health care, most jobs went to a 30-hour work week. And of course, the employer could move the factory overseas, and not worry about all of the government restrictions and taxes. Last Thursday, Carrier Air Conditioner announced that it is moving to Mexico and 2,100 jobs go with it. I guess moving “overseas,” is a misnomer. Mexico and Canada are right next door.
The newest thing is negative interest rate policy that is being pushed worldwide on the banks. It’s a little like telling hookers that they have to pay guys to have sex with them. The concept doesn’t float at that level for the simple reason, there is nothing in it for them (naturally I’m referring to the banks ;>)).
We have a drought out here and everyone has been asked to cut down on water usage. Our area in San Diego cut their water usage by 25 %. Net result the water company sold less water and their fixed costs did not go down, so our water bills increased as a reward for using less water.
We tried to bomb the dictators out of the Middle East, and give them Democracy. What did we get? Anarchy! Democracy is not something you can pass out at a pep rally.
Changing the school lunch program to be more healthy and force every student to eat whole wheat, and have a fruit with each meal, created incredible waste. Not to mention kids left the school to get something "Real" to eat. People don’t get fat eating food that doesn’t taste good. If it doesn’t taste good, don’t eat it (and that advice is a couple of million years old).
Oil prices have dropped dramatically and we are still adding 10% ethanol to each gallon. Ethanol gives lousy gas mileage, eats the hell out of the fuel system, and makes our beef steaks cost more. You can’t take a well fed car down to a slaughter house and get prime rib or steaks out of it, only easy monthly payments; miss one and pay the rest of your life. Some of our biggest ethanol producers are family of some well know Congressmen. The irritating thing is that everyone whines about gas prices, but most people have no idea of what they pay for steak, they just drop it in the shopping cart.
The great government program to help our kids get a college education has given a lot of them a financial education that will last their entire lifetimes.
Then we have the new health insurance for everyone. If you can’t afford it, the government will want to know everything about you for you to get it free. And when you file your taxes this year, you have a new form to show the IRS, your 1095-B proof of health care coverage.
The national debt is approaching 20 trillion. The average American thinks, government budgets have worked ok so far, the people in charge must know what they are doing. I guess, if you have that sort of faith in government, you don’t need to go to church every Sunday. What you save in church tithes, will make up for the interest lost on your 401k.
Do you get the feeling, that if big government left us alone, we could manage just fine? Of course listening to the election debates, the last thing anyone of them wants to do, is leave us alone, they want to give us something. The only thing that worries me, is that we may get everything we ask for and something we didn't, a Banana Republic.
A solution to one problem can create unforeseen problems. Raise the minimum wage to $15 per hour and you bump into the term “Shadow Labor,” like self-serve checkouts where you ring it up yourself and bag it. I was at Ralphs supermarket a while back waiting for the cashier to ring me up and a store clerk told the gentleman behind me that the self-serve island was open. He must have been a union man because he cracked me up when he said, “No thanks, I already have a job.”
The 15 dollar an hour wage increase was to give the worker a better standard of living, the net result, less employees. Even worse, with mandatory health care, most jobs went to a 30-hour work week. And of course, the employer could move the factory overseas, and not worry about all of the government restrictions and taxes. Last Thursday, Carrier Air Conditioner announced that it is moving to Mexico and 2,100 jobs go with it. I guess moving “overseas,” is a misnomer. Mexico and Canada are right next door.
The newest thing is negative interest rate policy that is being pushed worldwide on the banks. It’s a little like telling hookers that they have to pay guys to have sex with them. The concept doesn’t float at that level for the simple reason, there is nothing in it for them (naturally I’m referring to the banks ;>)).
We have a drought out here and everyone has been asked to cut down on water usage. Our area in San Diego cut their water usage by 25 %. Net result the water company sold less water and their fixed costs did not go down, so our water bills increased as a reward for using less water.
We tried to bomb the dictators out of the Middle East, and give them Democracy. What did we get? Anarchy! Democracy is not something you can pass out at a pep rally.
Changing the school lunch program to be more healthy and force every student to eat whole wheat, and have a fruit with each meal, created incredible waste. Not to mention kids left the school to get something "Real" to eat. People don’t get fat eating food that doesn’t taste good. If it doesn’t taste good, don’t eat it (and that advice is a couple of million years old).
Oil prices have dropped dramatically and we are still adding 10% ethanol to each gallon. Ethanol gives lousy gas mileage, eats the hell out of the fuel system, and makes our beef steaks cost more. You can’t take a well fed car down to a slaughter house and get prime rib or steaks out of it, only easy monthly payments; miss one and pay the rest of your life. Some of our biggest ethanol producers are family of some well know Congressmen. The irritating thing is that everyone whines about gas prices, but most people have no idea of what they pay for steak, they just drop it in the shopping cart.
The great government program to help our kids get a college education has given a lot of them a financial education that will last their entire lifetimes.
Then we have the new health insurance for everyone. If you can’t afford it, the government will want to know everything about you for you to get it free. And when you file your taxes this year, you have a new form to show the IRS, your 1095-B proof of health care coverage.
The national debt is approaching 20 trillion. The average American thinks, government budgets have worked ok so far, the people in charge must know what they are doing. I guess, if you have that sort of faith in government, you don’t need to go to church every Sunday. What you save in church tithes, will make up for the interest lost on your 401k.
Do you get the feeling, that if big government left us alone, we could manage just fine? Of course listening to the election debates, the last thing anyone of them wants to do, is leave us alone, they want to give us something. The only thing that worries me, is that we may get everything we ask for and something we didn't, a Banana Republic.
Sunday, February 07, 2016
Investment Returns vs Homeownership
The average person thinks that when they pay off the mortgage, they live in their home for free. This is semi correct. Sell the house and put the money in the bank and in the past, the interest was what you would pay to rent the house. So with a half million-dollar home today, the money in the bank pays about .05 percent. That comes out to $2500 a year or $250 a month. Something is wrong here. If you buy the same property as an investment, you will probably get a rental investment return of $2,500 a month which is $30,000. That’s a 6% return on your investment. So being a paid off home owner gives you a better return on your savings than what the bank could offer by a mile.
The statement hidden behind the data is that if interest rates remain low, the average blue collar worker can ill afford the house payments for a very overpriced home. If bank interest rates were to reach 8%, the monthly payment would be $3,660 a month, whereas at 5% they would be $2680 a month. The neat thing about the high sales price, is that it locks in the property tax assessment which is 1% in California. Even at the lower amount, the buyer with no money down needs about 50K a year just for the house payment, taxes and utilities
What is missed here, is that retirement funds or people with cash, can buy a home with an expected rental return of 6%. This in turn puts stress on the starter home prices. They go up in price to a level to where, starter homes are no longer starters.
There is a conundrum here; low bank interest rates, high rental return rates, and unrealistic house valuations. The real loser here is the homebuyer with very little down. He will be broke the rest of his life paying off the home. If you think about it for a few minutes, you will realize that everyone rents the home they live in. Your lifespan determines the rental length. A man in Oxnard made millions leasing 100 acres of land from the city for 100 years. He built rental condominiums on the acreage. After 20 years, he had them paid off and I think he lived to realize another 40 years of income off of them. So after another 40 years, when the lease expires, the relatives will give the land back to the city of Oxnard.
So until the cost of money gets back to more realistic levels. Everyone will be forced to park their savings in real estate investments, not home ownership, there is a difference. This is the definition of a bubble, the miss allocation of resources. The investment return, not the value of the asset, justifies the price paid.
The real reality of the situation is that when the housing prices double, you pretty much double the number of people occupying the house. And it is only noticeable when you come home late and can’t find a parking space for your car. Go figure.
The statement hidden behind the data is that if interest rates remain low, the average blue collar worker can ill afford the house payments for a very overpriced home. If bank interest rates were to reach 8%, the monthly payment would be $3,660 a month, whereas at 5% they would be $2680 a month. The neat thing about the high sales price, is that it locks in the property tax assessment which is 1% in California. Even at the lower amount, the buyer with no money down needs about 50K a year just for the house payment, taxes and utilities
What is missed here, is that retirement funds or people with cash, can buy a home with an expected rental return of 6%. This in turn puts stress on the starter home prices. They go up in price to a level to where, starter homes are no longer starters.
There is a conundrum here; low bank interest rates, high rental return rates, and unrealistic house valuations. The real loser here is the homebuyer with very little down. He will be broke the rest of his life paying off the home. If you think about it for a few minutes, you will realize that everyone rents the home they live in. Your lifespan determines the rental length. A man in Oxnard made millions leasing 100 acres of land from the city for 100 years. He built rental condominiums on the acreage. After 20 years, he had them paid off and I think he lived to realize another 40 years of income off of them. So after another 40 years, when the lease expires, the relatives will give the land back to the city of Oxnard.
So until the cost of money gets back to more realistic levels. Everyone will be forced to park their savings in real estate investments, not home ownership, there is a difference. This is the definition of a bubble, the miss allocation of resources. The investment return, not the value of the asset, justifies the price paid.
The real reality of the situation is that when the housing prices double, you pretty much double the number of people occupying the house. And it is only noticeable when you come home late and can’t find a parking space for your car. Go figure.
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