Saturday, April 30, 2016

The Coming Storm

When you turn on the news, you can tell the difference between a Democrat and a Republican just as easy as you can discern a woman’s voice from that of a man. 99 percent of the people speaking think that by some stroke of luck, what they say will change someone’s vote. My grandfather use to say, if you want to waste some time, talk about religion or politics. People are willing to die for their beliefs. You are not going to change their mind, no matter how long you talk.

I’m not sure how the Presidential election will go, but I do know that the economy is in a horrible mess. We have learned how to produce more with 20 percent less labor using computers. Raising the minimum wage to $15 per hour didn’t create any more jobs but it did raise the pay of those working for 2 dollars more than minimum wage. Everyone got a pay raise, not just the entry level worker.

We are getting one percent interest on our savings. It doesn’t look like the Democrats have our best interests at heart with this very low rate. The savers are being taxed at 5 to 7 percent minimum with these rates if you consider the “lost” interest from the lack of a realistic interest rate.

Stock markets and real estate are the real booming markets to make money in. The economy kind of offers up a question of “How is this possible?” The world credit orgy party could be ending soon.

The thing that could really start a financial meltdown is the exit of Great Britain from the European Union on June 23rd. Financial leaders talk about negative interest rates as if it is some tried and tested method of fixing the economy.

How dare people save money all their life and become rich—go figure. The funny thing is that most of the poor people spend all of their earnings trying to appear rich. Governments depend on banks for loans. And the banks loan their savers' deposits. Now you see why the banks were not allowed to fail. The government needs them, in order to juggle 21 trillion of borrowed debt. Common sense would suggest that a government cannot spend its way from bankruptcy back into prosperity.

At some point this house of cards will collapse. In 1929 individual investors panicked and brought the market down quite suddenly. In today’s market, there are investment advisors, they get paid to keep you in the market. If they sell everything, they are out of a job. So they are going to ride your 401k into the ground.

We have been here before in the Great Depression of 1929 and the pundits are right, it will be different this time. The people of 1929 were stupid and didn’t know what they were doing (believe that and I will tell you another). The people in charge right now are holding on by their fingertips. A straight face and a little hyperbole and they come across as financial wizards.

Turn on your TV and listen to the ads. Retirement is going to be fun. You’ll have gobs of money from your 401k. The new “Rule of 72” for interest rates has been changed. You work until you are 72 and then hope you don’t outlive your savings. The eighth wonder of the world is no longer “Compound Interest,” but “Unlimited Government Benefits.”

The one thing that should stand out, is that putting money in the bank and saving it, is an act of futility. If you have savings, convert it to cash and put it in a safety deposit box or buy some gold and silver. There is no reason to allow the bank to use your deposits at this low interest rate. If enough people do it, interest rates have to rise.

I think Bernie Sanders, Donald Trump and I are looking for the wheels to fall off of this Obama agenda band wagon before the election. Common sense, has value, but it's discovery, is often times late to the table.


dearieme said...

Ancient joke: a Financial Advisor is a man who invests your money, and then reinvests it, and reinvests it again, until it's all gone.

Sackerson said...

I think you're right, it's very worrying: massive inflation, or massive deflation?

Jim in San Marcos said...

Hi Sack

That is the great question.

My crystal ball can't make sense of the present reality.

If GB exits on the June Referendum, the world banking structure will have to change in ways that have not been imagined yet. I'm glued to my seat waiting to see what happens.

Jim in San Marcos said...

Hi dearieme

Thank you for the joke. Too bad reality can rob us of the laughter.

AIM said...

We're on a runaway train that is going to fast for anyone to jump off of. It is going to crash BIG TIME at the end of the line. A place called... Chaosville.

Jim in San Marcos said...


Chaosville is probably another name for Washington DC ;>)

AIM said...

Trump just won Indiana. Cruz has dropped out. They have no choice now but to line up behind and support Trump. He's got to win the nomination and he has got to beat HRC. Otherwise we will continue to descend into chaos.

You never know... Trump might finally be a step in the direction of the people recovering their country. Resurrecting America's original values. Throwing all the bums and criminals and cancerous systems out the window and returning to basics and sanity. A nation proud of its diversity, productive and prosperous, enjoying liberty and freedom, avoiding foreign entanglements and nation building, etc. One can dream.

Jim in San Marcos said...


I saw a bunch of newscasters that never smiled before look real happy today with the Trump win. Maybe its a sign that we have a chance at having real leader for a President.

Anonymous said...

The hope and change is now on Trump, but we have seen this before and it did not end well. At least he is a businessman, and can hold his own against China; perhaps he will not bow to the Saudis either.

aim said...

Trump could be the big disruption for both parties. If HRC is badly tainted by the FBI investigation she'll have to withdraw from the race (and Biden or Ryan would probably step in). Both parties are a mess and a plague upon our country. I hope that this is the beginning of the end for both parties and they break up in to pieces or disappear. One can dream.

UserFriendlyyy said...

"Governments depend on banks for loans."

No, they don't. A Dollar is just an IOU from uncle Sam and there is not a fixed quantity of them. Since we ditched the gold standard the only way we create dollars is when the US government runs a deficit and spends them into existence. If the government ran a surplus where would that extra money it was taking in come from? The private sector. A surplus (without a trade surplus on top) would require a shrinking of the savings of people and businesses. Or increasing their debt, like the freshly deregulated banks were all too happy to do in the 90's with the dot com bubble.

Jim in San Marcos said...

Hi UserFriendly

I think that you are missing the point. On the gold standard government is out of the money business and they have to obey people's sense of value for gold. Without it, the government gets to piss in the whiskey. The consumer and the saver are being ripped off.

UserFriendlyyy said...

The getting ripped off part has nothing to do with the gold standard part. Except in the resulting misunderstand of how the economy works that we inherited because of it. You should read Mitchell-Innes.