Thursday, June 30, 2016

Everyone Has a Different Right Answer

Just listening to the news about Brexit. One side says were doomed if we go down this path and the other side says this will correct all of the wrongs.

Then in the US, a vote for Hillary will continue the government in place, while the other side is fed up with all the socialism.

If you notice, we have a 50/50 split. At one time everyone was in agreement. Over time, things have changed. Once you disillusionize enough people, they begin to march to a different drummer. Not to mention the fact that people everywhere are beginning to realize that the world is in a global Depression.

The real trouble with these political arguments, both sides have an opposing solution to the problem, that will solve everything. My only concern is that both sides are adamant over what the final outcome will be if the other solution is applied instead. Common sense suggests that neither side has any idea of what real results lie ahead for either path. But both sides imply that an improper vote will set the country on a path to doom.

I’m not sure how this line of thinking turns out. Almost everything is in an evolving state. In nature, the inability to evolve and adapt to new and different conditions, means you get eaten. It nice to know that all of these individuals running amuck have a solution to all of our problems, if only they could get us to listen. I've always held, that "the people with a solution to all of our problems, are a part of the problem."

Either way, it a news media feeding frenzy. Someone will print what you want to read. It's only a matter of selecting the right TV station or newspaper. The final truth?---there are no wrong answers--go figure!

Sunday, June 12, 2016

Faux Government Investment Reality and Retirement Income

Short term interest rates all over the world are about to go negative. Which means, you’ll have to pay more now for a T- bill that will mature with a value less than the original investment. Common sense suggests that lead poisoning is rampant in world financial markets.

Let’s suppose that there is a different reason for lowering Treasury rates that allows us to arrive to the same conclusion. What if the governments don’t have enough money to pay the interest on the debt and declared a moratorium on interest payments? Hmmmm. Notice doing it this way affects both government and private debt. By just lowering the interest rates to zero for government obligations leaves private debt untouched.

Either way, nobody is going to add any additional money to their savings, you mise well go for immediate gratification of your desires. Notice that those who have saved over 40 years are in a different boat. The money that they have saved for retirement is no longer generating investment income.

If we reasonalbly assume that the average retired couple can save 200K in their lifetime, at 8% interest, that would return about $16,000 a year in retirement income. Or about $1,333 per month for perputitiy. The average monthly social Security pension is about $1,335. So with a married couple, net benefits would be about $4,000 a month with everything added in. Change the interest rate to 1% and the story changes. Their savings are depleted in 13 years. And then when they really might need additional funds, they do not have them.

Unfortunately, the retiree’s kids will never even comprehend what the government did to their parents. The kids usually have no idea as to their parent’s money management skills. All they may be able to surmise is that they ran out of savings. The kids would never guess that the government ripped their parents off of about 300K in interest. This is money that they would have inherited. This is the Ultimate government coup de grace, of people that saved for retirement. The neat thing is that it is invisible. Old people are considered inept and incompetent by the young. So complaining about what the government is doing to them falls on deaf ears. Of course without schooling in economics, the elderly have a pretty good idea that they have been ripped off but don’t understand how it was accomplished.

The Federal Reserve has removed compound interest from the retirement community’s reach. This step eliminates the cost of government borrowing. With this spread between government borrowing and private sector borrowing, it is possible to generate a new income stream for Congress to spend. The vehicle of choice, student loans. Here is how it works; Congress borrows one trillion dollars of old folk’s money at 1 percent interest and loans it to students at 8%. The interest generated using the rule of 72, says that the government will double their money in 10 years. Then they return the money borrowed to the seniors while still having the 1 trillion of student loan debt still on the books. The neat thing about this income stream is that the government can gouge the young for a lifetime, not just their retirement years.

I’d never accuse the people in government of being intelligent enough to formulate the above plan, but it does illustrate the idea that “The road to hell is paved with good intensions.” The young are not saving because they can’t afford to and the old are dying off, broke and destitute. Kind of makes you wonder, is it time to avoid government retirement programs? I think so, gold and silver keep the politicians honest only because they can’t print either one of them.

An added bonus, the rest home cannot see the assets in your bank deposit box. The Gold and Silver can dance until you want the cows come home.

Saturday, June 04, 2016

Unemployment An Invisible Problem Of This Great Depression

The jobs report came out and it looks as if the country as a whole only created 38,000 jobs for the month of May and I believe they readjusted the figures for April down to 123,000 from 160.000.

The good news is that the unemployment rate went from 5% down to 4.7%. Of course the news that 500,000 people stopped looking for work kind of makes you wonder about the idiots cranking out the figures. It’s a little bit like an expert hunter talking about taking “sound shots” while hunting. That’s where you hear a noise in the bush and take a shot at it. You know what he’s doing, and your only question is why?

Obama asked at a town meeting if he would have done anything different in his Presidency, said that he wished that he had advised the people of the severity of the recession we were in at the time it was happening.

The economic consensus of our present mess, is that we walked by the graveyard whistling and got to the other side without a scratch. The trouble is, the demons know you have to come back the other way sooner or later.

Some other news source stated that half of the US population can’t come up with $400 cash for an emergency, they need to use a credit card. That scares me.

Blue Shield in Texas has announced that they will increase premium rates by 60% November 1st. If you are paying $400 now, it’s not rocket science to calculate the new monthly payment; but you’d have to be a rocket scientist to cover the increased premium for a family of 3. Obama Care will destroy the private insurance industry. No profit, they are gone. Government programs are like public restrooms, abused just as much as they are used and always underfunded.

46 million households are on food stamps. That’s out of 134 million households. It’s not like anybody is starving, they ought to pass a law against wearing stretch pants in Walmart if you weigh over 200 pounds.

But I digress. Where do we go from here with 14 to 20 percent unemployment? Does raising the minimum wage to $15 create jobs? I can see the logic in wanting to start out at $15 an hour as an employee. We need to ask the question, are the people protesting unemployed? If so, raising the minimum wage is not going to help them get a job. Millions of people were unemployed during the Great Depression. It took government work programs on infrastructure to open up the jobs market. Obama couldn't figure that out, maybe Trump can.

Of course the government claims that unemployment is about 4.7 percent and inflation is almost negative. Then we have the banks paying interest of about 1 percent. Toilet paper use to have 1000 sheets per roll. It’s a buck a roll now and smaller, it has about 200 sheets and the rolls are 2 inches less wide. So a toilet paper inflation calculator suggests that inflation is about 15 percent a year.

The irritating thing is you feel like throwing a roll of toilet paper at a politician, but when times are tough, you have to reconsider, use it where it is really needed.