Recently we saw a four dollar rise in the minimum wage in California. The consensus among the legislators was that no one could live on $16 dollars and hour. The people in labor force rallied around that suggestion. The trouble is, the logic failed after it became law. The real assertion should have been, you need a roommate or two to live on $16 per hour. Thousands were laid off. The door, for the people just looking for that first job, to get into the labor market has slammed shut.
[The next paragraph is from my memory; the dollar amounts may
be wrong]
A while back, maybe 15 years ago the California legislators realized
that the utility companies were buying natural gas at about $8 a therm on a 5-year
contract. They noticed at the same time that the spot price for Natural gas was
about $1 per therm. The legislators decided
to let the contracts expire and not to renew them. They were going to buy natural gas on the spot
market at the lower price. Since there was no contract for
the Utilities anymore, spot prices for natural gas shot up to $20 per therm.
Heating bills went through the roof. I
don’t think that this summary of the events has ever seen print, rather, the gas companies were accused of gouging the consumer. Another case of pure stupidity on
the part of legislators.
Here in San Diego in 2018, we were requested to use less
water and we did. Since we did such a
great job, they had to raise our rates. The problem, the amount paid no longer
covered the fixed rates of operating the utility. This is now happening all
over again as I speak.
During the Great Depression of the 1930’s, many municipalities raised their property taxes because of the loss of income from foreclosures. They needed more money to fund their budgets. The net effect was less revenue generated and an increase in foreclosures. People barley holding on, threw in the towel and picked up and left. We are beginning to realize (for the first time- since everyone is dead that remembers the mistakes from before) that the legislatures’ have no concept of economics. Common sense suggests that if you double taxes you double revenue. What you really get, are unintended consequences.
Right now, the national debt is over 31 trillion dollars. I calculated it out a few years back, and if the interest rate hits 8 ½% we as a country cannot pay the interest on the national debt. The taxes collected will not cover the interest on the national debt. Congress (collectively) has no idea how previous spending is related to the money already borrowed. The mentality is, it has worked for the last 60 years, it can last forever.
You have to ask one question; was it obvious to the citizens
in previous Banana Republics (Germany, Zimbabwe and Venezuela, that inflation
would make the currency worthless? It happened very gradually. Many lost their life savings. Scrounging
through a garbage can for food was not what they envisioned for retirement.
We need to look at gold as a store of value and as an
instrument that the government cannot monitor or manipulate the price of. Our congressmen
are not going to willingly ruin our savings, their utter collective group ineptness will
doom us to financial ruin. Remember one
thing about gold, if you cannot hold your gold, in your own hand, you don’t own
it!
10 comments:
Very enlightening on unintended consequences.
Hi Sac
Not sure I have many viewers left. I haven't been writing much. Thank you for hanging on.
I am here. I enjoy the blog. Thank you for writing.
Anon 7:28
Thank you much, you are my paycheck.
I check regularly as well. Thanks for writing and keep them coming, now more importantly than ever.
"if you cannot hold your gold, in your own hand, you don’t own it!"
Fair enough but is there a way to stash it so that I, my widow, and eventually my descendants, can find it and use it safely?
Is there even a way to buy it that keeps it invisible to government and thieves?
There's probably not much point in my owning gold if gangs of armed men know I've got it.
Hi derieme
That quote refers to unscrupulous funds that promise to hold the gold for you. They can go bankrupt or as in Europe a few years back, didn't have the gold the depositors demanded and had to pay them cash (if they had it).
I keep my gold in a safety deposit box at the bank. My wife and my son also have access to the box. I have the keys.
Once you buy it, it is no longer traceable by the government. Gold sellers don't ask for ID when you purchase gold, cash is king.
Plus, if you are filing for government benefits, the gold will not show up as an asset.
I don't see gangs of armed men going after someone with six or seven gold coins.
If you have more and keep a low profile, you should be invisible. If you want to hide it in your home, make sure to tell someone where it is. Otherwise, you could have a stroke and not remember where you put it. It seems like that happens quite a bit, if you look at all of these historic discoveries of buried or hidden gold.
"I keep my gold in a safety deposit box at the bank." I used to have a safety deposit box at my bank; they closed the safety deposit and offered an alternative of using the safety deposit at a branch in Scotland, 400 miles away.
Only one local bank offers a safety deposit now and it forbids storage of gold sovereigns, which is how I would like to store my precious metal. "You must ensure that your safe deposit box ... never contains any of the following items: ... • cash, of any currency, amount or denomination".
"Once you buy it, it is no longer traceable by the government. Gold sellers don't ask for ID when you purchase gold": in Britain they demand that info and report it to the government if your purchase exceeds a modest amount. (I'm not up to date but the threshold used to be 5,000 GBP in a single purchase and/or 10,000 GBP in one year.)
Hi dearime
Your bank says no cash or currency how do they enforce that? Who is going to examine what you put in the box. Gold is not a currency. And what you put in the box is none of their business.
I have seen a person go into my gold dealer and buy 10 ounces of gold and pay by check and write on the check "cleaning expenses." 10 ounces is 23k! A hell of a tax write-off!
I don't think that the issue is as unsurmountable as you suggest.
"Gold is not a currency": Gold sovereigns are - and they are the way I'd like to hold gold because they are exempt from Capital Gains Tax in the UK.
If someone knows you own gold then you basically have no safe way of storing it - a thief can hold a knife to your wife's throat and demand you hand over the key/combination/location. (I assume all government records will eventually be available to thieves.)
I conclude that secrecy is the thing. Secrecy and weapons, perhaps. I sold my rifle years ago - what a pity.
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