Common sense suggests that as the government prints more dollars, inflation should become more apparent. But here is what is happening each month: Cell phone companies are withdrawing $10 more from circulation for services, Cable Sports providers probably withdrawing from the economy $40 for every sport fan now. Figure $300 in interest to the banks for credit card interest, and another $300 for health care and car insurance. It is not being plowed back into the financial economic churn, it is being saved.
Food may have doubled in price but few notice it, everyone eats out, and those prices are out of sight. Plus if you can't cook, why screw up the food? Inflation is invisible to almost everyone.
As the wealthy get richer, their lifestyle doesn’t really increase in spending, the extra goes into the bank. Notice at this point, the money never “trickles down” to the poor people. So in effect the government prints a billion dollars trying to stimulate the economy with inflation and it goes into some rich guy’s bank account and will never see the light of day again, or for that fact circulate in the economy. I could be shot again for oversimplification, but a tremendous amount of printed dollars never make it back into the economy. We use to just have millionaires, now we have billionaires. It takes 1,000 millionaires to make one Billionaire. The sponge inflation factor is being seriously overlooked as if it doesn't exist. The way the cash has been taken out of the economy is probably what has saved the country from massive inflation so far. These people are far too rich to be able to consume at a level that would lead to product disappearing from the shelves. That is a good thing.
Poor people have no savings, they live paycheck to paycheck. Rich people, let the dollars collect. If there was a better method of delivering dollars to the poor, the economic condition of the poor would have improved years ago. An outright gift to the poor would discourage working for a living.
But what if the country stopped printing dollars? No socialism and a balanced budget. If you’re poor, the cable and the phone drop out of the equation. With welfare and Food stamps gone, you are going to work or starve, drugs become unaffordable as do credit card debts and new cars. The money taxes the rich get off of the poor are now gone. Hmmm
Let's get government salaries back into line. Why pay them more, if they are now more valuable in private sector, because of training? Let’s endure the inexperience of youth and train government employees on the assumption that if they are any good we will lose them, they will move on to private employment. Keep government wages realistic. And while we are at it, give everyone an equal 35k retirement plan. If you make more, contribute it yourself. I see no reason for a person making 100k a year get a retirement plan geared to his salary. You make more, save more, equal retirement plan for all. Of course that’s probably appears to smack of socialism, but more likely it is just plain common sense. Sadly we seem to be very short of common sense now days, it's not practical anymore, --How times have changed!
11 comments:
Hi Jim,
Over here in Singapore, we don't have social security and most people/jobs don't have pensions. What we have is something called CPF, where the employee contributes 20% of his monthly salary and the Employer contributes 17%. This pool of money is held by the government but under individual account. So if you earn more and contributes more, eventually you'll get more out of it when you reach retirement.
We practise helicopter drop with a twist which we call workfare. This addresses your concern that it'll discourage work. You qualify for this workfare only if you are low income, and you are working consistently. The government will give a cash and CPF pay out every quarter if you qualify.
Overall, the environment over here is that you can't stop working and survive based on hand outs. There are social nets in place, but it's quite minimal and can be quite a hassle so that it doesn't discourage work.
"If there was a better method of delivering dollars to the poor, the economic condition of the poor would have improved years ago. An outright gift to the poor would discourage working for a living."
How about a progressive income tax that starts off with a negative tax rate? So, if you earn less than (say) $20k p.a. you receive another 10% from the taxpayer. Then the next tranche receives 0%, then the next pays 10%, then ... all the way up to (say) 40% tax. It's more promising than just using government/Fed policy to inflate the value of assets, which is what happens at the moment.
Ha! Now I read Anthony's comment and see that Singapore got there before I did.
Life here in the USA just keeps getting harder and more complicated as we move forward in time. Have to keep coming up with solutions, compromises and acceptance of new conditions. Either that or you just succumb. This is an unworkable system. It's failing and will eventually collapse. We need a Magna Carta for government. We need a governmental reset. Fed government needs to be reduced by 25% (just overseeing infrastructure, communication and defense) and the states need to take back all other responsibility and authority. This culture is on the decline (lack of morality and ethics in government and business is just one of the multitude of signs of decay). It will take a long long time, but we'll eventually get to that reset. We will evolve. Until that day comes we need to continue to be creative and work out how to survive.
Just a small amount of evil and stupidity in the population is enough to sink the ship of civilization. The baddies always seem to migrate to government, economics, education and mental health. Through them they kill the society.
Life in the USA only gets harder for those without the proper skills but those with the "right" skills are doing better than ever.
Go to school and learn some science, go to school and learn carpentry, the point is, have a damn skill you can use to barter your efforts, at the simplest level.
one thing i have found, if you are decent at what you do, there is a demand for you, no bitching necessary.
I deal with people with phd's to technicians, not that life is easy, but those who poses the skills in demand are doing just fine. the rest are sitting on their lazy ass and wondering why the universe isn't giving them more.
if conditions were so bad, then why is usa thriving. i know you think its not but time has proved you wrong.
Anonymous:
The fact that you think that the USA is thriving, and that all one needs is some specific skills to earn a good income pre-empts any conversation that I could have with you. Your misinformation or denial will wind up surprising you over the next decade.
2016 coming up...a decade...you have a decent thesis but are you willing to entertain the thought that it's a fixed world, it's a fixed game?
Hi Anthony
Thank you for the information. I like the way Singapore does it. It beats what we have in place.
20 percent savings for retirement is a sound figure. I'm just not sure how that plays out over a 40 year work span. Inflation can be a real stopper especially if the government is holding the purse strings. 50 years over here saw a 90 percent loss of buying power from inflation. Kind of sucks.
Hi dearieme
How about if everyone pays one months labor from the age of 18 to age 65 to the government. If you are rich, pay someone to work for you.
You can't plead poverty, and you end up pulling your fair share as far as everyone else is concerned.
The Romans did it and built a road system that is still used today.
Hi Anon 11:22
The game isn't fixed. The end is near. The Great Depression of 2006 is a part of history. Right now it is labeled as the "Greatest recession since the last depression."
We as a nation have a problem. Zero interest rates, zero inflation, and zero risk investments. We have zero savings, and infinite credit limits.
I can't determine the exact date of failure, but I can predict its inevitability.
Hi Jim,
As a small country, city state, we have to follow the world in terms of interest rate. If we are to set our own independent rate, there is the risk of hot money flowing in or out. Thus our rates are more or less in sync with the Feds. What we try to do instead is to increase/decrease the value of Singapore dollars against a basket of currencies to control inflation.
The returns of our CPF is tied to bank depositor rates or 2.5%, whichever is higher, plus 1.5%. due to the ZIRP, we get the 2.5%+1.5% which makes it 4%, which is quite a good deal compared to bunds and treasuries.
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