Tuesday, September 20, 2016

Air is Free

Just thought I would throw this out there. An individual consumes 19 cubic feet of oxygen every day. And when you put that in pounds, that’s about 1.69 pounds.

When you burn a gallon of gasoline, it consumes 23.22 pounds of oxygen and you get water and a lot of CO2.
I burn about a gallon and a half of gasoline every day going to and from work. That is about 34.83 pounds plus the air I breathe 1.69 pounds = 36.52 pounds of oxygen every day that I consume.

So if we take my total consumption per day (36.52 lbs.) and divide it by what I need to exist (1.69lbs) we get 21.61. From that we can conclude that the “average” person consumes 20 times the oxygen he needs to sustain life. Each additional person is accelerating the CO2 rate accumulation rate in the atmosphere, by a factor of 20 (I didn’t even include factory production in the calculation so it is on the low side).

The General import of the above is that global warming is a reality. Historically we can probably attribute the fall of many ancient major cities in South America from a lack of firewood. All the trees could have been consumed for fuel within a 100-mile radius. After exhausting their ability to heat and cook the inhabitants would move to where energy resources (wood) were more abundant. This would have been a logistics failure that made life economically unfeasible. Net result, they moved.

Now let’s look at US government financing of the national debt. The current interest on 21 trillion at one percent is about 210 billion. If it went to 8 percent, the interest charge would be $1,680,000,000,000. And that is about what we take in, in taxes each year. Do you get the feeling that we have run out of firewood? Common sense suggests that our financial problems, just like firewood in the above example, have solutions that are very much removed from reality, but not from the follies of man.

Monday, September 05, 2016

What’s in your Wallet?

The credit card ads on TV amaze me. Credit card companies are giving card holders 2 to 4 percent back on their purchases. The new concept of money is that, you get nothing for saving it in the bank, buy yet you get money back for spending it.

Ever wonder where that 2 to 4 percent rebate came from? It has to come from the retailer. Kind of takes me back 30 years ago when you asked the store for a cash discount and if they said, no, you gave them your credit card. And you could stick it to them in varying degrees. Master Card charged the retailers more than Visa did.

If you can repay the credit card charges at the end of the month, you get a little cash back. Realistically if you made 120k a year, that’s about 10K a month to spend—$200 to $400 dollars in cash back if you put everything on a credit card.

The question you need to ask is, “Where does the credit card company make its money?” And it certainly not by giving you cash back for each purchase. If you screw up, you get to pay 16% interest on your balance. Not a bad deal for the bank.

So in today’s world, the phrase “What’s in your wallet?” has a good ring to it. I have trouble with the concept of spending money to get money back. It smacks of a snake oil salesman.

Of course, todays grads get the student loan and then the 250K home at 4% and everything else on their credit card at plus 16%. Sounds a little like the company store routine. We know what’s in your wallet, absolutely nothing, for the rest of your life.

You wanted it now, and decided to pay for it over time. The trouble is, forever is a little longer than you had in mind. Compound interest is still the 8th wonder of the world.