I know it’s an election year, but the statements get more ridiculous. “Everyone needs the right to have a college education.” A college education will not in a lot of cases get you a better paying job. It may make you overqualified for the job you’re applying for. Probably at least 70 percent of the jobs in this country don’t require a college education, trade school training maybe. A college degree comes with the automatic assumption of higher wages. That’s not necessarily true.
Congress created a new form of serfdom with the promise of easy money loans for education. Student loan debt is not an issue of irresponsibility with the students, they had no idea of what they were getting into. It was a trap fashioned in Congress that the banks could not say no to. Credit cards and student loans are about the only moneymakers for banks since the Federal Reserve went into the mortgage loan business.
You can’t support a family on $10 an hour, so that justifies $15 an hour? In California, you better be living at home with your mother if you only make $10 hour. Have a kid or two and see what that does to your take home party money-- diapers instead of a 12 pack.
They do have one thing right; the middle class is shrinking. Why? The jobs are being moved offshore. Or worse yet the people with jobs are being replaced by immigrants with H-1B visas. The workers at Disney Studios were shown the door but they had to first train their replacements from India, irritating to say the least. How do you get the jobs back?-- make it more expensive to produce it over there than here. So you put a tariff on every cell phone of $300 and one on shirts and shoes of about $8. Will it be done? Probably not.
The real problems are created by government policies, lawyers and laws. A US company making red plastic gas cans, got sued several times and went out of business. The rest of the worlds labor pool doesn’t have to worry about social security, unemployment insurance, health insurance and worker’s compensation. Overseas production limits the owner’s liability.
Some businesses are trapped and can’t move off shore like food, shelter and services. Many companies that produce a product can successfully make the move. The real trouble is; people earn a living producing product for consumption. If the production moves off shore, the job moves with it. Will you move to Mexico to get your job back at half the price and no benefits? The rest of the world knows how this works, no job in your country, move to one that has jobs. The new people at Disney Studios know that quite well. And computer tech support goes one better. With the phone, the employer can farm out tech support to various companies located in India 24-7.
Current unemployment rate is listed at around 5% here in the US. Estimates place the real figure from 15% on up to 20%. Obama has even referred to the great recession of 2007 to 2010 as being a bad one. So if you carry that one step forward, he is implying that we are no longer in a recession that didn’t exist until after the fact.
To listen to Obama, I’m tired of “We’re not out of the woods yet,” for 8 years running. We are not blaming this disaster on any President. It has its roots back when FDR was president and the advent of Social Security. But the call to bring jobs back to the USA is a little hollow. Very few things that I have purchased in our home have “Made in America” stamped on them. Everything with a made somewhere else tag is a job lost in the US. These jobs could come back, but it would be gradual over decades of time.
The rich people from other countries will silently move here to retire and enjoy our way of life semi-tax free. Of course they will need servants at $15 per hour. And then Drugs, Sex and health care. Retirees’ here do the same thing when they move to Mexico to enjoy their Social Security retirement on a lower income level. Peculiarly if you are a foreigner reaching retirement age here in this country legally, you qualify for Supplemental Security Income and Medicare. So this road to citizenship for illegals could be the real road to hell for Social Security. I complained about the disparity to Social Security and they were very indignant pointing out that SS and SSI were two different programs. To me it’s kind of like the wife buying the new TV instead of the husband, it’s the same bank account.
Congress increased our unemployment numbers by cutting the military budget by 20%. Of course Congress will argue that, they only cut the military budget; the commanders had to figure out what they could cut and it wasn’t the weapons Congress forced them to buy, it was men. Budgets determine what you can do next year. So when the VA falls short on promises to veterans, it's the Congress you need to blame, they have the checkbook.
Congress tells private employers what they have to pay to employees and dictates their benefits. Any wonder why businessmen move their factories off shore?
The real problem is not the promise to fix, but rather the will to provide the funds necessary for these government institutions to perform as expected. And if you want to stem the flow of production overseas, read the writing on the wall; am I going to pay you $5 for something that I can get for $2 somewhere else. The minimum wage is set by laborers in Asia, not by the US Congress.
What we need to realize is, we have a bunch of old farts in Congress using a 20th century mindset that used to work well, but is severely outdated today. The laws no longer fit the times. It’s kind of like the right to bear arms. You wouldn’t rob a bank today with a flint lock pistol made in 1792. IMHO we need younger people at the helm, that can think outside of the "outdated box."
Wednesday, February 24, 2016
Thursday, February 18, 2016
The Golden Age of Mankind Is Behind Us
Here is a comment written by Anthony Tan to my last article, his words are well thought out and deserve review. Not everyone reads the comments section of this blog.The golden age of mankind is behind us. We live in a finite world with finite resources, man kind should be looking at sustainability instead of growth and GDP. Our current financial system (usury and debt based money) is simply not in line with reality. It's also why all governments are so obsessed with growth, the moment you can't have growth, it all collapses.
Throughout the world, you'll hardly find a nice, humble and wise ruler/government. Nice people work behind the scene to better the lives of people, they are not interested in the limelight and power. Psychopaths crave it, and will do anything to get into power. For democracy to work, you'll need a well educated, wise and hardworking citizenry. This is not in the interest of the psychopath and they would rather have a dumb down and distracted citizenry and reduce the society to bread and circuses.
Technology will improve, but we've already reaped most of the benefits years ago. An inkjet printer and a car is a good example. After thousands of new improved models, it is still essentially the same as a decade ago. Technology has reached the point of diminishing returns and you won't probably see any major changes unless you are part of the elites.
I recall seeing a sci-fi show called "Space 1999" in the 70s about a moon base, this is 2016 and a moon base is still a distant dream. At the rate we've burning and wasting resources, I doubt if humankind can ever get their act together to go beyond Earth and spread out to other planets. Hopefully it'll be a slow crash and I'll be long dead before we reach the Max Mad scenario.
Sunday, February 14, 2016
Unintended Consequences
About 50 years ago, the UN showed farmers in northern Africa how to more effectively farm the land and use fertilizer. It worked great. Farm production doubled and because of the abundant food, the population doubled overnight. There was one little thing that no one noticed. Each family needed firewood to warn their huts and cook their meals. It doesn’t seem like a very big thing, to be concerned about, but the area was running out of trees. Then the rains came. With no trees to control the runoff, the farmland washed away. Starvation ensued.
A solution to one problem can create unforeseen problems. Raise the minimum wage to $15 per hour and you bump into the term “Shadow Labor,” like self-serve checkouts where you ring it up yourself and bag it. I was at Ralphs supermarket a while back waiting for the cashier to ring me up and a store clerk told the gentleman behind me that the self-serve island was open. He must have been a union man because he cracked me up when he said, “No thanks, I already have a job.”
The 15 dollar an hour wage increase was to give the worker a better standard of living, the net result, less employees. Even worse, with mandatory health care, most jobs went to a 30-hour work week. And of course, the employer could move the factory overseas, and not worry about all of the government restrictions and taxes. Last Thursday, Carrier Air Conditioner announced that it is moving to Mexico and 2,100 jobs go with it. I guess moving “overseas,” is a misnomer. Mexico and Canada are right next door.
The newest thing is negative interest rate policy that is being pushed worldwide on the banks. It’s a little like telling hookers that they have to pay guys to have sex with them. The concept doesn’t float at that level for the simple reason, there is nothing in it for them (naturally I’m referring to the banks ;>)).
We have a drought out here and everyone has been asked to cut down on water usage. Our area in San Diego cut their water usage by 25 %. Net result the water company sold less water and their fixed costs did not go down, so our water bills increased as a reward for using less water.
We tried to bomb the dictators out of the Middle East, and give them Democracy. What did we get? Anarchy! Democracy is not something you can pass out at a pep rally.
Changing the school lunch program to be more healthy and force every student to eat whole wheat, and have a fruit with each meal, created incredible waste. Not to mention kids left the school to get something "Real" to eat. People don’t get fat eating food that doesn’t taste good. If it doesn’t taste good, don’t eat it (and that advice is a couple of million years old).
Oil prices have dropped dramatically and we are still adding 10% ethanol to each gallon. Ethanol gives lousy gas mileage, eats the hell out of the fuel system, and makes our beef steaks cost more. You can’t take a well fed car down to a slaughter house and get prime rib or steaks out of it, only easy monthly payments; miss one and pay the rest of your life. Some of our biggest ethanol producers are family of some well know Congressmen. The irritating thing is that everyone whines about gas prices, but most people have no idea of what they pay for steak, they just drop it in the shopping cart.
The great government program to help our kids get a college education has given a lot of them a financial education that will last their entire lifetimes.
Then we have the new health insurance for everyone. If you can’t afford it, the government will want to know everything about you for you to get it free. And when you file your taxes this year, you have a new form to show the IRS, your 1095-B proof of health care coverage.
The national debt is approaching 20 trillion. The average American thinks, government budgets have worked ok so far, the people in charge must know what they are doing. I guess, if you have that sort of faith in government, you don’t need to go to church every Sunday. What you save in church tithes, will make up for the interest lost on your 401k.
Do you get the feeling, that if big government left us alone, we could manage just fine? Of course listening to the election debates, the last thing anyone of them wants to do, is leave us alone, they want to give us something. The only thing that worries me, is that we may get everything we ask for and something we didn't, a Banana Republic.
A solution to one problem can create unforeseen problems. Raise the minimum wage to $15 per hour and you bump into the term “Shadow Labor,” like self-serve checkouts where you ring it up yourself and bag it. I was at Ralphs supermarket a while back waiting for the cashier to ring me up and a store clerk told the gentleman behind me that the self-serve island was open. He must have been a union man because he cracked me up when he said, “No thanks, I already have a job.”
The 15 dollar an hour wage increase was to give the worker a better standard of living, the net result, less employees. Even worse, with mandatory health care, most jobs went to a 30-hour work week. And of course, the employer could move the factory overseas, and not worry about all of the government restrictions and taxes. Last Thursday, Carrier Air Conditioner announced that it is moving to Mexico and 2,100 jobs go with it. I guess moving “overseas,” is a misnomer. Mexico and Canada are right next door.
The newest thing is negative interest rate policy that is being pushed worldwide on the banks. It’s a little like telling hookers that they have to pay guys to have sex with them. The concept doesn’t float at that level for the simple reason, there is nothing in it for them (naturally I’m referring to the banks ;>)).
We have a drought out here and everyone has been asked to cut down on water usage. Our area in San Diego cut their water usage by 25 %. Net result the water company sold less water and their fixed costs did not go down, so our water bills increased as a reward for using less water.
We tried to bomb the dictators out of the Middle East, and give them Democracy. What did we get? Anarchy! Democracy is not something you can pass out at a pep rally.
Changing the school lunch program to be more healthy and force every student to eat whole wheat, and have a fruit with each meal, created incredible waste. Not to mention kids left the school to get something "Real" to eat. People don’t get fat eating food that doesn’t taste good. If it doesn’t taste good, don’t eat it (and that advice is a couple of million years old).
Oil prices have dropped dramatically and we are still adding 10% ethanol to each gallon. Ethanol gives lousy gas mileage, eats the hell out of the fuel system, and makes our beef steaks cost more. You can’t take a well fed car down to a slaughter house and get prime rib or steaks out of it, only easy monthly payments; miss one and pay the rest of your life. Some of our biggest ethanol producers are family of some well know Congressmen. The irritating thing is that everyone whines about gas prices, but most people have no idea of what they pay for steak, they just drop it in the shopping cart.
The great government program to help our kids get a college education has given a lot of them a financial education that will last their entire lifetimes.
Then we have the new health insurance for everyone. If you can’t afford it, the government will want to know everything about you for you to get it free. And when you file your taxes this year, you have a new form to show the IRS, your 1095-B proof of health care coverage.
The national debt is approaching 20 trillion. The average American thinks, government budgets have worked ok so far, the people in charge must know what they are doing. I guess, if you have that sort of faith in government, you don’t need to go to church every Sunday. What you save in church tithes, will make up for the interest lost on your 401k.
Do you get the feeling, that if big government left us alone, we could manage just fine? Of course listening to the election debates, the last thing anyone of them wants to do, is leave us alone, they want to give us something. The only thing that worries me, is that we may get everything we ask for and something we didn't, a Banana Republic.
Sunday, February 07, 2016
Investment Returns vs Homeownership
The average person thinks that when they pay off the mortgage, they live in their home for free. This is semi correct. Sell the house and put the money in the bank and in the past, the interest was what you would pay to rent the house. So with a half million-dollar home today, the money in the bank pays about .05 percent. That comes out to $2500 a year or $250 a month. Something is wrong here. If you buy the same property as an investment, you will probably get a rental investment return of $2,500 a month which is $30,000. That’s a 6% return on your investment. So being a paid off home owner gives you a better return on your savings than what the bank could offer by a mile.
The statement hidden behind the data is that if interest rates remain low, the average blue collar worker can ill afford the house payments for a very overpriced home. If bank interest rates were to reach 8%, the monthly payment would be $3,660 a month, whereas at 5% they would be $2680 a month. The neat thing about the high sales price, is that it locks in the property tax assessment which is 1% in California. Even at the lower amount, the buyer with no money down needs about 50K a year just for the house payment, taxes and utilities
What is missed here, is that retirement funds or people with cash, can buy a home with an expected rental return of 6%. This in turn puts stress on the starter home prices. They go up in price to a level to where, starter homes are no longer starters.
There is a conundrum here; low bank interest rates, high rental return rates, and unrealistic house valuations. The real loser here is the homebuyer with very little down. He will be broke the rest of his life paying off the home. If you think about it for a few minutes, you will realize that everyone rents the home they live in. Your lifespan determines the rental length. A man in Oxnard made millions leasing 100 acres of land from the city for 100 years. He built rental condominiums on the acreage. After 20 years, he had them paid off and I think he lived to realize another 40 years of income off of them. So after another 40 years, when the lease expires, the relatives will give the land back to the city of Oxnard.
So until the cost of money gets back to more realistic levels. Everyone will be forced to park their savings in real estate investments, not home ownership, there is a difference. This is the definition of a bubble, the miss allocation of resources. The investment return, not the value of the asset, justifies the price paid.
The real reality of the situation is that when the housing prices double, you pretty much double the number of people occupying the house. And it is only noticeable when you come home late and can’t find a parking space for your car. Go figure.
The statement hidden behind the data is that if interest rates remain low, the average blue collar worker can ill afford the house payments for a very overpriced home. If bank interest rates were to reach 8%, the monthly payment would be $3,660 a month, whereas at 5% they would be $2680 a month. The neat thing about the high sales price, is that it locks in the property tax assessment which is 1% in California. Even at the lower amount, the buyer with no money down needs about 50K a year just for the house payment, taxes and utilities
What is missed here, is that retirement funds or people with cash, can buy a home with an expected rental return of 6%. This in turn puts stress on the starter home prices. They go up in price to a level to where, starter homes are no longer starters.
There is a conundrum here; low bank interest rates, high rental return rates, and unrealistic house valuations. The real loser here is the homebuyer with very little down. He will be broke the rest of his life paying off the home. If you think about it for a few minutes, you will realize that everyone rents the home they live in. Your lifespan determines the rental length. A man in Oxnard made millions leasing 100 acres of land from the city for 100 years. He built rental condominiums on the acreage. After 20 years, he had them paid off and I think he lived to realize another 40 years of income off of them. So after another 40 years, when the lease expires, the relatives will give the land back to the city of Oxnard.
So until the cost of money gets back to more realistic levels. Everyone will be forced to park their savings in real estate investments, not home ownership, there is a difference. This is the definition of a bubble, the miss allocation of resources. The investment return, not the value of the asset, justifies the price paid.
The real reality of the situation is that when the housing prices double, you pretty much double the number of people occupying the house. And it is only noticeable when you come home late and can’t find a parking space for your car. Go figure.
Wednesday, January 20, 2016
Everything’s GREAT!
Did you ever notice, people that wake up with a feeling of gloom seem to spread it to others? Now imagine if the country was in a major depression. Do you think government is going to point out the fact?
Depressions are self-fulfilling. The acceptance of the fact that you are in one, tends to exacerbate it. One tends to save more and spend less in anticipation of bad times that may lie ahead. Most politicians are doing the correct thing by not acknowledging the economic mess, it would only make things worse.
Obama in Detroit today shown in a car plant, said sales were up and things were getting better. Detroit is a city where they are tearing down so many houses that they want to rezone 60 acre portions into farm land. I not sure how true that is, but the Paul Bunyan folklore story tellers are known to be from around there and they tend to stretch the truth a bit.
So, everything is just great. The only problem is that the rest of the world is on life support. And it is getting worse. Europe could barely afford to finance their health care plans for their populations. Now they have 20 million immigrants that have no place to go. The support institutions of Europe will not be able to meet the demands put upon them. And nobody will believe that until it happens.
We have unrest in several Middle Eastern countries and with the price of oil falling out of bed, there is no support for the poor. Farmers can’t plant in war torn areas. People are fleeing to areas where there are so many refugees that there is a guaranteed impossibility of employment.
The only part of the global economy that governments cannot really control is the stock market. This world market has kind of taken on a mind of its own lately. We are not sure of where it is going tomorrow, but it doesn’t look good for the long run. We do know one thing, in 1929 most of the investors were individuals. In today’s market, most of the investors are fund managers. They need to keep in the market, to have a reason to keep their job, as a fund manager. For that reason, I don’t see a panic, just a very continuous steep sell off into oblivion. Plus, your stock fund manager isn't old enough to have ever experienced a bear market. And naturally, there will be one or two spectacular "recoveries" on the way to the bottom. Where to from here? Not sure. We have been here before in history, I’m sure of it. The only trouble is; you can only see the outcome from the rear view mirror.
I think we have time to go back to the snack bar and get a refill on the popcorn, you won't miss much of the movie even if you really wanted to watch it.
Depressions are self-fulfilling. The acceptance of the fact that you are in one, tends to exacerbate it. One tends to save more and spend less in anticipation of bad times that may lie ahead. Most politicians are doing the correct thing by not acknowledging the economic mess, it would only make things worse.
Obama in Detroit today shown in a car plant, said sales were up and things were getting better. Detroit is a city where they are tearing down so many houses that they want to rezone 60 acre portions into farm land. I not sure how true that is, but the Paul Bunyan folklore story tellers are known to be from around there and they tend to stretch the truth a bit.
So, everything is just great. The only problem is that the rest of the world is on life support. And it is getting worse. Europe could barely afford to finance their health care plans for their populations. Now they have 20 million immigrants that have no place to go. The support institutions of Europe will not be able to meet the demands put upon them. And nobody will believe that until it happens.
We have unrest in several Middle Eastern countries and with the price of oil falling out of bed, there is no support for the poor. Farmers can’t plant in war torn areas. People are fleeing to areas where there are so many refugees that there is a guaranteed impossibility of employment.
The only part of the global economy that governments cannot really control is the stock market. This world market has kind of taken on a mind of its own lately. We are not sure of where it is going tomorrow, but it doesn’t look good for the long run. We do know one thing, in 1929 most of the investors were individuals. In today’s market, most of the investors are fund managers. They need to keep in the market, to have a reason to keep their job, as a fund manager. For that reason, I don’t see a panic, just a very continuous steep sell off into oblivion. Plus, your stock fund manager isn't old enough to have ever experienced a bear market. And naturally, there will be one or two spectacular "recoveries" on the way to the bottom. Where to from here? Not sure. We have been here before in history, I’m sure of it. The only trouble is; you can only see the outcome from the rear view mirror.
I think we have time to go back to the snack bar and get a refill on the popcorn, you won't miss much of the movie even if you really wanted to watch it.
Wednesday, January 13, 2016
Who Is Financing Real Estate Loans?
The question arises, what bank is nuts enough to write home loans at even 4% for 30 years. The answer absolutely none. The savings and loan fiasco of the 1990’s was caused by Savings institutions loaning long and paying short term depositors interest. They loaned money for 30 years at 5%. When short term rates went to 6% their depositors move their funds to a bank paying higher rates and we had massive failures of Savings and Loans.
The banks could do 4% loans, but why bother with the potential risk, when you can make 12% to 36% on credit card loans.
The invisible banker in this whole mess is the Federal Reserve. They are financing the current real estate bubble. It’s kind of a peculiar arrangement. The Federal Reserve can keep a loan on the books for 30 years at zero percent interest and when it gets paid off, they get their money. Now if an investor has a 100k 30-year Treasury at 1% interest and rates go to 8% the current value of that bond is reduced to about $12,500. If they need cash, they will be eaten alive. If they can wait like the government can, they get every penny back in 30 years. Receiving interests on a loan is a human gratification, not a governmental expectation.
Most home loans end up being for about 5 years, the buyer sells (moves gets divorced, etc). So a loan written for 30 years, ends up being a 5 year loan after the home is sold and repurchased by a new owner. The Federal Reserve has amassed about 3 to 6 trillion dollars’ worth of real estate debt. The interest rate is really irrelevant to the Federal Reserve, they are not a bank, and do not have to show a profit. Time is an option that they don’t have to bother with. But the financing pool of money has to be very large. So when a bank writes a loan, they farm it out to a buyer like the Federal Reserve. The Fed has to buy all loans offered in order to keep interest rates low, just like what they are doing with T-Bills. If they don’t, prices rise until a buyer appears and purchases the note.
If you are following retirement funds and other investment operations, many are becoming involved in rental real estate. Notice the zero overhead of purchasing renting real estate for the Investment funds. They have the purchase money and need an investment return, plus they get to depreciate the investment. The base line return can be as high as 15% and most appear to be around 8%. In bad economic times projecting an 8% return just might not float the boat. But right now, the investment funds have a 4 percent hedge on potential home buyers; whose cost of funds is at 4 percent and no depreciation.
If we reduce it down to a personal level, for every dollar the Fed loans out, it will get one dollar back (if it waits long enough). Where you and I depend on the interest generated on loaning out dollars to create investment income for our retirement.
The real problem starts when the Federal Reserve stops buying real estate loans. The question now being asked, “Do they dare?” The questions of a lot of bystanders, is, “How can these crap shacks be worth so much?” Zero interest rates have distorted real estate values.
Just maybe, the Feds will be forced to take possession of the bad crap shack loans--- If this real estate bubble pops, they own it all, the only problem is the "they" bit; its you and me, AKA Taxpayer.
Reality might have “left the building” 20 years ago, but it will return. Stocks, bonds and real estate will return to historic norms. Once government influence drops from the equation, the mis-allocation of resources will stop. Just how this will happen is up for debate, but the drop in the world stock markets and the fall of oil prices seem to point to an uncertainty that could speed up the process a bit.
The banks could do 4% loans, but why bother with the potential risk, when you can make 12% to 36% on credit card loans.
The invisible banker in this whole mess is the Federal Reserve. They are financing the current real estate bubble. It’s kind of a peculiar arrangement. The Federal Reserve can keep a loan on the books for 30 years at zero percent interest and when it gets paid off, they get their money. Now if an investor has a 100k 30-year Treasury at 1% interest and rates go to 8% the current value of that bond is reduced to about $12,500. If they need cash, they will be eaten alive. If they can wait like the government can, they get every penny back in 30 years. Receiving interests on a loan is a human gratification, not a governmental expectation.
Most home loans end up being for about 5 years, the buyer sells (moves gets divorced, etc). So a loan written for 30 years, ends up being a 5 year loan after the home is sold and repurchased by a new owner. The Federal Reserve has amassed about 3 to 6 trillion dollars’ worth of real estate debt. The interest rate is really irrelevant to the Federal Reserve, they are not a bank, and do not have to show a profit. Time is an option that they don’t have to bother with. But the financing pool of money has to be very large. So when a bank writes a loan, they farm it out to a buyer like the Federal Reserve. The Fed has to buy all loans offered in order to keep interest rates low, just like what they are doing with T-Bills. If they don’t, prices rise until a buyer appears and purchases the note.
If you are following retirement funds and other investment operations, many are becoming involved in rental real estate. Notice the zero overhead of purchasing renting real estate for the Investment funds. They have the purchase money and need an investment return, plus they get to depreciate the investment. The base line return can be as high as 15% and most appear to be around 8%. In bad economic times projecting an 8% return just might not float the boat. But right now, the investment funds have a 4 percent hedge on potential home buyers; whose cost of funds is at 4 percent and no depreciation.
If we reduce it down to a personal level, for every dollar the Fed loans out, it will get one dollar back (if it waits long enough). Where you and I depend on the interest generated on loaning out dollars to create investment income for our retirement.
The real problem starts when the Federal Reserve stops buying real estate loans. The question now being asked, “Do they dare?” The questions of a lot of bystanders, is, “How can these crap shacks be worth so much?” Zero interest rates have distorted real estate values.
Just maybe, the Feds will be forced to take possession of the bad crap shack loans--- If this real estate bubble pops, they own it all, the only problem is the "they" bit; its you and me, AKA Taxpayer.
Reality might have “left the building” 20 years ago, but it will return. Stocks, bonds and real estate will return to historic norms. Once government influence drops from the equation, the mis-allocation of resources will stop. Just how this will happen is up for debate, but the drop in the world stock markets and the fall of oil prices seem to point to an uncertainty that could speed up the process a bit.
Sunday, January 10, 2016
A Readers Perspective
"The Mortgage Guy” put this letter in the remarks section of my last post. He spent some effort writing it, and it may be a refreshing break to my murder of English grammar and punctuation. Here is his letter:
Jim I've been a lurker here since 2008. I stumbled upon your site while searching for truth in a desert of deliberate media obfuscation at the least and out right propaganda at worst. Your site was one of the many oases of veracity that I came upon both back in 08 and presently.
I had a front line seat to the financial devastation of that time, these times, and early on I might add. I owned a mortgage origination company back then having migrated from the financial planning field. The earliest signs of things to come became apparent shortly after 9/11, a time that witnessed unwarranted easy monetary policy that helped inflate the ill-fated bubble. The initial easing was warranted in light of the terrorists attacks. There was no reason however not reverse that easy policy a couple of years later.
It was around 2003 when we started to see our wholesalers buying ridiculous mortgage paper. Our wholesalers wanted to buy loans that didn't require proof of a job, proof of income or proof of assets. The only things required was a 620ish credit score and a solid appraisal. We also saw demand for 100% loan to value loans, on both a first and second mortgage basis. Purchase money mortgages were equally ridiculous with 103% loan to value loans as well as a plethora of similar offerings.
On a number of occasions, I would come right out and ask my wholesalers "what are you guys doing buying this garbage paper?" The most common answer was "we're not holding it" or "we sell the loans to Wall Street" (Bear, Lehman, etc.). It became apparent that the proliferation of these toxic time bombs was due not to consumer demand necessarily but due to Wall Street's ravenous appetite to securitize debt. It's interesting to note, that had Glass Steagall not been repealed by the signature of Bill Clinton, these toxic loans could not exist and what is erroneously referred to as the Bush recession, would not have happened. It is equally interesting that these loans could not have proliferated without their fraudulent securitization, which is the second biggest reason after Clinton, for the economic meltdown of 2008/09.
Having provided some background, let me state that not only has "depression grade" financial devastation been inflicted all along, very little if anything has changed. That is because nothing has been done to address the problems at hand, rather all efforts taken were to paper over the damage.
The mirage of economic expansion is primarily due to a leftist media meme that brainwashed masses to believe the stock market is the economy as is the unemployment rate. Anyone with any financial acumen will tell you that the stock is one of the poorest economic indicators in existence. They will also tell you that the stock market's precipitous rise isn't due to economic or business fundamentals but to an unprecedented printing of trillions that were funneled into the market via insolvent banks. Thus benefiting the very entities that created the economic woe while starving Main Street of any trickle down.
As for the unemployment rate, that is a statistic rendered useless by its historically skewed shrinkage in the labor force. By some estimates, 80% to 85% of the unemployment rate drop isn't due to job creation but rather labor force shrinkage. This phenomenon is due to the way the unemployment rate formula works. Based on the way the formula works, it is possible to lower the unemployment rate to zero without creating a single job. This is accomplished through the labor participation rate falling to the necessary degree. One can duplicate this phenomenon with the jobs calculator on the Federal Reserve of Atlanta website. https://www.frbatlanta.org/chcs/calculator.aspx?panel=1
Taking away the two most used economic indicators used by the media to present a false sense of prosperity, we are faced with a majority of indicators that present are more sobering view of the economy. Even the highly touted 298,000 jobs (supposedly) created in the latest jobs report is a sham. All of the jobs were created by the BLS through voodoo seasonal adjustments; and not by actual businesses. The raw numbers show a loss of in excess of 60,000 jobs.
Since the end of Clinton's great recession, job creation has failed to keep up with population growth, an important metric that only lost its importance since the advent of the state owned media. The jobs that have been created are part time and low paying. The kind of jobs you can't buy a house with, as evidenced by the historically low home ownership rate. Not only are these jobs so bad that people cannot afford to buy homes, over half of all U.S. twenty-five years olds live in their parent's basement.
For the first time in history, the middle class is a minority in America. For the first time in history business failures out number new business creation. Half of the working people in the United States earn less than $30,000. Not only are incomes down on a purchasing power basis but wealth is down as well. 62% of Americans have less than $1,000 in savings.
Add to this that one in five children are on food stamps and UNICEF ranks the U.S. 35 out of 41 wealthy countries for percentage of children living below poverty. One in three children do. In 1950 80% of American men held jobs. Today only 62% hold jobs.
We still have the QE time bombs to deal with, bank solvency (papered over now but not in the impending meltdown) as well as the pension plan deficiencies. All of which will rumble through the economy on the days of reckoning.
What you/our detractors fail to realize is that the absence of bread lines (due to ebt and mail) and the lack of tanks in the streets doesn't mean we have not and are not in a depression. Even in Greece, there are no tanks in the street.
Jim, you and I were right all along. Take comfort in former Federal Reserve Governor, Richard Fischer's confession as to what they did to paper over the apocalyptic destruction to our economy. http://globaleconomicanalysis.blogspot.com/2016/01/former-dallas-fed-governor-richard.html#RjxLAsdKayftg64C99. Please keep your sanity when encountering the masses that have been brainwashed with a concerted media effort in order to hide our sad reality and please keep up the fine work.
A Happy and Prosperous New Year to you and your readers.
Jim I've been a lurker here since 2008. I stumbled upon your site while searching for truth in a desert of deliberate media obfuscation at the least and out right propaganda at worst. Your site was one of the many oases of veracity that I came upon both back in 08 and presently.
I had a front line seat to the financial devastation of that time, these times, and early on I might add. I owned a mortgage origination company back then having migrated from the financial planning field. The earliest signs of things to come became apparent shortly after 9/11, a time that witnessed unwarranted easy monetary policy that helped inflate the ill-fated bubble. The initial easing was warranted in light of the terrorists attacks. There was no reason however not reverse that easy policy a couple of years later.
It was around 2003 when we started to see our wholesalers buying ridiculous mortgage paper. Our wholesalers wanted to buy loans that didn't require proof of a job, proof of income or proof of assets. The only things required was a 620ish credit score and a solid appraisal. We also saw demand for 100% loan to value loans, on both a first and second mortgage basis. Purchase money mortgages were equally ridiculous with 103% loan to value loans as well as a plethora of similar offerings.
On a number of occasions, I would come right out and ask my wholesalers "what are you guys doing buying this garbage paper?" The most common answer was "we're not holding it" or "we sell the loans to Wall Street" (Bear, Lehman, etc.). It became apparent that the proliferation of these toxic time bombs was due not to consumer demand necessarily but due to Wall Street's ravenous appetite to securitize debt. It's interesting to note, that had Glass Steagall not been repealed by the signature of Bill Clinton, these toxic loans could not exist and what is erroneously referred to as the Bush recession, would not have happened. It is equally interesting that these loans could not have proliferated without their fraudulent securitization, which is the second biggest reason after Clinton, for the economic meltdown of 2008/09.
Having provided some background, let me state that not only has "depression grade" financial devastation been inflicted all along, very little if anything has changed. That is because nothing has been done to address the problems at hand, rather all efforts taken were to paper over the damage.
The mirage of economic expansion is primarily due to a leftist media meme that brainwashed masses to believe the stock market is the economy as is the unemployment rate. Anyone with any financial acumen will tell you that the stock is one of the poorest economic indicators in existence. They will also tell you that the stock market's precipitous rise isn't due to economic or business fundamentals but to an unprecedented printing of trillions that were funneled into the market via insolvent banks. Thus benefiting the very entities that created the economic woe while starving Main Street of any trickle down.
As for the unemployment rate, that is a statistic rendered useless by its historically skewed shrinkage in the labor force. By some estimates, 80% to 85% of the unemployment rate drop isn't due to job creation but rather labor force shrinkage. This phenomenon is due to the way the unemployment rate formula works. Based on the way the formula works, it is possible to lower the unemployment rate to zero without creating a single job. This is accomplished through the labor participation rate falling to the necessary degree. One can duplicate this phenomenon with the jobs calculator on the Federal Reserve of Atlanta website. https://www.frbatlanta.org/chcs/calculator.aspx?panel=1
Taking away the two most used economic indicators used by the media to present a false sense of prosperity, we are faced with a majority of indicators that present are more sobering view of the economy. Even the highly touted 298,000 jobs (supposedly) created in the latest jobs report is a sham. All of the jobs were created by the BLS through voodoo seasonal adjustments; and not by actual businesses. The raw numbers show a loss of in excess of 60,000 jobs.
Since the end of Clinton's great recession, job creation has failed to keep up with population growth, an important metric that only lost its importance since the advent of the state owned media. The jobs that have been created are part time and low paying. The kind of jobs you can't buy a house with, as evidenced by the historically low home ownership rate. Not only are these jobs so bad that people cannot afford to buy homes, over half of all U.S. twenty-five years olds live in their parent's basement.
For the first time in history, the middle class is a minority in America. For the first time in history business failures out number new business creation. Half of the working people in the United States earn less than $30,000. Not only are incomes down on a purchasing power basis but wealth is down as well. 62% of Americans have less than $1,000 in savings.
Add to this that one in five children are on food stamps and UNICEF ranks the U.S. 35 out of 41 wealthy countries for percentage of children living below poverty. One in three children do. In 1950 80% of American men held jobs. Today only 62% hold jobs.
We still have the QE time bombs to deal with, bank solvency (papered over now but not in the impending meltdown) as well as the pension plan deficiencies. All of which will rumble through the economy on the days of reckoning.
What you/our detractors fail to realize is that the absence of bread lines (due to ebt and mail) and the lack of tanks in the streets doesn't mean we have not and are not in a depression. Even in Greece, there are no tanks in the street.
Jim, you and I were right all along. Take comfort in former Federal Reserve Governor, Richard Fischer's confession as to what they did to paper over the apocalyptic destruction to our economy. http://globaleconomicanalysis.blogspot.com/2016/01/former-dallas-fed-governor-richard.html#RjxLAsdKayftg64C99. Please keep your sanity when encountering the masses that have been brainwashed with a concerted media effort in order to hide our sad reality and please keep up the fine work.
A Happy and Prosperous New Year to you and your readers.
Saturday, December 26, 2015
The Great Depression of 2006 never happened?
I got a comment last week about this blog being wrong for 10 years. And the writer went further by adding
I’d like to clarify a few things. During the years 2007, 8, 9 and 10 no one referred to those years as “the greatest recession since The Great Depression.” They do now. Janet Yellen in her address the other day stated, the bail out in 2007 was to confront “the greatest recession since the Great Depression.” No government employee is going to wave a flag and say we are currently in a depression. The Federal Reserve and the Treasury confronted the Congress in 2007 and said bluntly, to do a bailout or kiss the economy goodbye. And by the way the bail out failed to accomplish anything except spend money. We have 45.4 million people in the US on food stamps— so the telltale soup line kitchens of the 1930’s are not there.
The 100K, my wife and I have in savings, did not double in value over the last 10 years, it did nothing. We were effectively taxed by the government $100,000; our investment earnings were confiscated.
From 2006 to 20015 people have gone back to school to further their education because they couldn’t find a job. It didn’t do much, other than stimulate the economy and build up debt among young people. Over 60 percent of these loans will never be paid off, and they will linger around and hound the borrower until they die.
The national debt has increased 10 trillion dollars and the size of it means absolutely nothing to anyone. The US government has probably borrowed all of the saving in banks in the US and the entire amount in our retirement funds. They will have no problem paying you back, but will it be in your lifetime? Or will the entire amount paid to you have very little purchasing power?
There was the Great Invisible Displacement of Jobs because of the computer revolution that has been glossed over,(one person now had 10 times the productivity) and they were good paying jobs, gone forever. The largest loss of jobs has been to Asia; cheaper labor and lower corporate taxes. Most of those were minimum wage jobs.
There are absurd levels of unemployment in Europe. When Spain reports 20 percent, is it any more believable than any other government report? We can safely assume that they are not exaggerating. Banks in Europe are now “paying” negative interest rates. So with T-bills paying a quarter of a percent, a lot of foreign savings deposits will be headed to the US. ---Congress will have more money to borrow and spend.
You need a car; the car companies offer the new 8-year loan for those that can’t afford the 5 year one. The neat thing about this, is that it pushes the buyer’s insolvency out an extra 3 years into the future and at the same time stimulates the economy. Let’s face it, if it wasn’t affordable in 5 years, you shouldn’t have bought it in the first place.
Plus, look at what you purchase, everything has shrunk in size. There is no inflation unless you have a tape measure. Bleach and Ammonia used to be about a dollar a gallon. Guess what, they now sell half gallons at a dollar. Kind of looks the same, but there was a switch made you just didn’t catch it.
So from looking at this Great Depression, there is only one conclusion I can make. If you have money in the banks or in retirement funds, the interest on your savings have been confiscated for the last 10 years and prices have doubled. People with no savings thought that they had nothing to lose until they got a student loan, a wide TV and a new SUV. Add to that health insurance premiums cable and a couple of cell phones. They are living paycheck to paycheck. And if they are not working, they have moved home with mom and dad who are in their 80’s.
The real question: “Is the Great Depression over?” The answer is “No, it’s about to get worse.” Starvation in the Middle East. The collapse of the Euro in Europe. The collapse of oil prices could end most wars being fought (which might be a good thing). Stock market values are hypothecated on thin air. Bond prices are so low as to be deemed unreasonable as credible financial investment instruments. Speculative bubbles in rental real estate are rampant.
For people my age, the consensus is,keep working and don’t retire; it can’t be as painful, as retiring to suffer the future financial downfalls of fixed retirement benefits. We know something is about to change. Wall Street and the Federal Reserve have stirred the pot and no one is sure of the results. We do know one thing for sure, it is not going to be something that was planned or expected to happen.
This Great Depression started in 2006 and the end date is still not in sight. The only mistake I made in 1980 was to assume the interest rate would be around 7 percent up through my retirement. The changes over the last 10 years have been so gradual, they have been absorbed without being observed.
Here is hoping that the New Year will be better.
I hope everyone had a Merry Christmas, and here is I my wish to all of you, for a Happy New Year.
“The point of all this is to say, that yes we will have ups and downs in markets, that's what markets do. But to sit on your hands for a decade and wait for a depression, and when it doesn't materialize after a decade, not admit flaw in your assumptions, is bullheaded.”The following is not directed at my readers, but to Anonymous Dec 19, 5:21
I’d like to clarify a few things. During the years 2007, 8, 9 and 10 no one referred to those years as “the greatest recession since The Great Depression.” They do now. Janet Yellen in her address the other day stated, the bail out in 2007 was to confront “the greatest recession since the Great Depression.” No government employee is going to wave a flag and say we are currently in a depression. The Federal Reserve and the Treasury confronted the Congress in 2007 and said bluntly, to do a bailout or kiss the economy goodbye. And by the way the bail out failed to accomplish anything except spend money. We have 45.4 million people in the US on food stamps— so the telltale soup line kitchens of the 1930’s are not there.
The 100K, my wife and I have in savings, did not double in value over the last 10 years, it did nothing. We were effectively taxed by the government $100,000; our investment earnings were confiscated.
From 2006 to 20015 people have gone back to school to further their education because they couldn’t find a job. It didn’t do much, other than stimulate the economy and build up debt among young people. Over 60 percent of these loans will never be paid off, and they will linger around and hound the borrower until they die.
The national debt has increased 10 trillion dollars and the size of it means absolutely nothing to anyone. The US government has probably borrowed all of the saving in banks in the US and the entire amount in our retirement funds. They will have no problem paying you back, but will it be in your lifetime? Or will the entire amount paid to you have very little purchasing power?
There was the Great Invisible Displacement of Jobs because of the computer revolution that has been glossed over,(one person now had 10 times the productivity) and they were good paying jobs, gone forever. The largest loss of jobs has been to Asia; cheaper labor and lower corporate taxes. Most of those were minimum wage jobs.
There are absurd levels of unemployment in Europe. When Spain reports 20 percent, is it any more believable than any other government report? We can safely assume that they are not exaggerating. Banks in Europe are now “paying” negative interest rates. So with T-bills paying a quarter of a percent, a lot of foreign savings deposits will be headed to the US. ---Congress will have more money to borrow and spend.
You need a car; the car companies offer the new 8-year loan for those that can’t afford the 5 year one. The neat thing about this, is that it pushes the buyer’s insolvency out an extra 3 years into the future and at the same time stimulates the economy. Let’s face it, if it wasn’t affordable in 5 years, you shouldn’t have bought it in the first place.
Plus, look at what you purchase, everything has shrunk in size. There is no inflation unless you have a tape measure. Bleach and Ammonia used to be about a dollar a gallon. Guess what, they now sell half gallons at a dollar. Kind of looks the same, but there was a switch made you just didn’t catch it.
So from looking at this Great Depression, there is only one conclusion I can make. If you have money in the banks or in retirement funds, the interest on your savings have been confiscated for the last 10 years and prices have doubled. People with no savings thought that they had nothing to lose until they got a student loan, a wide TV and a new SUV. Add to that health insurance premiums cable and a couple of cell phones. They are living paycheck to paycheck. And if they are not working, they have moved home with mom and dad who are in their 80’s.
The real question: “Is the Great Depression over?” The answer is “No, it’s about to get worse.” Starvation in the Middle East. The collapse of the Euro in Europe. The collapse of oil prices could end most wars being fought (which might be a good thing). Stock market values are hypothecated on thin air. Bond prices are so low as to be deemed unreasonable as credible financial investment instruments. Speculative bubbles in rental real estate are rampant.
For people my age, the consensus is,keep working and don’t retire; it can’t be as painful, as retiring to suffer the future financial downfalls of fixed retirement benefits. We know something is about to change. Wall Street and the Federal Reserve have stirred the pot and no one is sure of the results. We do know one thing for sure, it is not going to be something that was planned or expected to happen.
This Great Depression started in 2006 and the end date is still not in sight. The only mistake I made in 1980 was to assume the interest rate would be around 7 percent up through my retirement. The changes over the last 10 years have been so gradual, they have been absorbed without being observed.
Here is hoping that the New Year will be better.
I hope everyone had a Merry Christmas, and here is I my wish to all of you, for a Happy New Year.
Friday, December 11, 2015
The Media The Phony Window To The World.
Pick up a newspaper, turn on the media and the world is all roses (except for a few minor wars and a world depression). Their investment advice and economic news is showing everyone how to invest their millions\billions. The media is no longer about who, what, why, where, and when; it's all about the rise to prominence and then the fall from grace.
The media is pandering to the masses. Feed them what they want to hear. Some news announcer tells me that Trump is not qualified to be President, I kind of wonder what school the announcer went to (The qualifications for President of the United States is 35 years or older and a born US citizen). Then we have Hillary Clinton not a day over 68 looking like she is 45 years old. On closer examination, Trump has balls and Hillary has (Bill’s) testicals (he lost them because of Monica). It’s a fine line defining the two, Trump will stride forward leading, while Hillary will push her group forward with an email.
I don’t really mean to be political, Hillary is depending on getting elected because she’s a woman. The country is already tired of the Democrats and Obama. A woman president, what a novel idea, but will it happen? The irritating thing is that I know people that will vote just for that, because it would be, “Such a great thing to have happen.” Political candidates are no longer being judged by their grit and gristle, but rather by what is deemed by the media as being politically correct.
We need to realize that we have a media that feeds on impropriety, and being politically incorrect. The media works on silly assumptions like black people can’t be racists because they are black. And if you are white and oppose their views, you are automatically deemed a racist and a bigot. Tell a racial joke and your political career is over. This is no longer a nation of tolerance and free speech, it is one of intolerance. The media feeds on this intolerance of being politically incorrect, until the person spotlighted resigns. It’s not about morals, it is about the media’s intolerance of imperfection.
Maybe Donald Trump knows something. The rest of the Republican Party contenders look like a bunch of wimps and pussies, too scared to talk, waiting to pounce on their opponents gaff. The media is running on the premise, "How can Trump represent the Republican Party and get elected?" He fails their litmus test of not being “Politically Correct.” Maybe the American public is tired of the media setting the standards for politicians running for office.
The real reality in the world is this, the media is setting standards that no real person could honestly meet. It is they who have set the standards of political correctness that everyone has to live up to. The media has set the bar too high for politicians (not to mention for everyone else). You have to be a godlike in character to get their blessing. Let’s face it, there are very few of us left that that can measure up ;>)
The media is pandering to the masses. Feed them what they want to hear. Some news announcer tells me that Trump is not qualified to be President, I kind of wonder what school the announcer went to (The qualifications for President of the United States is 35 years or older and a born US citizen). Then we have Hillary Clinton not a day over 68 looking like she is 45 years old. On closer examination, Trump has balls and Hillary has (Bill’s) testicals (he lost them because of Monica). It’s a fine line defining the two, Trump will stride forward leading, while Hillary will push her group forward with an email.
I don’t really mean to be political, Hillary is depending on getting elected because she’s a woman. The country is already tired of the Democrats and Obama. A woman president, what a novel idea, but will it happen? The irritating thing is that I know people that will vote just for that, because it would be, “Such a great thing to have happen.” Political candidates are no longer being judged by their grit and gristle, but rather by what is deemed by the media as being politically correct.
We need to realize that we have a media that feeds on impropriety, and being politically incorrect. The media works on silly assumptions like black people can’t be racists because they are black. And if you are white and oppose their views, you are automatically deemed a racist and a bigot. Tell a racial joke and your political career is over. This is no longer a nation of tolerance and free speech, it is one of intolerance. The media feeds on this intolerance of being politically incorrect, until the person spotlighted resigns. It’s not about morals, it is about the media’s intolerance of imperfection.
Maybe Donald Trump knows something. The rest of the Republican Party contenders look like a bunch of wimps and pussies, too scared to talk, waiting to pounce on their opponents gaff. The media is running on the premise, "How can Trump represent the Republican Party and get elected?" He fails their litmus test of not being “Politically Correct.” Maybe the American public is tired of the media setting the standards for politicians running for office.
The real reality in the world is this, the media is setting standards that no real person could honestly meet. It is they who have set the standards of political correctness that everyone has to live up to. The media has set the bar too high for politicians (not to mention for everyone else). You have to be a godlike in character to get their blessing. Let’s face it, there are very few of us left that that can measure up ;>)
Tuesday, November 10, 2015
“Placate the Masses” An Old Roman Game
Notice how lately the protests over citizenship and a 15 dollar minimum wage revolve around demands from people who feel they are entitled. People are not asking for $15 an hour, they are demanding it with the reasoning that you can’t raise a family on $15 an hour. Sex beer and drugs are great, the responsibility that goes with its reality, sucks.
The real problem with the $15 hour wage is a little hidden. Entry level workers need minimum skill sets. High school dropout comes to mind. For the employer, he has his choice of employees. A high school grad or better; or maybe a chick with a knock out body that likes the “late shift.”
Then if it is only part time, you’ll be working two 3 hour shifts twice a day, 5 days a week. At that point you are not making $15 per hour, maybe only $10 per hour. The employer in the past could afford an 8 hour work day at $10 an hour on the assumption that it came out ok with coffee breaks, lunch breaks and bathroom breaks. 2 hours of pay would be wasted on non-necessary busy work. By switching to part time employees, the unsupervised coffee breaks, lunch breaks and bathroom breaks, health insurance and unemployment insurance, drop out of the equation. The employee gets two three hour shifts with a 4 hour break in between, a 10 hour day with 6 hours pay.
Economics actually dictates the price for labor, by using the government’s regulations, to the employers benefit. 40 hour work weeks, demand employer health insurance, 30 hour weeks don’t. Part time employees don’t have to be paid $15 dollars an hour.
Legislation may appear to placate the masses, but in the long run it acerbates the problem. Our State legislatures are a collection of the dumbest of the dumb when it comes to practicality. The thought that a law raising wages can change the economic livelihood of people in poverty is a little bit presumptuous-- great vote getter though.
A person with two kids thinking that $15 dollars an hour will help them out, knows absolutely nothing about real life. They will know poverty for their lifetime. I have a quote taped to my desk that reads, “The easiest way to teach your children about money, is for you not to have any.”
There is this "New Age" mentality of, “I want it now!” The concept of saving over time and earning ones way to wealth appears to be a waste of time (Janet Yellen can confirm it). We are now a nation that gives money back to people willing to spend and consume. Some major car company yesterday had an ad offering 20 percent back in a cash bonus for buying a car. Are we really placating the masses; or has the game gotten out of control? Reality is not a factor as long as the consumer has a credit card to abuse. Responsibility is for losers. Hmmm 100K student loan, and 100K in credit card debt, but earn 5 percent back for all of the credit card purchases. Why save at .05 percent when you can spend and get 5% back. Am I missing something here?
The real problem with the $15 hour wage is a little hidden. Entry level workers need minimum skill sets. High school dropout comes to mind. For the employer, he has his choice of employees. A high school grad or better; or maybe a chick with a knock out body that likes the “late shift.”
Then if it is only part time, you’ll be working two 3 hour shifts twice a day, 5 days a week. At that point you are not making $15 per hour, maybe only $10 per hour. The employer in the past could afford an 8 hour work day at $10 an hour on the assumption that it came out ok with coffee breaks, lunch breaks and bathroom breaks. 2 hours of pay would be wasted on non-necessary busy work. By switching to part time employees, the unsupervised coffee breaks, lunch breaks and bathroom breaks, health insurance and unemployment insurance, drop out of the equation. The employee gets two three hour shifts with a 4 hour break in between, a 10 hour day with 6 hours pay.
Economics actually dictates the price for labor, by using the government’s regulations, to the employers benefit. 40 hour work weeks, demand employer health insurance, 30 hour weeks don’t. Part time employees don’t have to be paid $15 dollars an hour.
Legislation may appear to placate the masses, but in the long run it acerbates the problem. Our State legislatures are a collection of the dumbest of the dumb when it comes to practicality. The thought that a law raising wages can change the economic livelihood of people in poverty is a little bit presumptuous-- great vote getter though.
A person with two kids thinking that $15 dollars an hour will help them out, knows absolutely nothing about real life. They will know poverty for their lifetime. I have a quote taped to my desk that reads, “The easiest way to teach your children about money, is for you not to have any.”
There is this "New Age" mentality of, “I want it now!” The concept of saving over time and earning ones way to wealth appears to be a waste of time (Janet Yellen can confirm it). We are now a nation that gives money back to people willing to spend and consume. Some major car company yesterday had an ad offering 20 percent back in a cash bonus for buying a car. Are we really placating the masses; or has the game gotten out of control? Reality is not a factor as long as the consumer has a credit card to abuse. Responsibility is for losers. Hmmm 100K student loan, and 100K in credit card debt, but earn 5 percent back for all of the credit card purchases. Why save at .05 percent when you can spend and get 5% back. Am I missing something here?
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