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Friday, July 15, 2011

Banker Stress Friday

About all I can see that the European bank stress tests can achieve is to weed out those bankers with hypertension problems, because the conditions set up certainly don't test for the financial stressors most worrying investors.

So breathe deeply and remain calm, and don't walk under European bank buildings that still have windows that open.

US: CPI for June: There are three measures of CPI published. The first, CPI-U, is considered to be an overall. The second, CPI-W, is a measure of consumer prices for lower-income workers. This is the index which by law is now used to adjust Social Security. The third, a new one, is C-CPI-U, which is like the first except that it has more substitutions.
June CPI-U: 3.6%
June CPI-W: 4.1%
June C-CPI-U: 3.4%
The proposal to switch from CPI-W to C-CPI-U to calculate SS COLAs would have a very adverse effect on lower-income retirees in the future. Over time, the real value of their SS checks would drop very significantly indeed. I view this as a strikingly stupid proposal, and I have not seen it discussed honestly anywhere on an economics site, so I thought I'd mention it now.

The biggest part of the difference between the proposed adjustment index and the current does not come from a more accurate inflation calculation, but from a shift in the income base used to assess expenditure categories, i.e, assuming that retirees have higher incomes than they do and calculating inflation on a fantasy basis for them. The average Social Security check is less than $1,100 still. It's three hots and a cot money, and pretending that you are measuring inflation for retired households with average incomes of 50K is dimwitted and deeply dishonest. Even if that were true, medical costs have a higher inflation rate than the rest of the economy, and retirees spend far more of their incomes for medical expenses. So CPI-W already underestimates the inflation rates real retirees experience. CPI-U really understates it - it is hard to eke out hedonics when you are living on rice and beans.

The next generation of retirees are going to be much, much poorer than the current generation, on average. This will be true for a number of reasons, including, but not limited to, poor finances of state and local governments which will continue to raise the cost of local government charges and taxes, much lower defined benefit pension participation rates, lower average real salaries among the working class over the last couple of decades, a shift in cost patterns to rising basics (the retail efficiencies are worked through and dropping, and higher energy prices), an implicit drop in Social Security involved in raising the full retirement age from 65 to 67 (hits at lower income retirees much harder), changes in the way Social Security benefits are calculated to lower average checks, and changes to Medicare which will raise retiree medical costs and lower benefits.

In short, all but wealthy retirees are already screwed. Aside from the morality of this proposal (lacking), I view it as strikingly stupid because it will actually raise retirement costs to the government. Not only won't it save a penny, it will cost the government MORE money than it otherwise would. Why? Because so many retirees are going to wind up so poor that they will qualify for extra benefits such as Medicaid and food stamps, and quite a few will get Section 8 housing. If you shift a third of the retirement population into this income strata, it is going to amount to a per-retiree additional retirement benefit of over $300 a month in current dollars. It could well be more like $500 dollars a month; what will happen is that by the the second decade of retirement most older people will wind up in this bucket. On average, their medical expenses are much higher then, and so Medicaid finances would be deeply strained.

So let's not be jerks, okay? Barring shooting older people and burying them in mass graves, we are going to have to continue retirement programs pretty much as is for all the poorer older people. There is a reason why the Simpson-Bowles Commission recommended raising Social Security stipends for the poorest retirees, and it wasn't because of a sudden outbreak of fiscal irresponsibility. It's because it is the cheapest way to do it.

Empire State Manufacturing Survey. The current business conditions index was still negative. However that is not as dire as the big collapse in the average work week (-15.56) and the drop in unfilled orders (-12.22). There is a glimmer of hope for the future in that inventories went negative and shipments were up marginally, but new orders also dropped again (-3.61 > -5.45). So this is not an encouraging report overall, and the word "unexpectedly" was trotted out to describe it.

Industrial Production for June: The headline is +0.2, but in fact this is a strikingly negative report. I expected it to be bad, but I am somewhat confounded by these numbers. They do get revised, and perhaps they will look a little better next month. June also completes Q2, and when you look at the progression for the quarter the truth sinks in. Manufacturing has been a bright spot in this recovery - until now.

The weakness in the consumer economy is showing up - it has been for some months. For the quarter, production of consumer goods is negative (-0.1 > -0.3 > 0.0). Over the year, +1.4. Manufacturing as a whole was flat this month and negative for the quarter, but previous strength still gives us an annual rate of +3.7. Capacity utilization hasn't improved much - for the year overall it is +.4 at 76.7, well below the 72-10 average of 80.4. Manufacturing is now flat for the year. Of particular concern is business equipment, which had been very strong but came in negative for three of the last four months.

Some of the narrative:
Output for the second quarter as a whole moved up in most of the major market groups, although the production of consumer goods decreased at an annual rate of 1.2 percent. Declines in the output of consumer goods occurred for both durables and nondurables. In June, the production of consumer goods was unchanged, with a decline of 0.5 percent in durables offsetting an increase of 0.2 percent in nondurables. Among consumer durables, lower production of automotive products; appliances, furniture, and carpeting; and miscellaneous goods more than offset a small gain in home electronics. Within consumer nondurables, the output of non-energy nondurables was unchanged; increased output of chemical products was offset by declines elsewhere.
...
The production of business equipment declined 0.7 percent in June, with transit equipment and information processing equipment recording decreases of 1.9 percent and 1.4 percent, respectively, and industrial and other equipment being little changed. The output of business equipment increased at an annual rate of only 1.2 percent in the second quarter after gains averaging more than 12 percent over the previous five quarters. An increase of 7.0 percent in the production of transit equipment accounted for most of the rise in business equipment in the second quarter; the output of information processing equipment fell, and the output of industrial and other equipment was little changed. (Business equipment should be a predictor for general business conditions in a similar manner as temporary employment indicates future employment and wage trends.)
...
The production of business supplies rose in June after having declined in both April and May and was little changed for the second quarter as a whole.
...
For the second quarter as a whole, the manufacturing index edged up at an annual rate of 0.2 percent, a notably smaller gain than in any quarter since the recession ended in the second quarter of 2009.
...
The index for nondurable manufacturing increased 0.1 percent in June; higher output of textile and product mills, petroleum and coal products, and chemicals slightly more than offset lower output in other nondurable categories. For the second quarter, nondurables output decreased at an annual rate of 0.2 percent. Production in the non-NAICS manufacturing industries (logging and publishing) decreased 0.5 percent in June and dropped at an annual rate of 9.4 percent for the second quarter as a whole.

In June, the production index for utilities increased 0.9 percent; its operating rate rose to 79.5 percent, but that rate remained 7.1 percentage points below its 1972--2010 average.
Last, but not least: July 1st Reuters/Michigan Consumer Sentiment released its June summary on July 1st. 71.5 was the headline. The midmonth for July was released at 63.8 this morning. Another unexpectedly. A drop of this magnitude strongly suggests recession. March 2008 was about 69. Today's measure was way worse than anyone expected, but if you look at H.8 it wasn't surprising at all. This preliminary measure is the worst since we were still in recession in the second quarter of 2009. PS:: gas is back up over 314 - this isn't going to be helping consumer sentiment this summer.

H.8 should be updated late today.

I forgot - The Liscio Report is showing the sudden deceleration of sales tax receipts in states, with 82% meeting goals in May and only 58% meeting goals in June. This is the flipside of the H.8 Other Deposits recession signal and the remarkably poor Michigan survey. Needless to say, this contraction is going to hurt state finances badly.

This recession has been on for a few months - you don't get these results the first month. July is the third month.

Comments:
"This recession has been on for a few months"

For many Americans the recession has been ongoing at the locally level public layoff's are having a significant impact, a typical story around here is a part time Napa College instructor who was not retained for the fall due to budget cuts and at the same time lost her other part time job at a jewelry store due to slow sales.
 
Your comments on the proposed Social Security fix depress me. If you are correct, then there is no way to fix the program. It was supposed to be a form of retirement insurance but it is really just another welfare program The true fix is, I guess, setting a base retirement income such as $36,000 per couple. No one who has assets to achieve a better result will get anything. That way the truth of it all would be out there. All those fat cats who paid in all their lives don't deserve anything, heh?

Word verification = flesse. That's like fleese. As in fleese the sheeples.
 
I had been psyching myself up for my single-room occupancy retirement. Except Daley forced all those out of business. I suppose I can rent Class F office space and pretend I'm running a company.
 
"There is a reason why the Simpson-Bowles Commission recommended raising Social Security stipends for the poorest retirees, and it wasn't because of a sudden outbreak of fiscal irresponsibility. It's because it is the cheapest way to do it."

There's nothing "sudden" about the fiscal irresponsibility of socialism. Socialism has been fiscally irresponsible since day 1.

Capitalism's problem is the unequal distribution of wealth. But Socialism's problem is the equal distribution of misery.
(Winston Churchill)

And they aren't recommending it because socialism is in any way "cheapest" for society, they don't make any economic arguments about social security being good for society and therefore desirable. Rather, they start with the preservation of social security as their *PREMISE*:

Social Security is far more than just a retirement program -- it is the keystone of the American social safety net, and it must be protected.

And their bias to give poor people more has *NOTHING* to do with that somehow being the "cheapest" way to run social programs and has *EVERYTHING* to do with them being Marxists:

To save Social Security for the long haul, all of us must do our part. The most fortunate will have to contribute the most, by taking lower benefits than scheduled and paying more in payroll taxes. Middle-income earners who are able to work will need to do so a little longer. At the same time, Social Security must do more to reduce poverty among the very poor and very old who need help the most.

That's just a verbose way of saying:

From each according to his ability, to each according to his needs!

And you are making the argument that chained CPI is bad on one hand, and trying to use this report to support your overall argument on the other. But what the report really says about chained CPI is *EXACTLY* and *EXPLICITLY* the opposite of what you are saying:

RECOMMENDATION 5.7: ADOPT IMPROVED MEASURE OF CPI. Use the chained CPI, a
more accurate measure of inflation, to calculate the Cost of Living Adjustment for Social
Security beneficiaries.

As with the rest of the mandatory budget and the tax code, we recommend relying on the "chained CPI" to calculate the Cost of Living Adjustment (COLA) in Social Security, rather than the standard CPI. The Bureau of Labor Statistics has stated that the chained CPI is designed to more closely approximate a cost-of-living index than the standard CPI, and experts on both sides of the aisle have supported this technical improvement to the index.



"So let's not be jerks, okay?"

I "like" how you declare people to be jerks not because they lie or steal or perform some other immoral action, but simply because they don't agree to bend over and be raped. A lot of us believe that socialism has caused far more death and suffering than liberty. Layout a plan to get us back to liberty and show us that these SS recipients are voting to make it happen. Until then, this "moral claim" of yours has zero credibility.


"Barring shooting older people and burying them in mass graves, we are going to have to continue retirement programs pretty much as is for all the poorer older people."

Like that's the only "solution". Just one of many alternatives that could apply to many old people: Let them provide for themselves by selling their own children and grandchildren into slavery.
 
Foo - I know it says that, but I was referring to the bit in the report at which it suggest raising the lowest SS income. In other words, raising benefits for those individuals who have had very low paying jobs all their lives. I regard this as utterly justifiable, because ever since the Reagan amnesty we have followed a policy of artificially suppressing wages by allowing unchecked immigration.

You are free to be offended by my statements, but the fact is that this is not socialism. This is crazy government accounting.

Rock back on your heels and realize that since 1983, the federal government has been collecting 15.3% of everyone's working income. For most people, wage and self-employment income is is by far the majority of their income. On top of that, mid income workers have paid about 20% in federal income taxes. Then there is also state income tax, and then there all the other taxes.

If you try to save on your own, you are going to live on 50% of your income. Now, when your annual income is 35K or below, that's damned hard to do.

If the federal government, in its eternal balance, wisdom, benevolence and prudence, had NOT taken such a bit bite, people could have saved more.

But of course our benevolent and wise overlords were afraid we wouldn't, so they took the money. And blew it. Every red cent. This is such a scam that everyone's been lying about it for the last fifteen years, and many Congress Critters still believe that there is a pile of money somewhere waiting to be paid out for benefits.

So you can't escape responsibility, collectively, for what we have done to poorer people. Now, the money was blown in many ways, but one of those ways was to reduce the higher marginal income tax rates and to fund a bunch of very nice ways to allow wealthier people to save tax free.

So neither you nor I can escape the reality that now we have a generation of people who will retire with very little savings.

I will write a longer post about this, but believe me, you cannot default on the older people who never made much. You can cut around the fringes, but that's all.

You also cannot raise taxes on younger people now. They are completely unable to fund it. Trying to do so would force them to live on 35% of their incomes, which is not feasible.

The only place to get it back is from the wealthier retirees, and that's what we'll have to do.
 
Jimmy - not that absolute. If you look at the actuarial balance, we can pay about 75% of promised SS benefits. What I'm pointing out is that this is going to have to be more directed to the lower income half.

If you retire and have an income 60K, probably you'll get less SS and pay more for Medicare benefits.

As it is now, Medicare is unfunded after 2024 at the latest. Is that a better alternative? Social Security benefits get cut anyway start around 2035/36.

It's coming. If we had actually taken all the excess and invested it in Treasury bonds, all this would be a lot easier now. But hey.
 
Foo - please provide me some other alternatives.

Please.
 
"If you are correct, then there is no way to fix the program."

Jimmy, any politically-controlled defined-benefits retirement program is by definition broken and unfixable from its inception. Running a defined benefits program requires either accurately predicting the future, or being ready and willing to perform heavy-duty theft when predictions fail to materialize (or being ready and willing to fail to deliver on promises, in which case it really wasn't ever a defined-benefits program). Politicians can't predict the future, and buying votes means they have strong motivation to lie and promise more than could ever be delivered. This inevitably leads to short-falls. You then have a large number of people who (quite stupidly and quite their own fault) bought into the lies (and voted for the obvious liars and obviously immoral socialists) and now believe they are *ENTITLED* to get paid just the same as if the lies were truth. (It's pretty insane -- it's basically the same thing as if we were to not only make all of those suckers who gave money to Bernie Madoff whole again, but also pay them for the rest of their lives the yield that Madoff promised them.) And you also get the sense of entitlement in the form of "well, I paid in, so it's only fair I get to collect". Nevermind the complete mismatch between amount "payed-in" and "payed-out", no one is "paying in", they are just getting robbed by the previous generation. And since they got robbed they consider themselves "entitled" to rob from the next generation. It's like an abusive family where the abused grows up to become the abuser. It's completely dysfunctional.

One of the (mostly not-for-profit) business ideas I have had was to run an honest retirement fund. Basically it would function as an inverse to life-insurance. It (mostly) pays out if you live rather than if you die. People buy into a fund. The money they put in remains under their direction (so they can continue to choose how to invest it and grow it) but is owned by the fund (and has the restriction that the investments must have a certain degree of liquidity). The rules for payout would likely be something like it starts paying out once you reach a certain age, and the amount of payout is a predefined portion of the remaining funds, and is divided among all of those who are still living and in direct proportion to the amount their funds are currently worth. When someone dies, their money management could either be kept under the direction of their estate or be split and managed by the still living participants. Any money that is left when all members of the fund have passed on is divided in a similar fashion among their estates. (And of course whoever runs the fund gets some percentage -- but they don't have to do any money management work so it could be really cheap to run.) In an ideal world, I could just write up the details and set up the mechanisms to make this a reality in a matter of weeks. But I'm sure this would run afoul of thousands of pages of regulations that I don't even know about and have no desire to deal with, and I'm not fond of the idea of going to federal prison or losing my life's savings to fines for violating stupid regs, so I just dropped the idea.

A lot of people probably wouldn't consider the above (augmented by whatever voluntary charity people see fit to provide in amounts and to beneficiaries of their own choosing) a complete solution, because what they seem to really want is welfare/socialism/Marxism/theft, not an honest and just retirement program.
 
Foo - defined benefit contribution programs only work when you have a population increasing pretty rapidly, or when the programs themselves are very modest (a form of savings in which contributions in and investment returns build a pool of capital from which retirement benefits can be paid).

Defined benefit retirements went by the wayside because none of them were balanced - they were so constructed that everybody got out way more than the value of the contributions.

That's why so many of the government pension programs are busted too.

As soon as our population shifted toward stability, all of this was doomed to end for mathematical reasons. The problem is that people just don't want to face reality about it, and settle down to form some sort of stable system.

It's not even a matter of taxing the young. That's not possible. There aren't enough of them. Social Security was a system designed for a population with five workers to every beneficiary. We're going straight to 2 workers for every beneficiary. Anyone can do the math on that. If you want your average SS beneficiary to get a monthly check for 1K, both of the workers would have to pay $500 a month just in SS tax. It's not going to happen.
 
Here's my take on it for what it is worth.

If you tell people that there is a safety net and they therefore don't need to save for their own retirements then people tend to not save for their own retirements. (Be they pension promises and/or Social Security expectations.)

If you later come back and exclaim "Just kidding!" then you have done them far more harm with the fake safety net than you would have done not having one in the first place.

Why would we do this horrible thing to people? I think the answer is pretty easy. We needed people to spend (and not save) to keep this ponzi economy growing.

Pulling consumption from the future into the present has been an ongoing theme (as seen in the housing market for example). We're now dangerously close to the future. There's very little left that can be pulled.

Some might argue that the future is now. Our past decisions are unraveling. I'm one of them. Sigh.
 
I think Foo believes that everyone can achieve above average results if they work hard enough. Sounds like
a ponzi scheme to me. MoM, you know my solution,
use tariffs to help fund our budget. As it stands now,
we tax labor here and allow foreign goods to come in
with little or no tariff. That's where the downward spiral comes in. Look at the real income for labor now versus
the period before Gatt.

Sporkfed
 
"I know it says that, but I was referring to the bit in the report at which it suggest raising the lowest SS income."

But, as I pointed out, it is clear that their basis for that decision was Marxist philosophy. When you use them to support your position, you are by transitivity invoking Marxism to support your position (even if that was not your intent).


"I regard this as utterly justifiable, because ever since the Reagan amnesty we have followed a policy of artificially suppressing wages by allowing unchecked immigration."

Is that supposed to be some form of logic? Because I can't figure it out.

Immigrant or not, everyone should be able to participate in voluntary associations and enter into voluntary contracts. It sounds to me like you are appealing to protectionism. But rather than have it be in the form of tariffs, your mechanism of choice is restricted movement/association.

(Immigration is a large issue unto itself. Personally I would not restrict immigration based on place of birth -- but would restrict it based on ideology. People who don't believe in limited government and individual liberty do not belong in a country that was founded on those principles. I would be quite open to ejecting people born here who reject those ideals. It is the wide-spread lack of these ideals in so many that has brought ruin to this country.)


"So you can't escape responsibility, collectively, for what we have done to poorer people."

I reject collectivism. I am for individual liberty and responsibility. Punishing me for crimes advanced and perpetrated by others is an injustice. (It's especially unjust when you consider that many of the current and upcoming "victims" you want to save by "punishing" me are the same dorks that facilitated this crap in the first place and continue to facilitate it.)


"Rock back on your heels and realize that since 1983, the federal government has been collecting 15.3% of everyone's working income."

And despite not even being old enough to vote then, I was already against the theft. Since then I have been reamed for a *lot* of money. My total tax load (taking all taxes into account, including indirect taxation such as that via corporate taxes and the stealth tax of inflation) is north of 75% of my income. In not too many years if I were to just stick to a regular job it would *EXCEED* 100%. (I am basically being forced to make leveraged bets on currency/commodities to fight back against the inflation tax that only gets larger and larger as I save more for retirement. And I am well aware that I am in some perverse sense "fortunate" that I have the means to even do this at all, but being forced to gamble rather than produce in order to fight for your life somehow doesn't seem to make me actually feel "fortunate", and it is a really backwards way to promote the health of an economy.)
 
[lots of MOM-talk about taxation, corruption, theft, spending, etc.]

There's a lot in there that I agree is bad. It needs to be fixed. That is my whole problem with the current situation -- we are doing NOTHING to fix it. If I may simplify it down to two scenarios:

1. Keep everything as it is, but "do something" to keep SS going.
2. "do something" to keep SS going, but only as a temporary measure while we actively fix all of the problems that cause so many people to view SS as a necessary solution in the first place.

Then I could go with #2. I don't like the theft -- I wish it would end this second. But I can also be pragmatic and understand that if we are to end the theft through peaceful means rather than violent revolution, it may be easier to achieve that if the fixes are phased in in a manner which limits the disruption.

But all I hear about falls into #1. All the current SS recipients seem to care about is #1. Your original post seems to fit #1 as it does not say anything about your suggestions being a temporary measure to hold us over while we fix the things that must be fixed, much less call those things out.

Furthermore, no matter what rhetoric people put out, until I see this country moving towards actual solutions (working towards repealing the taxation/corruption/theft -- not just piling more on top to "fix it"), I am assuming we are stuck on track #1. And that track does not lead to liberty.
 
"I think Foo believes that everyone can achieve above average results if they work hard enough."

I am for individual liberty, individual responsibility, and a government which acts only to serve its true purpose, which is to protect our natural rights.

If you want to consume wealth, then you have to produce wealth and trade for that which you want to consume. You are entitled to the fruits of your labor (less what is required to fund a minimal government), but you are not entitled to the the fruits of other people's labor.

If you and others want to voluntarily enter into non-fraudulent financial agreements such as various forms of insurance (health, unemployment, retirement, death, etc.), then you should be completely free to do so. You are not, however, free to force me at the point of a gun to participate.

Under such a system, you don't need to be "above average" to live a decent life -- even relatively poor people can do OK.

That was *not* always the case. Go back several hundred years and the "relatively poor" were very bad off (as in living in filth and starving to death). A rather large reason they were so bad off was because they were not very productive. And that wasn't because they didn't work like dogs, it was because they did not have the technology to be as incredibly productive as we are today. Today almost everyone can produce enough wealth that they can purchase way more food than they need to live, almost everyone can manage to get a roof over their head (even if they share that roof with a few others), and almost everyone can buy some basic clothing. (And there are a lot of charities in this country aimed at helping out with these basic needs.)

Where everything goes wrong is:

1. People start calling other stuff "needs" and "entitlements". Everyone "needs" (and is somehow subsequently entitled to) the best health-care, everyone "needs" a college degree, everyone "needs" their own house, everyone "needs" to retire at 65, everyone "needs" to have kids, everyone "needs" to buy into the latest fad so they can be popular, everyone "needs" to keep up with the Joneses, etc. It does not matter how productive and wealthy we all become, such goal-post moving will *ALWAYS* be able to (invalidly) expand "need" enough so that the average person can no longer afford the new "needs".

2. Governments/banks steal (nearly) everyone's wealth. Instead of taking only the minimal amount of your produced wealth to fund a minimal government, the government takes lots of your wealth and gives it to other people (or uses it to kill and maim people). And what wealth you do manage to save in the short term is destroyed in the long term via central-bank-created inflation.
 
So Foo, you seem to believe in that work hard and you too can become wealthy. It can happen, but for most, it does not. Children of the well to do will always have a break over those born poor.

I am reading Jim Guinn's book on Bonnie and Clyde. I highly recommend at least reading the first part about West Dallas and Clyde Barrow's dad. He wanted nothing more than to be a farmer and own a bit of land. But it was his misfortune to be a cotton farmer at the end of World War I, when cotton dropped from 80 cents a pound to 20. It wiped out a lot of farmers in the area and many wound up in a slum called West Dallas. He managed to sell scrap and bit by bit, built a shack to live in. We can go back to that as a society, it's true. We can flat tell people that the government stole money they earned and tell them that they now need to make it on their own somehow. We can ensure that people die at a younger age, so that raising the retirement age will be even more cynical. I don't believe that freedom means the absence of any social safety net.

We could go back to straight food commodities, like we used to do, but that would cut the grocers and producers out of that government money. We could go back to county run poor farms, but that would put a crimp in the income of landlords and local housing projects. Those benefits being handed out are just as much for corporations and local/state governments as they are for the poor and elderly.
 
"So Foo, you seem to believe in that work hard and you too can become wealthy."

Go read what I just wrote to Sporkfed in the post right above yours. I said most could do OK, but only in a system where they aren't being constantly robbed like they are now.

And note that "wealthy" tends to be treated as a moving target just like "need" is. When you do that, no matter how wealthy we become in absolute terms, it will still be the case that only a small percentage of us will be considered "wealthy". In terms of what "wealthy" meant hundreds of years ago, it is likely that all of us posting here live like *KINGS* in terms of what we have available to us. Kings of old didn't have cable or HDVT or computers or cars. They couldn't fly on planes. They couldn't communicate across the globe in milliseconds. They didn't have access to what we consider the most basic of medicines like nutritional supplements and antibiotics. They didn't even have indoor plumbing.


"It can happen, but for most, it does not."

Read above. Most people today live in what would have been considered extravagance in the past.

If you define "wealthy" as "the top 1%", then of course 99% of us are going to fail to become "wealthy".


"Children of the well to do will always have a break over those born poor."

And what's your point? You think someone who works hard/smart or takes a chance and gets lucky *shouldn't* be able to use some of that wealth to improve their children's chances in life?

Note that in my previous post, among my list of *false* "need"s, is the "need" for everyone to have kids. If you don't have enough wealth to give your would-be kids a good start in life, then you shouldn't be having kids. And if you can give them a decent start, then you would do well to just do so and avoid the sin of envy if your neighbor manages to give his kids a better start. (If you are Christian, you might find something along the lines of a "Though shall not covet thy neighbor's goods" in your list of commandments, and it's a double sin if your follow-on to coveting is to violate "Thou shall not steal", whether you do it directly or via government makes little difference.)


"We can go back to that as a society, it's true."

No, we can't. (Well, maybe if we have a nuclear war, but probably not even then.) We have become far too productive to ever go back to that. Per-capita productivity has gone up many times since those days. Get the theft and corruption out of the system, and our technology and productivity will improve even faster. (And someone in that future will talk about how bad it was in 2011 and say "We can go back to that as a society, it's true" -- and they will be just as wrong.)

That's one thing that really eats at me -- so many people are so short-sighted -- they don't realize that by trying to achieve "relative wealth equality" now they are sabotaging our ability to achieve real, absolute wealth increases as we proceed into the future.
 
"We can flat tell people that the government stole money they earned and tell them that they now need to make it on their own somehow."

And who proposed that? Not I. Here's what I actually wrote:

I don't like the theft -- I wish it would end this second. But I can also be pragmatic and understand that if we are to end the theft through peaceful means rather than violent revolution, it may be easier to achieve that if the fixes are phased in in a manner which limits the disruption.

So we have to attack the problems in a specific order. Getting rid of the Federal Reserve (and inflation) has to be near the front of that. It is rather hard for most people to save for their own retirement so long as the fed creates inflation that destroys their savings. Some type of minimal welfare version of SS could be maintained until that change (and perhaps other changes) has been in effect long enough so that people can actually save for retirement. I would expect the whole process to take multiple decades. Other steps would include phasing out over time the SS taxes (which will also help enable people to save on their own). There would be many things that have to happen over time to get from the horrible place we are now to a place where we can have a truly free society.

Or you could just keep fighting the changes needed to achieve liberty until liberty won't wait any more. And instead of a slow gentle process you can get it all at once:

Those who make peaceful revolution impossible will make violent revolution inevitable.
(John F Kennedy)


"I don't believe that freedom means the absence of any social safety net."

If you believe that freedom means theft, then you do not believe in freedom, you believe in slavery.

All socialism involves slavery. That which fundamentally distinguishes the slave is that he labours under coercion to satisfy anothers desires.
(1884, Herbert Spencer)

You can have a "social safety net" which is charity-based. There is neither need nor moral ground to have one which is theft-based.


"Those benefits being handed out are just as much for corporations and local/state governments as they are for the poor and elderly."

Given that I am for *INDIVIDUAL* liberty, why would you think that I would consider continued handouts to corporations and local/state governments to be a good thing?
 
MOM,

"This recession has been on for a few months - you don't get these results the first month. July is the third month."

Here's a chart I created today that really backs your theory.

LA Area Port Traffic Is Stagnating Again

The exponential trend in port traffic has failed just like the exponential trend in employment has. Big shocker (sarcasm).
 
One of the best things we can do for the economy going forward is to amend the tax code. Changing the current tax structure to a 18% (or thereabouts) flax tax for EVERYBODY would not only reduce the burden on the middle class, but close tax avoidance loopholes to big business and corporations alike. It would also cut a lot of red tape for small businesses to simplify there cost structures.

It's a tragic shame Capitol Hill is in the back pocket of Big Business because it makes too much sense to implement these measures. Only when the K-Street lobbyists are expelled from Washington can common sense financial policies have any chance of taking hold.
 
Why SS has been a bad deal for we sheeple who have contributed and those who have to continue to contribute.

1.Some SS is paid to survivors of premature deaths of breadwinners.
2. Many wives who paid little or nothing in are receiving their deceased husband's benefits.
3.SS is now a disability program. And the ranks are growing.
4. Here's a back of the envelope calculation of benefits that could be achieved if people did their own
savings program. For purposes of this calculation, I assumed the employer would pay nothing, but would pay the employee better.
A 45 year career paying in $4500/year (15% of $30,000 per year - the present SS tax rate.) I know this is a very conservative example as most people would make more than an average of $30,000/year. At 45 years paid in if invested in laddered CDs that earned an average of 3%/year the saver would have about $428,000 to put in a fixed annuity that at today's rates would pay, at age 67, $2654/month for life and refund any principal to the heirs. No one will get that in SS. Yet, a conservative savings program can do it. Yes, some would not do the saving and some would invest recklessly, losing most of it. What then? There used to be poor homes so the elderly wouldn't die in the streets. They were much cheaper than what we are doing now with Medicaid paying for nursing homes. Heartless, I know, but how do we get people to take responsibility for their old age?

Well, that's probably not going to happen, even though Bush tried to sell it. If we can't figure out how to pull out of this power dive, the poor homes may return though.
 
I've been thinking it over and I think we need to realize that we are trying to deal with something unprecedented. In the past, there was no retirement. People worked as long as they were physically able. There was actually work that could be done by the elderly. They didn't live as long afterwards. And so they could live with families until death. We're not in that situation any more. Families are broken and scattered. There are few jobs for the elderly and they have a longer, unproductive life. Short of killing them off, we had to come up with a solution. I'd prefer personal savings accounts but there would have to be a way to keep the government from using them as a piggy bank.

As for the survivor benefits, I think we are about past the period when the survivor hasn't paid into the system on their own. You might have had a stay at home mom in the 50s but there are a lot fewer of them now. I personally get survivor's benefits but will wind up paying them back because I'll earn too much. And I've paid into the system since I started working into the 70s. It's more common for someone to die and not use the benefits, as happened when my mom and my boyfriend's wife died.
 
I don't think people have 45-year careers anymore, they get downsized and forced out of the labor market after 40 in far too many cases. And I think that's been baked into the New Deal cake - with high unemployment one of the tactics to combat it was to extend compulsory education by another 4 years so that late teens would not be in the labor market; the other tactic was to create a system where people in their late 60's would be paid not to work to get THEM out of the labor market.

The problem is those "solutions" might have been OK for 20 years, but after that they needed to be phased out over the next 20 years. Instead, they were expanded. Oopsie!
 
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