Category: Politics

Stocking up on Stacks

My brother has been saying it for years. I haven’t been listening, but I suppose I have woken up from a nascent dream based in Candyland. Its coming, the real depression, that is. I talk to people all day long and they simply don’t get it, or don’t want to get it. I am not sure which, but the cold hard truth is out there and Agent Mulder is hot on it’s tail.

While you and I have been de-leveraging our personal debt load, the U.S government has run up a massive and quite simply unpayable debt. So, while I paid off my 20K worth of debt following 2008’s crash, The US government has run up a debt for every single person in the US of almost 51K. While it took me 3 years to get out of credit card debt, the government was spending at twice my rate running up the tab. Surely, you see this can’t keep going on this way. Last Summer Congress created a task force to shave 1.2 trillion off of spending. Did they get anything done? Nope.

Unlike most people who simply don’t see the connection to the US debt and my own future, I get it and it is terrifying. So, for those of you who don’t quite understand how this impacts you let me give you a clear example. As the USG runs up this crazy debt that is closing in on 20 trillion dollars, the US dollar becomes weaker. How much weaker, you ask? Well, if you bought a book 10 years ago you probably have noticed that the Canadian dollar was almost 50% higher than ours. So, if it cost $10 US to buy a book it would cost roughly $15 Canadian. Well, within 10 short years that has been erased. The US and Canadian dollars are at parity with each other. This means Canadians can now come into the US and get a great deal on just about anything, and they are buying up real estate, to the tune of more than $20 billion a year. The dollar has literally dropped in value by 50% when compared to a Canadian dollar. Does the USG seem too concerned? Not really, they have continued to run up massive debt loads and refuse to address the problem.

 

So, even if we hypothesize the USG can turn off the spigot of debt, which is doubtful,we likely will  approach and pass $20 trillion of debt. The USG will have to print money, because it can, and frankly it will have no choice to cover its bills. Its the one tool it has untethered access to. It can print ’til the cows come home, ’til the ink runs dry, or ’til no one will take the dollar. The dollar is nothing more that an arbitrary agreement among the world that it holds value. Here is the rub, just like any fine art print, the more you copy it, less valuable it becomes. Currency is no different. The minute you have too much currency in the economy chasing too few goods, hyperinflation starts ramping up. So imagine pumping an extra 10 to 20 Trillion dollars into the money supply over time to pay down the national debt. The result would significantly devalue the dollar. $10 cup of coffee, $200 tank of gas, $30 movie tickets? That will become the norm as the dollar approaches a net value of zero. Now the Federal reserve has a neat trick too (bare in mind they are the government), they can buy US debt from the treasury and put it in a vault for keeping. They currently own $1.6 trillion worth. See how this makes no sense? While the right hand spends heavily, the left is picking up the bill with freshly minted money. Of course the real question is what will the Federal Reserve do with this massive debt the USG owes them. Umm, delete key anyone, it is all just data somewhere on some massive computer.

I’ve never been a savvy investor, the internet bubble of 1999, cost me more than half my IRA. Then 2001 nailed it another 20%. Then we hit 2008 which saw everything peel back 60% plus. So after 20 years of playing the stock market all I have to show for it is pocket change and lint. It is unequivocally a gamble at this point, and the crazy part is it has run back up on no real changes in the economy or fixes in the system that sent it over the edge in 2008. What this says to me is it will crash back down when reality sets in. I pulled out of the market when it 11,000 last year, irrational exuberance is what I call this rally and it appears to be running out of steam.

That leaves me with no other options except to hedge my bets. After listening to some advice and cajoling I finally started buying silver US coins minted prior to 1965. Here’s something for you to chew on. A 50 cent piece back in 61 was worth 50 cents. It had 90% silver in it, giving it a real tangible value. In 1965 the USG debased the coins and removed silver from them. The result is that same 50 cent piece today can be bought for around 10.50 in today’s dollars.   What this tells you is that had you been smart enough to horde 5K worth of these coins in the 60’s they would be worth more than 100K in US dollars today. While that seems impressive and like a great investment, you are probably not seeing the point. The US dollar has dropped in value over that same 50 year period by a whopping 2000%.  Now extrapolate that forward with a 20 trillion dollar debt load paid of with money becoming ever more worthless. Silver is currently at around $28 dollars an ounce. Seeing it go to $150 or more seems quite probable in the next several years. Doesn’t take a rocket scientist to see if silver is moving up the dollar is going down in value.

 

Comparing the French Revolution Lead Up to Our Own Status Quo

Its my personal opinion that we are headed for a dramatic shift in America like no one has ever seen since the American Revolution. Will we go so far as a full revolution, I’m not sure. When I talk to people about it I feel like most people have their heads stuck in the sand, somehow they seem to think that what is going on financially and politically in our country is a TV show, to be turned off every night and put out of their mind til next weeks show. If they have a job I suppose they think nothing has really changed in the past 5 years. Never mind that  the American dream has been sold off to the Chinese for 2 foreign wars and a Wall Street bailout, never mind that manufacturing jobs are as common as fire flies and toads these days, never mind that our schools are doing a dismal job of educating our future….never mind. As long as they can sit in traffic on the way to work and pay their mortgage every month, they see everything through rose colored glasses.

The problem is their are millions of people who were told to work hard, get an decent education ( even go into debt 10’s of thousands of dollars to do it) and the results would pay of in the form of a good job. There are also millions more who used to be able to get a decent manufacturing job with a high school degree and a little elbow grease. Those days are gone and are not coming back form many and both of these crowds are now feeling cheated. Stagflation appears to be the new norm, real income for the middle class is down 10%+ (below 1997 levels), and housing… ohh what a handshake many Americans made with the Devil when they bought that house that has dropped 10% or more.

So the stage is set for a small reaction to explode on the stage of the American Dream and turn huge. It could be something like a police confrontation with the Occupy Wall Street crowd, it could be another protest not yet set, or it could be an organization bent on causing chaos. “Escape from New York” and its post apocalyptic scenario  seems a lot closer to reality these days. That brings me to my comparison to the lead up of the French Revolution.

From Wikipedia….

  • Economic factors included hunger and malnutrition in the most destitute segments of the population, due to rising bread prices…
  • rising food prices, and an inadequate transportation system and drought…
  • state’s effective bankruptcy due to the enormous cost of previous wars… The social burdens caused by war included the huge war debt…
  • the growing commercial dominance of Great Britain.
  • the royal court at Versailles was seen as being isolated from, and indifferent to, the hardships of the lower classes… opponents in the parliaments successfully thwarted  attempts at enacting much needed reforms.
  • Those who were opposed to Louis’ policies further undermined royal authority by distributing pamphlets that criticized the government and its officials, stirring up public opinion against the monarchy.

Eerie how much of that applies now. Substitute Congress, President, China and Tea Party in there and  I think we have smoldering keg. I know plenty of people are going to say this was an oligarchy and absolute power, blah blah blah. But, while the players are different, the results have been the same up to this point. We are all look for change and neither party seems to be able to make any difference. The system is broken. Food for thought…


The Republican Misnomer

If you make a million dollars a year or have a large trust fund, I get it. It makes perfect financial sense. You want to pay the lowest taxes possible and the party that preaches that gospel is the Republican party. Hell, I grew up Republican, then I went to college and got an education. It doesn’t take much to realize the party is truly only interested in wealthy, white, connected men. Screw women and women’s rights, screw the vet that needs assistance after he was wounded by an IED, screw the homeless that lost their home becuase Wall Street gambled on housing values and lost. The Republicans have done a great job of convincing middle class America that all we have to do is work a little harder and come up with some great idea and “we too will be rich”. Well the cold hard facts are a lot more sobering. The uber rich control an all time high of 10% of the US economy while the “wealthy” control 50%. That means all the other folks,like me, are struggling to get ahead in a difficult economy and barely treading water. Wall Street has zoomed right up, but I gave up on Wall Street after the Tech bubble of 1999-2000.

Reaganomics with its trickle down BS has in fact been a trickle up. I personally work 50-60 hours a week and I live sparsely ( so my girlfriend says) and yet I don’t particularly feel like I am getting ahead. I have managed to sock away a little money in this horrific economy, but I’m no Richie Rich. Meanwhile, the rich have apparently zoomed right back and continue to dominate the economy. So I have to ask my fellow non millionaire Republicans why they are in fact supporting this party?

Is it becuase you think the Republican party limits government? G Bush II would love to prove that statement wrong. He increased government spending a whopping 25% during his administration. The most in 30 years, so clearly the Reps. are  worse  or at least no better than the Dems. at managing the US coffers. If you are pro life then I cant really argue with you, you will always view things from a point of view that faith conquers all. I’m not one to argue pointlessly in the religious contradictions of history.

But, the sad reality of the US middle class is this, today’s parents are working harder than our baby boomer parents did and making little or no more. But the rich are definitely picking up the slack. Long term capital gains taxes are down from a high of 39% to today’s 15%. Now I’m sure everyone like me thinks, wow, I can make some money in the market with that low rate. But the cold hard facts are that few of us middle class folks trade enough in the market for it to matter, and if you are like me you lost your ass in the 1999 and 2008 collapse of stocks that I still haven’t rebounded from.  What this tax does is give the rich a huge tax break. So much so that the top 400 richest ebb and flow with the stock market.  And lets look at the real statement here, should a millionare trading stocks pay less income tax than I do working my tail off all day? I personally don’t think that makes any sense.

So, I have to ask my friends again, why do you vote Republican? I only know a few millionaires, and yet I live in state controlled by the Republicans. The thing I so clearly see going on is the rich are influencing the politicians with money and the promise of a great future after politics. So the bills are slowly but surely eroding the middle class lifestyle. Unions are being dismantled under our noses, we are brainwashed into thinking that government is bad, yet all you have to do is learn and read up on US history to know what happened in the 1800’s and early 1900’s when rich men and corporations controlled everything. The Jungle covers it in nice detail. And unless this current onslaught against us is reversed, we will be there again and we will have no one to blame but ourselves, and our children will be too ignorant from the lack of funding at schools to know better.

 

Why Health Care has to be Nationalized

Everyone has an opinion on this and I’m no exception. The health care debate will continue for years no doubt. But I feel compelled to mention my recent experience with the system. I have chronic lower back pain. I have had it for 10 years and steadfastly refused to go see a doctor about it believing there was nothing they could do other than medicate me. I have used yoga to control the pain and maintain a level of flexibility that most men approaching 40 don’t have. But my most recent bout of back pain made me decide that rather than wait the month or two it takes for the episode to pass I would try a doctor. So I went to a sports medicine Doctor who looked my back, put a TENS unit on it for 30 minutes and referred me to another Doctor. I then went to a Spine Doctor who decided to give me 4 cortisone shots in my lower spine on the right side. Now this is an involved procedure requiring a surgery center, an Anesthesiologist, and my Doctor to do the injection through x ray vision. The whole procedure took all of 20 minutes and I was out of the center in an hour. Total bill, over $3000. Now I do not have insurance, I am self employed and have always considered it too expensive. Everyone keeps telling me I should get some to at least cover catastrophic, but I haven’t seen a need to do it. I am healthy as an ox and never get sick, even colds tend to bounce off me. Of course the really aggravating thing is that if I had had insurance it would not have covered any of this. But, spending $3000 for a 20 minute procedure that, here’s the kicker, didn’t work, is absolutely insane. I would have had more fun taking a cruise and gambling the entire time than staring at my credit card bill for this worthless exercise. I can’t comprehend how my doctor justifies a $1500 bill for 20 minutes. I know 4 shots of cortisone don’t cost more than a couple of hundred dollars. I know he went to school an extra few years and did an internship and residency somewhere for a few years but is that really worth $3000 an hour? No fucking way, it’s highway robbery. The Anesthesiologist charged me $450 and all he did was inject an iv and watch the monitor. The surgery center charged me $1050 to sit in their bed, talk to a few nurses and use their space for an hour. The system is truly and completely shot and needs to be overhauled top to bottom. If my doctor billed everyone they way he billed me then he must clear $6M a year. Even if he only bills everyone 4 hours a day like I was billed it would net him over $3M.

Dallas City Hall’s Moronic Budget Crisis

Dallas, like so many cities, is in crisis over a money shortfall from a drop in tax revenue. At first glance this seems reasonable, given the economic situation the entire country is in. But, the reality is quite different.
Here are the facts:

City’s budget for 2008-2009 $ 2.7B
City’s budget proposal for 2009-2010 $ 2.72B
Budget estimated Shortfall $190M
Jobs cut as a result 900+

If you want to see a pdf by the city here it is. The first thing you notice is that the city’s budget still went up by 20M this year. Which seems odd considering the 900+ layoffs. So the city manager and city council approved a budget increase last year, in what was obvious to everyone else, a major recession. I was aware that we were heading into a recession in 2007. So how is it that city hall did not even think to be conservative in its figures in 2008 when planning for 2009? More interestingly is to look at the city’s budget over time. Looking back at the previous few years:

Year Budget Increase over previous year
2002-2003 1.72B na
2003-2004 1.92B 10%
2004-2005 2.05B 6%
2005-2006 2.22B 8%
2006-2007 2.34B 5%
2007-2008 2.65B 12%
2008-2009 2.7B 2%
Total Difference $980M 64% Total Increase in 7 years

So the city has increased its’ budget $1B in 7 years, which is a 64% increase. Does that number seem really high to anyone else? But, lets take a look at the population estimates for Dallas. In 2002 the city had a population of 1.19M. The Census Bureau estimates the city had a population of 1.279M in 2008. Now that number really jumps out at you. The city’s population has only increased by roughly a 89K people in the same time frame, which is only a 7% increase. So our city budget went up 64% over the same time period that our population increased 7%. That in my book is out of control spending. That should indicate that the city’s taxes are too high to begin with. So using the Census Bureau’s data I thought I would look at a couple of cities of similar size to Dallas. San Antonio is slightly larger than Dallas at 1.3M and has a 2010 budget of 885M, that is a whopping $1.8B less than our budget.  San Diego, which has essentially the same population as Dallas, ( but a much higher cost of living) has a 2010 budget of $3.01B.  Houston with a population of 2.2M, quite a bit larger than Dallas, only has a budget of $2.3B, $400M less than Dallas.

So our city is laying off people and screaming about a drop in tax revenue, when the reality is it has been over taxing its citizens and spending like mad. Having lived in Houston for 4 years, I can’t say Dallas has any real advantage over that city’s level of service. So why is the discrepancy so large? What is our city wasting our money on? The really profound thing to me is I have noticed no changes with an extra billion in “services” the city is spending. There are still potholes everywhere, crime is out of control and response times suck. My car had both windows smashed out by thieves the other day and the police no longer even come out to take a look at the crime. All these extra cops on the streets and no service. It is a joke and so is the city council.