Sunday, December 30, 2012

Enslavement, Freedom, Re-Enslavement, Singularity/Freedom?

 As a young man I went through a period of OCD fascination with all things American Civil War ("ACW"). It was the mid-1980's and Gore Vidal's "Lincoln" found its way into my hands (as a teenager I raided my mother's "library" and came away with Vidal's "Burr" which set me off as a "Revolutionary Generation" groupie).

I won't bore you with my sense of the ACW here. Suffice it to say that it conforms with about 80% of the accepted narrative. I would only remind you that history is written by the victors with little consideration paid to the "victims"- the individuals used (killed, wounded, sickened) to further the political interests of the powerful. The term "survivor bias" is usually used in business, particularly for mutual funds, but I think the term's best use would be in the description of war.

Using the popular narrative that the ACW was fought to end slavery and to further freedom, that freedom did not long last on American Soil. The decades following the ACW were followed by years of "economic recession" and stagnation. This malaise was fertile ground for the "revolution" of 1913 - the enactment of the 16th Amendment to the U.S. Constitution allowing Congress to levy a tax on income.  That same year, 1913, saw the U.S. enact the Federal Reserve Act ("FRA").  This was not a coincidence.

So let me cut to the chase: The U.S. fought the ACW (accepted narrative) to further the interests of Liberty, enacts the 13th Amendment to abolish slavery in 1864, finds the following period's economic environment unsatisfactory, and re-establishes slavery with the 16th Amendment and the Federal Reserve Act.

Yea, I know... this is sort of a simple minded assertion - until you think about it. WWI and WWII (really one war with a 2 decade armistice. And what was Germany's, really all of Socialism's, motivation? To end the debt system) were fought for a great many reasons, or so our Western Intellectuals tell us (Chomsky often derides "intellectuals" as bright folks that need to make things complicated so they can sound smart by simplifying... seems to me he has a point), but to my mind these Wars were fought over bond (debt) payments - and all of the bleeding was done by folks that owned no bonds.

But back to the re-establishment of slavery in the U.S. by expanding the debt system, by enacting the income tax, and by establishing "Social Security".  The U.S. KILLED well over 1 million people (those during the ACW, those that died of their wounds in the years following the ACW, the dependent women and children that died as a result of the loss of a provider that was killed in the ACW) for the purposes of ending slavery, but how else can the life of modern "Debt Slave" ("DS") be described (this is not to make light of the living conditions of Slaves in the Pre-ACW South)? True, today's DS is not subject to beatings, rape, and violence - unless he does not pay his taxes (and winds up in prison), doesn't pay his mortgage (and winds up on the street), does not pay his car payment (winds up a pedestrian in a world constructed around the automobile), or does not pay his student loans (and as a result lives a penniless existence).

OK. For those that reject that line of reasoning regarding the use of "Slave" in "Debt Slave" please feel free to use "Indentured Servant" ("IS").

And here comes the Technological Singularity ("TS"). Or maybe just TS Light. Stuart Staniford has this excellent essay on TS posted at his blog.

I have nothing to add to the discussion on what TS or TS Light means, but the exponential increase in computer processing power is going to accelerate the automation and robotization in the labor market. Yesteryear saw ATM's put bank tellers out to pasture, along with gas pump operators, telephone receptionists, and check out clerks. Today, lawyers in the paper pushing business have gotten bushwhacked. Liberal Arts Colleges and College professors are freaking doomed,                         (who needs to be physically present to listen to a person repeat a lecture over and over again? Can't we record the lecture once and watch it forever on youtube? For free? This is was always such horse sh#!. The history of the "lecture" in education has at its base the fact that in previous times most people were illiterate. The only way they could learn was to be lectured. Literate people can read the material of the lecture (you know, books? Essays? Dare I say "blogs"?) at their own pace and take the material where they wish at the pace that suits them, the customer/student. Technical educations will still need those pesky labs... but really, how much of your undergrad time was spent in doing labs? A couple hundred hours total? WTF do we need to sit around for 4 years for? Because these people are in business, and their business needs you to pay for "The History of Rock and Roll", "Gender Discrimination in America", "Practical Uses for Yoga" credits in order to "graduate". And why is it all or nothing? Isn't education incremental? Wall Street got rid of fractions on the 1990's. Universities can get rid of "degrees". A numerical representation of academic accomplishment would be ever so much more practical as well as accurate)          
as are truck drivers, taxi drivers, pilots, ship captains, specialty surgeons, infantry soldiers (drones), police officers (cameras)... there is no end that I can see.  What robots did to manufacturing they are going to do to every other sector.

The implications are freaking staggering. Consumer demand would plummet, to my mind, with the slack to be made up by government demand. Run your mind around that for a moment.

And share with me what you see.

To be continued....

Tuesday, December 25, 2012

Micro proposals/Micro Solutions

Please read this depressing article about the unsettling economic prospects of Generation Y professionals.

I read with great interest the writings of the Great Minds of our day (as well as the musings of lesser mortals) holding forth about solutions to such world wide problems. These folks make some really great points and string their ideas together nicely - all condensed into the internet's written article equivalent of the 3.03 minute pop song. To be fair, far greater minds than mine have addressed these issues... but they were all wrong. If you want to know the real deal, listen up.

Just kidding.

Seriously. If you are a regular reader of this blog you know that I have asserted and maintained that there really are no macro "solutions" to whatever "problem" confronts "us", not the least of which is due to the fact that it is freaking impossible to define "problem", "solution", and "us". I don't have any answers for how "we" (that is an American centric "we") are going to do about employment, the political reality of our Federal Deficits, the mathematical necessity of the exponential growth of our entitlement programs and military budgets, et al... - and neither do any of our political, economic, social, and intellectual leaders. Oh, a bunch of them can vocalize some of the "problems", but, and this is going to be brutal: very, very few of them have their own house fully in order.

How smart can you really be if your health is not the best you, personally, can arrange (some things are beyond our control) for it to be? How smart can you be if you have arranged your life in such a way that your kids don't speak to you? How smart can you be if you have arranged your life in such a way that you have trouble falling asleep at night?

I regularly hear absolutely brilliant people waxing forth about system wide solutions to some overwhelmingly intractable problems and who just can't seem to get the oil changed in their car - even though they are so broke their car "issue" should be consideration numero uno on their list.

(That reminds me of a great quote from Warren Buffet: "Wall Street is the only place where people travel to in a Rolls Royce to get advice from people that went to work by subway". Everybody loves to quote Buffet. Personally, I am sick of listening to the media's worship of the man but I love this particular quote.)

The system's complexities compounded by an insanely confiscatory tax environment and modern consumerism have conspired to make current expectations both unrealistic and self destructive. That's a hard combination to achieve - but we sure seem to have accomplished just that. (When pointing out that the U.S. has low income taxes when compared to the Socialist European Model American Liberals are being just a tad disingenuous. In America, property taxes are much higher than in Europe, and when ALL taxes, especially payroll taxes, are considered they nearly level the playing field.)

I feel for young people like those mentioned in the above linked article. The collective "system" is not going to relinquish its throttle grip on their individual necks. Me thinks it impossible for any individual to overcome this system, ergo its better to avoid its strangle hold at all costs.

The individual needs new paths to "success" or "security". The idea that one can "stay in school" until 30, shop around for Mr./Mrs. Right for 5 or ten years, drop a kid or 2 in their 40's and be financially secure by their 50's is such an outrageous farce that it is hard to believe so many bright people fell for it. (That lie is almost as egregious as "50 is the new 30". When it comes to lies, damn lies, and Whoppers, well, that one tops Whoppers.)

In the final analysis, while our possessions enslaved us, it was our educations that made many, even most, of us poor! Of course, the vast majority of those 30 something M.S. and PhD holders don't know that yet. Most of those in their 40's are just coming around to the brutal truth.

The "Greatest Generation" had mortgage burning parties in their 50's. This generation has foreclosure/short sale/bankruptcy parties. Good thing this generation is sooooooo much more educated than old grampa and gramma. Some might find that a  LOL! moment, but there is nothing funny about this. The Left's propaganda machine continues to pump out material that the overwhelming concentration of wealth in the hands of the 1% is some how the result of those Evil Right Wing Bankers. Right Wing Bankers!!?? How that is possible when we all know that Republicans are nose picking, gun totting, White Male racists from the Red States in the Old South is beyond me. Does anybody know a single Wall Street fat cat that grew up in a trailer park in Arkansas? Whose first job was selling used cars? Quite a leap from that used car lot to the World Financial Capital, wouldn't you say?

The Financial system is run by the Federal Reserve for the benefit of Harvard Business School Alums running the U.S. Treasury/Goldman Sachs. Yea, a couple of very lucky guys have gotten tremendously wealthy out in Silicon Valley, but they don't hold much sway over this system. This unholy triumvirate, our modern day Anti-Christ, is hardly composed of Chamber of Commerce Republicans. So why do some of the smartest people I know believe otherwise?

(Because they need to. To believe otherwise would violate a belief system stretching back to their childhood and nourished by the Main Stream Media. Heck, 40% of Americans believe in the "End of Times" pitch of the Fundamentalist Right. These people are, for the most part, not voting for BHO, and they are not the people running Goldman Sachs - trust me.  And speaking of the Media... It is my experience that Americans believe that their media "experience" is a real life experience. That "cat call" scene/racist scene/anti-Semetic/poverty scene, et al people saw via some entertainment product is so real to them that it has become fact. After all, they said it on TV!)

Geologist Euan Mearns wrote this excellent assessment of the Oil potential for Iraq in general and Kurdish Iraq in particular. I think an excellent piece that pretty much undoes the doomer argument for the moment, and likely changes the short term story for world Oil exports somewhat. But read a little deeper in that... can any thinking person really draw any other conclusion than that the Iraq War was all about Oil? And before the nitwit-true-believers start ranting about Neo-Cons and GWB: How many Lefties ceased to drive a car? Stopped heating an oversized home? Only consumed local food? Stopped flying to "climate change conferences"? Wanted the economy to contract so that the Republicans could blame BHO (and the U.S. would emit less CO2)? Not very many, indeed. The meat eater and the butcher are on the same moral level, me thinks.

Does the Mearns story usher in a new era of low prices and plenty for oil? I rather doubt that, but it does mean that we can't count on resource constraints to solve our environmental/climate change problem for us - and that ain't good. There is no political arrangement on this planet that can withstand the temptations of Keynesianism (the other half of the counter cyclical Keynesian argument is to run surpluses during the good years. Anybody seen many surpluses around the OECD?), and there is no political arrangement that can withstand the lure, temptation, and seduction of Oil.

But I digress.

The machinations of the post-industrial, post-credit inflation, information/robotic economy have left no magic buttons to push in order to address the changes confronting the next generation of workers - knowledge or no. Things have changed, but the credential selling bodies standing guard at the bottle neck are determined to extort their pound of flesh.

The unfortunate 30 something lawyer in the link at the top of this post spent $175K and 3 years of her life attending "Law School". Abraham Lincoln never attended "Law School". Abraham Lincoln never attended college. Abraham Lincoln didn't even go to High School, let alone graduate. Yet, somehow, he passed the Bar Exam, was elected to Congress, and then some think he did rather well as President of the United States.

Go figure.

Sunday, December 23, 2012

Hog Slaughtering and Salt Curing

Today we slaughtered a hog (my son does the work and I take pictures) and are preserving the meat by salt curing.  The hog weighed about 275 pounds and had been raised on pasture, corn and a daily dose of 2 gallons or so of fresh milk from our cow, Elizabeth. This post is a DIY guide for self-reliant types.

Warning! Somewhat graphic.

Disclosure:  While we do raise animals for slaughter, they lead stress-free lives out on pasture with sunshine, shelter, water, plenty to eat, and the company of other animals of their kind. The end comes swiftly; the animal has no idea what is about to happen and experiences no pain.

1: You will need lots of hot water. This is to scald the skin of the hog so that the fur/hair and upper layer of skin comes off when scraped. We have a 100 quart (25 gallon) pot for the purpose. A friend of mine taught me some welding and we made the fire stand in the photo.

2: I use the following tools. The rounded skinning knife is indispensable, IMHO. The sharpening stone is also indispensable - knives dull quickly and the job goes much faster with one person sharpening and the other working. Not pictured is a dull machete that I use to scrape the hair and upper skin from the hog after the scald.

3: Dispatch the hog.

4. Lay the hog on a (very sturdy) table or platform (or the ground, if you have nothing else) and cover it with an old towel. Take the boiling water from the pot using a small pot, metal bucket (we use a stainless steal milking pail) and pour it slowly onto the towel. The towel will hold the scalding water against the hog's skin. After a couple of pours, you should be able to pull the hair off with your thumb and fingers. If so, you are ready to scrape.

5: Meticulously scrape the entire hog removing the hair and upper layer of skin. This is the hardest part of the job. It took over an hour to scrape this hog clean. After scraping, rinse thoroughly with a hose.

When scraped, the hog should look something like this. I don't worry about scrapping the hog down to its toes, as you can skin the lower legs (with a skinning knife) for soup bones. The lower legs are not going into the salt. The hair on the lower extremities has been singed with a propane torch.

6: Disembowel and decapitate the carcass. If you can, suspend the hog from something. I use this device (not sure what it is called. I purchased it from in their deer processing section) using a boom on the back of my tractor to raise the hog. I keep the kidneys, liver, and heart - they are delicious and nutritious. The remaining offal goes to the chickens - they love it. Little to nothing goes to waste. Bones go into soups, fat gets rendered, ribs get frozen, and everything else gets salted.

7: Split the hog down the spine with a meat saw. This is about as much effort as sawing through a 2 x 4.

8: Quarter the hog. On the left is a ham that has been removed from the carcass. The bacons are under the ribs. I remove the shoulders, hams, and bacons from the ribs and backbone. These will go into the saltbox. The ribs and tenderloin will go into the freezer. That white stuff in the stainless steel bowl is "leaf lard" - that's the fat around the hog's kidneys. This is the fat that Parisian bakers prize for baking their delicate pastry. I also take the "fatback" (that's the fat under the skin and above the spine) for rendering. We use it for cooking. Since the hog has been raised getting most of its calories from grass fed milk the lard should be heavy in oleic acid - the "good stuff" in olive and canola oils. Or so I am told!

9: Wash and put the parts in the salt. I keep 50 pound bags of salt in the garage for days like today. I put the salt in a cooler and bring the cooler out to the processing platform. As soon as they are separated, I roll the hams, shoulders, and bacons in this salt. Notice that the hide has been left on. The risk of spoilage will be around the bone, so make sure that the "meat" side is well salted and then store in a cool to cold place. I check the weather to find a week of cold weather and slaughter then.

10: Pack the meat - here is the final product in the "salt box" (a cheap plastic tub from one of the big box stores). I put a top on and check it every day for the first week to make sure that they stay covered with salt. After 5 weeks in salt, I wash them off and hang them. When hanging, I cover them with an old pillow case to keep insects off of them.

After 5 weeks in salt and a couple months of hanging, they are ready to go. Sliced thin and eaten with grapes, cantaloupe, strawberries, or honeydew mellon, et al, the meat is out of this world!

Tuesday, December 11, 2012

Propaganda Never Sleeps

"Jeffers Media Theory" states that no article makes its way into the mainstream media without being bought and paid for. I can only imagine who is paying for these articles and WTF the EIA is up to:

"U.S. rethinks security as Mid-East Oil imports Drop"

Oil imports into the U.S. continue to contract - right on schedule. In 20 years or less, Oil imports into the U.S. will be, with the possible exception of Canada, essentially zero. The slow grind of Peak Oil is here for the OECD. It may have schmooshed (that's a technical term used daily on Wall Street) Europe first but I think it is pretty clear that the air is leaking out of the U.S.'s tire. We have been fortunate to be able to increase domestic crude production by a whopping 600k BPD and 900k in ethanol which went directly into gasoline. (Of course, the mathematically and technically inclined will recognize that 900k BPD in ethanol = 600k in petroleum equivalent. Ethanol contains 1/3 less energy per unit of volume.)

So, the U.S. is going to replace the Middle-East/North Africa ("MENA") with "Tight Oil" from the shale regions? Who writes this SH#!? Who paid them to write this SH#!? And why do "educated" people believe such nonsense??? 

From the article:

The United States is now producing more of its own oil. Plus, it's getting more from Canada, Mexico and Brazil.

While true in Canada's case, Mexico's exports have been in decline for years and Brazil is not a net exporter of Petroleum products (exporting crude and importing gasoline does not make you a major export power!) 

So why does Reuters say such nonsense?

Good question (if I do say so myself), but there is more to this story. The examination of China's position in all of this simply stands U.S. policy outcomes on its head in the land of unintended consequences.

We fought war after war after war, killing and maiming millions of the world's people and several million American dead and horribly wounded to contain communism and maintain the flow of Oil while the domestic socialist/Statist BASTARDS/SCUM back home in the U.S. have demolished the family, enslaved those that actually work, and murdered 60 million unborn children?

And then rejoice at the re-election of a failed president (but who does give good teleprompter) who supports that policy agenda?


And now the propagandists are telling you that "TIght Oil" (for those that don't know what "Tight Oil" is: Despite the propaganda that the U.S. is producing "Shale Oil" or Oil from Shale, the truth is is that we, that is the U.S., has not produced a single drop of the Oil squeezed from Kerogen rocks, otherwise known as "Shale". What we have done is use horizontal drilling technology to access small pockets of conventional oil locked in "Tight" formations contained within the Shale. Oil from Shale? Zero. Conventional Oil from Tight Oil deposits? The U.S. has increased production of this resource from ZERO in 2004 to 600,000 BPD today. The EIA expects peak Tight Oil production sometime next decade of 1.2 million BPD and then to decline thereafter) is going to replace U.S. Oil imports??!! 

Mashuga! (That's crazy) But every day, I get email from well meaning folks linking me to an article like this one, tacitly telling me that Reuters is correct, I am an incompetent alarmist, and all is right with the world - and that average Oil prices for 2012 were a new record is an anomaly; we invaded Iraq to bring freedom to the Iraqi people; and if we would just amend the Constitution to ensure the Right of every woman to kill her unborn child, and recognize that White Men are evil, everything will be right with the world!

The other side of the Propaganda coin is "America is going to run on Frac Gas".

I gotta tell ya... sometimes I think I am the only normal person left.

Here is a historical graph of Nat Gas production from the U.S. Department of Energy. There is good news here. The good news is that it is extremely unlikely that Nitrogen fertilizer supply shortages will lead to a severe food shortage (had Fracking not worked out so well, and conventional Nat Gas production continued its decline, that outcome was an entirely reasonable outcome to worry about. If you are unfamiliar with the relationship between Nat Gas and Fertilizer, and Fertilizer and Food production please feel free to Google). There is also good news for the costs and availability of space heating fuel in the U.S., the environment, and the cost of electrical generation.

With all of that good news - how did the U.S. economy do? Do we have Nat Gas infrastructure for the installed auto fleet? Has all of that Nat Gas production increase replaced coal? (Think about that for a moment... when Nat Gas replaces all coal for electricity generation you will know that the Nat Gas glut is a permanent fixture and solution to the American Energy Crisis.) Can the production companies turn a profit from Fracking at these prices? How about double these prices? If not, stand by and watch the bottom fall out of Nat Gas production.

(The market will move equipment and make investment where there are profits to be had. If Fracking Nat Gas is profitable, why are the number of rigs drilling for gas plummeting?)

Wall Street, the Office of Management and Budget, the Federal Reserve, the IRS, and a few other massive institutions are in need of the above mentioned propaganda, and they have done a masterful job of "kick the can" over the past 4 years. Yet the American economy is still moribund and 1/6 of its citizens requires food assistance from the Federal Government - nearly double the rate of just 5 years ago.

I find it hilarious that U.S. policy makers are taking credit for the U.S.'s soon to be status as "Energy Independent! That circumstance had nothing to with anything the U.S. - and everything to do with the fact that Oil Exporting Nations are running out of available Oil to export. Peak Oil Imports (if not Peak Oil) is killing Europe and slapping the U.S. economy around - it could have been a lot worse. Increases in Ethanol and Tight Oil supplies helped the U.S. avoid Europe's fate (so far), me thinks. Maybe exponential growth in wind and solar will make up the difference in time - and maybe not. So far, I would have to bet the "Don't Pass" bar on that one - but I reserve the right to change my mind in a freaking instant if the data changes.

More soon (on the economic outcomes resulting from that input).

Tuesday, December 4, 2012

Industrial Deception - Alternatives

In my previous post I began speaking about strategies for not getting the debt hook set deep into ones mouth (when speaking of this I am really speaking to young people. Folks over 35 or 40 are where they are and should take what joy they can and adopt any measure that will help, but it is hard for them to get completely out of the line of (Debt) fire). The opportunities are only limited by your imagination.

More than half of America's population has settled within an hour's drive of the shore, perhaps less (given no traffic and a straight highway).  These areas have high property costs, high property taxes, and higher insurance premiums (the improvements, the actual structure, might also cost more because of higher wages for construction labor in these areas).

If you have been reading my blog you know I have posted endlessly on the damage high property taxes will do to a property owner over the long term. I used to live in Sleepy Hollow, NY, just north of New York City. I have friends living there now. The taxes on my house there (I sold it in 1998) are about $25,000 per year. Ergo, if I wanted to retire there and expected to live 20 years I would have to fork out $500,000 (plus annual increases, but let's just call this constant dollars) over my retirement for the privilege of paying New York State's outrageous income taxes on my income. What do I get for my money? More than half of that money goes to pay the pensions of retired municipal employees... so not very much.

(So, take a mid-level, working Wall Street schlep with $15 in life time earnings will have paid 45% or so to Federal, State, and City income taxes, taking home $8.25 million over the course of a career. If he was a great saver, and retired with a net worth of $3 million, $2 million in a 401k and a $1 million mortgage free house he can't sell - this would be less  than the gross income a retired police officer could expect! Over his remaining lifespan: 25% of his cash savings, $500k, goes to pay the property taxes! $500k is the expected health care costs for he and his wife post-65. He has to pay taxes on the withdrawal from his 401k... and viola! He and his wife are eating human dog food in order to make ends meet... after life time earnings of $15 MILLION??!! Yep.)

Meanwhile, all of the land/property from 30 miles east of the Atlantic to 30 miles west of the Pacific (fly-over-land) is going begging and can be had for roughly nothing (compared to NY or San Fran prices). Seems to me that if I were a young person I would not put my mouth into the Lion's Jaws... financial security is to be had by having low overhead. Somehow, I think a bright, ambitious, non addict could do very well in flyover land - especially when compared to the absolute guaranteed outcome of living in New York, California, or Taxachusetts.

(You just gotta love the Big, True Blue states. They have all manner of natural benefits from their position at the water's edge and yet they absolutely destroy the well being of their citizens at every step.)

The migration to these coastal cities is ooooovverrrrrr.  Demographics and confiscatory property tax policy have combined to end it (do they have property taxes in China? If so, I think I could work up a formula for when the migration from the country to the city ends). Peak FICA (Social Security & Medicare) taxes already happened (that's what Obama is fighting for - the extension of the "Bush Tax Cuts"... the tax policy of the guy that the Left gnashes its teeth over). Peak property taxes/municipal services in the Blue State Coastal Cities has already happened. The people there do not make enough new babies to replace themselves, and neither do the people from the hinterlands. The GDP growth is not there for it, and the population growth is not there for it. Worse, for the people living in those places and depending on the continued destruction of their fellow man via financialization of the economy and increasing The People's debt levels the pay back is going to be a biach

Automation and digital information is wreaking havoc with the Legal Business, Healthcare, Finance, etc... the "industries" that drive the economies on the coasts.

And just wait... one day soon the market is not going to let Amazon trade at 100x earnings (for a low margin retail business) or let any other "technology" business  trade for 100X earnings, for that matter. Ford, GM, Kodak, were all cutting edge "technology" companies in their day. Eventually, today's winners will crash and burn, too. The Ocean of liquidity these valuations are floating on is not going to be here forever. I have been to this movie - the Butler Did It!

James H. Kuntsler often longs for a resettling of the landscape (see the last paragraph in this week's post. I wish I had writing talent like that instead of having been born so darned good looking). Me thinks that this will happen in due time. First movers will benefit here as they have with every major development in the history of the Industrial Revolution.  The intricacies of money creation in a fractional reserve system, capital, labor, demand, and politics will make this inevitable. We may not like it. We may wish the flow would remain in the same direction and pace. NAFC.

Peaks in financial markets happen when the market runs out of net buyers (well, sort of). Bottoms occur when things look their bleakest and there is little left to sell. The same principal applies here, me thinks. National Geographic et al have been running stories about "the city solution". To me, that means we have reached peak city. Also peak Progressiveism/Liberalism. Our society simply cannot tolerate the level of abortions given the demographics. Knuckleheads on the Left blame births for overpopulation. They should look under the hood. That may have been true a generation or 2 ago. Population is soaring because of increased life expectancy - not increased fertility. Let me ask you a simple question: Is the U.S. (and the rest of the OECD) average age going down - or up? If population gain was from fertility, the average age would be going down; if population gain is from life increased life expectancy, the average age would be going up - and with it come terms like "the greying of America (Japan/Europe)" and "the 4-2-1 problem" (4 grandparents, 2 parents, supported by 1 working adult offspring). This is not up for debate. The demographic time bomb is going off and nothing can stop it.
In the middle of all of this the absolute worst thing an individual could possibly do (in addition to enslaving themselves with a high property tax bill) would be to take on debt that cannot be discharged in bankruptcy - student loans. There is simply nothing worse that you could possibly do to your self financially; well, with the possible exception of a felony conviction or some sort of really nasty addiction.

The best thing, to my mind, would be to live in a low tax/cost of living environment, enter into commerce, and acquire productive assets and property with judicious use of savings and debt - in short, get rich slow. If possible, do it in a community (remember that concept?) of like minded folks. After all, I have already shown you that making millions of $$ in New York or San Fran won't cut it below, say, the $30 million mark (counterintuitively, it does work out for those poor police officers, teachers, firemen, etc...), and making that kind of money is rare - to do it you will have to sell your soul, unless you are incredibly lucky, and even then it is very hard on your family; harder by far, I think, than being working class (something I know a thing or 2 about). I know so few genuinely rich people whose kids are not a complete mess. Seems hardly worth it.

Millions and millions of Americans are responding to these inputs and stimuli by not doing much of anything - and this makes a tremendous amount of sense.

People are not stupid. Bloggers and media know-it-all's use the term "sheople"to describe a sheep like acquiescence of the population. I don't think so. Ever read Sun Tzu? The people on the receiving end of all those social programs and War-on Poverty distributions are simply following Tsu's admonition:

"The supreme art of war is to subdue the enemy without fighting".

Or in this case, working.

Since we are all going to wind up broke in any event, why go through all of the ageda? Sleepless nights, missed parties, foregone sexual dalliances, etc... do not make a great deal of sense if you are stuck in a crumbling city with no way out and a sh#!tty ending is in the offing. If life hands you a lemon, make lemonade.

Staying put in the Big-True-Blue States and collecting from the government while working the black market market is an entirely reasonable (if unethical) plan. So is moving to a low cost, low tax environment and trying to get ahead by engaging in commerce and building a lifestyle that can be sustained throughout your entire lifetime.

One cannot "age in place" without a great deal of money in the Big Blues. Take one look at the retirement mecca's of Florida and Arizona - these did not come into existence in a vacuum. The tax and pension policies of the Big Blue States absolutely guarantee continued migration patterns that demolish family continuity and any transfer of intergenerational wealth.

Just thinking out loud on some alternatives to waiting around in the slaughter pen. I am sure there are many more.

Sunday, December 2, 2012

Industrial Deception - cont...

In my previous post I laid out the imbalances and inconsistencies with the impacts of the Industrialized/Financialized economic system on our personal lives. So? So what should "we" do about it?

In short, nothing. "We" should do nothing. Everything "we" have done is what got "us" here. This is beyond the Gordian knot. The complexity that has evolved is beyond anything that I can envision. It would take so much time that by the time anything was solved we would all be long dead. No, there is no macro solution. There is no going back to the Gold Standard, or 1950's America, or Woodstock America, or the Greatest Generation... Ben Franklin might need revision: The definition of insanity is taking time from your beautiful life to try and impose "solutions" on 7 Billion complete strangers - or believing some puffed-up-blow-hard-stuffed-suit of a politician can solve everyone's problems for them.

I think it was on Stu Staniford's excellent blog that I read that average lifetime earnings for those with a graduate degree is $3.5mm or so. High School grad's average lifetime earnings came in around $1.2mm. (I wonder what the median was, but that is not really important for our discussion here.)

In order to catch the brass ring of $3.5 million in lifetime earnings, an individual would had to have navigated the U.S public educational system, then the expense and time of an under-grad program, and then the Law School/Med School/MBA Grad program.

This analysis does not take into consideration the expense of that education AND all of the foregone interest, dividend, and appreciation potential of the capital required to pay for this education nor the "expense" of the family circumstances that give rise to achievement. I guess "they" assume all things are equal and every student has family resources for the $300k to $600k to pay for all of this (and its only that cheap if every student went to a public high school). If the analysis took into consideration the $500k to $1mm in principal and opportunity cost of the education, the different outcomes do not appear all that different (and granted, there is a big difference for a small percentage of these "professionals". Hedge fund managers, investment bankers, specialty surgeons and trial lawyers regularly have several individual years in their careers where they make more than the life time average of all professionals).

Especially when you take into consideration the necessary expenses "professionals" find required (impaled on?) of them.

Private schools for the kids, expensive McMansions, property taxes, marriages and divorces (high school grads don't seem to bother marrying anymore), country clubs, vacations, etc... and at the end of a career, these professionals (unless they are tenured professionals, government employees, or other recipients of pensions that have enslaved others) find himself/herself at the end of their career in exactly the same position as our average high school graduate - broke.

The entire "Financial Security" pitch is a complete farce.

$3,500,000 in lifetime earnings - educational expenses and interest, $500k; home purchase $400k; Interest on home mortgage $800k; property taxes on the home $200k (at $6k per year. Try paying $6k for property taxes in metro NYC); 8 cars $200k to $500k... we have not paid taxes or fed the kids yet.

So our average professional cannot get by on $3.5mm with a family, so both spouses have to work - or they have to forego having a family.

Having met thousands of duel income professionals in my career on Wall Street, I never met a single couple making $7 million in lifetime earnings that bought a $400k house or paid $6k in property taxes annually. Such couples invariably lived in far more expensive digs, paid much more in property taxes, and spent $500k or more on childcare before the kids were grown, paid taxes in a higher bracket... and wound up just as broke at age 60.

Think about it. Here this couple makes $250k+ per year per year for 30 years... leading to that $7 million in life time earnings and at the end of that 30 years very few of these couples have even $1 million in savings. And if that million is in an IRA or 401K it is really only worth about $650k in after tax money... Out of pocket medical expenses in retirement is about $250k per person...

Now, in order to navigate a path to the "good life", our average professional had to stress through a million academic tests, entrance exams, and applications, then state board and licensing tests, and all of the usual stress and trauma that goes with an "average" professional career. This cannot be over emphasized: How many nights did our "average" professional lay his/her head down on their pillow in the complete absence of stress and anxiety? Not many.

Now, this is the outcome if everything goes absolutely perfectly. Throw in a divorce, a serious illness, an onerous lawsuit... and the outcome goes from the best possible arrangement - at the end of the career of our $7 million earning couple is $650k in savings and a fully paid off $400k home (in constant dollars) -  to disaster. This is the outcome for the top 5% of the population (by achievement). For everybody else, the outcome sucks and the trip there sucked, too.

There is an alternative, and the lifestyles are, again, in stark relief.

The lifestyle described above is arranged around maximizing income.

One alternative would be to arrange ones life around minimizing expenses.

Just for fun, let's take all of this and turn it on its head.

What if our professional stopped class room education at 14 and was then put to work being economically productive and using his wits?

Rather than pay for an under grad degree in gender studies or English Literature our subject's parents gave their offspring $50,000 in land and $50,000 in building materials, tools, livestock and other productive assets? And then expected their child to build this only larger and with at least one productive outbuilding.

Don't think little Jimmy could do it? Of course he could, if that was what was expected of him. People do it all them time (18 year old soldiers in a POW camp in Nazi Germany tunneled 100 yards to freedom using a f***ing soup spoon. Trust me, little Jimmy could be himself a house). I respectfully submit that after accomplishing this task that little Jimmy can claim to be a highly educated individual - far more so than some Ivy League slapped ass that knows how and when to use "there", "their", and "they're" consistently.

Let's go a step further. Let's say that little Jimmy was expected to save $50,000 over 5 or 6 years working laborious jobs and learning how to do such practical things to contribute to the project with nothing coming from his parents.

Of course, why would a single young man need a house? He wouldn't. A young couple would, though, and with their combined savings they could do this without any input from their parents. Then the 2 of them could work together, learn to get along and cooperate, suffer the consequences of not doing so, and build a productive home place for themselves and their children. Instead of watching TV with their free time, they could read the great works, think the great thoughts, and learn the proper use of there, their, and they're just like their "educated" counter parts. Only now, they would own a home debt free, and instead of a consumer product POS suburban home they might own a productive property from which they might engage in commerce and family scale food production.

Let's go through the things that they wouldn't need: They wouldn't need to "meet the mortgage". They wouldn't need to pay student loans. They wouldn't need 2 cars to commute with, the gas to power them, or the insurance on that second car. They wouldn't need a nanny or housekeeper (the home would be of a size as to manage themselves, thank you). This means low property taxes. They wouldn't need a closet full of suits and the money to dry clean them. Their income tax bill would be next to nothing. If they lived in the country wood heating would be more than sufficient, and with a small home, the summer cooling season would be very inexpensive (we live in the South and the increase in electric consumption for the 3 month cooling season is a whooping $300! Or about $80 per month, with a little play for heat waves. In last summer's heat wave (some days the temp reached 109F. Not humidity indexed or "feels like" - straight up 109F - the increased bill was $120 for that month). The benefits of a small, energy efficient house are many.

And when this imaginary couple laid their heads down at night on the pillow in their mortgage free home they'd be asleep in minutes and they would sleep like babies. They would be done raising kids before they were at risk of falling and breaking a hip, and they might not only get to meet their grandchildren but be young enough to have an impact on their grandchildren's lives. This is not a common outcome in the lives of our "average" professional.

 Can you imagine what would happen to our political system if people behaved this way? Instead of only the privileged having "financial security" (I define "financial security" as having a home that you own, rather than the bank, and the ability to feed yourselves. You know - food and shelter?) nearly everyone would. The implications for The Powers That Be are rather interesting, if you think about it - but that is another discussion.

Somewhere along the line the model became sending kids to go to college so that they could commute great distances in a dangerous car to work in an office moving bytes around a screen and getting fat and unhealthy by foregoing fresh air, sunshine, and exercise - and winding up broke. To my mind, something in all of that just lacks a certain appeal.

A couple percent of these kids might escape the above mentioned fate and grow up to be Doctors, Lawyers, Investment Bankers, and Indian Chiefs, running triathalons and then returning home to their mansions with the hot tub filled with champagne, jump in and exclaim "Ta Da!". Everybody else is going off to a salt mine somewhere. These folks would be better off in a different model.

I go through this mental exercise in my own mind reasonably often because I am a concerned parent and I would hate to see my kids sentenced to the life of a Corporate Lemming. Corporations are very, very good to a very few people. Everybody else gets kicked out in their 40's with a watch, 2 kids in college, a mortgage, and $400k in severance and 401k - and they are flat broke by 50.

This outcome has happened to most corporate people. Our typical professional had a better outcome, but it was hardly ideal.

There are better models.