The other Conundrum

Folks need to save more for their retirement according to this study.

Maybe. Or maybe folks need to save more for many reasons. Maybe folks should work until they simply can't work any more (after all, working is good for you... although you may have to find a new line of work in old age...)... but there is NO doubt that folks really should save more - from an economic consideration. Savings, you see, is really unconsumed production. Ergo, if you are able to save in the first place it means your lifestyle is likely supportable without undo risk and stress; your overhead is moderate leaving money left over.

At least I think so.

The problem is that savings, in the form of unconsumed production, decreases demand in the short term (and increases capital investment over the longer term). And I think that that is exactly what is happening. Of course, our dumb government is "stimulating" by the amount of the rough increase in consumer savings in order to avoid all appearance of a contraction.

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estateIt will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

-Andrew W. Mellon, Secretary of the Treasury advising Herbert Hoover in 1929

Of course, Hoover did not follow Mellon's excellent advice. Can you imagine a sitting, Democrat Treasury Secretary giving that advice? Or even a Republican? In the "Land of the obese and the home of the something-for-nothing"? NAFC.

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Finding Employment in Post-Peak Oil America

“How fortunate for governments that the people they administer don't think.” - Adolph Hitler, Socialist and Mass Murderer (but then I repeat myself)

If you, like me, are an American it matters little if "Peak Oil" has happened to the world because the probability that it has happened to the U.S. is approaching certainty (probability of 1.00 = certainty).

I linked this article in my most recent post. The Class of 2008 and 2009 are still scrambling to find jobs... and here comes the class of 2010. Are Oil imports into the U.S. down because of the economy, or is the economy partly down due to the decrease in imports? Without doubt the debt situation is worse than Oil at this moment but that does not mean that constricted Oil and high energy costs are not doing their work as well... and perhaps its more than that...

Over the last five months, only one job materialized. After several interviews, the Hanover Insurance Group in nearby Worcester offered to hire him as an associate claims adjuster, at $40,000 a year. But even before the formal offer, Mr. Nicholson had decided not to take the job.

Rather than waste early years in dead-end work, he reasoned, he would hold out for a corporate position that would draw on his college training and put him, as he sees it, on the bottom rungs of a career ladder.

Hmmm... Fair enough. Ok, exactly what was his training in?

“I worked hard through high school to get myself into the college I did,” Scott said, “and then I worked hard through college to graduate with the grades and degree that I did to position myself for a solid job.” (He majored in political science and minored in history.)

The sad fact is that this young man has no training. He has an education. An education in Political Science is not being trained... Training, as in surgical/engineering/mechanics/plumbing/welding/shoe repair means you can actually DO SOMETHING useful at the end of your training.

Read this self-serving BULL SH*T from Rutgers University when asked "what can I do with a Poli Sci Degree?" The response? In a word - NOTHING. They claim they teach you how to think... and that is really all you need (and I agree with that part)... problem is, they (these private universities) charge $200,000 to give you a certificate that says you probably know how to think but that you really don't know how to do anything. That's great. Thinking is abstract and conveniently for the Universities it cannot be measured.

Let me ask you something... do you really think 4 years of part time class work and full time partying gives one better thinking capabilities than going to work, opening a business, saving money, buying a home, selling to gain customers/clients, servicing them, and reading humanities type material for 15 hours per week? Really?? No you don't. The problem is you don't get a certificate, a "union card" if you will, in the form of the sheepskin that SAYS somebody affirms you.

Look at this from OTHER side of the trade. IF, (IF!), any of the above claim from Rutgers was true, then Lifelong earnings should increase for each hour of course credit earned - a student who dropped out with only 3 hours left should earn 98% of the increased lifetime value of what a grad earns, a second year drop out should earn 50% of the of the difference between a high school grad and a college grad (I know, I know... the metric is not perfect... are they ever?)... but according to payscale.com's director of quant analysis, Al Lee:

“Essentially, if you don’t graduate, you’ve not only lost money to tuition, you’ve also lost wages that you would have earned by working instead of going to school. A non-graduate’s time in school creates, more or less, a net zero in their lifetime earnings,” says Lee.

I'd like to repeat that last line - "A non-graduate’s time in school creates, more or less, a net zero in their lifetime earnings". It then follows that it is not the increased ability to think, but an institutional affirmation (a degree) in ANY subject that creates opportunity for those fortunate enough to have the resources and support system to navigate the college educational system (otherwise each and every college experience would lead to increased "thinking" ability and the enhanced economic benefits that comes from such "think" training... I am desperately trying to suppress a laugh... tee hee!!) to its conclusion.

Life is not fair. Smarter people earn more money, and they congregate in "better" schools with Alumni connections and placement offices... One look at the U.S. Supreme Court should give you a hint. Over the years Justices hailed from all manner of Law Schools. Today? 5 schools DOMINATE the Court. Are there really no smart people graduating from the University of Texas, or U. of Colorado, or Auburn? Really??!!

If you can get into Harvard, Yale, Princeton, Stamford, or Columbia (or the other 10 TOP, TOP schools)... by all means, don't pass that up. They are worth the price of admission. Paying $200k for an also ran private school? You gotta have rocks in your head. Paying anything for a Poly Sci degree? In this economy? HAHAHAHAHHAHAHAHAHAHALOLOLOLOLOLOLOLOLOLOLOLOHEHEHEHEHEHEHEHEHAWHAWHAWHAW

Sorry, that got away from me.

These "also rans" are in the business of false promises and exaggerated claims. Don't let them bag you. Peak Oil has hit the U.S. The full repercussions of this are unfathomable, but it doesn't take too much thought to see clearly that wasting 4 to 8 years studying something that cannot earn you a living is probably not a great idea.

In the end, people that successfully interpret their environment prosper.

A History of the American Economy - Part 4

"There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences." P. J. O'Rourke (the funny thing about this quote is that it is a favorite on "Right Wing" web sites... sounds awfully Libertarian to me.)

Continued from Part 3

During the last 25 years of the 19th Century the U.S. bumped in and out of Recession - despite seemingly endless bounties of Oil, timber, coal, fisheries... and population growth. The 8 years following the civil war so overinflated capital investment that over-capacity existed until nearly WWI - 35 years later!

(If there was ever a sillier reason for the outbreak of War than WWI I simply cannot determine it. I think one could very effectively argue that the War was fought because it could be fought, and the financial system desperately needed an inflationary event. It is often said that WWII was a "Just" War, and taken on its own that might be so... I would argue that there was only ONE World War with a 20 year armistice. Without WWI, the Nazi's likely do not exist, or at least do not come to power, and without conflict in Europe Japan likely does not risk attacking the U.S.)

The Federal Government's budget in 2010 is slightly more than 26% of GDP, and that means nothing to people voting today... but when you consider that up until WWII the Federal budget had averaged something like 3% of what was then called GNP you get an idea of just how much Government intrudes into our lives. (Did the U.S. have nearly 2% of the adult male population in prison in 1900? NAFC.) Was the U.S. out and about as the "World's Cop"? NAFC. Were you responsible for your own problems? You bet. Was beer, surfing, sex, camping, eating, etc... still fun? You bet. I would argue that what little benefit came to American's lifestyle as a result of this massive increase in Government spending came at a horrific price.

(I read in detached awe the writings of Heinberg and Kuntsler. For the most part these are some exceedingly bright fellows, but their noodle must get overcooked when they try to express rational thought about economics. Most of the American lifestyle that these guys rail against, and I am with them, was created by the politicians and regulators on THEIR SIDE OF THE FREAKING ISLE!!!! These guys HATE the auto, but it was the democratization of transport that destroyed the environment and created suburbia! They HATE corporations (BTW, so do I... but for an entirely DIFFERENT reason... the way I see it, the onset of the shareholder Corporation gave the Left the perfect tax collection point to go forth and increase the size of the Government relative to GDP (and increase Government's ability to f**k with us) nearly 10X in less than 75 years) but it was the UAW and Steel Workers Unions that were the template (AND the funding source for the Left during much of the 20th Century, without which there would BE NO Left) for the Public Employee Unions that are destroying the fiscal stability of the state, city, county and local governments. The same guys that can grasp ERoEI with NO technical background suddenly go deaf, dumb, and blind when somebody points out that since there is a FINITE amount of fossil fuels then there is a FINITE amount of carbon that can make its way into the atmosphere... Guys... Guys... you can't get a little bit pregnant... and I realize that you guys make a living at this and must continue to appeal to your goof ball fan base (of which I count myself as one)... but your economic arguments are just silly even if they have appeal to economically illiterate populating the protest-just-about-anything set.)

I want to skip around for a moment and pass through the 00's, teens, and roaring twenties (though I will be back), and point out that Samual Clemmons (Mark Twain" really knew what he was talking about when he said:

"What gets us into trouble is not what we don't know... it's what we know for sure that just ain't so".

The media reconstructs history for reasons that should appear obvious, yet many in the electorate believe them! Read this excellent argument as to why the argument that the U.S. Government's policies during the 1930's are NOT what made the Great Depression what it was.

and we will talk more...

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Oil imports into the U.S. at the half year mark have declined 5.8% over this time in 2009. We are 54 months into a oil import decline averaging just under .7% per month.

Price does NOT matter as much as VOLUME.

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There are NO COINCIDENCES. I have NO IDEA what U.S. intelligence agencies picked up from China, but this is serious stuff and bears watching. I have maintained many times on this Blog that you will know when China has come to the conclusion that their U.S. Bond paper will never be paid back: They will take Taiwan by force. Just because I am an anti-War/anti-Empire Libertarian DOES NOT mean I reject the idea that the U.S. must maintain a strong National Defense. Fighting really dumb wars for an extra decade of Oil imports that puts us in extreme danger because we are stretched so thin is an outrage. OUTRAGE. The world is still a ugly, mean spirited place.

A History of the American Economy - Part 3

"If you have ten thousand regulations, you destroy all respect for the law." – Winston Churchill

...continued from "A History of the American Economy - Part 2"

There is this sense in American Media that the world began in the "Post War Period" (I often found that phrase somewhat dysfunctional, as if we live in the period when man came to his senses and wars are no longer fought...). That the end of WWII ushered in a brave new world unconnected to the past. Perhaps the advent of Television and mass communication had something to do with this.

In fact WWII WAS a dividing line of sorts in that immediately after the War the U.S. had almost of the world's Gold and almost all of the world's productive capacity - but that was not a permanent condition... we just thought it was.

The American Industrial Revolution meant Railroads ("RR"). In the years immediately after the Civil War the Railroad industry was the second largest employer after agriculture (Government jobs were not a significant portion of employment). The expansion of the RR's created markets where none existed and dramatically expanded those that did and provided access to farmland and natural resources that seemed almost boundless. And they were, from a short term economic view, boundless - attracting overwhelming investment for goods and services that could not find a market, leading to the inevitable bust. The 8 year period of over investment and over-capicity gave the U.S., and the world (although who gave who what is up for debate; the idea that this Depression was caused by the stock market crash in Vienna in May of 1873 is just as silly as the idea that the stock market crash of '29 caused the Depression of the 1930's) a nearly 25 year period of deflation and alternating recession and stagnation that did not let up until the end of the century.

During that time the U.S. was not a world power and the U.S.$ was NOT the world reserve currency. The British Pound filled that function. Accordingly the American people had to fund their own government spending, as well as provide for their own end of life needs (Even Presidents. The president at the time of the Panic of 1873 was U.S. Grant. Grant lived most of his post-presidency in poverty, even enduring bankruptcy. It was not until 1958 that a presidential pension was passed into law).

It is worth noting that while the U.S. economy was in almost constant recession during the last 25 years of the 19th Century the population was exploding with U.S. cities experiencing a 15 million person growth spurt. Even so, the majority of Americans lived on farms or small towns supporting farm land. at the turn of the Century. To understand what life was like for the over 30% of Americans employed in agriculture a definition of a "farm" is in order. Most farms had a small family house, often one large room with lofts. There was no indoor plumbing for toilets or the kitchen sink. Water was had from a well. There was no heating or A.C. Sanitation was an outhouse. Cooking was done outside in a "cook tent" until heat was desired in doors. Most boys went to school until 8th grade (so did many, but fewer, girls), but the graduation test for an 8th grade education in 1900 would stump 90% of the kids at the best high schools today. For farm families, at 14 you were a man and you had skills (and not video game skills).

"Roads" we merely dirt wagon paths and when wet they were mostly impassable. Local transportation was by wagon. Socializing was done in town on Saturday night and Sunday Church - hence, the Saturday night bath. Yes, there were the RR's but once off of the line, everything was transported by horse and carriage.

There were no federal income taxes... and if there were, how would they be collected? Most people today work for corporations or governments - easy collection points for the forced extraction of payroll deductions. Not so in the late 19th Century. The U.S. economy was as much a barter economy as a currency economy - particularly in rural communities. Trading using gold and silver NOT minted by the U.S. was also common place. I would argue that people were "freer" than now, but life was unforgiving. There were no social "safety nets" to speak of other than "faith based" charity - and that was not much.

In the absence of Corporations there existed REAL capitalism. If you failed, you went bankrupt. Life was an ongoing meritocracy.

(I am being summoned and will continue this shortly)

A History of the American Economy - Part 2

"I believe that every individual is naturally entitled to do as he pleases with himself and the fruits of his labor, so far as it in no way interferes with any other men's rights." – Abraham Lincoln

...continued from "A History, Part 1"

Back to our discussion of comparisons of the middle class in the 1930's and 2010...

It seems that most Americans consider themselves "Middle Class", and it would appear to me that it is our collective sense that this was always so - that America was always a "Middle Class" ("MC") kind of place.

What does it mean to be MC? Are you defined by who you go to school with? Or who you vacation with? Or by education, income, or net worth? The fact is that the concept is an abstract which rests in eye of the beholder and is continually marketed and manipulated in the Mainstream Media ("MSM").

(Here is a link to Wikipedia's article on Social Class in the U.S. I tend to reject the 3 class pitch from the Media given my experience coming from a working class family living in a gritty industrial town 1o miles north of New York City. Speaking from my experience Metro New York has quite a few more than 3 Social Classes. My family, and a large portion of our community, were working class Catholics - there were no vacations, new cars, gadgets, etc... and we never, ever dined out of the home (my poor mother had to cook for 9! 3 meals a day, every day for decades... and at nearly 87 she still parties like a rock star) but there were violin lessons and little league and I used to feel sorry for my wealthy friends that did not have a couple of brothers to share a room with.)

So who is MC in 2010? Can you be MC with little or negative net worth as long as you have a MC income? Are wage slaves MC? (Read that link. While I am an unrepentant capitalist and Libertarian I am NO CORPORATIST... more on this latter in the series.)

Speaking of wage and debt slaves... most Americans are unfamiliar with these concepts and how much angst these concepts produced during the early industrialization of America. Prior to Industrialization America was primarily employed in Agriculture and as Artisans. The great HOPE was that people would be able to move up from "wage slavery" to become self employed (think about that in today's context in which the vast majority would prefer death to the loss of their corporate or government job; were self-employment, unless one is a "professional", is a last resort). None other than Abraham Lincoln famously mused:

“The greatest fine art of the future will be the making of a comfortable living from a small piece of land.”

And then came the Stockholder Corporation and the infamous trusts. But I am getting ahead of myself... I want to leave the 1930's behind and get to the post Civil war period and the Long Depression (or the Panic of 1873) beginning in 1873.

to be continued...

A History of the American Economy - Part 1

Today's Quote:

"Never interrupt someone doing what you said couldn't be done." - Amelia Earhart, disappeared on this day, 1937.

I read with fascination the continued flow of B.S. coming from Wall Street, the MainStream Media ("MSMS"), and Washington in their debate over how to describe the current economic circumstances. I have been noodling this for a while and reading through the economic history of the U.S. (and hence the world) for the post civil war period.

One of the hardest things to do when considering this is to "compare apples to apples". For instance, is a house a house? Or should it be described as a square foot of residence per capita? Are we wealthier because we are better nourished? Or poorer because we are so very overweight? Is life more fair or less? Are we "freer"? And who, exactly, is "we"?

The comparisons in the media of this period to the 1930's accomplishes little - except in what it is meant to accomplish: To sway elections with an economically under informed and under educated electorate that seems incapable of comparing "apples to apples". An electorate that simply does not know its history, because all it knows is "what it reads in the newspapers" - material written by folks that have taken some serious poetic license with history.

I am going to jump around a bit on the time line in order to make comparisons of apples to apples but mostly I am going to compare today to various periods and walk through the series of events that got us from there to HERE.

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The First Installment

So here we are in July, 2010 America, a time by which a constant comparison to the 1930's is made in the media (primarily to gain advantage in the next election and not to accomplish a damn thing). There is in fact a great deal in common. Today, 25% of men between the ages of 25 and 75 DO NOT have a full time job (the headline unemployment number we see every month is merely propaganda) and through much of the 1930's 25-30% of men in this age group did not have a full time job. From an employment perspective, the circumstances are more similar than not (with the exception of "unemployment insurance"). However, there is vast difference in CAPITAL. No, not just corporate capital - capital investments and stock. We have more houses than we need, more cars than we can use, closets filled with enough clothes to last the life time of a denizen of the '30s, and the ability of the government to spend far more than it takes in WITHOUT having the currency collapse in a bout of hyper-inflation (a very bizarre set of circumstances). This has enabled the continued expansion of "unemployment insurance" payments (though some in the Senate are threatening reality as I write this). When and how this ends is up for debate.

The singular image burned into the minds of those that came after were photos of soup lines in New York City in the winter of 1933. In fact, documented cases of people starving are few and far between (other than Alcoholic residents of the Bowery). Politics ALWAYS rears its ugly head. While starvation in the modern "third world" is almost always as a result of politics, throughout history the simple fact of the matter is that hunger and starvation were ALWAYS ASSOCIATED with weather and natural disaster (and to a much lesser extent due to war. Many argue that this will change drastically in any serious fuel shortage and I tend to agree). In much of the 30's between 10% and 20% of the population experienced food shortages on a regular basis. In 2010, nearly 12% of the population receives "food assistance" from the Federal government.

A major difference is that the markings of middle class - cell phones, cars, certain apparel - is attainable by the "poor". In fact, many of the "poor" don't know they are "poor". They merely consider themselves "broke", and I think that that is a much better state of mind.

(I am being summoned by She Who Must Be Obeyed for some emergency furniture repair.)

To Be Continued...

"Fix Social Security by Hiking Retirement Age"

Today's quote:

"One of the greatest delusions in the world is the hope that the evils in this world are to be cured by legislation." – Thomas B. Reed

I will continue the "economic history of the U.S." thing shortly... But this article really screamed out for commentary.

As I have been saying for years, the government will absolutely, positively default on Social Security by raising the age to receive benefits. We have arrived in the Land of the Philistines.

Social Security collections were not considered a "tax", but a system of forced savings via a Government sponsored insurance program with forced participation that got out of hand (in fact there is no "Social Security", its proper name is the "Old-Age, Survivors, and Disability Insurance (OASDI) program"). People of a certain age (45-59) paid the absolute most in and will get the least out relative to their contributions. Yes Social Security is underwater. Not because people of a certain age (like me) have not been overpaying into it, but because Washington pols bought the good will of the elderly by over benefiting them for the past 30 years all the while increasing the extraction of the people born after 1955. Social Security collections have, in fact, peaked ("Peak Social Security" has a nice ring to it). The government can increase the percentage take all it wants, this will only further drain M1 at a time of deflation... which only exacerbate's the situation.

Now Washington wants your sympathy for stealing from you via robbing Peter to pay Paul.

Of course Congressman Boehner is correct. We will have to move the retirement age to 70 (and then 73) or cut monthly benefits drastically (I like this better, it has more truth to it). Take a good whiff of this Bull SH*T. Social Security was a HORRIBLE idea. It was and is nothing more than a Ponzi/Madoff scheme that, by mathematical necessity, MUST collapse of its own weight at some point... but before doing so it so addicts people to false promises and exaggerated claims that they begin to believe that it is some kind of Right.

Here's the clincher in the article:

There are those who say older workers won't be employable past age 65.

"But this is all, as an economist says, 'endogenous,'" said Mitchell. "That is, if you know that your work life will last till age 70, you'll be likely to continue to invest in your skills later in life, which will help make you more employable. And the fact that jobs today are much less physically demanding than they were 30 years ago helps make a longer work life feasible."

Then again, if you really don't want to keep working till 70, Mitchell said you could save so as to "buy your own early retirement."

Is Professor Mitchell really suggesting that people take responsibility for themselves and save for their own retirement? How Libertarian of her and I could NOT agree more... but funny, coming from a Tenured professor.

Oh, well... another do-gooder social program out to make Life fair is in its last throws before it bite's the big one.

In its death throws this is likely to cause some unbelievable angst. How are the over 60 folks that spent $400,000 on cigarettes (with interest) over a lifetime going to work? Are they going to carry the O2 tank with them? And the over 60 morbidly obese? With their fallen arches, diabetes, and bad backs I am concerned that they might be that reliable. We addicted them and we took away their incentive to FEAR old age and provide for it.

Why is it that someone who worked 20 years gets the same benefit as someone who worked 40? The system was so poorly conceived for the real world that it is hard to get your head around.

But there is some good news. We have too many houses and too many cars and too many EVERYTHING.... we will figure it out... but not if we continue to insist that $20,000 or $30,000 per year in property taxes is supportable by senior citizens (amongst other things).