Things could get better. But they could get much, much worse: An economic preview and personal convicitons.

The Great Wave

The Great Wave

Are you sick of this yet?   Even if you’re unaffected by the recession of late, it’s likely you’re sick of the news, commentary, posturing, and problems.  I know I am.

Yet I can’t seem to let it go.  As a culture, I think, we all tend to look for some as-of-yet undefined, great, “The End,” somewhere ahead – a cataclysmic final page to the story of the individual, nation, or world.  It’s built into our upbringing as Americans.  And, just as I did during the first few days after September 11, 2001; I find myself wondering, “Is this it? This time?”   And though I find myself feeling more worried over time instead of less, I still feel confident in answering, “Nope.”

Similarly, I’ve been asking myself over the past few months “Is it over yet?  Is this it? Is now the time when things start turning around?”  Agian, I feel some level of confidence in answering, “Nope.”  What I want to do is tell you why I think that way.

The problems we face today, I feel, are caused by two problems with the great American economy.  They are specifically that we embrace debt, and that certain parts of the American Lifestyle grow in expense faster than the average earnings of the average American.   This second problem simply feeds the first, as we buy on credit so we can have the things we can’t truly afford.   We do this again and again for things as basic as insurance coverage to cars, homes, groceries, and any number of other things.  Eventually our flow of income is completely diverted to other sources and bills start going unpaid.  The once profitable flow of cash and income turns back upon itself in a crushing wave of debt.

Because Debt and payment plans in general are  such a basic part of the American Lifestyle it’s become an investable and insurable asset in the economy.  But when this debt wave began to crest  and break, those companies who invested heavily in debt instruments found themselves suddenly worthless.  (An example, I recently read that insurance giant The Hartford has a stock value now less than the actual value of it’s vast cash reserves.  Wild.)

It’s been a rough ride so far.  I’ve worked with several young families who one week had plans to begin their retirement investment program, or insurance program; and the next week they call to say they’ve lost their jobs and will be moving home with mom and dad.  (Mom and dad are usually in pretty dire situations, too.)

The big problem is that there are certain parts of the average American’s budget which grow bigger and bigger each year or each generation.  These monsters eventually consume the rest of the budget and force the individual into insolvency.   These are especially:  The cost of Health Care, which inflates at about 7% per year (or doubles in cost every 10 years if you want to think of it that way) and which increases as a person ages;  the cost of housing, which, on average, inflates at about 5% per year;  and the cost of an advanced education, which costs, on average, 7% more each year.

Most people only gain about 3% per year on their income.  Do you see the problem here?

With the help of the recent government plans and bailouts, etc, there could be an end to the current financial crisis very soon.  Things could get better.  But it could get much much worse.  Here’s how:

The U.S. Government is just like an individual in some ways.  The Government also has a budget, has ongoing financial obligations, and carries a huge amount of debt.   In recent times, that ebb and flow of income and payments has remained essentially in balance – though there are always those who disagree.

However, by the end of the next decade, a massive swell is moving down the pipe.  For most of us, we’re hoping that if we ignore it it will go away.  It wont.  It’s the cost of social security, medicaid and medicare.  In about ten more years the monster of health care doubling yet again plus the huge amount of retirees combine to completely devour the federal budget as it is today.

There are only two outcomes:  the federal aid programs continue, thus necessitating a vast tax increase; or the federal aid programs are diminished, thus requiring each individual to care for his or her own families’ needs.

It is most likely, in my opinion, that the government will write itself a credit line, trying to swallow up this problem in a long stream of gulps rather than all at once.  More credit means a much larger debt payment in the budget.  More payments means more taxes and cut programs.

Now imagine for  yourself – your health care costs have more than doubled as you are now 10 years more unhealthy and health care costs have inflated at 7%.  Your children’s education now costs twice as much as it does today.  And your tax bill has just increased.

Add to those the car payment, house payment, utilities, and other living expenses.  Will you have enough to even get by?

Now imagine if this begins to happen today.  More debts go unpaid.  More banks become insolvent and start to call in the debts they’re owed by the average cardholder.  The cycle continues and industry after industry fails.

In reality, these things have been going on bit by bit for a long time and will continue long after we’re through the current crisis.  It is unlikely that the ’08-’09 recession will suddenly be driven into a second great depression.  If things get worse it will probably be gradual and will take place after the recovery from our current recession.  Putting off problems is our national pastime today just as it has been for the past century or so.

(It’s no wonder, then, that the youth of today have to take on more and more debt to get through college.  Nor, then, should it be a surprise that people are choosing to live with their parents for decades longer than they did a generation ago, or that the last thing a person does before leaving this world is to devour all their estate on paying for the high cost of long term care and other medical needs.  But I get off subject.)

The answer to this impending crisis, both individually and in a worldwide sense, is to avoid debt.  If, as a society, we weren’t clamoring for bigger and better homes than our parents and their parents had, and if banks hadn’t been willing to give it to us, treating debt like an unfailing and perfect resource,  it would not have come to this.

Avoid debt as much as you can.   Save up for yourself.  Only those who aren’t already stretched to their budgetary limits will survive if this next wave comes crashing down.

A Little Observation

Blue tooth and other hands free devices for cell phones are very useful. Nobody denies that. In fact, they may have already saved lives when people use them on the road. I can’t say how many times I’ve grumbled when a 3000 lb. phone booth blew past me on the freeway at 90 mph.

But I don’t understand why people are using these things outside of their cars. First, doing so makes you look crazy. Even though it is getting more common, I still have to look twice when I see people sitting alone, talking to themselves. Second, doing so makes you look stupid when others realize what you’re doing. I didn’t realize it was so much work to hold a phone up to your ear when your hands aren’t doing anything else.

Can somebody say why I am seeing this more and more? Are these things that comfortable and convenient?

I see the future of communication going toward some kind of phone implant for the ear. But I would prefer to see something along the lines of a “go-go-gadget” hand phone in recognition of the these “crazy” and “stupid” factors.

 

Facebook is Stupid.

You know what bugs me? I signed up to these things like facebook and myspace to keep in touch with my real friends. But I keep getting these friend invitations from random people from my high school. I say to myself “Okay, if you want to start talking now after all these years–when I didn’t even know you at all–that’s cool.” I’m a friendly guy, why not? But these people never say anything. If I send them a message, I get some meaningless “howdoyado” reply or nothing at all for weeks. I always wanted a group of friends that I don’t speak to.

Are these people adding me just to pad their stats? It’s amazing–like the same old high school games. “I’m so popular that EVERYONE is my friend. Soon I will have marshalled an Army strong enough to dominate this Middle-Earth!” Seriously, these people add like 5-10 friends a day. That’s all I see on my “news feed.”

 Here’s the thing: I hated high school. Why would I want to re-live it by linking up with these people? Also, it kind of makes the stock of my real friends go down when they are crowded out by these friend hunters.

Posted in Rants. 31 Comments »

The recession, inflation, and other exciting economics – Or “Why do I pay too much for my car insurance?”

I thought I would express today the reasons, both non-specific and specific, that I believe this country is in a recession and will stay in a recession for some time.

A recession is a decline in business activity over a period of time. Recessions have historically happened in this country a couple times every decade. During recessions there is less money spent and invested and more money put into savings accounts. Recessions may be times of lost jobs and general slowdown in how much we spend as citizens.

There are some people out there who say we’re in a recession right now. They point at the housing market and say “See! There, that proves it! Nobody is buying homes!” The important thing to remember about investment advisers and economists is that it pays to be pessimistic for them. If they project a gloomy future, nobody is upset if they are wrong. Conversely, if a manager of a mutual fund were to come out and say that the future looks bright, he will only keep his job if he’s right.

Don’t listen to these bozos. At least, not for the reasons they’ve come out with so far. Only the history books will be able to give us the true reasons for any recession or, heaven forbid, a depression. What I want to do is do my part to add to the doom by giving you my reasons – and I think they’re pretty good.

Back to the recession problem. The problem that we face is that people just aren’t spending enough. When I don’t shop and Lyn’s grocery store, Mr. Lyn has less money to spend. When he can’t spend that extra money to get the I-pod he always wanted, Mr. Jobs has less money. When Mr. Jobs has less money he can’t hire me to work for him.

The current management takes the stance of “Print more money,” and sends us a few hundred dollars to try to encourage spending. In the short run this makes sense, but once we’ve gone out and spent our tax refund, what then? The fact is that we are in the midst of a massive amount of government spending on military actions right now and yet somehow we still face an impending recession. Imagine what our situation would be like if we hadn’t gotten ourselves into a mid-east military miasma. The government is already pumping billions into the economy and yet it’s somehow not enough.

There are some underlying problems that need to be addressed. I believe that the problem is the increasing cost of things such as homes, cars, health care, and other ‘indispensable’ goods. The analysts point at the housing market as a symptom. I say it’s one of the underlying problems.

The real problem is that there are certain things out there which we call needs which we can’t afford not to purchase. These needs also have associated salespersons, producers, and various clingers-on. Let’s look at homes as an example.

I want a home. I have an income. My home cost can be expressed as a percentage of my annual income. Or my monthly payment can be expressed as a percentage of my monthly income. Traditionally (I mean going back 30 years or more) a home would cost no more than 3 times a household’s annual income. Similarly, the generally accepted advice even as recently as last year was to spend no more than 1/3 of your monthly income on housing. In the last 15 years or so, things have changed drastically.

According to the San-Francisco Gate newspaper, hardly anybody spends less than 50% of their monthly income on housing. Most people spend much more than that. How did this happen?

The price of homes rose much faster than income levels.

Why?

The efficient market hypothesis says that as demand increases (like when I want to buy my home) the price will go up a bit to match. The efficient market hypothesis makes no allowance for “sales” or “greed.”

Imagine selling a home. You built it for a certain cost, say 100,000 dollars. A few years later you want to sell it. Has the house changed? No. If anything, it’s developed defects and flaws. Yet rather than sell it for less you want to sell it for more. And not just an amount adjusted for inflation, either. A home bought for 100,000 dollars 5 years ago in the area where I live is now for sale for 235,000 dollars or more. Again, why is that so? Because people are greedy.

First the owner hopes to move up the ‘property ladder.’ He wants more than he paid for it. Second, the real estate agent wants more and has an incentive to sell the home for the maximum amount possible. Third, real estate developers who purchase and inflate the cost of homes for a profit.

People need homes. Human beings require shelter. We buyers, therefore, cough up the dough – even if it is more than we had expected or hoped to pay.  Even if the price of the home is more than the cost of the materials which form it.  We can’t afford not to. The only possible outcome is the inflation of the cost of a depreciating item. (think about it: homes don’t stay valuable forever.  They are about the only “investment” which increases in price year after year till suddenly becoming worthless when the property is judged as condemned.) Some possible outcomes to this scenario include either the beginning of government regulation on home prices, or the formation of an elite property owning class who charges the lower classes rent (only slightly lower than the cost of owning) and thereby prevents the lower classes from ever owning property.

As long as people are “selling” what we humans need, there will be the potential for drastic inflation and drastic recession.

Health insurance.

Think about it. We all need health insurance, yet it’s becoming more and more unaffordable. Why? Because there are people who make a living selling it. Because there are companies getting richer and richer providing it. Because there are lawsuits that justify the health care provider in charging more and more. It has become so expensive to insure employees here in the united states that some companies are paying to fly sick employees to other countries such as India where they receive world-class treatment and stay in 5 star hotels during recovery – and it’s cheaper to the company than the health insurance premiums.  I discovered for myself that it’s cheaper to fly to Taiwan to have my dental work done there (even without the government insurance!) than to pay for it here.

Cars.

As I remember the story, one day an analyst came to Henry Ford and told him that he was doing great, that his business was great, and that he would be out of business within a year. The reason was simple: His cars cost something like 600 dollars which was basically the average American’s annual wage. The people who could afford cars had bought them and there were only a few people left to sell to. Henry went away for a couple of days and when he came back he did something incredible: He increased his employees wages by 600 dollars per year, to be applied 1 year retroactively if they would accept payment in the form of a new car. Naturally, every Ford employee became the new owner of a new car. His decision rocked the world. No other car company, manufacturer, engineering company, or any related firm could compete with the wages he offered. Wages around the nation went up and cars became a necessity for all Americans rather than a luxury for the rich.

Today, perhaps because of strong competition, car prices are not rising as sharply as home or health care prices, but remain a massive strain on the average household’s income.

Education.

Education inflates at about 7% per year, meaning the cost doubles about every 10 years. Income inflates at about 3% per year on average. If nothing changes, we’ll either have an elite, educated class who can afford education, or the creation of a debt class – a generation who starts out their financial lives with enormous debt payments.

Back to our current situation:  the recession.  How can the average American afford to invest, spend, or otherwise help stimulate the economy when the cost of our ‘needs’ has grown to consume our entire income? We can’t.

If nothing changes this mini-recession will become worse and worse. Classes will become divided more and more till there is no more middle-class, just an upper and a working class.  We’re seeing it happen before our very eyes. Unchecked, the recession will grow into a full-blown depression. In the wake of a depression I would not be surprised to see as harsh controls placed on real estate, health care, and the like as there currently exists in the investments world.

The big question, then, is how do we make the change? And will we do it before it’s too late?
I’m afraid I’m not smart enough to know for sure, but it looks to me like it’s either going to be the whole nation suddenly becoming more selfless and less greedy, or it’s going to be the government stepping in more and more.

As much as we fight and hate things like nationalized health care in this semi-free-market economy, it may be the only solution that we can find.  Our only other realistic hope is the creation of businesses which drastically undercut their competition and somehow avoid the trap of inflation (or at least postpone it for another few decades). Realistically, this kind of business doesn’t come into existence until after a depression.

Scary to some, but it makes sense to me. The math is simple. Products with prices that inflate faster than income will eventually be out of reach. If those products are needs then we’ll soon find out just how badly we really need them.

Set phasers to rant, ye cowardly nerds: an indictment of Anonymous vs Scientology

Angry Eyebrows!The last two days have seen the social networking site Digg.com abuzz with news about the ‘group’ “Anonymous” who posted a video to youtube a few days ago. The video is some high-speed cloud motion and a computerized voice reading what can only be described as a manifesto against the Church of Scientology. Here’s an excerpt:

We are anonymous. Over the years we have been watching you, your campaigns of misinformation, your suppression of dissent and your litigious nature. All of these things have caught our eye. With the leakage of your latest propaganda video into mainstream circulation the extent of your malign influence over those who have come to trust you as leaders has been made clear to us.

Anonymous has therefore decided that your organisation should be destroyed.

So…

This makes me squint at the screen and blink a lot in confusion. I think you may know the expression I’m talking about. It’s that one that means both “What are they talking about?” and “These idiots can’t be serious.” at the same time. Why? Not because the message is unclear, but because the message and the action of creating the video itself seem so wrong to me on so many levels.

First, who in the world cares what the smelly nerds think about a weird religion? Just the nerds, that’s who. I don’t think the Church of Scientology will respond to this attack and if it did it would only draw attention to what is probably one guy without the guts to show his face. Most likely an overweight 8th year college student who spends most of his time trolling around the inter-tubes looking for cyber-fights. Why cyber-fights? Because he wants to feel important but can only find success in the intangible world. Now if this guy actually went out and did something which actually caused members to leave the religion that would be impressive. All this hypothetical obese troll did, however, is write a manifesto, make his computer read it for him, get dug up on digg.com and let other enthusiastic haters do his work for him.

Nicely done, Adolf.

Which brings me to point 2.

What is the problem, sweaty nerd? Here is a cult of people whose goal is to try and better themselves. Yes, their ideas of “better” and “selves” and maybe even “try” are pretty out there, but so what? They’re really trying to make themselves and the world a better place. Why do you have a problem with this? Is it because you disagree with their beliefs? So what?! It is an organization whose stated purpose is to be, on the whole, an influence for good. Can you with complete honesty say that you have a total understanding of their beliefs and their feelings? Yeah, they’re wacky, but so are the Buddhists, Christians, Muslims, Atheists, and flying spaghetti monster worshipers to every outsider. And yes, they have a few outspoken idiots who make the rest look bad, but so does every good organization out there. Are we focusing on the weirdos and then judging the whole? If we’re being honest we must say: Probably.

Do they pay money for ‘intangible’ spiritual benefit? Sure, but again, who cares? If spiritual enlightenment comes with a dollar price there are millions who would gladly give all they have for the ever elusive answer to the million-dollar question: “Why?” Let them be happy with their answers and with their sales load. The rest of us can stick with our own sure knowledge that the answer is actually 42.

Finally, I am disgusted that on a website so full of ‘diggers’ who have historically been promoting individual rights, civil liberties, and the liberal view there are so many who will join their voices to hate rhetoric by voting up story after story after story about ‘Anonymous,’ and leave hate-filled comments on those same stories.

It seems there are always people out there blithely willing to hate the (excuse the pun, scientologists,) alien. The unusual or new. What’s worse is that there is nothing I or anyone can do to change the minds of the bigoted idiots who call themselves enlightened or ‘right.’ They’ve made up their minds and will listen to nobody but the collective who agrees with them. That’s why anonymous is getting anywhere.

Finally, this point: What are you going to do, Anonymous? Attack a website? Publish memorandum? Create diggable but ultimately meaningless video diatribes? Encourage others to hand out hate-filled fliers or instigate Denial of Service attacks? You will be forgotten in a week. Your manifesto is meaningless because you will do nothing. The more energy you apply to the Scientology ‘problem’ is more of your life wasted. Why not take a lesson from Mr. Hubbard himself and instead of attacking an organization you probably don’t even understand write a book and create an organization which is even more appealing to the Scientologists? You may actually do some good out there that way. You may change minds, cause good in the world, and, if Scientology is as bad as you make it out to be, save lives.

Anonymous, if you really care about human beings so much, why aren’t you doing something?

Heck, I’ll answer right now.

It’s because you and people like you want to spread hate, yet refuse to identify yourselves as haters. You fear that stigma. Rather, you hope you can change the whole world to align to your view so that you can step out and say “It was me! I am your glorious leader!” And this is funny because in reality the whole world is more likely to change than you. Not because you are right on any level (and you know it or you would have shown your face, unafraid), but because you refuse to open your mind to the shocking idea that you may be wrong.

I am not a Scientologist. I don’t have much of an idea about their practices or beliefs. I can, however, recognize bigotry, hate, and brainless drivel any time I come across it. I believe this is true of most human beings. I also hope that we are all willing to make positive changes in the world around us rather than attack, blame, persecute, and create prejudices. What does hate do, other than tarnish the hater? I hope for a world where instead of putting our energy into spreading mistrust we work our whole lives to humbly and truly understand.

Yes, I know that I’m doing nothing constructive here.  That’s what rants are for.  But I hope that something I wrote tonight has got somebody out there thinking.  Then maybe, once he and I have calmed down (especially me) we can write something constructive and beneficial. Yes, I know I’ve got to be the first in line at the humble / true understanding booth, especially after this revealing article. Now everybody knows that I hate nerds.

Stupid nerds.

Posted in Rants. 2 Comments »

So…

You know those little non-words that we all use?

Like, um, anyway, well, so, uh, y’know…  The list goes on.

I find myself getting bugged by the word “So.”  Here’s what happens:  People will talk then end with “So.” as its own sentence.  Why?  I do it too, but why?

In any case, it’s started bugging me, and everybody does it.  So.

Just going crazy in my own little world here.

So.

-Greg

Dear America,

Hey, it’s me again, America.

I thought that I had better drop you a line since all these decisions are going on.  I wanted to let you know how I feel, particularly about these ‘elections’ going on.  If at all possible, America, (I thought it best to let you know sooner rather than later) I would like to vote for that nice semi-black guy or maybe the old crazy doctor.  Possibly I’d like to vote for the conniving Mormon, but I’m not really set on that either.

See, I thought I had better let you know, America, that I want to vote.  I want to be involved by voicing my opinion.  You probably remember I didn’t show up last time to vote.  And the time before that I seemed a bit grumpy.  You may have wondered why.  Well, I guess it was my own fault for not letting you know sooner, but I had actually wanted to vote for the folks who never made it to the election in which I was allowed to vote.

Remember me, America?  I’m what you call ‘independent’ or ‘undeclared’ depending on where I live.  I don’t get to vote right now.  That’s why I’m letting you know, see?  I was hoping that if I said something now, maybe you’d be nice enough to give me the chance to vote for the guy I actually support.  I sure appreciate the fact that those folks in Iowa, New Hampshire, and Nevada are excited and having lots of fun voting or taking polls or whatever it is that they do over there.  I just don’t happen to live there, America.  I want to have my fun too.

Dear America, could you find it in your heart to let me vote for who I want to vote for no matter what the people in Nevada or Montana say?  I’d sure appreciate it.

Well, like I said, just wanted to let you know.  Good job on the amber waves, etc.  Keep it up.

Your friend,
Greg