NO ONE TOLD YOU WHEN TO RUN, YOU MISSED THE STARTING GUN

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Posted on 20th November 2014 by Administrator in Economy |Politics |Social Issues

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Ticking away the moments that make up a dull day
You fritter and waste the hours in an offhand way.
Kicking around on a piece of ground in your home town
Waiting for someone or something to show you the way.

Tired of lying in the sunshine staying home to watch the rain.
You are young and life is long and there is time to kill today.
And then one day you find ten years have got behind you.
No one told you when to run, you missed the starting gun.

Pink Floyd – Time

I stumbled across two mind blowing charts yesterday that had me pondering how generations of Americans had frittered their lives away, spending money they didn’t have  on things they didn’t need, utilizing easy to acquire debt, and saving virtually nothing for their futures or a rainy day. We are a nation of Peter Pans who never grew up. While I was driving home from work, one of my favorite Pink Floyd tunes came on the radio and the lyrics to Time seemed to fit perfectly with the charts I had just discovered.

We were all young once. Old age and retirement don’t even enter your thought process when you are young. Most people aren’t sure what they want to do for the rest of their lives when they are in their early twenties. Slaving away at your entry level low paying job, chasing the opposite sex, getting drunk, and having fun on the weekends is the standard for most young people. But you eventually have to grow up. Because one day you find ten years have got behind you. No one tells you when to grow up. And based on the charts below, tens of millions missed the starting gun.

I graduated college in 1986 and started my entry level CPA firm job, making $18,000 per year. I did live at home for a year and a half before getting an apartment with a friend. I was able to buy a car, pay off my modest student loan debt, go out on the weekends, and still save some money. I was in my early 20’s and had opened a mutual fund account at Vanguard. Anyone who entered the job market from the mid 1970s through the mid 1980’s, which would be the late Baby Boomers and early Generation Xers, had job opportunities and the benefit of low stock market valuations.

P/E ratios of the market were single digits in the late 70s and early 80s, versus 20 today. Dividend yields on stocks averaged 5% for the S&P 500, versus 1.9% today. The Dow bottomed out at 759 in 1980, while the S&P 500 bottomed at 98. A 20 year secular bull market was about to get under way. Baby Boomers and Generation Xers had the opportunity of a lifetime. Even after six years of the bull, when I graduated from college the Dow stood at 1,786 and the S&P 500 stood at 521. I had just begun to invest when the 1987 crash wiped out 20% in one day. It meant nothing to me. I didn’t have much to lose, so I just kept investing.

The 20 year bull market took the Dow from 759 to 11,722 by January 2000. The S&P 500 rose from 98 to 1,552 by March 2000. You also averaged about a 3% dividend yield per year over the entire 20 years. Your average annual return, including reinvested dividends, exceeded 17%. Anyone who even saved a minimal amount of money on a monthly basis, would have built a substantial nest egg for retirement. If you had invested in 10 Year Treasuries, your annual return would have exceeded 11% over the 20 years. Even an ultra-conservative investor who only put their money into 5 year CDs would have averaged better than 7% per year over the 20 years.

Even with the two stock market collapses since 2000, your average annual return in the stock market since 1980 still exceeds 11%. That’s 34 years with an average annual total return of better than 11%. Every person who had a job over this time frame should have accumulated a decent level of retirement savings. That is why the chart below is so shocking. Over 15% of all people 60 and older and 23% of people 45 to 59 years old have NO retirement savings. None. Nada. Zilch. This means 25 million Boomers and Xers are stuck living off a Social Security pittance and choosing between keeping the heat on or eating a feast of Ramen noodles and Friskies. It seems they let 30 years get behind them. They missed the starting gun.

http://www.mybudget360.com/wp-content/uploads/2014/11/retirement-savings.png

I’m not shocked that over 50% of 18 to 29 year olds have no retirement savings. With the terrible job market, declining real wages, massive levels of student loan debt, two stock market crashes in the space of eight years, and 4% annual returns since 2000, young people today have neither the means nor trust in the system to save for retirement. Their elders had no such excuse. Just a minimal amount per paycheck saved over the last 30 years would have compounded to well over $100,000, even at modest salary levels. It is disgraceful that 25 million people over the age of 45 have saved nothing for their retirement. Far more disgraceful is the median household retirement balance of $3,000 for all working age households. There are 122 million households in this country and 61 million of them have $3,000 or less in retirement savings.

http://www.mybudget360.com/wp-content/uploads/2014/11/20130620__figure9.jpg

The far worse data points are the $12,000 median retirement balance of aged 55 to 64 households and the $10,100 median retirement balance of aged 45 to 54 households. These people are on the edge of retirement and have less than one year’s expenses saved. There is no legitimate excuse for this pitiful display of planning. These people had decades to save, strong financial market returns, and if they worked for a decent size organization – matching contributions to their retirement accounts. They didn’t need a huge salary. They didn’t need to save 20% of their salary. They didn’t have to be an investing genius. A savings allocation of just 3% to 5% would have grown into a decent sized nest egg after a few decades of compounding.

We know from the data in the chart, it didn’t happen. The concept of delayed gratification is unknown to the millions of nearly broke Boomers and Xers, shuffling towards an old age of poverty, misery and regret. A 64 year old has a life expectancy of about 20 years. They’ll have to budget “very” frugally to make that $12,000 last. The question is how did it happen. I don’t buy the load of crap that you can’t judge people as groups. I judge people by their actions, not their words. I know you can’t lump every Boomer and Xer into one box. Individuals in every generation have bucked the trend, lived within their means, saved for the future, and accumulated significant nest eggs for their retirement. But the aggregate numbers don’t lie. The majority of those over the age of 45 have squandered their chance at a relatively comfortable retirement. These are the people who most vociferously insist the government do something about their self created plight. It’s their right to free healthcare, free food, subsidized housing, free utilities, higher minimum wages, and a comfortable government subsidized retirement. They are wrong. They had a right to life, liberty and the pursuit of happiness. It was up to them to educate themselves, get a job, work hard, and accumulate savings.

The generations of live for today, don’t worry about tomorrow Americans over the age of 45 have no one to blame but themselves. They bought those 4,500 sq foot McMansions with negative amortization 0% down mortgages. They had to keep up with the Jones-es by putting in granite counter-tops, stainless steel appliances, home theaters, Olympic sized swimming pools, and enormous decks. They have HDTVs in every room in their house and must have every premium cable channel, along with the NFL package. They upgrade their phones every time Apple rolls out a new and improved version. They pay landscapers to manicure their properties. They lease new BMWs every three years. They have taken exotic vacations on an annual basis. They haven’t packed a lunch for themselves since they were 16 years old. Eating out for lunch and dinner has been a staple of their existence for decades. That morning Starbucks coffee is a given. A new wardrobe of name brand stylish clothes for every season is a requirement because your neighbors and co-workers are constantly judging you. Nothing proves you’re a success like a Rolex watch, Canali suit, Versace boots, or Gucci handbag. The have it now generations got it then and have virtually nothing now because they acquired all of these things with debt.

Real cumulative household income is up 10% since 1980. Consumer debt outstanding has risen from $350 billion in 1980 to $3.267 trillion today. That is a 933% increase. We’ve had decades of faux prosperity aided and abetted by Wall Street shysters, corrupt politicians, mega-corporation mass merchandisers, and Madison Avenue maggots trained in the methods of Edward Bernays to convince willfully ignorant consumers to consume. And consume we did. Saving, not so much. You can blame the oligarchs, bankers, retailers, and politicians for the fact you didn’t save, but it rings hollow. No matter how much propaganda is spewed by the ruling class, we are still individuals with free will. The older generations had choices. Saving money requires only one thing – spending less than you make. Most Boomers and Xers chose to spend more than they made and financed the difference. When the average credit card balance is five times greater than the median retirement account balance, you’ve got a problem. The facts about our consumer empire of debt are unequivocal as can be seen in these statistics:

  • Average credit card debt: $15,593
  • Average mortgage debt: $153,184
  • Average student loan debt: $32,511
  • $11.62 trillion in total debt
  • $880.3 billion in credit card debt
  • $8.05 trillion in mortgages
  • $1.12 trillion in student loans

I don’t blame those in their 20’s and 30’s for not having retirement savings. Anyone who entered the workforce around the year 2000 has good reason to not trust the system or their elders. There have been two stock market collapses and every asset class is now extremely overvalued due to the criminal machinations of the Federal Reserve. There are far less good paying jobs. Real wages keep declining. They were convinced by their elders to load up on student loan debt, leaving them as debt serfs. The Wall Street/Federal Reserve scheme to boost home prices and repair their insolvent balance sheets has successfully kept young people from ever being able to afford a home. So you have young people unable to save, invest or spend. You have middle aged and older Americans with little or no savings, mountains of debt, low paying service jobs, and an inability to spend. The only people left with resources are the .1% who have captured the system, peddle the debt, and reap the rewards of consumption versus saving. They may be able to engineer a stock market rally to further enrich themselves, but they can not propel the real economy of 318 million people. Our consumer society is dying – asphyxiated by debt – shorter of breath and one day closer to death.

I’d love to offer some sage advice on how to fix this problem, but it’s too late. Too many people missed the starting gun. More than ten years got behind them. No one is going to come to the rescue of people who never saved for their future. The Federal government has already made $200 trillion of entitlement promises it can’t keep. State governments have made tens of trillions in pension promises they can’t keep. They can’t tax young people who don’t have jobs. Older generations who think the government is going to rescue them from their foolish shortsighted choices are badly mistaken. Their benefits are likely to be reduced because the unsustainable will not be sustained. The 45 to 64 year old cohort who chose not to save can run and run to try and catch up with the sun, but it’s too late. It’s sinking. Their plans have come to naught. They are destined for lives of quiet desperation. There is nothing more to say.

So you run and you run to catch up with the sun but it’s sinking
Racing around to come up behind you again.
The sun is the same in a relative way but you’re older,
Shorter of breath and one day closer to death.

Every year is getting shorter; never seem to find the time.
Plans that either come to naught or half a page of scribbled lines
Hanging on in quiet desperation is the English way
The time is gone, the song is over,
Thought I’d something more to say.

Pink Floyd – Time

Rogue President

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Posted on 23rd November 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Patrick J. Buchanan

 

Rogue President

Asserting a legal and constitutional authority he himself said he did not have, President Obama is going rogue, issuing an executive amnesty to 4 to 5 million illegal aliens.

He will order the U.S. government not to enforce the law against these 5 million, and declare that they are to be exempt from deportation and granted green cards.

Where did Obama get his 4-5 million figure, not 2-4 million, or 5-7 million? Nowhere in law, but plucked out of his own mind, as to what he can get away with. Barack Obama just felt it was about right.

Thus does our constitutional law professor-president “faithfully execute” the laws of the United States he has twice swore to uphold?

Our rogue president has crossed an historic line, and so has the republic. Future presidents will cite the “Obama precedent” when they declare they will henceforth not enforce this or that law, because of a prior commitment to some noisy constituency.

We have just taken a monumental step away from republicanism toward Caesarism. For this is rule by diktat, the rejection of which sparked the American Revolution.

The political, psychological and moral effects of Obama’s action will be dramatic. Sheriffs, border patrol, and immigration authorities, who have put their lives on the line to secure our broken borders, have been made to look like fools. Resentment and cynicism over Obama’s action will be deeply corrosive to all law enforcement.

Businessmen who obeyed the law and refused to hire illegals, hiring Americans and legal immigrants instead, and following U.S. and state law on taxes, wages and withholding, also look like fools today.

Obama’s action makes winners of the scofflaws and hustlers.

Bosses who hired illegals off the books will also receive de facto amnesty. La Raza is celebrating. But, make no mistake, a corrupt corporate crowd is also publicly relieved and privately elated.

Immigrants who waited in line for years to come to America, and those waiting still, have egg on their faces. Why, they are saying to themselves, were we so stupid as to obey U.S. laws, when it is the border-jumpers who are now on the way to residency and citizenship?

When the world hears of the Obama amnesty, millions more from Latin America, Africa, Asia and the Middle East will be coming. And if they cannot get in legally, they will walk in, or fly in, and overstay their visas.

Why not? It works.

That this action will be as much a part of Obama’s legacy as Obamacare is certain. The unanswered question is how the Obama amnesty will be remembered by history.

His aides think that it will be seen as a second Emancipation Proclamation. Perhaps.

But with this amnesty Obama takes custody of and responsibility for the entire illegal population. He is the patron saint of illegal aliens. And for what they do, he will be held accountable, as was Jimmy Carter for the Marielitos Castro sent and Carter welcomed.

If the amnestied illegals contribute to the drug trade and violent crime, that will be Obama’s legacy to his country. If they turn up disproportionately on the welfare rolls, exploding state and federal deficits, that will be Obama’s legacy.

If this amnesty is followed by a new invasion across the border America cannot control, that, too, will be Obama’s gift to his countrymen.

One wonders. Will poor and working class blacks and whites, Hispanics and Asians, welcome this unleashed competition from the amnestied illegals, for jobs where the wages never seem to rise?

In the four decades before JFK, the nation had a pause in legal immigration. During that pause, the Germans, Irish, Italians, Jews, Poles, Greeks and Slav immigrants who had come in from 1890-1920, and their children and grandchildren, were fully assimilated. They had become not only U.S. citizens, but also identifiably American.

The Melting Pot had worked. We had become one nation and one people, almost all speaking the same language, and steeped in the same history, heroes, culture, literature and faiths.

Today, in 2014, after an influx of perhaps 50 million in 50 years, legal and illegal, no longer from Northwest Europe, or Europe at all, but Latin America, Africa, Asia, the Middle East, of every race, color, creed, culture and language we seem less a nation than some mammoth Mall of America. An economy, but not a country.

Running in 2008, Obama said he intended to become a “transformational president.” With this decision, he succeeds.

He has accelerated and ensured the remaking of America. Now when the wives and children of the illegals arrive, and their extended families apply for and receive visas, and bring their wives and children, we will become the Third World country of Obama’s dream, no more a Western nation.

But then the community organizer did not much like that old America.

SUNDAY FUNNIES

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Posted on 23rd November 2014 by Administrator in Economy |Politics |Social Issues

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Via Cagle Post

ALL I HAVE IS A VOICE TO UNDO THE FOLDED LIE

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Posted on 23rd November 2014 by Administrator in Economy |Politics |Social Issues

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SEPTEMBER 1, 1939

I sit in one of the dives
On Fifty-second Street
Uncertain and afraid
As the clever hopes expire
Of a low dishonest decade:
Waves of anger and fear
Circulate over the bright
And darkened lands of the earth,
Obsessing our private lives;
The unmentionable odour of death
Offends the September night.

Accurate scholarship can
Unearth the whole offence
From Luther until now
That has driven a culture mad,
Find what occurred at Linz,
What huge imago made
A psychopathic god:
I and the public know
What all schoolchildren learn,
Those to whom evil is done
Do evil in return.

Exiled Thucydides knew
All that a speech can say
About Democracy,
And what dictators do,
The elderly rubbish they talk
To an apathetic grave;
Analysed all in his book,
The enlightenment driven away,
The habit-forming pain,
Mismanagement and grief:
We must suffer them all again.

Into this neutral air
Where blind skyscrapers use
Their full height to proclaim
The strength of Collective Man,
Each language pours its vain
Competitive excuse:
But who can live for long
In an euphoric dream;
Out of the mirror they stare,
Imperialism’s face
And the international wrong.

Faces along the bar
Cling to their average day:
The lights must never go out,
The music must always play,
All the conventions conspire
To make this fort assume
The furniture of home;
Lest we should see where we are,
Lost in a haunted wood,
Children afraid of the night
Who have never been happy or good.

The windiest militant trash
Important Persons shout
Is not so crude as our wish:
What mad Nijinsky wrote
About Diaghilev
Is true of the normal heart;
For the error bred in the bone
Of each woman and each man
Craves what it cannot have,
Not universal love
But to be loved alone.

From the conservative dark
Into the ethical life
The dense commuters come,
Repeating their morning vow;
‘I will be true to the wife,
I’ll concentrate more on my work,’
And helpless governors wake
To resume their compulsory game:
Who can release them now,
Who can reach the dead,
Who can speak for the dumb?

All I have is a voice
To undo the folded lie,
The romantic lie in the brain
Of the sensual man-in-the-street
And the lie of Authority
Whose buildings grope the sky:
There is no such thing as the State
And no one exists alone;
Hunger allows no choice
To the citizen or the police;
We must love one another or die.

Defenseless under the night
Our world in stupor lies;
Yet, dotted everywhere,
Ironic points of light
Flash out wherever the Just
Exchange their messages:
May I, composed like them
Of Eros and of dust,
Beleaguered by the same
Negation and despair,
Show an affirming flame.
W.H. Auden, Another Time

FUNDAMENTALS

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Posted on 23rd November 2014 by Administrator in Economy |Politics |Social Issues

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Best time to buy.

Via Zero Hedge

QUOTES OF THE DAY – TYRANNY EDITION

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Posted on 23rd November 2014 by Administrator in Economy |Politics |Social Issues

“The wisest thing in the world is to cry out before you are hurt. It is no good to cry out after you are hurt; especially after you are mortally hurt. People talk about the impatience of the populace; but sound historians know that most tyrannies have been possible because men moved too late. it is often essential to resist a tyranny before it exists.”

G.K. Chesterton, Eugenics and Other Evils: An Argument Against the Scientifically Organized State

“There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.”

Robert A. Heinlein

“The means of defense against foreign danger, have been always the instruments of tyranny at home.”

James Madison

“If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that ye were our countrymen.”

Samuel Adams

“When one with honeyed words but evil mind
Persuades the mob, great woes befall the state.”

Euripides, Orestes

“Those who are capable of tyranny are capable of perjury to sustain it.”

Lysander Spooner

“A democracy which makes or even effectively prepares for modern, scientific war must necessarily cease to be democratic. No country can be really well prepared for modern war unless it is governed by a tyrant, at the head of a highly trained and perfectly obedient bureaucracy.”

Aldous Huxley, Ends and Means

“Withholding information is the essence of tyranny. Control of the flow of information is the tool of the dictatorship.”

Bruce Coville

“This work was strictly voluntary, but any animal who absented himself from it would have his rations reduced by half.”

George Orwell, Animal Farm

“In every age it has been the tyrant, the oppressor and the exploiter who has wrapped himself in the cloak of patriotism, or religion, or both to deceive and overawe the People.”

Eugene V. Debs

“War is an ugly thing, but not the ugliest of things: the decayed and degraded state of moral and patriotic feeling which thinks that nothing is worth a war, is much worse. When a people are used as mere human instruments for firing cannon or thrusting bayonets, in the service and for the selfish purposes of a master, such war degrades a people. A war to protect other human beings against tyrannical injustice; a war to give victory to their own ideas of right and good, and which is their own war, carried on for an honest purpose by their free choice, — is often the means of their regeneration. A man who has nothing which he is willing to fight for, nothing which he cares more about than he does about his personal safety, is a miserable creature who has no chance of being free, unless made and kept so by the exertions of better men than himself. As long as justice and injustice have not terminated their ever-renewing fight for ascendancy in the affairs of mankind, human beings must be willing, when need is, to do battle for the one against the other.”

John Stuart Mill, Principles of Political Economy

The Consequences of Imposing Negative Interest Rates

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Posted on 22nd November 2014 by Administrator in Economy |Politics |Social Issues

Negative Interest Rates and Capital Consumption

Ever since the ECB has introduced negative interest rates on its deposit facility, people have been waiting for commercial banks to react. After all, they are effectively losing money as a result of this bizarre directive, on excess reserves the accumulation of which they can do very little about.

At first, only a small regional bank, Deutsche Skatbank, imposed a penalty rate on large depositors – slightly in excess of the 20 basis points banks must currently pay for ECB deposits. It turns out this was a Trojan horse. Other banks were presumably watching to see if depositors would flee Skatbank, and when that didn’t happen, Commerzbank decided to go down the same road.

However, there is an obvious flaw in taking such measures – at least is seems obvious to us. The Keynesian overlords at the central bank who came up with this idea have failed to consider a warning Ludwig von Mises once uttered about the attempt to abolish interest by decree.

Obviously, the natural interest rate can never become negative, as time preferences cannot possibly become negative: ceteris paribus, consumption in the present will always be preferred to consumption in the future. Mises notes that if the natural interest rate were to decline to zero, all consumption would stop – we would die of hunger while investing all of our resources in capital goods, i.e., while directing all of our efforts and funds toward production for future consumption. This is obviously a situation that would make no sense whatsoever – it is simply not possible for this to happen in the real world of human action.

Mises warns however that if interest payments are abolished by decree, or even a negative interest rate is imposed by decree, owners of capital will indeed begin to consume their capital – precisely because want satisfaction in the present will continue to be preferred to want satisfaction in the future regardless of the decree. This threatens to eventually impoverish society and reduce it to a state of penury:

If there were no originary interest, capital goods would not be devoted to immediate consumption and capital would not be consumed. On the contrary, under such an unthinkable and unimaginable state of affairs there would be no consumption at all, but only saving, accumulation of capital, and investment.

Not the impossible disappearance of originary interest, but the abolition of payment of interest to the owners of capital, would result in capital consumption.

The capitalists would consume their capital goods and their capital precisely because there is originary interest and present want-satisfaction is preferred to later satisfaction. Therefore there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. He who wants to “abolish” interest will have to induce people to value an apple available in a hundred years no less than a present apple. What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.”

 

(emphasis added)

 

mises_0
Ludwig von Mises: he warned that the abolition of interest payments would induce the owners of capital to consume rather than invest it. Society would soon be impoverished as a result.

(Photo via Wikimedia Commons)

 

Of course today’s central bankers to a man seem to believe that what makes the economy grow is “spending” and consumption. This is putting the cart before the horse. Since the accumulation of capital threatens to go into reverse due to their policies, there may well come a time period during which reports of aggregate economic statistics appear to indicate that “economic growth has returned”, while all they reflect in reality is the fact that scarce capital is in the process of being consumed. This process is also known colloquially as “eating one’s seed corn”.

 

How to Counter Deposit Flight: The Cash Ban Debate is Revived

In practical terms, the main reason why large depositors have only grumbled, but not (yet) fled the banks imposing penalty rates on them – in spite of the fact that fractionally reserved banks are not merely warehousing and guarding their funds, but using them for their own business operations – is that withdrawing money in the form of cash and storing is doesn’t come for free either.

Not only must one pay for storage, security and insurance in that event, but one is also cut off from the convenience of effecting payments with a mouse click. Moreover, possession of large amounts of cash, although officially not illegal, is dangerous because it is “suspicious” in the eyes of the State’s minions.

In the US, private persons who are found in possession of large amounts of cash must fully expect that it will be confiscated without trial or any evidence of a crime by means of the “civil forfeiture” procedure. As the Washington Post informs us, in spite of a recent storm of negative publicity regarding these government-directed shakedowns, “the racket is still humming”. Below is a video by comedian John Oliver discussing the topic that gives a good overview of the problem (Oliver may only be a comedian, but he is certainly an informative one tackling a great many interesting subjects).

 

 

John Oliver on the shakedown procedure known as “civil forfeiture”.

 

Nevertheless, large depositors could presumably take the necessary legal precautions (again at a cost) to ensure their cash does not become suspect. So there is certainly a possibility, especially if the penalties incurred for keeping large amounts of money on deposit should become even greater, that depositors may decide to remove their money from the banking system and keep it in the form of cash currency.

The probability of this happening has increased further due to the decision of European governments – which governments elsewhere are planning to emulate – to “bail in” bank creditors in the event of bank failures. In the modern fractionally reserved banking system, depositors are legally held to be creditors of the bank, even though this flatly contradicts the contractual promise that they will be able to withdraw their money on demand.

Absent this legal contradiction, fractional reserve banking would of course not be possible. By extending this privilege to banks, governments have greased the wheels of modern-day welfare/warfare statism, so depositors holding money in demand deposit accounts will continue to be regarded as “creditors of the bank”, regardless of the obvious absurdity of this legal doctrine. While we believe that it is proper and laudable to shield tax payers from having to bail out failing banks, the situation in which owners of demand deposits find themselves in is completely untenable.

However, depositors have now been put on notice: not only will they bear the full risk of losing the bulk of their funds when overextended banks are failing next time around, on top of this they will now also have to pay for the dubious “privilege” of bearing this risk. If banks were indeed merely warehousing the money in demand deposits at arm’s length, the payment of a fee for their warehousing services and any other services they may offer in connection with such deposits would be entirely proper and sensible. However, if depositors are forced to take the risk that their money could be lost as a result of the bank’s business activities (over which they have no control), they have very little reason to happily pay such a fee.

Interestingly, when the Austrian press recently reported on the decision by Commerzbank to impose a penalty interest rate on its large depositors, Kenneth Rogoff’s idea of simply banning cash currency was mentioned in the same breath. Apparently Mr. Rogoff is currently touring the world beating the drums for this dubious (to put it very mildly) plan. Here is a translation of the respective passage in the article:

 

“Harvard economist Kenneth Rogoff even argues in the daily paper FAZ that cash currency should be banned altogether. Central banks could impose negative interest rates more easily that way, he explained. Tax evaders and criminals would also find life more difficult. From this perspective, banknotes and coins appear superfluous, he said at a presentation at the IFO institute in Munich. Measures to spur the economy could be implemented more easily that way.”

 

(emphasis added)

Since we have discussed Rogoff’s plan in great detail before (see “Meet Kenneth Rogoff, Unreconstructed Statist”) there is no need to rehash all the arguments we made against it. We note though that Mr. Rogoff continues to craftily associate cash with “criminals”, while concurrently asserting that it is our duty to make central planning of the economy easier for the interventionists, in spite of its recurring failure.

In our opinion, a cash ban would constitute a criminal act. One of the reasons is precisely that people would no longer be able to remove their funds from fractionally reserved banks. They would be forced to bear the risks these banks are exposed to, whether they want to or not. Implementing a cash ban would not only amount to an abrogation of all financial privacy, it would clearly represent an abrogation of fundamental property rights as well.

It is noteworthy that Mr. Rogoff is a member of the “monetarist” Chicago school. As Hans-Hermann Hoppe has rightly pointed out, it demonstrates how utterly infested with statism modern society has become that the Chicago school is today held to be the most “conservative” and “free market oriented” school of thought that is still considered acceptable to the establishment.

No wonder – as Mr. Rogoff so clearly demonstrates, it is statist through and through. Ludwig von Mises reportedly once left a meeting at the Mount Pelerin Society in medias res, muttering something along the lines of “you are nothing but a bunch of socialists” after having listened to various representatives of the Chicago School drone on about which liberties the State should abridge next in its relentless pursuit of welfare statism. While it is apparently not certain that this incident really happened, Mises would have been quite correct with this assessment. As Mr. Hoppe notes:

 

“This seemingly unstoppable drift toward statism is illustrated by the fate of the so-called Chicago School: Milton Friedman, his predecessors, and his followers. In the 1930s and 1940s, the Chicago School was still considered left-fringe, and justly so, considering that Friedman, for instance, advocated a central bank and paper money instead of a gold standard. He wholeheartedly endorsed the principle of the welfare state with his proposal of a guaranteed minimum income (negative income tax) on which he could not set a limit. He advocated a progressive income tax to achieve his explicitly egalitarian goals (and he personally helped implement the withholding tax). Friedman endorsed the idea that the State could impose taxes to fund the production of all goods that had a positive neighborhood effect or which he thought would have such an effect. This implies, of course, that there is almost nothing that the state can not tax-fund!

In addition, Friedman and his followers were proponents of the shallowest of all shallow philosophies: ethical and epistemological relativism. There is no such thing as ultimate moral truths and all of our factual, empirical knowledge is at best only hypothetically true. Yet they never doubted that there must be a state, and that the state must be democratic.

Today, half a century later, the Chicago-Friedman school, without having essentially changed any of its positions, is regarded as right-wing and free-market. Indeed, the school defines the borderline of respectable opinion on the political Right, which only extremists cross. Such is the magnitude of the change in public opinion that public employees have brought about.”

 

(emphasis added)

 

rogoffHarvard economist Kenneth Rogoff wants cash to be banned to make the imposition of central bank intervention “easier”. Ironically this unreconstructed statist found himself hounded by the political left when a few errors were found in the data used in his book on government debt and growth (the book tried to prove with the help of statistics that too much government debt retards growth. The incident illustrated the danger of relying on statistics instead of sound economic theory to make one’s case).

(Photo via Imago)

 

Conclusion:

The “unintended consequences” of the negative interest rate policy will vastly outweigh the perceived advantages of any short term boost to economic activity they may provoke. Consumption is not what produces economic growth, and giving capital owners an incentive to consume rather than invest their capital will only hasten Europe’s economic decline.

Given that the failure of these interventions is already absolutely certain, we must be prepared for even more interventions to “fix” the failures produced by the previous ones. Mr. Rogoff’s plan would certainly enable more State control over the citizenry and the economy. Many modern-day intellectuals appear quite keen on abolishing the market economy and replacing it with some form of command economy (just as long as their personal plans are implemented of course). They should be careful what they wish for.

PLAY BALL

6 comments

Posted on 22nd November 2014 by Administrator in Economy |Politics |Social Issues

Ice Age Fever

8 comments

Posted on 22nd November 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Dr Sircus

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The news of this winter has not even begun because we are still five weeks away from that equinox. Yet you would never know it watching what is going on in upstate New York and the rest of the United States that recently saw record-breaking cold in all fifty states.

Like all kids, growing up I heard of such things as ice ages and that we were overdo for one. You know once in every 10,000 years kind of trip, and I thought well ok, that is the pattern, but must take a long time to come on so I will never have to worry about it in my lifetime!

But not so, says Professor William Patterson of the University of Saskatchewan in Saskatoon, Canada, and his colleagues. Using the most precise record of the climate from paleo history ever generated they tell almost the same story we saw in the movie The Day After Tomorrow, when the world went stone cold from one week to another. Buffalo looks like act one on our screens.

Patterson, a world expert, also thought it would take time to come on but lo and behold, the scientific evidence suggests otherwise. Robert Felix, author of Not by Fire but by Ice, thought that ice ages begin in less than 20 years. His site is the best place to keep up with the cooling news, which is heating up, according to religious disciples of manmade global warming that never was.

I have been writing for 7 years about global cooling, (confronting the most ridiculous fantasies of the global warming crowd), I had no idea whatsoever how fast things would come on and why. There are just some people who would rather freeze to death than admit that there is no global warming. I still get letters from them no matter how much evidence is laid before their eyes.

I think no one really expected such a violent change to the cold so soon. It certainly took farmers by surprise. Professor Patterson published his research saying, “JUST months – that’s how long it took for Europe to be engulfed by an ice age,”

These findings emerged from one of the most painstaking studies of climate changes ever attempted and reinforce the theory that the earth’s climate can switch between warm and cold incredibly quickly.

Of course, we know that the head of the Space Research section of the Russian Academy of Science, Professor Khabibullo Abdussamatov, in 2006 issued a press release, warning that the world should prepare for imminent global cooling. He predicted that the next ice age would start in 2012 – 2015, and would likely peak around 2055. He was looking to the most obvious reason global cooling is happening—the sun.

Abdussamatov was seeing far and sensitively enough into the climate’s future to see it coming on in just a few years. Upstate New York is just the first inning a taste of things to come. It is not a first taste of how desperate things can get though with heavy snowstorms. However, it is setting records that none could foresee.

We are seeing the first act of the new ice age and how hard it will be to live in or through one.

The county reports 30 major roof collapses as the region recovers from the historic storm that dumped more than 7 feet (2.13 m) of snow on the area in only three days. Buffalo normally gets around 8 feet of snow during an entire winter season. Emergency workers are also monitoring hundreds of structures at risk for collapse. The thirty major roof collapses were largely farm buildings and those with flat roofs.

Governor Andrew Cuomo of New York is weighing in on this saying, “This is an historic event. When all is said and done, this snowstorm will break all sorts of records. It will get worse before it gets better.” Snow-bound residents of western New York awoke to as much as another foot of accumulation on Thursday with possibly another 30 inches expected.

One has to begin to wonder how much an unprepared population stored up on food in their homes. I heard of no last minute panic buying at the supermarket with this storm. Few are getting in and out of their homes and food is not being delivered. Eight dead so far.

Of course, in the news they are more worried about Sunday’s football game. Meanwhile global cooling is being felt in other places. The shipping season on the upper Mississippi River ended yesterday as ice surrounding locks and dams near Minnesota’s Twin Cities forced the earliest winter closure on records that date back to 1969, the U.S. Army Corps of Engineers said. This halts shipments of corn, soybeans, wheat, fertilizer, salt and other goods from the most northern reaches of the nation’s busiest waterway.

View image on Twitter

People seem worried about the football game that might not be played in this stadium any time soon. I am more worried about people running out of food or losing their light and heat and their roofs collapsing on top of them. Global warming believers will be relieved to know warm temperatures and rain are on the way but that will be dangerous because of flooding and even more weight on people’s roofs.

Back in 2009 I published:

Dr. Willie Soon, astrophysicist and geoscientist at the Solar and Stellar Physics Division of the Harvard-Smithsonian Center for Astrophysics, Saying the climate system is completely dominated by how much carbon dioxide we have in the system is crazy – completely wrong. Carbon dioxide is not the major driver for the earth/climate system. Temperatures are going down, but CO2 levels are still going up. It’s close to being insane to try to keep insisting these changes in carbon dioxide are going to create all of the disasters that politicians and doomsayers are trying to tell us. Climate is totally, completely dependent on what the sun is doing to the system. The sun is the major driver of the earth climate system.”

It is Cold Out There

Meanwhile way to the south: 141 year old cold weather record falls in Jacksonville. Thursday morning not only broke an “ancient” record from 1873, but we also dropped to the second coldest temperature ever recorded in the month of November in Jacksonville. According to the National Weather Service, for the second morning in a row, Jacksonville set a new cold weather record. Thursday morning’s temperature dropped to a bone chilling 24 degrees F breaking the old record of 30 degrees set in 1873. An astounding 226 million people in all 50 states, which includes the tropical paradise of Hawaii, were below freezing at the same time putting an exclamation point on an already paralyzing winter season — that has not even officially started yet.

About 50% of the United States had snow on the ground Tuesday, according to the National Weather Service. There were also forecasts for heavy snow for counties in Michigan and Vermont.

John Casey a former White House space program advisor and consultant to NASA, has been writing about global cooling for as many years as I have and has said, “global warming” is a sham. And perhaps the most expensive — and lethal — sham in American history. A sham that our government spends $22 billion a year financing. Think about that: our government spends $22 billion a year financing “global warming” initiatives.” Obama certainly likes things the way they are and will go down with the global warming ship. Yesterday Casey published a press release:

  1. The Earth is about to begin a steep drop in global temperatures off its present global temperature plateau. This plateau has been caused by the absence of growth in global temperatures for 18 years, the start of global cooling in the atmosphere and the oceans, and the end of a short period of moderate solar heating from an unusually active secondary peak in solar cycle #24.
  2. Average global atmospheric and oceanic temperatures will drop significantly beginning between 2015 and 2016 and will continue with only temporary reversals until they stabilize during a long cold temperature base lasting most of the 2030’s and 2040’s. The bottom of the next global cold climate caused by a “solar hibernation” (a pronounced reduction in warming energy coming from the Sun) is expected to be reached by the year 2031.
  3. The predicted temperature decline will continue for the next fifteen years and will likely be the steepest ever recorded in human history, discounting past short-duration volcanic events.
  4. 4. Global average temperatures during the 2030’s will reach a level of at least 1.5° C lower than the peak temperature year of the past 100 years established in 1998. The temperatures during the 2030’s will correspond roughly to that observed from 1793 to 1830, shortly after the founding of the United States of America. This average lower global temperature of 1.5° C on average, translates to declines in temperatures that will be devastating for crop growing regions in the mid latitudes of the planet.

Special Note: For the cows and sheep and everyone who swallow whatever the corporate controlled press says: Global Temperatures Are the Hottest on Record for a Fifth Month This Year. That’s despite the U.S. experiencing a bit of a deep freeze. To read how pathetic Time Magazine is, read today’s article. All fifty states below freezing in November and that is a “bit” of a freeze!

With each passing day, the global warming paradigm creeps closer to its deathbed.