Posts Tagged ‘spending’

Debt is destroying America

2016/09/04

Debt is denying a whole generation of jobs, places to stay, and self-respect.  Debt is consuming the money supply, creating little liquidity in a bubble-like environment.  There is nothing to flip anymore, there are no safe investments, living off of your investments is just not going to work now, and retirement is a nightmare.

But we are all still the same people that we were ten, fifteen years ago, so what has changed?  Debt.  No matter how you look at it, we are all in debt, no matter what our supposed worth.  But it is all just numbers in machines, it is not anything real, tangible.  Debt is not a place to live, nor is it key to a good job.  Debt is what holds us to the grindstone, wearing away our humanity.

Debt is destroying the American economy, poisoning innovation, stifling education.  We should all be helping each other out, sharing what we have.  When I have something extra, or unused, or rusting away, someone else can use it, maybe even keep it, because I know that when I need one again, one will be there for me.

Puritan Pilgrims Day

2010/11/25

Today marks the arrival in North America of a group of intolerant religious fanatics, who fled Europe because they believed that the society there was becoming too permissive.   These fanatics would have starved and frozen to death had it not been for the kindness and generosity of the local heathens.

This holiday is the result of the efforts of a single woman, who organized a campaign to convince President Lincoln to declare a ‘day of thanks’ for the landing of the Pilgrims at Plymouth Rock.  This holiday has nothing to do with celebrating the bountiful harvests the land has yielded, coming long after all harvests are in.  Today, it is used as the kickoff for the Christmas Shopping Season, as well as being clothed in sentiment for home and family.

Holidays, or sabbats as they were called by many in Europe in ancient times, used to mark the turning of the Wheel of the Year.  They were tied to the astronomical calender, falling on the solstices and equinoxes, and the days halfway between.  These sabbats represented the periods of the year associated with renewal, growth, and harvesting, as well as worship of the ancestors.  Their meanings were timeless, beyond everyday life, immutable.

Thanksgiving falls during a time which was thought by many to be a dormant time, a period when conservation of resources was critical.  Winter is just beginning, and one’s stocks of food and fuel had to last for months.  Our genetic heritage is telling us to keep our activities to a minimum, to stay home, to endure the darkness.  We are goaded into action by advertising sponsored by those who want us to spend our money, even if we have none to spare.

Thanksgiving is a totally artificial holiday, having no connection with Nature and the world around us.  Its meaning is being lost in a blitz of advertising and promotions.  More and more, it is merely a celebration of consumption, of spending which keeps the rich getting richer.  Ignore the countdown which starts now, find another way to celebrate the harvest, save your money for more important things.

Building a better beast

2010/02/22

The United States economy is a sick puppy right now, reeling after over 1 trillion dollars evaporated.  The driving force of the economy in the past, consumer spending, has fallen drastically, as the middle class has been forced to live within its means.  Credit is almost impossible to get, and has become more expensive.  The declining value of homes has made the home equity loan a thing of the past.  Unemployment is scaring people into paying off credit cards, and building up savings.  Federal stimulus money has kept states from laying large numbers of employees, but the money is running out.

Maybe we ought to think about spending some of our money making the country more efficient.  This would reduce our dependence on foreign energy sources, as well as cutting the emissions of greenhouse gases.  Money would be freed up from energy costs, which could be used to increase spending.  Consider:  Many commercial buildings have no insulation.  That is right.  None.  The average home more than 20 years old is seriously lacking in insulation, and often leaks air copiously.

Putting people to work right now is difficult, because plans have to be drawn up and approved, bids taken, and contracts let.  But retrofitting homes and businesses could commence within weeks, if done properly.  Although President Obama talked about a program such as this a few months ago, little has been said regarding it recently.  Could it be that energy companies don’t want to see consumption reduced?  Could it be that Congress doesn’t like giving money to the average American, although they have provided plenty to the big banks and two of the car companies?

Perhaps we could couple improved efficiency with greater reliance on solar and wind power.  Low interest loans for solar panels and wind farms would probably increase the numbers in use considerably.  We are falling behind the rest of the world in the use of renewable energy, especially in the field of solar.  Building and installing solar panels would employ many people if we were to make a national push to utilize them.

Buses are a good way to save energy, and many parts of America have very few.  Building buses financed by federal loans to local transit operators would create employment in the parts of the country which have been hit so hard by the fall in auto sales.  People who ride buses save money which they can use to take their cars out for recreation, whereas people who drive to work often cannot afford Sunday drives.

There are ways to put people to work, right now, doing things that we would benefit from for years and years.  Some seem socialistic, but saving our society seems a worthy enterprise to me.  If we are going to keep borrowing money from China, at least we ought to do something worthwhile with it.

Let’s see some real financial regulation!

2010/02/02

President Obama’s push to reform the financial system is causing disquiet in many executive offices.  Yet he has not proposed any serious changes in the way that business will be done, instead merely expressing a desire to create a source of funds which would be used to bail out big banks that get in trouble, as well as seeking some form of protection from predatory lending for the average consumer.

No one has suggested taking steps to stop the underlying problem with the financial system, which is the selling of debt to investors.  What used to be standard practice was never regulated, because there was no need.  Banks traditionally carried the loans that they originated to maturity, even 20 year mortgages.  There was no law saying that they had to, it was just the business model.

Bet greed changed things around, and banks discovered that they were able to sell those loans to other banks, which then packaged vast numbers of those loans into single investment vehicles, the infamous ‘collateralized debt obligation.’  Add the ratings agencies willingness to give these vehicles AAA ratings, and a whole new realm opened up.  Gone are the days when the bank that wrote the mortgage was there to keep an eye on the borrower, or when a borrower could call the bank to talk about altering some aspect of their mortgage.

Mr. Obama also wants to stop the credit card companies from engaging in loan shark behavior, but his proposals do not address the penalties which banks can impose when a creditor is late with a payment, or goes over their credit limit.  Nor does his proposal prevent credit cards from being issued to people who are likely to get behind on their payments.  This has been a source of great revenue for credit card companies, at least on paper, because they can impose fees which, when combined, exceed the amount of the monthly payment whenever a creditor slips up.  These fees can add up very quickly, so that a person with a 500 dollar credit limit is suddenly 1200 dollars in the hole over a credit card.

The credit card company counts that 1200 dollars as real money, which increases their net worth, irregardless of the ability of the creditor to pay.  This can lead a person to file bankruptcy over credit card debt, which hinders their ability to rent an apartment, get a job, or even to travel, while the credit card company is faced with charging off substantial amounts of money it had been treating as already in its pocket.  Instead of increasing consumption, the credit card company has hurt the prospects of consumption growing.

The business leaders of this nation have got to stop trying to increase consumption by handing out easy credit, and banks have got to stop trying to grow their profits by selling debt over and over again.  Investors need to be putting their money into ventures which will create real, concrete growth, not numbers in accounts which can disappear overnight.

The view from debtor’s prison.

2010/01/18

Debt.  Credit.  Lenders and losers.  Somehow, the world economy has morphed from saving to buy to borrowing to buy.  Lending has been so lucrative that banks have made credit a normal way of doing business.  It wasn’t that long ago that state and local governments only borrowed money by selling bonds, companies sold stock to raise money, and individuals only borrowed from friends.  The one exception was the mortgage used to buy a home.

Partly as a result of banks desire to be able to loan out their money faster, we have seen the world economy severely damaged by excess credit.  Banks which wrote mortgages used to hold those loans themselves, having to wait until they were paid off before the money could be loaned out again.  Then, someone had the brilliant idea of having the banks sell the mortgages to another investor, so that the bank could then turn around and lend the money out again.

Back in the 1960’s, many consumers had used up their savings, and they began to stop spending on unnecessary things.  In order to keep consumption up, a new financial instrument was created:  the credit card.  At first only available to those with the ability to pay off the balance each month, credit cards gradually found their way into the wallets of nearly every American.  Paying off the balance each month was no longer necessary, and often discouraged, as the lenders made more money on revolving balances.

Corporations climbed on board the credit train when they found selling stock inadequate to provide short term liquidity, such as making payroll.  They even began lending money to each other for short periods of time, creating what is known as commercial paper.  State governments saw this, and decided that borrowing to cover expenses while waiting for tax receipts to come in was a sound practice.

In less than 50 years, borrowing had changed from a dirty word to the accepted way of life.  Credit was widely available, to almost anyone, for a fee.  Saving became old fashioned, and consumption was getting higher all the time.  Bankers even encouraged people to borrow against the equity that they had built up in their home, so that the bankers could make even more money.  Its citizens too broke to lend it money, the federal government turned to other nations to borrow the money used to pay for weapons, wars, and welfare.

Now, we are waiting for consumer spending to resume to dig the economy out of the hole we are in.  The government is borrowing nearly as much money as the country makes each year, trying to keep the wheels turning.  Home owners are walking away from mortgages which are for much more than the homes are worth.  Bankruptcies and bank failures are happening faster and faster.  But everyone wants to believe that things will get back to the way that they were.

No where do you hear respected economists and academics calling for the tightening of credit, or for learning to live without it.  Credit has become so fundamental to our economy that people can’t imagine a world without it.  We had better start, because credit is not going to be easy to get for a long time.  How can a bank loan out money when it doesn’t know how much it has?  Many banks are carrying packages of mortgages which, if put on the market today, are worth about 25 cents on the dollar.  Writing off the value of those collateralized debt obligations, as they are known, would wipe out the bank, so they are holding on to them.  In the mean time, the solvency of the bank is questionable.

As the tidal wave of foreclosures engulfs us, those packages of mortgages are going to lose even more value, making credit even tighter.  The federal government has to borrow money to pay the holders of Treasury bills and notes when those instruments come due, which means that it is insolvent, surviving on the good will of China.  Many of the states are facing running out of money, and not being able to borrow more.

Welcome to Debtor’s Prison.

Growth, or profit?

2009/12/06

Over one trillion dollars has disappeared from the American economy, and it wasn’t the big corporations which lost most of it.  It was the American homeowner, the retired person, our children.  The value of our country shrank by a good portion of what it  used to make every year, and it is no where near returning to the levels of wealth creation that we all got used to.  The money that has disappeared was in the same category as the money that hasn’t been made yet, because it was just numbers in computers.  It wasn’t houses being destroyed, cars wrecked, bridges falling down, dams bursting, or planes crashing.

We suffered the kind of destruction of wealth normally only seen in wars, yet, most of us are still sleeping indoors.  While that is still true, we should consider what lead to the economic catastrophe that we are enduring.  What were we building with all of that wealth we used to have?  What were we creating that would have lasting value, or even create more value?  A cell phone network?  Shopping malls?  New cars?

What about bridges, high speed rail systems, fiber optic networks, advanced space craft, health care that is affordable without insurance, renewable energy?  What about all the wonderful things that were talked about 20, 30, or even 40 years ago?  Why have we let bridges fall down, roads fill with holes, and public transit decline?  Why is it such a wrenching change to deal with hiccups in the energy supply?

Because we have been after easy money, quick money, right now money.  How often are we reminded of the future in our media, our advertising?  Everybody wants their money yesterday, so that they can pay the bills they got the day before that.  Save?  That is what they call it when we pay down debt instead of shopping.  When we invest, we are putting our money into hedge funds, stocks, or collateralized debt obligations.  How are we going to pay for the future when all of our money is tied up making money right now?

This economic catastrophe has been on the horizon for years, yet no one has figured out how to avoid it while still enjoying the profits that we have come to depend upon.  We have gotten used to taking every year what used to be made in only the best of years, to the point that management is focused entirely on meeting the cash requirements of paying dividends to stockholders.  They have done this by slashing research and development, cutting production costs by shipping jobs overseas, and using lower quality.  Just a few years ago, General Motors paid out over 1 billion dollars in cash after losing over 8 billion.

We can continue to use all of our money to make money today, but we will sacrifice our standard of living to do so.  The alternative is to willingly lower our standard of living so that we can invest in things that won’t pay off for a while, things which will be needed by all of us.

Cash for Caulkers makes many sense!

2009/12/04

Why is it difficult for people to support a public works program which would employ large numbers of people for at least a year or more, which would reduce the nation’s carbon footprint significantly, as well as our dependence on foreign energy, and which would increase the value of homes and business establishments across the country?  The proposed energy conservation program being called ‘Cash for Caulkers’ offers the most benefits from spending federal dollars I can imagine, both in the near term and years down the road.  A large number of structures in this country were built with little regard to energy efficiency, both residential and commercial.  Increasing insulation values, installing storm windows, and closing up gaps in siding can have a tremendous impact on the amount of energy used to heat or cool a building.

So, why would people oppose such a program?  Perhaps because they stand to gain more if consumption of energy is not reduced?  Could it be that there are people who are so selfish that they begrudge any effort to improve energy efficiency?  Certainly, reducing the amount of coal and oil that we burn seems the logical way to reduce our emissions of carbon, but discussions of solutions to the climate change problems never seem to include changing our habits or improving our methods to significantly reduce the amount of fuel that we use.  But improving the energy efficiency of structures is the most painless way to reduce our consumption of energy, because it won’t result in changes to our lifestyle.  Just because your house has been insulated doesn’t mean that you have to get up earlier, spend more time commuting, or that you have to spend time out in the weather.

There are such a large number of structures which qualify for weatherization that the program could last five years and still not get them all.  But that would be five years of employment for people who have experience in the building trades, or warehousing, or billing, or any other job created by the spending of our money to make us smarter in how we do things.  The individual consumer will benefit the most from this program, because, even if the work is financed as a loan, it will be paid off in just a few years, and then the consumer can enjoy lower energy costs.

This is investment in ourselves, the acceptance of the need to spend for the future, instead of just for the moment.   This is setting money aside in the knowledge that it will create more money, for years to come, without betting on interest rates or the stock market.  This is investment which pays dividends starting immediately, and continues to generate dividends for a lifetime. This is investment that will put lots of people to work, and not for just a few weeks, or a couple of months, but long-term.  This is investment which will create jobs across the spectrum, from skilled to unskilled, from manufacturing to construction.  This is a public works project that makes sense, and is long overdue.  Let us see if we can shed the mantle of shame that goes with being the most wasteful nation on the planet.

Can’t you feel the rage?

2009/10/20

Seems like these days, when someone gets upset, they completely fly off of the handle.  Minor annoyances become life-threatening catastrophes, and driving is an exercise in combat avoidance.  People blow up for no apparent reason, then become distraught because they have over-reacted.  Polite conversation hovers on the edge of the abyss, threatening to fall into discord and conflict at any moment.  The intensity of people’s emotions can be physically difficult to tolerate when they lose themselves again in their anger.

Far too many people have bottled up their depression, frustration, jealousy, and anger, so that they can appear calm and reasonable.  But they lose control over their feelings when they repress them, and are easily overwhelmed when something triggers them.  It is almost like they willingly cast away any control over themselves for a few moments, seeking the single-mindedness of rage.

All too often, I encounter people who cannot even recognize their own anger and frustration, who are at a loss to explain their outbursts.  Watching them go from relaxed and smiling to screaming and thrusting their fists in the air in a matter of seconds truly frightens me, because I have so little control over myself when I get that mad.  I am afraid for these people, that they might do something that they have never done before, and so end up in trouble.

We are constantly under pressure through the media to live lives that are productive and happy, by buying things, spending money, pushing the economy along.  Yet, most of us have little extra money to spend, and we often are putting off purchases that we really want.  On the one hand, we are encouraged to spend, spend, spend, and, on the other hand, we are reluctant to part with one more dollar, because we have already spent more than we should have.

Tuning out the programming, avoiding the stress, requires staying away from electronic media.  Evaluating our goals and aspirations in light of what we have experienced is a hard come-down from the euphoria of youth, but we only set ourselves up for a fall when we continue to expect life to be filled with pleasure and distractions.  We have to understand that there are people who want us to chase those pleasures and distractions, irregardless of whether we can afford it.  Their affluence depends greatly on our pretending to be affluent, so they use every trick there is to get us to spend, including making us feel inferior if we can not.

The years ahead are going to be filled with unmet expectations and shattered dreams.  We came to believe that we were entitled to luxury and instant gratification, when we are not.  Much hard work will have to be done before the average American is going to spend freely on non-essential items, but the whole time people will be angry over what they think they are being denied.  Accepting ourselves as we are, right now, is essential to getting away from the rage.  We will always feel unhappy and angry if we don’t like who we are.

Not more money, more CARE!

2009/10/12

The saddest thing to me about the current health insurance debate is the drive to throw more money at the problem.  The problem is that we are spending too much money on health insurance.  For what we pay, we should have universal coverage, full dental, vision, and mental as well.  Our health care costs are the highest in the world, even though only a small part of the population enjoys the very best health care.

Instead of reigning in the profits that the insurance companies reap off of health plans, the Congress seems intent on finding more money to give them, to compensate for the supposed losses that they will face if everyone has insurance.  But our current bill for health insurance is far beyond what we should be paying if everyone did have insurance.  Because the larger the pool, the lower the risk that the insurer faces of a big number of substantial claims.  Most people don’t need expensive health care in their lives.  And even fewer would require such expenditures if proper preventative medicine and dentistry were the standard form of health care that most people consumed.

Congress is trying to preserve the health insurance industry as a profitable business, irregardless of where that profit comes from.  If we are going to spend even more money on health insurance, we should buy out the share holders, over a span of several years, so that they can realize their profits from their investments while still allowing the government to eliminate the profits, reducing the costs of the care that we receive.

Every patient who sees a doctor is receiving a service, which should be rewarded.  Doctors should be able to set their fees within a market value, and be paid in a reasonable period of time.  This is not what has made health care so expensive.  It is the fee that the insurance company adds to every transaction between the doctor and patient, and fees which do not involve doctors services at all, but the services of the insurance company instead, which has helped drive the costs of the care that we receive beyond sustainable levels.

Health care, or wealth care? (Part two)

2009/08/14

Let us say that the unthinkable happens, and the United States adopts nationalized health insurance.  What will this mean?  For one thing, everyone will have to see a doctor at least once a year, and probably more often.  Regular check ups are the single best way of reducing health care costs, by catching problems early.  If a person is injured in an accident, at work, at home, commuting, or out partying, all of their expenses will be covered, including physical therapy.  Bankruptcies as a result of medical costs will cease, and case loads in Emergency Rooms will likely decline significantly.

Who needs the most health care?  The elderly.  As the emphasis in medicine shifts to preventative care from catastrophe care, the elderly will receive more care in terms of check-ups, tests, and evaluations.  Exercise and diet, along with social activities, will become medically directed, instead of individually initiated.  Health care will be about health instead of care.  The elderly are likely to gain in importance to the rest of us, because so many activities will be oriented around the them, because it is much easier to keep an elderly person healthy than it is to get them to recover after being seriously ill.

Extreme procedures, which can prolong life for a short time in an elderly person, or for many years in a younger person, will become rare, because few young people need extreme procedures, and we simply cannot afford to provide them to large numbers of people.  Quality of life will become more important than simply keeping a person alive a little longer, when they are unlikely to ever leave the hospital.  The elderly will be less likely to suffer from cross drug reactions, when a doctor monitors all of their care, instead of people being seen only be specialists.  Tests will become less common, as doctors opinions are not contradicted because of costs to an insurance company which threaten its profits.

Because the emphasis will be on preventing catastrophic illness, specialists will be in less demand.  Instead of expending huge amounts of resources to repair damage caused by lifestyle, huge amounts of resources will be spent changing lifestyles.  Most people have accepted that it is cheaper to wear a bicycle helmet than it is to hire a brain surgeon to repair the effects of a head injury.  Regular exercise is much cheaper than open heart surgery.  Preventing diabetes is much cheaper than treating it.

That isn’t the way things are right now because it is more profitable to deal with catastrophe than it is to prevent one.  Great strides are being made in the treatment of various disorders, but little progress has been made in learning how to get people to change their behavior to prevent the disorders in the first place.  If diabetes is becoming a national epidemic, shouldn’t we be focused on changing behaviors rather than accepting  higher disease rates?