After the financial system meltdown of 2008, Congress and the executive branch decided to "clamp down" on risky trading by large financial institutions and enact reforms aimed at making them more transparent and solvent. More consumer protections were put in place, including the elimination of certain fees and stricter reporting requirements. They also decided to go after tax cheats by requiring foreign banks to keep more detailed records of transactions in American accounts overseas. These and other measures are supposed to protect consumers from the evil greedy capitalists, but like Joan Robinson said "The only thing worse than being exploited by a capitalist is not being exploited by a capitalist." Consumer protection measures have actually hurt the very people is was supposed to help.
Banks and financial institutions that once had no minimum account requirements have had to impose them. The cost of paperwork and record keeping for smaller accounts makes offering them for free unfeasible. Banks have had to raise requirements for borrowing, taking many would be borrowers out of the game. Financial institutions that have never had foreign branches in the past have had to open them, because doing business in the United States has become too expensive. Many foreign banks have stopped opening accounts for U.S. citizens due to regulatory burdens. The net result has been a reduction in credit and services available to the average Joe. Sure banks are making money. But, they're making it on foreign investments and sovereign debt, not on small business and consumer loans.
It's not just the financial sector that's affected by consumer protection laws run amok. In health care, many doctor's practices have the majority of their employees working on one thing; processing paperwork related to Medicaid, Medicare and other third-party payers. If you were to go to the doctor's office for an ear infection and pay in cash, you'd be saving them a tremendous amount of time and paperwork, and therefore money. However, they are forbidden by law to charge cash patients less than they would charge a Medicaid patient. They are not allowed to pass that savings on to you. The intent is to keep costs lower for Medicaid. The actual result is to remove any incentive to cut costs by offering a discount for cash payments. Nobody wins. The only out is to stop accepting Medicaid and Medicare patients, which many practices are now doing.
Protections put in place to protect us from the free market, more often than not have a negative affect on our choices and our economy. They stifle entrepreneurs and income mobility by ensuring that only those who can afford the cost of compliance can enter and remain in an industry. In most of the country, you can't start a business in your garage and become a huge success because you can't start a business in your garage.
One of the main issues the government was supposed to address after 2008 is the "too big to fail" problem. That is, when so many people and companies are so dependent on a single business entity, that it simply cannot be allowed to go under. There's really an easy fix for that which I haven't heard anyone propose. The government can simply state in no uncertain terms, or even pass legislation that forbids the government from providing financial assistance to a failing business, regardless of size. The markets would take care of the rest. Money would be spread out in order to spread the risk. Companies can afford to put all their eggs in one basket right now, due to the implied guarantee that the Feds will make them whole in the event of disaster. Take that guarantee away and they will take evasive action. This hasn't been done simply because most of the egg heads in Congress and our regulatory agencies really don't understand how a free marketplace works, although they truly believe they are geniuses on the subject.
Perhaps part of the problem is that free markets require that bureaucrats, regulators and legislators hold the default position of: do nothing. But you can't show how smart you are or make headlines by doing nothing. The natural impulse of a public figure is to do something; to guide, to manage, to control. When they do, they get accolades and awards for doing so, regardless of the actual result. The important thing is that they cared enough to act, not that their action had the desired effect.
I don't know if the governing cycle of "regulate, fail, repeat" can be broken. It's tough to get elected or appointed by promising to do less, but I sure wish they would.
Monday, May 14, 2012
Monday, April 23, 2012
U.S. Debt is a safe haven?
Stocks are stagnant, oil has settled below its recent high of $107. Even gold and silver seem to have run out of steam. The debt is approaching $16 trillion dollars with no plan to even address the deficit on the horizon. So why are Treasury Securities (U.S. debt) trading at historically low interest rates? Why the big global demand for more U.S. debt? They call it a flight to safety, but what's so safe about it? Why is it more attractive than other investments or other country's debt?
Well, it's not because anyone's excited about the prospects for a solution any time soon. It's about our political system and our capacity to get things right, eventually.
People and companies with large sums of money on hand have to store it somewhere. They want to make sure it's safe and ready to use in better times. Putting it to work right now is not all that attractive as governments are in over-regulation mode at the moment. European countries with debt issues similar to ours are faring much worse in the credit markets. There are several reasons for this.
For one, European countries generally are governed by a parliamentary system. There is no clear separation of the legislature and executive. The executive branch comes from the legislature. They also have multiple parties as opposed to the two main parties in the United States. At first blush, this might seem like it would provide better, across the board representation. That's the theory. In practice it usually means no party gets a clear mandate from the people. A party can come to power with say 30% of the public behind them. Now they have to ally themselves with one or more other parties to form a majority government. This is not a recipe for bold or quick changes.
We also have a Constitution and a an independent judiciary charged with ensuring that legislation adheres to it. It is not their function to decide whether or not the intention of a law is good, but to decide if the mechanism for achieving the intention is permitted under the Constitution. Other countries are bound only by majority vote. Ideas and programs that are short-term popular and long-term disaster have a much better chance there.
What investors are betting on is that the U.S. system will eventually produce a plan that works. There are really only two conceivable outs for our debt problem One is hyper-inflation. However, even if that's allowed to take hold, the American public will not tolerate it long enough to bring the debt down to manageable levels. Inflation may make the math work, but it's also devastating to a large portion of the population. More likely, we will go with a version of cut, cap and balance. Maybe next year; maybe in four years, but we'll get to it. As the saying goes, the government will inevitably do the right thing, but not until all other avenues have been exhausted.
The plan doesn't have to bring the budget to balance immediately. In fact it can be a 20, 30, 40 year or more plan. The only essentials are that the math works, it's feasible and there's reasonable expectation that it will be adhered to. The only way to achieve that last bit is with a Constitutional amendment. Congress can not bind a future Congress. Only the Constitution can. That's another reason the Constitution gives us an advantage over other countries. Even if Europe came up with a grand, bold plan, it can be undone at any time with a single vote.
As messy as our political system is, we are fortunate that our Founders realized that a vibrant economy must be based on free individuals and a government accountable to them. They laid down some absolute rules designed to limit the damage a government can do. We've had bad times, corruption, scandal and gone down some dead ends over the last couple of centuries, but on a net basis, you must admit, it's worked pretty well. It seems global investors agree.
People and companies with large sums of money on hand have to store it somewhere. They want to make sure it's safe and ready to use in better times. Putting it to work right now is not all that attractive as governments are in over-regulation mode at the moment. European countries with debt issues similar to ours are faring much worse in the credit markets. There are several reasons for this.
For one, European countries generally are governed by a parliamentary system. There is no clear separation of the legislature and executive. The executive branch comes from the legislature. They also have multiple parties as opposed to the two main parties in the United States. At first blush, this might seem like it would provide better, across the board representation. That's the theory. In practice it usually means no party gets a clear mandate from the people. A party can come to power with say 30% of the public behind them. Now they have to ally themselves with one or more other parties to form a majority government. This is not a recipe for bold or quick changes.
We also have a Constitution and a an independent judiciary charged with ensuring that legislation adheres to it. It is not their function to decide whether or not the intention of a law is good, but to decide if the mechanism for achieving the intention is permitted under the Constitution. Other countries are bound only by majority vote. Ideas and programs that are short-term popular and long-term disaster have a much better chance there.
What investors are betting on is that the U.S. system will eventually produce a plan that works. There are really only two conceivable outs for our debt problem One is hyper-inflation. However, even if that's allowed to take hold, the American public will not tolerate it long enough to bring the debt down to manageable levels. Inflation may make the math work, but it's also devastating to a large portion of the population. More likely, we will go with a version of cut, cap and balance. Maybe next year; maybe in four years, but we'll get to it. As the saying goes, the government will inevitably do the right thing, but not until all other avenues have been exhausted.
The plan doesn't have to bring the budget to balance immediately. In fact it can be a 20, 30, 40 year or more plan. The only essentials are that the math works, it's feasible and there's reasonable expectation that it will be adhered to. The only way to achieve that last bit is with a Constitutional amendment. Congress can not bind a future Congress. Only the Constitution can. That's another reason the Constitution gives us an advantage over other countries. Even if Europe came up with a grand, bold plan, it can be undone at any time with a single vote.
As messy as our political system is, we are fortunate that our Founders realized that a vibrant economy must be based on free individuals and a government accountable to them. They laid down some absolute rules designed to limit the damage a government can do. We've had bad times, corruption, scandal and gone down some dead ends over the last couple of centuries, but on a net basis, you must admit, it's worked pretty well. It seems global investors agree.
Wednesday, March 21, 2012
How Government funding creates an enviornement for corruption to thrive and innovation to die
It seems the more government funding we apply to education, the worse it gets. Government tries to regulate and inform the public on nutrition and the population keeps getting less healthy. Recently we've spent more tax dollars on "green energy" companies that go bankrupt. There are those who believe that our elected officials and government bureaucrats actually conspire to destroy the things they claim to support. In some cases, maybe that's true. But for the most part, the system itself creates failure by its very nature.
In a free marketplace, ideally producers and end users voluntarily enter into transactions at mutually agreeable terms, absent any third party or government influence. A buyer may get fooled into buying a shoddy product or service once, even twice, but over time bad ideas wither and die. Good ideas thrive and are imitated and replicated.
Now add some government funding and regulation to the mix. Now there's money and opportunity on the table that comes not from customers, but from legislators and executives at government agencies. Where previously my product had to stand the test of a 300,000,000 person focus group, now I just have to influence a handful of bureaucrats. I put on a nice suit, maybe a lab coat, come up with a professional, heady presentation and presto, I've got a big ole subsidy or a competition crushing regulation. The legislator's intentions may be noble, but by taking the decision making out of the hands of the end user, they've corrupted the whole process.
This process actually favors those who are inclined to get ahead through deception, obstruction and fraud and puts those who would like to test good ideas in a free market at a distinct disadvantage. Legal maneuvering, and influence peddling become more important than hard work and innovation. Even with the best of intentions, the government employee is not going to get input from everyone. They guy with the small shop, trying to prove himself in the capitalist arena, can't afford the plane ticket, the suit and the time off to go to Washington and lobby a bunch of legislators. Advantage cronies.
Our lawmakers and executives are not omniscient experts in everything from nutrition to education and energy production. They're just people. Furthermore, they're more likely to be elected based on their "likability" or how they feel about abortion or gay marriage than any expertise in any of those fields. Of course they're influenced by lobbyists. We've charged them with making decisions effecting industries, products and services they know absolutely nothing about. Most of them have no experience in any kind of business outside law firms and politics.
The solution isn't to elect different people to make our decisions for us. It's to take those decisions back for ourselves. We're discouraged from doing so by people who constantly point to the worst possible outcomes and convince us that those are the norms; that left to our own devices, we are doomed to fail. But just look at the track record. Societies that have been most successful at limiting choice and restricting free markets don't have illegal immigration problems. In fact they have to force people to stay. Don't buy the rhetoric. Believe your own eyes.
In a free marketplace, ideally producers and end users voluntarily enter into transactions at mutually agreeable terms, absent any third party or government influence. A buyer may get fooled into buying a shoddy product or service once, even twice, but over time bad ideas wither and die. Good ideas thrive and are imitated and replicated.
Now add some government funding and regulation to the mix. Now there's money and opportunity on the table that comes not from customers, but from legislators and executives at government agencies. Where previously my product had to stand the test of a 300,000,000 person focus group, now I just have to influence a handful of bureaucrats. I put on a nice suit, maybe a lab coat, come up with a professional, heady presentation and presto, I've got a big ole subsidy or a competition crushing regulation. The legislator's intentions may be noble, but by taking the decision making out of the hands of the end user, they've corrupted the whole process.
This process actually favors those who are inclined to get ahead through deception, obstruction and fraud and puts those who would like to test good ideas in a free market at a distinct disadvantage. Legal maneuvering, and influence peddling become more important than hard work and innovation. Even with the best of intentions, the government employee is not going to get input from everyone. They guy with the small shop, trying to prove himself in the capitalist arena, can't afford the plane ticket, the suit and the time off to go to Washington and lobby a bunch of legislators. Advantage cronies.
Our lawmakers and executives are not omniscient experts in everything from nutrition to education and energy production. They're just people. Furthermore, they're more likely to be elected based on their "likability" or how they feel about abortion or gay marriage than any expertise in any of those fields. Of course they're influenced by lobbyists. We've charged them with making decisions effecting industries, products and services they know absolutely nothing about. Most of them have no experience in any kind of business outside law firms and politics.
The solution isn't to elect different people to make our decisions for us. It's to take those decisions back for ourselves. We're discouraged from doing so by people who constantly point to the worst possible outcomes and convince us that those are the norms; that left to our own devices, we are doomed to fail. But just look at the track record. Societies that have been most successful at limiting choice and restricting free markets don't have illegal immigration problems. In fact they have to force people to stay. Don't buy the rhetoric. Believe your own eyes.
Saturday, March 17, 2012
The return of multi-level marketing
Multi-level marketing has been around for a long time. Its popularity rises and falls and currently it's on the rise. This has been fueled by a still struggling economy as well as new regulations in the energy industry that require producers to make their products available to wholesale customers.
In the energy and utilities industries, you may have been approached by one or more purveyors of this business model. Essentially a cable provider, phone company or utility company agrees to sell x amount of accounts to a company at a wholesale rate. This company then recruits individuals, acting as sole proprietors, to go out and sell. In some cases they may offer the same service, with the same company you're already with, at the same or lower price, depending on the margin they're going for. In almost all cases, the person selling to you will encourage you to become a saleperson yourself, although they rarely use the term salesperson. They then get a piece of your sales.
The model is also used in cosmetics, travel, cleaning supplies, nutritional supplements and other areas. Here are some things to keep in mind before you sign up. First, many will claim they can undercut the competition because they don't spend money on big ad campaigns. That's true. They don't have to. Why should they spend money on a bunch of 30 second ads that might reach 1,000,000 viewers when they can get 1,000,000 individuals like yourself to schedule one-on-one sales appointments and pay them for the privilege? You're doing the marketing. You're investing the time, making the copies, scheduling and doing the appointments and making the pitch. Resources are being spent. Yours.
Your time is not free. If you spend a total of 40 hours in a week thinking about the program, attending expos, networking groups, seminars, generating leads, scheduling appointments, going to and from and conducting the appointments, and the result is a net of $200 to you (after expenses) in said week, you made $5/hour.
What are the barriers to entry? If you can become an "associate" by filling out a form and paying a fee, guess what? So can anyone else. If the company you're working with is reselling a commodity, guess what? Anyone can start a company just like it. If it's really that easy to make a whole bunch of money, the rest of the world isn't going to sit back and just leave it to you. You'll get more and more competition until the margins are squeezed right out of the game.
Now you can do well with these kinds of things if you're a talented salesperson. But that's all it is. It's a marketing and sales competition. If you enjoy it and you're doing well at it, more power to you. But don't be under any illusion that at some point you'll be able to just sit back and collect checks. Multi-level marketing is a high turnover business. Even the "Platinum" players have to work it full time to stay there. The most successful ones are those who are excellent motivational speakers. They get your assistance there too. When they come to your town, they can count on you and your fellow associates to fill the hall rather than having to spend a lot of money on media ads. After all, they're going to help you close your prospects, right?
Bottom line, if you think it's something you might enjoy, have at it. Just understand what you're getting in to. Do the math. Factor in your time and expenses. It's not magic. It's not passive and the product doesn't "sell itself". If it did, what would they need you for?
In the energy and utilities industries, you may have been approached by one or more purveyors of this business model. Essentially a cable provider, phone company or utility company agrees to sell x amount of accounts to a company at a wholesale rate. This company then recruits individuals, acting as sole proprietors, to go out and sell. In some cases they may offer the same service, with the same company you're already with, at the same or lower price, depending on the margin they're going for. In almost all cases, the person selling to you will encourage you to become a saleperson yourself, although they rarely use the term salesperson. They then get a piece of your sales.
The model is also used in cosmetics, travel, cleaning supplies, nutritional supplements and other areas. Here are some things to keep in mind before you sign up. First, many will claim they can undercut the competition because they don't spend money on big ad campaigns. That's true. They don't have to. Why should they spend money on a bunch of 30 second ads that might reach 1,000,000 viewers when they can get 1,000,000 individuals like yourself to schedule one-on-one sales appointments and pay them for the privilege? You're doing the marketing. You're investing the time, making the copies, scheduling and doing the appointments and making the pitch. Resources are being spent. Yours.
Your time is not free. If you spend a total of 40 hours in a week thinking about the program, attending expos, networking groups, seminars, generating leads, scheduling appointments, going to and from and conducting the appointments, and the result is a net of $200 to you (after expenses) in said week, you made $5/hour.
What are the barriers to entry? If you can become an "associate" by filling out a form and paying a fee, guess what? So can anyone else. If the company you're working with is reselling a commodity, guess what? Anyone can start a company just like it. If it's really that easy to make a whole bunch of money, the rest of the world isn't going to sit back and just leave it to you. You'll get more and more competition until the margins are squeezed right out of the game.
Now you can do well with these kinds of things if you're a talented salesperson. But that's all it is. It's a marketing and sales competition. If you enjoy it and you're doing well at it, more power to you. But don't be under any illusion that at some point you'll be able to just sit back and collect checks. Multi-level marketing is a high turnover business. Even the "Platinum" players have to work it full time to stay there. The most successful ones are those who are excellent motivational speakers. They get your assistance there too. When they come to your town, they can count on you and your fellow associates to fill the hall rather than having to spend a lot of money on media ads. After all, they're going to help you close your prospects, right?
Bottom line, if you think it's something you might enjoy, have at it. Just understand what you're getting in to. Do the math. Factor in your time and expenses. It's not magic. It's not passive and the product doesn't "sell itself". If it did, what would they need you for?
Tuesday, March 13, 2012
Republicans missing the point on the health care debate
Republicans may think they've gained an edge with the backlash against the White House for insisting on a requirement in the health care law that mandates insurance companies provide birth control. The dust up came from objections by religious institutions for whom birth control is morally wrong. They say it is a violation of religious freedom to require them to pay for a procedure or product that they find morally objectionable and are demanding an exemption.
Perhaps they'll get their exemption and feel as it they've won. Well, they may win the battle, but in doing so lose another big round in the war. For in accepting the exemption they are validating the rule. The rule being that it is right and fitting for the government to determine the nature of products offered in the marketplace. Of course, a free market advocate would say that what's included or not included in an insurance policy is between the buyer and the seller. No more. Now we're dealing with a buyer that's forced to buy a product and a seller that's forced to meet parameters, not set by said buyer, but by the government.
From the very beginning of the collectivist movement, it's been held that the system will only work properly when everyone participates. How do you make that happen? There's only one answer. By force. That's why every drive toward socialist Utopia ends the same way, no matter how progressive. It always ends in misery.
By focusing on objections to individual provisions of the health care law, Republicans are implying that the law itself is not the problem, just the details. We're still primarily arguing over which brand of Statism we're going to live under.
Perhaps they'll get their exemption and feel as it they've won. Well, they may win the battle, but in doing so lose another big round in the war. For in accepting the exemption they are validating the rule. The rule being that it is right and fitting for the government to determine the nature of products offered in the marketplace. Of course, a free market advocate would say that what's included or not included in an insurance policy is between the buyer and the seller. No more. Now we're dealing with a buyer that's forced to buy a product and a seller that's forced to meet parameters, not set by said buyer, but by the government.
From the very beginning of the collectivist movement, it's been held that the system will only work properly when everyone participates. How do you make that happen? There's only one answer. By force. That's why every drive toward socialist Utopia ends the same way, no matter how progressive. It always ends in misery.
By focusing on objections to individual provisions of the health care law, Republicans are implying that the law itself is not the problem, just the details. We're still primarily arguing over which brand of Statism we're going to live under.
Saturday, March 10, 2012
Not sure when it will end, but I've got a good idea how
Two stories recently illustrated to me that the decline and fall of the great American experiment is moving along faster than I had imagined.
First, a young women testifies before Congress that she needs $3000 worth of birth control to get through 3 years of law school, and furthermore, that it's appalling that she doesn't get it free of charge. Now I don't actually believe that she has sex 3-6 times a day every day of every year, as her testimony would imply. I think she just pulled a number out of thin air and didn't expect anyone to actually do the math. The sad part is, there wasn't even an honest debate over the question of whether the government, and thereby the public at large, needs to all pitch in and cover everyone's birth control. It's been dubbed a women's health issue. If you're going to call birth control a women's health issue and something the taxpayer should cover, why are weights and gym equipment not equally men's health issues and covered by the taxpayer? Heck, food and shelter are health issues as well. Why should anyone pay for those?
Another story was about illegal immigrant detainees. Now you may not be aware that most people who are caught crossing the border illegally are simply given the option to get on a bus and go back to Mexico. Some refuse and are detained awaiting hearings. While they are detained they are provided free of charge, everything from dental care to abortions, to hormone therapy. Yes, if you're in Mexico and have a medical problem, or need a cavity filled, just sneak across the border, turn yourself in, and refuse to get on the bus. After that, Uncle Sam is responsible for all your health care needs.
Our entire political system has been contorted into a game to see who cares for what more. You prove how much you care by obtaining funding in its name. There are, of course, competing care camps for competing interests, but rarely are those who say "We really can't afford that." or "That's not really a role for government." portrayed in a pleasing light in the news or on the web. The health care law really raised the game to new heights. Now that the government is charged with ensuring everyone has health care, all you have to do to get goodies for your voters is connect it to health care. There are very few things and activities that can't, in some manner, be connected to health care.
Obviously, none of this is really free. Somebody has to do the work, and at least for now, work still requires money. The government doesn't actually earn money. They have two ways of obtaining it. They can print it, or they can take it. I suppose you could call borrowing a third way, but that's really just a delay on either printing or taking. Lately, they've been doing a bit of printing and a lot of delaying. It's becoming glaringly evident that taking is not going to fill the debt hole, unless entire generations are willing to live in slavery to their government. More likely, there will be a lot more printing going on at some point down the road.
It may seem like there's not a lot of money out there, but the reality is, there's tons of it in cold storage. Companies like Apple, Microsoft, Toyota, as well as governments like China, are sitting on mountains of dollar denominated cash hoards. If they see the U.S. Treasury start cranking out bills like there's no tomorrow it will spark a spending frenzy of Biblical proportions. The good news is, we'll all be millionaires. The bad news is, a loaf of bread will set you back $10,000.
I don't know where it goes from there. There are too many uncertainties. How the public at large will react to monetary chaos is anybody's guess. But I do know the notion that deficit spending is a financial burden upon our children and grandchildren is not exactly correct. There's no way they'd be willing or able to pay such a debt. That's not how it's going to go down. Inflation is the only remaining resolution. This isn't so much a warning as an observation. A warning only makes sense for something that can be prevented.
First, a young women testifies before Congress that she needs $3000 worth of birth control to get through 3 years of law school, and furthermore, that it's appalling that she doesn't get it free of charge. Now I don't actually believe that she has sex 3-6 times a day every day of every year, as her testimony would imply. I think she just pulled a number out of thin air and didn't expect anyone to actually do the math. The sad part is, there wasn't even an honest debate over the question of whether the government, and thereby the public at large, needs to all pitch in and cover everyone's birth control. It's been dubbed a women's health issue. If you're going to call birth control a women's health issue and something the taxpayer should cover, why are weights and gym equipment not equally men's health issues and covered by the taxpayer? Heck, food and shelter are health issues as well. Why should anyone pay for those?
Another story was about illegal immigrant detainees. Now you may not be aware that most people who are caught crossing the border illegally are simply given the option to get on a bus and go back to Mexico. Some refuse and are detained awaiting hearings. While they are detained they are provided free of charge, everything from dental care to abortions, to hormone therapy. Yes, if you're in Mexico and have a medical problem, or need a cavity filled, just sneak across the border, turn yourself in, and refuse to get on the bus. After that, Uncle Sam is responsible for all your health care needs.
Our entire political system has been contorted into a game to see who cares for what more. You prove how much you care by obtaining funding in its name. There are, of course, competing care camps for competing interests, but rarely are those who say "We really can't afford that." or "That's not really a role for government." portrayed in a pleasing light in the news or on the web. The health care law really raised the game to new heights. Now that the government is charged with ensuring everyone has health care, all you have to do to get goodies for your voters is connect it to health care. There are very few things and activities that can't, in some manner, be connected to health care.
Obviously, none of this is really free. Somebody has to do the work, and at least for now, work still requires money. The government doesn't actually earn money. They have two ways of obtaining it. They can print it, or they can take it. I suppose you could call borrowing a third way, but that's really just a delay on either printing or taking. Lately, they've been doing a bit of printing and a lot of delaying. It's becoming glaringly evident that taking is not going to fill the debt hole, unless entire generations are willing to live in slavery to their government. More likely, there will be a lot more printing going on at some point down the road.
It may seem like there's not a lot of money out there, but the reality is, there's tons of it in cold storage. Companies like Apple, Microsoft, Toyota, as well as governments like China, are sitting on mountains of dollar denominated cash hoards. If they see the U.S. Treasury start cranking out bills like there's no tomorrow it will spark a spending frenzy of Biblical proportions. The good news is, we'll all be millionaires. The bad news is, a loaf of bread will set you back $10,000.
I don't know where it goes from there. There are too many uncertainties. How the public at large will react to monetary chaos is anybody's guess. But I do know the notion that deficit spending is a financial burden upon our children and grandchildren is not exactly correct. There's no way they'd be willing or able to pay such a debt. That's not how it's going to go down. Inflation is the only remaining resolution. This isn't so much a warning as an observation. A warning only makes sense for something that can be prevented.
It's about time
After watching the movie "In Time" which depicts a future world where the currency is time, it occurred to me that it's not really a futuristic concept. Time is already the essence of our currency, even if it's not immediately evident. In fact, the best yardstick with which to measure the value of anything, including actual paper currency, is the time standard.
What do you need money for? Housing? You could learn to build a house, gather and process the materials and make your own. What? That would take years, maybe decades. It's much more efficient and practical to pay someone else to do it. Same can be said for finding and processing your own food, clothes, toys. Money buys you time. You spent time doing something else in return for money, then exchanged the money for someone else's time.
This is not always top-of-the-mind math. For example, have you ever driven 5 miles out of your way to gas up at a station that's 10 cents/gallon cheaper than closer ones? If you spent 20 minutes round trip doing so and saved $2, you've valued your time at $6/hour. There may be other considerations of course. Maybe it's a nice ride on a Saturday afternoon, in which case your spending that same time on more than just gas, making it a better value.
The Internet uses time as currency much more directly. Google is a prime example. They offer services like their search engine, Blogger, YouTube and more, free of charge! Well, not really. It's free of any paper money charge. The currency is your time and attention, as well as information about yourself. Google resells those moments and bits of information to advertisers for cash. The information is actually used to try to gain a few more moments of your time later. It's something to consider when deciding whether or not to take someone up on their "free" offer. I ordered a pizza online a few days back and decided to look for free online coupons before I finished my order. I found some easily enough, but they all wanted me to "register" first. I decided I'd rather just pay the additional $3 or so than get put on a dozen or more new mailing lists.
The government taxes more than just your income. Every time you're required to fill out a form, register for something, take some mandatory action, you're paying out your time. Even the monetary taxes are really taxes on your time. If your tax rate is 15%, that's how much of your work day is going to the government rather than toward your personal agenda. Time is what gives money value. After all, the slaves of Egypt didn't have money to give to the Pharaohs, yet they built magnificent structures for them that still are revered today. It was all paid for with time.
In this period of financial uncertainty, with currencies and commodities fluctuating and the future of the very financial system that trades them up in the air, it can be difficult to determine the true value of a product, service or transaction. When in doubt, reduce it to lowest terms. Consider not "Is it worth the money." but, "Is it worth the time?".
What do you need money for? Housing? You could learn to build a house, gather and process the materials and make your own. What? That would take years, maybe decades. It's much more efficient and practical to pay someone else to do it. Same can be said for finding and processing your own food, clothes, toys. Money buys you time. You spent time doing something else in return for money, then exchanged the money for someone else's time.
This is not always top-of-the-mind math. For example, have you ever driven 5 miles out of your way to gas up at a station that's 10 cents/gallon cheaper than closer ones? If you spent 20 minutes round trip doing so and saved $2, you've valued your time at $6/hour. There may be other considerations of course. Maybe it's a nice ride on a Saturday afternoon, in which case your spending that same time on more than just gas, making it a better value.
The Internet uses time as currency much more directly. Google is a prime example. They offer services like their search engine, Blogger, YouTube and more, free of charge! Well, not really. It's free of any paper money charge. The currency is your time and attention, as well as information about yourself. Google resells those moments and bits of information to advertisers for cash. The information is actually used to try to gain a few more moments of your time later. It's something to consider when deciding whether or not to take someone up on their "free" offer. I ordered a pizza online a few days back and decided to look for free online coupons before I finished my order. I found some easily enough, but they all wanted me to "register" first. I decided I'd rather just pay the additional $3 or so than get put on a dozen or more new mailing lists.
The government taxes more than just your income. Every time you're required to fill out a form, register for something, take some mandatory action, you're paying out your time. Even the monetary taxes are really taxes on your time. If your tax rate is 15%, that's how much of your work day is going to the government rather than toward your personal agenda. Time is what gives money value. After all, the slaves of Egypt didn't have money to give to the Pharaohs, yet they built magnificent structures for them that still are revered today. It was all paid for with time.
In this period of financial uncertainty, with currencies and commodities fluctuating and the future of the very financial system that trades them up in the air, it can be difficult to determine the true value of a product, service or transaction. When in doubt, reduce it to lowest terms. Consider not "Is it worth the money." but, "Is it worth the time?".
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