Tuesday, January 31, 2012

Return to the Gold Standard?

Small children are enticed by shiny objects.

On NPR this afternoon, I heard this discussion on the gold standard.  Newt is trying to suck up to Ron Paul supporters by saying he is for the gold standard.  The discussion on the program was informative, but like most media, they put up a crackpot against someone who knows what they are talking about, and then give both arguments equal weight and "let you decide."

Worse yet, they fail to research or challenge any of the "facts" cited by one of the "experts".  One particular boner jumped out at me and almost made me drive off the road.

Jim Grant, a "respected Wall Street Publisher" (interesting credential) noted that  the argument for gold begins with its role as the original money.  From NPR:
"People recognize it as such. You don't need a Ph.D. in economics to have it explained to you. Gold is sort of the Muhammad Ali of monetary substances; the world over, you look at it, you know what it is," Grant says. 
Pegging the dollar to gold would limit inflation, he says, and force greater fiscal constraints on governments because they couldn't simply print money to pay their debts or bail out bankers. 
And, he says, it would bring the kind of stability to the monetary system that it had a hundred years ago.
Read that last sentence again, and when after you fall out of your chair from laughing, you may understand why Ron Paul followers are total losers.

Financial stability in 1912?  First of all, look at the 1800s.  Taking aside for the moment the Civil War, there were panics and bubbles of all sorts, such as the great railroad bust and a few mineral bubbles as well.  And in the 1900s, there were a few as well.  Something happened in 1929, but I can't remember at the moment what it is.  Oh yea, the great depression.  And we were on the gold standard then - we were until 1973 when Nixon took us off it.

From Wikipedia a short history of those "good old days" when the economy was stable and we were on the gold standard:

19th century
  • Panic of 1819
  •  – pervasive USA economic recession w/ bank failures; culmination of U.S.'s 1st boom-to-bust economic cycle
  • Panic of 1837
  •  – pervasive USA economic recession w/ bank failures; a 5 yr depression ensued
  • Panic of 1857
  •  – pervasive USA economic recession w/ bank failures
  • Panic of 1873
  •  – pervasive USA economic recession w/ bank failures, known then as the 5 yr Great Depression & now as the Long Depression
  • Panic of 1893
  •  – a panic in the United States marked by the collapse of railroad overbuilding and shaky railroad financing which set off a series of bank failures

20th century

  • Panic of 1901
  •  – limited to crashing of the New York Stock Exchange
  • Panic of 1907
  •  – pervasive USA economic recession w/ bank failures

Ahhh! for the good old days of robber barons, monopolies, the trusts, and people manipulating railroad stocks!  Let's go back to that!  We can all wear tophats and waistcoats, too!  Maybe not.

Why did we go off the gold standard?  That is a question worth asking, and remember it was a Republican President - Nixon, he of wage and price controls - who did this.

Simply stated, the dollar was fixed to the price of gold at $32 an ounce.  Foreign countries sold gold for far higher prices.  So, naturally, when they cashed in their chits at New York banks, they insisted on being paid in gold, thank you.  And there was a run on gold as a result.  If Nixon hadn't let gold "float" we would have run out in short order.

And gold, far from being "stable" goes up and down in value as well - it is a commodity, not the rock of Gibraltar.   It moves all over the place, based on the good old laws of supply and demand.  It has no inherent value.  It is merely a talisman, a placeholder for the idea of money, not money itself.

And as I noted before, money is just an idea - and that freaks some people out.  When I hand you money - whether it is a dollar bill, a Euro or a gold coin, it is just a promise being handed back and forth.  Maybe you give me labor in return, or maybe goods.  And you take that promise and hand it off to someone else - who in turn provides you with labor or goods.  No one actually ends up using the gold, other than some industrial processes and electronics firms - and of course jewelers.

So, contrary to Mr. Grant's assertion (Oh, Mr. Grant!) the idea that we will return to a "stable" economy of 100 years ago is nonsense.  Why?  Because 100 years ago our economy wasn't stable - in fact one could argue it was more unstable than today.

And replacing dollar bills with gold coins just is replacing one placeholder for another - the underlying idea of money is not changed.  Nor is it fixed - as the "value" of a gold dollar would depend on how much gold there was in the world and who controlled it.

Think about it for a minute.  Suppose they find a huge gold reserve in, let's say, Uzbekistan?  Suddenly, they are the richest country in the world, and basically control our currency.  You want to cede our sovereignty to whoever has mineral rights?  Aren't we already doing this with petro-dollars and the Arabs?

And the value of gold is not constant, and as a result, huge inflation can take place, even on a gold standard.  The price of gold - its value - has shot up dramatically in the last few years, from less than $500 an ounce to more than $1500 an ounce.  Meanwhile, inflation in regular goods has remained relatively flat.  A $10,000 car in 2005 costs about $12,000 today.   In 2005, that car would cost 20 ounces of gold.  Today, it would cost 8 ounces of gold - a staggering amount of deflation - more than 50%!

So no, gold is not "stable" at all.

Going to a gold standard is not a panacea to all our problems.  In fact, there are no panaceas to all our problems - never were, never are.  When someone comes along and says, "Well, the world is a highly complex place, with all sorts of complex inter-relationships and things going on.  But, I tell you, if we change just one thing, it would solve all our problems!" - they are selling you snake oil, plain and simple.

The attractive "selling point" for gold bugs is that the gold standard would prevent governments from "printing more money" and thus causing inflation and devaluing the currency.  But as more gold is discovered, it deflates the value of the currency by an amount not controlled by the government - or anyone for that matter.  And when economies expand, the shortage of gold can throttle expansion - which was one argument behind the whole "free silver" deal.

Simple answers to complex problems are attractive.  But they are invariably not only wrong, but usually against your best interests.  There is no "one secret to the tiny belly"  there is no one "trick" to getting out of debt.   You cannot solve your tax problems by calling the 1-800 number touted by the animated robot on television.  Life just isn't that simple or easy.

And believing in easy answers is always what gets us in trouble - on a personal level or a national one, historically throughout time.  A leader or would-be leader comes along and tells us that if we just do one thing, we would be living in a paradise!

But rarely do these plans work out as promised - and usually, everyone ends up more miserable than before.

Walk away from charismatic leaders with simple answers.   They are very dangerous, and history has proven this so.

Mea Culpa!

Recanting is all the rage these days.  It worked for Galileo, right?

I renounce the error of my ways!  I have been shown the light by helpful commentators!

Everything, it turns out, I have posted in this blog was flat-out wrong!  How could I have been taken in by Satan himself?  Mea Culpa!

I have reformed!  From now on, I will preach only the approved gospel from the approved financial pages:

  • Buy a huge mini-mansion, finance it with a "payment optional" mortgage!  You'll get more house for the money and come out ahead!  It will be worth a pile of money, in only a few years!  Plus the tax deductions!  You can deduct your way to wealth!
  • Lease a new luxury SUV!  The monthly payments are low, and you get more car for the money!  What's not to like?  And you get a new car every three years!  And gas mileage?  That's for sissies!  We need to show those Arabs who really owns that oil.  If you are getting over 20 mpg, you must be a terrorist!
  • Don't bother saving for retirement!  Your job is secure and they have a defined-benefit pension plan.  Besides, you'll get Social Security on top of that!  Live for today!  Spend!
  • Frequent Flyer Miles Credit Cards are the way to get ahead in life!  Not only will you be able to spend more, but you can get an upgrade to first class! 
  • Clipping coupons is a good deal - you can get free food at the store!  Work those cash-back bonus plans and rebates, too!  This is how Warren Buffet got his start - few people know that!
  • Everything you see on Television is true - especially the commercials!  You should watch as much as possible, including at work, at a restaurant - even in the elevator!  You need television to tell you want is right and wrong in the world, and also so you can be informed for water-cooler chat at the office.
  • Get a smart phone and text!  It is a great way to stay in touch with those grandchildren.  And let's face it, nothing is more important in a child's life than a texting Grandma.  I don't know how I could have lived without mine!  Hey, it only costs $100 a month or so.  And it has a GPS! And texting sure takes the boredom out of those long commutes!  Hey, look out!
  • Sign up for cable! Get ALL the channels!  Yes, you cannot even live without cable television - it is, after all, more important than oxygen.  Get every channel - the more you watch, the smarter you get!  And its only $100 a month - that's not a lot of money!
  • Know your credit score!  Sign up for credit protector!  All the smart set does this - after all, having a high credit score is essential in life - how else will you be able to borrow more money?  You can monitor your credit score on a daily basis AND get credit protector to protect you from "identity theft" for only $29.95 a month!  Cheaper than Cable!
  • Blame the Government!  Yes, when things go bad, it has to be someone else's fault, preferably the President's!  You never did anything wrong, right?  All you did was follow the advice on the television and as I noted above, the television always tells the truth!
  • Blame the Poor!  Blame Minorities!  The government is giving all your hard-earned cash to minorities and immigrants.  We should set up a camp for them - you know, round them all up and put them in there and make them work!  Yea!
  • Blame the Rich!  Those 1% people who often have funny names - they took all our money, too!  Let's round up the Wall-Street Fat Cats and lock them all up too!
  • Buy Gold!  It can only go up in value!  $5000 an ounce is just around the corner!
  • Get in on the Facebook IPO!  Facebook is wildly profitable and will always remain so!  And it is worth more, in the long run, than Apple or GM.  100 Billion is an under-evaluation, if you ask me!  IPOs always are a good investment!
  • Be sure to follow all the advice of the television gurus!  If the shouting guy says "buy a stock!" then buy it!  His track record on stock picking is stellar!  Call Suze Orman and ask if it is OK to buy a new car!  She has your best interests at heart!   Buy stocks touted by the guy in a clown suit!  Follow Dave Ramsey's advice and give 10% of your money to an odious born-again church!  And be sure to buy all their books and attend their seminars!  After all, how else will you learn?
  • Don't stop spending!  Our economy is based on consumption, not production, and this is a sound economic theory and moreover is sustainable - indefinitely.   Well, it is, if you do your part and consume, consume, consume!  So long as you keep buying, the system will work.  Ignore people who whisper things like '"sounds like a pyramid scheme to me!" - they just hate our freedom!
  • Eat at McDonalds!  In these trying, troubled times, nothing is a better value than the "dollar menu" at Mickey-D's - or a "value meal" - they are inexpensive!  Just a few dollars!  Just drive your SUV over there and idle it in the drive-through lane.  It is a good value and very nutritious!  And the kids love it!  Cooking at home is time-consuming and expensive - and it takes away from your quality time with the cable TV!
I don't what I was thinking, preaching heresy!  Personal responsibility?  Taking the blame for your own malfeasance?  That's downright un-American!  Saving money?  That's what the Commies in Red China do, not red-blooded citizens of the US of A!   Spending less?  That is what is tanking our economy!  Spend more not less!

Can you imagine what our country would be like today if everyone had lived more frugally during the 2000's?  Where would be today?

That indeed, is a good question.

Caution:  The Sarcasm Light is ON.   Doing the opposite of everything listed above is probably a better idea.

The College-Status Conundrum

Statistics show that if you go to college, you will make more money in life, compared to those that don't go.  But if everyone goes to college, does everyone make more money?  No, and this illustrates the fallacy of using backward-looking statistics to make decisions.

One of the problems with the economy today - indeed worldwide - is youth unemployment.  Many parents are now facing financial struggle - facing their retirement years with a mortgage, debts, and little saved for retirement, as they helped pay the staggering costs of a college education for their kids.

And the kids?  Graduating with tens of thousands of dollars in debt, and no job to pay it off.  It seemed like a swell scheme, too.  Mom and Dad insisted that Junior go to college - after all, they were not "white trash" people, but middle-class sophisticates, and in their status-group, children go to college.

And the college education was a guarantee of a high-paying job in their minds, because, according to statistics, college graduates earn more!  Or, at least they did, for the people who graduated from college in the 1970's, 1980's, and perhaps 1990's.

I wonder, though, if you charted the delta on this, over time, if it would not in fact be declining.  And I think one reason is, that as more people go to college, college loses its cachet and elite status.  It is like taking an airplane, putting in all coach seats and then saying it is "All First Class" seating.  You can't have first class without a coach to compare it to.

So we end up with a lot of unemployed kids looking for "clean" salary jobs where you work in a cubicle, and such jobs are evaporating quickly, as automation replaced a lot of these jobs - just as computers replaced the armies of accountants with adding machines and secretaries with IBM selectrics.  There is a reason that PanAm had its own office building in New York - as did GM, Chrysler, and every other major company.  These were human computers, basically, and nowadays, simple PCs handle most of these tasks.

Today, the trend is accelerating, and many cushy mid-level management jobs are going away, as they had no real function, and in fact, often decreased productivity, not increased it.

Meanwhile there are jobs going unfilled, often involving technical skills.  But college graduates are not trained with these skills, and their parents would be horrified if their kids took such jobs.  Getting your hands dirty is still viewed as a lower-class activity.

I went through this myself.  I was accepted at General Motors Institute in 1978.  It was a five-year Engineering program that required you complete a thesis to graduate.  In the Engineering community, it was well-respected.  And since you spent half your time working in a GM factory, it was an accelerated education that you cannot get anywhere else.

While most of my friends were doing bong-hits in the dorm and studying for their American Lit test, I was in a forge plant, learning firsthand what it is like to wrestle a white-hot telephone pole of steel into a machine, along with five other sweaty men.  Or I was programming a computer - not to play a game, but to do real work.  Or I was inspecting steel in the metallurgical lab,  and learning metallurgy firsthand.  Or learning how to run any number of machine tools - lathes, mills, etc. or to program the then-new "NC" equipment.  Or learning how to weld.  Or even, in one assignment, drawing up contracts for construction projects around the plant.  I learned more there in a few years than most do in the first ten years of work.

And yet, my Mother was horrified.  "You are going to a Trade School"  she would say in one of her drunken tirades.  No doubt she was embarrassed when she was at the club, and the other parents started talking about how Buffy was accepted at Vassar.    But she's dead now, and I have a job.

And many of the Liberal Arts majors struggled to find jobs after graduation - and often end up in other fields.  Indeed, my Mother never made much use of her education, either.

Education for education's sake is a fine thing.  But when it costs tens of thousands of dollars and leads nowhere, well, you can study the "great authors" on your own time at the local library for a lot less money.

A lot of my friends from that era are now working in various fields.  Some ended up starting their own businesses - often because they ended up taking low-wage jobs and working their way up in the field.  After college, Fred cannot get a job in his field, so he gets a job as a waiter.  Today, he runs a restaurant.  Sam did odd carpentry jobs after college, as he could not find a job based on his communications degree.  Today he does fine carpentry and cabinet work - and enjoys working with his hands.  Perhaps his parents are horrified by this.  But Sam has to live his own life - not theirs.

Status makes us do weird things.  Expensive things.  Wasteful things.  And one thing we are seeing today is this insistence by many folks, that their kids go to college at all costs, regardless of whether it will bankrupt the parents in retirement, or start out the kid in life with a mountain of debt.

And for the most part, this is due to status, more than anything else.  Because people feel their their children are "cut out" for a certain standard of living, and that college is the path to that standard of living.

Perhaps.  Perhaps not.  Perhaps that was true in the past.  But I am not so sure it is true today.  When everyone goes to college, then not everyone will make more money - or make it worthwhile.  It is like good old Huey Long, and his promise to make "Every Man a King!"  That never works out.

Monday, January 30, 2012

Bad Financial Choices or Government Malfeasance?

These poor folks bought a brand-new house at the height of the Real Estate Bubble, without selling their old house first.   Now they are screwed, so it has to be someone else's fault, right? 
 Note how close the neighbor's house is!  These new developments suck.

On National People's Radio this morning, an article about how NPR has "discovered" that Freddie Mac is  "betting against" its own borrowers in the marketplace.  NPR is apparently very proud of this discovery, touting it several times on the segment.  This just in:  NPR has "discovered" that the sun rises in the East. More after the break!

Well, any idiot knows that if your bank has you locked into a loan at a high rate, the last thing they want you to do is refinance at a lower rate.  If rates drop low enough, they might let you, provided you pay them a lot of fees - if the alternative is you going out and borrowing from somewhere else.   But thanks to tighter lending standards, even though interest rates are at an all-time low, few people, particularly those "upside down" on houses or late on loan payments, can afford to refinance.


But the poster child couple, the Silversteins, that they used to illustrate the problem, well, they've made a lot of horribly bad financial decisions.  Whose fault is that?

Jay and Bonnie Silverstein describe themselves as truly stuck in a bad mortgage.  They live in an unfinished development of yellow stucco houses north of Philadelphia. The developer went bankrupt.
The Silversteins bought this home before the housing market crashed, and then couldn't sell their old house.  They now say that buying a new home before selling the old one was a mistake — a painful one.  Stuck with two mortgages, they started to get behind on their payments on the old house. 
"It wound up taking us years to sell that house, so we had two homes and two mortgages for two-and-a-half years," Jay Silverstein says. "It burned up my 401(k) and drained us."

What did they do wrong here?  A host of things, over a number of years:

1.  They bought an overpriced house.  As soon as I saw the phrase "Yellow Stucco House" I knew exactly what it looked like - something like the nightmare below, perhaps not as ostentatious.  These are houses that are slathered in Dry-Vit brand synthetic stucco and look more expensive than they are.

Houses like this may look expensive, but often, they are cheaply built and thus overpriced. 
 Yellow Stucco - how 2000's!

2.  They bought at the height of the market.  Articles abounded, in the newspapers and on the Television and Radio, about how how overheated the Real Estate market was, back in 2005 or so.   All you had to do was read these and understand the market - and realize that when homes are unaffordable, no one will buy them.  The bubble was there for astute people to see.  Few bothered to look.   I did.  Where's my bailout?  Where's my hot meal?

3.  They bought the new house without selling their old one.  This is a colossal blunder of epic proportions.  Never, ever, ever, ever, do this.  Ever.  Never-Ever!  Why?  Because you end up having two mortgages to pay and like musical chairs, you want to be sitting down when the music stops.  It is also so, so, unnecessary, too!  You can write an offer contingent on the sale of your home, and then do back-to-back closings - it was done all the time.  No doubt, a Real Estate Agent pressured them into signing the deal, telling them that they had better jump on it before all the houses sold out!  We know how that worked out....

4.  They had a mortgage at an age when they should be debt-free:  It is hard to judge their age from the photo, but with all that white hair, they appear to be in their 50's, possibly early 60's.  At that age, you should be looking forward to a debt-free retirement, not making mortgage payments on a house, much less TWO houses!

5.  They dipped into their 401(k) to make mortgage payments.  Never, ever do this, either.  At their age, they can't rebuild a 401(k) as retirement is just around the corner.  It is silly to squander your savings to hang onto a "thing" like a house - particularly when the 401(k) is one of the few assets protected from bankruptcy.  They may have been better off just walking away from the Yellow Stucco Nightmare and moving back to their own house - which may have been protected in Bankruptcy (some States allow a "homestead" exemption, protecting your primary residence from judgments).

6. They bought a house they didn't need:  The article is silent on why they felt they needed to move to a new house.  Likely they had equity in the old one, and if they had stayed put, they would be quite solvent today.  Moving to a new home, just to get style points, is rarely a good idea.  A reader writes, claiming they were downsizing from a home that they lost $500,000 in equity on - more than double the median home price in America.  We are supposed to feel sorry for folks in million-dollar homes?

7.  They are "Hanging On" to a house that likely will be under water for a decade or more.  You hear this all the time - people say "well the market will turn around any day now, and then I can sell my Mini-Mansion Nightmare for a ton of money!"  But if the 1989 Housing Bubble is any indication, housing prices will remain flat for the remainder of this decade.   The Silversteins will be living in an half-finished development for many years - and for what?

I am not picking on the Silversteins.  I feel sorry for them!  They made not one, but a series of really bad choices in life and now they are paying for them.  They should be debt-free by this stage in life.  Was the Yellow Stucco House worth all that grief?  Or was it a status symbol that is going to bankrupt them and make their retirement a decade of penury and want?  And whose fault was it that they made this series of bad decisions?

Well, according to NPR, it is Freddie Mac, of course.  Those bastards loaned them the money on easy terms, and now won't refinance an upside-down house, where the debt-to-equity ratio is beyond the limits set by national law, and their credit score is in the tank, thanks to the late mortgage payments.

(Note: A late mortgage payment, by the way, will tank your credit score.  Even one late payment is enough to drop your score below qualifying level for a reasonably-priced mortgage.  Never be late on a mortgage payment!)

Again, it is easy to externalize our own problems and foist them off on government, political parties, minorities, big corporations, Wall Street, or whoever.  But the bottom line is, your decisions in life are far more relevant that the actions of these conveniently unseen "others" that we like to blame.

It is too late for the Silversteins now - they have sold their first home and already are tapped into the 401(k) to make mortgage payments.  They are stuck with a high mortgage payment on a house in an unfinished development that likely will never be worth what they paid for it, in their lifetime.

I can only wish them the best, but frankly, their future is not a rosy scenario by any means - so long as they are stuck in the Stucco.  Myself, I'd rather live in Florida in Park Model and have money in my pocket, than stucco on the walls.

A better approach, if you are in this situation is this:

1.  NEVER tap into bankruptcy-protected assets, such as your 401(k).  If you do this, you may end up bankrupt anyway, as making a mortgage payment on an upside-down house after you have lost your job is just delaying the inevitable.   Once you do declare bankruptcy, you lose the house AND you now have no 401(k), because you squandered it trying to hang onto "things".  Better to emerge with your savings unscathed than to be bankrupt AND broke.

2.  THINK about where to go with this.  The mini-mansion is upside-down.  Yes, it is a fancy house and all, and it sure would stroke your ego to be able to "keep it".  But it is the big financial drag on your life - not the older, smaller house.  Personally, I would try to walk away from the mini-mansion, by doing a short sale or otherwise disposing of it, and move in to the smaller home (less costly to maintain, less taxes, etc.).

3. Don't fear Bankruptcy, and don't delay if you need to.  If you are tapping into your 401(k) to pay your mortgage, chances are, it means you are living beyond your means and are heading for financial ruin.   Destroying your retirement plan so you can live in a house for a few years, is not a good idea.  Better to declare Bankruptcy early on, get rid of the white elephant, and then move on with your savings intact.   At least you end up with SOMETHING this way.

Unfortunately, the Silverstein's story is repeated all across the country today.   People made bad choices, and stick with them out of foolish pride.  And I count myself among them, although I came out largely unscathed.  Why?  I let go of pride and stopped trying to hang onto "things" when it became apparent that they were costly to own and raised my cost of living to a level that required a fire-hose of cash.

If you are cashing in your 401(k) to make loan payments, think about where you are going with this.  Sit down and "do the math" on where you are headed.  How long can you keep this up?  Is the idea that you will get another high-paying job realistic (if you have been laid off?).  Is the house really going to appreciate in value enough to offset the losses to your savings? (likely not).  Are you robbing Peter to pay Paul - squandering your future so you can not make hard choices today?

Of course, if you are asking yourself these questions in 2012, and not 2009, then it may already be too late - you've already burned through tens of thousands of dollars of retirement funds.  But better late than never - and it is never too late to start over.

A lot of people will be doing just that, I'm afraid!

Playing the Poor versus the Poor

Getting poor white people to battle poor black people has been a game played since the days of the Confederacy.

It is interesting to parse some of the on-line comments sections on the news sites these days.  One common theme you hear, and one you also hear from people you meet in person, is the idea that, since Obama got elected, all of the poor black people are going on welfare and the rest of us are all paying for it.

You see this in offhand comments, made as if the underlying premise was true.  In these folks' reality-view of the world, nearly 1/6 of the population, mostly black, is "on welfare" and never works, and the rest of us are struggling with high taxes as a result.

Fortunately, they believe, helpful Republicans will throw those blacks off welfare and cut the white folk's taxes as a result, and they will not be burdened by those "Welfare Queens" and their 20 children.

Of course, the real truth is not quite all that.  While there are too many people on Welfare, the number of real welfare recipients has held pretty steady at about 4 million, or 1 in 75 people.  It is only by adding the number of Welfare recipients to the number of Medicaid and Food Stamp recipients that one comes up with the "50 million people on welfare" number, which as I noted before, is disingenuous.

And of course, what largest demographic group is on welfare, collecting food stamps, and on Medicaid?  Well, white folks, of course.  As they are the majority of the population, they are the majority of people getting government assistance.   But that fact doesn't jive with the "narrative" that people want to sell you.

So why do people lie like this?  Well, to achieve and maintain power, plain and simple.

My great-great-grandfather, Col. Robert Thompson, lived in Alabama and had a plantation, and slaves.  When the war broke out, he put on his resplendent Colonel's uniform and urged his troops to charge Union picket lines, only to be mowed down by Minnie balls and cannon fire.  He remained in the rear, on his beautiful white horse - he was no fool.

The troops?  Mostly poor white farmers, who lived hardscrabble lives and had no dog in the fight. They didn't own slaves, but were told that this issue, couched in terms of "State's Rights" was important to them.  And they died so that wealthy people, like my great-great-grandfather could preserve his way of living.  Poor white farmers are not very bright, and you can sell them ideas like this - that preserving slavery will somehow benefit them.  Perhaps a trickle-down argument was used back then.  It is today.

While the mostly poor troops died in droves, my great-great-grandfather survived and moved to Texas after the war, much of his wealth intact.  His slaves, not knowing what else to do, went with him.  Not much had changed for him, really.  His surviving troops went back to their farms, which were devastated by the war, and tried to eke out a hardscrabble existence.  It was not hard to steer their anger and resentment over the whole deal against the newly-freed Blacks.   The KKK was born.

Fast-forward 150 years and not much has changed.   The news reports stories about "Welfare Queens" abusing the system, and it is not hard to convince white folks - facing economic difficulties - that these stories apply to ALL Black people.  Ronald Reagan used this tactic in the 1980 election to defeat Jimmy Carter.  But it would take another 20 years and a Democratic President (Bill Clinton) to see real Welfare Reform.

Fast-forward another 15 years, and the issue is being raised again today.  And again, the issue is fabricated from whole cloth - that zillions of Black people are all getting Gub-Ment money, now that "one of them" is President.  But it isn't true, of course.

Why would they sell this narrative?  Because it is a lot easier to sell than the real truth.  You can go to a rural poor white area, and sell them the idea that you should vote Republican, because they will be "strong on defense!" (one of the largest and most bloated areas of our budget) and that they will cut the Black folks' Welfare (but not of course, the "government programs" that White folks enjoy) and moreover, will "Cut your taxes" - even though the tax brackets being cut affect people making only $350,000 a year or more.

Oh, and they will outlaw Abortion and Gay Marriage, which usually seals the deal, as we don't want little Billy-Bob getting Gay Married, or his sister Lurleen waiting until she is 18 to have kids.

You sell them the lies, you sell them the social issues, and you get elected and..... You hand out all the government money to YOUR friends.

Much hay will be made this year about the defense budget, which is being cut by 10%.  A 10% cut in anyone's budget is hardly catastrophic, and considering how much fat there is in the Pentagon budget, it is trivial.  Plus, winding down two wars overseas should cut the budget automatically by more than that amount.

But brace yourself for the attack ads - they will try to sell you the idea that Obama is cutting the defense budget "by the largest amount ever!" and that "record numbers of people are going on welfare!" which may or may not be true - or may merely be a reflection of the fact the budget is the largest it has every been - as has our population.  In a growing economy and population, every year is the "largest" or "most" this and that - it is hardly remarkable.

It is interesting to me that many on the far-right believe many of these lies and distortions, not as astounding facts, but merely as a background to more sinister things going on.  In a way, it is not too dissimilar to the events surrounding the Clinton Administration - the endless investigations into Whitewater, Vince Foster, and finally Monica Lewinsky.

Remember the "Clinton Death List?"  We were supposed to believe that the Clintons were having scores of people "rubbed out" if they got in their way.  For some reason, they never got around to Gingrich or Limbaugh.  And yet I knew people at the time - college educated people - who were willing to believe this.  Heck, you would believe anything, after listening to 10 hours a day of talk radio.

We are constantly fed this stuff, through mainstream media or back-channel communications.  The Internet, once thought to be harbinger of Truth, has turned out to be a festering swamp of half-truths, lies, and outright lies.  You can sell people any sort of bullshit, and the fact the mainstream media hasn't reported it, is, to the believers, only an indication that it must be really true.  After all, the real goings on of our society are hidden beneath a veneer, right?

Wrong.  If there is a conspiracy, it is in plain sight - the financial flim-flam that goes on every day, that people buy into.  How many people comment here that cash-back rewards "really are a good deal!" and can't see otherwise.  How many folks defend buying brand new cars - or worse yet, leasing them.  How many folks think spending hundreds of dollars a month on cell phones is a good idea, because you can then send short little ASCII messages to people, thus squandering most of your waking life?

They are snookering the middle class and lower middle classes - who believe truly, that "he who dies with the most toys, wins" - and are upset only when their toys are repossessed.  They are being sold a bill of goods in more ways than one - sentenced to perpetual poverty and told that their actions are not to blame for their circumstances.  And then they tell them that it is all those Black and Hispanic people's fault (those darn immigrants! - the other half of the dividing the poor story).

By dividing the poor into separate groups and then setting them against each other (there is also hostility between the Black and Hispanic camps) you can prevent them from combining into on coalition which would easily overpower the powers that be.

Divide and Conquer - the oldest game in the book.   It's how the West subdued the Arab States (Sunni v. Shiite) and India (Hindu v. Islam) and every other country in the world.  Even today, these ethnic and cultural divisions are exploited to maintain a balance of power.

Will this ever change?  I doubt it.  Racism runs very deep among a number of people.   And scapegoats are a handy talisman to blame all your woes on.  Why bother trying to better yourself when you can just blame it all on Immigrants, Hispanics, Blacks, or Jews?  I didn't do anything wrong!  It must be that other guy - taking all my money.

And of course the GOP is not alone in this tactic.  The Democrats tell us that "but for" a bunch of people on Wall Street, we'd all still be in our plastic mini-mansions, swimming in our own private Scrooge McDuck money vaults.  The 1%, we are told, are the source of ALL of our problems.  We are merely innocent bystanders.

It is scapegoating in a new format - class warfare.  And yes, the GOP decries class warfare, but then engages in race-baiting.  Neither side has clean hands, from what I can tell.

If your political views are predicated on the premise that all of your personal problems are the fault of some "other" group, let me suggest that you are externalizing your problems, which is probably the worst thing you could do.  Why?  Because when you do this, you let yourself become a victim of someone else's schemes.  Moreover, you end up not addressing your own personal problems, which leads to more problems down the road.

Saturday, January 28, 2012

Change the Rules of the Game?

Should we change the rules of the game, or just keep playing and enforce the rules we have?

Reform is a word on everyone's mind right now.  Everyone, it seems has an idea on how we can throw out all the old rules and start over with a new game.  Herman Cain, he of Presidential Timber, had a "9-9-9" plan for reforming our taxes, which would have been a radical overhaul of our tax system.  Is this what we need?  Or a flat tax?  Or a national sales tax?  Or something else?

The problem with changing the rules of the game, once everyone is playing, is that some folks rightly feel that they are doing pretty good at the game, and don't see why the rules should be changed, just because they ended up with Boardwalk and Park Place - with hotels on both.  To them, the game is going pretty good.  And maybe you have Marvin Gardens and Atlantic Avenue - and are hoping to get Ventnor.  Starting with new rules at this point sort of throws your plans into a flux.

Perhaps we just need to enforce the rules we have.  It always pisses me off that people make up new Rules for Monopoly - so-called "house rules" such as "Free Parking" - and usually it is white trash that does this, as they want to make the game "more fair" or more like a lottery, and less like a game of skill.  So they create a rule that all the money from Community Chest and Chance, or get-out-of-jail fines, goes into a "Free Parking" pot, and whoever lands on "free parking" wins it all.  It ain't in the official rules, but probably half my friends liked to play the game that way.

It's like changing how the pieces move in Chess - you may still have a game, but it ain't Chess.  Or one of your annoying friends who makes up weird rules of Poker - where there are so many wild cards and aces are high and, well, you get the idea - no one knows how to play the freaking game, and then your friend throws down a "sampler" hand of random cards and says "Royal Flush! - See, the two's and seven's are wild, and the diamonds and hearts are counted as the same suit, and since aces are high, my two-seven-jack-king-ace hand is a royal flush!"

At this point, everyone groans and decides to call it a night.  And it is one reason I don't bother playing poker anymore.  Stick to the rules!

And you know, I think whether or not you play the "Free Parking" house rule in Monopoly says a lot about who you are and your character.  People who like the "Free Parking" house rule, tend to want to make things "fair" and "give everyone a chance to win" and perhaps favor redistribution of the wealth.  Folks who prefer to play the Official Rules, want to play strategy and work to get ahead, and don't want someone who doesn't take the game seriously to just win at the last minute by landing on "Free Parking."

You either are a Free Parking person, or you are not.  It is as simple as that.  And if you like to play the "Free Parking" house rule, chances are, you end up in a lot of financial trouble in life.  In real life, there is no "get out jail free" card - and there is no pot of cash waiting for you in Free Parking.  The something for nothing or lottery mentality of life ends up causing more grief than joy, for those who engage in such thinking.

In our economy, it is tempting at times to throw out the rule book and try to "start over" with a new one - to make things fair and "give everyone a chance to win!" -  But rarely does it work out well.  And in fact, over time, the new rules tend to morph to be a lot like the old ones.  But funny thing - the guy who suggested all the new rules - like my crazy poker friend - somehow end up winning all the chips in the interim.

In the 1930's, a lot of people suggested that Capitalism was broken and should be discarded.   And a lot of Americans started to embrace Socialism, Communism, and other leftist causes as the "cure" for Capitalism.  We could not reform our existing system - no, it needed to be discarded and a new one put in its place.

Rarely does this work out well - whether it is the French Revolution or the Russian Revolution, the new forms of society are often not stable, and usually end up reverting back to their old forms in short order.  The American Revolution was successful in that it did not substitute a radically new form of government, but rather just replaced who ran things.  Once we tossed out the British, it was back to business-as-usual, including that whole slavery thing.  So much for holding truths to be self-evident.

Today we are seeing similar calls to overhaul or replace our system.  Some are contemplative ideas that suggest ways our economic system can be tweaked to make it more stable and to eliminate the excesses caused by various bubbles in housing, electronics, oil, minerals, and the like.  Others want to directly redistribute the wealth through more socialistic means.

And still others just have silly half-assed ideas that are more style statements than anything else.   When you see some suburb-raised 20-something with a bandanna over his face, smashing a Starbucks and shouting "Anarchy Now!" you know you've met a really deep thinker.

Most of the major problems in our economy do not come from a lack of rules, but from a lack of enforcement of a lot of existing rules, and also an utter lack of common sense in the populace.  We create financial instruments that are designed to fail - and then we buy them without vetting them properly.  We build houses and sell them for fantastic sums using dubious financial instruments - and we buy these houses and sign the loan documents without thinking very hard about them or what they mean.

Companies cook their books and accounting firms give them stellar ratings - violating many laws in the process, and no one bothers to look more closely at the specifics of the transactions involved.  The shouting guy, or the fellow in the jester suit, on the TeeVee says "buy stocks!" and we buy, and then grouse when the go down in value.

You bought stocks based on the advice of a guy in a clown suit and you wonder why it all went horribly wrong?  Whose fault is it?  His, yours, or the company whose stock you bought?  Call me a radical, but I think when you take financial advice from crazy people on the television, it is YOU who are to blame when it goes wrong.

What it boils down to, in the end, is personal responsibility.  The folks who are "hurting" now in the recession - who bought overwrought and overpriced (and poorly built) mini-mansions that they could not afford - using toxic loan instruments - were not "victimized" by anyone but themselves.  If you buy crack cocaine, you can try to blame the dealer for selling it to you, but the upshot is, you decided you like crack.

No one forced you to buy it.  No one forced you to buy a house like that - you were merely greedy and thought you could afford a fancy house and not have to pay for it - and you could "flip" it and make money.  And now your dreams of avarice are gone and it has to be someone Else's fault, dammit!

Don't get me wrong, I am all in favor of credit card reform, student loan reform, mortgage reform, Wall Street reform - and so on.  But like legalizing marijuana, (or colonizing the moon) it ain't likely to happen in my lifetime, at least not to the extent that people still won't be safe from victimizing themselves.

In the very end, it comes down to you.  Changing the rules of the game isn't going to save you from making bad choices, in the end.  We need to stop making bad choices - that is the fastest and most direct way to improving your own lot in life.  Railing against the unfairness of it all rarely accomplishes anything.

Friday, January 27, 2012

Google Chrome and Google Docs (Wither Apple?)

Google Chrome has some interesting features, and Google's suite of web applications is pretty interesting.

I am backing up my hard drive, as it is acting up again.  I have six computers, so instead of doing "backups" I merely copy all my important files to the hard drives of all six, plus a portable hard drive.  It is hextuple redundancy, and it means I generally don't lose data, unless I want to.

Cloud computing, of course, is supposedly the wave of the future.   With a robust internet connection, in theory you could run applications from servers on the Internet and even store data there.   It is an idea that has been bandied about for decades.  Back in the day, we called it "thin client" and it never seemed to go anywhere then.

I think people like to have control over their own data and not be reliant on an Internet connection to be able to use their computer.

But cloud computing does have some advantages - and running TurboTax, for example, online, is far better than trying to run in on a program on your computer.  The data is stored in their servers, and the program runs as an HTML website, so you can access your data anywhere.

I have been a Google "customer" (not sure if that terms if applicable, as I have not sent them any money) for a few years now.  I use gmail, blogger, google sites (for my web site), picasa web (for photos) and of course, their search engine.  I have not tried Google+, their social networking site - but as you can see, they have their hands in a lot of thing these days.  Similarly, since I think smart phones are dumb (or at least smarter than their owners) I do not have a Google Android product.   Google has a primitive shareware Operating System - Chrome O/S - although no one really seems to be using it quite yet, at least outside the netbook arena.   They also have something called "Google Docs" which basically allows you to have a virtual hard drive on the Internet.

You can upload documents one at a time, or if you are using the Chrome browser, folder at a time.  The process is slow, but if you run it as a background job, you can do other things.  You can also save documents that arrive attached to e-mails, display them in Google Documents, and even create new documents in Google Docs, using a primitive word processor.

Google Docs will display Word documents and PDF files.  I have occasionally noticed artifacts in the latter, as the site "converts" the document to their own proprietary format before displaying.  However, you can save documents there in any format you choose.

In order to use the folder upload feature, I had to run Google Chrome.  I have always been a Firefox kind of person, but I tried Chrome, and it seems to run a bit faster and is a little less cluttered than Firefox.

Note then when uploading documents, be sure to UNCHECK the "convert to Google Documents format" box, otherwise your documents will be converted from their native formats.

If you are looking to store some files, give Google Docs a try.  The price (free) is pretty good.  And you never know - those six hard drives could all crash at once!

There are, of course, some caveats.

For example, Netflix may have trouble running on some machines using Google Chrome.  Why?  Because Netflix chose Microsoft Silverlight as the plug-in to run its video.  And for some funny reason, Silverlight runs best on Internet Explorer, but not as well on non-Microsoft products.  A little Corporate Hegemony?  Perhaps.

It seems that these companies want us to pledge loyalty to their own brands and suites of products, which is one reason why I am a little nervous about using so many Google products.  But they are free and easy to use, which makes them compelling.   I just wish they'd stop "upgrading" so many of these products all the time.  "Click here for our NEW version of e-mail, where the background is in annoying shades of pastels, we've hidden all the controls from you, and everything is grouped into Twitter-like "conversations"!!

No, I'll keep the old view, thanks.

And all you Apple people out there, well, your company is rapidly becoming the worst of them.  Apple used to be the "alternative" company that wasn't involved in the monopoly practices of Microsoft.  Now we discover that they really wanted to all the time, but just didn't have the product popularity.    Apple, like Microsoft, wants you to remain all-Apple, and once you sign on to their sealed-box, closed architecture philosophy, they sort of have you.  Want your computer fixed?  Better call an Apple "Genius" at $400 an hour.  Want to replace the battery in your iPod?  Ship it back to the factory and pay more to fix it than you paid to buy it.

And with nearly $50 Billion in the bank (literally in low-yield treasury funds) Apple is embarrassingly rich - yet they rely on well-publicized sweatshop labor in China to built all those nice toys you like to play with.  While once the company of the politically correct, Apple has morphed into the cold, heartless, and ruthless IBM of yesteryear.  "Don't be evil" doesn't carry much currency there, apparently.

So it is interesting, to me anyway, that a fight is taking place on our desktop.  A fight for the "hearts and minds" of the general public, to win us over to an operating system, a suite of software, products, a philosophy, whatever.  And these little games of product incompatibility are being played out - intentionally, I believe - to get us to remain "loyal" to one provider or another.

They want you to have their computer, operating system, phone, music player, game station, search engine, word processor, blogsite, e-mail account, website hosting, social networking site - just about everything, it seems.  And you sort of get tired of it all, after a while.

But what about Mozilla?  What about it?  Shareware is an interesting option, but in my experience, it tends to be a big buggy at times.  I use a lot of shareware products - from OpenOffice (to open those annoying DOCX documents) to Spybot, to Malwarebytes, to CutePDF, to Firefox.  They work pretty well, although Firefox seems to be annoying in how you configure it, and the more I use it, the less and less enamored of it I get.

I am not a "fan" of Google, like some people are "fans" of Apple,  Being a fan of a major corporation or its products is stupid.  As I noted before, while you may wear a hat that says "Chevy" on it, the people at GM don't wear hats that say "Bubba" on them.  You may be a fan of a company, but trust me, they are not fans of YOU.

But it does seem like Google has a lot of free and easy-to-use products - software products - that make my life easier.  Apple wants to tie us to particular hardware, which is a strategy that has backfired in the past.  Bill Gates taught us that computers were commodities, and the software was where the money was at.  In the early days of computing, getting software and hardware from one place meant that you had a robust and compatible system that worked well.  And in the early days, Apple sold a lot of computers.  But the open architecture of the PC dominated over time, due to lower costs.  I wonder if the same will hold true for Apple and the iPhone and iPad - that an open architecture phone, running software such Android or Windows Phone, will dominate over time.  It will matter less which phone you buy, as to what operating system run on or what network.

If so, Apple better hang on to that $50 Billion it has in the bank.

And that is the rub for Apple.  With nearly 1/4 of its stock price represented by cash-on-hand, the company is ripe for a buyout or takeover.  Shareholders are pushing for a stock buy-back, dividends, or some form of payback to the owners.  Some are saying the stock price could go as high as $700 a share (from today's $400 range).  Such talk is never a good sign - just as talk of Gold going to $5000 a share is bad - it usually means you need to get out.

Many analysts point out that Google has the largest share of the smartphone market.  And many folks think that as RIM (Blackberry) fades from view, Microsoft will gobble up the other portion.  There could be a scenario where Apple could go from HOT to NOT nearly overnight - losing its share of the smartphone market, which basically is propping up the company right now (despite the popularity of the iPhone and iPad, the Mac remains a niche product).

Sounds far-fetched?  Well, being old, I remember the last time Apple was the big player - in 1980 or so - in the Personal Computer market.  Before there was the IBM-PC, there was the Apple - and a host of no-name or wanna-be CP/M based-machines.  Apple had the market sewn up, so it seemed, until IBM introduced its PC, with "IBM-DOS" from a little-known company in Redmond, Washington.

Within a few years, Apple went from top of the market, to struggling.  While trading at nearly $8 a share in 1983, it dropped to less than $2 in 1985.  Granted, if you had kept that stock  for 25 more years, you would be very rich.  But investors back then were looking at a major loss - 3/4 of their share value wiped out, as the market for the Apple II declined and the Macintosh computer showed itself early on not to be a serious or cost-effective machine for business use.

So not only could the same thing happen today, it is in fact, likely to.  People are platform agnostic, as evidenced by the popularity of the Android O/S (nearly twice the market share of Apple).  Yet, no one proudly whips out their Android phone and says "check this out" - the way they do with an iPhone.  Then again, no one was "proud" of their PC the way Mac fanatics were of their machines, back in the 1980's.  Who won that battle?

Thursday, January 26, 2012

Good News is Not Considered "News"

The Dow has risen steadily since December.  But the news media does not report this as 'news'.

I was doing my monthly net worth calculation to see how things were going.  Now that we are out of debt, it is an easier calculation to make.  And as I have noted before, it can be a dangerous number to look at.  If your investments do well, you may end up thinking you are "rich" and go out and spend money - or worse yet, borrow it - and end up in trouble.

That WAS one cause of the "meltdown" of the last decade - we all saw our portfolios and home values go up, up, up, and thought, "well, I've got money, why not spend some?"  But since our money was tied up in houses and 401(k) plans, we borrowed to spend.  We did not spend the actual money.  So when it all went horribly wrong, we were in debt and our paper "assets" were worth less (but not worthless).

But I digress...  yet once again.

What was interesting to me was the fact that all my accounts were way up - by enough to buy a nice new Camry, with a leather interior.  Hybrid.

Still down from April 2011, where we were flying really high.   But way up from December.  And yet, well, why hasn't the media reported this?  We hear all the gloom-and-doom about how the market tanked in December (see chart above).  But the bounce-back in the last month has been pretty spectacular.

Yet, when I think about the news over the last four weeks, all I recall is "Dow ends the week down" and other negative headlines.  I only recall a few positive headlines, for example, about the year-end rally (which looks pretty podunk, in retrospect).  All you hear is "Dow Down" it seems.

As I noted before, long-term trends that are gradual are not news and not noticed.  You put aside $50 a week, and by age 65 are a millionaire.  No one notices.  You win a million dollars in the lottery, and it is headline news in your home town.

Long-term, slow trends, are rarely reported by the news.  Bad news and sudden occurrences, are.  Getting your information from the news is thus a really bad idea, as all you get exposed to is sensationalistic events and bad news trends.  You do not see the whole picture.