Could a Roth IRA be a good savings account for a rainy day? Maybe.
The minute I hit "post" on my last posting, I realized I would receive howls of protest from the Roth IRA faithful. As one reader put it, there is really no penalty in putting your after-tax "rainy day" savings into a Roth IRA, as you can withdraw the money at any time - just not the gains. Well, not any time exactly, as there is a five year window after you open an account which locks your money in place.
The Roth IRA was created in 1997 and at the time, I was nearly 40. There was a window where you could "convert" a conventional IRA to a Roth IRA, and many financial advisers promoted this - as they got a "taste" of that conversion. But it made no sense to me, as I would have had to pay taxes on the converted funds, at a time when I was in the higher tax brackets. That window has closed, so I guess the point is moot.
The smiling face above is of Senator Roth, for whom this IRA is named after. I guess he felt we needed to complicate retirement even further. Sadly, he died a few short years after shepherding the legislation through Congress, so he never saw the fruits of his efforts materialize.
For me, in 1997, and indeed, until fairly recently, I had no "rainy day fund" to cover my ass if I should get into some sort of financial trouble. And that is a sad thing to admit. I was funding my 401(k) at my business and was Mark. But in terms of daily living, we were doing the "paycheck to paycheck" Samba, using credit cards to tide us over when clients were slow in paying. It was, pretty dumb, in retrospect, considering how much "bling" we had at the time.
But I could see where a more fiscally responsible young person (they exist? Oh brave new world!) might want to start a Roth IRA and fund it modestly for the first five years. After that, it could be used like a savings account - throw any excess cash into it, and if you need the money again, take it out. In the meantime, any gains you have are tax-free. Sounds like a pretty sweet deal. Sorry I didn't have the financial acumen and discipline to take advantage of it.
On the other hand, the lost opportunity probably wasn't as great as all that. After all, I was heavily in debt at the time - with four rental properties, plus two mortgages on our house, and (shameful to say) credit card debt. Oh, and car loans. In other words, I couldn't have funded a Roth IRA at the time if I wanted to. If I was smarter back then, I would have paid down those debts (or never taken them on) and maybe then, I could have started a Roth IRA.
It is like the investment "advice" I got when I was in my 20's. "Get $5000 together and then call me!" one financial advisor said. Right, like that could happen.
So, mea culpa, my negativity about Roth IRAs isn't all that justified. On the other hand, if you haven't opened one yet, you didn't miss out on too much, particularly if you are financially stressed. A dollar put into a Roth IRA is nice and all, but not at the expense of a dollar put into your 401(k) or IRA.
I noted before that one problem confronting young people starting out in investing is that they assume they can "save money" without cutting corresponding expenses from their budget. A friend of ours (and yes, there were drugs involved) decided to put 10% into her 401(k) at work - without taking 10% out of her spending budget. Worse yet, she decided that "now that she was saving money!" she could afford her own apartment (WTF?) and increased her monthly cash-flow requirements. Within a few months, she was borrowing against her 401(k) and ran the account dry, incurring a 10% tax penalty, as well as interest payments.
That, sadly, reflects the financial discipline of most Americans - including myself - particularly when we are young.
So to my young reader who does have financial discipline, I say go for it. Just don't put more money into a Roth IRA than you might need in the next five years, as it will be locked up.
But for me, already in retirement, already draining that IRA, having a Roth IRA would be nice, of course, but it really doesn't change my tax situation by very much. I didn't miss much by not starting one or by not converting to one.
You can generate a lot of clicks on YouTube with unconventional advice!
Mark was watching a YouTube video which popped up on his phone for some reason. The nominal topic was how Social Security is untaxed in Georgia, which is apparently true. But then the presenter veered off into the deep end by suggesting that you set up a Roth IRA, which is taxed when you contribute to it, but not when you take money out. If you did this, you'd pay no taxes in retirement! Whoo-whee!
Oh, wait, that makes no sense. My Federal taxes last year were about $300 and my State taxes $600. This is not a lot of money. My taxable income was the $30,000 I take out every year from my 401(k) and maybe a few grand we make on the condo rent. Since I have no debt, we live quite comfortably on this amount. And since we take out so little, our tax bill is negligible - we are in the lowest brackets to begin with, and when you get done with the standard deduction, well, there ain't a lot of taxes.
That same $30,000, when I contributed it to my 401(k) or IRA, saved me far more than $900 in taxes, as I was in much higher brackets when earning - 25% or more. So putting thirty grand into my 401(k) or IRA back then, saved me at least $7500 just in Federal taxes. Pretty swell deal.
But what about the Roth IRA? I get a lot of e-mails on this topic from people who have watched videos about Roth IRAs on YouTube and fear they are "missing out" on some great bargain. FOMO strikes again - and FOMO should never be trusted. The advice on these YouTube channels is unconventional, and people love unconventional advice. "Gee, I never thought of it that way! I might not save any money on my taxes today, but when I retire, I will avoid paying those trivial amounts of tax!
Yea, that makes sense - NOT!
Well, it could make sense, but not for you and me. Take my millionaire friend who has a trust fund that cranks out money like clockwork. Most of this is taxed at the long-term capital gains rate, which can vary from 0 to 20%. Capital gains rates are generally far lower than ordinary income rates, which can be 35% or more. And when you take money out of a 401(k) or IRA, it is taxed at ordinary income rates.
So, for my trust fund friend, the traditional IRA makes no sense. You are "saving" maybe 15% in taxes, only to pay it later on, when you retire, at 35% or more. And she's taking out hundreds of thousands a year in retirement. But for most of us, our earning years are also the years we are in the highest tax brackets and our retirement years are the years we are in the lowest tax brackets, which with deductions can end up being little or nothing in taxes. For the vast majority of Americans, a Roth IRA makes no sense, whatsoever.
Bear in mind, however, that like with an IRA, there are limits to how much you can contribute to a Roth IRA. It sort of ruins the fun, doesn't it? I mean, a few grand a year isn't going to make you enough to retire on. I was fortunate to have a 401(k) plan, which allowed us to contribute far more.
Which brings up another point. That $7500 I avoided in taxes when I contributed that thirty grand to my IRA and 401(k) (over several years) was put to work for me as part of that investment.On the other hand, the $900 I paid in State and Federal Taxes, thirty years later, in retirement, was worth maybe a hundred and fifty bucks when I contributed that money. A tax deferred is a tax denied.
And one more thing - the only taxes you are saving are on the gains you make in the Roth IRA. If you put that same money into an ordinary savings account (stocks or mutual funds or whatever) you are only taxed on the gains you make. So if you put $10,000 in a mutual fund and it is worth $15,000 when you retire, you pay taxes only on the $5,000, which at a 15% marginal rate (that I am in) is $750 in taxes (but with standard deduction, much less than that!). The Roth IRA would save you that $750 bucks. That's it. You save taxes on the gains only, you pay ordinary income taxes on the principal.
So why all the FOMO about Roth IRAs? Why do people put up YouTube channels about them, or do postings or articles? It is the same old thing - unconventional advice sells, even if it makes no sense at all. And I've seen people get that "true believer" look in their eyes, convinced that having a "tax-free" retirement is worth giving up a hefty deduction today.
So relax. You didn't miss some lucrative government gravy train by not setting up a Roth IRA. If you did this in addition to maxing out your 401(k) contribution and maxing out your IRA contribution,then good for you. On the other hand, if you did go out and set one up (no doubt goaded by a "financial advisor") you may have missed the boat, if you did this instead of contributing that same amount of money to a conventional IRA or 401(k) or SIMPLE IRA or whatever. And it goes without saying that if you enter retirement with no savings and a mountain of debt, well, the boat left you at the dock ages ago.
Taxes for the elderly are often trivial. As I noted before, when I hit 66, my school tax - $2000 a year - will go away. This is double what I am paying in income taxes. And when I hit 70 and start collecting Social Security, this will be untaxed as well. Throw in the senior coffee, and life is pretty sweet!
A reader writes asking about this - tax rates in different States and different kinds of taxes. For example, I have mentioned that Florida taxes are kind of insane. One reason we sold our condos in Pompano (besides being able to double our money on them) was that the tax bill came, and we were re-assessed at the sales price. Since we were not "homesteaded" (these were investment properties) we had to pay the full boat on the taxes, which would increase every year. And since there was no income tax in Florida, real estate tax rates, particularly in more crowded jurisdictions, could be quite staggering - in the thousands, even tens of thousands a year, even for what used to be considered a modest home.
But perhaps Florida's allergy to income taxes isn't driven by Libertarian largess, but rather by the knowledge that retirees pay little income tax anyway, so real estate taxes are a neat way to zing those New Yorkers who want only a winter home. Florida is that way - very protective of its own. You can't "waive in" to the State Bar there, as every New York lawyer would do so when they retire, and put the locals out of business. You have to take the bar exam, and no 60-year-old wants to go through that again!
But if you didn't set up a Roth IRA, don't sweat it. Chances are, it isn't going to be of much advantage to you, particularly if you are not contributing all you should to your 401(k) or IRA. For me, it made no sense whatsoever. I suppose I could have tossed a few bucks of after-tax money into it and saved a few dollars in income tax when I took it out. But having retired at an early age, the idea of locking up that money (the gains, anyway) until I was age 59-1/2 kind of scared me. Turns out, I needed some of that money before then.
Is legalizing everything a way of reducing crime? Well, in a way it is. If everything is legal, then by definition, there is no such thing as crime!
In my last posting, I mused that the drug wars have destroyed Mexico. And the minute I hit "POST" I realized I would get howls of protest from the Libertarians, who would argue that it was the illegality of drugs that created Mexico's drug gangs, not the drugs themselves. An interesting argument, but during the height of the "war on drugs" no such decapitating drug gangs existed. Indeed, when we drove through Mexico in 2002, there was plenty of crime, but not on the level we see today. Maybe it just took them time to get organized?
It was pretty funny, but on the way back to the US from Acapulco, we drove up Route 200 along the Pacific coast - not realizing that back then, it was a major drug-running route. The scenery was beautiful, and the road would climb up into the mountains and then plunge back to the sea. On these narrow, shoulder-less mountain roads, a guy driving a tanker truck full of fuel - "Doble Remolques" or two-trailers - would pass us on a blind curve. Coming the other way was an overloaded bus full of people. We could see the drivers doing "hail Mary's" to the small statuettes on their dashboards before all three of us squeezed by, nearly trading paint.
Coming down to the sea, we came upon a town shrouded in what we thought was fog. As we approached the town, we heard helicopters and saw Army trucks and many soldiers - most of whom looked to be about 16 years old. Mounds and mounds of burning greenery lined each side of the road. And at the roadblock was a young man in Army fatigues carrying an M-16 that was almost larger that he was.
As soon as I rolled down the window, I thought, "Gee, this smells like a college dorm" - and then I realized what was happening. They were burning the marijuana fields. And instantly, everyone in the camper was high as a kite - as high as the soldiers were. The young man with the gun said to me, "Si?" and I said, "Roadblock?" and he nodded and said "Oh, Si! Si! Roadblock, Yes!"
"You wanted to see inside the camper?" I replied, and he said "Si!"
So we let him inside and he marveled at our Casa de Camiones with a microwave and a refrigerator and even air conditioning. He looked inside the fridge and saw a bottle of Coca-Cola. He looked at me inquisitively, obviously having "cotton mouth."
"Oh, please, help yourself!" I said, and he handed me his M--16 and started drinking the coke. One of our friends offered him a bag of Sabrinas or Lay's Potato Chips as we call them, and before long there were three thirsty young soldiers in the camper, having snacks and carrying on. It was a regular Cheech and Chong moment.
Finally, I said, "Can we go now?" and he said, "Si! Si!" and I said, "Don't forget your gun!" - handing him his M-16 back.
He said, "Si! Gracias!"
They never asked about the trailer we were towing behind the motorhome. It could have been filled with bales of the stuff! It was a surreal experience.
We later landed in Zihuantanejo, which is a nice town. We ended up flying back there the next year - you can get a direct flight from Houston. Nice place!
But I digress. But not by much. Zihuantanejo was famous for resisting the efforts of the central government to develop into another Acapulco. The government built Ixtapa next door (hence the airport) and built high-rise "all inclusive" resorts that are favored by some. But Zihuantanejo remained a sleepy little town with small hotels lining the beach. In the village, they had a bulletin board where people would post pictures of corrupt government officials, and what bribes they asked for. Maybe they couldn't change the system, but they could at least try to shame the people involved. Of course, part of the problem is that government officials and police are paid so little that bribery becomes part of their salary plan. The whole country is messed-up!
Anyway, a reader writes, arguing that if drugs were legal, all of this would go away. I am not so sure about that, although the argument has a core of truth to it. We tried, at one time, in America, to outlaw alcohol, and you know how that worked out. The Mafia and the House of Seagram made millions of dollars supplying the illegal booze. And today, we still have organized crime, although increasingly, much of what was bread-and-butter for the Mafia is now legal. Take that, Libertarians!
For example, in the old days, you went to the corner "Candy Store" and would "play the numbers" or bet on horses or maybe on college or professional sports. Today, the Candy Story is now a 7-11 selling lottery tickets legally. The Off-Track Betting parlor takes your bets on horse races and even sports can be gambled on, thanks to the Supreme Court. In America today, no one is more than a half-hour's drive from some sort of casino - we have one ten minutes from where I live. They put you on a boat and drive it three miles offshore.
And loan-sharking? Why bother when you can legally ruin yourself with a payday loan or a title pawn loan? Loan-sharking is now legal - so what does the Mafia do for a living?
Well, funny thing, even when things are legal, there is still an illegal trade. Reports are coming in that pot is still being sold illegally in States where it has been legalized, as the illegal pot is still cheaper than the heavily taxed legal pot. As I noted before, any criminal enterprise can be profitable simply because it is untaxed. So yes, people sell untaxed cigarettes to make money. People still run moonshine - or did for a long while after prohibition. I suspect if you legalized cocaine, there would still be an illegal market for it.
Whether it is the mountains of Mexico, where drug gangs hide out, or the mountains of Colombia, where they cook down coke from coca leaves, or the mountains of Northern California, where they do illegal "grows" of pot on Federal lands, if you wander into any of these places, you may likely end up dead. And this has even been the case with booze. Consider the "humorous" lyrics from the song above:
Once two strangers climbed ol' Rocky Top
Lookin' for a moonshine still
Strangers ain't come down from Rocky Top
Reckon they never will
And yes, "Revenuers" have been murdered in the past - along with other law enforcement officers - when they have tried to shut down these forms of organized crime.
Blow is an autobiographical movie based on the life of a drug smuggler. He started out stealing planes and flying to Mexico, where he would load up with marijuana and fly back to the States. It was sort of a lark at first, but he quickly realized that marijuana was bulky and cheap, and that the risk was great. On the other hand, cocaine was a lot more compact and expensive, and he could make ten times as much - maybe a hundred - per load smuggling coke as he could pot. And the further he got involved with that, the scarier it got, as the amounts of money involved were so large that people were willing to kill over it.
And therein lies the problem. Right now we are experimenting with legalizing pot. Has this put an end to the illegal trade in marijuana? Apparently not. But since the profits from pot smuggling are smaller, though, the drug gangs long ago switched to cocaine and later, methamphetamine. And with the popularity of opioids, well, they've been smuggling in powerful fentanyl from China.
The list goes on - it is like playing whack-a-mole. You legalize one drug, they will move onto the next one. Ecstasy, LSD, synthetic marijuana, opioid derivatives - whatever.
Speaking of which, in our little town there is a row of "Sports Medicine" and "Pain Management" clinics on Route 17. If you looked at the average local here - 300+ pounds in weight - you might be surprised to believe that we have so many athletes in pain here. The reality is, of course, that many of these outfits are little more than pill-mills. One local runs a chain of "pain management" clinics across Georgia. If you thought the opioid crises was over - think again. Like any good drug war, they nailed a few more obvious targets, but realized they cannot stamp out all of them.
And even though these pill-mills are "legal" and "prescribing" Oxycontin and other opioids which can be purchased legally at the local pharmacy, there is still a thriving business for illegal opioids. In fact, the legal market for opioids drives the illegal market for heroin, Oxy, and fentanyl. Once the user gets "hooked" on Oxy, they seek out additional thrills when the mean old doctor cuts them off.
Now, some might argue these are victimless crimes - after all, the only person you are hurting is yourself, right? But sadly, a staggering number of people are dying from these drugs, which in fact has decreased the expected lifespan of our generation by a year or so. Pretty staggering stuff! We worry about Covid deaths, but Opioids have killed more people and will continue to do so - no vaccine is available.
The same Libertarian argument could be made about seat belts or airbags or helmet laws - and are in fact, routinely made. Why make airbags mandatory? If people wanted them, they would pay for them, right? Airbags have been around since the early 1970's when they were offered as an option on Oldsmobiles, among other makes. There were few takers. Given the limited production volumes, they were hugely expensive, and thus few people ticked off that option on the order form.
In fact, you could make the Libertarian argument about any laws if you wanted to. I suppose though, that any reasonable Libertarian (is that an oxymoron, or just a moron?) would concede that your unlimited rights are in fact, limited, when they intersect the rights of others. Some folks argue that speed limits are "just a way to collect revenue!" (such people we call whiny losers). But if you collide with someone, going 100 mph, and kill people, well, maybe that isn't a consequence-free decision. Maybe we need speed limits to prevent people's "Freedom" from destroying the freedom of others.
But to what extent does the government go to protect us from ourselves? And is it really that or something else? The Pure Food and Drug Act of 1906 was passed because people were selling adulterated foods and medicines that were making people sick and even killing them. Is this another "unnecessary regulation" hindering business? If we only just revoked all this "red tape" industry could take off and the economy would expand! And as for the little old lady who died from tainted medicine? Too bad for her - she should have known better!
Of course, that is nonsense. Not only that, the greater good is served by such regulations. The companies that make and sell food products are not hampered by such regulations but helped. People have confidence in our food supply and think nothing of consuming things they buy from suppliers, large and small. Eliminate those regulations, and well, it would actually damage commerce. Of course, to what extent such regulations should go is debatable. But eliminating them entirely? Not a good idea.
The same is true of automotive safety regulations. We decided, as a society, to embrace the automobile. If you are a public transit nut, maybe you disagree with that decision. But it was already made before we were born, and it isn't about to change. Americans love their cars. So we built a trillion-dollar highway system that slaughters 40,000 people a year. To keep the system going, we've had to regulate safety, emissions, and a whole host of other things. The epidemic of stolen cars in the 1950's and 1960's forced us to create new regulations about VIN numbers and titles - the entire system would have broken down if insurance rates became so onerous that no one could afford a car. And like I said before, such regulations, fought by the car companies, are now welcomed, as they keep out competition, to some extent.
But what about drugs? Maybe if we legalized them, like we do with marijuana, it could regulated, taxed, inspected, and made safe. But all drugs are not alike. While you may smoke pot or drink beer and be "functional" as a human being, things like methamphetamine, cocaine, and opioids can cripple you. Is it healthy for society for people to be wired on drugs like this? Cocaine turns people into assholes and destroy lives - I've seen it firsthand. Maybe there is a "functional" coke-head out there - I am sure that all the coke-heads believe this. But as Steve Martin - or was it Richard Pryor? - once said, "A hit of coke makes you feel like a new man! And the first thing a new man wants, is another hit of coke!"
If we legalized cocaine in the United States, I doubt it would be the end of the drug gangs in Mexico, just as ending prohibition didn't end the Mafia. I suspect they would find some other outlet to make money illegally - trafficking in other drugs, people, or whatever seems profitable. On the other hand, if people didn't demand these illegal things, there would not be a market for them. And in good conscience, how can anyone lightheartedly snort a line of coke, realizing that someone probably died in order for them to be able to do so? And by "died" I mean having their head slowly cut off with a chainsaw.
No, I think the answer isn't "small government" or "less government" or "powerless government" - Mexico has demonstrated what happens when there is a power vacuum - others fill it in. Libertarianism sounds great in theory, but in practice would be a nightmare. Since the day I was born, sixty-some years ago, we have moved toward a more Libertarian society. Things that were strictly illegal when I was born - gambling, drugs, loan-sharking, etc. - are now legal and run by corporations. And people have ruined themselves by patronizing these enterprises. Progress, eh? And people want more of this nonsense?
Much of the world is already a Libertarian "paradise" of sorts. Weak governments with few regulations means high crime rates and gangs running everything. Most of the people living in these places are striving to come here - to a place where a strong government means law-and-order, and the idea of bribing government officials is alien to us. This is not to say it doesn't happen, only that when it does, we are outraged by it, not consigned to accept it. Oh, and it is illegal here and does get prosecuted.
And no, laws are never perfect. Just because murder is illegal doesn't mean everyone goes to jail when they kill someone. In fact, less than 1-in-3 do. That doesn't mean we should abandon murder laws. While laws may not catch and prosecute everyone, what folks don't realize is how many people are discouraged from breaking the law as a result.
I mean, I get it that people sometimes feel oppressed by the law - even if they have little chance of being caught at it. I recounted before how my friends at the IRS told me that one of their biggest weapons is the irrational fear people have (and by people, this mostly means Libertarians) of being audited. The scare stories printed in Reader's Digest are the greatest allay the IRS has, and they don't go out of their way to refute them. The reality is, the GOP has largely gutted the enforcement budget of the IRS, and the odds of being audited are lower than ever. President Biden wants to change that - which no doubt is bringing howls of protests from tax cheats. Myself, I am not so much concerned, as I don't cheat on my taxes.
Like I said, Libertarianism seems like an awful lot of fuss to go through just to not have to register your car (it's a thing they do, google it). While it may be a "hassle" to obey the laws sometimes, it isn't as much of a hassle as you might expect, and the resultant civilization we have developed is certainly worthwhile. If this means I can't destroy myself through drug abuse, I can literally "live" with that!
We complain about excess in America while the rest of the world suffers.
In 2002, we made a somewhat ill-fated trip by motorhome from Alexandria,Virginia, all the way to Cuernavaca, Mexico. Our cleaning lady thought it would be a good idea for us to see her home there (which was quite nice) and also carry a trailer-load of her possessions for her. She wisely flew home. It was an adventure, to say the least, and we were only kidnapped twice, by the Police, who shook us down for petty bribes.
The first time was at the border, where we "hired" a bribe-taker to get her possessions through customs. He put us in the back of his van and drove us (illegally) across the border from Brownsville to Matamoros. So here we are in Mexico, trapped in the back of this guy's van. It started to turn into a theater of the absurd, as he drove around pointing out the sites to see. "There's the big drug dealer's house - right next door to the American Embassy - you might want to remember where that is, by the way," he said, as if this was some package tour.
Finally, he gave us the lowdown. We could take this trailer-load of her crap across the border, if we paid a $500 bribe (including his fees) but we would need our cleaning lady's passport. We explained we didn't have it, as she (wisely) flew to Cuernavaca. "No problem," he said, "We will make one!" And we drove around some more until he found an older Mexican lady who sort of looked like Gloria, and offered her a few dollars if we could take a photo of her for this forged passport. Photo in hand, he went to another place where apparently manufacturing Mexican passports is a business.
As for the $500, Gloria had given this to us before she flew home. "You will need this at the border!" she said, knowing he exact amount of the bribe. By the way, we had been to the Mexican Embassy in Washington, DC, twice to get a "Menaje de Casa" or household goods importation certificate. We jumped through all the hoops and got this very impressive ribboned-and-sealed document. But the lady at the embassy admitted that "you will still have trouble at the border" and implied we would have to pay a bribe. It is sad, but the Mexican government doesn't really control Mexico.
Again, we take for granted how lucky we are as Americans. If I came to the US border with a certificate issued by the US government, specifically allowing me to import my household goods, I would expect it to be honored, as a matter of course. And paying bribes to border officials? Unheard of. As Americans, we would rebel against such chicanery. The rest of the world just goes along with it. Maybe we are lucky - or maybe it is because we don't tolerate that kind of shit. Maybe a little of both. But I digress.
Back to the Brownsville border checkpoint, we were released from the van and went back to the camper, where our friends were waiting in air-conditioned comfort, watching videos and having a glass of wine with our dog. "Where the hell have you been?" our friend Susan furiously demanded. "Oh, just took a jaunt over to Mexico," I replied nonchalantly. We had been gone nearly three hours.
Anyway, an hour later, we are allowed to go through the border checkpoint, at which point we are instructed to pull over so they can take everything out of the trailer and inspect it. And when they took all this crap out, we thought that maybe Gloria had a hoarding problem. There were boxes and boxes of used clothing - Ropa Usada in Spanish. Plus boxes with nothing in them but coat hangers. They were looking for guns, of course. There are two things you can't bring into Mexico, guns and Ropa Usada, and we were loaded to the gills with the latter. But the bribe was sufficient to let it slide. The bribe would have been less if we had a trailer-load of guns. They take this Ropa Usada shit, seriously.
It seems the Mexican government wants to protect its non-existent domestic clothing industry. It is interesting, but the textile mills and clothing factories of the Carolinas all went out of business back in the 1970's and 1980's. Used to be that if you bought a Champion sweatshirt, it was made in South Carolina or some such. No more. And you would think that this business went to Mexico, but you would think wrong. Most of it went to Asia, where it is still, today. We live in a sea of cheap clothing as a result.
And when we are done with it, our Ropa Usada often is shunted off to third-world countries in Latin America, South America, and Africa - clothing so cheap that it basically kills off any domestic industry. our cleaning lady wasn't insane taking this stuff to Mexico - it was highly valued there. This was back in 2002, but we saw people in Mexico wearing "Reagan 1984!" t-shirts, or in one instance, a Mexican lady wearing a purple "California Raisins" shirt that was at least a decade old. The incongruity was startling. I doubt she knew who the "California Raisins" were.
But apparently this used clothing thing is a problem, worldwide. Cheap clothing made in Asia is sold in America and Europe, and once we are done with it, it is so cheap that it floods the markets in third-world countries. It is akin to the problem with free bags of rice we send as "aid" - it insures that the local farmer goes bankrupt. Kind of hard to compete on price with "free" isn't it?
I digress once again, but I would highly recommend not driving through Mexico. The roads are in bad shape, and even the ones in good shape will have unmarked two-foot-high "Topas" or speed bumps placed randomly. We got the motorhome airborne over one of these. Not only that, you are likely to be robbed, or killed, particularly today. Back then, it was just the Police shaking us down for $10 or so. Today, the drug gangs decapitate you. Such a shame, too, as the country is beautiful and the people are so nice (other than the drug-gang people). If you think there are no consequences of drug use, think about Mexico today. An entire country brought to the brink so assholes in America can snort coke.
I digress further, but Gloria came to us one day, upset. "My son has joined a criminal gang!" she said, "He has joined the Police department!" That is how messed-up things are there.
Anyway, I got to thinking of this old story when I was cleaning out my closet. Like most Americans, my biggest gripe in life isn't having too little, but having too much. It is obscene how much shit we Americans have. We have too much food and constantly are worried about dieting and losing weight. We have too many cars that clog our roads. We have too many "things" cluttering up our houses. We have too many clothes jammed in our closets. And we have too much trash filling up our landfills. In a world of scarcity, we live in a country of excess.
Aren't we lucky? Good, now act it - be grateful for a change! That's the worst thing about America and Americans. We have so much but are so ungrateful - wanting more and more because someone else has more than we do. No wonder the rest of the world hates us. And no wonder everyone wants to migrate here. People in other countries don't see life in America as "hardship" the way Americans do. We are a nation of whiny little bitches.
Anyway, I started going through my closet and realized that I had like 50 t-shirts and 25 Hawaiian shirts. I have a drawer full of shorts and another stuffed with socks. And I also realized that more or less, I wear the same three or four outfits all the time. There are clothes that don't quite fit right (they just are not comfortable) or shirts that seem inappropriate to wear. For example, I was in Fredricksburg, Texas, and we went to a German schnitzel house. It was fun and I bought the t-shirt, only to realize the guy on the shirt, quaffing a big German beer, bore a striking resemblance to you-know-who. What's worse, is that it said, in big letters, "Adolph's Schnitzel Haus" on it. I mean, wearing this shirt made me look like I was endorsing Nazism.
Other clothes are "too nice" to wear (what am I saving them for, my funeral?) and yet others are deemed worthy only of changing the oil on the car. I save an old t-shirt for "painting the house" or something, only to ruin a good one by forgetting to put it on. It is borderline hoarding behavior.
The only thing I don't have anymore is suits. I think I have one sportcoat, but it rarely gets worn.
Anyway, I decided to start wearing everything in the closet, one different outfit at a time, and give to charity the stuff that didn't fit, was starting to get worn, or I simply didn't like. But how to monitor what was worn and what wasn't? When I went to summer camp, some 50 years ago, my Mother bought a set of iron-on labels with my name on them, which she ironed on to my underwear for some reason. She lived in fear, I guess, of us boys exchanging underpants. I had about 100 of these labels leftover, which for some reason my Mother had saved for nearly half a century, and shortly before she died, gave to me - my inheritance! And for some weird reason, I had saved them for another decade.
So this was my plan. I would wear a t-shirt and shorts and whatnot, and if it fit and I liked it, I would iron-on these labels with my name in them, and cut off the itchy neck tag that came with the shirt. This way, I could tell what I had worn and tested (and approved) and what I hadn't. And pretty soon a box of rejects started to accumulate in the laundry room. It was a system! So far, I am only 1/3 the way through the process.
After a month, we took the box to Goodwill. No doubt today, someone in Mexico is running around with a t-shirt that says "Adolph's Schnitzel Haus" on it. But going to Goodwill was an interesting eye-opener. They re-arranged the store quite a bit, dividing it in half. On the right side, they have the traditional store, although shrunken in size somewhat. They have racks of clothing and everything is sold at a standard price or is marked in price. You know, a traditional thrift shop. By the way, these are a great place to buy used DVDs and CDs for a buck or so. You can rip the CDs to your computer, iPod, Phone, memory stick, or whatever, and then donate them back to Goodwill or sell them in a garage sale. DVDs you can watch and then donate back, or swap them with friends or at the local campground. Make sure the DVD or CD is in the case, though or you just bought an empty DVD case for a buck.
So we bought a few DVDs - we didn't see any clothing that fit us that we liked. But on the way out, we saw that the other side of the store had a separate entrance and they were selling "thrift goods by the pound!" What the ever-loving......?
Inside were huge trays on wheels, each about 10 feet long, with junk thrown on them. Clothes, shoes, old electronics, books, DVDs, CDs - you get the picture. And people were literally digging though these bins. Clothing and "textiles" were sold at $1.29 a pound. Anything else was 89 cents a pound. I think they need to just throw away the electronics. An old busted printer that weighs 20 pounds is worth nothing, but they want eighteen bucks for it.
We did find some clothing. One of the campgrounds we are visiting this summer is having a Circus themed weekend and Mark wants to find or make some clown costumes. And find we did - some pretty funny stuff. Actually, it was a drag queen's paradise, with lots of stiletto high heels, platform shoes, and even a pair of "kinky boots" in red pleather. I was shocked the local cross-dressers weren't in there digging.
But what an odd way to sell thrift goods! I mean, how hard it is to put things on hangers and sell them? Then again, they probably are facing a labor shortage like everyone else, and this is a lot easier to do - just dump stuff in the bins and let the customers have at it.
Used clothing can be a real bargain, depending on where you buy it. I've found vintage Tommy Bahama shirts - pure silk - for $10 in Florida, which fit like a charm. Of course, you have to launder these things when you get home. Some folks have issues with the idea of used clothing - that someone else wore it before them. Myself, I am not so fussy. I found out long ago that fussy just costs money. And fussy people are no fun to be around.
In general, though, the wealthier the surrounding neighborhood, the better the stuff at the local thrift store. And maybe it isn't for everyone, but it is worth a look. At the very least, take the stuff you don't wear anymore - for whatever reason - and donate it. Goodwill, Salvation Army, St. Vincent dePaul - whatever. It may not be a tax deduction like in the good old days, but it is a good way to clean out your closet and do a little good in the world.
That being said, it is considered poor form to dump your trash at Goodwill or other thrift stores. People do this, apparently, dumping moldy old sofas at the loading dock at midnight (which if they are not moldy before, become so when it rains). Broken things, worn out things, just plain junk, costs them money to dispose of, in terms of dumpster fees. Just don't do it. But I suspect the sorts of folks who are doing this are the same kinds who dump their trash down dead-end roads or throw old mattresses and furniture onto abandoned properties. You know, classy people.
But again - America! We have so much stuff that we can't even find a place to throw it away. How odd.
A recent article online illustrates two problems (among many) with "crypto" which like "AI" is cool to say but really means nothing. I have recounted before the dangers of crypto - that people are investing in the concept of scarcity itself. It is scarcity attached to nothing, other than an abstract concept.
Bitcoin went over $60,000 a "coin" recently, but then dropped into the $30,000 range. This is not stability or predictability, unless you are the ones manipulating the market for these coins. Two announcements recently caused the value of the "coins" to drop.
First, the Chinese government warned its citizens not to put money into cryptocurrencies. This announcement illustrates two points itself. First, the Chinese love to gamble and make wild speculative investments, and the sudden drop in Bitcoin illustrates who is buying these damn things (other than clueless millenials hoping to make a big score). Second, the Chinese want to offload their wealth into other countries, such as Canada and the United States, because their own government has a nasty little habit of lining billionaires up against the wall and shooting them, if they get out of line. Bitcoin and other cryptocurrencies are an easy way to avoid foreign exchange restrictions and move "money" around the globe, often for illegal purposes. This is the only "legitimate" (if you'll pardon the phrase) use of Bitcoin - doing an end-run on government laws against moving currency overseas, or for buying drugs, weapons, or people online.
Second, our friends at Tesla announced that they are not going to take Bitcoin as payment for Tesla cars, which is a neat thing to say after you've made more money in Bitcoin speculation than in making cars - and this solely because you manipulated the market in the first place, by saying you were going to accept Bitcoin for payment! But we all knew the announcement was hooey to begin with. It can take hours to process a Bitcoin transaction and cost hundreds of dollars. It just isn't worth it as a "currency" of any sort. If Tesla accepts Bitcoin - really accepts it, not just immediately converting it into local currency - it would have to keep a second set of books logging each Bitcoin transaction and then pay suppliers in Bitcoin. Big problem there - no one else takes Bitcoin, so it is a pointless move. They would just have to convert the "coins" to local currency and spend that. And if that is the end game here, then why not just make the purchaser do the conversion at Coinbase or whatever and pay for their Tesla in cash?
There are ancillary reasons as well. Most Tesla buyers, I suspect, finance their purchase. Do you accept payments via Bitcoin when it is such a volatile currency? How does this work for a five year loan? Are the payments in dollars, but paid in Bitcoin, or do you make a series of regular payments of even amounts of Bitcoin? Because of Bitcoin was really a "currency" then you would do the latter. Bitcoin is, of course, not a currency. To be a currency, you have to be able to spend it, not just convert it to other currencies.
These two events illustrate the Achilles's heel of Bitcoin and other "crypto". First, Bitcoin et al. have been successful, in a manner of speaking, only because governments have not gotten very involved in regulating them. But since they are used for so many illegal transactions, it is only a matter of time before they are outlawed. Recent "Ransomware" events, for example, were all paid in Bitcoin, which illustrates why Bitcoin is dangerous (so is Western Union, for that matter). If Bitcoin were outlawed in the US, it would be a lot harder to use "crypto" to pay for ransomware. It is an interesting thought - like the idea of outlawing the $100 bill. Drug dealers would need tractor-trailers of $20 bills to replace their trunks and suitcases of $100 bills. But likely they would switch to the Euro or something if that happened, so maybe it is a non-starter.
If more and more countries outlaw or regulate or otherwise control "Crypto" it could be the end of it, at least for illegal uses. Kind of hard to pay a ransom in a currency which can be electronically traced, which some folks say is already possible with some kinds of cryptocurrencies.
The other problem is manipulation. Since these are unregulated, for the most part, there is very little oversight over these things. If you want to do an IPO, you have to disclose all the financials of your company. If you go on Twitter (as Musk famously did) and say you have a buyout offer for your company for $420 a share, you could go to jail for stock manipulation (in reality, you get a slap on the wrist, but still, the threat is there).
And yes, you can end-run the SEC with these "SPACs" but that sort of illustrates the point. Do you really want to invest in something that was designed specifically to avoid government regulations regarding disclosure? It is like turning off the airbag on your car and hoping for the best. Why would you want to do that? Why would someone want to avoid disclosure regulations? Because they are so super-honest they don't need them?
Markets are always being manipulated, but these new vehicles for "investment" are built from the ground-up for manipulation. As Tesla/Musk illustrated, you can make a quick billion with a couple of Tweets these days. All you have to do is say Tesla accepts Bitcoin, after you've bought a shitload of it. Then, sell your Bitcoin and announce you changed your mind. And hey, if the suckers still don't get it, you can buy-back all that Bitcoin for 50 cents on the dollar after you've depressed prices and repeat the whole scenario again! Are people dumb enough to fall for that gag? You betcha!
Now some might point out that even though Bitcoin et al. is very volatile, it has gone up in "value" over time. Just like stocks have their ups and downs, if you look at the charts from 1929 onward, they go up, up, up! But of course, that assumes your investment timeline is infinity, and none of us will live that long. In fact, what usually happens, is we have to sell a stock or other investment at a time not of our choosing. You lose your job, or the market tanks, such as in 2008. You need the money, so you have to sell. You are chagrined to see that other people have to sell, too. So you take a huge loss on your stocks and other investments. Little people think they can beat the system, but the system beats them.
And sadly, it seems with every market gyration, the little people lose money, and a few people at the top make a shitload. Many a small investor or homeowner lost their shirt in the 2008 fiasco. In 2009, those same houses sold for less than half the price the sold for in 2007 - sometimes less than 1/4 the price. We went down to Cape Coral to see these bargains - by the time we got there, the people with real money - cash and lots of it - had snapped everything up. You can never win, as a leveraged investor, against the guy paying cash. The only real option is not to play their game. Never invest in all one thing, and never invest in hyped investments.
When I was a kid, they had a movie they showed us in the first grade, called "Stranger Danger!" The message to us was clear: Never get into a car with strangers, even if they entice you with candy. You don't know where that car will take you, what their intentions are, and of course, you are not at the wheel. Safer to take the bus.
With crypto - and other sketchy "investments" it is the same deal. You are enticed with candy - the stories of incredible profits to be made and the FOMO - fear of missing out. Sure, I might get raped and strangled to death, but hey, that's a full-sized Snickers bar he's holding out to me! Don't want to miss that!But once that car door slams, well, all bets are off.
UPDATE: Musk is at it again, trying to "pump" up the price of Bitcoin with a new announcement that this time for sure, Bitcoin is going places. Or, he is just hyping something he bought yesterday for half what it was selling for a few days ago. Will the chumpsters buy in again? Or will they learn a lesson after being burned by Musk already? Maybe, maybe not. The "bump" Musk was hoping for didn't really recover the losses. This makes me wonder about his other ventures as well. It would be a shame if the Tesla and Space-X, which are technological achievements, were just the front for a Ponzi scheme.... Let's hope not!
