Financial topics

[gerald]

There are two considerations here -

1) Those that have worked and have earned pensions. The pensions, like the health benefits, are actually part of the person's salary, but the first is (as today's catchword goes) "deferred salary" and the second is, like all benefits, "in lieu of salary."

2) Those who are too young to work and whose parents either can't support them, won't support them, or are dead.

A subset of those are teenagers who are quite able to do some jobs but whom our very own labor laws relegate to begging, stealing, and prostitution.

Your answer in such cases?

I am aware that benefits are a contractual agreement, and society has a structure, but when things get pushed too far, something has to give and it may not be very pretty.

Otto Von Bismark, Germany, 1870's created a pension system, but as time went on he had to raise the retirement age because of cost.
I do not have a solution, but it will get interesting.

[Samir]

Regarding the health care and pension problem there is a solution, nature's way. Nature, ultimately, always has the final say.
The solution.--- From a cost benefit perspective if you do not work, you do not eat. Regarding health care, if the cost is excessive verses the persons future productivity, sorry. Yes, this is a cruel approach, but societies have done this before, in order to survive. As an extreme example, you can't have every healthy productive person taking care of an old nonproductive person, After all, who is then left to create the goods necessary for survival? By the way, I am in my 60's, reality is reality.

I think you are forgetting a couple of basic economic principles. Fist of you are missing the second half the major economic equation: Supply (production) needs Demand (consumption). Just because somebody is not on the production end, doesn't mean they are not contributing to the economy. Capital flow is very important, and producers need to see return for their production. Secondly, Labor is not the only factor of production. The three factors of production are Land (natural resources), Labor (I include entrepreneurship in Labor), and Capital (or capital Goods). When you work, invest, use (or let others use) your resources (for production or consumption), or consume, then you are contributing to the economy.

With that being said, there have been many proposals for fixing healthcare. I am not a fan of the Canadian an UK systems of single payer. I prefer the French and German system if we are going for universal coverage. My favorite proposal so far is the Universal Healthcare Voucher. The bets part is there has already been a lot of number crunching and examination of this proposal. If you are interesting in learning more here are some links (the first links are newer):

Different Way to Pay for Health Reform
A Blueprint for Tax Reform and Health Reform
A Comprehensive Cure: Universal Health Care Vouchers
Beyond Health-Care Band-Aids
The Universal Cure
Getting Covered
Health Care Expenditures Reexamined
Solved!

It is also important to remember that the way we fund many of the social programs, and the poor tax structure in the US is as big a part of it. Though many of the programs could use an overhaul, have better alternatives, or should just be eliminated.

[The Grey Badger]

And BTW, there is the "non-producing" homemaker, also said to be "not working", whose labor in dollar value can be disputed (or why every family reaches its own tradeoff with dollars earned vs dollars spent vs do-it-yourself labor), and who has been written off in decades past as a "dependent" whose household budget has been termed her "allowance" as if it were pocket money for comic books and soda pop, but when a family does without her, watch the expenses climb.

Not all producers are in the labor market.

Pat, mother of a stay-at-home mother and formerly one herself - who quit that racket because I never had a nickel in my pocket to call my own. But my daughter is as canny a budgeter as a Highland Scots farmer.

BTW - I know full well things are going to get ugly, and that my daughter's age group is bearing the brunt of it right now. When we go into survival mode, the resources flow to the breadwinner and everybody else supports the breadwinner nonfinancially and we all stick together, or we go under. I'm decidedly well aware of that and stand prepared to do what I can for my daughters and grandchildren if they need me. And to cut way, way back and live a lot more simply.

BTW - some health care expenses can be avoided at the end of life by saying, as I did in a document on file with my doctor and my lawyer-brother, essentially - "If making the repairs will make me functional again, do it. If nothing can be done, I want to go home and live my days in what comfort is possible." I saw the suffering caused by the GI meme that you do everything you possibly can at all costs, even if it means six more months of agony for the patient, who dies anyway. We all do. People I know are even taking that approach with aging pets.

[wvbill]

Not to worry --

Abraham Delano Messiah Obama will save us...

Sorry, I found this name somewhere on the Mises Institute Site and had to relate it.

Bill

[mannfm11]

John, I have been waiting on what you were going to say about this recent bull crap. I didn't think you were going to change your mind. The whole world economic team seems to be shameless, including the Chinese, who might be the most shameless of all. In any case, Bernanke and Obama seem to want to outdo each other then create acts about deficit spending. Bernanke must be out of his mind if he thinks he could let the lending around the world get heated up then take up the liquidity. Obama has a deficit 4 times as large as any in history, not all his doing, but with a straight face he says he will get it to half of what it will be this year? Half is twice of the old record. They aren't going to fix this mess in that manner.

What I do believe is going on is the extra funds being put into the system are going toward speculation. The price of oil is absurd in light of the glut around the world. It is shameful that operations like Goldman are taking easy money from the tax payers and using it to speculate at the publics expense. When this crapshoot fails, the public will get the bill again, as Goldman, if they fail will be too important to fail. I believe they have their finger in this and I believe they only issue false information to the public at large in an attempt to create enough public interest to assist them in leaving a position. Last year, they came out with the $200 a barrel prediction right on the top.

I have read that the forced fed money in China went right into speculation. They are hoarding commodities right now. In the old days they called this a corner. They will stop buying at some point if they are in deed putting up a supply and when they do, they will have been the demand. Also, the speculation in the Chinese market will also come to an end with no buyers to take the buyers out of the market. Demand worldwide fell so fast and sudden that the uptick in activity has a lot to do with many companies moving from a dead stop, not picking up the pace. I really don't believe we have seen the coming adjustment to lower world demand for finished goods.

Here is the other point. I have written this over and over again without having ever read it until I read it in a Murray Rothbard book. That is that money does not exist in banks. We are seeing tens of billions being poured into the big banks in recapitalization efforts. This is nothing more than increasing the share of money already in existance that the bank has as skin in the game is all. Thus these deposits are really nothing more than the systematic killing of the liquidated assets bought by the Fed. There was $700 billion in TARP. If the government actually floated bonds for this, it would have been $700 billion taken out of the money supply. I really believe when all is said and done, the money Bernanke has in the words of many as being printed have gone to the furnace of bank capital hell.

The $64,000 question is, who is going to step up and lend the bad credit risk on the margin money to buy consumer goods this time around? All you hear on CNBC is that this or that is damaging to the consumer. Bullcrap. How do you get any kind of balanced trade with China if the mantra is that we are going to spend ourselves out of this? I believe the US is dangerously running close to a credit crisis on an international basis to the point that we could wake up one day and there be no gasoline at the corner station. I hate to say it, but this is the way the world is set up and I don't believe many are satisfied that it is set up this way. But, it isn't going to change any time soon that China is going to be its own demand unless its demand is arms. So we go to this absurd point that we have to spend ourselves broker and broker. The problem is that the dollars necessary to pay the debt are no longer here, nor are they sufficient in this world of compound interest.

Once this rally overlapped the bottom of the January low, I knew it was probably going higher. I actually believe we rally into mid July if not longer. Remember we are seeing $50 to $100 billion in stock go over the counter every day in the USA, which means that probably 90% of the volume is speculation. The speculators need dumb money to take them out of dumb trades or smart money to take them out of smart trades. The money is not there on the margins, despite the large money market balances. Who would be so stupid as to plunge into a market that has gone nowhere for 10 years and is still valued at a historically high price. I wish we could avoid this trip, but we are likely headed for national bankruptcy before this one is done.

[gerald]

We live in interesting times. Many things seem to building to a crescendo.
There is at least one "Black Swan" event on the horizon, and it is quite interesting.
Some people know of it, and they are either pushing for it or are trying to prevent it.
If it occurs, it will be beneficial, it will solve many problems and alter the landscape. It could come like a tsunami, very fast, but unlikely. It will most likely come like a fast moving glacier, grinding every thing down in its path. What will this "Black Swan" affect? How about governments, militaries, technology, education, religions, etc. In short just about everything. Which is why it is being resisted. When the dust settles, we will never look at things the same again.

[JimZ]

Gerald,
Sorry if I'm being too lazy by not reading old posts, but I am curious, what is a "black swan event"? Thanks

[gerald]

Jimz
.
You are not being lazy, a "Black Swan" event comes from the book by Nassim Nicholas Taleb, "'The Black Swan", sub titled
" The impact of the highly improbable". He states that history has been changed by highly improbable events, he also destroys financial annalists and number crunchers. A simplistic example given of a "Black Swan" event, is that of a turkey which is fed and taken care of by his owner. From the perspective of the turkey, he is fed , protected and taken care of, he likes his owner. The "Black Swan" event, for the turkey, is the day before Thanksgiving.

In my previous statement, there is a "Black Swan" event coming, very different from the above example. Those who know of it, on either side of the fence, know it's importance and are acting accordingly. For the others, it is so far off the radar as to be unbelievable. When the time comes I will post information regarding it.

Gerald

[wvbill]

Gerald,
Sorry if I'm being too lazy by not reading old posts, but I am curious, what is a "black swan event"? Thanks

Jimz

In my previous statement, there is a "Black Swan" event coming, very different from the above example. Those who know of it, on either side of the fence, know it's importance and are acting accordingly. For the others, it is so far off the radar as to be unbelievable. When the time comes I will post information regarding it.

Gerald

I think we know what Black Swan events are -- I, also have no idea what you are talking about. Please Enlighten us...
I fail to see the purpose of your post.

Personally, I think there are enough White Swan events going on right now to bring serious collapse.

Bill

[John]

From a web site reader:

> what are the safest places for funds? i have most of my ira in
> cash reserves and u.s. gov't reserves with one of the major mutual
> fund companies. are these safe enough? i'm thinking of
> transfering some of it my local credit union which is at least
> covered by fdic.

> i hope you don't mind the question and i would understand if you
> decline to answer, but i'm relatively new at managing my own money
> and am trying to take responsiblity for myself.

You're going to have to investigate exactly what investments your
mutual fund company is making with your money.

The phrase "cash reserves" can mean many things these days. For
example it might refer to a bank CD (hopefully FDIC insured), or it
might refer to commercial paper from one or more corporations.

Even if it's invested in a bank CD, you may still lose money if you
don't own the entire CD, but own a share of a pool of various money
market instruments.

Call your broker and tell him that you want to transfer your IRA
funds into an FDIC-insured CD or into short-term Treasuries.

I have to add that Higgenbotham posted some warnings a few weeks back
in this thread, saying that even some Treasuries aren't safe when
purchased through dealers. He suggested purchasing your
http://www.treasurydirect.gov .

I would also suggest that if you have a home with a basement or some
secure area that you hide some cash there.

Diversifying your holdings by moving some into an FDIC-insured
credit union is a good idea as well. By having your money in
different places, you have a better chance that some of it will be
available as the crisis proceeds.

There are no simple solutions today. You have to research your own
situation and devise a plan that will work for you and your family.

Sincerely,

John