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Guest Post: Let's Stop Fooling Ourselves: Americans Can't Afford the Future
Submitted by Adam Taggart of Peak Prosperity,
The American spirit is rooted in the belief of a better tomorrow. Its success has been due to generations of men and women who toiled, through both hardship and boom times, to make that dream a reality.
But at some point over the past several decades, that hope for a better tomorrow became an expectation. Or perhaps a perceived entitlement is more accurate.
It became assumed that the future would be more prosperous than today, irrespective of the actual steps being taken in the here and now.
And for a prolonged time – characterized by plentiful and cheap energy, accelerating globalization, technical innovation, and the financialization of the economy – it seemed like this assumption was a certain bet.
But these wonderful tailwinds that America has been enjoying for so many decades are sputtering out. The forces of resource scarcity, debt saturation, price inflation, and physical limits will impact our way of life dramatically more going forward than living generations have experienced to date.
And Americans, who had the luxury of abandoning savings and sacrifice for consumerism and credit financing, are on a collision course with that reality. Like the grasshopper in Aesop's fable, they have partied away the fair seasons and winter is now on the way, which they are not prepared for.
The prudent thing to do here would be to have an honest, adult-sized conversation with ourselves about our level of (un)readiness and how best to use the resources and time we have left while the system still works more or less the way we're used to. There are certainly strategies and steps we can take in the here and now to best match priorities to needs, and meet the future as prepared as possible.
But you won't find this discussion in the national media. Our politicians insist on charting a course of more of the same, no matter how unsustainable, adamant not to touch any political third rails – for fear of not pleasing the electorate and/or donors. Major media outlets have abandoned the investigative journalism that once held the mirror of truth up to power, and instead, run superficial puff pieces that conclude with platitudes – for fear of not offending viewers and/or sponsors. The message is clear: The future will be better as soon as economic growth returns. Or oil prices come down. Or the iPhone 6 comes out. Or whatever the magic bullet du jour.
So it's up to the concerned and critical-thinking among us to look at the math, the hard data underlying the headlines, and construct what we can best calculate to be true.
And the truth is: The three adult generations in the U.S. are suffering, and their burdens are likely to increase with time. Each is experiencing a squeeze that is making it harder to create value, save capital, and pursue happiness than at any point since WWII. At that point, we were a creditor nation with an economy exploding into dominance on the world stage. Now, however, the U.S. is the largest debtor nation and our economic hegemony is increasingly at siege across a number of fronts.
A continuation of the status quo is a decision to sleepwalk face-first into the constraints hurtling towards us.
Instead, shouldn't we stop fooling ourselves and ask: What should we be doing differently?
We'll address that after we walk through the numbers.
Seniors Woefully Unprepared for Retirement
In the late 1970s, the 401k emerged as a new retirement vehicle. Among its touted benefits was the ability of the individual to save as much as s/he thought prudent for his/her financial future. Companies loved the new private savings plans because they gave them a way out of putting aside mandatory savings for worker pensions. For a long time, everyone thought this was a big step forward.
Three decades later, what we're realizing is that this shift from dedicated-contribution pension plans to voluntary private savings was a grand experiment with no assurances. Corporations definitely benefited, as they could redeploy capital to expansion or bottom line profits. But employees? The data certainly seems to show that the experiment did not take human nature into account enough – specifically, the fact that just because people have the option to save money for later use doesn't mean that they actually will.
First off, not every American worker (by far) is offered a 401k or similar retirement plan through work. But of those that are, 21% choose not to participate (source).
As a result, 1 in 4 of those aged 45-64 and 22% of those 65+ have $0 in retirement savings (source). Forty-nine percent of American adults of all ages aren't saving anything for retirement.
Of those with retirement savings, the numbers are not good. Over half of US retirees have less than $25,000 in savings:
(Source)
Most planners advise saving enough before retirement to maintain annual living expenses at about 70-80% of what they were during one's income-earning years. Medicare out-of-pocket costs alone are expected to be between $240,000 and $430,000 over retirement for a 65-year-old couple retiring today.
The gap between retirement savings and living costs in one's later years is pretty staggering:
- As the table above shows, nearly 83% of retired households have less saved than Medicare costs alone will consume.
- One-third of retired households are entirely dependent on Social Security. On average, that's only $1,230 per month – a hard income to live on. (source)
- 34 percent of older Americans depend on credit cards to pay for basic living expenses such as mortgage payments, groceries, and utilities. (source)
As for Medicare, the out-of-pocket costs could easily soar over retirement. The Wall Street Journal reports that the current estimate of Medicare's unfunded liability now tops $42 Trillion. Such a mind-boggling gap makes it highly likely that current retirees will not receive all of the entitlements they are being promised.
And the denial being shown by baby boomers entering retirement is frightening. Many simply plan to work longer before retiring, with a growing percentage saying they plan to work "forever".
But the data shows that declining health gives older Americans no choice but to leave the work force eventually, whether they want to or not. Years of surveys by the Employment Benefit Research Institute show that fully half of current retirees had to leave the work force sooner than desired due to health problems, disability, or layoffs.
Add to this the nefarious impact of the Federal Reserve's prolonged 0% interest rate policy, which makes it extremely hard for retirees with fixed-income investments to generate a meaningful income from them.
The number of Americans aged 65 years and older is projected to more than double in the next 40 years:
Will the remaining body of active workers be able to support this tsunami of underfunded seniors? Don't bet on it.
Taxes and Inflation Are Sucking Productive Workers Dry
To borrow from another fable, U.S. policy is doing its best to kill the goose that lays the golden eggs. Bottlenecked between retirees and the younger "millennial" generation is the current "productive peak" working class. As government, mired in debt and budget deficits, grows desperate to boost tax receipts and keep interest rates on its debt manageable, it is increasingly both siphoning capital and stealing purchasing power from those generating income.
History shows that this cannot continue indefinitely. Eventually you exhaust the incentive for working and your productive class goes on strike.
How close are we to that breaking point? It's not hard to find a litany of articles on the Internet these days warning that it's coming soon:
Personal Incomes & the Decline of the American Saver
If we put all of this together we can see a picture of the average American. The chart below shows the annual change in personal incomes combined with the annual change in personal expenditures. What is clear is that consumption has been supported by rising transfer receipts (welfare) and a drop in the personal savings rate which is now at the lowest level since just prior to the last recession. The consumer is clearly struggling to maintain their current standard of living and all indications are that they are going to lose this battle.
Consumer Spending Drought: 16 Signs That the Middle Class Is Running out of Money
Is "discretionary income" rapidly becoming a thing of the past for most American families? Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought. Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank. Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news. How will we ever have a sustained economic recovery if consumers don't have much money to spend? Well, the truth is that we aren't ever going to have a sustained economic recovery. In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get. Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years
Looking from a bird's-eye view, real wages have been falling in the U.S. for decades. The below chart includes numbers based on the officially reported Consumer Price Index (or CPI, the methodology of which has been changed many times to make the output "kinder and gentler"), as well as those from ShadowStats, which applies a standardized and less fuzzy methodology to try to get to a truer picture. You can see that according to ShadowStats (the dark blue line), real wages have been plummeting in recent years as the Federal Reserve has been running the money-printing machines at full tilt:
Meanwhile, the cost of living has soared as the Fed's liquidity has found its way into the commodities markets and driven prices of essentials higher:
So today's worker is enjoying paying for substantially costlier goods with a materially devalued income – that is, if they are fortunate enough to have an income. Unemployment in the U.S. is still painfully high. Even the recently-celebrated declines are due to a jump in part time jobs as workers take on multiple jobs to simply get by. Full-time jobs are actually on the decline.
At the same time, in pursuit of greater efficiencies, U.S. corporations are investing more than ever in automation. Many of the less-skilled jobs lost during the Great Recession are simply not coming back, as human labor is increasingly replaced by robots and intelligent machines.
And yes, while the stock market is up nicely in the past year, the wealth gains from this are hyper-concentrated within the top 10% – really the top 1%, as this excellent video visualizes. (Warning: viewing this may make the blood boil.) The mean U.S. household currently only has about $50k in savings (and that average is skewed upwards by the super-rich).
These workers have also been whipsawed over the past decade by several asset bubbles blown by central banks that have knee-capped their efforts to amass wealth. The S&P 500 stock index has just returned to price territory last seen in 2001 and 2007, and housing prices are only slowly beginning to rise again in the aftermath of the vicious correction begun in 2007. Sadly, it seems that new bubbles in stocks, bonds and housing are being inflated once again – sure to take a large swath of wealth from these workers when they burst.
Perhaps the arriving cohort of younger workers will be able to support their elders once they hit their peak earning years. We can hope.
But again, the prospects do not look encouraging.
Millennials at Risk of Becoming a Lost Generation
Pity the recent college graduate. The cost of higher education has been far outstripping inflation for years, largely due to that fact that most colleges have no exposure to their students' ability to repay their loans. So universities actually have an incentive to continue to raise tuition and other fees as high as the market will possibly bear.
The average graduate student has a student loan balance of over $27,000 (not including credit-card or other types of debt that many students also have). This puts them into a hole early in their adult lives that delays their ability to create families, buy a first home, or start businesses.
This challenge to capital formation is compounded by the frighteningly high unemployment rate of approximately 12% for those under 30. Not only are companies still hiring conservatively, but given the factors mentioned above, younger workers find themselves competing with older ones for entry-level positions to an extent not seen in living memory.
It's no wonder there's a growing perception that going deep into debt for a college diploma isn't a smart trade-off. A number of today's graduates will be finally paying off their balances around the same time their own children are heading off to college.
And along with the joys of debt-serfdom, younger workers are realizing they can't count on:
- loyalty from the companies they work for
- a national infrastructure that is the envy of the world
- low oil prices
- affordable healthcare
- affordable home prices
- easy access to credit
- Social Security
...and a number of other elements of the "American promise" that preceding generations were able to take for granted.
It's no surprise that millions of young workers are giving up on searching for work.
Of course, the big danger for this generation's members is that the longer they go without work experience, the less appealing they become to employers when hiring does begin to pick back up. Tomorrow's new college graduates will be hired for entry-level positions, leaving many of today's unskilled seekers "unemployable" – a lost generation.
Let's Stop Fooling Ourselves
In summary, if we're being honest with ourselves, the current narrative of recovery being pushed by Wall Street and the mainstream media doesn't make any sense. The American experience of rising standards of living and general prosperity have always rested upon a deep and healthy middle class. That middle class, by mos any available economic or financial measure, is steadily losing ground as a direct consequence of Fed and DC policies.
By forcing the stock market higher, the Fed has simply made a small minority of the country better off By funneling endless amounts of free money to the biggest banks, the Fed has enriched the banking system. The Fed truly seems to believe that this is the right course of action: that a stable and profitable banking system coupled to rising stock prices will somehow generate the necessary confidence within the middle class required for them to once again go on a borrowing binge.
Because that's what the system has devolved into, for better or worse: our economy is founded on credit and borrowing, not earnings and savings. The problem is, outside of the manufactured statistics of government and the manufactured stock prices of the Fed, the median family has far less earning power this year than last. And it knows in its heart of hearts that DC will tax more and return less as time goes on, and that job security no longer exists as corporations ruthlessly pursue bottom line results. Quite rationally, many families are realizing that's not an appropriate environment for taking on more debt.
More profoundly, the big picture numbers just don't add up. A nation that's collectively in hock to the tune of 373% of GDP – not including entitlement liabilities which launch that figure to more than 1000% – needs to seriously face the fact that it cannot make good on its current promises, let alone entertain making them larger. And yet here we are, with every outlet of the current power structure vigorously promoting that "all is well" while minimizing or completely ignoring those who would seek to open a dialog about the wisdom, or lack thereof, of ramming asset prices higher and supporting historically ruinous levels of deficit spending by printing money out of thin air.
Redefining Prosperity
As dire as the trends look, there is much that can be done to ameliorate their impact – and enter the future with grace and optimism – if as a society we have the courage to do it.
There's no doubt that simply continuing along the status quo is a vote for digging ourselves deeper as the constraints of the future arrive. Behavior change is necessary in order to improve our chances.
At the core of the needed change is redefining prosperity. In modern society, it has largely come to be defined by material possessions, usually assuming that the more (and the more expensive), the better.
In the future, we'd do much better to define it by:
- our health (both physical and emotional)
- our purpose
- our ability to meet our needs sustainably
- our relationships
- our level of happiness
In sum, all things that were once valued much higher in our culture.
It's important to realize that when the cheap energy and associated cheap-credit era arrived, the work of all those energy and liquidity "slaves" allowed us to disassociate ourselves from centuries-old customs and live a much more isolated, materialistic life. While freeing in ways, perhaps, we are beginning to realize that those values and norms evolved for a reason. We'll be on a journey of rediscovering their worth as we start trending back towards more historic baselines.
The good news is the list of prudent behavior to adopt is long, and it's growing as we (here at PeakProsperity.com and related sites) work together to identify those with the most promise. This is by no means an exhaustive account, and I look forward to active discussion and additions in the Comments section below:
- Live below your means – Rather than pride yourself on what you purchase, pride yourself on what you don't. That doesn't mean you must live miserly or live in poverty. Learn the peace of mind that comes from knowing you can afford the things you do buy, and the confidence that comes from growing your savings. (Frugality is the #1 quality that all self-made millionaires share)
- Buy quality and maintain it – When you do purchase something, buy for utility and longevity. "Cry once" is a good motto: in other words, pay a premium if necessary to get what will meet your needs best over the longest time horizon (versus "crying often" and spending more $$ over the long run because you bought an inferior product that needed chronic repairs or replacement). Take good care of what you do buy to ensure it will be there as you need it when you need it.
- Take control of your income – Avoid being a wage slave for your entire life. There are innumerable reasons why your situation with your employer can change faster and more drastically than you think. Cultivate an income you "own", either full-time or on the side, so that you aren't left 100% vulnerable to a sudden change in employment. (I realize this is easier said then done, but it is doable by just about everybody. We have a guide we'll publish on this subject within the next few weeks.)
- Cultivate resiliency – Invest in your skills, your homestead, your health, and your community. These will all serve you well as economic growth slows further due to reasons outlined in the Crash Course – and for the skeptics, these are solid investments no matter which way the economy turns. For those new to resiliency, our What Should I Do? Guide is a useful resource to start with.
- Simplify – Learn that less is more. Fewer things to deal with frees you up to focus more on those that matter most. In addition to being a good philosophy to live by, it also reduces the number of things to pay for and the number of things to be taxed on. Both of which leave more money in your pocket.
- Apprentice/mentor – Learn how to do important tasks yourself instead of becoming dependent on paying someone. If you can trade labor for learning, you may be able to avoid some or all of the excessive time and $ costs of academia. If you have expertise, pass it on to others around you. In this way, we create resiliency at the community level, improving the odds that an effective local support network is in place if ever needed.
- Shop & invest locally – Keep capital inside your community to strengthen it and enable re-investment. So much is currently sent to multinational corporations and Wall Street banks – never to return – that even a small percentage redirection will make a big impact at the local level.
- Prefer hard assets to paper ones – In a world of runaway central bank money printing, paper currencies (like the U.S. dollar) are not a smart option for storing wealth. Nor are dangerously inflated paper securities like stocks and bonds. If possible, purchase physical assets you can tangibly hold and store, like precious metals, and for the rest of your investments, find a financial advisor who has a strategy that takes hard assets and depleting resources into account. (We know a few, if you're looking.)
- Consider multi-generational living – The economics of the future may force this on us, and that may not be a bad thing. But it's better to adopt this lifestyle by your own choice, on your own terms, if possible. We have moved so far away from this model of living, at great cost – both money-wise and socially. Knowledge transfer, chore sharing, child/elder care, emotional support, cost reduction, pooled purchasing power – there are many advantages to co-habitating with close family or friends.
- Get and stay fit – The benefits of good health on quality of life, longevity, and net worth are just too numerous to ignore. The modern "sick care" industry over-focuses on treating what breaks. Instead, focus on achieving and maintaining wellness. Chris did it; you can, too.
- Use your productive output as an alternative currency – Much can be acquired without $, in trade for your support or skills. Both goods and services. Learn to ask: What can I trade? before asking How much does it cost? You'll save money while at the same time increasing your perceived value to those around you.
- Pursue happiness – Learn that pleasure comes from relationships, from having purpose, from creation, and having new experiences. All of these can be enjoyed in a multitude of ways, and few require spending lots of money. If you manage to simplify your life (see above) and find pleasure in doing so, you'll be much more likely to enjoy the future, whatever it brings.
- Require awareness and accountability for the future – Hold your elected officials to the same standards you hold yourself. Vote accordingly. Participate in the democratic process. It may not work as well or as fast as we want, but boycotting will only guarantee us disappointment. In a nutshell, hope for the best but don't plan on miracles.
- Trust yourself – Always rely on your own good sense and intuition about what makes sense for you and your family in your unique situation. Do consult with those who have insight and experience to share that will help you make the most informed choices you possibly can, but remember that your present and future are your own responsibility. Do not ever fully relinquish this power to anyone else – not the government, not a family member, not a professional adviser, not even "the experts." Always, always trust yourself first and foremost.
There are other prudent behaviors to add to this list, but this is a pretty good start.
And a good start is what we need, as a country and a global community: to stop denying the reality around us and start getting on with how we want to deal with it.
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Actually American can afford the future if Washington and Wall Street stop stealing it! Fix the Tax Code, Rationize the benfits and we would be fine. Instead we have a tax code that benfits the few at the expense of the many. Everyone should pay in if they are making something. The massive loophole for capital appreciate, charity fraud, offshoring profits, has to STOP. I don't want my taxes covering the deduction for your big house, your cat charity or generation skipping tax scam. Lower the rate and tax it all! A low national sales taxes of 2% should catch the off book people as well. A trading tax of 1% on every trade would eliminate the joke of HFT and useless trading most wall street does. A 1% transfer tax...move money in or out of the country 1%....to stop the money scams that wall street does as well!
What's a "Tax Code"? I no not of what you speak. It is a strange concept for me to be robbed at gun point by criminals who "wealth distribute". I am a mere man, and cannot afford the luxuries of others. Therefore I shall KEEP EVERY-FUCKING-THING that I make/earn/trade for. Fuck YOU Bernanke!
Before socialism and central planning arrived in Amerika, production minus consumption=savings=capital=wealth. Now, we have production minus consumption=deficits=less capital and wealth. Every Amerikan is responsible for their own destiny (savings/wealth), for the most part; that was until government went hog-wild and decided to become a power hungry illusion.
Less government always equals a higher standard of living, provided capital is re-invested wisely. As we are experiencing now, more government has created a monstrous welfare/entitlement state that substacts on a daily basis from accumulated wealth in the form of Benny (FED) sponsored deficits. We is doomed, trapped in the quicksand of debt that has no way to be satisfied except with more debt.
Grow up! Less government my ass. There is no such thing. Either government benefits everyone or just the few. This economic debacle was not an accident. The Oligarchs bought government, lowered their taxes, destroyed regulations and put you on the hook for their debt. There is your less government. You got what you asked for. Enjoy and stop bitching.
HFS!
is there are that many white people in amerika?!
whatching tv it looks like only 30% are white. wtf?
A wonderfull article.
If an economic downturn gets some of the fat off the otherwise decent young women at college then I'm all for a recession.
Like they say, all men are assholes until they hit 40.
A better tomorow when your on the Government take. Good luck lazy assholes. No excuses. Time is on the short side.
did i miss the link to this one...?
Is this the group that Mitt was talking about.
Forty-nine percent of American adults of all ages aren't saving anything for retirement.
Eventually they'll get the SARS virus right and the geezers will no longer be a problem.
"Simplify – Learn that less is more."
Restated:
“A designer knows he has achieved perfection not when there is nothing left to add, but when there is nothing left to take away” ~ Antoine De Saint-Exupery
If the masses can't afford it then prices will adjust downward or the goods and services won't be offered at all. So what.
Why should we be "entitled" to anything anyhow? A comfortable retirement? Really? What a bunch of spoiled rotten human beings we've become, we have every creature comfort imaginable and then we expect an opportunity to "take it easy"? Geez.
My dear late uncle used to say before he passed and after he lost his beloved wife of over 50 years of whom succumbed to the dreaded Alzheimers, "Golden years??? These aren't the golden years! The golden years are when you're raising your kids, going camping, playing games! Those are the golden years!"
Maybe right now it's as good as it gets.
I've lived credit free for the last 30 years. It's easy. It's just like saying no to drugs. The result is that I am truly free to go where and when I choose.
No, you're free to go where you choose when you are TAX free.
Too late. I've already done it for too many years.
Well written and spot on. I thoroughly enjoyed it.
Tom Petty - "Learning to Fly"
Well the good ol' days may not return
And the rocks might melt and the sea may burn
I'm learning to fly, but I ain't got wings
Coming down is the hardest thing
+1 for the Florida boy!
I believe that all countries will eventually see a better tomorrow (not just the USA), but there’s a difficult metamorphosis that we’ll need to go through first, wherein a new monetary system is created.
As ZH readers already know, the current U.S. monetary system is on the verge of failure, and mankind needs to design something that works better; we need a system that promotes balanced growth. I believe the ZH community has the talent to identify a better means, and here’s my humble contribution:
• Fundamentally, the control of the money supply needs to be transferred back into the hands of the people (like it used to be a long time ago). We can achieve that goal by simply using physical gold and silver coins as money.
• The new monetary system wouldn’t utilize any centralized locations where *large* amounts of gold and silver would be stored as backing for paper certificates/notes that were issued to allow redemption of gold or silver upon demand. That system has proven itself to fail over time, and the reason is simple: the people in charge of the precious metal depositories cannot be trusted to ethically fulfill their custodial responsibilities to the public. It’s simply too tempting for them to bend the rules “in the best interests of society” or “in the best interests of our government” thereby causing the public’s deposits to be jeopardized (i.e., due to leasing and swapping, and thereby rehypothecating the gold and silver deposits that belong to the public). Precious metals *must* be physically distributed across a large number of individual hands within society.
• Encourage state governments to mint gold and silver coins. Citizens would be able to turn in their various forms of gold and silver to the mints and would receive newly minted coins in return, at an even exchange rate (measured by net weight). The federal government would also mint gold and silver coins.
• The stamped images on the faces of the gold and silver coins would state only the net weight of the precious metals contained therein; the coins wouldn’t denote any kind of fixed “dollar value”. The prices of all goods and services in the marketplace would transition from being denominated in “Dollars” to being denominated in precious metals. For example, the shelves at Walmart would show prices in silver grams, and if a customer wanted to pay using gold, a conversion based upon current market rates would be easily made at the checkout counter.
• The values of gold and silver would be allowed to fluctuate over time and independently of one another in a manner controlled solely by the markets. That would allow two important objectives to be met: 1. The values of the precious metals would respond naturally to an important and fundamental characteristic of human nature: people desire to borrow money for purposes of *consumption*. That borrowing is what primarily causes the business cycle, and the business cycle thereby causes the value of money to effectively go up and down over time. (During periods of price deflation, lenders desire to stop making new loans and instead, they simply wish to collect payments on their existing loans. Lenders do that because at the peak of the business cycle, they become worried that they’ve loaned out too much of their money and borrowers as a whole are overly burdened with debt and may begin defaulting at a substantially higher rate. During the phase when lenders are collecting gold and holding onto it, there is less gold and silver in circulation, thereby causing the value of money to rise relative to goods and services. During periods of price inflation, lenders loan out the gold they’ve been holding on to, because they’re confident in the economy and they believe borrowers can currently service more debt. During that period of confidence, the prices of goods and services naturally rise because the amount of gold and silver in circulation increases thereby causing higher prices to be bid for limited goods and services. Inflation and deflation occur naturally within markets; excessive creation of fiat currency isn’t a requirement in order for price inflation to occur. Whenever governments have tried to provide “stable money” for public use, they’ve always fought against complex market forces; it’s fundamentally a flawed objective and shouldn’t be attempted.) 2. By keeping gold and silver unlinked to one another (i.e., by not stamping a “dollar value” on the faces of the two different metal types of coins), we’ll prevent one or the other precious metal from disappearing from circulation when one or the other becomes relatively more scarce. Lower-value silver coins are needed as well as higher-value gold coins; you need both to facilitate trade. If silver becomes too valuable over time to serve as the lower-value coin (due to continued increases in industrial demand), another type of metal may be assigned the role of the lower-value coin.
• If any person is convicted of counterfeiting precious metal coins, he would automatically receive a mandatory death penalty.
• Electronic verification systems would be developed to test precious metal coins quickly at checkout counters (if the merchant desires to verify authenticity; the machines would be paid for by the merchants). The coins may be physically designed by the mints to facilitate efficient testing.
• Banks would no longer be permitted to utilize fractional reserve banking (the practice is simply outlawed). When a person makes a deposit to a bank, it’s agreed by the bank and the banking customer that the deposit is categorized as either a “time deposit” or a “checking deposit”. Any gold or silver deposited by a banking customer as a “time deposit” isn’t available to be withdrawn by the customer until the agreed upon maturity date. That allows the bank to lend the gold or silver out to qualified borrowers and to earn interest on the deposited money. Gold deposited by customers can thereby earn interest for the customers, with the mutual agreement that those monies are subject to loss if the bank goes out of business. In other words, the customer agrees to take a risk whenever he makes a time deposit with the bank. If the bank has sufficient gold or silver on hand that’s currently available to lend at the time a depositor requests early withdrawal, the bank may return the money to the depositor with an interest penalty applied (forgone interest income due to early withdrawal). It’s the bank’s option; the bank isn’t required to return the depositor’s money before the maturity date.
• Any gold or silver deposited by a banking customer for the purpose of a “checking deposit”, must remain at the physical address of the bank and that precious metal cannot be loaned out. The banking customer agrees to pay a fee for the privilege of writing checks against his “checking deposit” balance and the banking system is responsible for settling interbank balances for physical gold. In other words, the banks would be required to transfer physical gold to other banks in order to cover *net* physical gold imbalances. That rebalancing process would be performed at the close of business each day, and any physical quantities of gold currently in transit would be considered to be part of the destination banks assets as soon as the shipping process begins. There wouldn’t be a centralized “clearing bank” for the purpose of settling interbank accounting. Instead, there would simply be a distributed on-line system that would calculate net balances due each bank, and the details of that system would be available for inspection by any member bank at any time. Doing things that way would prevent the fundamental control issue that emerges when one large centralized clearing bank is set up to service a large number of individual banks.
• If a banker is convicted of operating a fractional reserve system (or any type of Ponzi scheme), he would automatically receive a mandatory death penalty. The banking system requires the utmost trust from society, and therefore it’s appropriate to hold the bankers responsible for a high level of ethical conduct and to respond with severe consequences for unlawful activity.
• The federal government (and all state governments) will do business with the distributed banking system just like all of the private banks. In other words, the government entities receive no special privileges, and they must settle up daily using physical gold transfers just like all of the private banks. There are several important benefits of doing business that way. Namely, when a government entity runs out of gold, it cannot continue to spend money that it doesn’t have.
• The U.S. Constitution would be amended to include a flat tax for federal and state levels of government.
• The U.S. Constitution would be amended to require balanced budgets by the federal and state governments. In the event of exceptional circumstances (e.g., a war declared by the U.S. Congress), the federal government would ask the people for *donations* to support the defense of our country. If the war is on U.S. soil, American people would give generously to the cause, since they’d want to protect their own families, businesses, and lives. By making war funding dependent upon donations, the people would be able to greatly reduce the number of inappropriate wars that the U.S. Government is currently waging all around the world. For example, if the American people didn’t desire to donate their savings (and their soldier’s lives) towards fighting a war in Afghanistan, the conflict would likely end, simply because there wouldn’t be enough gold held by the federal government to pay for the war effort while also meeting its fiscal responsibilities here at home.
• Okay, those are my humble ideas for building a better tomorrow. (Sorry about the long post, but I honestly believe there’s value therein.)
Very nice and well thought-out post!
At last...we are on a Path Forward.
5-year-old: I would like 3 milligrams' worth of jujubes please!
That part about the images on the coins...there should be no images on the coins. Let's be done with this president worship crap.
Interesting effort. Thanks.
Other than the problems of denomination, weight (heaviness as well as unit - I prefer metric), and donations from corporate entities to fund wars, I don't see why it can't work a million times better than how it is now. Transition could be tricky. All the top 1% have to do is corner the physical market and sit on their assets to prevent the circulation of metal and watch prices skyrocket, making them wealthier.
I must admit that I have always thought that the specious objection to the use of specie (physical precious metal) money, that it is "heavy", to be nothing but a red herring, and probably nothing more than pro-fiat bankster propaganda.
I mean, just think about it --- when one lousy ounce of gold (one ounce being approximately the weight of three US quarter dollar coins) is TODAY worth more than $1500, just how much weight in coinage would one really have to carry on any kind of regular basis? Even accounting for making change, I cannot see it ever being more than two or three ounces in coins, which is probably less weight than the average set of keys. Do you, or anyone you know, routinely carry more than $1500 in cash today? And even if you wanted to carry $10,000 in physical metals today, that would only weigh about six ounces. So honestly, this "it's too heavy" argument is nothing but tripe.
+1
Thought about it, and excluding instances where change for a gold 1oz was given in silver for a nominally small purchase, I think you're correct. In the course of an ordinary day, weight should not be a problem. Getting the correct weight change might be, but portability is not. Interesting that the truth is counter intuitive, so perhaps I have been hoodwinked about the utility of pms.
Thanks YHC, and I am very glad if I have been able in some small way to help somebody else see this subject in a new or unexpected manner. My prior post, by the way, was certainly NOT intended as any kind of slam or rebuttal of you personally, and I am happy that you seem to not have taken it in that way.
Personally, I would LOVE to see a purely physical PM monetary system (aside perhaps from checks being written for VERY large sums, or for large business transactions). Given the option, I would chose such a system in a heartbeat, and it hardly needs saying that virtually none of the bankster-inspired shenanigans surrounding our current fiat monetary system would be possible using purely specie money.
Well it is true that I got to think about this in a new light because of your reply. Intuition and reason are never usually far apart with me, but it is surprising how wrong I was about PM utility. I wasn't able to get over the heavy coin concept buried deep in my head. Thanks mate
"All the top 1% have to do is corner the physical market and sit on their assets to prevent the circulation of metal and watch prices skyrocket, making them wealthier."
Haven't they already done that?
You're ideas are all fine and dandy. Except to the elite. They'll try to get rid of us, you're idea of a "difficult metamorphosis" in my mind is going to be possibly full scale nuclear war, millions fucking dead, the same stupid fucking clowns at the helm when it's over. Except the helm will have nothing left to control.
Who knows, we'll be finding out.
.
Ehm... well... New N0rmal 2.0, I guess. And what does "äfførd" mean? Printing?
Stop with the gloom already, it's RECOVERY SUMMER 4!
Time to throw all of your extra $$$$$ into stocks!
Buy High! Sell errrrrrrrrrr HIGHER!
I can afford the future, i put my daylight savings in a FRB. Should be rich by Nov. An old Indian proverb... "Only a government would think they can cut a foot off the top of a blanket and sew it onto the bottom and have a longer blanket."
We have Bernanke spewing out $85. Billion a month. Just this year. How can the Government ever cut the amount of money to pay down the debt, much less keep up with all of the Money Bernanke is printing?
Plus, the Money being printed goes to a very select few, Bankers and even Foreign Bankers. Yet, the American Citizens are expected to pay it back and they did not get any benefit from the Money. Except higher Food, Gas, Energy prices and the devaluation of their Dollar.
Off grid, Self sustainable lifestyle....
It's the only way forward.
Heimo Korth....The guys a hero among self sufficient folks around my parts....
http://youtu.be/Iq0rZn8HFmQ
Bernanke systemically printing Money on Americas Debit Card and giving it away to all of the Bankers and the 1%. In the mean time Bankrupting the Country. While the Congress and the Senate try to figure out a way to pay for it on the backs of Seniors and Citizens.
always heard from older co-workers that the 1960's were their best purchasing power/cost of living
The US peaked in 1963, and it has been all down hill since then. The resiliency of the past is gone, as the extreme debt limits any options or recovery.
http://incogman.net/2013/03/never-ending-jew-psyops-on-america/
This is bullshit. You get a few military generals to bring back the gold JPM moved offshore. Arrest the banksters and bring back their stolen wealth from abroad (from the Caymans and elsewhere). Throw the crooked politicians into prison with the Madoff and the others. Open up the bank of the United States with Bitcoin as its global currency which must be maintained by the open source community. Re-install the Constitution of the United States of America. Axe the law (that was never ruled on) that allows corporations to be individuals. Install term limits. And pass a law that makes anyone trying to lobby a politician a traitor guilty of treason. Implement tariffs and duties.
In other words take back Washington D.C. and the Federal Government from bankster occupation. Then you'll know what is possible and not before.
Alexis de Tocqueville had it spot on when he said, some 200+ years ago, that the problem with Amerika is that when 50.1% of the voting population figures out they can vote themselves free shit, at someone else's expense, the gig is up and the country will fall apart. Amerka's politicans are pimps - the public dumber than a bag of radishes. It will end very badly.
http://www.vegasxau.blogspot.com
Good article.
But when an otherwise good article about "reality" neglects the Criminals and neglects the Controllers,
it is disappointing... in a very big and important way.
Because it's not really about reality then, is it...
Banks and Corporations can't afford the future of America.
They'll be re-locating offices and staff to China and Africa before long.
Once they've bled out the middle class they'll offshore completely so they can run the sick-care hospitals and retirement homes from a distance with no resuscitation orders sanctioned by Uncle Sam.
Once we finally realize the worlds economies are built on nothing but sand, we find out the wealthy own all the sand.
What has been brainwashed into the mindset of most human beings via the most evil weapon of mass destruction ever conceived, the TV, is that people are sand pebbles. It is now become vital that people stop thinking like the sand pebble, and start thinkng like the beach. These babylonians think they own the sand, but in truth, they will never own the beach.
A better version
http://www.youtube.com/watch?v=ZLQ7klqYE_4
Jim Willie: The collapse is at our doorstep....
http://www.silverdoctors.com/jim-willie-the-collapse-is-at-our-doorstep/
Nothing like a good Jim Willie throwdown....
I hate to say it, but we need to have some type of corporate VAT and transaction fees for all those corporations that pay nothing while doing business in the US. We give them free Fed money for them to build factories in China, we give them cheap shipping and no tariffs to bring those goods into the US, and we give them tax breaks so they pay no corporate income tax. The global tax model is broken when corporations can move HQ to a low tax country while maintaining operations in higher tax countries.
then let's not fool ourselves anymore. there's no future for anyone.
Projected population of USA 2010-2050..............hahaha
You know that graphs not quite right. Did they include a zionist dictatorial police state government, gmo, flouride, chemtrails, radiation, starvation, biological war, civil war, nuclear war or any other wars since the rest of the world hates the USA (who could blame them?)?
What a joke....I see that graph cut by 60 to 85% by 2020 and about the same for the people younger than 65.
Can't afford the future?
Hell we can't afford the present.
Tomorrow is just a new chance to make the same old mistakes when you're a central banker.
Summed up in one sentance: "it's time to take the 'baby' out of 'baby boomer'"
I already did a lot of stuff on that list years ago because I seen this shit coming.
I was a fucking nut back then in most peoples eyes ( and some here depending on if im drinking at the moment lol) and now it amazes me that just about everyone is becoming an "expert" on the subject of collapse and how we are going to become a barter system, etc etc etc etc.
Now i'm going to jump out in front of this crowd and tell them "I sure am glad you listened to me 15 years ago because now we're fucked and most likely in the worst case scenario most of us are going die."
And now im fucking crazy again.
Being prepared for what's coming isn't the hard part. The hard part are the 99.9% of the population that won't be and I don't care how many fucking guns you have.
they gotta find me first.....
good luck
I agree. In a SHTF scenario, many will perish. I'd say 50% of the US population after the first 3-6 months. I can imagine all the decaying/unburied bodies will cause insurmountable problems and health issues.
My wife and I started out on this journey 8 years ago and everybody thought we had lost our minds. The house we sold and the life we led and gave up.
Not any more, (especially the last year) now they want to know our every waking thought. I get 50 emails a day looking for advice on this new life we created.
It's over, I don't really know what it would take to convince people....no freaking idea.
If you are not serious, I mean real serious at this point about living a new life....forget it. It's over.
Food and energy.....wake up
Is it trickling yet?
No? Don't worry it's still not heavy enough up there to push it down. So keep piling it up there and eventually it will and then future will be bright for a long long time.
Case in Point. I suffered a compound fracture and dislocation of my right ankle around noon on 12/31/12. Sweetie (yes, why get married again and give up sex) bought me groceries for the next 7 weeks until my cast was removed. As was catching up on business, I didn't go to Earth Fare (yes, I'm a granola republican) until 3 days ago.
F'ing sticker shock. Grass-fed ground beef had gone to $7.99 from $5.99. Organic canned beans (12 oz) from $1.18 to $1.49. Dried cranberries up 20%. DRIED CHERRIES $8.99/LB. F*CK!!!!
No inflation my ass. "Osama, Obama, Gorilla for sale, How much is that Go-Rilla for sale in da window?" 15 points awarded who can identify that cartoon theme from the 70s.
MAGILA
"...up 20%."
"We will just have to find out what is in the bill after it is passed."
"Wow, that is a big fucking deal."
Yes, it's the 20% tax on every single thing that can be bought anywhere to pay for the obama care that has yet still to unroll even more wonderful things to find out after it was passed. Prolly going to be the final stick that broke the poor Americans back.
Change!!!
I will vote for the politician who starts to tell the people the truth - that the generated wealth of the world has a finite capacity to expand (if it even is expanding) and as the nations of Asia increase their wealth, we must necessarily decrease ours. Now that we are at near peak global consumption, global wealth is no longer a balloon, but rather a see-saw; we need to start getting used to getting by with less consumption. The person (and it may very well be a woman) who finally starts to articulate the truth will get my vote.
Yeah - common society has its illusions, and I have mine .......
My Zerohedgers - Regarding this point
Get and stay fit – The benefits of good health on quality of life, longevity, and net worth are just too numerous to ignore.
-----------------------------------------
Now my question - is say 1-2 hours of intense exercise 5 or 6 days a week sufficient. problem is what if one is hooked on a commonly prescribed stimulant that is hard to quit but gives you that energy -- Adderall plus Energy drinks? now how does one unhook themselves from this substance? going from 30 - 60 - 80 a day but it does give you decent amount of energy and motivation
Happiness is a warm gun
Beatles for you youngins
If you can't afford it, just borrow the money. I'm going to divorce my wife so she's not tied to me financially. Then, I'm going to take out all the loans for college, the house, cars, vacations, etc... And, when the bill comes due, i'll just move to mexico or jump off a bridge. FU banks, I'm dead. Jokes on you. sucker.
The masses of boomers are generally rational. In general, they didn't want too much risk or additional headaches from starting a business or buying investment property. so there were only two "normal" choices:
1. Save paper money (under the mattress, in the bank, 401k, RRSP's, bonds, etc)
2. Buy a large house that will gain in value.
They know that cash gets devalued and the markets can crash, but house prices generally go up. So the only rational decision is to reduce your savings and buy the biggest house you can.
The problem is that after all these Boomers have most of their net worth in their property and very little cash (needed for old-age health-care and services), when the demographics shift and a they start dying, there will be an over-supply of real-estate in the hands of too few younger adults who are themselves already debt-saturated. Young adults will try to raise cash by selling property, but that will be a nightmare since they will get much less than they hoped for. The illusion of wealth will finally be broken., and rental income will plummet after that.