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The Solution To The Declining Middle Class: Destroy Fixed Costs And Debt
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The solution to the erosion of the middle class lifestyle is to destroy debt and other fixed costs and eliminate self-sabotaging discretionary consumption.
Last week I covered the structural dynamics causing the decline of the middle class. In general, the costs of untradable services (healthcare, higher education, government) and the rot of financialization have increased while wages have stagnated. The Federal Reserve's "solution" was to make everyone who owned a house a speculator who could only keep even with rising costs by riding the asset bubbles higher and then extracting the "free money" generated by these bubbles before they popped.
The Decline of Small Business and the Middle Class
The Changing Nature of Middle Class Work
How the Middle Class Lifestyle Became Unaffordable
The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle
The Changing Nature of Middle Class Work
How the Middle Class Lifestyle Became Unaffordable
The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle
Let's take two representative households to understand the decline of the middle class and the solution. Let's say both households earn $81,000 annually, virtually all from wages and salaries. This puts the family at around the 70% mark of U.S. households, just within the top 30%. (For context, the 2011 median household income was $50,054.)
This income is solidly middle class: not low enough to qualify for much in the way of government subsidies but not high enough to avoid prioritizing and trade-offs.
Household A has a big mortgage on a house they bought near the top of the market with a minimal down payment, student loans, two auto loans and credit card balances. After making the loan payments and paying for utilities, transportation, groceries, employees' share of healthcare costs, eating out, mobile phone/broadband/TV service plans, there is little money left to save for emergencies, travel, college for the kids, home maintenance, etc.
How do we describe this family: middle class or debt-serfs? Actually, they're both:measured by what they superficially own (home, two vehicles, communication and entertainment devices, college degrees, etc.), this household is solidly middle class. But measured by how much income is spent servicing debt, how much is left to accumulate or invest, the family's net worth (their assets' market value minus debt) and generational wealth, this household is mired in debt-serfdom: their debts will never be paid off.
The mortgage will never be paid off, and by the time the parents' student loan debt is reduced, the next generation's student loans are piling up. The auto loans may eventually be paid off, but it will look cheaper to buy a new vehicle with a modest monthly payment than to pay costly auto maintenance with scarce cash.
Debt anchors this household's fealty to the state and financial sector as securely as any medieval peasant household's bond to the noble's manor house. This is the basis of my characterization of the U.S. economy as a neofeudal arrangement based on debt.
Household B shares the family home that is owned free and clear (mortgage has been paid off) with other family members, owns debt-free vehicles and maintains the cars themselves, rarely eats out, has no student loans (either paid cash for college, used scholarships and grants or paid their loans off), buys cheap catastrophic medical insurance and invests money in staying healthy/preventative care, i.e. eating and preparing real food and enjoying regular fitness, lives close to work, invests some of the ample family savings in enrichment (lessons for the kids, etc.), occasional frugal travel and income-producing assets and retains the rest for emergencies such as vehicle breakdown, medical emergency, etc.
If this scenario seems "impossible," recall that 1/3 of all homes (roughly 26 million houses) in the U.S. are owned free and clear, i.e. there is no mortgage.
How do we describe this family: middle class or wealthy? Actually, they're both:this household has a solidly middle class income, but because they've eradicated fixed costs (most importantly, debt, costly "gold-plated" healthcare insurance, etc.) and discretionary luxuries such as eating out, costly entertainment plans, etc., but measured by their values, behaviors and net income saved and invested, this household is upper-middle class or wealthy, having achieved a level of prosperity that eludes free-spending households with double their annual income.
The solution to the erosion of the middle class lifestyle is to destroy debt and other fixed costs and eliminate self-sabotaging discretionary consumption that cripples the household's ability to accumulate capital that generates income. There is nothing magical about the values and behaviors that enable this; it boils down to choosing to leave the permanent adolescence of debt-based consumerism behind and move up to a more prosperous, productive way of living: doing more with less.
I am indebted to Paul C. for this graphic depiction of how instant-gratification consumption that appears "cheap" is actually horrendously expensive when the consequential costs and alternatives are considered:
This is but one example of many in which the lower-cost alternative is the better choice, not just in value but in opportunity costs. We assess the opportunity costs of every purchase or loan by asking one simple question: what else could we have done with this money?
It's a question that is scale-invariant, that is, it works as well for a nation as it does for an individual, and every organization between these two ends of the economic spectrum.
In the case of the debt-serf "middle class" household, the answer to the question, "what else could we have done with our money?" is slowly build productive assets and prosperity that is within your own control.
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Right to work states actually have jobs that you can work at. Closed shop states have gov dependency.
Nope, right to work states have the highest poverty rates.
....and the lowest educational levels with the worst health care. I live in one, too. The rallying cry in SC for decades has been "Thank God For Mississippi".
I am not a huge fan of Unions, but do believe in workers right to organize. However, management has to be strong, too, and not cave to unreasonable demands. That is what happened too often in America. Weak management enjoying good times kept giving in to ever more ridiculous Union demands...just as pointed out above happened to CAT.
Govt. Unions, however, should be outlawed to stop the rape of the taxpayer.
When you work inside a company like Cat and get to know your fellow employees and their attitudes, it's not entrepreneural at all. It's very socialistic. Many go into work day after day moving paper from one side of their desk to the other. If they die the person who takes this paper and puts it in his round file may miss him. That's about it. Still, a very small part of that workforce is able to produce truly high quality products.
When I worked there 40 years ago they had about 75,000 people and did $2B a year. Now they have 125,000 employees (up 66%) and do $66B (up 3300%). They now have lots of computers and lots of robots.
I steal citrus out of my neighbors yards and juice it reducing my orange juice costs. I also have sex with other peoples wives and girlfrieinds which reduces those associated expenditures.
Don't get yourself shot!
No keep going
Free Lead Bullets
Whole roasted chickens at Safeway are $5 once a week. How many chickens would it take to pay a GP for casting a broken arm?
unfortunately these are not the solutions to save middle class
the only solution to save middle class is the redistribution of productive capital or at least the redistribution of the added value that that capital produces
that very likely means REVOLUTION and a violent one
Such profane language - "redistribution".
IT SHOULD NEVER HAVE BEEN TAKEN FROM THE RIGHTFUL OWNERS TO BEGIN WITH!
define what is RIGHTFUL owners ?
Why don't you give your definition?
the only solution to save middle class is the redistribution of productive capital
Wow! A commie!
Welcome to the party son. You're gonna take a few beatings. But, seeing that you had the guts to show up, you may just wise up along the way.
If the revolutionaries are waving red flags, I'll end up shooting at both sides.
+1
That's hilarious.
you can call me whatever you want
i am not a commie because what i stated above does not mean i suggest to resolve the issue that way
I am just stating the obvious fact that the middle class can only exist when the wealth is redistributed. In laissez faire case the wealth is accumulated by the top and middle class simply can not compete and goes to extinction
It is a terrible delima, isn't it?
For over 30 years now, income/wealth has been re-distributed to the 1%. It is fact. We rant and rave about it here every day. We have charts and graphs, statistics and theories.
We note the corruption of the various politicians and the electoral system that keeps them in power. We know that laws are written for the benefit of corporations, and not the people. If ever in doubt, just refer to the Supreme Court.
We see the FED handing out untold fortunes to chosen beneficiaries, and essentially telling us to fuck off if we don't like it.
But, as soon as someone suggests reversing the flood of cash from bottoms up to top down, the Pavlovian response kicks in and all the diry "ism" labels start flying. Would be funny if not so sad, but so many of us need our labels to keep us in our little brain-washed comfort zones. The Bankster, the MIC, and the the Multi-Nationals all say thank you for your conditioning and sticking with the herd.
It's going to be hell when they start suspending SS and pension payments, or reduce them by 50% in order to stay solvent.
That only comes after they bail-in your checking account and 401K...but it will get there eventually.
Patience, bent-over.
They print a cool Trillion a year for the Military/Security Industry. They'll do the same for SS when it comes down to it. Although current law allows for a 25% reduction when the "trust fund" is depleted.
and just to point out how screwed we are...doing what needs to be done (a return to living within our needs) will crater the economy.
Ain't but one way out, Lord I just can't go out the door.
And what is our economy? A criminal construct built on debt money and selective enforcement of laws and regulation for the benefit of a small minority. So, if it implodes, who really loses?
You can fight a revolution and spend your blood or you can withdraw and create a value based home economy in partnership with your community.
Doesn't seem like a tough choice.
no one gets out of that event unharmed. Although I know we have to go through this event to finally clear out the fraud and croni run economy, I am in no way looking forward to that day or even decade of reset. But i am looking forward to the 10-15 years post event. Then the whole system builds until it happens agian in 100 years.
Hard to say. It would be ugly. Which should encourage us to eliminate the one tool that is used to re-create the same feudal system over and over- the law. It is the law that protects the criminal and allows us to be herded and bled.
I don't worry too much, I have made my preparations. Now, if everyone else decides to do the same, who will it actually be ugly for? Do you care if the crony capitalist/zionist/illuminati nexus starves and crashes and is eliminated from power? I don't.
Life is not safe, look around you. Do bugs get stepped on, deer shot, fish caught, grass cut, trees felled? Do people not get cancer, run over, shot, raped and pillaged? Are not your earnings confiscated? Are our sons and daughters not killed in the pursuit of "global objectives" of corporations while we honor their sacrifice?
This universe is not safe, but outside of man, it does have a surprising degree of liberty.
Self regulation does not work, nor would self enactment of laws.
I agree, the criminals run the roost, but I trust human nature to create even worse ones at a prodigious rate.
And what we have now does? I remember when a handshake completed a contract and both sided "regulated" their behavior. You see, it is in their self interest. Law just became a means to cheat.
Law has ALWAYS been a means to cheat. It just restricted it to those that pay.
I don't like it but I am not sure opening lawbreaking to all without ability to pay is much better?
So, you're just against competition? :)
he who has the biggest guns gets to take over when the collapse happens. Look at Egypt, Libya, Ukraine. There are very few "Nice" collapses. Most of the time the thugs take over control. Our 1776 revolution was an outlier... not forgetting the masses that died in just producing it. Our civil war, is more representative of the coming collapse.
With all our big guns, we failed to control Iraq nor Afganistan and Vietnam kicked our asses out. Americans in community would produce a much more intractable enemy. The fear card cannot justify tyranny.
Wagthetail --- Live....closing night at the Filmore, 1971. The Brothers riped it.
http://www.youtube.com/watch?v=XAyaw4ktO5g
incredibly obvious
Incredibly stupid article. The real problem is finding that job paying $80K in the first place. Are there enough of these jobs so we can actually have a middle class? For what I see, the answer is no. This article is really all about managing a potential middle class income. It tells us nothing about creating the millions of middle class jobs this country needs if we are going to have a thriving middle class.
No 80k per year jobs... looks like you'll have to get a second 40k per year job to make up the difference. ps, your wife and kids will miss you, if they can just look up from their ipods to notice youre gone.
For most it's too late. And considering this entire sham of a system thrives on debt? Race to the bottom. It will be pinto beans without the bell peppers and bacon.
Yeah...and the solution to drug addiction is to just quit.
Hard to do when it's totally free.
[sound of respirator]
[sound of toke]
WTF? Free? [cough] Where?
[coughing; deep, sack-clinching, boulder-hacking coughing]
Fuck. Now I need a drink.
[sound of respirator, interspersed with tiny hacks]
[sound of good scotch poured neat into a dirty glass] (the helmet mic's in this thing are great..)
WTF? Free? [cough] Where?
You're doing it wrong....this should help.
https://www.youtube.com/watch?v=xLTTX35LNJo
Yep .....Just broke a long time vicodin habit, it's hell but at least sets one free. now if I could break free out of this country once and for all and get my sanity back.
Cold turkey.
MAY ALL CLASSES DISAPPEAR!!!
Well, there hasn't been much of the singular in a while...
Call me when you have no class.
"You are like school in the summer time... Noooo Class!"
(favorite quote from Fat Albert show when I was growing up)
Factor in massive nationwide layoffs every 7 years and lengthy unemployment stints (6 to 15 months) between subsequent jobs with having to sell the paid off house and buy another somewhere else into the picture of both families and you might be closer to the truth.
those prices are fake or? how can u pay so much for food?
u need socialised farming like in the EU. its just fantastic.
The bankers can not survive on a nation of household B's
Sure they can. They Just ask the FED to print and loan to them for free, and mark to imaginary. Voila. instant prosperity.
Pinto beans and rice????? Just kill me, already!! We had Porterhouse steak yesterday!! I can skimp and do without a lot of things, eating ain't one of them.
"I can skimp and do without a lot of things, eating ain't one of them."
Yet.
Craig
A cursory read makes this all seem obvious: spend more than you have and you'll never be able to save and always be paying on interest and not capital. But take this one step further and look what the endpoint of the game is.
Family B has saved and has a house and cars, education without the student debt and potentially hard assests. But all those things depend on a functioning society in order for you to take advantage of them. When half or more of your neighbors don't keep up their houses, your fixed asset house loses its value. The rats and roaches that move in to your neighbors decay don't stop at the property line because you paid off your mortgage. When 30% of your neighbors can't pay for gas or clothing or other fundamentals to hold a job, they stop working and things spiral downward. You may think you're sitting pretty as Family B, but when the majority of families are Family A you're in the same boat.
It is a societal problem, and thinking you'll ride it out and be a winner because you saved, bought PMs and have weapons/dried food is short sighted at best. What CSM always adds in his books and longer writings is that society needs to handle these issues at a local level, at a neighborhood level. If you haven't started talking to your neighbors yet, no time like the present. And don't laugh at them when you find out they're Family A ... just be prepared to offer what help you can when it's needed.
So right, Oreilly. We know our neighbors and many of them are struggling, big time. We are not 'wealthy' but we're doing ok. There's few days where we don't at least offer psychological support to someone close by. Looking back 10 years, it's hard to believe it's the same neighborhood. Sad, more than anything. And we're fully aware, we could be next.
I think the article is naieve. Many responsible american families already prepare healthy meals instead of consuming fast food at every meal. I'd argue that it is predominantly the poor (government subsidized) that eat McDonalds. AND, the responsible americans are instead being destroyed by inflation.
Say the $81,000 per year family bought their house years ago, buys used cars and keeps them for beyond the loan payment, buys their food at the grocery store, and prepares their own meals, doesn't take outlandish annual vacations, doesn't have a "Family plan with 8 phones and ipads"...
That $81,000 doesn't do much more than pay the bills.
http://www.ucdmc.ucdavis.edu/medicalcenter/features/2011-2012/12/2011121...
And you would be wrong. If 81,000 doesn't do much more than pay your bills, then you have too many bills. Talk about naive. Of course, if you still have checks in your register, you must still have money in the bank.
If you don't like inflation, handle your affairs in Constitutional money- silver and gold. Even other barterable asset classes. If you trade in debt notes, don't be surprised when the value equals the collateral behind them.
Yeah, you're right. I'll barter the next used vehicle I buy, and I'll pay the electric bill with an ounce of silver that I didn't use fiat dollars to purchase. I dug it out the rocks with my own hands. Retard. You are in a FRN environment. Every bill is paid in fiat. You are paid in fiat. Fucking moron. The article identifies saving for college, saving for retirement, paying the mortgage. Not stacking silver. Those middle class things all deal with fiat. Putting money into a 401 or 529. You can do all you can to limit costs, but it's tough to pay off a 30 year mortgage on a used house that you could afford very comfortably 15 years ago. but can't do so easily now b/c the raises haven't kept up with inflation. But hey, i'm a moron b/c I should have dropped every spare nickel into silver ounces that i could use in lieu of FRN's. B/c I'm sure the bank would totally accept it in places of dollar bills. What a fucking retard. We're talking middle class lifestyle. Not living in a van, wearing salvation army pants and eating squirrels that i trap myself. Clown.
Ah, what's the matter- caught in a blatant lie and now you're all upset! I think I will call names and be an internet tough guy! I should wear my slavery proudly by doing nothing that might inconvenience me, but continue to buttress and encourage my masters. My money is inflating! Oh no! I wish I knew what causes that, because that should be changed! Let me get some more FRN's- that will work!
If you would read the Constitution, it tells you what money IS and can be determined as legal tender. Just because Congress passes a law, the President signs it and the SCOTUS upholds it does not make it binding. Laws violating the Constitution are null and void- regardless of what your masters tell you.
"Just because Congress passes a law, the President signs it and the SCOTUS upholds it does not make it binding. Laws violating the Constitution are null and void- regardless of what your masters tell you."
Well that's funny, because people keep getting arrested and thrown in prison for breaking them. Go figure! Should I print out your post and hand it to my arresting officer, or my judge, or my jailer? It sure would make things a lot easier!
The State depends on the acceptance of the people- it's laws, actions and enforcement. When people refuse to accept the laws, when people band together in defense against their prosecution, the State fails. Now, run along and be a good slave.
LOL...yeah, okay. So which laws, exactly, are you refusing to accept? The state would like to know. And since you're obviously such a fearless freedom warrior, I'm sure you have no compunction about telling them. Or us.
All of them.
So you're not paying taxes, driving without a license, and poaching? Personally, I don't care--I'm just curious...
The transfer of wealth isn't complete until the elites have everything.
They'll then direct the police goons and military to any squash any discontent.
https://www.youtube.com/watch?v=csnxJFQw98kI just skimmed this article because it's open to ridicule on it's face. Seemed to say:
1) Don't borrow (i.e. make trading promises), rather barter.
2) Learn to be satisfied with less (i.e. ignore marketing).
Both contribute to the collapse of the middle class.
But where did the middle class really go? It went to automation. What the middle class used to do is now being done by highly automated machinery (requiring less skilled operators), robots (requiring less skilled or "no" operators), and computers (doing more than humans can do faster).
When I started my career, accounting departments of mid to large sized companies we referred to as "acres of tits". Huge rooms with rank and file of desks, each with a person and a comptometer (spell check doesn't even remember them). Now one computer that could fit on your thumbnail and it produced photographically does what that whole room did.
You see the same thing on the shop floor.
And those tasks that remain are still being done by unskilled workers ... over in China, India, Bangladesh, etc. The labor force in the USA priced itself out of business. Their work required less skill but they wanted the same or more money for doing it.They claimed they were more productive. They weren't ... their machines were.
First there was a migration of manufacturing from North to South where the labor was cheaper. Then the migration continued from the South to further sought (Mexico and South America) or overseas.
Advances in transportation methods made globalization possible. There were lots of humans around the world who were doing with less and willing to work for the low wages, just to have a little more. Japan was the first big migration of jobs. The Japanese workers became too proud of themselves and the migration went to China.
In the end, skills all over the globe will reach homogeneity. Robots will be doing most of the work. We need to find a way to enjoy life after offloading our work onto robots. A capitalist system isn't going to get us there. Neither is a socialist system.
But one thing would really help: A properly managed Medium of Exchange where INFLATION is guaranteed to be zero and responsible traders (who don't DEFAULT) pay zero INTEREST. Then making long term trading promises, like buying a house, would cost 1/3 and happen 3 times faster than with our capitalist framework. Then, putting your money under a rock for retirement would be a viable risk-less strategy. That would allow people to work hard, then relax and enjoy life later.
I will add this: Most of the automation would not have been practical if it wasn't for the hassle people brought to the equation.
Perhaps you should READ the article, because neither of your points are contained in this article.The article refers to responsible borrowing that leads to increases in production and wealth. Two, spending should be intelligent and directed towards an affordable purpose.
If advances in technology resulted in unemployment, the industrial revolution would have never happened.
You seem to be forgeting the effects of the financializaton of the economy and growth of the communistic state.
Mediums of exchange need no management. They are just fine on their own. The people can decide what has value. Why would I loan capital with no return? If you want to reduce the cost of a home, eliminate law, regulation and licensing.
"Two, spending should be intelligent and directed towards an affordable purpose."
Oh, really? The U.S. government clearly doesn't adhere to that principle--why should anyone else?
Because you are not allowed to print your way free of spending restrictions.. You don't have a magic mastercard. You have no debt slaves to bleed and steal from. Of course, the more you participate, the more you strengthen the State and its' controllers.
It's called "stealing."
"Why would I loan capital with no return?"
Well, you might decide that you want to help out your neighbor who has a good idea, and you, he and a few others establish a business, hire some tradesmen (people who know how to create value), pay them a good wage, and if you are successful your capital might become more valuable. Oh - I suggest allowing your tradesmen to participate in the endeavor.
One change I would suggest is to alter the present corporate paradigm - get rid of the idea of limited liability and reestablish the idea of responsibilty. This means making owners financially responsible for debts, liabilities, negligence, and criminal acts by the "corporation." And, the penalty for criminal action includes fines, jail time, and restitution for all decision makers - board members, officers, and directors, including financial liability to be paid from their own estates, including by law all trusts in which they have any interest or their family has any interest.
Then, by law establish that they are responsible for clean up of any problems the corporation creates, such as effluents, discharge of noxious byproducts, and criminal sanctions for hazardous waste leaks and failure to clean up same.
In short, impose on them the level of responsibility they urge on the other 95%.
And, for God's sake, stop trying to further limit corporate responsibility (or personal for that matter) for harm they cause by limiting damages in lawsuits. Jeez!!
Craig
So return on profits is not a return? Did I miss something in the definition of return?
If you eliminate limited liability, you eliminate the government's invisible contract against your earnings. You really think that will happen? Bwahahahaha.
As for the law, since when has it ever deterred the criminal corporate class except to diminish competitors? Since when has law been written to help the worker? The people which control the making of legislation control the outcome.
You could be more naive and brainwashed, but I am not sure how...wait, I got it! Vote for change! Bwahahahahaha.
Right Craig. To support your point about why anyone would lend money at 0% interest.....I do it often - for those who have heard of KIVA you will know that this org gives us the opportunity to directly lend out money to entrepreneurs in 3rd world countries at 0% interest. I have done so a number of times....using the same money over and over again (as I am always repaid!). Great concept that should scare the shit out of bankers worldwide.....death to compound interest and usury!!
Sean beat me to pointing out that "if you are successful, your capital might become more valuable" is exactly how many VC's operate. "No return" is a fanciful concept, not a realistic way to run the world, the occasional altruist notwithstanding.
But your take on liabiity worries me.. you are going to apply 20/20 hindsight on every new venture where the negative effects weren't known for many years, like asbestos, apply inflated and spurious values to the claim ('well, we'll assume that this bricklayer making $25k/yr was going to make double that for the rest of his working life, which would have extended to 65 years but was cut short by asbestos, never mind his two-pack a day habit."), and then go after the personal assets of the CFO who joined the company two years ago? No one in their right mind would ever work for a corporation with that potential negative payoff.
Life has risks, buddy. Get used to it.
If neither of my points is contained in the article, I was right in skimming it.
The term should be "responsible trading", not "responsible borrowing". With a properly managed MOE, it's not borrowing (there's no one being borrowed from); it's getting trading premises certified (i.e. exchanged for money), which can then be bartered because it is "guaranteed" to exhibit zero INFLATION, and which is returned and extinguished when you deliver on your promise.
I now spend 1/10th of what I spent when society found me "of value". In terms of skills, mine are easily 10 times now what they were then ... but of no value. It's just the way things are. It's a social thing.
Re advances in technology resulting in unemployment: In the beginning those advances were necessitated by conditions. The streets were filling up with horse manure. The trees were all being cut down for fuel. People were spending all their own time spinning cotton for string; weaving string into fabric; sewing fabric into the clothes they wore. They didn't have time to dig coal. They didn't have time shovel manure.
Now time is in abundance. 1/2 the people can be unemployed and the other 1/2 can easily provide for them.It's now about which 1/2 "gets" to work ... not which half "has" to work.
And the biggest leak both then, and now, is finance (your financialization). Blow up Wall Street and the economy would not miss a beat ... same as blowing up Las Vegas. They're both casinos. Blow up Washington DC and the economy would not miss a beat ... witness the recent government shut-down. We'd be doing just fine even if they were still not working.
Nice rhetoric, pointless, but nice. First sentence- circular logic. What is wrong with responsible borrowing? If I can borrow a sum at a fixed cost, seeing future costs and profits which make the borrowing useful, why wouldn't I I think they call it "entreprenuerialism". Promising a percentage of future profits or value is acceptable as well, but not the only means of financing a venture, nor should it be. perhaps you want to insure you get the lion's share of the profit?
How can money be guaranteed to exhibit zero inflation? Money embodies the concept of value, which is subjective.
Your next paragraph is circular logic again, but deficient in value. Pre capitalist/feudal societies worked an average of three hours a day. Plenty of time. People work now to finance debt and the State. Debt that was the result of the debt of their forefathers- thus denying them representation.
Blow up Wall Street and Washington DC and the economy will miss several beats, but there is a cost to fractional reserve banking run amok. Better to withdraw support and turn to "black markets" and civil disobedience.
I'm not going to address most of your nonsense, because it is just that... nonsense.
But I will educate you about money. Money is "a promise to complete a trade". This is obvious from examining trade.
Trade happens in three steps: (1) Negotiation; (2) Promise to Deliver; (3) Delivery. With simple barter, (2) and (3) happen simultaneously, on the spot. Money allows (3) to happen over time and space. So "money" is obviously "a promise to complete a trade".
Where does money come from? Traders create it by making trading promises and getting them certified. If you've ever bought a house you have done this. You promised 360 monthly payments for a house. You were given certificates (money) which you gave to the seller. Then each month you returned 1/360th of the certificates which were extinguished. In the meantime those certificates circluated in the marketplace as preferred items of barter.
If you failed to deliver (DEFAULTED), the money you failed to return was recovered by INTEREST collections. Thus, INFLATION of the MOE was guaranteed to be zero by the relation: INFLATION = DEFAULT - INTEREST. And supply and demand for money in circulation is always in perfect balance. It's the nature of a trade.
Responsible traders pay zero INTEREST.
The fact that our MOE is being manipulated rather than properly managed not-withstanding ... money is obviously "a promise to complete a trade" and when properly managed (which is a robotic actuarial process), it never loses value.
Of course you won't address it, you can't. However, you will attempt a different argument.
No, money is a mechanism to enhance trade by supplying an acceptable value substitute. Meaning, it must have value to represent value.
You are confusing credit with money which your example clearly admits. A promise has no more value than one assigns it. If I fail to fulfill my "promise" where is the money? Which runs us to collateral- please reference the housing collapse. Inflation is a relationship between money supply and faith in a fractional reserve world. Not a formula on the failure to conclude a contract.
Responsible traders pay zero interest? Example please. Any item of value being lended against future value always accrues an additional payment for time and risk. Whether it is included as a separate line item or negotiated price.There are cases of charity, but that is a value asset as well.
So, money is NOT a promise to complete a trade- a contract is. If it is a fact that our money is being manipulated this negates the whole concept of properly managed. Unless you are referring to whom it is manipulated for, which happens to be the people that created the system in the first place.
>>Of course you won't address it, you can't. However, you will attempt a different argument.
>Well, I'm up to that challenge ... and I will. But first this current flurry of nonsense from you.
>>No, money is a mechanism to enhance trade by supplying an acceptable value substitute. Meaning, it must have value to represent value.
>And your foundation for that is? Take silver for instance. What is its value? How did it obtain that value? Take BitCoins. What is its value? How did it obtain its value? Take FRNs. What is its value? How did it obtain that value? Now a trading promise is different. Its value is in guaranteed delivery ... just like simple barter. The traders themselves set the value. If they get it wrong, that's their problem.
>>You are confusing credit with money which your example clearly admits. A promise has no more value than one assigns it. If I fail to fulfill my "promise" where is the money? Which runs us to collateral- please reference the housing collapse. Inflation is a relationship between money supply and faith in a fractional reserve world. Not a formula on the failure to conclude a contract.
>A promise delivered in a properly managed MOE has perfect value. A promise broken has zero value. On average a promise has nearly perfect value (there are way more responsible traders than deadbeats). Money is "a promise to complete a trade". Credit is a measure of how easily a trader can get his promises certified based on his propensity to DEFAULT. A promise has the exact same value when made as if it were instantly delivered-on in simple barter on the spot. By definition, that "is" its value. If you fail to fulfill your promise (you DEFAULT), the money is left in circulation without backing of a trading promise. It must be recovered by INTEREST collections of like amount to guarantee the trade and to guarantee zero INFLATION of the MOE. Collateral is a capitalist concept. When a system requires a capitalist to back a trading promise, that capitalist seeks further security in the form of collateral. At the limit we have the ridiculous concept of the "compensating balance". The housing collapse illustrates the domino effect from improperly managed MOE. Properly managed MOE mitigates the problem in two ways. First it makes good on the trade ... thus, the injured party is made whole and the downstream parties are not affected. Second, INTEREST collections immediately increase to equal the DEFAULT which is an automatic negative feedback. New trading promises with higher INTEREST components become less viable ... and in the limit, non-viable. Fractional reserve is a corruption of capitalism. It says if I put up one unit of capital I can "back" 10 units of trading promises. This is, of course, nonsense ... but we have accepted it as the rule as long as I have been alive. With a properly managed MOE, surprisingly, the reserve fraction is zero ... there are no reserves.
>>Responsible traders pay zero interest? Example please. Any item of value being lended against future value always accrues an additional payment for time and risk. Whether it is included as a separate line item or negotiated price.There are cases of charity, but that is a value asset as well.
>Since we've never had a properly managed MOE in all of history, an example cannot be given. But we can get close. People needing pay-day loans and using pawn shops pay an exorbitant INTEREST to have their trades certified. People with bad credit pay more INTEREST than people with good credit and getting their trading promises certified is difficult. Governments, who supposedly have splendid credit, pay little or no INTEREST. In all cases (except governments), the level of INTEREST correlates to the propensity to DEFAULT. Taking the government as the exception, they "never" keep trading promises. They roll them over ... which is DEFAULT. But because they control the MOE, they are in a position to manipulate it ... and counterfeit it. That not-withstanding, the MOE is obviously a promise to complete a trade.
>>So, money is NOT a promise to complete a trade- a contract is. If it is a fact that our money is being manipulated this negates the whole concept of properly managed. Unless you are referring to whom it is manipulated for, which happens to be the people that created the system in the first place.
>Certification of a trading promise (i.e. exchanging it for money) is an "explicit" contract. You must return the money as agreed. If you don't, it is recovered by INTEREST collections. It's an actuarial process and benefits from classifying traders according to their "propensity to DEFAULT".
The fact that the system has leaks (INFLATION) and corruption (counterfeits) does not negate its usefulness. It just demonstrates it is sub-optimal. An optimal system would be easy to obtain ... but first people have to know what money is ... "a promise to complete a trade". Armed with that knowledge the current charade can easily be deposed. And they know this. That's why they only leak 4% while claiming to want only 2% and justifying that gap by a temporary jobs problem ... and claiming it's their responsibility to protect jobs and stabilize prices. A properly managed MOE has no interest in either of those matters.
This dialog is pretty time consuming so I leave it as a lesson to the student to go back and see that it explains and justifies all the points I made earlier. You are a product of your brainwashing. Work to become a product of rational, logical thinking and you can come to see the light. But if you again insist, I will go and do your homework for you. If so, I suggest you take this off line with me at Todd at WithGLEE dot com. OK?
Ah, the baffle them with bullshit defense.
My foundation for it is simple economic theory. Believe it or not, people have defined the chracteristics of money. It must represent a value equal to the goods or services traded in each person's mind. Silver may not be money to some, but it is the only money defined by our Constitution as a dollar and legal tender. Paper money is often given legal tender status otherwise people wouldn't accept it. There are histories, you could study.
As for perfectly delivered...if wishes were horses, beggars would ride. Promises are contracts. You can trade contracts, but they are never considered money, they may be collateral, but only that. There is a reason we have definitions, so people can communicate effectively. If you want to make up your own definitions, fine, but don't be surprised when people think you're nuts.
"Since we've never had a properly managed MOE in all of history, an example cannot be given." Well, that clears that up.
If you certify a trading contract, you are creating insurance to offset risk. Money has no counterparty risk. It is that definition thingy again.
It negates it if there are preferable systems without leaks, like Constitutional specie exchange. Please consult your historical charts on silver and gold standards which show remarkable resiliance against inflation even though the systems were under constant duress by bankers.
There is no reason to go offline. I understand economics, I'm educated.
>>If you certify a trading contract, you are creating insurance to offset risk. Money has no counterparty risk. It is that definition thingy again.
>The whole marketplace is the counterparty ... just as it is now. The risk is covered by INTEREST collections when DEFAULTs occur. Who in the world do you think the counterparty for QE is? It is the marketplace. QE is counterfeit and DEFAULT on its face. Since it isn't being mitigated by INTEREST collections, INFLATION is resulting. There can be no other result. Failing to measure it properly doesn't mean it isn't happening. Logic and reason make it obvious that it "is" happening.
>>It negates it if there are preferable systems without leaks, like Constitutional specie exchange. Please consult your historical charts on silver and gold standards which show remarkable resiliance against inflation even though the systems were under constant duress by bankers.
>The Constitution is definitely flawed in this regard. It doesn't even mention a Medium of Exchange. It just mentions a right to coin and set the value there of. It's an anachronism as coin for all intents and purposes is obsolete. To get proper management of the MOE by the government would require a constitutional amendment. Fortunately we don't need the government to manage the MOE any more than we need it to manage health insurance.
You're confusing money, "a promise to complete a trade" which is certified, the certificates exchanged as the most preferable item of barter, with a commodity "store of value". Oil in a drum is a store of value. Grain in a silo is a store of value. A stack of silver is a store of value. None are money. I have some 90% silver quarters from before 1965. I need 14 of them to barter for a gallon of gas. I have some 0% silver quarters from after 1964. I need 14 of them to barter for a gallon of gas. If I find the right counterparty, I can get a silver trader to give me 14 0% quarters for one of my 90% silver quarters. I can then take those 14 quarters and get my gallon of gas ... and still have 13 of the 90% quarters in my pocket. As money, both are 25 cents. As value one is worth 1 gallon of gas; the other is worth 1/14th gallon of gas.
Under proper management of the MOE since 1964, both would be worth 1 gallon of gas (as they were when I was in highschool) With proper management, the silver quarters would have long ago been melted down and used for something for which silver is useful. Most people knew the government was a bogus manager of the MOE and within a year the 90% silver quarters vanished. The banks tried to pull most out of circulation ... but the citizenry pulled many out too.
>>There is no reason to go offline. I understand economics, I'm educated.
>The reason to go offline would be to save others the embarrassment of seeing you demonstrate that you just don't get it. If you were being educated in the time of Copernicus you would think the Earth was the center of everything ... but reason and logic of course proves otherwise.
So,you would socialize the risk? Sorry, I can protect myself from risk presently.The counterparty for QE is the taxpayers as the guarantors of the debt. Do you read what you write? Do you understand what dollar inflation is? Interest can't mitigate that. It can try to catch up, but it won't because it would bankrupt the government. You are transiting between reality and fantasy with a single idea.
Sure, now the Constitution is flawed. While I agree, it is what what we brought to the dance.You might want to reread the Constitution. It clearly defines the dollar as a silver coin of 371 and 1/4 grains similar to a pillar dollar or piece of eight which was prominant at the time.It allows gold, but defines its' value in terms of the silver dollar. See, "Pieces of Eight".
No, you are attempting to redefine money a paper promise. Money has a definition- look it up. Money is not a contract. Are you being deliberatly obtuse? If you can't get a better deal than that for your silver quarters, send them to me. I can't imagine a worse analogy or one more desperate.
I'm pretty confident about who gets it and who doesn't.
>>So,you would socialize the risk? Sorry, I can protect myself from risk presently.The counterparty for QE is the taxpayers as the guarantors of the debt. Do you read what you write? Do you understand what dollar inflation is? Interest can't mitigate that.
>The risk is automatically socialized ... it's called INFLATION. Oh yes INTEREST collections can mitigate it. That QE is being dumped into the marketplace and trades just like "trading promise" money. But it's counterfeit. If it's not removed from the marketplace, trades in progress at the time of the helicopter drop are disadvantaged. Removal with INTEREST collections protects those in-process trading promises. Further, they call attention to the fact that QE is DEFAULT and it would be stopped muy pronto.
>> It can try to catch up, but it won't because it would bankrupt the government. You are transiting between reality and fantasy with a single idea.
>Bingo! Mom, I think he's beginning to get it. Do you subscribe to the thought that this government is "too big to fail" and can counterfeit like a deadbeat trader with impunity. People around me don't see it that way. The natives are getting seriously restless. When this system collapses, they don't want to trade it for a commodity backed system that is also doomed to collapse ... not from drowning, but from thirst.
>>Sure, now the Constitution is flawed. While I agree, it is what what we brought to the dance.You might want to reread the Constitution. It clearly defines the dollar as a silver coin of 371 and 1/4 grains similar to a pillar dollar or piece of eight which was prominant at the time.It allows gold, but defines its' value in terms of the silver dollar. See, "Pieces of Eight".
>So it does.That's not in dispute here. That system is flawed on its face. If it wasn't we wouldn't have gone through the bi-metalism wars of 4th quarter of the 19th century. There's nowhere near enough gold and silver to back world trading promises. Nobody got it then either or we wouldn't have the problem (or the Fed) now. The gold bugs won out. The silver miners got screwed. Both were pushing the "money is value" song.
>>No, you are attempting to redefine money a paper promise.
>It's not a paper promise. It's a contracted trading promise represented by paper. You are given paper (accounting entries) for your promise which you put into circulation. Through your trade you recover that paper (accounting entries) from circulation and return it to the MOE managers as promised ... and he extinguishes it.
>>Money has a definition- look it up. Money is not a contract.
>Look it up where? Every definition I have seen is bogus. But what money obviously is doesn't require a look up. It just requires examination of trade; reason; and logic.
>>Are you being deliberatly obtuse? If you can't get a better deal than that for your silver quarters, send them to me. I can't imagine a worse analogy or one more desperate.
>I can get a better deal for them ... but not as money. At my local 7/11 the 90% quarters are no better than the 0% quarters to that clerk ... who views them both as money of equal value when traded towards that bag of chips.
>>I'm pretty confident about who gets it and who doesn't.
>The astronomers in Copernicus' time claimed they got it ... and several hundred years after. Bruno died for being right. Galileo was a better politician ... and had a more convincing instrument that made denial of the obvious a non-starter.
You could rationalize for eternity, rather than face the shortcomings of your arguments. Well, good luck with that.
Remarkably you just "declared" my arguments wrong. You didn't "demonstrate" any to be wrong.
It might be helpful to clarify first if you are talking about debt-based money or commodity-based money -
oh, I forgot, you are not here to explain your thoughts in a concise manner but to prove yourself right even if you need to redefine terms mid-stream.
Money is "a promise to complete a trade". When you make a trading promise you are indebting yourself. Thus, all money originating for the certification of that promise is so-called debt based money. There is no such thing as commodity money. A 90% silver quarter is of no more value than a 0% quarter when I go to put gas in my car or bread on my table.
And just what term have I "redefined"? I put the proper definition on all terms as I initially use them and I never change them thereafter.
There is no such thing as commodity money.
Rrright.
But why stop there? Every barter trade also exchanges two things, which by your definition are both for sure not money. So in the end nothing is money.
You have just defined money away, therefore the question "what is money" becomes moot.
Congratulations!
Wrong. When I barter 14 quarters for a gallon of gas, the 14 quarters are money ... and they are the most valued item of barter when it comes to putting gas in my car. The real issue is "what created those quarters"? The answer: Someone, somewhere made a promise to complete a trade, got it certified, and they traded those certificates for something in barter. It may have even been me when I promised to trade 360 payments for my house; got that trade certified; and gave those certificates to the seller ... who then put them into simple barter trade circulation. Every month I made simple barter trades with my employer and received money in return. I returned a portion of that money to the MOE manager each month ... meeting my trading promise. The MOE manager then extinguished it. It's really a very very simple concept.
So you're talking about debt-based money or fiat.
Those 14 (non-silver) quarters were minted by decree of the govt. I'm not seeing what kind of promise the govt made at the time.
Now these quarters are simply IOUs. There are no promises, just assumptions: if I take those quarters for my gallon of gasoline, I assume that someone else is going to accept my quarters in exchange for something else. Within a blink of an eye that assumption can become false. If that's becomes the case I have no title to a piece of your house or something similar, it's just poof and it's gone.
No promises. Just assumptions.
Where is this fantasy land you live in? I'd like to visit.
Meanwhile, back on earth, "money has these functions four: a means, a measure, a standard, a store". You only consider the first of these in your screed. Money is much more than a 'medium of exchange'. As a measure, money allows us to consider different choices (e.g. rent an apartment and save, or get a mortgage now) and make what we hope are rational decisions. As a standard ('legal tender'), money removes capriciousness from debt ("I don't want yer money, but I'll take yer horse/daughter/cotton gin.."). Finally, as a store, money allows us to store our labour (e.g. our time, which is the ultimate wasting resource) until such time as we have a need that requires satisfaction.
"If you failed to deliver (DEFAULTED), the money you failed to return was recovered by INTEREST collections". When and where has this fantastical scheme ever happened, outside of your own head?
"If you failed to deliver (DEFAULTED), the money you failed to return was recovered by INTEREST collections". When and where has this fantastical scheme ever happened, outside of your own head?
Actually it's in anybody's head who puts themselves to logically and rationally thinking about it. Most people never think about what money really is. They get it from their employer and their grocer takes it for the food they need. That's all they know. That's all they care.
The educators "should" know better. When money created in 1913 has lost 96+% of its value here in 2014, you know it's being mismanaged. It has a serious leak. And that leak has averaged 4% per year. And it's not by accident. It's by design. That's how governments finance themselves because no one is willing to pay taxes for their so-called services. Our government originally financed itself exclusively though tariffs ... another bogus method but easy to hide from the general public who felt they were paying no tax themselves. Unfortunately that wasn't enough to satisfy the government. All along, the government has been the instrument of the international bankers ... not the other way around.
How do you average 4% a year when you lose 96% over 101 years?
Got me: 1/(1.04 ^100) is .0198 (i.e. you've lost 98%, not 96%.) INFLATION averaging 3.271% would bring you to 96%. Close enough for government work.
"2) Learn to be satisfied with less (i.e. ignore marketing)."
It's a foreign concept with the majority because the president on down talks about helping the economy with more consumption and debt.
Why would you listen to assholes?
Just askin'.
I don't know about you, but everything I have ever bought I have needed more than something else (i.e. my FRNs); I have used it; I have enjoyed it; I have worn it out and had to replenish it. Or I have found I didn't really need it and I have traded it; sold it; or trashed it (these instances being far in the minority).
The thing I have never gotten my money's worth from is financing. To buy my houses I have had to:
When it's all said and done, I pay for my house 3 times. I have never lost a house to fire or storm. I have never missed a house payment.
Yet I, and everyone on my block, and almost everyone in my neighborhood has had the same "good luck". Yet, we have all been paying insurance premiums equal in total to our principal payments ... i.e. all of our houses were predicted to be destroyed.
Yet I, and everyone I know have never defaulted on a house purchase (I do know "of" people who have defaulted). Yet I paid interest exceeding my principal payments which suggests my failure to complete my trading promise was a 100% certainty.
The game is rigged. The result: All these people who I have to pay to make a simple trading promise to purchase a house are doing better than I am. It's not capitalism. It's not socialism. It's just robbery ... stand and deliver tribute.
Good article but it does not go anywhere near far enough. One key area that needs to change in order to resurrect the middle class is the centralisation of power. If it stays in the hands of a small elite then no serious change will occur no matter how much debt is written off and how much healthy food people eat. However if people get rid of central power systems there is hope that wealth will become more evenly spread. Perhaps this is why the elites are so terrified about what is happening in the Ukraine, where the central power system is being rejected by the public in various areas. The elite seem terrified about this as they know this is something we could all do if we got organised.
"The elite seem terrified about this as they know this is something we could all do if we got organised."
Izzat a volunteer, I hear? If so, then, "Great!!!!"
Otherwise, it is just noise.
Craig
Charles does a first rate job... lowering expectations is priceless... For everything else... There's MasterFed.
The real issue-to-be is that both Family A and Family B have been promised more than the government will be able to deliver, and both have made choices based on those promises. While the thought is that Family B will be better off as they near retirement, they are also more likely candidates for a bail-in of their savings, they will likely have to pay all the costs of their kids college since they will have too many 'assets' to get scholarships, they will not qualify for any subsidies for Obamacare and their current plan does not meet the minimum standards, and the author fails to consider the time spent preparing and cleaning up food.
Totally screwed up, aren't we!
And no relief in sight.
::sighs::
Goodnight.
Craig
People act on emotions not logic.
People will buy Mickie Dees dinner rather than cooking a far more helthy meal for less, becuause marketing "teaches" them to.
People will also steal from their workplace because existing laws "teach" them to. Until you start enforcing the laws and putting WS criminals into jail, you are just training the lower classes up to and including middle class and above to strive to be a lawbreaker, cause that is what pays.
American society, here comes your payday...
Soylent green would work much better. Soylent green meal for four:
http://cinemaknifefight.files.wordpress.com/2011/12/dessert.jpg?w=450&h=407
Xlnt soylent green candiate: the corrupt, arrogant, narcissistic, illegall indonesian kenyan muslim sociopathic ignoramus liar in chief living its grand imperial golf lifestyle on the backs of US citizen tax paying serfs and peasants.
I agree with his principles and in fact I live by them already myself. I only buy things with cash (so everything I have now is 100% mine), I make most of my own food (quality kitchen tools and a couple gourmet DVD classes by famous chefs make my home food much better than the stunningly marked up restaurant stuff), and I even ferment and store my own wine (wine juice from vineyards generates big batches of bottles at $3 each, the home manicured taste is worth $20 per bottle at least).
Last time around I did the credit orgy too, buying garbage I didn't really want, and paying other people for the "privilege" of using their credit money. This time I make quite a bit less than I used to, and I have much more of everything! More good food, more nice things, and even more money.
So he's right on principle, don't be a material worshiper and follow along with all the marketing bullshit you are broadcast all day long, or above all the interest payment schemes, and you will be happier and more in control.
Having said that, it's true that I follow this method by philosophical choice, but the rest of America may have to do it because of financial necessity.
Clever. You pay rent while you save to buy a house (your savings bucket leaking about 4% per year through INFLATION) . Finally you have saved enough for the house and you buy it. The next day you die of old age. But you're right ... you didn't have to make a trading promise and keep it (i.e. go into debt).
What you're missing is that with a properly managed Medium of Exchange (MOE), INTEREST is not some number made up by LIBOR. Its purpose is to reclaim money (created by traders) when the trader does not deliver and return the money (i.e. he DEFAULTS). INTEREST recovers the DEFAULTed money from circulation. It is exactly equal to DEFAULTs at all times, everywhere.
In a properly managed MOE, INFLATION is guaranteed to be zero by the relation INFLATION = DEFAULT - INTEREST.
In a properly managed MOE, responsible traders (who don't DEFAULT) can have and enjoy home ownership at zero INTEREST and avoid rent altogether.
if we all stop makeing mortgage payments, car notes and student loan payments then the system would collapse.
Yep, good thing to strive for.
OT / The buzz right now is about Tim Geithner's book and its acrimonious take down by ex - Tarp inspector Neil Barofsky.
Read all about Tiny Tim's roll in this awesome take down of US economy. As one of the posters on the thread rightly points to Geithner was prime culprit in GWB days as head of NY FED who protected the banks.
That Obammy named him to Treasury and maintained that other GWB luminary Bernanke at FED says it all about Obammy's partiality to Oligarchy and/or his about his judgemental skills.
Obammy was totally rail roaded into being a TBTF patsy, alike Geithner, by the Squid cabal that bank rolled his election.
Thats what is implied indirectly in this scathing takedown of "Stress Test" by the author of "BaILOUT" as by Yves Smith of Naked Capitalism.
http://www.nakedcapitalism.com/2014/05/neil-barofsky-geithner-forthcomin...
Oversimplified, but basically true. I generally agree with the characterization of the American system as a "neofeudal arrangement based on debt", but I would generalize it as a neofeudal arrangement based on capital, where debt is negative capital. Original feudalism was based on ownership of land. Neofeudalism has replaced land with capital. Most call this capitalism. It is better than feudalism because capital can be created, whereas land mostly cannot be created. You ascend the ranks of American society by creating capital, which you mostly cannot do while in debt.
"Original feudalism was based on ownership of land."
Actually, it was based on theft of land by the Soverign based on trumped up Biblical authority, and gifting of land to his (at which time only men were soverigns) cronies. Today we have something similar - theft of capital generated by labor by "owners", and gifting to their cronies (politicians). It is called Crony Capitalism.
As I have oft said, value is created by applying labor to things - land, metals, wood, etc. If the land and its contents (ores, water, wood, etc.) had not been stolen from the commons by the "Soverign" in the first place, the disturbing situation today would not be as mistifying to the general public. The confusion is compounded by armies of accountants spinning facts to try to contradict reality.
I have given up on people even wanting to understand it. Those in the 1% (more like the 5%) like it just fine the way it is; the rest are too lazy to think about it. The ones who are screaming tend to be the ones just below the 1% who can see that the deck is stacked and they will really never get to the 1%...
At which point, they give up as well.
Craig
Value CAN be created by adding labor, but there is no guarantee of it. Value is subjective and cannot be predicted by the quantity of labor. This is why NO theory of labor value has ever worked.
We have allowed the theft of resources by accepting law and reasoning in conflict with our personal benefit. We have been conned. Law is a great tool for this, it gives a body of reason for subjugation, whether by divine right or democracy, etc.
You can't leave the land to the commons. Suppose you think there's copper under the overburden. You slave removing the overburden. Then the common people come and take the copper. That can't work.
In other words the middle class simply needs to stfu and eat their peas........
I think that we are way beyond peas, we are soundly at broccoli.
As someone living inbetween A & B (mortgage - small stu loan but no other debt and paying cash for kids college). It's nice to see this topic being discussed on a personal level
The first rule of economics: Everything is scarce.
The first rule of politics: Ignore the first rule of economics.
Didja ever notice how many people here like telling other people how to live their lives while they rail about freedom?
What's up with that shit?
People like living in debt and eating McD's don't bother me.
Why should it bother you?
Pity party for how other people live.
It’s Thunderdome - act accordingly.
"let them eat pinto beans!" moochelle antoinette obama
"The solution to the erosion of the middle class lifestyle is to destroy debt and other fixed costs and eliminate self-sabotaging discretionary consumption that cripples the household's ability to accumulate capital that generates income."
Sorry, but the solution to what ails them, and us, is the elimination of big thieving government and the thieving banksters.
All I know is, I make over $50k a year now, and I'm living about the same as I did in 2000, making $20k. I don't know how all these $30k millionaires do it...
Where I live, the millionaires hire all the third world labor, fuck playing by the rules. Pay them above minimal wage, keep the 40 hour week split into two shifts, no health insurance or any type of benefits. Merge your business into a corp....instant millionare status.
I made $50k a year in 2000, and now I make $60k a year, but now it takes 3 jobs to do it.
Impossible when the government takes half your income. It doesn't matter how frugal you are when the money you're left with can't cover the rising costs of living. You're simply urging substitutions; replacing steak with dog food. Debt sucks, but it's voluntary. Taxes are not voluntary and are the single biggest expense I have.
It is not impossible
Fientist, jlcollinsnh, Brave new life, Mr. Money Mousestache.
Mox E said: "... when the government takes half your income."
You must make a godawful large amount of money. I did a quick compute, and at $140 K annual income, with 6 dependents, self employed, total tax for all is less than 33% That includes the 15.3% social security / medicare fraud (actually a bit less than 15.3% - more like 13% and only on the first $117,000 and then 2.9% - and actually not a tax so much as an investment), 7.65% sales tax on some of it (not on my mortgage payment, taxes, insurance, food, medical and Rx, etc.), 3% for property tax, plus income taxes.
Of course, you need to itemize on your 1040. Thing is, no one I know pays the full rate for their level of income - they deduct what they can, take all exemptions, etc., and if their taxable income is < $80,800 (2013), effective tax rate is like 11.5% at the most. And that is without any credits such as education.
Now, considering that for that investment, I get my streets repaired, public schools for my children, police and fire protection, a court system to protect us from cheaters, an army, navy and air force to defend our shores, and my parents are supported, not such a bad deal. I may get screwed over on the Social Security part, but that's because cheap assholes cheat on their taxes and won't vote to increase taxes to the amount needed pay for what benefits them, apparently thinking all of those actual government services are free (or maybe, just maybe, THEY are the ones with an entitlement mentality?)
Taxes ARE voluntary. You can always leave the country if you think you'd get a better shake elsewhere. And you won't be missed, mooch!
Craig
I get my streets repaired, public schools for my children, police and fire protection, a court system to protect us from cheaters, an army, navy and air force to defend our shores, and my parents are supported, not such a bad deal ...
This was rich. Definitely keep it in your routine. Thanks for the laugh.
You might want to include fees, gasoline taxes, utility taxes, school bonds, registrations, licenses, mandatory insurances (car and medical), use taxes, disposal fees, etc.
My street hasn't been repaired in five years, public school is for idiots, police and fire are grossly overrated- worthless actually, the courts are rigged, we haven't needed an army, navy or air force since 1812 ( and we declared war on England).
Not a bad deal? I could do all of that for a fraction of the cost and not have to put up with the terminal stupidity and tyranny of government. Taxes are not voluntary, try to leave the country without giving them a cut first. What a rube.
so we should buy VIX inverse funds?
I don't see any other assets worth purchasing....
Not only can u live debt free, you can retire early
Fienstist (hacking taxes)
jlcollinsnh (FU Money)
Mr. Money Mousestache (DIY)
Going without debt, not buying corporate soda sugar, roll sugar, potatoe starch sugar, pink slime and not getting diabetes and participating in Oserfacare is a threat to the Merkin economy and terroristic.
The solution: Gummint: ctrl-alt-del
This is the stupidest thing I've ever read.
So the cure for the economy is to eliminate spending. Oh wait, hey author of this tripe, you do realize 70% of GDP is due to consumption, right??
So when you say "you can make a hamburger for 20% of what you buy a pre-made hamburger", you do realize what you're eliminating....right? IT'S CALLED LABOR.
So pray-tell, how do you make money on all that money you are saving....when no one is spending?
If everyone took your advice, the family making $81K may just be on welfare and UNEMPLOYED.
It's a bit laughable that the folks on this website think AUSTERITY is a cure for everything.
Indeed having debt locks up money and only makes bankers fatter, but spending disposable income creates jobs, it generates economic activity.
As it is now, the only jobs being created are the ones that make hamburgers. You take those jobs away by going all ape-shit austere and game over.
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It's called a "red flag"...
Are you really afraid that everyone is going to take his advice? REALLY?
Perhaps you would take his advise but don't want us to? Are you a blood tick locked into a juicy vein?
Please tell me how eliminating jobs because you're stuffing money under the bed allows you to make money on that money?
The reason you're making money on your saved money is because people eat at McDonalds. Are you fucking DAFT?
So McDonalds shuts down, you only have your local grocer with very slim margins because everyone is frugal as hell, where is the economic activity that allows you to earn money on your money?
Instead of coming back with some insult, tea-party bullshit line, TELL ME HOW.
The reason the rich are rich is because people buy at Walmart and McDonalds. Because they buy new cars and new appliances, etc. etc.
If everyone went into austerity mode, unemployment would skyrocket and more would be "a blood tick" getting a welfare check.
Stuffing money under the mattress? Yeah everybody does that! So our entire economy depends upon people eating at mcdonalds and buying at walmart? If this is so please end it now for me.!
We must have fake jobs to fake work. You are a keysian Commie!
There is a huge, unseen, elephant lurking in the room. I mean, what goes unsaid is that as energy costs, and material costs inexorably and inevitably rise, it becomes ever less possible to support the huge mass of humanity hanging in there, indebted to the Too Big To Fail Banks and unable to repay those debts. Many of them are not even dischargeable in Bankruptcy, to-wit the student loan debt that is currently crushing consumers, both student and parents / spouses of those students.
More and more student debtors find themselves residing with parents as they come to realize how truly dire their situations. Others, lacking compassionate loved ones may find themselves living on the street. In years past, they would live in their automobiles. They do not have that comparative luxery. Instead they may discover that, in order to subsist, they must steal. When they apply for jobs, their appearance exposes their situation. And, being good Capitalists, the corporation HR dept. makes a minimal offer, often for minimum wage, and at less than 30 hrs / week. Now, in order to live these good citizens must seek assistance. They request food stamps - and they qualify.
Our increasingly insane insistance that we keep our taxes low results in increased taxes. Either to pay for courts, public defenders, and prisons for those who take to criminal acts in order to survive, or for welfare, forced on the workers they refuse to pay adequately. And more! Those people have no health insurance. When things go south, as they always do, they wind up in the emergency room, and the hospitals are repaid from the public coffers.
Why do "those people" do that? Well, you have forced it on them. With no money to support a family, with no jobs or with jobs that do not pay adequately, and with no benefits whatever, what choice have they? Go somewhere and die? What would you do in such a case?
Yes. Taking to proferred advice would result in destroying our economy as it is set up. What, though, is the alternative? They cannot borrow money; they either do not work or they make too little. I submit that we need to find a way to have a viable, sustainable economy during our time of 'pull-back.' As the economy shrinks, we need to either support all of the masses we have encouraged by establishing an 'eternal growth' economy that must eventually fail, or those masses will turn on us. It has already begun. "Arab Spring" will soon see European Summer, Asian Fall, and American Winter.
If we do not find a way, we will see Soup Lines and Firing Lines instead of Voting Lines. Just as we see that refusing to employ and pay our students, and forcing them to borrow in order to get an education, all to increase bottom line in the short run, costs more in the medium run, and can be deadly in the long. The dangers are nearing, and all we hear in the MSM is distraction. No one is talking about the 800 Lb Gorilla in our midst.
Wake up, people! It is not funny, and it is not / will not be easy!
Craig
Sure, we forced it on them. Not the government, not the bankimg system, not the crony corporate leaders, we did it. You and I. We forced them to take out student loans. We, of course, made the loans unable to be dismissed in bankruptcy court. It was us, not the bankers.
Perhaps the 800 pound gorilla is debt slavery via the fractional reserve banking system in coordination with government as a violent enforcer? Maybe, if we get rid of the government, write off all the debt and start using real money, we can make the gorilla disappear.
I like my solution better, it doesn't call for more tyranny.
Sean, I'd like to know what "real mone" is. If you mean gold, I disagree. Gold was only used for money long ago when it was easy to imprint your face on it. What made it valuable is that it was an agreed upon arbiter of value. What gives value is the labor added to goods. If you see a stick on the ground, it has little value. If you take an axe, remove side branches, smooth it, and make a groove in one end, then place a sharpened stone into the groove and tie it on, you have added value. It is now YOUR stick. It has value. If someone wants it, you decide how much the labor you put into it is worth on a value exchange.
In a similar fashion, there is some land. I plow the land, plant seeds, keep out the weeds, and harvest the plants that grow as a result... I have added value, and in some way the use of a coin symbolizes that value.
Because long ago people used gold and sliver (otherwise pretty worthless, but easy to imprint with the emporer's face, and easy to change), that does not mean that gold had the value. You cannot eat, wear, or put in your gas tank, an ounce of gold. Historically, one ounce of gold represented one week of labor for the average person. Somewhere along the line people conflated the value, and began to think that it was the gold that was valuable.
Today, of course, gold has some REAL worth, as a conductor of electricity, as well as nice for making jewelry. It does not oxidize, so it is permanent (another reason it was chosen, and valued more than silver). AND, it is much more difficult to mine it today since the 'easy gold' is already gone. That means you can measure in labor equivalent terms the 'value' of gold. Dollars are not worth as much, to me, for several reasons. One - they are made of paper, and can be destroyed easily. Two - they are easy to counterfeit (not that no one is counterfeiting gold - but paper money is much easier). And, three, it is too easy to print too many of them. However, and strangely, electronic money seems to be better than the paper stuff in at least one way, or at least no worse.
The difficulty is not with the specie (gold, of course, is just another species of money), but rather with the greed and corruption around money, be it gold, silver, or paper. And that has to do, in the final analysis, with power. The golden rule, as you know, is, "He who has the Gold rules." It enslaves, and corrupts men.
The alternative is "real money." That is to say, barter. You have something I want. I have something you want. We discuss and exchange according to how we value each item. It is cumbersome. If the system crashes, it is what we will be left with. In a total economic crash, gold is only valuable if you have something you need to do that requires gold. Food is better... wisdom / knowledge is good as well, and ability to perform some service as a craft. Will work for food will be heard much more often.
I am trying to impress on my grandchildren that they need to have a craft or skill to back up their techno-knowledge. Leather working, metal working, making paper, ecologically based farming, animal husbandry, medical, dental and veternarian skills. These will be worth much. And, they cannot be stolen (except by fraud - which is one reason some level of government may be needed [personally, I am Libertarian, and recognize that need. Plus I've read Hobbes]).
I agree 100% about debt tyranny and writing off the debt.
Craig
What is real money? Any item that can be used to effect an exchange of goods, would be its' general description. We can classify some forms of money as having more value than others. Value retention, portability, greater acceptance, etc. Depending on the characteristics, we could prioritize one form over another.
When the Constitution was written, it clearly stated that a dollar would be 371 1/4 grains of pure silver. It states gold may be used as well with a value in relationship to silver to be determined by Congress regularly. It is the only form of money that is allowed to be legal tender for government, both federal and state.
Therefore, In America, Constitutional money is clearly defined. This does not outlaw paper money, but requires silver and gold be avaoilable for the payment of debts and to conduct commerce. Now, this is in conflict with some (since 1873) subsequent Congressional rulings. However, laws in conflict with the Constitution are null and void.
If we are to mantain the legal status of the Constitution, we have to follow its' rules, otherwise, it is a broken contract.
As for labor, I can go out and pick up a gold nugget and it required almost zero labor compared to its' value. I can spend 6 weeks growing a carrot, but the labor value would be negligible. This is because value is subjective. Regardless of the amount of labor, value will lie in the eye of the beholder. Many things affect the value of a good, resource availability, resource supply and demand, etc.
One of the reasons specie has priority as money is that it is difficult to expand the supply, unlike paper currency. It is preferred in trade because it is portable, divisible and universal cache. Food will not always make the trip. Knowledge and skills are great locally, if in demand, but can fail to transfer over long distances.
If you want to discuss economics, it is useful to understand the subject.
If the system crashes, many people will have gold and silver in amounts that allow for trade in goods difficult to obtain locally. As a foundation for an economy, honest money protects the worker.
Yup. This "simple" advice is a vital part of how our family climbed out of $50,000 worth of debt in the very early 90's to net worth of well over a million today.
Cutting self-imposed vice taxes can also do wonders for your budget, wealth, health, and happiness.
Awesome
I don't know who said it, but it's a great quote that I heard recently:
"In the United States, we buy things we cannot afford, with money that we do not have, to impress people that we do not like..."
Yup, that about sums it up!
Well I get what you are saying here, we all live together in a debt free house, there are no loans, I have my student loan, which I had to take, but I've put into high interest accounts which pay more than the debt its self, although a small amount of it is invested in pm and btc, which is sitting at about 10% of total savings at this point as a disaster fund, the plan is to pay the loan off at graduation or to start paying it early, to nullify possible rule changes that may come along, we fire all the bills through a cash back bank account to gain a discount at roughly 2% and the credit cards are played off in full every month, so not interest payments on that, internet phone and utils are essential, we invested in free sat a few years back and it has payed for its self 5 times now compared to what we would Have been paying to sky TV in a normal household, so technically its money we would have spent anyway, and were in the past, now removed from the eequation, and technically now a net benefit. Investments are scarey for us, but the pm and btc play seems pretty sensible to me, I don't gamble drink take drugs and recently stopped smoking but I have been buying ecigs which are marginally cheaper, and I hope to kick that too. I am at uni so fast food is an unfortunate fact of life, however I used to train, so I'm gonna move back into that to build health protection, I'm on a stem end degree, so future earning potential is looking not bad? I do edx courses, and i can repair maintain computers, and side line that for cash tooI, I Have technical knowledge so I invaded is a few small solar panels, and rigged them to an old car battery, a few scavenged and eBay bits and I now have have a sustainable charger for phones and low voltage stuff, however now I know how to do that, I can either replicate it on a largest scale, expand it for more generation, or duplicate it for every room in the house so there is useful knowledge to reduce possible future energy costs partially implemented. Next step is the consideration of a grow box in the back garden to teach how to grow for the future, the house is the most important asset and protected at all costs, there is cash there, for what it is worth. We go out for food now and then as a family excursion, and we do enjoy the odd luxury, buy clothes second hand where possible, and have a twin wardrobe for summer vs winter, shoes are high quality so they last a long time, and clothes are repaired albeit at a cost to extend their longevity, rather than purchasing new replacements immediately, is there anything I'm missing here.
Now looking at this, any tips for becoming more sustainable
Look at where you live and try to find a Community Supported Agriculture farm then volunteer there. Depending on the farm, they might give you free food like mine does, and the experience you get actually doing farmwork coupled with the contacts you'll be making will be invaluable. Learning to compost and grow in containers is an art within itself, so you're definitely on the right track there.
Here are some sites for you to consider:
https://attra.ncat.org/
http://permacultureprinciples.com/
http://www.permaculture.org/
http://soilandhealth.org/
https://www.biodynamics.com/
http://seedsave.org/
http://howtosaveseeds.com/
Read these books:
The Omnivore's Dilemma -Michael Pollan
Gardening When It Counts -Steve Solomon
The New Vegetable Growers Handbook -Frank Tozer.
" I'm on a stem end degree, so future earning potential is looking not bad?" Yeah they say that, but STEM grads, contrary to what people say, are a dime a dozen; especially when they just import them on H1-Bs.
What my family is doing is we're pooling our resources (sold one house, car, extra furniture, combining paychecks, living under one roof) so we can eliminate any debt amongst ourselves, and then we'll be starting up a farm. Back in the old days families would work together to acquire land and build businesses, so why not bring that back? People were right when they said the breakdown of the family structure is part of the reason for the decline of the U.S., because you need that cooperation in order to make it in this world.