"hard times"
semitdrah.com> wrote in message
news:090820071501137345%%semitdrah@semitdrah.com...>
> Marcello wrote:
>>>> As long as US GDP keeps outpacing US inflation, there is nothing to be
>>>> concerned about. To multiply by a factor of 10 over a 50 year span
>>>> you
>>>> need
>>>> a 4.7%% interest rate...so unless you are keeping your money under your
>>>> mattress the historical rate of inflation is hardly a concern. Simple
>>>> concepts, you just gotta do the math. The sky is hardly falling.
>
>>> "hard times" wrote:
>>> Perhaps where you live. But where I live (and I doubt any other place
>>> in the US is much different) inflation hurts certain classes of people,
>>> particularly older people for whom fixed or low-mobility income factors
>>> mean much more than increases in GDP. Inflation causes them to have to
>>> choose between food and medications, wiping out any discretionary
>>> income they have and making them vulnerable to increased expenses like
>>> rent increases or trips to the emergency room.
>
>> Marcello wrote:
>> And those who have prepared for retirement poorly should be saved at my
>> expense why???
>
> Theoretically, none. If it's a video game you're playing, you can
> bloody up the bunch of them. But there's a real world out here and 1)
> there is a functional level of unprepared just as there is a functional
> level of unemployed and functional levels of other factors, and 2)
> incremental levels of unprepared expand when retirement savings (if
> there are any) are dipped into for college educations that have
> skyrocketed, housing costs and other inflationary factors squeeze even
> those who have planned for retirement based on a model that was viable
> maybe 30 or 40 years ago. And I haven't mentioned those whose
> employers flubbed or stole retirement plans. It isn't hard to find
> retirement funds wiped out by medical expenses after one loses a
> medical plan.
>
> Listen, the people I'm talking about built America. They have no time
> left for compounding. How can you, as the compassionate person you
> are, seriously say that "...those who have prepared for retirement
> poorly should be saved at my expense why???" I'm reminded of the
> landlord who was sentenced to live in his own (decrepit) building in
> order to appreciate the real world where people have blood not cash
> flowing in their veins. Where is your humanity?
How can you judge my humanity on the basis of helping those that planned
poorly? What a shallow observation.
I prefer my charity to go to those who I feel are most deserving, those who
truly were not granted equality of opportunity, whether if be by society or
the way they were born. Those who chose to put their eggs in the wrong
basket for retirement instead of taking responsibility for their own
retirement (yes, responsibly includes planning for levels of inflation) are
not in that category. Those who have lost their medical and/or retirement
due to fraudulent activity and have not been properly compensated by law are
another story, and you only made mention of that in your last post.
However, we were talking about the possible adverse affects of inflation,
not criminal activity, so introducing that into this at this point is
somewhat strawman, or at the very least a distraction to the actual
discussion.
But MI must know, who do you think you are be telling me how I should
distribute my charity???
>
> BTW, appreciation of capital is going to be negative over 50 years at
> 4.7%% in present circumstances where the true inflation rate (with
> excluded factors like food and fuel added back) is considered, and the
> money supply is expanding at a 13%% annual rate. And a factor of 10 in
> 50 years has meant treading water. When I came back from Vietnam, I
> bought a new Ford for $2800. That same brand and model costs 10 times
> that now. And that's only 40 years ago. I remember when I was a kid
> in the 1950's we had no refrigerator (just an ice box), no television
> (just a radio), and no car (just the bus). Then my dad got a job
> making $200/wk and we suddenly had all of those things. Now, for the
> same family of 5, you need to have one government job or both spouses
> working in the private sector making roughly 10 times what my dad made
> in order to live the same lifestyle and have good prospects of not
> having inflation eat you up so you have to dip into your retirement
> savings or home equity in order to send kids to college.
Not everyone is going to be better off, just as not every single item is
going to go in cost at the same rate of inflation. Might I remind you that
inflation is an average. Merely taking out a single object and pointing out
that is has risen faster than the rate of inflation proves what exactly? I
will tell you what it proves, it proves that many other items have increased
in price at far less than the rate of inflation, just as countless people
have prospered during the same time period you mentioned Overall, a
pointless addition to your argument.
>
> I don't understand why you like inflation so much, unless you are in
> debt up to here --> (-: and expect, no, need inflationary times to pay
> it off. Well, you're not the only one if that's the case because lots
> of people have this as their M.O.
You have drawn another baseless assumption here. I only ever implied that
the sky is not falling as many suggest. Personally, I do not have any
preference to inflation as it merely dictates my strategy. A perfect
example. There is an old adage that says something along lines of during
inflationary times, its better to own "things" than cash. I have a
portfolio with a mix or real estate and equities which has easily hedged
against any inflation during my lifetime, and yes, often inflation makes
using leverage very attractive over the long term. Does that make having a
solid investment strategy that uses leverage a bad idea? Hardly.
I don't purport to be some genious, but I certainly take responsibility for
my own future and have planned accordingly and am not adversely affected by
inflation. Everything I have done throughout my life is equally available
to anyone else willing to put money aside for retirement.
>
>>> "hard times" wrote:
>>> Inflation is an unfair tax on wealth. Everyone seems to want to whip
>>> the wealthy, but three or four generations of inheritance usually
>>> dissipates that wealth, with inflation taking its toll as well.
>
>> Marcello wrote:
>> I don't agree. Inflation is unfair to those who hold money, but more
>> than
>> fair to those who hold inflation proof assets. Ignorance of this is no
>> excuse.
>
> What these days is inflation proof? Even gold in inflation adjusted
> terms is way behind. About a quarter century ago gold was $2400 if
> inflation is taken into account based on today's price. Are you
> talking about tech stocks? Remember, "intellectual property" was sold
> as an asset, something tangible to build a future on, and it turned out
> to be as worthless then (1999) as it is now. Are you talking about
> homes? Oil? Then you're talking about speculation. Most people have
> no idea about investing, much less speculating. The pros will nail
> them every time. Ignorance is not always not an excuse. Ignorance is
> no excuse for the law is a legal term.
I am talking about a wide spread of investment, not just securities. There
are plenty of good books available on having a portfolio that will hedge
inflation.
>
> Given the state of secondary education in this country I'd say that
> ignorance of just about anything (except for inducing guilt for not
> voting, for not getting a job, and for not rushing out to spend the
> paycheck and more on consumer goods) is excusable. I ask young people
> all the time about compounding, and even after an explanation they
> still say they had no idea about it. In the real world, where johnny
> paycheck relies on their pension plan and social security for their old
> age, ignorance of the realities of retirement income can and should be
> expected. A crisis of unimaginable proportions is about to reveal
> itself in the form of hordes of destitute baby boomers. Think real
> world, not theoretically based on what people should have done.
>
>>> "hard times" wrote:
>>> There are only two ways to generate wealth -- take something from the
>>> ground like crops or minerals, and adding value to something in a
>>> manufacturing process. Everything else is bean shuffling, with
>>> inflation helping to obscure what is really The Great Drain of capital
>>> from this country.
>
>> Marcello wrote:
>> I think this is a limited view - why would adding value be limited to
>> only
>> the manufacturing process? I think Bill Gates and his billions would
>> disagree for he created wealth by providing a system that added immense
>> efficiency (well in excess of the billions he is worth) to the world with
>> software.
>
> Microsoft is a manufacturer.
Fair enouh, perhpaps my deifntion of manufacuting is a little limite. I see
more in line what you meant and to that extenst I agree/concede this point;
however,I do not wholly agree with your definition.. You do in fact leave
out wealth that is dirclty related to my quality of life. For instance, I
may make home improvents that significanlty inprove my life, and to that
extent I have created additional welath for myself. I am not talkin about
wealth in terms of the value of my home (as that would be included in "bean
shuffling" as you say), but if my quality of life is improving, then I am
becomin more wealthy.
I will also grant that a precise definition of wealth would be requred to
give a full debate on the issue.
>
>> Marcello wrote:
>> Adding value that increases the quality of life in any process
>> creates wealth. This is precisely why the US economy has far out
>> distanced
>> inflation.
>
> Other than the two ways I have specified above (take it out of the
> ground, add value in a manufacturing process), there is no other way to
> create new wealth in order to increase the size and velocity of the
> capital cycle. Everything else just shuffles the existing wealth from
> one place to another. Bean shuffling. We have managed to have a bogus
> kind of growth based on roughly $50 trillion of debt (including
> government, corporate, and individual debt). These chickens are coming
> home to roost right now, and we will be mighty lucky to weather what
> appears to be a slow-motion train wreck. I will remind you that all
> debts will be paid - either by the debtor or by the creditor. At some
> point the chickens will be replaced by vultures.
This is the same thought process that many have had for generations. Its
only now, during the internet age that so many can collectively cry chicken
little together. Please do not be misconstrued, I am in no way suggesting a
blind faith in government fiscal policy and/or economic information, but we
are hardly seeing issues that warrant the sky is falling claims of many.
>
> The American economy was built through the justifiably selfish and
> clever use of the factors of production, along with trade barriers.
> "Free trade" is the death knell for America.
Let's not forget about ideas, which were the basis for the factors you have
outlined as well as many entities that created win/win situations for both
workers and stakeholders. Free trade would only be the death knell of
America if future generations refuse to take heed of the equaling level of
competition worldwide. I do not believe that anyone is better than anyone
else for merely being born in a certain sector of the world, so naturally as
the rest of the world takes to our superior system the playing field will
level worldwide. If this is perceived as the death of America then so be
it, but could anything be more just worldwide...to have everyone with the
same basic level of economic opportunity? I am not so sure this is a world
I would find overly concerning as many war might not exist within such a
world. This is a discussion for another thread perhaps.
>> Marcello wrote:
>> Then I ask, what if it is that interest that is
>> used to buy the lawn mower, does that justify it?
>
> Who's making that interest? If he's Chinese (Chinese in China, that
> is), he's perfectly justified in buying any Chinese-made good.
>
> Looking at it from the standpoint of the person who holds capital (or
> wealth, the same thing), compounding that wealth and capital
> preservation are the first priorities. If one preserves capital by
> adding back what it has lost through inflation, then the excess can be
> used however one likes. But it is just as much of a sin as it is for
> johnny paycheck to run out and spend one's discretionary income (much
> less run up debt) for goods where value has been added elsewhere,
> unless the economic unit one is participating in has balanced trade
> (then it's a wash).
Preciseley, its an issue of self control and spending habits.
>
> In America right now it's a sin to buy a Chinese made anything.
> Punctuation, period! We have no comparative advantage with China.
> Instead, they have the advantages of low cost of LABOR and high CAPITAL
> accumulation (the latter we provide for them). Note that those are
> factors of production. And the quid pro quo has been our repatriation
> of the capital they've accumulated, the issuance of debt for it, then
> an equivalent amount of deficit spending by our government. It's the
> worst of all worlds in the long run. In this environment, it's a sin
> for an American, wealthy or not, through interest income or by debt, to
> buy the lawn mower you refer to, unless it is made in America or by a
> country we have a favorable trade balance with.
You are forgetting however that this debt is being held at very low rates,
rates that if you include both the growth of our economy and inflation are
actually negative. Time is our friend in this regard.
>
>> Marcello wrote:
>> What good is capital ifs
>> its only purpose is to earn more capital.
>
> Because that's what Capitalism is all about.
Really, so you are suggesting that consumerism is not a major part of
capitalism?
>
>> Marcello wrote:
>> What about the fact that capital
>> is stored value and some may value cars immensely because it takes them
>> to
>> work and visit family, even though it will be in a landfill in 15 years?
>
> That really isn't a good example of a productive use of capital -- in
whoa! Productive use of capital? If that car results in an increased
earning capacity is certainly is a perfect example of a productive use of
capital.
If I can earn twice the pay in a job that requires me to travel 50 miles,
and the only way I can do that is to buy a car, than I have made a VERY
productive use of capital in the purchase of the car. I am sorry, but you
are totally wrong in this regard.
> anything but the short term. It makes a little more sense if the car
> is made where it is consumed. But, ultimately, a car that's bought for
> and used for anything but the generation of new wealth is a losing
> proposition because 15 years is a very short time. The matter of
> opportunity cost comes into play (an expenditure on a car may have been
> better expended on a machine that actually adds value, like a farm
> tractor or a stamping machine).
Ok, so you see my point above and we agree. But considering how much of the
population travels to work by car (which assumes distances that are not
feasible otherwise), then you have to agree that in the majority of cases a
car is a productive use of capital. Certainly some overspend, and that is
their prerogative, but that is an individual decision and any burden as a
result of overspending on a vehicle is the fault of the individual making
that choice.
>
>>> "hard times" wrote:
>>> Not only that, but the capital, seeking a return, comes back to the US
>>> and debt is issued for it. There are no sinking funds for this debt.
>>> The government issues the debt, but the dollars go into the general
>>> fund and is seen by Congress and the Administration as revenue. Hence
>>> deficit spending, wars, low interest rates creating bubbles and
>>> inflation, and $250 Billion in interest (capital rental) expenditures
>>> weighing down the budget.
>
>> Marcello wrote:
>> While I am no advocate of major deficit spending, you cannot overlook the
>> very fact that inflation itself makes the interest on that debt gradually
>> less and less costly. Think about how difficult a $500 home loan payment
>> seemed in 1982 but how effortless that payment is made today - the same
>> can
>> be said for Federal deficits at the time when $50 billion was concerning
>> and
>> today seems like all but insignificant in the view of massive GDP. The
>> same
>> will be said about today's deficits 25 years from now and as long as we
>> are
>> not growing proportionally (debt versus GDP) than we are not in any
>> significant economic problem areas...certainly nothing that would
>> threaten
>> any default.
>
> You neglect to take into account the ideas that in order to maintain
> the same lifestyle (government, corporation or individual) one has to
> borrow larger and larger amounts in inflationary times, in addition to
> rolling over the existing debt, which will require a greater "rental"
> sacrifice when it becomes apparent to debt holders and new debt
> purchasers that repayment of debt is questionable. And, despite
> inflationary times, the debt and the interest on it are at astronomical
> levels. The perception of "good times" has a way of masking adverse
> factors, but the acquisition of so much debt and having to pay the
> interest and roll it over because it cannot be paid means there will
> not likely be any "muddling through" times, that there will only be
> bogus good times, or hard times (with the slipping into hard times
> being a very painful process and outcome).
Again, your glass is half empty. Throughout every generation since the
existence of federal debt, people have prospered. Some have made bad
decisions, some have invested poorly, and some have gone flat broke, but we
all have the same opportunity to invest. Again, I would recommend reading
more along the lines of having a portfolio that hedges against inflation,
and it doesn't alwasy requie debt.
>
>>> "hard times" wrote:
>>> Take a look at what's going on in the economy, the markets, in politics
>>> and the military, the attack on the middle class (downward mobility),
>>> inflation, debts ($50 trillion in all sectors) and deficits, and what
>>> you are seeing right now is a slow-motion train wreck. End of empire
>>> behavior. And now the talk is about trade war, while Hillary runs for
>>> the presidency by saying she'll raise taxes on the rich (but it will
>>> really be on the middle class) by repealing tax cuts of recent years.
>>>
>>> The sky is hardly falling, you say???
>
>> Marcello wrote:
>> No, your glass is just half empty, like all chicken littles.
>
> Okay, you didn't need to say "chicken littles." My glass is actually
> quite full because I'm prepared for what's to come, good times or hard
> times. When things get tough, I'll check back here with you to see how
> your optimism paid off. But I suspect that you will have a crisis in
> confidence like a lot of people will. The things I'm saying are not
> new. My influences were people who lived during the 20's and 30's and
> remember how unbounded optimism, backed by debt and speculation,
> eventually got wrung out. Another time when the axiom came into play:
> All debts will be paid, by the debtor or by the creditor.
haha - you draw some interesting (yet baseless) assumptions about me. I
have never implied unbridles optimism. Conversely, if you in fact are
prepared and doing well, bravo; but this is the same discussion I have had
with many people claming the same things for over 25 years.
>
>> Marcello wrote:
>> There are a lot of things that are not great about the economy, but when
>> haven't there been? But what about the consistently low unemployment
>> rates,
>
> ...at declining wages and declining mobility (except, of course, by
> corporate management and public employees), not to mention
> underemployment. The term employment needs several asterisks because
> it doesn't mean family wage anymore.
>
>> Marcello wrote:
>> the near record low interest rates,
>
> ...made possible by the decapitalization of America, causing a flood of
> dollars to return to the country. When the flood slackens, or if
> foreigners lose confidence in America, then the consequences will be
> severe. I don't have a crystal ball, but it may very well be that the
> cracks in the carry trade and the sub-prime lending and repackaging and
> hedge fund markets may be signaling a collapse in the larger debt house
> of cards.
>
>> the record breaking DOW and S&P?
>
> Well, not the S&P, which has not kept pace with the Dow. And,
> remember, the Dow stocks are supposed to be the where the quality is,
> and there's been a flight to quality recently, which will bid it up.
> Analysts, even the most rational and successful among them, like
> Richard Russell, have been talking about a third speculative leg to
> come in the Dow. But many other stocks are not participating, and the
> matter of a third leg seems to be in doubt due to all of the
> liquidation. You may not realize it, but the bond market, which is a
> debt market, is the big kahuna. It's 10-times bigger than the stock
> market. If the credit crunch expands to include other classes of debt,
> then a stock market crash will be peanuts in comparison with a bond
> market crash. Like I said, the chickens seem to be coming home to
> roost, and they look a lot like vultures.
>
>> Marcello wrote:
>> Sorry,
>> but those are some very positive things, and yes, they are somewhat
>> countered by inflation, weakened US dollar, high gas prices, etc, but one
>> doesn't need to be a rocket scientist to see where the positives are in
>> the
>> economy and get those working for you.
>
> The economy can only be pushed or manipulated for so long. You must
> realize that we are a collection of markets. When confidence in
> financial and consumer markets wanes, especially when they are so
> unstable due to so much debt, then things start to happen that people
> have little understanding about because they have only ever known
> prosperity and expansion. I detect a lot of current opinion in your
> statements, but I think you will be telling your grandchildren quite a
> different story.
>
Again, assumptions about my age are from where??? I am not a grandparent
but I have been around and investing and doing fine for quite a long time
thank you.
I believe it all amounts to a line of perception - for your statement about
the economy says it all. If you believe the economy can only be pushed or
manipulated (by who, government???) than we disagree to a greater degree
than I originally thought. This economy was and is based on the
entrepreneurial spirit and hard working people. It has never been perfect,
not even close, but it is certainly not pushed (not to get too far into
semantics), its is driven along and will continue to be so until government
manipulation one day becomes too burdensome and revolt becomes the most
viable option (not a prediction, merely a possible outcome).
I appreciate your good wished and of course I wish the same for you. I do
believe that you are slightly in denial regarding your pessimism, perhaps
(only a guess) sheltered by a perception that you are a realist. In all
your analization of all the data, I must know - when you consider how
quickly the debt could be paid down with a mere 10%% reduction in federal
spending combined with a cap of spending growth tied to that of the GDP, do
you really think the concern should be on the US economy as a whole of the
political process of out of control spending by both major parties?
Additionally, why do those who jump to the size of the national debt never
take into consideration the stored wealth of the US in its holdings across
the country. A perfect example is the land covered by the military base in
coastal Southern California (Camp Pendleton). This land, if sold in to the
private sector, is estimated to have value in excess of $900 billion. I am
not suggesting a fire sale, but if one single asset among thousands of
freely owned assets accounts for almost 10%% of the current debt, how can
anyone sincerely be concerned about the meditate (next 150 years) future of
this country? If there should be any concern, its should be on that which
politicians push on us all.
