patrick.net

I am trying to figure out which is making me more upset:
1. Taxking me without my agrement like the state of CA is trying to do with its proposed sur-charge.
2. Paying bonuses to failed business people whose malfesiance caused the loss of every working person's retirement. Good Lord, instead of prosecution they are getting SEVEN FIGURE BONUSES!
3. Seeing tax dollars making Wall stret speculators whole. Why are we paying off AIGs CDS exposure?
4. Raising the expense side of the state budget 40% in 3 years in CA then stating it would be cruel to roll back any spending so we simply must have more taxes.
5. Allowing retirment managers to speculate with CA retirement funds that are bound by law to be made whole through taxation.
6. Paying much higher than prevailing wages for fire/police/prison guards. One job opening, 3,000 people apply. Something is wrong there.
7. Legislating charity. In the past, people would privately donate for organizations like mental health care, substance abuse, child health care. Now we just make everyone pay.
8. Really stupid laws about how much and when people receive social security. Remember when families took care of their own?

I am reminded of, I think it is Marin. More than 50% of the town are renters, so everytime they want to raise money for something they vote to 1) approve it and 2) to levy the item as a parcel tax. Somehow CA has the voting might to keep putting agencies and projects into place that someone else has to pay for. This has simply got to stop.

"Uh, whom exactly do you think all those illegal immigrants are illegally working for?"

NOT ME.

And I don't understand your point. What does them working for CA companies have to do with giving them free health care and schooling? They would still work without the handouts.

I think the old addage has been, "We are such a rich country, we should do these things."
I think the new reality is, "We simply cannot afford to keep providing all things to all people becasue we think that is a good idea."

Unless the rich clas is willing to part with the amazing amount of money they have collected over the last 8 years (or longer) than asking those who do not have enough to continue paying for everything and everyone is simply an impossile proposition.

Deflation is good because things tend to get cheaper, but with time wages go down so it is null.

Inflation is bad because things get more expensive, but with time wages go up so it is null.

Deflation helps savers, inflation helps borrowers.

The government is a borrower. They don't like deflation and will try to stop it. Which is what we are seeing.

“We simply cannot afford to keep providing all things to all people becasue we think that is a good idea.”

We are realizing this at an amazingly slow pace. It's like our country is one big underwater homeowner who keeps buying plasma tv's even though they're broke and out of work...

But deflation can spiral. Reduced demand, reduced investment in production capacity, fewer jobs. Lather, rinse, repeat.

That's a popular misconception.

Deflation results in increased investments in more sustainable (or what I like to call 'real') endeavors as money tied up in nonproductive investments frees up.

While jobs will be lost where overcapacity exists, new jobs will be created as resources find their way to more productive uses.

It's more than just wages and prices going down, but reallocation of resources to more productive efforts that makes this corrective phase much more desirable than the continued policy of inflation.

Blaming deflation for your woes is like a dope addict blaming his predicament on his rehab program.

Deflation is just time to pay the piper.

It is a message from Free Market...

Dear Keynesian,

Business cycles cannot be defeated.

Love
XXX

Business cycles are there because it is how the financial elite gets to buy low and sell high.

Of course cycles can be avoided, but not as long as the Federal Reserve is in cahoots with the elite rather than doing what it should.

frank writes:

Deflation results in increased investments in more sustainable (or what I like to call ‘real’) endeavors as money tied up in nonproductive investments frees up.

Arguably so, but it's complicated by the fact that the measurement of "productive" is changed by the swing to deflation, and therefore existing debtors (nearly everyone) will suffer.

Creditors would gain, of course. Maybe we can deflate our way into the reestablishment of the American manufacturing industry ... for the Chinese, Japanese, and European middle class. (mostly kidding, globalization is a multi-way street).

Still, I maintain that a little deflation to slow expansionist policy down a bit wouldn't hurt too much and would probably be healthy, but anything prolonged would do great and long-lasting damage.

justme...

Annuit cœptis - Novus ordo seclorum

Just take out your dollar bill. ;)

But it is all understandable...

Defeating business cycles is as satisfying as reversing "global warming."

Kewp,

Exact;ly, who do we think all these illegal immigrants are working for?

Here is one answer: Doing the yard work and construction for a whole class of aspiring property owners that were too busy inflating the housing bubble to do their own chores.

Fuzzy,

Are you serious, do you think children of illegal immigrants should just be roaming the streets rather than being in school?

I heard on the radio yesterday that about 3-4B out of a 65B schools budget can be attributed to illegal immigrants. For sure this is not the real problem with the California budget. And what would we do without all the farm labor?

Just heard from my buddy over at Merrill Lynch that he received the same bonus as last year. He wants to thank all the rest of you taxpayers for that and wants you to know that he will promptly send most of it to his family in India. He was so gracious that ML laid off US citizens and kept his H1-B ass employed too. He told all his friends back home and they too will be lining up for your tax dollars. Merry Xmas.

Are you serious, do you think children of illegal immigrants should just be roaming the streets rather than being in school?

If they have legal status (e.g. citizenship) of course they should be in school. If they are here illegally, we should deport them as we see them.

And what would we do without all the farm labor?

Guest worker program. Those who are unwilling to register or apply should be deported on sight.

The most important part of my post was the 4/65 fraction.

justme... take your 4B from schools, and another 506B on health for the illegals, and you're getting damn close to the $11B we're short by.

Here's the idea. We can't have everything. EVERYONE CAN NOT HAVE EVERYTHING THEY WANT. It's that simple.

The correct response to the CA budget problem is to cut any costs that can be cut. Raising taxes is NOT a solution. Raising taxes during the onset of a depression IS NOT A FUCKING SOLUTION!

There are a few cores we should be protective of... like education, and police. Everything else in my mind is a target for cutting. Health care is the primary.

It does no good to bankrupt people that have a little bit of money left to support the people who are already bankrupt.

woops, 506B should be 5-6B

I'm pleased that Bush finally managed to do one right thing (automaker rescue), and he did not even break the union in the process.

Of course, were it not for 8 years of Bush we would never have been in this predicament in the first place. California would have been allowed to set emissions standards, Detroit would have been forced into more efficient cars, just for starters.

Fuzzy,

You are thinking about this the wrong way. It is the police that is overpaid, not the teachers. And without schooling for the citizen children of immigrants, you will spend still more on police just to keep crime under control.

I’m pleased that Bush finally managed to do one right thing (automaker rescue), and he did not even break the union in the process.

For that, I finally hate him. He is a liberal!

“productive” is changed by the swing to deflation

Then you probably have a skewed definition of a productive endeavor. A business that does not rely on government subsidies or bailouts or overtly loose credit will most likely remain a viable business model in deflationary times.

Can you give an example of the contrary?

It is the police that is overpaid, not the teachers.

Unless schools can expel students at will it is useless to have good teachers. Since there are bad kids anyway we can only have an adequate police force to counter them.

It is absolutely, positively incorrect to think that good teachers can turn bad kids into good ones. As a society, we sometimes must simply cut the loss short.

Perhaps there are many wastes in the police infrastructure, but my father (as a lifetime policeman) was certainly not overpaid. If you think so, then perhaps you should try getting your finger bitten off or shot at during your normal work day.

I agree that teachers are underpaid.

Note that I do not believe police protection nor education are human rights. However, they provide a safe and productive breeding ground for future prosperity.

How does health care provide that?

I’m pleased that Bush finally managed to do one right thing (automaker rescue), and he did not even break the union in the process.

You can't say this is the right thing until the automakers turn around and become profitable again. This is highly unlikely as the bailout will not inspire people to buy cars nor will it resolve the fact the the companies are run by a bunch of idiots employing overpaid workers.

Look for more good money being thrown after bad next year as the automakers continue to fail.

I should add as well that I think pensions in general are a good thing. However, allowing the pension fund to gamble the money? Give me a fucking break.

Why don't we just take the rest of our coffers to Vegas, and put it all down on one hand of blackjack.

I do not think pensions are a good thing. People should plan for their own retirements. What is the difference between a pension plan and a ponzi scheme anyway?

Is this for real?

http://www.foxbusiness.com/story/markets/fox-business-sues-treasury-failure-respond-freedom-information-act-requests/

yup, it's for real. Bloomberg has also sued the Treasury for the same thing.

"What is the difference between a pension plan and a ponzi scheme anyway?"

can't really argue with that. They are certainly not designed to last through periods of contraction.

Social Security definitely looks like a ponzi scheme to me.

what isn't a ponzi scheme these days I wonder.

LOL! :)

Peter, do you ever get concerned that capitalism itself is a form of a ponzi scheme? I haven't put too much philosophical thought into it, but something about it nags at me. Namely, absent growth, the system seems to break down entirely.

Also, what growth is real? As the rug gets pulled out of the last 8 years, we are seeing alot of castles made of sand. How far back does this fake growth go I wonder? The early 80's? 60's? WWII?

Why should any retirement plan be a pension scheme financed by future company earnings? That is insane, one should see that the retiree expense will skyrocket over time, especially as people live longer and are able to retire early.

Why not set up a variation on the IRA that has no contribution limit and can be match funded? The contribution does not have to be deductable, but should accumulate interest tax free. Only allow contribution to Treasuries or insured CD/MMA. In essence, this is more an enhanced or employer aided savings plan for retirement rather than a pension. One can still use company stock in compensation, but keep it out of any retirement plan.

"Food prices are nasty-high right now and dont seem to be falling along with everything else." - mickrussom

Actually food prices have alot of pressure to fall. There is over-capacity and high inventory everywhere you look. (BTW, I am in the food industry and have first hand knowledge). It is just taking a long time, because quite frankly food prices were very low while all other assests were booming. In some cases the gains in prices of food were very justified and will not roll back, even during this deflation.

Food prices have been low for a long long time and now that they have gained, and food is a necessity, they are going to stay that way. The cost of transportation will be rolled back, but that is about it. People don't need a TV or a cell phone, but they have to eat. More cash is going to flow to food and less to "luxuries".

The saying in the food industry is: "When times are good, we do OK. When times are bad, we do OK."

Peter, do you ever get concerned that capitalism itself is a form of a ponzi scheme?

Not quite so. The weak hands always lose to the strong hands, through booms and busts. Capitalism is true to human nature and I believe it is sustainable.

Namely, absent growth, the system seems to break down entirely.

Growth and contraction come in cycles. The sooner we allow things to correct, the sooner we will see growth again. It is absolutely necessary that mal-investments be liquidated. Creative destruction is the life force of Free Market and I do not see any need to dampen its effects.

What growth is real? I do not know. I just see booms and busts as pendulum motions. There is no real growth in that sense. Things just move along.

BTW, I believe the mother-of-all-bubbles is not this credit bubble. It is the human population bubble. When that corrects, and it will, it is going to be scary. Hopefully, I will not see that in my lifetime.

exactly what I'm getting at.

Humans are ferocious in building the population base. Human nature, as well as capitalism both support this.

When a real limitation is put in the way of this, like lack of natural resources for sustenance, then both human nature and capitalism become detrimental to quality of life.

While this could just be an acceptable ugliness in the way things are, perhaps there is a better way.

Even without resource limitations, the internal dynamics of the population boom will tear it apart. Bubble is like a stable disequilibrium. Things all seem to be aligned and all right and then, suddenly...

While this could just be an acceptable ugliness in the way things are, perhaps there is a better way.

There are perceived "alternatives" to capitalism but there are no alternatives to human nature.

Honestly, the planet is better without us. Therefore, IMO, any form of philanthropic environmentalism is guilty of hypocrisy.

Capitalism ends up becoming stagnant with time. The rich stay rich and the poor will stay poor. I am talking about strict free market capitalism, with little to no taxes and no unions. The government ends up becoming a tool for the rich to swindle the poor, so no real democracies and no more middle class. Which causes a populist revolt and it starts over again.

What I am trying to say is, like deflation and inflation. Populism and Capitalism are also cycles that help breath new life into countries and peoples