Perry Glasser

Posts Tagged ‘Finance’

THE CRUSH: THE COMING STUDENT DEBT CRISIS — PART 1 OF 3

In Economics, Economy, EDUCATION, Finance, Millenials, Personal Finance on June 7, 2018 at 5:58 pm

When it comes to student debt, because of the coercive necessity for advanced education and its the rising cost, the perennial Millennial and Gen-X complaint about how their parents, those self-centered Boomers,  screwed up everything, Dollar$ concedes the issue.

Millennials are, for once, correct.

Call them The Whiners, but call our system to fund education The Crush.

whiner

Dollar$ despises the reductio ad absurdum that dumps entire populations into convenient rhetorical buckets. Gross generalizations about millions of people can never be accurate. Any thinking person (a Dollar$ reader, for example,) can point to dozens of exceptions, but in the grand scheme of things it is now long overdue that we grapple with the out of hand system for funding education.

The Crush will soon crush us all.

So this column will not be about how Whiners need to man-up, knuckle down, and work. Look, a kid borrowing money for education is accepting debt precisely because the kid wants to get ahead. The Crush does not allow it.

This Dollar$ series will be about

  • our coercive culture,
  • risk-free lending from banks and The Fed,
  • educational institutions that have no incentive to manage costs.

The Crush allows  no escape, no free market options, no serious choice to not participate, and no institutions with any incentive to carry the weight, though plenty offer lip service as they add bricks to the load.

COERCIVE CULTURE

Citizens in America with advanced degrees earn considerably more than citizens without a parchment.

graph

Of course, free spirits may always choose to abandon The System and be poor, but the gap between having a Bachelor’s Degree and not having one in a nation where medical care, housing, and being reasonably fed depends on income, makes the Poverty Option the choice of living with a gun to one’s head or not.

Trapeze artists who fly with no net all eventually fall to earth.

What is a Whiner to do?

RISK-FREE LENDING

Bankruptcy laws are the enlightened replacement to debtor’s prisons. Nor do we allow people any longer to become indentured servants to pay their debt. Slavery is simply evil; holding debtors behind prison walls disables their ability to pay their creditors.

Besides, in our corporate state, to be fair, where corporations are legally people, you can’t jail a business no matter how badly it manages its affairs (though Dollar$ ardently wishes we could).

Bankruptcy laws humanely offer a Citizen a new start. To be sure, as a strategy to manage personal finances, declaring bankruptcy should always be a last resort; it cuts an individual off from future credit for many years, and the process of bankruptcy debt relief is managed by courts that apportion remaining assets to grumpy creditors who must accept something instead of nothing.

Yet debt incurred for education whether it be from the Fed or a private loan from a bank cannot be settled by bankruptcy. Businesses leverage their assets with debt all the time. Who would argue that leveraging oneself as an asset that can and will earn more is a bad idea? That debt follows the borrower forever, even through bankruptcy. Short of paying it off, the sole means of settling student loans is Death.

death

THE ONLY WAY TO ESCAPE STUDENT DEBT

Like Fat Harry, who in my Brooklyn childhood was all too happy to lend money for a quick plunge on a horse at Aqueduct, some education loans grow through compounding any unpaid balance. Harry called that the vig. Harry might apply a baseball bat to the knees of a derelict borrower to encourage compliance, though Harry never preferred a payoff when he could keep his money on the street earning ever more. An outstanding balance was far better than some Citizen … uh make that Sucker….trying to settle.

With educational loans, just because you’ve made the stupid decision borrow a fortune against future earning when you are in your teens (something like betting on the wrong horse), the banks and Fed will forgive several payments. No problem! Like Harry, they are delighted to fold what you did not pay into your outstanding balance and add it to your total debt! When you start paying the vig again, YOU’LL OWE EVEN MORE and if you don’t pay, they’ll take it through the IRS.

It’s not a baseball bat to the knees, it just feels like one.

THE RISING TIDE WILL SINKS ALL SHIPS

The cost of that required education at public and private schools has soared at twice to three times the rate of inflation, a rate that HMOs, hospitals, and medical insurance envy. Baby Boomers who earned a year’s tuition and fees with a decent summer job, if they needed it, worked during the school year for a few hours per week for incidental expenses, inexpensive textbooks and dormitory space that was less than luxurious, but kept rain off their heads.

Whiners caught in The Crush have no such option.

The average tuition and fees for a degree program at a state institution in 2017 is just under $10,000. Now add books and mad crazy things like food and a roof. Boy, those college kids are scamps!  The eat food! They wear clothing! Such frivolity!

There’s not enough ice cream to scoop to meet those expenses.

Of course, they might work their way through school, attending fewer hours while they work somewhere at minimum wage–except that winds up making the cost of their education go up by another year or two…

The Crush has no mercy.

**********************

COMING SOON

PART 2—WHY DOES EDUCATION COST SO MUCH?

PART 3—THE CRUSH

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MILLENNIAL WHINING

In Economics, Economy, Millenials, Political Economy, Politics, SOCIAL MEDIA on June 2, 2018 at 10:45 am

The jobless rate ticked own in May to a seasonally adjusted 3.8%, the lowest since April 2000…The last time the rate was lower was in 1969.
–Wall Street Journal, June 2, 2018

Since 1969?

Dollar$ turned 21 in 1969.

The good news reported by the Labor Department includes rising wages among all classes of workers irrespective of race, gender, or education, but Dollar$ could not help to think of Millennium friends who periodically flood social media with bitter attacks against those Baby Boomers who came of age when life was so easy, and who then spoiled everything for everyone ever after.

Dollar$ as a matter of disclosure is happy to reveal he is one of those Baby Boomers, and Dollar$ freely admits the rise in price to thrive in in the American economy has not always been even—the rise in cost of housing, education, and healthcare as percentages of incomes is staggering—but Dollar$ takes perverse pleasure in noting that there is simply no longer any contemporary rationalization for staying at home and whining about it.

Whining most often to each other about the unfairness of life is accomplished by cell phone (A Boomer Innovation) is, how there is never enough time to compete on the Internet (ABI) with video games (ABI) on their flat screen hi-def TV (ABI) and which leaves not much else to do except participate in Hook-Up culture enabled by easily obtained and easily used birth control (ABI). Leave alone the more significant cultural changes in Civil Rights, Women’s Rights, Voter Registration, Marriage Equality, and a half-dozen other causes, all essentially accomplished but under perpetual attack by troglodytes who long for an America that never was.

The price of social freedom and progress has always been vigilance.

But the good news means there is no excuse not to go forward. Sorry we did not get to it, but it is time to roll up your sleeves, kids. C’mon, my grandchildren are counting on you for:

  • Silent jet planes,
  • Genetic cures.
  • Economically viable renewable energy,
  • Relief from America’s oil, concrete, and rubber infrastructure.

And, yeah, like Captain Jean-Luc Picard, after some time on the holodeck, Dollar$ wants to kick back with refreshment prepared by voice-recog: “Computer, Earl Gray, hot.”

tea3

BITCOIN & SAD MILLENIALS

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on February 3, 2018 at 1:18 pm

It’s hard to be sympathetic.

Several years ago, Dollar$ started plainmoneytalk to offer explanation and instruction about financial matters to the naïve and young. Someone had to.

Big honkin’ financial websites and advisory services run by Wizards have a vested interest in making what is basic seem complicated, the better to charge for magical advice no one should need.

buzzard

Credit Card Company

Personal Finance instruction at high schools is abandoned after explaining checkbooks, possibly because teachers themselves are uncertain of how banks, credit cards, car insurance and all the rest fit together. Young Citizens are left baking in the sun along the roadside, tasty meals strewn meal for carrion credit card companies who feast on the dead.

Dollar$ refrains from specific investment advice, the realm of Buccaneers and Wizards who cover their asses by couching advice in subjunctive mood: If XYZ Corp does not go up, it might go down!  Yes, well, other than standing still, there is no third alternative. There is, however, lots of deniability, and the advice applies not only to investments but to hydrogen airships navigating through lightning storms. If it does not go up like the Hindenburg, it will do just peachy.

hith-hindenburg-

Financial adviser: “But look how well they are doing at the front of the ship!”

The four personal financial functions – Saving, Investing, Spending, Insuring (SISI) — have been explained by Dollar$ in the past. Underlying the advice are a few principles, the hallmark of which is Get Rich Slowly.

BITCOIN TODAY

So it is with a heavy heart but some smug self-justification that Dollar$ observes that in the past two months, the eager sweaty Get Rich NOW! Millennials, nurtured on tales of college drop-outs making billions in weeks and because of weak toilet training remain puzzled by the concept of delayed gratification, have gotten kicks in the head and keister. (Why do we never read of the legions of Ivy League dropouts who lost Mom and Dad’s fortune by investing in systems to convert lead into gold?)

Bitcoin and other “digital currencies” took a beating, dropping a bruising 60 percent from a high of $19,783 in December 2017 to (gulp) as low as $7,700 last week. That’s 60 percent, and the fun is not yet over.bitcoin

Someone will offer a postmortem—increasing regulation around the world? invisible North Koreans getting out of the game until after the Winter Olympics?—but the fact is that at any time  they could have read Dollar$. With any luck, we have seen the last of this worldwide swindle put together for the greater glory of sex traffickers, arms dealers, dope runners, and terrorists.

Dollar$ does not like saying, “I told you so” because it is like kicking  corpse, but in this case will make an exception.

 

WHINING – A HOW-TO FOR MILLENNIALS

In Business, Economy, Political Economy, Politics on December 9, 2017 at 2:26 pm

One of the more frequent themes Dollar$ reads on social media is the ongoing complaint that the generation born between 1945 and 1970, those rotten Baby Boomers, are a bunch of louts who deliberately loused up the economy for everyone who came after them. Selfishness is something you develop by smoking weed through a bhang and

HENDRIX

SELFISH BABY BOOMER

listening to Jimi Hendrix. If they would all only die, housing would be cheap and jobs would open, easy, high-paying jobs with benefits that require no experience.

This theory explains why that kid who lives in your basement on a three-legged couch incessantly watches pornography on his cellphone. All the jobs out there are soul-sucking crushes, fruitless and stupid wastes of time. Even looking for that job is a waste of time. Fixing the couch isn’t worth the trouble, either. Glue? Nails? It’s all too complicated.

Facts

Facts only obstruct a good theory, but Dollar$ is not yet of the party that deems feelings should be the basis of policy because facts are no more than the legacy of the dying culture called Western Civilization, but our hearts never err and can only lead us to a better world. As Donald Trump and deconstructionist professors have taught us, facts are relative.

However, some facts are numbers.

  • In November 2017, the US economy created 228,000 new jobs
  • The jobless rate for non-high school graduates is 5.2%
  • The jobless rate for the overall US economy is 4.1%, the lowest it has been since the dot-com bubble burst in 2000.
  • After years of lackluster growth of 2%, the economy is now growing at nearly 3%, a pace that means business expansion will require ever more new employees and—gasp—will need to pay entry-level employees well to compete for their heads and hands.
(figures from The Wall Street Journal, Dec 9, 2017)

By the way, Dollar$ also notes that the economic expansion these figures suggest is worldwide. The stock market is soaring because that confidence in the future is shared most everywhere. If Finance Buccaneers don’t screw it up by inventing products that have no basis in reality and then leverage that fantasy 100-fold before selling those vehicles to municipal retirement accounts, regional banks, and other suckers, your BitCoin Futures, for example, we are in for some good years.

Good news upsets ideologues who prefer to complain about their ongoing, constant anxiety even though that anxiety, at least in the economic sphere, is misplaced. Sure, things can go wrong, and eventually will, but the quality of life has never grown in a straight line. When things suck, wait a while. They will turn around. You don’t really need to check under the bed each night.

For example, Robert Reich, the Beserkely professor, former Secretary of Labor, and Facebook columnist, checks under the bed three to four times each day with columns and videos. His trauma at not being reintroduced to the corridors of power when Hillary Clinton failed to be elected must have been acute. Instead of running the world, he is on the sidelines where he generates a tsunami of media whose final point is that whomever is doing whatever, Professor Reich could do it better. He has the time to do this because California pays him in excess of $400,000 per year, requires him to teach no more than one or two classes, pays the salaries of a cadre of graduate students to assist him with his onerous work, collects $40,000 for speaking engagements, and has published a book called Saving Capitalism, which, if Dr. Reich’s situation were typical, would seem to need no saving at all.

At least not for him.

Baby Boomer Failures

  • The safe and cheaply available birth control that makes hook-up culture possible on that basement couch, thus eroding the moral fiber of our culture.
  • The internet that delivers porn directly to the basement couch.
  • The virtual elimination of several diseases, such as polio and smallpox.
  • The virtual elimination of famine because of advances in agriculture and the successful world distribution of crops like winter wheat.
  • The Civil Rights Movement of the 1960s.
  • The Women’s Rights Movement that began again in the 1970s.
  • Passenger jets. How else can a Millennial go backpacking in Nepal before taking residence on the sofa?
  • Cell phones, that device that permits Millennials to snap selfies, cat photos, and up-to-the minute data on any Millennial’s location should they venture from the basement, all forms of narcissism previously never seen on our planet.
  • Digital special effects that bring believable visions of world apocalypse and intergalactic warfare to that cell phone or the game box beside the couch facing the flat screen TV on which HD pornography plays most of the day.
  • The rising preponderance of women in higher education as students, teachers, and administrators.
  • Automobiles that cost more because they are built to new standards of safety, airbags, seatbelts, and the like for passengers who strangely wish to live through collisions. Those doodads are constructed with materials other than steel to keep vehicles lightweight enough to conserve fuel. slow global warming, preserve energy, and keep that basement comfy.

Why are These Failures?

Dollar$ is glad you asked.

The work, you see, is not yet done. Those damn Boomers selfishly left the world imperfect. Some kids may have to get off the couch and build better infrastructure, get us renewable energy sources, find better batteries, silence jet engines, create hologram entertainment, and take the US out of rubber, concrete, and petroleum logistics.

You know, work and innovate.

Effort sucks.

Totally.
download

 

 

 

Tulips and BitCoins

In Business, Economics, Economy, EDUCATION, Finance on December 7, 2017 at 9:00 pm

Tulips

In 1636, Holland discovered the tulip. They were imported. People went crazy for them. Everybody wanted them. No one could get enough of them, and the more rare they seemed, the more valuable they became. The cost of tulip futures for some bulbs rose to prices worth more than 20 acres of land. I am not making this up.

It’s easy to laugh, but open your closet and count your Beanie Bag Babies stash. How many collectibles have you bought recently? Holy bananas, have you been buying fake money and stamps with baseball players on them from small Caribbean states as family heirlooms?!?

But God forbid, have you considered BitCoins?

The Wizards on Wall Street are fainting. They notice that Bitcoin rose above $15,000 this week, and is up from $800 a year ago.  Remember, always that Wall Street Wizards invest in nothing, but they want a piece of every transaction. They earn profits when money changes hands, and if that is when your kid’s college education turns to dust, well, that’s a shame.

BitCoins are an imaginary currency backed by the full faith and credit of nothing, not nobody, not nohow.  The dollar, on the other hand, is a currency backed by the full faith and credit of the United States, which Dollars$ admits may not be all that much more, but has to be worth more than a few beeps and blips on some kid’s garage in a Tokyo sub-basement. Sorry, Binky, but the gold in Fort Knox has not been seen for decades. Every bill in your American wallet is a promise to pay–later.

The US dollar is also the standard for several other currencies, small countries, mostly, that cannot risk having speculators manipulate their money. In  the currency markets where money floats, the US dollar is relatively stable.  On the other hand, people who invest in Bitcoins either live too far from a decent casino or think Monopoly money is tricky stuff. They plan on being the last person through the exit when the inevitable collapse occurs, but do you know what happens when all the elephants try to get through the door at the same time?

BitCoin is the preferred currency among drug dealers and computer hijackers, those rascals who are the cousins to that Nigerian prince who offer you millions if you’ll send just a few thousand. The Prince makes that offer by email; the BitCoin pirates fly the Jolly Roger  while sailing through cyberspace.

You get your choice.

bitcoin

look that them digits!

jolly roger

WEALTH INEQUALITY

In Business, Economics, Economy, EDUCATION, Finance, Political Economy, Politics, TAXES on December 5, 2017 at 10:40 pm

bossy sisterWhenever my big sister played Monopoly, if the game was going against her she would toss the playing board in the air. My hotels and houses would scatter across the living room carpet as she shouted, “Salugi!” (a New York-ism pronounced “suh-LOO-gee”)and lunged across the table to confiscate most of my deeds, especially Boardwalk and Park Place.

When I was able to read the rules of the game, I learned there was no allowance for tossing the game in the air or confiscating my property. My sister was cheating! But since I was 8 and she was 14, she was able to meet my accusation by beating me up.

The History of Wealth Redistribution

My sister was a revolutionary.

To be sure, Dollar$ reminds readers that rebels object to rules, but revolutionaries rewrite them. Rebellions are common; revolutions are rare.

The folks who threw the board in the air in the past have cried, “Justice!” not “Salugi!” They had names like Washington, Lenin, Mao, and Castro.

Note that political persuasion—Left or Right—has nothing to do with revolutionary status. Mao and Washington might have discussed military tactics, but Dollar$ suggests they would have come to no agreement about economic systems or the function of government.

The Function of Governmentpreamble-20532-20120118-55

It’s less complicated than Monopoly.

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

Washington (the dude on the $1) believed that the function of government was primarily to protect the rights of the individual, rights that most often needed protection from government itself. If no military personnel have been billeted in your living room, thank Washington.

Washington may have noted that to promote the general welfare required some redistribution of wealth to insure equal opportunity and to insure domestic tranquility, but that does not guarantee equality of status among citizens.

Washington’s pal was the first Secretary of the Treasury, Hamilton (the dude on the $10). Hamilton understood that wealth concentration in institution like banks were a social good, provided the bank used that concentration of wealth to fund the visions of a greater society, lending money to visionaries and giving stability to the economic infrastructure by protecting wealth from being squandered by a ruling class on personal indulgences. Hamilton, an orphan at 11 and the illegitimate son a British West Indies plantation owner, would likely not endorse a notion that the function of government was to protect the rights of the filthy rich to become obscenely rich.

The Situation Today

Some of Dollar$’s best friends sink into fuzzy thinking when talk comes around to how wealth is created and distributed in the United States. They lose sleep fearful that someone, somehow, somewhere, is leveraging assets to optimize profit.  They simple-mindedly believe that economics is a zero-sum game and cannot imagine economic growth. If an organization makes a dollar, someone must be a dollar poorer.

No. That simply is untrue. If it were so, you and I would enjoy the same standard of living as Washington and Hamilton. But the fact is that economies grow.  At issue is how they grow, not whether they should grow at all, though there are indeed some who think that a good idea, too.

The deluded friends of Dollar$ from time to time propose bold programs to redistribute wealth, programs they understand as pursuing Justice.

There two reasons those cannot and should not work.

1. Nowhere in the US Constitution will one find the word corporation. True, we reserve the right to free assembly, but that does not elevate any assembly of citizens devoted to profit a guaranteed right to speak lies in its advertising or compensate its directors and executive officers so rapaciously that shareholders who hope to partake of the boons of the system see their profit participation reduced by rapacious Buccaneers.

Oliver-Wendell-Jr-Holmes-9342405-1-402
Not Sherlock; not Mycroft, just Oliver

2. Oliver Wendell Holmes, Jr. noted Taxes are the price we pay for a civilized society. The idea is carved in stone on the IRS building in DC., but let’s note that corporations do not pay taxes, they collect them.  If you think they do not, you are submitting to a distraction. Dollar$ hastens to explain that citizens are consumers. Tax us, and we bleed money. Bleeding, we consume or save less, neither of which are good things, though it does not follow consumers should not be taxed. Civilization is messy, but must be purchased. But to a corporation, taxes are a cost of doing business, like labor, supplies, and logistics.

Raise corporate tax rates, and corporations will only raise their prices.

Guess who pays the difference?

Today’s  Lesson

Remember, friends, we cannot pursue social justice by confiscating wealth. We can, however:

  • Limit executive compensation by law to some multiple of the lowest worker in an organization;
  • Create progressive income tax brackets that limit the shift of American wealth to the rich from the poor;
  • Lower repatriation taxes so that companies that keep their money off-shore are encouraged to bring it home where they can invest in more factories and create jobs here–better to collect 15 percent of something than 30 percent of nothing;
  • Demand that higher education is a matter of national security, and so to insure the blessings of liberty are  free to all;
  • To insure the blessings of liberty on ourselves and our posterity, give tax breaks to organizations that train employees instead of demanding that future employees borrow so much money to gain perceived needed skills that students have no choice except a life of indentured servitude;
  • Regulate publicly traded corporations by disallowing aggregation of profits as cash without paying shareholder dividends, a means to share in that profit. Can we stop the nonsense that hoarding cash is good corporate financial strategy when all it does is spike share prices that are subsequently used to calculate executive performance compensation? (Are you listening Apple Computer?)
  • Return to personal income tax rates that  reflect the needs of our society. Under Eisenhower, we built the interstate highway system and taxed marginal income as much as 92 percent.

We don’t have to throw the game board in the air to start over again: all we need to do is play by the rules.

CONSPIRACY THEORY

In Business, Economics, Economy, Finance, Political Economy, Politics, Wall Street on February 12, 2016 at 1:09 pm
Janet Yellen

Wizard-in-Chief

Dollar$, always eager to explain the inexplicable world of Finance, that realm in which Wall Street Wizards and Corporate Buccaneers run rampant in their never-ending struggle to own, pervert, master, and control Political Weasels, has developed a theory.

 

Why should Plain Money Talk  be any different from every other blog?

 FACTS

2015 saw:

  • unemployment drop to new lows,
  • minimum wage adjusted up,
  • auto sales rise to recent highs,
  • home sales rise to recent highs with no speculative bubble,
  • the cost of gasoline and heating oil sink to new lows,
  • the United States become an oil exporter.

The Fed is so concerned at all this good news that Janet Yellen has begun to tighte credit, a tactic employed to throttle growth and forestall inflation. Yes, the Wizard-in-Chief, Janet Yellen, is worried things are too good.

Some apologist is sure to point out that the second largest economy in the world, China, is hurting. Dollar$ will give that point of view some quick attention.

CHINA

China’s weakening economy should mean the cost of living in the US will drop, meaning you and I will have more money in our pockets to pay off debt or buy more stuff, everything from furniture to T-shirts at Wal-Mart. The US – China trade balance is heavily weighted toward China—the US imports far more goods from China than China imports from the US. If those good become less expensive, the American consumer benefits. This does NOT harm American business.  Maintaining profit margins at lower prices is easy to do. The cost of commodities the world over is dropping because of the slowdown in Chinese demand. Commodities are the stuff that comes out of the ground from tin to lumber and to gold, the stuff from which everything else is made. Everything should be getting cheaper. Every time Wizards predict that Apple will stop selling iPhones in Shanghai, Apple sells another few million units, but at a lesser price. With inexpensive gasoline, Citizens will be driving  to Disneyworld this year, and they will be able to afford the Mouse’s uptick in prices.

This phenomenon confounds the Wizards., who have learned that bad predictions are clickbait, and clicks drive revenues. No one watches CNN until the shit hits the fan and the shelter under the table grows crowded and cramped.

In the face of positive economic news, the US stock market should be soaring. Instead, the Dow-Jones average has stepped off a cliff in 2016, shedding 2,000 points in 8 weeks, more than a trillion dollars worth of value has been erased from the books.

THE CONSPIRACY

Cui bono?

For the past 30 years,  at every presidential election, commentators complained of the choice between Tweedledee and Tweedledum. But this year, it ain’t so.

weasel candidates in days of yore.

US Presidential Candidates Since 1964

 

This year, on the one hand, we have a wealthy, self-funded foul-mouthed injudicious narcissist celebrity never elected to anything anywhere who is much favored by people who have felt disenfranchised for a generation. On the other hand, we have a New York Jew now from Vermont who has never accepted a dime from Buccaneers or Wizards. An older man, his followers are youth because he demands payback from the banks and companies who were too big to fail and in the past 20 years have sucked the economy dry, indenturing students with education debt. On the third hand, we have a woman who is indebted to the old politics, and on the fourth hand, we have a clown car of interchangeable Republicans who lacking economic issues promise to disallow what your neighbors do in their bedrooms while coyly ignoring that for those promises to be fulfilled they will have to rollback several Supreme Court decisions by what by any account has been a conservative court.

Dollar$ sees the common threat. The two leading candidates are not in thrall to Wizard or Buccaneers. Should either get elected, the summer house in the Hamptons, the private jet, and the 10-room Manhattan  condo are all in jeopardy.

How to dissuade Citizens from voting for either?

Scare the piss out of them. Scare the piss out of them by manipulating stock prices downward. It’s only temporary, and it’s not as tricky as it sounds.

  • Claim good news is bad.
  • Threaten us with defunded pensions, evaporating college savings, and the elimination of savings toward the American Dream, a house.
  • Imply that unless Citizens vote the status quo and allow rapacious policies to continue, grass will grow on Main Street as economic activity collapses.

The stock markets should be soaring, but never forget that 90 percent of all trading is electronic and that computer algorithms engage in a global battle to take advantage of a quarter point’s worth of arbitrage. There is no longer any such thing as investor sentiment. As they now say in Wizard country, My algorithm can beat up your algorithm!

Fear is the most potent means of keeping the harridans out of the White House. Without the creation of synthetic Terror, Weasel Business As Usual will come to a halt.

O the horror!

 

DEFLATION, OIL PANIC, AND THE SKIDS #2

In Business, Economics, Economy, EDUCATION, Finance on January 8, 2015 at 10:05 am
imagesHI5F8ZBL

Is the past our future?

 

 

Dollar$ gazes at the skid in oil prices and asks:  Does the precipitous drop in oil prices presage a worldwide deflationary spiral? Is the world economy contracting so as to calcify economic activity?

In a word: No.

No one will be selling apples on the street any time soon.

 

Oil.

Oil is a commodity, which is to say, like lumber, cattle, gold, and copper, it comes out of the ground to be used to create more sophisticated products like jet fuel, gasoline, nylon, and plastic. Like all commodities, oil’s price is strictly set by supply and demand, a fact less true for many goods and service where supply and demand can be artificially manipulated.

Hatless in the cold.

Hatless in the cold.

Slide11-1024x767

The entire Marketing industry, Prevaricating for Profit,  is devoted to creating false demand. When in 1933 Clark Gable wore no undershirt, the men’s underwear business went into a tailspin. John Kennedy in 1960 insisted on wearing no hat when he spoke at his presidential inauguration; the men’s hat industry has never recovered.

To be sure, hats and undershirts are not commodities. Their worth changes as a matter of fashion, not supply and demand.

OPEC

OPEC is the international oil cartel that has controlled oil’s supply for a generation, but the game changer is a recent innovation. Fracking, it turns out, is cheap enough and ideal in north central United States and southern Canada.

The cartel is losing its grip. The US is going from oil importer to oil exporter. To compete for those petro-dollars, OPEC and especially Saudi Arabia can no longer manipulate supply, but pumped as much as it could. Supply soared. Oil has become a glut on the market.

But at $40 per barrel, fracking becomes uneconomic.  Make no mistake, OPEC would like to see a price for oil that once again leaves OPEC as the only game in town. If that means bankrupting oil exporters not part of the cartel, such as Russia, so be it.

Bye-Bye Putin!

Winners in a Price War

It’s an old-fashioned price war, nothing more. As with all price wars, consumers benefit. Estimates put as much as $1,500 per year in the pockets of ordinary American citizens.

Never forget that the US economy is consumer driven—we like to spend on stuff because we are blessed to be in a places where there is stuff to buy. Expect discretionary products to fly out of stores. That new refrigerator is coming home soon.

The demand for stuff made in the USA will increase in the USA; expect hiring. Elsewhere, not so much because that strong dollar will make US goods seem expensive.

When you read dry-mouthed dire predictions of European disaster because hard-working Germans are tired of supporting spend-thrift Greeks, remember that the GDP of Greece is about 25 percent of New Jersey’s GDP. The drama is interesting, but the world economy is not going down any drain in Athens.

Since the US is an oil exporter, the US dollar grows stronger every day. Would you rather own dollars or euros?  You can’t pay for US oil with euros–it’s really not a choice. For the American consumer, tourist destinations overseas that were prohibitively expensive last year are going to seem to be on sale. Book the flight! Greece needs you money!

Big US oil consumers can lower their prices and still make big profits. Airlines and cruise lines will soon compete on price, instead of competing on service.

Losers.

What’s that Binky? You ask who are the losers? You ask why the stock market plummets with  the price of oil?

Well, oil companies aren’t happy. Along with Big Oil  the losers are the very rich, the institutions and people that had been positioned to enjoy high oil prices. Sheiks and hedge funds are madly selling to gather cash, the better to buy US stocks  when they believe oil prices have bottomed, which will be about $43 per barrel which is where OPEC can comfortably reinstate its hegemony. Much higher than that, and North Dakota gets rich–again.

So the stock market plunge does not presage a deflation spiral, but it seem that for a while we can expect a new set of winners.

ESCAPE THE STUDENT DEBT TRAP??

In Business, Economics, EDUCATION, Finance, Personal Finance, Wall Street Journal on June 14, 2014 at 10:04 am
St Milton, Nobelist  in Economics, Doyen of the Right.

St Milton, Nobelist in Economics, Doyen of the Right.

Finding new ways to pump money into education as Miguel Palacios seeks to do in today’s Wall Street Journal, is no more than leaning on the bicycle pump with greater vigor to inflate the tire. We saw it in real estate with substandard loans: now we are seeing it again with financial schemes that do little more than bleed profit from students ill-equipped to endure debt no matter how it is structured. Income-share agreements a la Milton Friedman will not rescue higher education until higher education rescues itself, and higher education will not rescue itself until it has incentive to do so. Friedman’s idea was fine, 5o years ago, but the pump today is attached to a balloon already stretched to contain trillions. How much longer can it inflate?

First, let’s address the proliferation of “professionalized” administrators whose experience of classrooms is nil, and let’s limit their compensation to a single-digit multiple of teaching personnel. We can do this at any US school accepting US money—which is all of them, public and private. Should any private school express horror, all it needs to do is stop accepting Federal funds in the form of student loans: then the Trustees can then pay a president anything they wish.  If it is good enough for Harvard, it is good enough for Oral Roberts University.

Second, let’s reconsider what we want higher education to be. Do we have the courage to stop equating “education” with “training?” Are our children empty vessels to be filled so they may take their places at the machine, or do we want to train our children to be thinking leaders?

Third, outsourcing job training to prospective employees has to stop. “Hit the ground running” is a metaphor drawn from images of troops dropped into combat from helicopters, but business leaders whose strategic horizons rarely extend beyond the next quarter have to close their copies of Sun Tzu and stop thinking of employees as conscripts. At these prices, youth will eventually not enlist. When that happens, business throughout America will go into a death spiral. Who will be buying the goods and services when an entire generation is already so underwater no one can borrow to buy houses and cars? Before we demand that youth borrow tens of thousands of dollars to mold themselves to a vision that business itself will discard in a heartbeat, and before telling laid-off employees to “retool,” let’s see the return of ad that read, “College grad wanted. Will train.”

Another productive college grad.

Another productive college grad.

Fourth, scrub campuses clean of cruise ship personnel, those pleasant folks who for 10 months each year deliver non-teaching services to students. They account for more payroll than all teachers. Can’t a campus go forward without offices devoted to diversity, racial and ethnic education, and the rest of the panoply of politically correct educational goals with no cognate in the real world? Can an academic year pass without barbecues, fairs, or Frisbee competitions?No wonder kids are lured into majoring in Women’s Studies or Conflict Resolution: they’ve gotten the notion that such careers exist.

Finally, for those of us who demand American employees be competitive and fear they are not, consider the long view on American education. Literacy meant mandatory education through 6th grade, then 10th grade, then 12th grade. Do we have the vision to acknowledge that American prosperity and security at this time requires a population that can access education through the 14th grade? Are we brave enough to say it? — education is an entitlement because it promotes a public, widespread good.

The question is not whether we can afford it, but whether we can continue to pretend that we cannot.

STUDENT DEBT – THE NATIONAL ROAD TO PALOOKAVILLE

In Business, Economics, Economy, EDUCATION, Political Economy, Politics on May 7, 2014 at 11:05 am

Buccaneers, those captains if industry who have offloaded their training costs to trainees, are sending themselves and the United States on a one-way trip to Palookaville.

If we create a generation that cannot afford new housing, cannot afford new cars, are unable to purchase or  enjoy the fundamental goods and services our economy provides, hesitate to marry, delay child-bearing, we will arrive in Palookaville.

The American economy is choking itself to death, and is doing so at the expense of youth.

The Crisis

Evidence that we face a crisis abounds. Dollar$ does not have to work hard to make the case. Student debt is now greater than all credit card and mortgage debt, surpassing a trillion dollars.

student tuition earning Fortune Magazine

student tuition earnings
Fortune Magazine

 

Dollar$ does not imagine this calls exclusively for a financial remedy.

Yes, for a decade and more, the cost of higher education rose faster than any other sector of our economy. Policies pump money into Education with no incentive on Education to reduce costs. Administrators proliferate, non-teaching personnel pop up faster than toadstools in Oregon after rain, the teaching-productivity of professors decline.

But blaming the greed of higher education for the debt crisis is like complaining that ticket prices at sports events are too high because professional players are overpaid.

This is America: wages and compensation are set by markets, and the rule of markets is whatever the traffic will bear. Every CEO loves that rule.

Mortgage and Students

Consider: when money was pumped into the mortgage market, the resulting balloon and eventual collapse rocked the world economy in ways from which it has still not recovered.

The similarities between that mortgage market and the market for student debt are breathtaking—quasi-government agencies, favorable loan rates, and loose regulation.

But there is a difference: a mortgagee can walk away from real estate and leave banks owning worthless property, students cannot walk away from their education. They get to keep what is in their heads.

In fact, we have passed laws that safeguard student debt — not students — even in bankruptcy.  Should a former student go broke, they can seek financial relief in Bankruptcy Court, but no court will release anyone from student loans.

The only way out of student debt is death.

So with apologies to followers of Senator Elizabeth Warren, other well-intentioned Weasels, and the legions of Wizards ever-eager to brew a new potion of loan and grant combination to foist on youth, Dollar$ maintains the solution is not to make higher education “affordable.”

The solution is to champion higher education as an entitlement.

Education must be free.

The Platform

Access to two years of higher education is a right of every citizen.

This is no money giveaway, though the usual Blue Meanies will choke on it.

The program is necessary for the preservation of our democracy, the maintenance of our standard of living, and to liberate forthcoming generations from a lifetime of debt.

In 1944, The United States passed the GI Bill, which promised every veteran free tuition and living costs while in school. Who among us would call that bad policy?  The United States embarked on a rising tide of growth that benefited every economic class.  The lesson was plain: general education benefits us all.

If Buccaneers tell us the United States is engaged in economic war, why are we taxing only youth in our war effort?

Why do the same patriots who grouse that in terms of education “America is falling behind,” insist that the cost of keeping educational pace with the rest of the world is one that must be borne by students?  When did accruing debt to the point of guaranteeing a lifetime of indentured servitude become an act of patriotic obligation?

Why do the same Buccaneers who grouse they cannot find sufficient employees with the “right” job skillset insist that the cost of training be borne by trainees who are speculating about what higher order skills will be needed in the near and distant future?   When did the phrase “will train” drop from the language of employee recruitment?

 Dollar$ calls for free higher education through the 14th grade.