Sunday, September 26, 2010
America The Bankrupt
U.S. Is Bankrupt and We Don't Even Know It: Laurence Kotlikoff
Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It’s also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.
‘Unofficial’ Liabilities
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.
The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous?
Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance.
Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”
Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It’s also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.
‘Unofficial’ Liabilities
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.
The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous?
Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance.
Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”
Lessons Lost On Mankind
Sobering Lesson for the World as Gold and Silver Set to Explode Higher
As the old expression has it, there are: “None so blind as those who will not see.”
The world is about to get a sobering lesson over the next year or two as the precious metals markets move explosively to the up side. As happens so often in the affairs of men, reality is there in front of us just sitting and being itself. Yet so few of the species homo sapiens can see it.
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I have presented an alternative explanation for the blind stupidity of the Keynesian “economists” and their almost perfect record of being wrong. On March 9, 1933, Congress gave the commercial bankers the special privilege to create money out of nothing. Immediately the money supply began to increase, and today the price level is 17 times what it was on that day.
Since the bankers could now make loans (receiving interest) without paying for capital (as the old fashion savings bank or S&L did), they naturally had a strong interest to do so. They immediately began to fund a group of “economists” who emerged to defend the thesis that creating money out of nothing was the “road to plenty” for a society.
Creating money had been tried many times in many different countries, always with the same result. Prices went to the moon, and the society got very poor. The most recent example of this was Zimbabwe where life expectancy dropped from 60 years to 40 years over a decade, a figure which explains the photographs of human skeletons and the official unemployment rate of 95%. By comparison, the two most successful countries in world economic history are Britain (including the Commonwealth) and the United States. And these are countries which maintained a strict hard money standard for over a century.
The “economists” who apologized for paper money and served the commercial bankers were a collection of phonies and frauds. Most prominent here were two American economists named William Trufant Foster and Waddill Catchings, who wrote a book in 1928 entitled, “The Road to Plenty.” In the 1940s, the bankers realized that something had to be done, and they embarked upon a campaign to buy titles for these crackpot economists.
But first a British pedophile (John Maynard Keynes) “improved” the Foster and Catchings fraud by employing a technique I call the wolf in sheep’s clothing. Here the wolf consists of a group of people in politics or economics who wish to go back to the way things were in the Middle Ages. The proper term for such people is reactionaries. The sheep’s clothing is a disguise these people adopted to pretend to be in favor of science, liberty and progress. When you see words like “new” or “progressive,” then you are dealing with the wolf in sheep’s clothing.
Keynes plagiarized the Foster and Catching theory, called it “The New Economics,” and presented it as the latest word in the modern science of economics. The bankers then entered and literally bought fancy titles for their favorite “economists” so that these could use the prestige so gained to influence the country in favor of paper money. The classic case here was when the Manhattan Bank (later Chase Manhattan) bought a chair of economics for John Kenneth Galbraith at Harvard to provide a platform from which he could present his paper money theories and serve the interests of the bankers.
This is a fantastic picture. The entire institution of higher learning in America was bought out by the bankers. They took the bankers’ money and sold a pack of lies to the American people.
Actually, I have written a book on the wolf-in-sheep’s-clothing tactic (The Wolf in Sheep’s Clothing). It is scheduled for publication soon by the Foundation for Economic Education and Harper Collins. It is the story of a gigantic fraud which has deceived our entire society and come close to overthrowing freedom in America. A group of reactionaries (people who want to go back to the past) are pretending to be advocates of progress and have pulled the wool over the eyes of all of the people.
Once the banker “economists” infiltrated into our higher education system, it ceased to be education, and the teaching of economics became a joke. If you take an economics course in 99% of all American institutions today, you will be taught a pack of lies, not just any lies but precisely the lies designed to support the bankers’ privilege to create money. You can hear a good many of these lies any time Bernanke opens his mouth to speak.
Now when economics was a science (prior to the 1930s), the basic thing that economists did was to make predictions. Prediction is the basic tool of science. If you have a true theory, then you use it to make a prediction, and when the prediction proves correct, then this is supporting evidence for the theory.
Naturally, when the banker “economists” came in during the 1940s, they established an unparalleled record of failed predictions. The year I entered Harvard (1955) John Kenneth Galbraith went to Washington and testified before Congress that the stock market (DJI 420) was in danger of another 1929. He caused a panic as speculators in the market rushed to sell their stocks, driving the DJI from 420 down to 400. It then turned and rose for the next 11 years, hitting DJI 1,000 in 1966. There was no repeat of 1929.
We had a more modern example of this foolishness in late July. After a decline in the gold market through late July, Alan Abelson of Barron’s predicted (on July 26) that the price of gold was ready for a substantial decline. Gold declined for exactly one day as Abelson’s readers rushed to sell. You know what has happened since that time. Gold turned on a dime. The breakout created on the 27th proved false, and it is now at $1,275. Abelson’s readers are sitting there with their mouths agape. They sold their gold at the exact bottom.
Now certainly people can make mistakes. The progress of science is full of them. But when a scientist makes a mistake, he observes it and admits it. When a banker “economist” makes a mistake, he hopes the public will not notice, puts a good front on it and uses his title to get away with it. I have often referenced Henry Kaufman’s prediction of higher interest rates and a depression in 1982. I happened to catch Kaufman on a talking head TV show around the turn of the century. There was the host obsequiously kissing up to him and not one mention of the fiasco of 1982.
I was screaming at the TV set. “What about the depression? What about the high interest rates?” Kaufman got millions of stock market traders to sell their stocks with the DJI under 800. It was the bonehead play of the century. But the host continued smoothly on. “Oh yes, Mr. Kaufman, what is your opinion of the coming year?” To heck with the coming year. How does he explain his prediction of 1982?
I have detailed in these articles many other bonehead predictions such as the Great Depression of 1990 and Dow 36,000 (by 2003-05). Why are all these establishment “economists” making one wrong prediction after another – throughout their entire lives?
The answer is very simple. They don’t know anything about economics, and they don’t care. They are hired agents of the bankers, and their impressive titles are intended to get the sucker public to believe any absurd thing they say. Their most common error is; to predict “deflation” because they are trying to get the Fed to print money. When the “deflation” does not happen, they shrug their shoulders, hope you will quickly forget and go about their business. They are confidence men, not economists, and as long as you are stupid enough to believe them, they will continue to lie to you.
But consider the tremendous position that puts us gold speculators in. The last employment of the “deflation” lie occurred in 2008, and virtually all of the media joined in. The fools who believed the lie rushed to sell commodities in the last half of the year, and the CRB index fell in half. But despite this artificial self-confirming effect we have still not had one year in which the Consumer Price Index declined. “Deflation,” where is thy sting?
And even as all await the “deflation” with bated breath, commodities are gathering strength for a second move up. Gold has broken out to new highs. Silver has broken out from an ascending triangle. Wheat and corn are on the move. Coffee is at new highs for the century. The CRB is gathering strength for an attack on the July 2008 high. The charts are not predicting “deflation.” The charts are predicting “inflation.”
So here are all the traders in the world taken in by a lie, the exact same lie which has been used to take their money over and over and over. Here are all these stupid people rushing to give their money to us, and all we have to do is to reach out our hand.
And what it all comes down to is that, if you want to be a good speculator (or a good person), then you have to see reality as it is. This is easier said than done. These five little words contain a crucially important moral virtue. To actually follow them requires a lot of work. You must draw your own conclusions in defiance of what the people around you believe (and are trying to shove down your throat). This is the virtue known as contrary opinion. You must put your emotions aside and believe what is true, not what you want to believe. Emotions are great things, but a strong emotion can cloud the mind. If you try to suppress the emotion, it will just get stronger and come out in ways of which you are not aware. What you must do is to tell your emotion to temporarily stand aside.
I often find it effective to simply talk to my emotions (as though they were a little person inside of me). For example, I might say, “Avarice, stand aside for a while. I need to think clearly if I am going to be able to give you what you want. You are a beautiful woman and should be given fine jewelry and pretty clothes. But if I am to accomplish this, then I have to see reality as it is. When I have made my big score, I will invite you back, and we will have great fun together.” Ditto, ditto for the emotion of fear (which in the markets is very powerful).
Incidentally, Keynes’ views on fear and greed, like everything else the man said, are garbage. Markets are not made by cycles of fear and greed. An easy way to see this is with the auto stocks (more so with the housing group). They characteristically develop very low P:E ratios at stock market tops (and high P:Es at market bottoms). Wait a minute. If the market puts a low P:E on the auto group near a market top, is it committing greed? No chance. If market tops are caused by an irrational desire for money, then why are auto stocks (one of the big movers) showing lower P:Es at the top? This is rational behavior, not irrational.
What, in fact, causes stock market tops is government intervention (via the Fed). When the Fed eases (as in 1982 and 2008), stocks form a bottom. When the Fed tightens (as in 1987 and 2006), stocks form a top. I have known this for 41 years. It has enabled me to predict 90% of all bull and bear moves in the stock market. I have been writing about economics for all of this time. Wouldn’t you think that somewhere, someone would have caught on? How about when I predicted Black Monday on October 19, 1987? On that day, the DJI fell 22%. All these people lost a big bundle that day (as they will lose more bundles in the future), but no one woke up to see reality as it was.
None so blind as those who will not see.
As the old expression has it, there are: “None so blind as those who will not see.”
The world is about to get a sobering lesson over the next year or two as the precious metals markets move explosively to the up side. As happens so often in the affairs of men, reality is there in front of us just sitting and being itself. Yet so few of the species homo sapiens can see it.
google_protectAndRun("ads_core.google_render_ad", google_handleError, google_render_ad);
I have presented an alternative explanation for the blind stupidity of the Keynesian “economists” and their almost perfect record of being wrong. On March 9, 1933, Congress gave the commercial bankers the special privilege to create money out of nothing. Immediately the money supply began to increase, and today the price level is 17 times what it was on that day.
Since the bankers could now make loans (receiving interest) without paying for capital (as the old fashion savings bank or S&L did), they naturally had a strong interest to do so. They immediately began to fund a group of “economists” who emerged to defend the thesis that creating money out of nothing was the “road to plenty” for a society.
Creating money had been tried many times in many different countries, always with the same result. Prices went to the moon, and the society got very poor. The most recent example of this was Zimbabwe where life expectancy dropped from 60 years to 40 years over a decade, a figure which explains the photographs of human skeletons and the official unemployment rate of 95%. By comparison, the two most successful countries in world economic history are Britain (including the Commonwealth) and the United States. And these are countries which maintained a strict hard money standard for over a century.
The “economists” who apologized for paper money and served the commercial bankers were a collection of phonies and frauds. Most prominent here were two American economists named William Trufant Foster and Waddill Catchings, who wrote a book in 1928 entitled, “The Road to Plenty.” In the 1940s, the bankers realized that something had to be done, and they embarked upon a campaign to buy titles for these crackpot economists.
But first a British pedophile (John Maynard Keynes) “improved” the Foster and Catchings fraud by employing a technique I call the wolf in sheep’s clothing. Here the wolf consists of a group of people in politics or economics who wish to go back to the way things were in the Middle Ages. The proper term for such people is reactionaries. The sheep’s clothing is a disguise these people adopted to pretend to be in favor of science, liberty and progress. When you see words like “new” or “progressive,” then you are dealing with the wolf in sheep’s clothing.
Keynes plagiarized the Foster and Catching theory, called it “The New Economics,” and presented it as the latest word in the modern science of economics. The bankers then entered and literally bought fancy titles for their favorite “economists” so that these could use the prestige so gained to influence the country in favor of paper money. The classic case here was when the Manhattan Bank (later Chase Manhattan) bought a chair of economics for John Kenneth Galbraith at Harvard to provide a platform from which he could present his paper money theories and serve the interests of the bankers.
This is a fantastic picture. The entire institution of higher learning in America was bought out by the bankers. They took the bankers’ money and sold a pack of lies to the American people.
Actually, I have written a book on the wolf-in-sheep’s-clothing tactic (The Wolf in Sheep’s Clothing). It is scheduled for publication soon by the Foundation for Economic Education and Harper Collins. It is the story of a gigantic fraud which has deceived our entire society and come close to overthrowing freedom in America. A group of reactionaries (people who want to go back to the past) are pretending to be advocates of progress and have pulled the wool over the eyes of all of the people.
Once the banker “economists” infiltrated into our higher education system, it ceased to be education, and the teaching of economics became a joke. If you take an economics course in 99% of all American institutions today, you will be taught a pack of lies, not just any lies but precisely the lies designed to support the bankers’ privilege to create money. You can hear a good many of these lies any time Bernanke opens his mouth to speak.
Now when economics was a science (prior to the 1930s), the basic thing that economists did was to make predictions. Prediction is the basic tool of science. If you have a true theory, then you use it to make a prediction, and when the prediction proves correct, then this is supporting evidence for the theory.
Naturally, when the banker “economists” came in during the 1940s, they established an unparalleled record of failed predictions. The year I entered Harvard (1955) John Kenneth Galbraith went to Washington and testified before Congress that the stock market (DJI 420) was in danger of another 1929. He caused a panic as speculators in the market rushed to sell their stocks, driving the DJI from 420 down to 400. It then turned and rose for the next 11 years, hitting DJI 1,000 in 1966. There was no repeat of 1929.
We had a more modern example of this foolishness in late July. After a decline in the gold market through late July, Alan Abelson of Barron’s predicted (on July 26) that the price of gold was ready for a substantial decline. Gold declined for exactly one day as Abelson’s readers rushed to sell. You know what has happened since that time. Gold turned on a dime. The breakout created on the 27th proved false, and it is now at $1,275. Abelson’s readers are sitting there with their mouths agape. They sold their gold at the exact bottom.
Now certainly people can make mistakes. The progress of science is full of them. But when a scientist makes a mistake, he observes it and admits it. When a banker “economist” makes a mistake, he hopes the public will not notice, puts a good front on it and uses his title to get away with it. I have often referenced Henry Kaufman’s prediction of higher interest rates and a depression in 1982. I happened to catch Kaufman on a talking head TV show around the turn of the century. There was the host obsequiously kissing up to him and not one mention of the fiasco of 1982.
I was screaming at the TV set. “What about the depression? What about the high interest rates?” Kaufman got millions of stock market traders to sell their stocks with the DJI under 800. It was the bonehead play of the century. But the host continued smoothly on. “Oh yes, Mr. Kaufman, what is your opinion of the coming year?” To heck with the coming year. How does he explain his prediction of 1982?
I have detailed in these articles many other bonehead predictions such as the Great Depression of 1990 and Dow 36,000 (by 2003-05). Why are all these establishment “economists” making one wrong prediction after another – throughout their entire lives?
The answer is very simple. They don’t know anything about economics, and they don’t care. They are hired agents of the bankers, and their impressive titles are intended to get the sucker public to believe any absurd thing they say. Their most common error is; to predict “deflation” because they are trying to get the Fed to print money. When the “deflation” does not happen, they shrug their shoulders, hope you will quickly forget and go about their business. They are confidence men, not economists, and as long as you are stupid enough to believe them, they will continue to lie to you.
But consider the tremendous position that puts us gold speculators in. The last employment of the “deflation” lie occurred in 2008, and virtually all of the media joined in. The fools who believed the lie rushed to sell commodities in the last half of the year, and the CRB index fell in half. But despite this artificial self-confirming effect we have still not had one year in which the Consumer Price Index declined. “Deflation,” where is thy sting?
And even as all await the “deflation” with bated breath, commodities are gathering strength for a second move up. Gold has broken out to new highs. Silver has broken out from an ascending triangle. Wheat and corn are on the move. Coffee is at new highs for the century. The CRB is gathering strength for an attack on the July 2008 high. The charts are not predicting “deflation.” The charts are predicting “inflation.”
So here are all the traders in the world taken in by a lie, the exact same lie which has been used to take their money over and over and over. Here are all these stupid people rushing to give their money to us, and all we have to do is to reach out our hand.
And what it all comes down to is that, if you want to be a good speculator (or a good person), then you have to see reality as it is. This is easier said than done. These five little words contain a crucially important moral virtue. To actually follow them requires a lot of work. You must draw your own conclusions in defiance of what the people around you believe (and are trying to shove down your throat). This is the virtue known as contrary opinion. You must put your emotions aside and believe what is true, not what you want to believe. Emotions are great things, but a strong emotion can cloud the mind. If you try to suppress the emotion, it will just get stronger and come out in ways of which you are not aware. What you must do is to tell your emotion to temporarily stand aside.
I often find it effective to simply talk to my emotions (as though they were a little person inside of me). For example, I might say, “Avarice, stand aside for a while. I need to think clearly if I am going to be able to give you what you want. You are a beautiful woman and should be given fine jewelry and pretty clothes. But if I am to accomplish this, then I have to see reality as it is. When I have made my big score, I will invite you back, and we will have great fun together.” Ditto, ditto for the emotion of fear (which in the markets is very powerful).
Incidentally, Keynes’ views on fear and greed, like everything else the man said, are garbage. Markets are not made by cycles of fear and greed. An easy way to see this is with the auto stocks (more so with the housing group). They characteristically develop very low P:E ratios at stock market tops (and high P:Es at market bottoms). Wait a minute. If the market puts a low P:E on the auto group near a market top, is it committing greed? No chance. If market tops are caused by an irrational desire for money, then why are auto stocks (one of the big movers) showing lower P:Es at the top? This is rational behavior, not irrational.
What, in fact, causes stock market tops is government intervention (via the Fed). When the Fed eases (as in 1982 and 2008), stocks form a bottom. When the Fed tightens (as in 1987 and 2006), stocks form a top. I have known this for 41 years. It has enabled me to predict 90% of all bull and bear moves in the stock market. I have been writing about economics for all of this time. Wouldn’t you think that somewhere, someone would have caught on? How about when I predicted Black Monday on October 19, 1987? On that day, the DJI fell 22%. All these people lost a big bundle that day (as they will lose more bundles in the future), but no one woke up to see reality as it was.
None so blind as those who will not see.
Gold and Silver Are Sounding The Alarm
We've been sounding this drum for years. Trouble is, it's too late for most americans.
Nicely Said......................
"It is also important for the State to inculcate in its subjects an aversion to any outcropping of what is now called 'a conspiracy theory of history.' For a search for 'conspiracies,' as misguided as the results often are, means a search for motives, and an attribution of individual responsibility for the historical misdeeds of ruling elites. If, however, any tyranny or venality, or aggressive war imposed by the State was brought about not by particular State rulers but by mysterious and arcane 'social forces,' or by the imperfect state of the world -- or if, in some way, everyone was guilty -- then there is no point in anyone's becoming indignant or rising up against such misdeeds. Furthermore, a discrediting of 'conspiracy theories' will make the subjects more likely to believe the 'general welfare' reasons that are invariably put forth by the modern State for engaging in aggressive actions." - Murray Rothbard
For the Unemployed Over 50, Fears of Never Working Again
Patricia Reid is not in her 70s, an age when many Americans continue to work. She is not even in her 60s. She is just 57.
But four years after losing her job she cannot, in her darkest moments, escape a nagging thought: she may never work again.
College educated, with a degree in business administration, she is experienced, having worked for two decades as an internal auditor and analyst at Boeing before losing that job.
But that does not seem to matter, not for her and not for a growing number of people in their 50s and 60s who desperately want or need to work to pay for retirement and who are starting to worry that they may be discarded from the work force — forever.
Since the economic collapse, there are not enough jobs being created for the population as a whole, much less for those in the twilight of their careers.
Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.
After other recent downturns, older people who lost jobs fretted about how long it would take to return to the work force and worried that they might never recover their former incomes. But today, because it will take years to absorb the giant pool of unemployed at the economy's recent pace, many of these older people may simply age out of the labor force before their luck changes.
New York Times
Patricia Reid, 57, lost her job at Boeing four years ago and has struggled to find a new position.
For Ms. Reid, it has been four years of hunting — without a single job offer. She buzzes energetically as she describes the countless applications she has lobbed through the Internet, as well as the online courses she is taking to burnish her software skills.
Still, when she is pressed, her can-do spirit falters.
"There are these fears in the background, and they are suppressed," said Ms. Reid, who is now selling some of her jewelry and clothes online and is late on some credit card payments. "I have had nightmares about becoming a bag lady," she said. "It could happen to anyone. So many people are so close to it, and they don't even realize it."
Being unemployed at any age can be crushing. But older workers suspect their resumes often get shoved aside in favor of those from younger workers. Others discover that their job-seeking skills — as well as some technical skills sought by employers — are rusty after years of working for the same company.
Many had in fact anticipated working past conventional retirement ages to gird themselves financially for longer life spans, expensive health care and reduced pension guarantees.
The most recent recession has increased the need to extend working life. Home values, often a family's most important asset, have been battered. Stock portfolios are only now starting to recover. According to a Gallup poll in April, more than a third of people not yet retired plan to work beyond age 65, compared with just 12 percent in 1995.
Older workers who lose their jobs could pose a policy problem if they lose their ability to be self-sufficient. "That's what we should be worrying about," said Carl E. Van Horn, professor of public policy and director of the John J. Heldrich Center for Workforce Development at Rutgers University, "what it means to this class of the new unemployables, people who have been cast adrift at a very vulnerable part of their career and their life."
Forced early retirement imposes an intense financial strain, particularly for those at lower incomes. The recession and its aftermath have already pushed down some older workers. In figures released last week by the Census Bureau, the poverty rate among those 55 to 64 increased to 9.4 percent in 2009, from 8.6 percent in 2007.
But even middle-class people who might skate by on savings or a spouse's income are jarred by an abrupt end to working life and to a secure retirement.
"That's what I spent my whole life in pursuit of, was security," Ms. Reid said. "Until the last few years, I felt very secure in my job."
As an auditor, Ms. Reid loved figuring out the kinks in a manufacturing or parts delivery process. But after more than 20 years of commuting across Puget Sound to Boeing, Ms. Reid was exhausted when she was let go from her $80,000-a-year job.
Stunned and depressed, she sent out resumes, but figured she had a little time to recover. So she took vacations to Turkey and Thailand with her husband, who is a home repairman. She sought chiropractic treatments for a neck injury and helped nurse a priest dying of cancer.
Most of her days now are spent in front of a laptop, holed up in a lighthouse garret atop the house that her husband, Denny Mielock, built in the 1990s on a breathtaking piece of property overlooking the sound.
As she browses the job listings that clog her e-mail in-box, she refuses to give in to her fears. "If I let myself think like that all the time," she said, "I could not even bear getting out of bed in the morning."
With her husband's home repair business pummeled by the housing downturn, the bills are mounting. Although the couple do not have a mortgage on their 3,000-square-foot house, they pay close to $7,000 a year in property taxes. The roof is leaking. Their utility bills can be $300 a month in the winter, even though they often keep the thermostat turned down to 50 degrees.
They could try to sell their home, but given the depressed housing market, they are reluctant.
"We are circling the drain here, and I am bailing like hell," said Ms. Reid, emitting an incongruous cackle, as if laughter is the only response to her plight. "But the boat is still sinking."
It is not just the finances that have destabilized her life.
Her husband worries that she isolates herself and that she does not socialize enough. "We've both been hard workers our whole lives," said Mr. Mielock, 59. Ms. Reid sometimes rose just after 3 a.m. to make the hourlong commute to Boeing's data center in Bellevue and attended night school to earn a master's in management information systems.
"A job is more than a job, you know," Mr. Mielock said. "It's where you fit in society."
Here in the greater Seattle area, a fifth of those claiming extended unemployment benefits are 55 and older.
To help seniors polish their job-seeking skills, WorkSource, a local consortium of government and nonprofit groups, recently began offering seminars. On a recent morning, 14 people gathered in a windowless conference room at a local community college to get tips on how to age-proof their resumes and deflect questions about being overqualified.
Motivational posters hung on one wall, bearing slogans like "Failure is the path of least persistence."
Using PowerPoint slides, Liz Howland, the chipper but no-nonsense session leader, projected some common myths about older job-seekers on a screen: "Older workers are less capable of evaluating information, making decisions and problem-solving" or "Older workers are rigid and inflexible and have trouble adapting to change."
Ms. Howland, 61, ticked off the reasons those statements were inaccurate. But a clear undercurrent of anxiety ran through the room. "Is it really true that if you have the energy and the passion that they will overlook the age factor?" asked a 61-year-old man who had been laid off from a furniture maker last October.
Gallows humor reigned. As Ms. Howland — who suggested that applicants remove any dates older than 15 years from their resume — advised the group on how to finesse interview questions like "When did you have the job that helped you develop that skill?" one out-of-work journalist deadpanned: "How about 'during the 20th century?'"
During a break, Anne Richard, who declined to give her age, confessed she was afraid she would not be able to work again after losing her contract as a house director at a University of Washington sorority in June. Although she had 20 years of experience as an office clerk in Chattanooga, Tenn., she feared her technology skills had fallen behind.
"I don't feel like I can compete with kids who have been on computers all their lives," said Ms. Richard, who was sleeping on the couch of a couple she had met at church and contemplating imminent homelessness.
Older people who lose their jobs take longer to find work. In August, the average time unemployed for those 55 and older was slightly more than 39 weeks, according to the Labor Department, the longest of any age group. That is much worse than in August 1983, also after a deep recession, when someone unemployed in that age group spent an average of 27.5 weeks finding work.
At this year's pace of an average of 82,000 new jobs a month, it will take at least eight more years to create the 8 million positions lost during the recession. And that does not even allow for population growth.
Advocates for the elderly worry that younger people are more likely to fill the new jobs as well.
"I do think the longer someone is out of work, the more employers are going to question why it is that someone hasn't been able to find work," said Sara Rix, senior strategic policy adviser at AARP, the lobbying group for seniors. "Their skills have atrophied for one thing, and technology changes so rapidly that even if nothing happened to the skills that you have, they may become increasingly less relevant to the jobs that are becoming available."
In four years of job hunting, Ms. Reid has discovered that she is no longer technologically proficient. In one of a handful of interviews she has secured, for an auditing position at the Port of Seattle, she learned that the job required skills in PeopleSoft, financial software she had never used. She assumes that deficiency cost her the job.
Ms. Reid is still five years away from being eligible for Social Security. But even then, she would be drawing early, which reduces monthly payments. Taking Social Security at 62 means a retiree would receive a 25 percent lower monthly payout than if she worked until 66.
Ms. Reid is in some ways luckier than others. Boeing paid her a six-month severance, and she has health care benefits that cover her and her husband for $40 a month.
And she admits some regrets: she had a $180,000 balance in her 401(k) account, and paid $80,000 in penalties and taxes when she cashed it out early. She did not rein in her expenses right away. And now, her $500-a-week unemployment benefits have been exhausted.
She has since cut back, forgoing Nordstrom shopping sprees and theater subscriptions, but also cutting out red meat at home and putting off home repairs.
In order to qualify for accounting posts, she is taking an online training course in QuickBooks, a popular accounting software used by small businesses. She recently signed up for a tax course at an H&R Block tax preparation office in Seattle.
And she is plugging ahead with her current plan: to send out 600 applications to accounting firms in the area, offering her services for the next tax season. Eventually, she wants to open her own business.
With odd jobs and her husband's — albeit shriveled — earnings, she could stagger along. For now, she stitches together an income by gardening for neighbors, helping fellow church members with their computers, and participating in Internet surveys for as little as $5 apiece.
"You don't necessarily have to go through the door," Ms. Reid said. "You can go around it and go under it. I can be very creative. I think that I will eventually manage to pull this together."
But four years after losing her job she cannot, in her darkest moments, escape a nagging thought: she may never work again.
College educated, with a degree in business administration, she is experienced, having worked for two decades as an internal auditor and analyst at Boeing before losing that job.
But that does not seem to matter, not for her and not for a growing number of people in their 50s and 60s who desperately want or need to work to pay for retirement and who are starting to worry that they may be discarded from the work force — forever.
Since the economic collapse, there are not enough jobs being created for the population as a whole, much less for those in the twilight of their careers.
Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.
After other recent downturns, older people who lost jobs fretted about how long it would take to return to the work force and worried that they might never recover their former incomes. But today, because it will take years to absorb the giant pool of unemployed at the economy's recent pace, many of these older people may simply age out of the labor force before their luck changes.
New York Times
Patricia Reid, 57, lost her job at Boeing four years ago and has struggled to find a new position.
For Ms. Reid, it has been four years of hunting — without a single job offer. She buzzes energetically as she describes the countless applications she has lobbed through the Internet, as well as the online courses she is taking to burnish her software skills.
Still, when she is pressed, her can-do spirit falters.
"There are these fears in the background, and they are suppressed," said Ms. Reid, who is now selling some of her jewelry and clothes online and is late on some credit card payments. "I have had nightmares about becoming a bag lady," she said. "It could happen to anyone. So many people are so close to it, and they don't even realize it."
Being unemployed at any age can be crushing. But older workers suspect their resumes often get shoved aside in favor of those from younger workers. Others discover that their job-seeking skills — as well as some technical skills sought by employers — are rusty after years of working for the same company.
Many had in fact anticipated working past conventional retirement ages to gird themselves financially for longer life spans, expensive health care and reduced pension guarantees.
The most recent recession has increased the need to extend working life. Home values, often a family's most important asset, have been battered. Stock portfolios are only now starting to recover. According to a Gallup poll in April, more than a third of people not yet retired plan to work beyond age 65, compared with just 12 percent in 1995.
Older workers who lose their jobs could pose a policy problem if they lose their ability to be self-sufficient. "That's what we should be worrying about," said Carl E. Van Horn, professor of public policy and director of the John J. Heldrich Center for Workforce Development at Rutgers University, "what it means to this class of the new unemployables, people who have been cast adrift at a very vulnerable part of their career and their life."
Forced early retirement imposes an intense financial strain, particularly for those at lower incomes. The recession and its aftermath have already pushed down some older workers. In figures released last week by the Census Bureau, the poverty rate among those 55 to 64 increased to 9.4 percent in 2009, from 8.6 percent in 2007.
But even middle-class people who might skate by on savings or a spouse's income are jarred by an abrupt end to working life and to a secure retirement.
"That's what I spent my whole life in pursuit of, was security," Ms. Reid said. "Until the last few years, I felt very secure in my job."
As an auditor, Ms. Reid loved figuring out the kinks in a manufacturing or parts delivery process. But after more than 20 years of commuting across Puget Sound to Boeing, Ms. Reid was exhausted when she was let go from her $80,000-a-year job.
Stunned and depressed, she sent out resumes, but figured she had a little time to recover. So she took vacations to Turkey and Thailand with her husband, who is a home repairman. She sought chiropractic treatments for a neck injury and helped nurse a priest dying of cancer.
Most of her days now are spent in front of a laptop, holed up in a lighthouse garret atop the house that her husband, Denny Mielock, built in the 1990s on a breathtaking piece of property overlooking the sound.
As she browses the job listings that clog her e-mail in-box, she refuses to give in to her fears. "If I let myself think like that all the time," she said, "I could not even bear getting out of bed in the morning."
With her husband's home repair business pummeled by the housing downturn, the bills are mounting. Although the couple do not have a mortgage on their 3,000-square-foot house, they pay close to $7,000 a year in property taxes. The roof is leaking. Their utility bills can be $300 a month in the winter, even though they often keep the thermostat turned down to 50 degrees.
They could try to sell their home, but given the depressed housing market, they are reluctant.
"We are circling the drain here, and I am bailing like hell," said Ms. Reid, emitting an incongruous cackle, as if laughter is the only response to her plight. "But the boat is still sinking."
It is not just the finances that have destabilized her life.
Her husband worries that she isolates herself and that she does not socialize enough. "We've both been hard workers our whole lives," said Mr. Mielock, 59. Ms. Reid sometimes rose just after 3 a.m. to make the hourlong commute to Boeing's data center in Bellevue and attended night school to earn a master's in management information systems.
"A job is more than a job, you know," Mr. Mielock said. "It's where you fit in society."
Here in the greater Seattle area, a fifth of those claiming extended unemployment benefits are 55 and older.
To help seniors polish their job-seeking skills, WorkSource, a local consortium of government and nonprofit groups, recently began offering seminars. On a recent morning, 14 people gathered in a windowless conference room at a local community college to get tips on how to age-proof their resumes and deflect questions about being overqualified.
Motivational posters hung on one wall, bearing slogans like "Failure is the path of least persistence."
Using PowerPoint slides, Liz Howland, the chipper but no-nonsense session leader, projected some common myths about older job-seekers on a screen: "Older workers are less capable of evaluating information, making decisions and problem-solving" or "Older workers are rigid and inflexible and have trouble adapting to change."
Ms. Howland, 61, ticked off the reasons those statements were inaccurate. But a clear undercurrent of anxiety ran through the room. "Is it really true that if you have the energy and the passion that they will overlook the age factor?" asked a 61-year-old man who had been laid off from a furniture maker last October.
Gallows humor reigned. As Ms. Howland — who suggested that applicants remove any dates older than 15 years from their resume — advised the group on how to finesse interview questions like "When did you have the job that helped you develop that skill?" one out-of-work journalist deadpanned: "How about 'during the 20th century?'"
During a break, Anne Richard, who declined to give her age, confessed she was afraid she would not be able to work again after losing her contract as a house director at a University of Washington sorority in June. Although she had 20 years of experience as an office clerk in Chattanooga, Tenn., she feared her technology skills had fallen behind.
"I don't feel like I can compete with kids who have been on computers all their lives," said Ms. Richard, who was sleeping on the couch of a couple she had met at church and contemplating imminent homelessness.
Older people who lose their jobs take longer to find work. In August, the average time unemployed for those 55 and older was slightly more than 39 weeks, according to the Labor Department, the longest of any age group. That is much worse than in August 1983, also after a deep recession, when someone unemployed in that age group spent an average of 27.5 weeks finding work.
At this year's pace of an average of 82,000 new jobs a month, it will take at least eight more years to create the 8 million positions lost during the recession. And that does not even allow for population growth.
Advocates for the elderly worry that younger people are more likely to fill the new jobs as well.
"I do think the longer someone is out of work, the more employers are going to question why it is that someone hasn't been able to find work," said Sara Rix, senior strategic policy adviser at AARP, the lobbying group for seniors. "Their skills have atrophied for one thing, and technology changes so rapidly that even if nothing happened to the skills that you have, they may become increasingly less relevant to the jobs that are becoming available."
In four years of job hunting, Ms. Reid has discovered that she is no longer technologically proficient. In one of a handful of interviews she has secured, for an auditing position at the Port of Seattle, she learned that the job required skills in PeopleSoft, financial software she had never used. She assumes that deficiency cost her the job.
Ms. Reid is still five years away from being eligible for Social Security. But even then, she would be drawing early, which reduces monthly payments. Taking Social Security at 62 means a retiree would receive a 25 percent lower monthly payout than if she worked until 66.
Ms. Reid is in some ways luckier than others. Boeing paid her a six-month severance, and she has health care benefits that cover her and her husband for $40 a month.
And she admits some regrets: she had a $180,000 balance in her 401(k) account, and paid $80,000 in penalties and taxes when she cashed it out early. She did not rein in her expenses right away. And now, her $500-a-week unemployment benefits have been exhausted.
She has since cut back, forgoing Nordstrom shopping sprees and theater subscriptions, but also cutting out red meat at home and putting off home repairs.
In order to qualify for accounting posts, she is taking an online training course in QuickBooks, a popular accounting software used by small businesses. She recently signed up for a tax course at an H&R Block tax preparation office in Seattle.
And she is plugging ahead with her current plan: to send out 600 applications to accounting firms in the area, offering her services for the next tax season. Eventually, she wants to open her own business.
With odd jobs and her husband's — albeit shriveled — earnings, she could stagger along. For now, she stitches together an income by gardening for neighbors, helping fellow church members with their computers, and participating in Internet surveys for as little as $5 apiece.
"You don't necessarily have to go through the door," Ms. Reid said. "You can go around it and go under it. I can be very creative. I think that I will eventually manage to pull this together."
Nicely Said............................
"What kind of man would put a known criminal in charge of a major branch of government? Apart from, say, the average voter." - Terry Pratchett
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