About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Tuesday, August 23, 2016

Debt Question Raised - The Principle Of The Opposite

 
This post is written to respond to questions like long time reader DC asked regarding the referenced post – specifically DC questioned how the savings rate in America increased, regardless of the bond or CD interest rate yields, when "Americans have once again pushed up to record levels of consumer debt."
 
This is an excellent very intuitive question. 
 
The graph below shows household saving rates have increased in many countries with low or negative interest rates.  The referenced post was written to show that increased savings were being realized in many countries all over the world – not just the U.S. which shows a smaller uptick (really very flat) in household savings rates the past few years than the other countries on the graph.  In brief, the referenced post was talking more about other countries than it was the U.S.
 
The graph also shows that nonfinancial companies in Europe, the Middle East, & Africa are holding on to cash which was another part of the referenced post.
 
click on graph to enlarge
 
Although the U.S. savings rate has not increased as much as the other countries shown on the above graph have, the following graphs show that student loan debt is the only type of debt that has significantly increased in the U.S in the last several years.  Although students have a tremendous burden in paying off their student loans they will not worry about retirement savings for many years & accordingly are not the people the post was referring to.  Click on graphs to enlarge.
 
 
A good key to start saving is to reduce existing debt & people who have reduced credit card & home equity debt are in a much better position than they were a few years ago in this regard.  But the graph below shows that America is still debt heavy with almost two thirds of college graduates having student loan debt.
 
click on graph to enlarge
 

Sunday, August 21, 2016

The Principle Of The Opposite

Early in my adult life I noticed that plans people made often did not work out well – in fact I noticed that more than half the time the exact opposite of the planned result occurred.
 
In the case of government bureaucrats - they never blink an eye @ this phenomenon - they just shrug it off & refer to outcomes that are not foreseen or intended by a purposeful action as unintended consequences – a term developed in the 20th century by Columbia University Professor Robert K. Merton.
 
In my own life I certainly would make plans but then I took time to consider what would happen if the exact opposite of my plan occurred – which it did more than 50% of the time also.  I came to call this The Principle Of The Opposite & incorporating this principle into my thinking has been a big help not in making original plans that are independent of The Principle Of The Opposite but in adapting those original plans to what was more likely to really happen.
 
To understand what I am talking about go back to pre-1492 days when the consensus was that the world was flat – it turned out to be round.  The Principle of the Opposite is different than just considering the worst case scenario – although sometimes it can be that scenario.
 
The latest example of the opposite of planned purposeful action taking place involves the world's central banks lowering interest rates to all time lows including negative yields in Europe & Japan.  The purpose of these central banks' plans is to have consumers spend more & businesses invest more because the money is cheap.
 
In essence the central banks are trying to manage both sides of the interest rate coin – savings & borrowing.  How conceited.
 
Stanford University economist John Shoven points out that "retirement was a 20th-century invention, but it's kind of gotten out of control.  If you go back to 1900, most men worked until they couldn't work anymore & died a few years later.  Now you can spend 40% of your adult life in retirement."
 
Come to find out consumers are quite aware of Dr. Shoven's above point & are more interested in saving for retirement than spending on every trinket or gadget that comes along even if the yield on their savings is negative.  The central banks' actions cause consumers to save more (i.e., spend less than before the low or negative interest rate policies were put into place).  If you need so much money to retire & the interest rate component on your savings is low, virtually non-existent, or negative you have to save more in order to retire on a date certain like your 65th birthday – i.e., people in this situation need to save more to accumulate enough money over their lifetimes so that the interest income adequately supplements pensions & Social Security.
 
Of course it is really not the same amount of money that a prospective retiree had previously planned on saving when interest rates were higher but rather a larger amount of money that will produce from lower interest rates the same annual cash flow living expenses.
 
The graph below illustrates the additional years people who turned 65 in 2012 have to work in order to be confident they are financially ready to retire.  The percentages shown on the graph have not improved in the last four years.
 
click on graph to enlarge
 
Look @ the pie chart graph below to see where you fit in.  Please note that 40% of the 124.6 million households in America have no tax-advantaged retirement plan.
 
  click on pie chart to enlarge
 
The other side of the interest rate coin is borrowing.
 
Historically the lowering of interest rates has incentivized businesses to borrow to expand their operations.  But after 91-months of BO's deliberate & intentionally harmful policies & the current likelihood of Hillary Clinton becoming the next president & continuing the same policies it is no wonder that businesses have, for years, reduced their capital budget investments regardless of how low interest rates have gone.
 
Under BO the total business cost of compliance of federal regulations in 2012 was $2.028 trillion (in 2014 dollars) – the annual cost burden for an average U.S. firm is 21% of its payroll.  Hillary is running for what would be the equivalent of a third BO term – if not farther to the statist side if for no other reason that she has an eight year statist foundation under her. 
 
Just look @ the graph below of inflation-adjusted GDP growth since the second quarter of 2011 – only once during this period did real GDP growth exceed 3% & eleven times real GDP growth was less than 2% – what prudent business would want to expand in such a slow growth economy?  And of course this was all per BO's design to make Americans more dependent on government as both private sector investment & employment dried up.
 
click on graph to enlarge
 
Higher taxes & more regulation is all that can be seen if Hillary wins the White House with promises like expanding Social Security benefits, reintroducing the public option to the ObamaCare legislation, enacting $15 per hour federal minimum wage laws, providing free college to people making less than $125,000 per year, mandating overtime pay for salaried personnel, & enacting paid family leave laws.  These policies continue the type of policies that produced the current stagnate economy & do not make for a good investment climate.
 
Please consider the two graphs below.  The graph on the left shows the change in annual investments since the recession began in December 2007.  Business investment during the last seven quarters is essentially zero & it has actually declined the last three consecutive quarters.
 
click on graphs to enlarge
 
The graph on the right above shows that 56.8% of the economists surveyed think that uncertainty to one degree or another regarding the presidential election is hurting the economy.  These economists think that uncertainty will restrain consumer spending & business investment if people worry about higher taxes & more regulations.  I think it is more accurate to say that it is the certainty that Hillary Clinton will be elected that is hurting consumer spending & business investment since she has promised increases in taxes & regulations. 
 
In perfect correlation with the negative private investment figures indicated above productivity also has declined the past three quarters & is now lower than when BO took office – see graph below.  Increasing productivity is the biggest factor in determining prosperity & rising living standards because it is a measure of the efficiency with which industry works & business investment is the foundational support of productivity increases.
 
  click on graph to enlarge
 
Stocks, bonds, & investments have been my hobby since I was 12 years old.  Until recently I followed the principle of investing in stocks only for capital gains (& never for dividends) & buying bonds (& CDs) only for income.  This is now another Principle Of The Opposite in that it is bonds that have appreciated in value as bond yields plummet to record lows while stock dividend yields are raised above bond interest rates due to companies raising dividend payouts thereby making stocks more attractive than bonds – i.e., instead of investing in new plants & equipment companies are putting this money into raising dividends that will ultimately raise their stock price.  Especially in this government controlled investment climate dividend increases paid to shareholders are actually investments by the underlying companies intended to increase the companies' stock price.
 
In step with both lower investment & productivity, as described above, earnings of the S&P 500 stocks are set to decline from year earlier levels for the fifth straight quarter.  Source FactSet & the WSJ.  Since earnings are the long term basis of stock prices all of this manipulation & distortion of free markets by the government makes a stock & bond market bubble ready to burst highly likely.
 
A specific example of where BO's & Hillary's political correctness has led us is Target's planned $20-million expenditure to add locked single stall bathrooms to 297 stores due to customer protests over its policy to allow transgenders to use whichever public restroom corresponds to their current gender identity.  Now I make it a point to never be big with other people's money but it is hard to believe that this bathroom project is the best use of Target's capital.  This is Target's second visit into gender issues – about a year ago Target announced that it would no longer label toys as being for girls or boys.  Target's earnings, revenue, & stock price have all declined since venturing into the gender field which the management certainly thought would be a progressive plus.  It is unknown how or if Target figured in The Principle Of The Opposite in their thinking.
 
On a more positive note this past week Donald Trump began to pull himself out of the trough he put himself in following the Republican convention last month.  His speeches were excellent & the one in Charlotte last Thursday was as good as any I had ever heard by any politician.  Trump specifically tried to reach Blacks & the other 47% of the population that Romney identified in 2012 as "people (who) are dependent on government, believe they are victims entitled to government handouts, & pay no income tax."  If Trump reduces the number from 47% to 40% he could win – & start the needed mindset change.
 
Two posts ago I wrote "Trump has time to reach all of these people & if he is good enough & they are worth it he can win."
 
To be good enough I wrote "If Trump is to make a difference he has to focus & relentlessly drive home what he can do to improve the lives of every American – Blacks, Whites, Hispanics, Asians, single mothers, teenagers, Republicans, Democrats, Independents, homosexuals, transgenders, & people who think socialism is the answer to their problems.  Trump has to convince all Americans that it was capitalism that originally made America great & it is capitalism that will make America great again."  Trump has to present the ideas in the Charlotte speech over & over again until people understand what he is talking about & believe it.  He has to change the government dependent mindset that now totals over 50% of Americans.
 
By whether or not we are worth it I meant that if Trump makes his case will people rise up & take the chance that we can return to the excellence of the free enterprise prosperity that enriched everyone's lives.  To do this the citizenry would have to know in their heart of hearts that we are on the road to socialist ruin with Hillary Clinton & that each & every one of us has to help turn this around.  It is a tall order in an apathetic society where people have been brainwashed into taking all of America's freedoms for granted never realizing that these freedoms will disappear along with their government benefits that maintain their standard of living.  In brief, they have to be able to see that the future will be nothing like the present.
 
With the polls showing Hillary slaughtering Trump as of August 21 we are counting on The Principle Of The Opposite more than ever.
 

Sunday, August 14, 2016

Quiz - Ben Or The Bard

Click here to take the subject quiz.  Ten famous quotations are shown & the idea is to identify whether they are attributable to Benjamin Franklin or William Shakespeare.
 
After you submit your answers online the website will tell you your score & the average score of the thousands of people who have taken the quiz.
 
Please let me know how you make out.