What are the potential impacts of public confidence on the economy's recovery?

[brainstorm]

Post #522:
Since the depths of recession in December 2008, the average household net worth has climbed by $51,309 to a current level of $477,315

Does household net worth include human capital? If you would take age of retirement and subtract age of employability (e.g. 67 - 17 = 50), you could multiply that number by minimum wage or higher and come up with a lifetime earnings-projection. Using this number, you could extend credit lines to people and allow them to stimulate the economy by buying real-estate, cars, and other expensive items on credit. Sure, some would never make enough to pay off all their debt and would spend their lives indentured, but wouldn't the economic growth be worth a little enslavement? I mean, at least they would be able to feel like their "net worth" was higher than if they were free.

 

[nismaratwork]

Does household net worth include human capital? If you would take age of retirement and subtract age of employability (e.g. 67 - 17 = 50), you could multiply that number by minimum wage or higher and come up with a lifetime earnings-projection. Using this number, you could extend credit lines to people and allow them to stimulate the economy by buying real-estate, cars, and other expensive items on credit. Sure, some would never make enough to pay off all their debt and would spend their lives indentured, but wouldn't the economic growth be worth a little enslavement? I mean, at least they would be able to feel like their "net worth" was higher than if they were free.

Re: bolded: In fact that's some of what you'd calculate on an actuarial table for a number of purposes. Although it isn't usually advertised that way, what do you think drives insurance profits, credit cards, loans and especially mortgages? You're not describing an Orwellian nightmare, you're describing accounting.

 

[WhoWee]

Does household net worth include human capital? If you would take age of retirement and subtract age of employability (e.g. 67 - 17 = 50), you could multiply that number by minimum wage or higher and come up with a lifetime earnings-projection. Using this number, you could extend credit lines to people and allow them to stimulate the economy by buying real-estate, cars, and other expensive items on credit. Sure, some would never make enough to pay off all their debt and would spend their lives indentured, but wouldn't the economic growth be worth a little enslavement? I mean, at least they would be able to feel like their "net worth" was higher than if they were free.

Please help me to understand.

If someone never works a day in their life and lives on Government benefits from cradle to grave - they have a negative net worth under your calculation?

I guess it could also be said they're indentured to the Government system - in this example?

 

[mheslep]

[...]
The solution is obvious: eliminate most federal taxes (to strip the federal government of its power) so they can't distribute (earmarks,etc) it via politics and darkroom deals, let States do the work and exercise their legitimate powers,
and constrain the federal government via enumerated powers specified in the Consiitution of the United Sates.

Clearly the lack of revenue ($1.6 trillion short) has not stopped the Congress from issuing earmarks, nor stopped it from doing much of anything.

 

[WhoWee]

Clearly the lack of revenue ($1.6 trillion short) has not stopped the Congress from issuing earmarks, nor stopped it from doing much of anything.

I strongly believe we need term limits in the House - and without lifetime benefits for serving a single term (or a portion thereof) - the past election meant nothing to these people.

Anyone the voters want to re-elect when their term has expired - would be eligible to run for the Senate. This might help turn the Senate (occasionally) as well.

 

[mheslep]

I strongly believe we need term limits in the House - and without lifetime benefits for serving a single term (or a portion thereof) - the past election meant nothing to these people.

Anyone the voters want to re-elect when their term has expired - would be eligible to run for the Senate. This might help turn the Senate (occasionally) as well.

Get started on the Article 1 amendments then, as we've been there already through legislation: http://en.wikipedia.org/wiki/U.S._Term_Limits,_Inc._v._Thornton" .

 

[WhoWee]

Get started on the Article 1 amendments then, as we've been there already through legislation: http://en.wikipedia.org/wiki/U.S._Term_Limits,_Inc._v._Thornton" .

I don't think limits in the Senate are realistic. However, a focus on the House only - might be possible?

 

[mheslep]

I don't think limits in the Senate are realistic. However, a focus on the House only - might be possible?

Not without a constitutional amendment. See the link.

 

[WhoWee]

Not without a constitutional amendment. See the link.

Never said it was easy - I said possible.

 

[brainstorm]

Re: bolded: In fact that's some of what you'd calculate on an actuarial table for a number of purposes. Although it isn't usually advertised that way, what do you think drives insurance profits, credit cards, loans and especially mortgages? You're not describing an Orwellian nightmare, you're describing accounting.

That's what makes it a poignant social critique instead of dystopic scifi.

 

[nismaratwork]

That's what makes it a poignant social critique instead of dystopic scifi.

I find that the latter is often a preview of the former, beyond which I see little difference.

 

[brainstorm]

I find that the latter is often a preview of the former, beyond which I see little difference.

Excellent point. So why did you differentiate between accounting and an Orwellian dystopia?

 

[nismaratwork]

Excellent point. So why did you differentiate between accounting and an Orwellian dystopia?

I didn't, I simply pointed out that you weren't delivering news... I'd say that most here grasp the situation that the average wage-slave or indebted 1st worlder finds themselves in. That reality has led to global economic chaos, so it may not be Orwellian at the moment, but it's a dystopia.

 

[brainstorm]

I didn't, I simply pointed out that you weren't delivering news... I'd say that most here grasp the situation that the average wage-slave or indebted 1st worlder finds themselves in. That reality has led to global economic chaos, so it may not be Orwellian at the moment, but it's a dystopia.

I don't think people think of debt and wage-labor as modernized indenturement. I think people realize that when banks assess the ability of a borrower to pay, that they are calculating their prospective wages over the period of the loan but what I don't think they consider is that when you add up all the value of someone's labor for their entire life, it is basically the same thing as pricing a slave on an auction block. Obviously there are some significant differences with slavery, but it's kind of sad that people live for wage-labor to pay for acquisition and consumptions. Some things in life are priceless, but that seems to be a shrinking part of too many people's lives.

 

[WhoWee]

I don't think people think of debt and wage-labor as modernized indenturement. I think people realize that when banks assess the ability of a borrower to pay, that they are calculating their prospective wages over the period of the loan but what I don't think they consider is that when you add up all the value of someone's labor for their entire life, it is basically the same thing as pricing a slave on an auction block. Obviously there are some significant differences with slavery, but it's kind of sad that people live for wage-labor to pay for acquisition and consumptions. Some things in life are priceless, but that seems to be a shrinking part of too many people's lives.

I'm not sure this comparison is valid. If you walk into a bank and ask for a loan, yes they will inquire about your ability to pay. However, they are more interested in the asset you are using to secure the loan - my bank likes CD's - they own enough real estate, cars, boats, commercial buildings, and restaurant packages.

In your example, the bank might have loaned money to someone to buy the slave being offered - based upon the slave (assets) ability to produce income?

 

[OmCheeto]

Post #522:

blah blah blah

Since the depths of recession in December 2008, the average household net worth has climbed by $51,309 to a current level of $477,315

blah blah blah

Household net work HAS never been anywhere near that high...I don't thion it has EVER exceed even $100K...Could not find a current figure but the government tracks that...here is one chart that seems in the ballpark:

http://en.wikipedia.org/wiki/File:Graphic.png
\Note the peak at about $65K.

Um...

Naty. I don't mean to be rude, but you really need to pay closer attention to the scales on graphs:

[PLAIN]http://upload.wikimedia.org/wikipedia/en/a/a3/Graphic.png
Naty's wiki Graphic.png graph

$55,000 x a BILLION is 55 trillion dollars.

55 trillion dollars divided by 115 million households is around 400+ thousand dollars per household.

I actually did the math last week wondering how incredibly rich this nation was. I was like; "Where's my $477,315?!"


115000000 = households
477315 = wealth number from original article
$54,891,225,000,000.00 = wealth of a nation

But of course, wealth is all relative to what people will pay for something. I was arguing the other day with a fellow investor about the value of gold, as I find the value of gold to be quite humorous.

He said; "The value of gold is what people are willing to pay for it."

I didn't argue the point, because he was, as everyone knows, correct.

 

[brainstorm]

I'm not sure this comparison is valid. If you walk into a bank and ask for a loan, yes they will inquire about your ability to pay. However, they are more interested in the asset you are using to secure the loan - my bank likes CD's - they own enough real estate, cars, boats, commercial buildings, and restaurant packages.

In your example, the bank might have loaned money to someone to buy the slave being offered - based upon the slave (assets) ability to produce income?

LOL. I actually went into banks to talk to loan officers following the credit meltdown. I asked them how much I could borrow and they told me it was purely dependent on my income (i.e. my ability to repay the loan). I asked them if things had changed, because I thought that collateral-value was a standard basis for lending and they told me that this was never the case. Maybe they were lying because of the stigma associated with "hoodwinking" at that moment in time, but I took them at their word. The assurance was, however, that lending is based on ability to repay the loan. You can use your imagination for how to establish how much someone is capable of repaying to establish their credit-maximum.

 

[mheslep]

It has always been the case, in the modern US at least, that the first thing banks want to see on an individual loan deal is a demonstrated income stream sufficient to paying back the loan. Banks don't want your collateral so that they have to get into house selling business or the gold coin collection selling business or the yacht selling business, though they are often forced to do so. They just want a monthly payment. It's occasionally possible to use collateral in lieu of income, but considerably more difficult.

 

[WhoWee]

I helped prepare 3 different loan packages in the past few months, for small business owners. In each case, the bank wanted the loan secured with the cash each of them had on deposit. In previous years, 2 of them had borrowed from the same banks to purchase their land and build their buildings - based on business income at that point.

In my lifetime, the banks have never had better rates to borrow at, nor has it been so difficult to borrow (as a business owner).

 

[brainstorm]

It has always been the case, in the modern US at least, that the first thing banks want to see on an individual loan deal is a demonstrated income stream sufficient to paying back the loan. Banks don't want your collateral so that they have to get into house selling business or the gold coin collection selling business or the yacht selling business, though they are often forced to do so. They just want a monthly payment. It's occasionally possible to use collateral in lieu of income, but considerably more difficult.

In other words, banks want you to sell houses, businesses, gold coins, and yachts so they don't have to. Is this a form of indenturement? Of course, there are banks that do sell things for you so that you don't have to but those are called pawn shops and they give you a worse deal. Although the lenders facilitate your indenturement, they are only brokers that help you trade future labor for immediate gratification. Your actual owner(s) is/are the people whose savings you borrowed and whose investments pay your income. These might include you if your net-worth is greater than your debts.

What is "economic recovery" in light of the fact that people become slaves to debt? Is the economy recovered when everyone has sufficient means of income to pay off their debts and be free? If everyone did this, how would anyone save money? Doesn't having savings require someone else to borrow and pay back their debt with interest? Considering that some people are always going to save money requiring others to be held in debt, will the economy ever really "recover" for debters or will they always be caught in a cycle of repayment and new credit lines?

 

[WhoWee]

What is "economic recovery" in light of the fact that people become slaves to debt? Is the economy recovered when everyone has sufficient means of income to pay off their debts and be free? If everyone did this, how would anyone save money? Doesn't having savings require someone else to borrow and pay back their debt with interest? Considering that some people are always going to save money requiring others to be held in debt, will the economy ever really "recover" for debters or will they always be caught in a cycle of repayment and new credit lines?

Interesting comment (I bolded your words) what do you suppose happens when Government becomes a slave to debt - along with a majority of it's citizens dependent upon (Government) subsidy?

 

[brainstorm]

Interesting comment (I bolded your words) what do you suppose happens when Government becomes a slave to debt - along with a majority of it's citizens dependent upon (Government) subsidy?

A slave broker? Well, technically it depends on HOW the government mitigates the debt and how citizens respond to the mitigation. If, for example, the government would continue its policy of exempting incomes from taxation below a certain threshold, then citizens are not responsible for paying off the debt as long as they limit their incomes to below that amount.

On the other hand, if government decides to repay the debt by taxing the "wealthiest individuals," i.e. corporations, then the corporations will become the slave brokers by extracting the taxes they owe from their clientele and employees.

The question is what a "recovered" economy means and whether it's possible to achieve economic well-being without anyone having to be in debt.

 

[WhoWee]

A slave broker? Well, technically it depends on HOW the government mitigates the debt and how citizens respond to the mitigation. If, for example, the government would continue its policy of exempting incomes from taxation below a certain threshold, then citizens are not responsible for paying off the debt as long as they limit their incomes to below that amount.

On the other hand, if government decides to repay the debt by taxing the "wealthiest individuals," i.e. corporations, then the corporations will become the slave brokers by extracting the taxes they owe from their clientele and employees.

The question is what a "recovered" economy means and whether it's possible to achieve economic well-being without anyone having to be in debt.

It seems reasonable that recovery would be possible in your example if the full production output capabilities of the citizens and businesses could be realized - that is, if EVERYONE capable of being productive was productive?

 

[brainstorm]

It seems reasonable that recovery would be possible in your example if the full production output capabilities of the citizens and businesses could be realized - that is, if EVERYONE capable of being productive was productive?

But doesn't this imply that everyone has to totally submit their labor-productivity to monetary exchange? If I make a sandwich for myself, do I have to charge myself a dollar to make the economy "recover?"

What if everyone cooked all their own meals for themselves and all restaurants closed? Would that inhibit 'economic recovery' even if everyone was sufficiently nourished?

 

[Al68]

But doesn't this imply that everyone has to totally submit their labor-productivity to monetary exchange? If I make a sandwich for myself, do I have to charge myself a dollar to make the economy "recover?"

What if everyone cooked all their own meals for themselves and all restaurants closed? Would that inhibit 'economic recovery' even if everyone was sufficiently nourished?

Yes, assuming you are using meals as an example of the economy as a whole. Because in general, the things bought have more value to the buyer than the labor expended by the buyer to buy them. That's because of the efficiency gained by mass production, as well as the fact that different people are more productive at different things.

For example, if the time it took for someone to cook their own meal cost them more in lost time doing something else than the added cost of buying the meal from someone else instead, everybody loses.

Every voluntary transaction in a free market creates wealth, since the product sold both has more value to the buyer than the price paid and the price paid has more value to the seller than the product sold. Otherwise the transaction would never occur, unless it involves force, fraud, charity, mistake, etc.

 

[WhoWee]

But doesn't this imply that everyone has to totally submit their labor-productivity to monetary exchange? If I make a sandwich for myself, do I have to charge myself a dollar to make the economy "recover?"

What if everyone cooked all their own meals for themselves and all restaurants closed? Would that inhibit 'economic recovery' even if everyone was sufficiently nourished?

Rather than spend too much time with the sandwich analogy - let's look at the US during WWII. Everyone was called upon to do their part. Women went to work in factories, children collected scrap, food and fuel were portioned, etc. There was a clear purpose (survival) and everyone had a role.

The US ran lean and mean - and still incurred massive debt.

Now consider the output and debt if the US had been saddled with our current entitlement programs.

 

[brainstorm]

Yes, assuming you are using meals as an example of the economy as a whole. Because in general, the things bought have more value to the buyer than the labor expended by the buyer to buy them. That's because of the efficiency gained by mass production, as well as the fact that different people are more productive at different things.

No, I'm not making this an example of any "economy as a whole." I'm saying that economy consists of a spectrum of activities between the poles of total corporatism and total individualism/independence. When people make their own sandwiches, this has economic value but needs not be taxed or otherwise harnessed for "the common good." It may already contribute to "the common good" by promoting economic culture of self-reliance which reduces the burden on corporate productivity.

For example, if the time it took for someone to cook their own meal cost them more in lost time doing something else than the added cost of buying the meal from someone else instead, everybody loses.

You are implying that everyone should give up doing anything that is not directly subjugated to corporate management. That is disturbing, imo. What's more, you can't assume that greater efficiency wouldn't be achieved by more independent labor. E.g. Less food is wasted in home food-preparation than in corporate food-preparation, therefore maximizing availability of food-resources for the greatest number of people.

Every voluntary transaction in a free market creates wealth, since the product sold both has more value to the buyer than the price paid and the price paid has more value to the seller than the product sold. Otherwise the transaction would never occur, unless it involves force, fraud, charity, mistake, etc.

Many transaction appear to have value because the buyer has been led to believe something that's not true.

Rather than spend too much time with the sandwich analogy - let's look at the US during WWII. Everyone was called upon to do their part. Women went to work in factories, children collected scrap, food and fuel were portioned, etc. There was a clear purpose (survival) and everyone had a role.

And lots of people got killed and products got destroyed. Then the economy prospered after the war because of a renewed financial lending system that allowed people to finance a larger portion of their houses and receive GI benefits. Both the war itself and the financial system that followed it eventually failed, more or less, but there's this obsession with the idea that it was a good fix, albeit a short-term one. More sustainable economic culture is needed, imo.

The US ran lean and mean - and still incurred massive debt.

Now consider the output and debt if the US had been saddled with our current entitlement programs.

Economic practices need to be designed that allow people to "run lean and mean" (whatever that means) and prosper without debt or entitlement programs.

 

[OmCheeto]

I'm still waiting for the day (perhaps in vein) that I can opt-out of Social Security and instead put that money in a Roth IRA or 401k of my choosing.

Interesting idea. Have you done an economic impact study on SS as a whole if everyone at your income level and higher did this? I'm having a blast investing in the market right now and would love to have had the option of pumping in $300 vs $100 a month. And if my Chrysler Ebola hadn't died last year, it would have been $600 a month.

I bring this back up, as the tax activist group I joined last month referenced a wsj article yesterday, and there were some very entertaining statistics:

http://online.wsj.com/article/SB100...46.html?mod=WSJ_hps_sections_personalfinance"
According to the most recent survey by the Employee Benefits Research Institute, a think tank specializing in the topic, fewer than half of workers have even saved $25,000, and only a third have saved as much as $50,000. Forty-four percent have saved less than $10,000, and a quarter have basically saved nothing at all.

To put these numbers in context: Someone with $25,000 can buy an annuity (with the 3% annual bump) paying maybe $1,400 a year. Someone with $50,000 can raise that up to $2,800 a year. That works out to an income of $54 a week. Good luck with that.

 

[Al68]

When people make their own sandwiches, this has economic value but needs not be taxed or otherwise harnessed for "the common good."

Sure, my point was only that the time used might have far greater economic value, if used for something else.

You are implying that everyone should give up doing anything that is not directly subjugated to corporate management. That is disturbing, imo.

I implied no such thing. Your being disturbed is unwarranted, at least in this case.

What's more, you can't assume that greater efficiency wouldn't be achieved by more independent labor.

Correct. You can't assume either greater or lesser efficiency. It could be either, depending on the specifics.

Many transaction appear to have value because the buyer has been led to believe something that's not true.

Yep. That's why I said "unless it involves force, fraud..." in the post you were responding to.

 

[Al68]

Interesting idea. Have you done an economic impact study on SS as a whole if everyone at your income level and higher did this?

This has been done in cities, before the option was prohibited. Galveston, TX, for example, has been doing it since 1979: http://www.ncpa.org/pub/ba514.

They invested only in low risk annuities instead of stock, mutual funds, etc, so they could have done far better, but here's a graph showing the difference between them and SS:

 

[OmCheeto]

This has been done in cities, before the option was prohibited. Galveston, TX, for example, has been doing it since 1979: http://www.ncpa.org/pub/ba514.

They invested only in low risk annuities instead of stock, mutual funds, etc, so they could have done far better, but here's a graph showing the difference between them and SS:

I suppose that graph would have made sense in 2005:

http://www.ncpa.org/pub/ba514
Galveston County: A Model for Social Security Reform
Tuesday, April 26, 2005

Has the NCPA done a more recent study? God knows if I'd sold my house and invested wisely 2 years ago, I'd be a millionaire right now. On the other hand, if I'd done that in 2005 when the market was at 10,300, and now sitting at 11,500, 6 1/2 years later, that's not really a great return. I figure 1.8%.

 

[Ivan Seeking]

This has been done in cities, before the option was prohibited. Galveston, TX, for example, has been doing it since 1979: http://www.ncpa.org/pub/ba514.

They invested only in low risk annuities instead of stock, mutual funds, etc, so they could have done far better, but here's a graph showing the difference between them and SS:

In that case, you should have no objection to the government simply guaranteeing a minimum and investing in those same mutual funds. This would solve the problem, right? This way the average worker doesn't have to become an investment expert in order to benefit.

Alternatively, if one invests privately, as opposed to SS, and they lose their money, then would you support a law requiring that these people are never elegible for welfare, food stamps, or other government assistance? If they lose their money, they can live on the streets. Right?

 

[Al68]

Alternatively, if one invests privately, as opposed to SS, and they lose their money, then would you support a law requiring that these people are never elegible for welfare, food stamps, or other government assistance?

Nope. No law is needed to choose not to use force to confiscate property for that purpose. As a libertarian, I don't support the laws that confiscate money by force to pay for those things. No one is legitimately "eligible" to receive the property of others via legalized theft. Advocates of liberty figured that out during The Enlightenment.

Of course, since then, many have joined a cult with a different moral code, one that not only allows for legalized systematic theft, but glorifies it. De-enlightened, in other words, by the propaganda of power hungry corrupt politicians.

As Fredick Bastiat wrote in http://bastiat.org/en/the_law.html" , "The law has placed the collective force at the disposal of the unscrupulous who wish, without risk, to exploit the person, liberty, and property of others. It has converted plunder into a right, in order to protect plunder...the beneficiaries are spared the shame, danger, and scruple which their acts would otherwise involve."

 

[WhoWee]

In that case, you should have no objection to the government simply guaranteeing a minimum and investing in those same mutual funds. This would solve the problem, right? This way the average worker doesn't have to become an investment expert in order to benefit.

You want the US Government to invest broadly in equity markets?

You do realize the Government would quickly control all public companies? Also, would their investments be limited to domestic corporations? Would they participate in IPO's?

I think this would be a very bad idea.
Conversely, I've long considered it a major mistake not to retain an equity position in the conquered lands of Japan and Germany, especially after rebuilding. I'd have been quite in favor of redistribution of these funds - after paying the debt of course.

Along the same lines, I seem to recall at some point early on in the Iraq debate - oil was a prize to be won - then not long after I recall a speech promising every last penny from oil would go to the Iraqi people.

Full disclosure, I'm a Viking and just don't comprehend going to war with a goal of expanding out welfare state (off topic - I know).

 

[Al68]

You want the US Government to invest broadly in equity markets?

You do realize the Government would quickly control all public companies?

Assuming you're referring to private corporations (with publicly traded stock), I think the Dems prefer to control them by socialist regulation instead of legitimate ownership.

That way they can exercise ownership rights without ownership responsibility.