We saw an article (first published 18th November 2009) featured on MSN which got us thinking; the title is "How long can Social Security last?" Reading the article, the answer seems to be "not long at all." It's very interesting that this article was apparently dredged up from the archives and floated once again on MSN, unless it's just that popular.
The article perpetuates the myth of an SS trust fund, stating that the fund will go in the red "in a few years," and be empty by 2037. Oh darn, that sounds unfortunate. But what actually caught our attention was when the article talked about how to fill the 'short-coming' in the 'fund.' The list was as follows:
-Benefit cuts
-Tax increases
-Riskier investments
The first two options are obvious: more money coming in, less money going out, just like our wallet and bank account. The irony of cutting benefits is that inflation is constantly decreasing the value of the SS payouts, but that is beside the matter. We want to dissect the third option: investing the 'trust fund' in riskier ventures.
Given the present, heady atmosphere in the United States Government, we can think of a few exciting places wherein the SS Administration can dump the excess cash it has just sitting around at the office. Now, we have to point out here, that the SS 'trust fund' is actually just money which flows in and out of the U.S. Government's General Fund. In spite of all the accounting shenanigans, in reality the SS cheques are drawn from the general operating budget, as simply any other expenditure.
If the SS 'trust fund' is authorised to be 'invested' in riskier ventures, it will allow the U.S. Government to treat those monies as, effectively, another slush fund. Or, to put it another way, the SS 'trust fund' becomes the SS 'bank, automaker, and whatever-else-Congress-feels-necessary bailout fund.' This can, of course, be dressed up as a good thing: banks and automakers are 'turning the corner,' and will make massive profits to investors; mortgage-backed securities will recoup their value, and then some; credit cards will become profitable again; car loans will be great as the economy turns around; et cetera, et cetera. All these would seem, on paper, to help the SS 'trust fund' close its fiscal gap.
"Surely they won't do that!" you exclaim, dear Reader; "the Government wouldn't put the retirement of millions of Americans on the line to bail out banks and other corporate interests?"
Well, what can we say to that? Frankly, the U.S. Government seems to be constantly doing exactly the worst thing possible during this Depression. From bailing out banks and automakers, to planning on raising taxes via health care 'reform' and other such nefarious plots, we can't see any good moves having been made at all! So, if the SS 'trust fund' were to be allowed to invest in riskier sectors of the economy, where would that investment go but to the arenas which the Government has already been furiously bailing out for two years? We'd be overjoyed to hear other likelihoods, but such corruption as we lay out herein seems inevitable to us. That is, of course, contingent on the SS 'trust fund' being loosened in its restraints.
If the SS 'trust fund' is successfully retooled as a slush fund for banks and automakers, we fully expect to see all other Federal 'trust funds' to be similarly revised. Since all such 'funds' are facing budget shortfalls, brought on by whatever cause(s), such changes can be presented as both necessary, and intelligent. Perhaps even shrewd. Those manoeuvres will be, of course, none of the kind, but rather hopelessly wasteful and economically destructive.
Showing posts with label automakers. Show all posts
Showing posts with label automakers. Show all posts
Thursday, January 14, 2010
Friday, August 28, 2009
Economic Stress Report for August 2009
Once again we've gathered sufficient data to provide an update on the Economic Stress Report. According to our analysis method, the following are the top ten States on our list of economically stressed states. We present them here in order of highest to lowest severity:
South Dakota
Vermont
Ohio
Arizona
Kansas
Montana
Washington
West Virginia
New York
Indiana
Of those States on our watch list, the following have suffered bank closures - another sign of economic stress - since December 2007:
South Dakota (1 closure)
Ohio (1 closure)
Arizona (2 closures)
Kansas (3 closures)
Washington (2 closures)
West Virginia (1 closure)
New York (1 closure)
The past month or so saw two big surprises for us: first was the very rapid fall of Maryland from stressed to 'troubled.' We're not completely convinced that Maryland's situation has suddenly improved for some reason, The State is still on our watch list, but it is no longer stressed, according to our analysis. Even so, we suspect that things will be getting quite a bit worse in Maryland, especially when the Federal Government is forced to commence personnel cutbacks (whenever than might occur), or when large numbers of bank failures finally take place.
The second surprise was Vermont's meteoric rise to runner-up basket case of the Union. We can only assume that Vermonters were somehow heavily over-extended, which quickly came back to haunt the economy in general, but that's just hand-waving. Frankly, we're not exactly sure why Vermont is apparently in such bad shape, so if any of you, Dear Readers, have thoughts, please share.
At this point we're hopping onto our old horse and ranting about South Dakota, still the worst-off State in the Union, according to our analysis. Simply put, we suspect that some political shenanigans are going down to prevent South Dakota from suffering the effects of its zomboid banking system. We have some thoughts on that, which we'll touch on in a future post, but suffice it to say that South Dakota should have had so many bank closures by now, it's not even funny.
Moving on, Ohio continues to hold third place for another month, so we take this as a sign that the State is in bad shape. Presumably the collapse of the American car industry continues to hit the State hard, and we expect that this condition will continue to worsen (perhaps by the eventual failure of Ford, or the re-failure of Chrysler or General Motors). Whatever the case, though, we feel it is a sign that Ohio is experiencing a relatively stable rate of economic contraction, as evidenced by its stable place as #3.
As a final note, we're very pleased to see that an increasing number of those States on our top ten list have suffered bank failures. This we take to be a good sign, perhaps indicating that our stress analysis will have a strong correlation with future bank failures. Time will tell, at any rate; the next report can likely be expected around the end of September.
South Dakota
Vermont
Ohio
Arizona
Kansas
Montana
Washington
West Virginia
New York
Indiana
Of those States on our watch list, the following have suffered bank closures - another sign of economic stress - since December 2007:
South Dakota (1 closure)
Ohio (1 closure)
Arizona (2 closures)
Kansas (3 closures)
Washington (2 closures)
West Virginia (1 closure)
New York (1 closure)
The past month or so saw two big surprises for us: first was the very rapid fall of Maryland from stressed to 'troubled.' We're not completely convinced that Maryland's situation has suddenly improved for some reason, The State is still on our watch list, but it is no longer stressed, according to our analysis. Even so, we suspect that things will be getting quite a bit worse in Maryland, especially when the Federal Government is forced to commence personnel cutbacks (whenever than might occur), or when large numbers of bank failures finally take place.
The second surprise was Vermont's meteoric rise to runner-up basket case of the Union. We can only assume that Vermonters were somehow heavily over-extended, which quickly came back to haunt the economy in general, but that's just hand-waving. Frankly, we're not exactly sure why Vermont is apparently in such bad shape, so if any of you, Dear Readers, have thoughts, please share.
At this point we're hopping onto our old horse and ranting about South Dakota, still the worst-off State in the Union, according to our analysis. Simply put, we suspect that some political shenanigans are going down to prevent South Dakota from suffering the effects of its zomboid banking system. We have some thoughts on that, which we'll touch on in a future post, but suffice it to say that South Dakota should have had so many bank closures by now, it's not even funny.
Moving on, Ohio continues to hold third place for another month, so we take this as a sign that the State is in bad shape. Presumably the collapse of the American car industry continues to hit the State hard, and we expect that this condition will continue to worsen (perhaps by the eventual failure of Ford, or the re-failure of Chrysler or General Motors). Whatever the case, though, we feel it is a sign that Ohio is experiencing a relatively stable rate of economic contraction, as evidenced by its stable place as #3.
As a final note, we're very pleased to see that an increasing number of those States on our top ten list have suffered bank failures. This we take to be a good sign, perhaps indicating that our stress analysis will have a strong correlation with future bank failures. Time will tell, at any rate; the next report can likely be expected around the end of September.
Thursday, June 11, 2009
U.S. Government's Latest Conflict of Interest
With the U.S. Federal Government firmly in the automobile manufacturing business, we make the fearless prediction that they will be staying into the business until the Government itself collapses into ruin. When that day may come is anyone's guess, but in the meanwhile the United States is stuck with a Government-owned car company. Prepare for even more waste, even more unreliability, and even more ugly to be found in your next new GM car, dear Reader - if you are fool enough to buy one.
But that is neither here nor there; what we'd like to point out is that the Government is positioning itself for a conflict-of-interest situation. A "cash for clunkers" bill is presently making its way through Congress, and it seems to have a good chance at becoming law. The programme would give up to a $4,500 credit to buyers who trade in their older vehicle (25 years old and newer) for a brand-new vehicle. This will come with the price-tag of $4 billion... just a drop in the bucket, really.
The problem is, the Federal Government owns a couple car companies... and here it goes, putting out a bill to pay people to buy new cars! Instant conflict of interest: the Government would naturally prefer you, dear Reader, buys their cars, not the vastly superior Japanese or European models which might catch your eye. When the "clunkers" programme becomes law, we posit it's only a hop, skip, and a jump to legislation punishing those who purchase cars from the non-Government-owned manufacturers. Such a thing would fall loosely under the "Buy American" nonsense.
As an aside, and despite the concerns raised in this article about the possible bad effects the "clunkers" programme will have on auto repair shops, we suspect the new GM (and probably Chrysler) cars will suck so bad that they'll break some expensive - and functionless - part before the first oil change. Repair shops will have booming business for awhile, swapping out broken parts with faulty replacements.
***
At this point, we're officially putting Ford on the death-watch. Sure, the company may be able to limp along for awhile, but at some point Ford too will fail. The Government will be waiting with money in hand to add to its burgeoning car manufacturing empire.
But that is neither here nor there; what we'd like to point out is that the Government is positioning itself for a conflict-of-interest situation. A "cash for clunkers" bill is presently making its way through Congress, and it seems to have a good chance at becoming law. The programme would give up to a $4,500 credit to buyers who trade in their older vehicle (25 years old and newer) for a brand-new vehicle. This will come with the price-tag of $4 billion... just a drop in the bucket, really.
The problem is, the Federal Government owns a couple car companies... and here it goes, putting out a bill to pay people to buy new cars! Instant conflict of interest: the Government would naturally prefer you, dear Reader, buys their cars, not the vastly superior Japanese or European models which might catch your eye. When the "clunkers" programme becomes law, we posit it's only a hop, skip, and a jump to legislation punishing those who purchase cars from the non-Government-owned manufacturers. Such a thing would fall loosely under the "Buy American" nonsense.
As an aside, and despite the concerns raised in this article about the possible bad effects the "clunkers" programme will have on auto repair shops, we suspect the new GM (and probably Chrysler) cars will suck so bad that they'll break some expensive - and functionless - part before the first oil change. Repair shops will have booming business for awhile, swapping out broken parts with faulty replacements.
***
Friday, May 22, 2009
Saving Jobs at $385,000 Each
So far, the cost to the US taxpayer of bailing out GM has been 15.4 billion dollars. With that kind of investment, one would think a lot of jobs would be saved. But this is not the case. According to the deal between GM, the UAW, and the government, GM is planning on keeping only 40,000 permanent hourly workers. The cost to the taxpayer is then $385,000 per job.
How long will these jobs last? Given the tremendous over-capacity in the world's automobile industry, GM will be faced with further drastic cutbacks, if not outright closure, in a few more years. Given that most of these jobs are essentially temporary, $385,000 per job is a waste of resources.
It is our opinion if vast sums of money are going to be used to create jobs at public expense, the jobs created should provide long-lasting public goods and services. This is also known as good government. Bailing out GM, a failed company creating private-sector goods unprofitably, is lemon socialism.
How long will these jobs last? Given the tremendous over-capacity in the world's automobile industry, GM will be faced with further drastic cutbacks, if not outright closure, in a few more years. Given that most of these jobs are essentially temporary, $385,000 per job is a waste of resources.
It is our opinion if vast sums of money are going to be used to create jobs at public expense, the jobs created should provide long-lasting public goods and services. This is also known as good government. Bailing out GM, a failed company creating private-sector goods unprofitably, is lemon socialism.
Thursday, April 2, 2009
A Modest Proposal to Save the United States
We've been following the affairs of the United States' automobile manufacturers rather closely. It's an interesting situation, one that we think deserves more analysis that it seems to be getting. The moves to nationalise the companies, as we wrote about in an earlier article, seem to suggest that one of the most probable outcomes will be the foundation of 'AmeriCar'.
The notion of a nationalised automobile manufacturer is not outside of the realm of possibility, in this bailout-happy era of U.S. policy-making. It carries with it a guarantee of employing thousands of people, backstops what James Kunstler calls the "Happy Motoring fiesta," and more-or-less (mostly less) preserves the appearance of the status quo. All these appear to be the avowed goals of the Obama Administration, so the situation really is ripe for this particular flavour of Lemon Socialism. If the AmeriCar future is true, we have some thoughts as to how the Government can help make the continuation of the Happy Motoring fiesta more durable.
All that we suggest is the phasing in of a national speed limit of 35 miles per hour. Municipalities could, of course, have lower speed limits, but the highest legal speed in the United States would be 35 mph. Ignoring the indignant screams of rage from the Citizenry, this vastly lower limit would bring many positive changes:
The loss of life in automobile accidents would fall dramatically to near zero, reducing the cost of cleaning up the wreck, the medical bills, and fixing any damage done to public roadways. The repair cost of automobile collisions would be greatly reduced, since at 35 mph the force involved in any one collision is relatively low. The wear on public roadways and bridges would fall dramatically, allowing for more maintenance money to be diverted from maintenance to building more infrastructure.
Additionally, the reduced speed limit would force citizens to live closer to their places of work. By vastly cutting commutes, this would give citizens more time to spend with their families (or work more, according to preference). Also, the amount of energy burned daily by citizens going to work would be vastly reduced, thereby cutting the United States' dependence on 'foreign oil.' At the same time, this would automatically increase the density of American cities, which would both give a larger tax base to those cities, as well as make public services cheaper (i.e. more people are paying less).
We could go on, but we hope the point is made. A simple and elegant piece of legislation, like a vastly reduced national speed limit, could perform a world of change. Many of the apparent goals of the Obama Administration could be serviced by a lower speed limit. To be honest, we fully believe that this sort of legislation will never see the light of day. Such well-reasoned, functional mandates seem to be beyond the abilities of the Government.
The notion of a nationalised automobile manufacturer is not outside of the realm of possibility, in this bailout-happy era of U.S. policy-making. It carries with it a guarantee of employing thousands of people, backstops what James Kunstler calls the "Happy Motoring fiesta," and more-or-less (mostly less) preserves the appearance of the status quo. All these appear to be the avowed goals of the Obama Administration, so the situation really is ripe for this particular flavour of Lemon Socialism. If the AmeriCar future is true, we have some thoughts as to how the Government can help make the continuation of the Happy Motoring fiesta more durable.
All that we suggest is the phasing in of a national speed limit of 35 miles per hour. Municipalities could, of course, have lower speed limits, but the highest legal speed in the United States would be 35 mph. Ignoring the indignant screams of rage from the Citizenry, this vastly lower limit would bring many positive changes:
The loss of life in automobile accidents would fall dramatically to near zero, reducing the cost of cleaning up the wreck, the medical bills, and fixing any damage done to public roadways. The repair cost of automobile collisions would be greatly reduced, since at 35 mph the force involved in any one collision is relatively low. The wear on public roadways and bridges would fall dramatically, allowing for more maintenance money to be diverted from maintenance to building more infrastructure.
Additionally, the reduced speed limit would force citizens to live closer to their places of work. By vastly cutting commutes, this would give citizens more time to spend with their families (or work more, according to preference). Also, the amount of energy burned daily by citizens going to work would be vastly reduced, thereby cutting the United States' dependence on 'foreign oil.' At the same time, this would automatically increase the density of American cities, which would both give a larger tax base to those cities, as well as make public services cheaper (i.e. more people are paying less).
We could go on, but we hope the point is made. A simple and elegant piece of legislation, like a vastly reduced national speed limit, could perform a world of change. Many of the apparent goals of the Obama Administration could be serviced by a lower speed limit. To be honest, we fully believe that this sort of legislation will never see the light of day. Such well-reasoned, functional mandates seem to be beyond the abilities of the Government.
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