Karen de Coster for President --- Yes!

Sacrilege!

Burn the witch at the stake!

Drive a stake through her heart!

How DARE she try to profess the truth to the great unwashed???

“When governments lie it is dangerous to tell the truth”.  Voltaire, I think.

H.F. Wolff

Great post, Ms. De Coster!

Karen,
I’m torn between a delight at the fact that “this sucker is going down” and the the fact that a lot of innocent low time preference people, some of whom I know and love, are going down with it.  I suspect my inner angst is far from unique.  At any rate, you have done a clear and straightforward analysis of the situation.  Thank you.

Another great item from Karen.

When the German middle class was destroyed by hyper-inflation in the 1930s, they became the ‘rank and file’ supporters of Herr Hitler.

What will be the radical politics of the deadbeat “debt-oisie”??

Will Obama be raised from Messiah-hood to the godhead? Or will they opt for some form of old fashioned fascism?

It will be up to the next generation after them who will recover genuine conservative values of thrift and moderation.

I’ve already swallowed my bitter pill, so this is actually fun for me.  What are those yupsters with the leased Porsche Cayenne going to do when the developer for their mostly-empty high rise goes bankrupt and can’t carry the building anymore?  Are 30 condo owners going to come up with $500K to keep the elevators running?  I know people living in $700K homes who haven’t taken a draw in a year.  The upper middle class in this country is going to start doing the unthinkable:  bankruptcy court, foreclosure, telling the kids everybody’s going to be staying wth grandma and grandpa for the time being, and on and on.

Great to see Karen here. 

Good article, plainly written.

Most people in this country are economically illiterate and in deep denial.

The big OUCH for me is that I have been financially prudent and I am still going to be punished when “this sucker goes down.”

Every consumer who participated in the orgy of unrepayable debt collectively is a pimple on the butt of the shenanigans in the finacial sector. 

These were the"experts" who had a fiducialry responsibility to do due dilligence and failed miserably.

My husband is in a profession that is licensed and regulated by a state agency and the standard for his performance is what he SHOULD know.  If he screws up his ass is grass.  No license, no livelyhood, and a possible stint in the slammer.

Nice that we give bankers and brokers and apparently insurance companies a big get out of jail free card and oodles of our future earnings. 

Even the finacially illiterate get that this is inately UNFAIR.

Paul S. Quagmire has several oft-used catchphrases, including giggity (and variations thereof, excitedly), all right, both usually indicating perceived sexual situations or opportunities; these exclamations are often accompanied by a head bob. His earliest catchphrase, Oh! (in arrogant triumph), is usually delivered with a pelvic thrust.

Good, insightful article. I’ve watched this coming for some time now. I’ve tried to prepare. The real lesson to be learned: Never, ever trust the central state! Now we’re to believe they’re going to fix the very mess they created?

Americans will have to learn that moderation is a virtue- one way or another. And it looks like it will be the hard way.
Imagine what this country could achieve if it cared more about truth and the improvement of the soul than about money (to borrow from Socrates).

“The impending bust will affect us all, regardless of whether or not we partook in any of those easy-credit orgies sponsored by our leaders in Washington.”

AMEN!.... my father was a welder - just retired - old school.... mom -clerical worker.... they never had excessive debt.... lived within their means - bought home for $20kish in 1975 - now worth $200kish.... drove gms and fords -preached to keep American manufacturing alive - and their children learned - and we all have solid balance sheets - live withing means in humble abodes.... well.... WTF! - maybe we should have partaked! - maybe we should have just went FULL BOARD into $500k mcmansions!.... i’m madder at the STUPID american public than i am the swindlers!

Yeah, sure. It’s all the fault of those troublesome “little” people and their piggish ways. Except Americans have been buying homes and cars on credit for more than a century now, and never have these purchases been the sole factor in a financial meltdown.

Fewer than three percent of American homes with mortgages are in foreclosure right now. There are about 51 million first mortgages in the United States — but only about 1.4 million of them are either referred for foreclosure or in foreclosure - according to the Mortgage Bankers Association.

Home values were puffed up by house flippers and speculators who kept getting credit for inflated prices - and then inflating the price even more on a quick sale - because everyone else in the credit/housing industries was doing it.

There’s a tear coming in auto-finance because those purchases are linked to all credit purchases, now ice-bound, and because consumers get pummeled with skyrocketing adjustable interest rates.

Our sniffy elites turned our economic system into one big Ponzi scheme, into Loanshark, Inc. They engineered this crisis, just as high-level greed has sparked every other “meltdown”. Workaday dreamers of the American dream have no voice, no articulate means of answering this chronic calumny. It’s easy to hang it all on them, but it’s not sound. Or decent.

Yeah…

I don’t know what I think about this article.  I dig it on some level.  The State has taken us down a road that is not serving us.  I just keep reminding myself that moderation has never been a national strength (see: Roaring 20’s, Coked-up 80’s) and that our overindulgent State is a Republic at least in intention if not in actual practice.

There is no one to blame but ourselves.

“The upper middle class in this country is going to start doing the unthinkable:  bankruptcy court, foreclosure”

In retrospect, the recent reform of bankruptcy laws appears to have anticipated this outcome.

Humans are not made to handle tough times.  Things should always be easy with a profusion of entertainments and luxuries.  That’s Americans’ mindset.  We will need to wander in the desert for 40 years while all those who think like this drop dead.

Guilty!

Imprudent. Mea culpa, mea culpa, mea Maxima Culpa . . .

If a child eats only ice cream for sustenance and gets sick thereby, should we blame the child or the provider of the meals. Given a choice, the child will always choose that which tastes good and sweet. It doesn’t concern itself with the future results of its indulgences.

The provider of our meals has been the FEDERAL RESERVE SYSTEM. This system was allegedly installed to protect against unstable currency fluctuations, devaluations, and extreme business cycles. So in the 95 years of its existence, how has it all worked out? The currency has DEVALUED by 97%, and we have experienced the Great Depression, many severe recessions, and the present crisis.

Any answer to the crisis that does not hold the very existence of Central Banking as the culprit is an exercise in futility. First and only cure is to cancel all LEGAL TENDER LAWS. Let people and markets associate their efforts and produced goods freely and with a medium of exchange of their own choosing. Wonder what that would be?

How true, sadly, how true, Ms.De Coster!

My greater worry is that our sugar daddy...the Chinese will decide that his money is being wasted. He will then demand that the debt be paid in real property; as opposed to worthless paper.

Now that I understand that the those in power change the rules at will - there is nothing that I can “invest” in. They have effectively precluded financial “planning” of any sort.

Dear Karen,

You certainly have a nice and creative way of writing that makes the reader want to read on and on. This is especially praiseworthy since you also keenly understand the underlying truth of the unparalleled prosperity of an unhampered economy.

The USA is proffed as the most religious Christian country in the world. 

If so how come the majority of these Christians did not remember the one bible story in particular, where Joseph stored surplus grain during the 7 fat years to tide his people over the following 7 lean years?

And of course the lesson from an earlier age that one must live within one’s means so as not to become a slave of one’s wants, ie. a wage slave in modern parlance.

While a valid point can be made about the terrible leadership in the USA and the western world, one is not forced to partake in frivolous or reckless actions, financial or otherwise. Ie. why would one jump in front of a subway car just because a stranger happened to do so?

Whatever happened to personal responsibility?????

H.F. Wolff

Great article Karen:I have been a big fan for years. Many of us here saw it coming, but you could not convince people you care about not to spend and borrow so foolishly. I have a friend who ran through his retirement, overfinaced his house by 100,000 and ran up 150,000 in credit card debt. He lived in big house with no money using credit to live on. He knew better but just could not accept reality.

I do not want to say that this was whole mess was planned, but it sure looks that when the dust settles, a very few will own the majority of real assets in this country. All those, who borrowed against their property to spend on worthless baubles over the past years, which is the majority of the middle class, will wake up discovering that they own in reality only a tiny percentage of their home, and will have to work longer and harder to make ends meet. Add to that the increased tax burden to pay for the “bailout” of those who will now own the real assets, a proactively “reformed” bankruptcy law, and ever increasing political and media dominance of those with access to cash, and you will have the middle class of this country in involuntary servitude. Seems we are well down on the road to serfdom.

One thing that speaks volumes about the absolute ignorance of the American public is when they swallow the media’s fairy tale about increases in stock prices and home values equaling increased wealth. A house does not get more bathrooms or bedrooms or more livable if the market value goes up, and a factory does not get more productive or profitable, if the stock price goes up. It simply means that your salary is buying you less, until you come to a point, where you cannot afford to live the lifestyle you presently live. It is called inflation.

And speaking of Karen (of Michigan), somebody with time and bandwidth needs to set up a website for my favorite bugaboo:  the GM and Ford deathwatch.

No earnings, negative equity from now to the end of time, and they STILL haven’t been de-listed

Mr. Hoermann, you are exactly right. Troubling summation, great post.

Isn’t this article rather stating the obvious? If it was written a few months ago, I might have been impressed. But now, it is simply a summation of current events. I’d like to see what she thinks America will look like 5 years from now. Third world country? A total totalitarian government? A recovery?

The only intelligent thing said was AC’s comment. Nothing much more needs to be said after that.

Great article.
Thank you.

Those of us from the midwest saw this deterioration long ago. Now, the media talks about it, but we lived it since the early 1980s, when it was thought of as savvy, for business owners to offshore and outsource their production or operations.
But you are so right on most accounts, because the Middle Class is dying, and the politicians and corps have shot themselves in the foot. Who is going to buy their products? Not the Chinese or other lands...where workers can barely get by.
Without a abundant Middle Class, the American dream is lost.

Great article Karen.
Achmed. We’ve been short or in cash for 12 mths. We are now in 1929. It was caused by FED, fraudulent banks and gov’t intervention.
Next 5 yrs? Gov’t intervention, fascism, new deal, rascism, nationalism, blame the hobos, hyperinflation, keynes, marx, WWII.
Believe me, they will not ask the Austrians for advice.

Karen has hit the nail on the head.  A house is not ‘wealth’ and neither is any other consumer durable or any credit line coming off a plastic card.  Now that everyone realizes that the value of anything is what a prospective buyer will pay for it, maybe more people will consider looking at sound Austrian School economics.

Carry the story just a bit further and one can see the coming negative growth. The Gen X/Y-ers won’t be able to afford the McMansions of the AARP crowd much less the costs of Social Insecurity & Mediscare.

Karen, I enjoyed this article very much, and found it very inciteful. (Enjoyed, sigh.
the right word of course...)

One thought to bounce around… While one can definitely argure “what were they thinking?”
to take out such massive debt… Still, was it entirely insane? After all, with the constantly
inflating money supply… Wouldn’t saving be even crazier? And if the world has become one
of banks and government sucking the real economy dry… Why not spend now, and worry later?

After all… If I buy a loaf of bread today… Then I won’t need a wheelbarrow full tomorrow…

Just (a poorly worded) thought…

Thomas Jefferson speaking on the first attempt to establish a central bank in America:

“The system of banking is a blot left in all our Constitutions, which, if not covered, will end in their destruction. I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity is but swindling futurity on a large scale.”

“The end of democracy, and the defeat of the American revolution will occur when government falls into the hands of the lending institutions and moneyed incorporations.”

“If the people ever allow the banks to issue their currency, the banks and corporations which will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered.”

“Paper is poverty… It is not money, but the ghost of money.”

“There is an artificial aristocracy, founded on birth and privelege, without virtue or talents… The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendency.”

“The bank of the United States is one of the most deadly hostilities existing against the principles and form of our Constitution. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries. What an obstruction could not this bank of the United States, with all its branch banks, be in a time of war? It might dictate to us the peace we should accept, or it might withdraw its aid. Ought we then to give further growth to an institution so powerful, so hostile?”

James Madison speaking on the first attempt to establish a central bank in America:

“History records that the money changers have used every form of abuse, intrigue, deceit and violent means possible, to maintain their control over governments, by controlling money and its issuance.”

“It is proper to take alarm at the first experiment on our liberties. We hold this prudent jealousy to be the first duty of citizens and one of the noblest characteristics of the late revolution. The free men of America did not wait until usurped power has strengthened itself by exercise and entangled the question in precedents. They saw all the consequences in the principle, and they avoided the consequences by denying the principle.”

Andrew Jackson speaking on the second attempt to establish a central bank in America:

“If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations.”

“I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic, inasmuch as it is calculated to raise around the administration a monied aristocracy dangerous to the liberties of the country.”

President Jackson told the bankers “You are a den of vipers and thieves. I intend to rout you out, and by the Eternal god, I will rout you out!”

And my favorite one of all:

President Woodrow Wilson, after having broken campaign promises and betrayed his country by signing into law the Federal Reserve Act:

“I am a most unhappy man. I have unwittingly ruined my country.

A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation therefore, and all our activities, are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world. No longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.”

You see, we’ve been duped. Several times! But the greatest swindle, the one most foul, is our educational system not teaching these things in schools to prepare us for these days. We’ve been, and we’re being, indoctrinated. The truth is out there, but we must find it on our own. Trust No One.

Reading this article and the following posts makes me wonder if we even had a chance.  I found this a few days ago.

In the late 1700’s a scottish history professor, Alexander Tyler, studied the democracies thathad existed until that time. He had this to say about democracies in general.

“A democracy is always temporary in nature: it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the voters discover that they can vote themselves generous gifts from the public treasury.  From that moment on, the majarity will always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is ) always followed by a dictatorship.”

During the days when the housing bubble was still going strong, I used to walk by a bank each day which had the following ad displayed: “Need a vacation?  It’s on the house.”

Don’t forget the recurring “lifestyle expenses”. Even the poorest American typically has some monthly obligation to pay for an upgraded lifestyle. Cable TV is not a necessity. I would miss the Discovery Channel but I have lived without cable and survived to tell about it. Through bundling packages, cable companies routinely extract $100/month each customer. Cell phone bills (with the downloaded custom ringtones, text messages and internet packages)can also easily be $100. And for the economically retarded you have furniture rentals. A surprisingly large portion of some people’s income is spent on these expenses.

I think Karen DeCoster is laying too much blame upon boobus Americanus.

How is the average person supposed to figure this stuff out?  He’s been brainwashed by a government school and propagandized by almost every “mainstream” media outlet his entire life.

Opponents of central banking quite rightly point out the distortions caused by all the lending and borrowing.  But they seem to miss this:  perhaps the main distortion is in what we pay each other for products provided or services rendered.  The ready availability of borrowed funds to meet living expenses completely short circuits the delicate feedback mechanisms of the market which help people decide what, exactly, is a fair and decent wage.

It is annoying that so many of the only group of people that have a reasonably good handle on the current crisis turn around and claim that somehow, people could have ever been expected to manage credit based living.  It is inherently unmanageable and wrong.  There is no “responsible” method to have a mortgage against one’s own home, for example.  If one requires a mortgage of any size at all to buy a home, that means one cannot afford it.  And the solution is to not buy it until one CAN afford it, as opposed to borrowing, which of course only masks the problem.

When enough people are unable to afford a home on these terms, the market will adjust by either paying people more or providing less expensive homes to purchase.  But introduce lending and borrowing into the situation, and the great charade is on.  The winners are always bankers and government.

Borrowing to meet living expenses is always a terrible idea and always irresponsible.  But we have an entire economy predicated upon it.  The “excesses” are inevitable because it is so perverse and unjust to begin with.  It is a half-way measure to fault “irresponsible” or “excessive” borrowing and lending when such borrowing and lending is wrong in principle.

The real crisis isn’t even here yet!  Wait until the government can no longer sell treasuries.  And holders of US debt all over the world start dumping/fleeing it.  Then the feds will no longer be able to finance bailouts or anything else and we’ll really see things hit the fan !

At our house we long ago began observing the Biblical injunction: “Owe no man anything....” (We haven’t had a car payment in over 15 years.)

We are happy to report that His yoke is easy and His burden is light (Mt. 11:30).

Karen:

As Oscar Wilde said, “If you are going to tell people the truth, you’d better make them laugh or they’ll tear you limb from limb.”

Do you give speaking engagements?  If you are ever in Wichita, Kansas, I’d like to help you set something up.

Ms. DeCoster, look at the brighter side: broken bubbles mean an abundant supply of nearly new Harley’s and Harley parts for us to scavenge.  Fewer members of the faux leisure class means less crowding at our gym/spa or weekend mini-triathlon.  Tightened consumer credit and depressed wages means a reduction in “Bling Culture” excess and its eyesores - expensive cars driven by people whom we do not yearn to be like, gaudy car customizations, tattoos, and so forth.  At the same time Bling Culture’s wellspring - America’s penitentiary systems - stands ready to receive an infusion of new blood.  White middle and working class blood.  And with any luck at all we’ll continue blaming/berating the victims from relative comfort so long as we cover the nakedness of the pillagers with the gauze of omissions.  What merry, gloatful times lie ahead!

jr,

It appears to me the point you are making is a lack of education in basic money management.  Agreed that one is not likely to get this in today’s public schools, but I am not sure.

Surely you have heard the expressions “there is no such thing as a free lunch”, or “saving for a rainy day” or “live within your means”?

And “buy now pay later” is not a new marketing slogan but was popular when I was a teenager; my parent’s wisdom educated me as to the pitfalls of pursuing such spendthrift philosophy.

There are many more such homilies that address todays difficulties.

As to buying on credit, or taking out a loan to purchase whatever… In principle there is nothing wrong with this, provided one can afford it. Having to borrow funds to buy groceries, however, is surely the path to ruination.

However, borrowing funds, ie. a mortgage, to purchase a house in a good location is a wise decision for most people, if they can afford this.  And affordability is based on sound rules that have withstood the test of time.

Fundamentally one should pay cash, from savings, for goods & services that depreciate (cars, boats, vacations, groceries, etc.) and borrow if necessary to purchase goods that appreciate in value.

Another poster above stated that “a house is not wealth”.  I’d like to see some back-up for this assertion.  Real property is wealth, and in a good location will appreciate in real value because as cities expand, property closer to the core, ie. more desirable, will increase in value over and above the increase due to inflation.  Notice that I heavily qualified this assertion with “in a good location”.  A cardboard box or a shipping crate 20 miles from nowhere does not qualify as “good location”.  Neither do McMansions if the underlying economics and demographics do not support this.

Finally, it is a parent’s job to ensure that the offsprings are educated in the minimal requirements for living in their environment. This takes time and a positive example. Mammals and birds are very good at this! Many humans for some reason or other cannot be bothered.  My sons used to call their parents “cheap”, to which my standard reply was:  “Naw, we are thoughtful with our money, and taxes being what they are I expect to get $2 worth of satisfaction for every $1 I spend”. Now that they are on their own they sing quite a different tune!

In the final analysis one will lead a miserable existence if one finds it necessary to blame one’s misfortune on everybody else.  This despicable characteristic was adopted, unfortunately, from the tribe of “the chosen ones” who have raised this to the most prevalent art form of the our times.

H.F. Wolff

Harry Sumerer, That Alexander Tyler quote is made up. They guy’s name wasn’t even tyler, but tytler.
http://www.snopes.com/politics/quotes/tyler.asp

http://www.lewrockwell.com/north/north484.html

Rick Johnson, state paternalism is enabled by people like you. We are not children and your icecream analogy perpetuates the nanny state mentality.

Karen was absolutely right. We are victims of out own short-sightedness. It is foolish to ever assume that the “leaders” ever have or had or will have our best interests in mind.

I know turning debt into a commodity is one of the pillars of Fiat Money but why anyone is surprised that the leveraged crowbar slipped and clothes-lined the collective head is a mystery to me. Then again, this just may be the dumbest generation in all history....something to do with all that claptrap about artificial intelligence.

>>As to buying on credit, or taking out a loan to purchase whatever… In principle there is nothing wrong with this, provided one can afford it.<<

But how does one know that one can “afford it”?

Income is not guaranteed.  You can lose your job, or receive a salary cut.

Leveraging for profit or gain might be a reasonable business decision.  But it is always irresponsible to borrow for life’s basics, such as a roof over your head.

Anyone who borrows to buy a home is being irresponsible, unless perhaps they don’t have to, as in they can borrow $100K for a house at 4% interest and have $100K in the bank at 6% interest, something like that.

But if they don’t have the money, they are already buying what they “cannot afford”.  After that it’s just a question of degree.

And when this becomes a widespread practice, it becomes impossible to determine how to pay people enough to “live on”, because the assumption is they can always borrow to get something that they REALLY need.

One must EARN what one needs to live on, not borrow it.  This is a very basic moral principle, as well as an economic one.  Yet it is impossible to determine how to implement this principle when the process is so corrupted by borrowing and lending.  How do you think we have managed to experience this upward adjustment in the so-called “standard of living”, all the while with stagnant or falling real income?  Ms. DeCoster says it:  people have been using their home equity, i.e., their “power” to borrow, to live in a dream world.  It is folly to focus on the “excesses” of this.  It must be addressed as a matter of principle.

True enough, there are ancient aphorisms widely known about “living within your means”, for example.  But those phrases are meaningless and in principle violated by ANY borrowing for living expenses, because it is impossible to determine what one’s “means” are when borrowing is an acceptable method to falsely augment them.

Who is to blame for this?  It has been going on for several generations, since the early part of the 20th century.  People believe what their parents tell them.  You want to fault them for that?

The parties truly responsible for this mess are all long since dead and buried.  They wrote the script way back then and we’re just living it out.  The question is what to do from here, and it is relatively unimportant to point fingers at the living, all of whom are to one degree or another locked into something that was handed to them at birth with little or no choice.

Bearded Spock,

You write,"We are victims of out own short-sightedness.” That sounds like “childish” behavior to me. And if one is a “victim,” then there is a victimizer. Who is that, pal?

It is long since we had a zeitgeist that equated individual adult responsibility as the standard. There ARE victimizers out there, and most people today are so weak and befuddled that they are defenseless against them. Why else would they give away equity in their homes to elevate their consumption?

jr,

I think you are making excuses. I certainly had my share of career and economic set-backs but I would not blame someone else for this.  I made my choices, some unwise and others could have been better, but I live with them.

With very little reading one can determine what are historically realistic mortgages to assume, based on one’s income.  Taking on a mortgage assuming 2 people’s salaries is the height of stupidity, even though numerous people do this and get away with it. 

Let me assure you that my family always lived on my salary alone, and when I lost my job during the downturn in the early 1990 my wife, a stay-at-home-mom, found a job to tide us over until I found a new job. This is how we protected ourselves against economic calamity, by living on one salary only, and savings.

Apart from a house all our purchases were/are from savings; we buy cars new and drive them until ready for the scrap yard.  We do not take foreign holidays.  Oh yes, we paid off our first house within 8 years.  The second one had to be sold… we broke even...during the 1990’s economic downturn.  The third house, our present abode, was paid for in cash.

A bland life?  To some perhaps that value trappings paid for through credit.  But now our choices allow us a life style with a lot of free time while still working.  I own and operate a professional (hard sciences) service sole proprietorship and life again is beautiful.  Oh yes, by no means would I rely on any government to pay for my retirement.

None of this would have been possible without some guiding principles, hard choices, and sacrifices, along the way.  All this of course flies in the face of today’s mantra of “I want it and I want it now”.  But then I have never been accused of being politically correct.

H.F. Wolff

i belive the meltdown was manufactured by the fed,they knew the cause n effect of lowering int.rates and keeping them at i% for 2yrs.some people seem 2 think that a facist gouvt is some far off thing,i think it will happen n 3 to seven yrs,im interested to hear what time horizon the rest of u people have n why

“Thus the cycle of fiction will be lengthened, turning a headache into a migraine, and perhaps even worse.”

More probably, brain cancer.

See the end result of The Last Bubble™ to swallow the planet:

http://djomama.blogspot.com/2006/12/first-world-government-junk-bonds-on.html

Bearded Spock.......thanks for the info on professor Tyler (Tytler) and his wrongly attributed quote.

The thoughts do ring true tho’.

My own opinion on the potential salvation of this constitutional republic (democracy) is a “flat tax” system of some type.

I have donated to a mixed trio of campaigns over the years: example...Jerry Brown (against Clinton), Steve Forbes, and of late Dr. Ron Paul.  Brown and Forbes advocated a flat tax while running their primary campaigns.
Paul, we should all know his views on the subject.

For the sake of easy discussion, all earnings over 30,000 (family of 4?) would be taxed at 20% ?.

I’ve been told it will never happen, which I’ve come to believe.
Too many lawyer and accountant types would be looking for work.

I suspect the real reason the flat tax won’t happen is the politicians would have a hard time buying their constituants votes and holding them ransom after dependency is achieved.

The Dems’ will scream it’s for the rich, (” the rich won’t care about that first $30,000 deduction)the real reason being losing the welfare state they have purchased.

The Repubs’ will have none of it either, as they also would lose the ability to favor their groups thru’ tax breaks and favoritism.

This might break the chain of democratic state failures, alas, it will not happen.

May I add as an after thought on the flat tax?......if the pols wanted to go on a spending spree, like a war or a foreign aid binge, they could be controlled by forcing them to raise the theoretical 20% rate for their ventures instead of printing more $$$$$$.  Fat chance eh?

Mr. Wolff:

I’m not making excuses, just trying to identify the right problem.

I admire the virtue you have practiced in living a largely debt free life.  It is very difficult to do and requires a lot of self discipline.  More than that, it requires a good deal of intellectual inquisitiveness and integrity even to realize that one must practice these virtues to begin with, because the world is telling you the opposite all the time.  But I would submit that your virtue can become the impetus for vice when you take inordinate pride in it.  Granted you have been far more virtuous than almost everyone else, and at least in some ways others have brought their economic suffering upon themselves.  But if there is a way to ameliorate that suffering - which, by the way, will be visited upon many innocents along with the “guilty” - we should not begrudge this result on the ground that an insufficient price has been paid for folly.  None of us would fare very well if we paid the full price for every mistake we made.  Justice will prevail in the end; in the meantime our petitions and prayers should focus on mercy.  Regards to you.

As was pointed out above, credit should only be used for investments that have a chance to appreciate. However, this does not include a residence, since the inherent value does not increase for the owner/occupant. A business that actually produces something, creating a value greater than its components and thus generates a profit does qualify. To take a loan from somebody in whatever form, who has excess value, e.g. raw materials or machinery or know-how, makes this loan a worthwhile endeavour for the person who gives it and the one who puts it to productive use, since they will share in the profits it generates.
However, our present monetary system allows people, who do not have anything real to contribute - i.e. the financial organizations with the government and the fed at the top - , to invest, without really having anything real to give except values created out of thin air, and collect rewards for it.  It is a risk free game for these people, who have rewarded themselves with oodles of titles against real values, like houses, land, raw materials, and means of production, which they will not relinquish without a fight. All those, who made a lot of money “flipping that house”, are not returning that money back, just as the corporate raiders, who made their fortunes through buy-outs and subsequent “going public” of productive business are certainly not returning anything to the public. Keep in mind that they benefitted from the “loose money” policies of the feds. I don’t see real estate brokers and commissioned loan brokers returning the monies that they have earned for their essentially unproductive activities. Nor are the fed or the banks returning the interest they collected for “loaning” money that they created out of thin air and that was by all standards not really theirs to lend. It is a rigged game and people should realize that it is beyond repair. It is time to cleanse the system of the parasites and to start fresh.

There is only one good solution.

END THE FEDERAL RESERVE FIAT MONEY SYSTEM.

Boom and Bust them for a change!

http://www.endthefed.us

http://mises.org

As my wife and I searched for a home to purchase over the last ten years, we simply could not reconcile the gap between what the houses were appraised for and their relative value in appearance and upkeep. We did not purchase because we could never reconcile that gap....thankfully....however, I think the biggest untold story about the housing boom is really related to the crappy construction and terrible quality of the new McMansions. When you really look at the materials and quality of workmanship....these houses will be section eight ghettos in about twenty years…

Regards

BobbyJoe

jr,

Thank you for your kind response.

If I came on a little strong in my above post, I apologize; I merely wished to point out the choices I made, and that I was/am prepared to live with the results regardless of what they are or turn out to be.

Agreed that I have partaken of society’s help when needed… I also pay my taxes without grumbling too much since I believe this to be part of the social contract.

Neither would I wish to see a neighbour go hungry or freeze; this is also part of the social contract of civilized society, as is schooling, medical care, etc.

Between the extremes of freezing and 3,000 - 5,000 squarefoot McMansions is a lot of room for personal choices and prudence.

Perhaps it is necessary to teach our children some fundamental economic principles which, at one time, were common knowledge, almost as if they were passed on with mother’s milk.

My best wishes to you. HFW

Mr. Hoermann,

I have read arguments for-and-against considering a home an investment.  Upon reflection I am inclined to agree that most homes do not fall into the investment category because of the extreme difficulty in anticipating which bit of ground will be “in”, ie. more desirable, 5, 10, 20 years in the future.  I think some guidelines for choosing are possible, though.

Home ownership is first and foremost a lifestyle choice, and, after having made the mortgage payments for 10 or 20 years one owns the place and can sell it.

As to paying a mortgage with interest… I got stuck with 18% in 1981 upon renewal after a 5 year term.  Yet, in principle I cannot object to reasonable interest because I am asking someone else to forgo the pleasure of enjoying his savings, and loan these savings to me to enjoy.  Somewhat simplistic, I know, in today’s world of practically unlimited credit and creation of money out of thin air.  For this kind of money nobody had to save or forgo any pleasure of use.  I really don’t have the answer to this; in all likelihood a return to full backed banking is required to stop the current malaise.

Pay rent for the same length of time and one owns nothing, unless one had the discipline to save and invest the difference between rent and ownership costs.  How many of us have that discipline?  I certainly am glad that in today’s rocky financial climate we own debt free the abode we occupy.

It has been my observation that by-and-large people that own their dwelling are better off in old age than those that don’t.  Of course I don’t frequent among those that don’t have to work for a living and live in $10M penthouses in NY, LA, TO, etc.

It is all about personal choices and making sure to not “paint oneself into a corner”, ie. be left without options or alternatives.

Following the herd usually leads to slaughter. 

All the best to you,

H.F. Wolff

Been longing for this kind of Judgement Day
(Secular that is),
Where the “Train to Oblivion” grinds to a HALT!
Time to stop and smell the Toxic Tu*ds,
sold as AAA rated, by people who will probably escape
their justified legal desserts.
Basically until we all see who is controlling us,
nothing will change. 
Looks like time to get off my hobby horse!
(that too ground to a halt!)

Sha Ren

BobbyJoe,

10 years spent looking for an abode?  What are you looking for and willing to pay?

The next 2 years will, in all likelihood, provide a boon to house buyers.

Keep the faith and your $$$ handy for this opportunity.

H.F. Wolff

You conservatives really are a bunch of goat blowing freaks.

When the going was good it was all free market this and free market that.  Now your precious free markets and conservatism has FAILED, and you have your pants around your ankles, it’s all socialism this and socialism that.

Stick to conservatively blowing goats.

hy, Do something to help those hungry people from Africa or India,
I made this blog about that subject:
in http://tinyurl.com/5hu74e

It all boils down to this:
If you owe them, you have to pay them
If they owe you, they have to pay you

While a valid point can be made about the terrible leadership in the USA and the western world, one is not forced to partake in frivolous or reckless actions, financial or otherwise. Ie. why would one jump in front of a subway car just because a stranger happened to do so?

Whatever happened to personal responsibility?????

H.F. Wolff

I agree with you Mr Wolff. Another thing that is destroying this country is personal responsibility. No matter what happens it seems to always be the same, look around for someone to blame...and then sue and make money off whatever happened. People do need to take responsibility for their own actions and even more important… learn from the mistakes.

A democracy will continue to exist up until the voters discover that they can vote themselves generous gifts from the public treasury.  From that moment on, the majarity will always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is ) always followed by a dictatorship.”

Posted by harry sommerer on Oct 25, 2008.
-----------------
Thank you for posting this. Spoken in the 1700’s it could be today’s headlines. Both candidates for president are promising money in the form of “stimulous checks”, and I actually overheard someone say they were voting for a certain candidate because they would get a check. This is shameful. Not to mention one of the companies who recently were bailed out (AIG) just went on with their normal ways...(an example recently was spending 89,000 for a quail hunt in England for it’s membere within a week or so of the govt. bailing them out). Even more shameful.

Ms Ginty,

Almost 75 years ago a nation’s leader addressed his people as follows: “To improve your standard of living you must work for it with your own two hands.” Not ONCE did he promise that the state or government would pay for any improvements to the citizen’s way of life, or take additional taxes from those who earned the money to pay for this.

This same statesman began government to government foreign trade thereby cutting out international bankers and the obscene profits they made off the working man’s efforts.

The capitalist world could not tolerate this curtailment of profits (Churchill wrote about this citing this bank-free trade as reason to wage war on this country) and had to manufacture a war to stop it.  And indeed they did stop this government to government trade; it only took the combined effort of the ENTIRE capitalist and communist world over 5 years to defeat a tiny European country and its new methods of international trade.

This very same trading method would solve many of today’s international financing difficulties.

H.F. Wolff

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For unique perspectives on the financial rape of the American people listen to a few radio interviews with Ron Paul, Patrick Carmack, Naomi Wolf and others.  They are free MP3 downloads at http://drop.io/Summerbird