July 4th is an appropriate day to borrow Winston Churchill’s the gathering storm to describe the existential crisis that will envelope America within the next decade. There is no single cause of the gathering storm; in complex systems, dynamics feed back into one another, and the sum of destabilizing disorder is greater than a simple sum of its parts.
Causal factors can be roughly broken into two categories: systemic and social/economic. The central illusion of those who focus solely on social, political and economic issues as the sources of destabilization is that tweaking the parameters of the status quo is all that’s needed to right the ship: if only Trump were impeached, if only GDP hits 4% annual growth rate, if only the Federal Reserve started controlling the price of bat guano, etc., etc., etc.
The unwelcome reality is the systemic issues cannot be reversed with policy tweaks or shuffling those at the top of a crumbling centralized order. The systemic problems arise from the structures of centralization and monopoly capital, theinstitutionalization of perverse incentives and the depletion of natural capital: soil, water, fossil fuels, etc.
We can create “money” out of thin air but we can’t print fresh water, productive soil or affordable energy out of thin air.
Regardless of their ideological labels, centralized socio-economic systems follow an S-Curve of rapid expansion during a “boost phase,” a period of stable expansion (maturity) and then a period of stagnation and decline as the system’s participants do more of what’s failed, as they cannot accept that what worked so well in the past no longer works.
A successful model traps those within it; escape becomes impossible. That’s the lesson of the S-Curve:
The Ratchet Effect is another key reason why meaningful reform of the status quo is impossible. In flush times, budgets expand as easily as waistlines, ratcheting up to consume ever-higher revenues. But once revenues start declining, the administrative/consumerist status quo is fiercely resistant to any reduction.
Like a body which has grown fat from excessive consumption and a decline in vitality/ functionality, the status quo resists any reduction in staffing or spending, sacrificing muscle to keep its layers of fat untouched.
In other words, the social crises, the constitutional crises, the financial crises–all of these are to some degree mere manifestations of the failure of centralized systems that arose to benefit from conditions that no longer exist.
Our centralized institutions and systems are failing, and shuffling the management and tweaking the parameters cannot stave off collapse.
What nobody gorging at the trough of the status quo dares admit is the system is failing most of its participants, and this is the source of populism and other manifestations of social disorder. I often publish this chart, as it crystallizes and encapsulates the verboten reality of 21st century America: the few are skimming the vast majority of the rewards of the system, at the expense of the many.
The many are politically powerless and divested of capital. Our centralized system concentrates wealth and power into the very apex of the wealth-power pyramid. In this apex, wealth, power, and control of media and surveillance all mix easily: thus Bezos controls Amazon and The Washington Post and has long-established ties to the National Security State in what’s been aptly described as Surveillance Capitalism, a term that also describes Facebook and other quasi-monopolies of social media.
Rather than admit the failure of our socio-economic system, those benefiting from the system’s gross imbalances are pursuing a multi-pronged strategy of control:
1. Propaganda. The basic idea here is simple: ignore what your own experience is telling you about the failure of our socio-economic system and believe a carefully tailored host of interconnected narratives that all is well and this is most prosperous, wonderful system in the galaxy, nay, the universe.
Anyone who challenges these narratives is quickly attacked and marginalized:a highly centralized state goes hand in hand with a highly centralized media. Anything outside this apex of wealth and power is dismissed as “fake news.”
For example, anyone who dares measure real-world inflation is quickly attacked and marginalized, least the restive masses finally awaken to the reality that the unprotected are being ravaged by 6% to 8% annual inflation in big-ticket items while the protected elites bask in subsidies that protect their self-serving fiefdoms from the harsh reality of rising inflation (i.e. loss of purchasing power).
2. Bribery and buy-offs such as debt forgiveness, tax breaks and Universal Basic Income (UBI). To calm the restive masses who have been disenfranchized, exploited and transformed into tax donkeys, those in the apex of power offer bribes and buy-offs: hey, let’s “forgive” student loan debt–but of course it’s not actually forgiven; the losses are simply transferred to the taxpayers.
Tax breaks and subsidies are used to mask the ever-greater share of the nation’s wealth being skimmed by junk fees, useless licencing, compliance penalties, and taxes on everything.
Universal Basic Income (UBI) is the ultimate systemic bribe. Having stripmined the unprotected non-elites of opportunity and capital, those at the top of the wealth-power pyramid are promoting basic material survival as the substitute for actually having a stake in the system.
The unspoken reality is that UBI is designed to give debt-serfs just enough income to keep servicing their debts. Why not bypass the charade of “helping the powerless” and transfer the taxpayers’ money directly to the banking sector?
The gathering storm cannot be dissipated with propaganda and bribes. The status quo is only hastening its demise with its strategy of misdirection and distraction.
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1. Every Man Has a Primary Battle
“Life is warfare . . . Then what can guide us? Only philosophy.”
As David Brooks noted in his fantastic podcast with Brett, every man has a primary battle or two in life. Dwight Eisenhower could be viciously angry, but found ways to deal with it. Jack London battled alcoholism, and while it ultimately contributed to his death, he battled through it, and lived a remarkably productive life. It’s quite possible that Marcus Aurelius feared death (not just his, but for his loved ones too) and had a short temper, and so he wrote himself these notes, repeating his themes over and over.
Let this be a lesson that while all humans face universal challenges, each of us has a primary struggle or two in life. Laziness, substance abuse, compulsive lying, over-eating, etc. It could also be things out of your control — the death of a spouse or child, an abusive family, job loss. Whatever your own personal context may be, it would serve you well to do like Marcus and write out meditations and exhortations to yourself as “moral reminders” — pithy ideas to keep you going in the midst of ongoing hardships and struggles.
2. Every Man Should Take Lessons from Everyone Around Him
“From my grandfather Verus I learned good morals and the government of my temper.
From the reputation and remembrance of my father, modesty and a manly character.
From my mother piety and beneficence . . .”
Our modern culture, however, has forgotten this ancient lesson. A moral failing by a modern business person, celebrity, politician, or even a company sparks internet outrage and calls for boycotts. Behaviors of historical figures now judged to be offensive, even if common to the time in which the men lived, are enough to write off all of their other admirable virtues and worthy accomplishments.
We don’t write ourselves off despite our flaws. Likewise, the wisest of men know that every person is a mosaic of virtue and vice, and that wisdom can be found in everyone, if only you’re willing to look.
3. Fate Plays a Role in Every Man’s Life — You Can Either Fight It or Accept It
“To the gods I am indebted for having good grandfathers, good parents, a good sister, good teachers, good associates, good kinsmen and friends, nearly everything good.”
“For all these [blessings in my life] require the help of the gods and fortune.”
As Isaac Lidsky has said, accept that life is a game of poker. While there are certain things you can do to increase your odds of winning, a large part of each hand is completely out of your control. Would you fight the cards dealt in a given hand, arguing that it’s not fair or that you want a re-shuffle? Of course not. While life is certainly higher stakes than poker, you just have to accept that what happens, happens. Even with death.
You can either double down and try to gain a greater grip of control (and lose much in the process), or you can know that whatever randomness and complexity life throws your way can be an opportunity to learn, grow, and build your resilience, even if the hand you’ve been dealt is pretty crappy. Sometimes even a 7-2 — statistically the worst starting hand in poker — wins out every once in a while.
4. A Man is Not to Be Consumed by the Actions and Attitudes of Others
“When you wake up in the morning, tell yourself: The people I deal with today will be meddling, ungrateful, arrogant, dishonest, jealous and surly. . . . none of them can hurt me.”
“Don’t waste the rest of your time here worrying about other people . . . It will keep you from doing anything useful.”
“Why do you not rather act than complain?”
How much of your day is spent complaining — either out loud or silently — about the actions of others? The driver who cut you off. The slow barista. Our deadlocked government. Your crank boss. How much of your energy and time is wasted thinking and stewing about those things?
As Aurelius wisely notes, you cannot be harmed or hurt by any of these people unless you allow it. Your life is wasted in choosing to be guided by the thoughts and actions of others.
We aren’t in control of the events that play out around us. But we are in control of our own attitude and responses to those events. It’s really that simple.
Viktor Frankl clung to this idea when he was imprisoned at both Auschwitz and Dachau during the Holocaust. He said: “The one thing you can’t take away from me is the way I choose to respond to what you do to me. The last of one’s freedoms is to choose one’s attitude in any given circumstance.”
5. Strenuous Action is the Answer
“When thou hast trouble in getting up, say to thyself: I awake to do the work of a man; why then should I grieve for having to do the things for which I was sent into the world? Was I born to remain warmly in bed under my covers? But it is so pleasant. Wert thou born for pleasure, then? Was it not for action, for work?”
“On the occasion of every act ask yourself . . . Will I regret it?”
“Why were you born? For pleasure? See if that answer will stand up to questioning.”
The catchphrase of The Strenuous Life is “Do Hard Things.” The point being that hard things — learning new skills, pushing yourself physically and mentally, serving others — is far more inherently fulfilling and satisfying than leading an easy, climate-controlled, smartphone-saturated lifestyle….
There is an immense pleasure to be found in partaking in the strenuous life. And because it’s earned, it’s a pleasure that’s far greater than what you’d find simply lying about. I assure you, a good meal and a good beer tastes far better when you’ve first hiked a few miles or lifted a few hundred pounds of iron.
6. A Man Should Think, Do, and Be Good
“While you live, while it is in your power, be good.”
“Consider if you have behaved to all in such a way that this way be said of you: Never has he wronged a man in deed or word.”
“Look within. Within is the foundation of good, and it will ever bubble up, if you will ever dig.”
“No longer talk at all about the kind of man that a good man ought to be, but be such.”
“What is your art? To be good.”
s Aurelius advises, “inquire of yourself as soon as you wake from sleep.” Start every morning by getting in a mindset where you’re prepared to look for opportunities to serve and be useful. Benjamin Franklin practiced this, asking himself every morning “What good shall I do this day?” Then, at the end of the day, review your actions and inquire of yourself, as he did, “What good have I done today?” By bookending your day with a meditation on goodness, you will orient your soul more and more towards virtue.
Make your art that of being good. Do not simply think on it or talk about it; do good.
John Mauldin is one of the economist/traders I follow. His analysis is well researched and his experience in the markets lends credibility to his predictions. I find his ability to explain difficult subjects in common terms.
His recent series on Train Crash Preview, details how we’ve moved from business cycles of expansion and contraction (recession and boom), now being replaced by credit cycle boom and bust cycles. Government intervention into the credit market is causing abnormal investments and asset inflation. His theory is that the bing of corporate debt will be the spark that starts the run for the doors. The series is well worth a read.
Below is the ‘what happens when that happens’ portion of his analysis. It ain’t going to be good for retail investors and employees.
Mauldin’s prediction is that from 2020 to 2030 it’s going to suck. He believes we’ll whiplash between Republican and Democratic administrations with the cry from the voters to DO SOMETHING. What will we do? Pump up the debt. The entire globe has already been taking on massive amounts of debt. From central bankers to corporate to consumer, we are on a once in a 5000-year debt run. Speaking of once every 5000 years, Mauldin is predicting what I asked one of our local Congressman on air about 3 years ago … ‘what’s the end goal with all this debt binge? Are we just going to reset the decimal point and refactor debt?’ A good old Biblical debt jubilee.
To put some numbers behind the debt:
An exception to this is the Bank for International Settlements (BIS), which has been making loud noises about the toxic level of global debt and the anticipated bubble. It recently reported that the global debt of 2008 was $60 trillion, small when compared to the current debt of $170 trillion. To make matters worse, today’s global debt is 40 percent higher in relation to GDP than it was in 2008, just prior to the Lehman Bros. downfall. To add to the current headache are the rising debt levels of emerging markets and corporate debts. According toMcKinsey & Company, a global consulting firm, two-thirds of U.S. corporate debt are from corporations that pose a high default risk.
So my theory that business cycles don’t matter as much as credit availability. I believe that buying a stock with the old techniques of Price to Earnings Ratios and the strength of the management teams is gone. The stock market is nothing more than gambling. Companies are not grabbing market share or working on becoming more efficient, they are buying back stock to increase the share price. Asset bubbles are appearing in real estate and stocks-bonds. These asset bubbles are blowing up in China, India, Brazil, and Japan. The wealthy of these countries are trying to get their money out of shakey political systems and into North American real estate. Look to LA, NY, San Francisco (the tech sector has helped drive this market more so than foreign investors). Look at Toronto or NY City to see where the foreigners with money are trying to protect their assets. Bubbles, Bubbles EVERYWHERE.
What Happens When That Happens
As you can read in the two analysis below, we are predicting the future. Some things, like the business cycle, the power of government intervention and accumulation of wealth at the expense of the masses have consistent patterns in history, we are in uncharted territory for a couple reasons. First, the numbers are so incredibly large. Mauldin talks about $30 Trillion in debt in America and we ballooned from $60 Trillion in global debt at the popping of our last debt bubble to $170 trillion globally today. These numbers are so astronomical it’s anyone’s guess on what will happen. Mauldin and Hughes allude to civil unrest inside the US, which they summarize will be squelched with ‘free cheese’, in the form of a Universal Basic Income or additional money from a government (printed in the form of debt), for the masses. We could see a global war similar to the rise of Dictators in the 1930 lead to WW2. Hitler was a loud mouth in Germany through the 1920’s who predicted bad times ahead for Germany at the hands of the victors of WW1 and the reparations that had been saddled on Germany. It wasn’t until the Crash of 1929 and the Great Depressions spread to Europe that people started to believe that the nut had some validity. We know how that turned out. Do we have another set of evil men ready to fill a vacuum? You bet, we’ve had evil rulers from the beginning of time.
So my predictions are similar to Mauldin’s;
- The Spark – The next recessions, which can be sparked by any number of things are going to be a turning point. Federal governments have learned that they can push the can by taking on debt and helicoptering every more capital into the economy.
- If the central banks go back into the debt business and the recession is minor. Buy the dip and buy areas that have been shown to artificially grow during a Fed-fueled debt cycle. Think blue-chip stocks and real estate. On real estate, chose wisely the states and cities that are playing long ball. Stay away from Illinois and California and focus on Arizona and Texas. I’d look to the south, states like North Carolina, Georgia, Oklahoma are deep red and nice places to live. Cities like Dallas, Phoenix, Colorado Springs, or Charollete are going to fare better than others. Farmland is always interesting, especially if you can speculate on the edge of one of the cities I’ve mentioned and created a capital-intensive operation that will give you tax incentives during the crazy times. I’m going back to my roots and starting a boutique cattle operation in Arizona for some of these very reasons. I’m also growing and developing Charter schools in these markets for similar reasons.
- Low Rates and Taking on Debt. The flood of debt keeps interest rates low for another decade or so. If you have the income, buy assets with debt. Careful about overpaying because one day the $100k house you bought may be worth $50k. If the $100k house is generating rents to cover your debt payment, ride the wave. I’m exploring developing a fast-casual hotel like Holiday Inn Express. Right now it’s too frothy to buy the land and cover the development costs. During a dip, that asset looks stronger. Build it right and put it in the right area and the cash flow with limited labor starts looking pretty nice.
- Look international – I tell my kids that their Great Great Grandparents left Ireland for a better life. Think globally. Other markets around the world that are great spots to live, fertile lands with tons of natural resources are all places to keep an eye on. I’ve enjoyed Doug Casey’s philosophy and his International Man site which explains some of the nuances of making an international decision.
- Be super careful of the stock market right now. I took my soon-to-retire father in law out of the stock market in early 2008 before the crash. It was too frothy and he was too late in his investment game to weather the storm. I didn’t put him back in and missed the run-up but who would have guessed the entire globes central banks would forgo the pain and pump in all the liquidity? Next time, I’ll know better. When the recession hits and the stock market dips 30-40% AND we see quantitative easing or massive intervention, plow into the market and ride the next wave.
- Gold and Bitcoin – I dig in to these but I’m still on the fence. Both of these are stores of value in times of debt-fueled asset inflation. When all else loses market fundamentals, these assets are the insurance policy. Bitcoin is the scariest. Gold is being bought and stored by China and Russia in massive quantities. That should say something.
- A Once Every 5000 Year Debt Jubilee – long shot but who knows. Watch for a world currency and a world central bank to make sure this never happens again. Mauldin suggests it gets quitly decided behind closed doors. That’s never good.
Remember how Peter Boockvar describes the new cycle. Instead of recession pushing asset prices lower, lower asset prices trigger the recession. That will be the next stage as falling stock and bond prices hit borrowers. Rising defaults will force banks to reduce their lending exposure, drying up capital for previously creditworthy businesses. This will put pressure on earnings and reduce economic activity. A recession will follow.
This will not be just a US headache, either. It will surely spill over into Europe (and may even start there) and then into the rest of the world. The US and/or European recession will become a global recession, as happened in 2008.
Aside: Europe has its own set of economic woes and multiple potential triggers. It is quite possible Europe will be in recession before the ECB finishes this tightening cycle. With European rates already so low, and the ECB having already bought so much corporate debt, I wonder how else they will try to bring their economy out of recession? Everything is on the table.
As always, a US recession will spark higher federal spending and reduce tax revenue, so I expect the on-budget deficit to quickly reach $2 trillion or more. Within four years of the recession’s onset, total government debt will be at least $30 trillion, further constraining the private capital markets and likely raising tax burdens for everyone—not just the rich.
Meanwhile back at the ranch, job automation will intensify with businesses desperate to cut costs. The effect we already see on labor markets will double or triple. Worse, it will start reaching deep into the service sector. The technology is improving fast.
Needless to say, the working-class population will not like this and it has the power to vote. “Safety net” programs and unemployment benefit expenditures will skyrocket. The chart below from Philippa Dunne of The Liscio Report shows the ratio of workers covered by unemployment insurance is at its lowest level in 45 years. What happens when millions of freelancers lose their incomes?
Source: The Liscio Report
The likely outcome is a populist backlash that installs a Democratic Congress and president. They will then raise taxes on the “rich” and roll back some of the corporate tax cuts and increase regulatory burdens. They may even adopt my preferred consumption-oriented Value Added Tax (VAT)… but without the “reduce income taxes and eliminate payroll taxes” part that I suggested in 2016.
At a minimum, this will create a slowdown but more likely a second recession. Recall (if you’re old enough) the back-to-back recessions of 1980 and 1982. That was an ugly time for those of us who lived through it.
Of course, that presumes a recession before the 2020 election. It may not happen—I put the odds at about 60–70%. Also, it is possible the Democrats will fumble what for them will be a golden opportunity. I’m not sure Republicans should view that as a “win” because they will then have to deal with the eventual recession themselves instead of being in opposition. I think by the latter part of the 2020s, US total government debt will be at $40 trillion. You think Washington is paralyzed now? You’ve seen nothing yet.
My friend Neil Howe thinks we could see a socially conservative, fiscally liberal party gain power. (Some would argue one already did, given the current GOP’s spending binge.) But in any scenario, I see very little chance the federal government will shrink or reduce its impact on the economy. That is already a big problem and will only grow.
The Great Reset
Unemployment may approach the high teens by the end of the decade and GDP growth will be minimal at best. What do you call that condition? Certainly not business as usual. Long before that happens, the Federal Reserve will have engaged in massive quantitative easing. There’s a lot of misunderstanding about QE, so let me clarify something important.
Quantitative easing is not about “printing money.” It is buying debt with excess bank reserves and keeping that debt on the Fed’s balance sheet as an asset. The Bank of Japan is an example. They did not put currency (yen) into the market. That’s how Japan still flirts with deflation and its currency has gotten stronger. QE is the opposite of printing money, though there is a relationship. That’s one reason central bankers like it.
As this recession unfolds, we will see the Fed and other developed world central banks abandon their plans to reverse QE programs. I think the Federal Reserve’s balance sheet assets could approach $20 trillion later in the next decade. Not a typo—I really mean $20 trillion, roughly quintuple what they did after 2008. They won’t need to worry about the deflation that usually accompanies such deep recessions (dare we say depression?) because the Treasury will be injecting lots of high-powered money into the economy via deficit spending. But since we have never been in this territory before, I must say this is only my guess.
If that’s what they do, will it work? No. The world simply has too much debt, much of it (perhaps most) unpayable. At some point, the major central banks of the world and their governments will do the unthinkable and agree to “reset” the debt. How? It doesn’t matter how, they just will. They’ll make the debt disappear via something like an Old Testament Jubilee.
I know that’s stunning, but it’s really the only possible solution to the global debt problem. Pundits and economists will insist “it can’t be done” right up to the moment it happens—probably planned in secret and announced suddenly. Jaws will drop, and net lenders will lose.
While all that is brewing, technology will keep killing jobs. Many mainstream commentators and serious analysts like Karen Harris (see The Great Jobs Collision) are projecting that 20–40 million jobs will be lost in the US alone and hundreds of millions across the developed world.
As we get into the 2020s, the presidency and Congress will again be whipsawed, and we will begin to discuss Bernie Sanders’ “crazy” universal basic employment idea, or others like it. By then, the idea will not be considered crazy, but the only feasible choice. Even conservative politicians can see the light when they feel the heat.
All of this is going to lead to the most tumultuous decade in US history, even if we somehow (hopefully) avoid throwing a war into the mix, as is typical of the end of a Fourth Turning. Typically, the end of a Fourth Turning (which started in 2007, according to Neil Howe), has been accompanied by wars. This one could, too, though I think we will more likely see multiple low-grade skirmishes.
If we somehow get through all that, and particularly the Great Reset, the 2030s should be pretty good. In fact, think incredible boom and future. No one in 2039 will want to go back to the good old days of 2019. Our kids will think it was the Stone Age. But we have to get there first.
That will be our topic today as we continue my Train Wreck series. This will be chapter 8. If you’re just joining us, here are links to prior installments.
- Credit-Driven Train Crash (May 11)
- Train Crash Preview (May 18)
- High Yield Train Wreck (May 25)
- The Italian Trigger (June 1)
- Debt Clock Ticking (June 8)
- The Pension Train Has No Seat Belts (June 15)
- Europe Has Train Wrecks, Too (June 22)
Tie-Ins – 7 Deadly Sins – 4th Turning
Mauldin breaks down the financial implications of gorging on debt. We don’t just live in finance, we are an integrated society and financial implication have an effect on our politics, our cities and our families. Charles Hugh Smith weighs on the progression from abundance to scarcity. These theories of financial markets and societies tie into my theory of my 7 Deadly Sins resting in all of us and all of the societies. It also ties into the Straus – Howe theory of the 4th Turning.
Just as the acorn can lead to a 1000-year-old oak tree, that one day falls, so does great societies rise and fall. It’s the cycle of life that we can watch across at least 10,000 years of organized civilization. (Historical Decline blog post HERE)
The Gathering Storm
On a 10 hour trip back from vacation, I dug into deep and obscure Jordan Peterson interviews. This one sums up his 5 main points of his books and message. Jump past the analysis of his Channel 4 Interview and you’ll hear the interviewer summarize Peterson’s 5 repeated theories.
Here’s an 8-minute clip of the 2-hour interview that will give you a taste of his technique of tieing together history, psychology, sociology, and neuroscience to deliver a message. The power of telling the truth when faced with adversity is explained in this clip. The truth will set you free. “Life without truth is hell”
To understand Peterson’s message, this clip of his 13 Truths;
- Encourage people, they are hungry for encouragement.
- Everyone matters – society functions – that’s true
- Take responsibility for failure – Failure to act is the most catastrophic – take the risk or it continues to grow
- You’re a mess, but you don’t have to stay that way –
- Do Not Cast Pearls Before Swine – if people aren’t listening to you, stop talking.
- We all have chaos, the hero has to be a controlled and flawed monster that is aware. Jung’s Shadow Theory
- Goals, what to do if you don’t know where to go? Clean up your room – Fix things that need order…we are wired towards order and need to distinguish between chaos and order.
- You must have meaning or purpose in your life. The more important the goal the more life-affirming your reward! Go big and fill your cup.
- Treat yourself like you matter. Treat other people like they matter (or else you lie, cheat steal, end up in bad relationships). Everyone matters
- Make a schedule and stick to it.
- What you want may not be good for you. You have to figure out what your goal is…you have to aim, adjust and tact….then you have to try!
- Stop doing the things that you are doing that aren’t in your best interest. If it’s self-evident that it’s bad, stop. Discipline, secondary payoffs, anger/fear all stop you but go small at first.
- Conscientiousness – orderly and industriousness. Industriousness (Grit) is the most important factor of success. Set goals that you value and
Baby Boomers have wrecked politics, society and left massive financial destruction in its wake. Individually, the Grandparent Generation will do anything for their grandkids. Collectively, once their financial decisions are covered by the layers of government programs like Social Security and Medicare the Baby Boomer generation has broken America.
A couple of recent articles of interest.
First AARP, yep the one that you can only join once you are a senior, is weighing in on the huge student loan debt problem going on in America. Why would AARP care about a 20-year-old student loan? Well because garnishing of future income reduces the Social Security payments into an already underfunded system. I’ve written about the student loan problem before and I’ve covered it on the air for years. The banks lobbied to have bankruptcy protection by students removed so the Federal government backstops their risks. The schools get their money up front, no matter what their graduation rates or acceptance. A university can charge a student $45k for a freshman year set of courses with no underwriting, no rigorous approval system, and no risks. The incentives for the banks are to push out money, the incentives for the university to put as many kids into Freshmen and undergrad courses. The people left holding the bag is the students who can’t bankrupt out of their debt and the Federal government who is paying the banks. If you haven’t realized this yet, we, as taxpayers, are the Federal government.
How To Solve The Student Loan Mess
My solution is to spread the risk to all the involved parties. Banks can have recourse on their underwriting standards by 1/3, Universities have up to 1/3 of a student loan at risk in the event of a drop out and students are on the hook for 1/3 of the debt they incurred. Just by spreading the risk to those that benefit, you’ll see a massive sucking sound in college enrollments. Should everyone go to college? With your high school grades, are you a good risk to invest in? Can you pay back your loan with the type of degree you’re going for? Let the market forces solve the student debt problem.
Now that the Federal government (taxpayers) are on the hook, that debt has to be paid from somewhere. Garnishing wages is the power the government has to collect a federal obligation (no different than an IRS or SBA default). This garnishing is what has caught the attention of the AARP. There is only so much lending capacity in a generation. The shame is that the student loan and university systems have sucked up the borrowing capacity, leaving the housing market anemic (see the boom in apartments), and saddling the youth of our country with financial obligations that cause them to delay starting their lives (see my post on declining birth rates).
WHY THE AARP IS WORRIED ABOUT STUDENT DEBT: As student loan debt has ballooned over the past two decades, the issue has moved from the sidelines of wonky policy debates into a full-fledged presidential campaign issue, with candidates playing to the economic anxieties of parents and recent college grads. In the latest sign of just how far-reaching student loan debt has become, the issue is now on the radar of another, perhaps more surprising group: the AARP.
— Over the past several years, the nation’s leading senior lobby has become increasingly involved in student loan issues, pressuring the federal government to stop garnishing the Social Security benefits of older borrowers who defaulted on their loans. And in some state capitals, the group is taking on the student loan industry, pushing for more regulations to police abusive loan-collection practices.
— As Americans of every generation struggle to pull together enough savings for retirement, the new worry about student loans illustrates just how deeply debt can hang over people’s financial lives, especially in areas like higher education and health care, where costs are growing faster than the economy overall. Those costs can lead to some brutal surprises in old age.
— Michael Stratford has more here as part of a new “Future of Prosperity” series that POLITICO’s policy magazine, The Agenda, is launching this morning with a deep dive on America’s growing retirement crisis.
Time Magazine did a cover story this week that digs in a bit deeper.
The Meritocracy’s ascent was about more than personal profit. As my generation of achievers graduated from elite universities and moved into the professional world, their personal successes often had serious societal consequences. They upended corporate America and Wall Street with inventions in law and finance that created an economy built on deals that moved assets around instead of building new ones. They created exotic, and risky, financial instruments, including derivatives and credit default swaps, that produced sugar highs of immediate profits but separated those taking the risk from those who would bear the consequences. They organized hedge funds that turned owning stock into a minute-by-minute bet rather than a long-term investment. They invented proxy fights, leveraged buyouts and stock buybacks that gave lawyers and bankers a bonanza of new fees and maximized short-term profits for increasingly unsentimental shareholders, but deadened incentives for the long-term growth of the rest of the economy.
From John Mauldin on his breakdown of the 2016 Federal Budget:
Among the many tidbits, it contains a table on page 63 that reveals the net present value of the US government’s 75-year future liability for Social Security and Medicare. That amount exceeds the net present value of the tax revenue designated to pay those benefits by $46.7 trillion. Yes, trillions.
Where will this $46.7 trillion come from? We don’t know. Future Congresses will have to find it somewhere. This is the fabled “unfunded liability” you hear about from deficit hawks. Similar promises exist to military and civil service retirees and assorted smaller groups, too. Trying to add them up quickly becomes an exercise in absurdity. They are so huge that it’s hard to believe the government will pay them, promises or not.
Now, I know this is going to come as a shock, but that $46.7 trillion of unfunded liabilities is pretty much a lie. My friend Professor Larry Kotlikoff estimates the unfunded liabilities to be closer to $210 trillion.
Joe’s Healthcare Presentation to Arizona Doctors
While I was in the medical field, I focused on helping independent medical practices stay alive and viable. With the growth of the hospital sector, my theory was keeping the independents alive would one day help create a true market for healthcare services. I worked on a business model CashMedicalCare.com, that was basically the Priceline for medical services. I scrapped the model because the passage of Obamacare locked down any innovations spurned on by entrepreneurs in the medical industry. My model was predicated on consumers spending up to their deductibles in conjunction with Health Savings Accounts. I was playing in the first $10k of a high deductible program where the consumer was incentivized to watch their pennies and shop for medical service. Those HSA plans were big under Clinton and Bush but all but went away under Obama.
Heres’s some highlights from my presentation;
Government involvement in other industries;
The math problem explained as a cartoon.
The archetypal story about the fight for good through order an chaos shows up in stories throughout history. Jonah and Jobe in the Bible to Star Wars, Game of Thrones and Harry Potter are all stories with an arch about mothers/fathers and good/evil and order/chaos. Smooth sailing life doesn’t always happen, when the first roadblock hits, if you haven’t been sharpened by prior battles you could crumble.
I look back at my life experiences and I’ve lived a number of highs but it’s the massive lows that have sharpened me. Once I’ve survived chaos/evil and conquered the dragon in front of me, the next dragon had better get ready because I sure am. The battles that can destroy us are the scariest and most fulfilling to conquer. These stories are the hero’s journey. Be a hero, rise to the occasion, live the dance between order and chaos. SLAY THE DRAGON and BE THE HERO!
Choas will happen, learn the skills to reorder your life to a better order.
May 28, 2018
The Rules for a Long and Happy Life
The most important ingredient of a long, happy, and successful life is self-discipline.
You also need to develop resilience and tenacity
Discipline yourself to maintain a normal weight. Obesity is the second largest cause of premature death.
Discipline yourself to get regular exercise. You’ll feel better and live longer.
The most valuable thing you can own is a good reputation.
Take responsibility for your actions.
Stop whining, complaining, and criticizing. No one will want to be around you.
Stop blaming others. The person who is responsible for over 90% of your problems is the one you see in the mirror every morning.
Always give more than expected. Always do more than your share.
If you once tell a major lie, no one will fully trust you again. If you regularly tell lies, no one will believe you even when you tell the truth. The same thing if you steal.
Get enough sleep. Most people need eight to nine hours. But don’t waste the whole day in bed.
Be slow to take offense, and never on little things, especially those involving taste.
Be slow to anger and quick to forgive.
Everyone has bad days, but don’t inflict them on others. Greet everyone you meet with a cheery hello. Even if he doesn’t return the greeting, you’ll feel better.
Don’t walk around studying your smartphone (or at mealtimes if you are with other people). You’ll miss communicating with the real people you meet, you’ll miss seeing the world around you, and you might become a statistic – pedestrian deaths have tripled, due mostly to inattention.
Get your hands dirty. Many worthwhile things – fixing a car, gardening, cleaning a weapon, baking – require it.
Do the disagreeable tasks first. Procrastinators suffer twice – once in the agony of anticipating the task and again when they are forced to do it.
Here’s your all-purpose job description for school, for work, and for life: “whatever needs to be done.”
Be the most reliable person you know. Under-promise and over-perform.
Be kind. It makes the world a better place and makes you happier.
Be punctual. If you’re not 15 minutes early, you’re late. People who are chronically late are saying, “My time is valuable; yours is not.”
Banish “it’s not my job” and “we’ve always done it that way” from your lips.
If you behave in a meretricious manner, do not complain if people treat you as a meretricious person.
Every day, life presents us with choices between what we should do and what we want to do. Do the “should dos” first 90% of the time. People who always do what they want first have sad, poor, and unhappy lives.
Don’t always live in the “now.” You may not believe it, but tomorrow always comes.
Plan for the future. Yes, people, circumstances and plans change, but at least you will have thought about it.
Doing things for others is more rewarding than doing things for yourself.
Happy people always care about something larger than themselves. It might be family, job, church, community, country, or the U.S. Marines. Often it is several things.
Pick up after yourself daily. You will live in cleaner, neater surroundings. If you leave it for later, it will become an overwhelming job.
If you were born in the United States, or in fact in any of the capitalist democracies in the West, you won the lottery. The free-market system has given the mass of people here by far the highest standard of living in history and in the world today. Of course, many people don’t take advantage of it. But if you want something besides capitalism, throw away all those consumer goods – smartphones, computers, cars, and so on – that were inventions and produced under capitalism, and move to a country where socialism has given people a good life.
Be slow to borrow and quick to repay.
Be slow to lend. You will find there are people who will convince themselves that they deserved the money and will become sullen and hostile if asked to pay it back. You expect gratitude, and you get attitude.
If a couple is having problems, having a baby will not make those problems vanish and bring them closer together. Usually, it will make them worse.
Large tattoos and face piercings do not make a person more attractive.
I can’t tell you what to believe, but according to many studies, people who believe in God are happier, because it gives their life meaning.
Studies also show that people in small towns are happier than people in cities.
Everything needs maintenance: cars, homes, people. Maintenance is time-consuming and costly. But if you don’t do it, it will be more time consuming and costly in the future. Tomorrow always comes.
Ranting and raving rarely changes the person’s behavior or the situation for the better.
Make your bed every day. It instills discipline, and you’ll feel better about your surroundings.
“Thank you” and “please” are not old-fashioned, out of date, or constructs of the patriarchy. They are the essential grease that reduces friction and makes civilization work.
Learn to say, “I’m sorry. It was my fault.”
If you punish people for giving you their honest opinions, you will be surrounded by “yes men” and will have no warning of approaching disasters.
Read at least two books a month. Reading well and widely is highly correlated with success.
You are not entitled to anything paid for by money other people earned working. Be grateful for anything you get.
Respect must be earned. It cannot be given.
Some people are poor because of circumstances, like illness or accident. But in America, most people are poor because they made bad decisions. There are four rules if you don’t want to be poor: 1. Don’t marry until you have the education or training for a career. 2. Don’t have babies before you are married, in a stable, financially secure relationship. 3. Get a job, even a bad one, and work full-time until you get a better one. 4. Don’t get addicted to drugs or alcohol.
Every time you get in a car, you are at risk of dying. But if you follow four rules, you can reduce your chance of being killed in an accident by about 90%. 1. Always wear your seat belt. 2. Don’t speed. 3. Don’t drive if you’re impaired by alcohol, drugs, or fatigue. 4. Don’t drive distracted by a phone or other device. (And don’t ride with a driver who violates these rules.) One or more of these factors are involved in almost every fatal crash.
That’s it. Having a happy life is really simple, but it’s hard to discipline yourself to follow these rules. Look at the many unhappy people you know and see if you think they did.
Robert A. Hall served as a Marine in Vietnam, for five terms in the Massachusetts Senate, and for 31 years as an association executive. He holds a B.A. in government and an M.Ed. in history and has 12 books in print on Amazon. He retired in 2013 due to pulmonary fibrosis for a lung transplant. He now works part-time at the Madison V.A. hospital, interviewing veterans and writing up their life stories for their records and their families.
Worth a listen. I particularly enjoy the chaos and order discussions found at:
20-minute mark and at the 50-minute mark.
Love his book list; – HERE
I first saw the Huka done by the University of Arizona Wildcats Football team. The UofA has always had a number of Samoan players and the tradition started. In 2015, based on some sort of complaint the program stopped doing the haka, only to have it come back in 2016.
For me, it’s primal. It’s warrior energy. The haka is intense! Looking at the commitment of the men doing the dance, watching their facial expressions and knowing the intention behind the dance is pure beauty.
A farewell to a loved teacher – HERE
Prince Harry – HERE
Jarom Hadley Nathaniel Rihari, 11.02.2000 – 29.06.2017. Haka ‘Tau Ka Tau’ done by Jarom’s brothers and friends. Their final send off to him as his hearse left the chapel. Their friend committed suicide and this is his send off. Watch the pain in the leader with the blue shirt and tie.
WIKI – – The haka (plural haka, in both Māori and English) is a traditional war cry, war dance, or challenge in Māori culture. It is a posture dance performed by a group, with vigorous movements and stamping of the feet with rhythmically shouted accompaniment.[a]
War haka were originally performed by warriors before a battle, proclaiming their strength and prowess in order to intimidate the opposition, but haka are also performed to welcome distinguished guests, or to acknowledge great achievements, occasions or funerals, and kapa haka (performing arts) groups are very common in schools.
However, “According to Karetu (1993), the hakas have been “erroneously defined by generations of uninformed as ‘war dances’, the true ‘war dances’ are the whakatü waewae, the tütü ngärahu and the peruperu” (p. 37). Within Mäori culture, haka is the generic name for all types of dance or ceremonial performance that involve movement.”
New Zealand sports teams’ practice of performing a haka before their international matches has made the haka more widely known around the world. This tradition began with the 1888–89 New Zealand Native football team tour and has been carried on by the New Zealand rugby union team (“All Blacks”) since 1905.
One of my arguments of the 12 Reasons America is in decline is that Demographics is Destiny. A recent report is showing that the American birth rate is at a 30 year low. This trend has some long term consequences that won’t be pretty. Europe is racing the US to the bottom (Forbes).
The American economy will be crippled
BBC – A fear of low fertility is that the lack of American babies will turn into a lack of American adults – adults needed to fuel the economy, pay into social security, and provide goods and services (especially services) for an ageing population.
Countries like Japan have been crippled by an ageing population and fewer young people to care for them.
But the US is in an enviable position. “Small changes in our own birth rates can be easily offset by changes in our immigration policy,” says Bronars.
“From my point of view as an economist, there’s a certain demand for workers and labour services, there are a lot of ways in which that demand can be satisfied.
“One is having children here, educating and training them and producing the next generation of workers. The other is to make up the difference by importing the workers from overseas who have the skills we’re looking for.”
While Japan has few immigrants, the US is still a top destination for those looking to have a better life. A sensible immigration policy, says Bronars, could help make up for a population on the decline.
Here’s an exert from my 12 Arguments:
Demographics is destiny. Just ask Japan, China and most of Western Europe. The birth rate which is the number of live births per 1000 population for a given year, in a particular country, is probably the most important number a country should pay attention to. The old adage of ‘if you’re not growing you’re dying’ could not be more important today in your local community or if you are talking about countries around the world. Demographic booms and busts are like two high-speed trains destined to collide but there is nothing that you can do but just watch.
If we look at Americas Baby Boom generation, born after post WW2 we see the impact of the largest run-up in the stock market when 401k rules were introduced that pushed billions of dollars into investments from Boomers earned during their peak earning years. The expansion of vacations homes, the Yuppie wave of the late 80’s, BMW’s, golf country club memberships, luxury cars, cruise travel on the growth mode. As Boomer, they start retiring in droves watch for their impact on all things medical, from home services to hospital and prescription medication. Watch for mandatory sell-offs of 401k plans starting at age 70.5. What happens when the Boomers are mandated to sell off their mutual funds? The opposite of what occurred through the 1980’s and 1990’s during the largest run-up of US Stock Market values in history. The laws of supply and demand dictate a massive sell-off of stocks and investments. The Fed has been meddling in the market dynamics but the can’t do that forever.
Economist and investor Harry Dent has been watching the global demographic trending for decades. He’s chronicled the rise and fall in a series of books; The Great Boom Ahead in 1993, The Great Jobs Ahead in 1995, The Great Depression Ahead in 2009, and The Great Crash Ahead in 2011 and most recently Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019.
From his research here are some highlights of how demographics will change our world:
- Young people cause inflation because they “cost everything and produce nothing.” But young people eventually “begin to pay off when they enter the workforce and become productive new workers (supply) and higher-spending consumers (demand).”
- Unfortunately, the U.S. reached its demographic “peak spending” from 2003-2007 and is headed for the “demographic cliff.” Germany, England, Switzerland are all headed there too. Then China will be the first emerging market to fall off the cliff, albeit in a few decades. The world is getting older.
- The U.S. stock market will crash. “Our best long-term and intermediate cycles suggest another slowdown and stock crash accelerating between very early 2014 and early 2015, and possibly lasting well into 2015 or even 2016. The worst economic trends due to demographics will hit between 2014 and 2019. The U.S. economy is likely to suffer a minor or major crash by early 2015 and another between late 2017 and late 2019 or early 2020 at the latest.”
- “The everyday consumer never came out of the last recession.” The rich are the ones feeling great and spending money, as asset prices (not wages) are aided by monetary stimulus.
- The U.S. and Europe are headed in the same direction as Japan, a country still in a “coma economy precisely because it never let its debt bubble deleverage,” Dent argues. “The only way we will not follow in Japan’s footsteps is if the Federal Reserve stops printing new money.”
- “The reality is stark, when dyers start to outweigh buyers, the market changes.” It all comes down to an aging population, Dent writes. “Fewer spenders, borrowers, and investors will be around to participate in the next boom.”
- The U.S. has a crazy amount of debt and “economists and politicians have acted like we can just wave a magic wand of endless monetary injections and bailouts and get over what they see as a short-term crisis.” But the problem, Dent says, is long-term and structural — demographics.
- Businesses can “dominate the years to come” by focusing on cash and cash flow, being “lean and mean,” deferring major capital expenditures, selling the nonstrategic real estate, and firing weak employees now.
- The big four challenges in the years ahead will be 1) private and public debt 2) health care and retirement entitlements 3) authoritarian governance around the globe and 4) environmental pollution that threatens the global economy.
Another great book on this topic is from Mark Styne,
America Alone – Population growth peaked in the US, Western Europe and Japan peaked in the 80’s and annually, new population growth has been declining ever since. By 2008, the US population of 25-54 year old population went negative. The decline in consumers, spending on everything from housing to clothes, cars, and computers have been artificially propped up by years of borrowing, second mortgages and subprime credit. When the Great Recession popped in 2008 the Federal Reserve went into debt hyperdrive to keep the consumer economy primed. We are seeing that even the Zero Interest Rate Policy (ZIRP) isn’t enough to keep demand going. By artificially propping up the economy through debt we are masking the decline in demand. A decline we may not see come back for a decade or more.
The Cost of Aging – Medicare Problem
Alexis de Tocqueville, the French author of Democracy In America, visited America during our formation wrote about the amazing experience that was the United States. He opined about our morality, education system and a new form of government for the people and by the people. He also concluded that the society would eventually degrade into tyranny once politicians figured out the key to holding power is over promising benefits to the voters. “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
― Alexis de Tocqueville
When the US Social Security program was first put in place, for example, the typical American male could expect nothing from it. He was expected to live to 61. He’d be dead before benefits kicked in. But as the 20th century led to the 21st, his life expectancy increased, and so did the burden of old people.
In America today, most Americans do not make enough to support a middle class lifestyle on a single salary. The following figures come directly from the Social Security Administration…
-39 percent of American workers make less than $20,000 a year.
-52 percent of American workers make less than $30,000 a year.
-63 percent of American workers make less than $40,000 a year.
-72 percent of American workers make less than $50,000 a year.
We all know people that are working part-time jobs because that is all that they can find in this economy. As the quality of our jobs continues to deteriorate, the numbers above are going to become even more dismal.
It was Alexis de Tocqueville who observed that democracy was doomed. He said it would soon degrade into tyranny. As soon as politicians realized that they could win elections by promising the voters more of other people’s money, it was just a matter of time until they overdid it.
Had he imagined how old people would get, he wouldn’t have been so optimistic. As things developed, politicians noticed two important things: that young people (especially those who hadn’t been born yet) didn’t vote… and old people’s votes could be bought fairly cheaply, at least so it appeared at first.
Who doesn’t know Billy Graham? I, of course, have heard of him but didn’t really know his impact until watching the Netflix series The Crown. In the series, there is one episode that features Billy Graham and his interaction with the young Queen Elizabeth. The Queen is the head of the Church of England and a spiritual leader in her own right. Their interaction was powerful, and Graham’s influence on the world stage..in his prime…truly showed me the depth and breadth of his work.
Billy Graham is an Evangelical. He understands the nuances of the Bible and shows the humility for a man at the peak of power to remain humble and defer to the Word of God for all answers.
A great interview;
The million dollar question is at 5:02!
Listen to Graham’s answer…it ties into my 7 Deadly Sins argument. “This is the only planet in rebellion to God.” FREE CHOICE
The negative influence of organized religion.
14:00 – This is a real Christian.
16:39 – It’s possible to have an intellectual understanding of Christianity and still not be a Christian…BOOM
20:35 – The spiritual barometer of the spirituality of the country –
23:52 – Catholics vs Protestants and the New Pope John
25:40 – I believe
31:14 – We could bring utopia except for Lust and Greed and Pride – 7 Deadly Sins
36:20 – Communism and the Bible – Future Plan
37:05 – Make a better pig pen or make a better man to get out of the pig pen!
38:47 – It’s not ethics…Buddhists have ethics…..it’s Man’s Need For Reconciliation (Cross and Communion)
41:39 – Billy Graham on abortion
48:27 – Billy Graham on the celebrity and his feelings about his role. HUMILITY – I am able to help many many people because I’m known, it’s also a hindrance.