Gambling With Your Retirement [Archive]

02-04-2005, 12:14 PM

February 4, 2005 OP-ED COLUMNIST Gambling With Your Retirement By Paul Krugman
A [color=black]few weeks ago I tried to explain the logic of Bush-style Social Security privatization: it is, in effect, as if your financial adviser told you that you wouldn't have enough money when you retire - but you shouldn't save more. Instead, you should borrow a lot of money, buy stocks and hope for capital gains.

Before President Bush's big speech, a background briefing by a "senior administration official" (http://www.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per) made it clear that the plan calls for exactly the "borrow, speculate and hope" strategy I described - not just for the system as a whole, but for each individual.

Here's the money quote: "In return for the opportunity to get the benefits from the personal account, the person forgoes a certain amount of benefits from the traditional system. Now, the way that election is structured, the person comes out ahead if their personal account exceeds a 3 percent rate of return" - after inflation - "which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent rate of return."

Translation: If you put part of your payroll taxes into a personal account, your future benefits will be reduced by an amount equivalent to the amount you would have had to repay if you had borrowed the money at a real interest rate of 3 percent.

Peter Orszag of the Brookings Institution got it exactly right: "It's not a nest egg. It's a loan."

For years, privatizers - including Mr. Bush - have claimed that people would do better with private accounts than with traditional Social Security even if they played it safe and invested in U.S. government bonds (which yield 3 percent after inflation).

But the official at the briefing made it clear that his boss was fibbing: if you invested your private account in government bonds, you would face benefit cuts equal in value to your investment, so you would be no better off than under the current system.

The only way to get ahead would be to invest in risky assets like stocks, and hope for higher yields. But if the investment went wrong and you earned less than 3 percent after inflation, your benefit cuts would leave you poorer than if you had never opened that private account.

So people are expected to take a loan from the government and use it to buy stocks, and if that turns out to have been a mistake - well, too bad.

Experts usually tell people to plan for their retirement by investing in a mix of stocks and bonds. They disapprove strongly of speculation on margin: borrowing to buy stocks. Yet Mr. Bush wants tens of millions of Americans to do exactly that.

Meanwhile, what does any of this have to do with the ostensible purpose of the whole thing: saving Social Security?

Here's the senior official again: "In a long-term sense, the personal accounts would have a net neutral effect on the fiscal situation of Social Security." The government would have to borrow huge sums up front to create the personal accounts - $4.5 trillion in the first two decades - but it would supposedly make up for all that borrowing with offsetting cuts in account holders' benefits many decades later.

Color me skeptical: will retirees with private accounts that performed badly really be forced to repay their loans in full? Even if they are, private accounts will at best have a "net neutral effect" - that is, they will do nothing to improve Social Security's finances. Mr. Bush says the system faces a crisis; what does he propose to do about it?

The answer, presumably, is that his plan will also involve major benefit cuts over and above those associated with private accounts. And it's true that you can improve Social Security's finances with privatization, as long as you also slash benefits - just as you can kill a flock of sheep with witchcraft, provided you also feed them arsenic. (Thanks, M. Voltaire.)

Do you believe that we should replace America's most successful government program with a system in which workers engage in speculation that no financial adviser would recommend? Do you believe that we should do this even though it will do nothing to improve the program's finances? If so, George Bush has a deal for you.

E-mail: krugman@nytimes.com (mailto:krugman@nytimes.com)briefing on social security attached as zipped word document - 12 pp.

02-04-2005, 12:48 PM

I agree 100%. Americans, welcome to FERS and the TSP. ;)

Mike

02-04-2005, 02:07 PM

If I can't get 3% annual returns with 30-40 years to play around in the market, I don't deserve the money in the first place. :D

This is precisely why the privatization must be optional- if you think you can beat that 3% rate, go ahead and take the chance. If not, go ahead and take whatever benefit the system would have given in the first place. Then again, what the system promises - even if unchanged - and what it can deliver are two very different things, particularly for those age 35 and younger.

They will certainly tinker with the financing aspects of the system - we will see a higher retirement age - even AARP is willing to accept that - and we may see a higher cap on FICA income. Those two things by themselves will probably add another 20-30 years of solvency. Whether or not they will tie benefit increases to the price index rather than the wage index is an open question.

This whole deal will come down to the moderates in congress and what they are willing to compromise on. I'll reiterate that there is a snowball's chance in hell of Bush's proposal getting through as he wishes. There will be major modifications.

02-04-2005, 02:18 PM

Paul Krugman? Now there's a voice of balance and reason without an agenda ;). He doesn't even give anyonecredit for bringing this discussion to the table, however, I amfairly sure that if this was a proposal under the last administration, it would have been enlightened and insightful. We are smart enough to manage our money! Paul Krugman doesn't think so. Better for Big Brother to take care of us :s. You know, a worker's Utopia...

Until afew of months ago, no one seriously thought this issue would come to debate for another 20-30 years, when the coming doom will beat the gate.

Let's at least give this administration credit for attempting to start discussion (3rd rail of politics?). We must disagree before we can reconcile, thus the debate which can produce effective remedy, what we call "The American, Democratic Process."

If we want talk about successful programs, let's discuss WIC and some of those kinds of things, where people in need actually get help, rather than the Socialist Insecurity Program.

SS is about redistribution of wealth, albeit, for a noble purpose. I would think a successful program would be measured by efficiency and results. By this metric, SS fails miserbly when we consider dollars collected and monies now available. What about the mismanagement, the bloat in those who qualify to receive benefits, i.e. SIS, death benefits, dependant benefits. Incremental cradle to grave coverage... per the subtext of Animal Farm.

We are shocked by the Oil for Food program corruption, yet we fail to apply the same scrutiny to our own social programs, why is this? One could ask of SS "Where did all the money go?" Let's look at all the IOU's owed to the system, follow the money. It has operated as a slush fund, and has been sacrosanct because it was seen as a "scared trust". The poor box has been robbed.

Not to mention the mismanagement of the funds by lack of sound investment that would have produced a surplus, even with the geometric growth of beneficiaries. Successful, to some degree, but a miserable failure in terms of what should have been. (by the way, my parents recieve it, and my Dad was on SIS, and I received dependant benefits, so it is not as if I haven't been at the trough too.)

It has also had to be "fixed" over the years, with tax increases, so the contention that it is a self perpetuting program lacks a certain credibility.

I fear that will be the next "fix" as well, unless we reform the system, and put it on a sound footing, and empower the public. Reform is always popular in principle, just tough for those being reformed, as we always tend to want to keep the status quo. The reality is, the status quo will always change, either by reform or due to failure. The SS program will change, but will it be with careful and thoughtful deliberation, or with a violent and sudden learch?

Me thinks I am becoming a libertarian, what say you?

That' just me though, and my perspective isthrough my own narrow, biased and scratchy,foggylens.These arejust opinions,so let's keep up the discussion, it's good and healthy:).

02-04-2005, 02:49 PM

Chaplain wrote: Better for Big Brother to take care of us :s. You know, a worker's Utopia...

Until afew of months ago, no one seriously thought this issue would come to debate for another 20-30 years, when the coming doom will beat the gate.

Let's at least give this administration credit for attempting to start discussion (3rd rail of politics?).
SS is about redistribution of wealth, albeit, for a noble purpose.
Me thinks I am becoming a libertarian, what say you?

That' just me though, and my perspective isthrough my own narrow, biased and scratchy,foggylens.These arejust opinions,so let's keep up the discussion, it's good and healthy:).

No. I would not say that you are a libertarian because the individual rights of which you speak do not affect all Americans equally.

SS isa safety net for the elderly poor.

The only reason that this issue has come up is because of the massive federal deficit caused by the recent tax cut (which enormously benefitted the wealthy) and because of the costs of the Iraqi War.

Notice that we are not discussing rolling back the tax cut to reduce the deficit, since that would take money away from wealthy Americans. We are talking about taking money away from the poor elderly.

On the contrary, the USA is becoming an upper class utopia, whereredistribution ofwealthis well underway and continuing to prosper, IMHO.

Mike

02-04-2005, 03:00 PM

Tax cuts do not create deficits - excessive spending creates deficits.

The economy is expanding, and federal revenue is climbing (even though taxes were cut). Unfortunately, federal spending has climbed at a much faster pace, and therein lies the problem.

You can't spend over $400 billion on defense, $200 billion on a war, and add a massive medicare benefit without repercussions.

cowboy

02-04-2005, 03:19 PM

Mike wrote: Tax cuts do not create deficits - excessive spending creates deficits.

The economy is expanding, and federal revenue is climbing (even though taxes were cut). Unfortunately, federal spending has climbed at a much faster pace, and therein lies the problem.

You can't spend over $400 billion on defense, $200 billion on a war, and add a massive medicare benefit without repercussions.

I believe you are 100% correct in this statement. We are going to lose in this deal either way as the people running this country don't have a clue how to do it except by borrowing more.

02-04-2005, 03:50 PM

saraho wrote:
No. I would not say that you are a libertarian because the individual rights of which you speak do not affect all Americans equally.

SS isa safety net for the elderly poor.

Should we guarantee equal results, orequal oppourtunity? I say, let all invest or spend according to their free will.Government control will never encourage thrift, so equality and parity are intangibles that cannot be implemented by policy.

Let's return SS to it's status and function as a safety net for this class, call it welfare, and move on.

pyriel

02-04-2005, 04:30 PM

saraho wrote: No. I would not say that you are a libertarian because the individual rights of which you speak do not affect all Americans equally.

SS isa safety net for the elderly poor.

The only reason that this issue has come up is because of the massive federal deficit caused by the recent tax cut (which enormously benefitted the wealthy) and because of the costs of the Iraqi War.

Notice that we are not discussing rolling back the tax cut to reduce the deficit, since that would take money away from wealthy Americans. We are talking about taking money away from the poor elderly.

On the contrary, the USA is becoming an upper class utopia, whereredistribution ofwealthis well underway and continuing to prosper, IMHO.
Saraho, Sorry to disagree with you about the deficit being the reason why we are proposing to bail out of ss. About a year ago, i've read Robert Kiyosaki's book concerning this issue. A few months later, I read from a newspaper on Greenspan talking about ss possible bankruptcies. Democrats ranted that there is now problem with ss and we should just leave it alone. We all know that is a wrong answer. Baby boomer from WWII is about to start hitting the age of retirement and there will be alot of them with the life span estimated to be longer than ever. The bottom line, there is no way to sustain the negative cash flow that will be happening once they all start drawing their ss. The only way to save it is for the government to bail them out and continue to pump money to a bottomless pit. I hope that is not your proposal based on your remarks about the deficit.Another thing that is causing this is the job market. We are now in the internet world where things happen simultaneously and instantaneously. This means thatlessworkers are needed to do certain things. Jobs are also being sent abroad because it cost lessfor the company which of course brings profit to the shareholders. This would equate to less people working (prosperously) and contributing to ss. I can go on with the list but I don't see the deficit having anything to do with what is going on with ss. If I agree, then I will be buying into your argument that the gov't will bail ss when it startsgoing bankrupt. Do you want to support that with your precious tax money?You see, ss have to go. It is antiquated and supports an industrial era created afterWWII.I manage real estate (part time) and I sure do not hang on to properties that are creating negative cash flow for me. I either fix it so it will become attractive to possible tenants or I sell them. Either way, it will stop the bleeding from negative cashflow. We moveour money around TSP based on what is going to make money for us (at least that is theidea). You don't put money on a fund that continue to lose money for you. You either move it or you will lose it all. This is the same situation we have with ss...:s

Pyriel

cowboy

02-04-2005, 04:48 PM

I agree with you Chaplain but I wouldn't go as far as to call SS welfare. When SS was first implemented it was for the poor that lost it's bread earner not necessarily the elderly.

You mentioned the WIC program previously. I agree this program has a purpose, and I was on it for a very short period. When I wasn't on it I could hardly afford to feed my kids and we bought the cheapest product we could get. It does have it's problems though as any program does. For an example, prior to when I was not on it we were very thrifty with what we purchased and maybe purchased 2-3 gallons of milk and Flavorite orange juice at .89 a can in that week. When you get on WIC you get so many gallons of milk plus you can buy the most expensive orange juice in the store. Just go to the store look at what WIC people can buy. In my opinion this is counter productive that is welfare. Here isanother good example of welfare and should get a rise out of this board but I'm going to say it anyway. Your job and my job is welfare, we are living off the person that is carrying the work load. Look at how many government agencies are workload oriented to how many people they have. What is the best way to keep a job in the government under that situation?

pyriel

02-04-2005, 05:07 PM

saraho wrote:
Notice that we are not discussing rolling back the tax cut to reduce the deficit, since that would take money away from wealthy Americans. We are talking about taking money away from the poor elderly.

On the contrary, the USA is becoming an upper class utopia, whereredistribution ofwealthis well underway and continuing to prosper, IMHO.

Sorry but I have to disagree with you about this. Tax benefits are not just for the wealthy, it is for everyone that is willing to thread the water and do something about their financial current situation. I took a tax course more than ten years ago and I've learned that these tax regulations services everyone. It is up to the individuals whether they want to utilize them or not. You and I and others here in this board decided that we will be a slave to somebody else. Well, the path that we took happens to be in a disadvantage when it comes to taxation. Earned income (which is what we get for our sweat equity) is the highest tax bracket and we all get hit with (even the wealthy and the middle class) it evenly. The difference is that the wealthy have chosen a different path from us. They decided to create a business and be their own bosses instead of working for someone else. They took a chance. We didn't. We went after job security which gave us a regular paycheck on a regular basis. If we were to compare that with the five funds that we have here in TSP, this would mean that we went and parked ourselves to the G fund (secured) while others who became successful decided to be aggressive and parked themselves to c/s/i or better yet, moved themselves around. So what is my point? My point is that we should not blame the wealthy for being able to dodge around the taxation loophole. They are paying the same taxes like we do it is just that they are able to deduct more of them as expense because this is the way the rules work. It's been like this for generation and it will be like this until both of us are gone. There is nothing that is stopping us from switching into their tax bracket. The only thing is that we would have to give up ourprecious job security and go to an unknown territory by creating our own business. The good news about this is that it is easier than I thought. I just finished doing my taxes and I am getting a return. Thanks to my part time business (real estate) I was able to transfer some of my day to day expenses and made them deductible. Bottom line, I am now in a position where I can keep more of my earned income due to the knowledged I learned when I took that one week course on taxation. I'm sure everyone can do the same.

Show-me

02-04-2005, 05:09 PM

Hi,

What happens to the people who do so horrible investing their money that they go in the hole? How many will there be? Who will help them? Where will the money come from? Who’s taxes will be raise to fill in the “bad investment void”? Will Corporations do it now that they do not have to match the SS tax?

Lot of obvious holes in the system for people who are not as privileged as us and know just a little bit about investing. Ask someone in the inner-city if they know what DOW Theory is. Or Cup and Handle. Or Head and Shoulders. Or what P/E Ratio. Do they all have easy accessible computer access? Can they monitor the market on the computer daily like us? Can the interpret the reports? Make good fiscal decisions? Probably not. They are in a poor situation already now you want them to make a finical decision base on their vast education and experience. Sound like we a setting THEM up to fail. We (on this board) can take care of our selves. How many wealth people NEED to collect Social Security?

Was not Social Security designed to help the poor and disadvantaged and persons that had tragedies in their lives that effected them financially (death of primary bread winner).

I agree changes need to be made. But, giving more responsibility to people who are irresponsible in the first place or uneducated is a system to fail. I am planning my retirement without Social Security. If it’s there and I reach the age goody for me.

Good luck out their.

pyriel

02-04-2005, 05:17 PM

cowboy wrote: I agree with you Chaplain but I wouldn't go as far as to call SS welfare. When SS was first implemented it was for the poor that lost it's bread earner not necessarily the elderly.

You mentioned the WIC program previously. I agree this program has a purpose, and I was on it for a very short period. When I wasn't on it I could hardly afford to feed my kids and we bought the cheapest product we could get. It does have it's problems though as any program does. For an example, prior to when I was not on it we were very thrifty with what we purchased and maybe purchased 2-3 gallons of milk and Flavorite orange juice at .89 a can in that week. When you get on WIC you get so many gallons of milk plus you can buy the most expensive orange juice in the store. Just go to the store look at what WIC people can buy. In my opinion this is counter productive that is welfare. Here isanother good example of welfare and should get a rise out of this board but I'm going to say it anyway. Your job and my job is welfare, we are living off the person that is carrying the work load. Look at how many government agencies are workload oriented to how many people they have. What is the best way to keep a job in the government under that situation?
Cowboy, you hit it right on the head of the nail. You see government is not in the business of saving money. Rather they are in the business of spending money. I holda million dollar budget yearly and I have to spend them by the end of every FY. If I don't meet 99.9 obligations by end of FY, I failed my mission and there is a possiblity that I might get less funding for the next FY. Private company however, is a different story. The less cost they have the higher their yearly earning. Ever wonder when a company layoff employees that their earnings/dividends starts to go up. This is true in every case within a company. Less expense means you get to keep more cashflow.

02-04-2005, 05:18 PM

Mike wrote: Tax cuts do not create deficits - excessive spending creates deficits.

You can't spend over $400 billion on defense, $200 billion on a war, and add a massive medicare benefit without repercussions.

There has been massive spending combined with a reduction of revenues.

If the government had not cut revenues, there would be less reason today to find newsources in such areas as Social Security.

02-04-2005, 05:23 PM

Chaplain wrote: Should we guarantee equal results, orequal oppourtunity? I say, let all invest or spend according to their free will.Government control will never encourage thrift, so equality and parity are intangibles that cannot be implemented by policy.

Let's return SS to it's status and function as a safety net for this class, call it welfare, and move on.

We should guarantee equal opportunity. Do we currently have equal opportunity to good health care? to good schools? to a good retirement system? Give me a break.

Governments do nothingBUT encourage people to do this or that through tax incentives.

There are government welfare programs for the rich ..and those for the poor. The welfare programs for the rich are not being touched in attempts to reduce the deficit.

pyriel

02-04-2005, 05:24 PM

Show-me wrote:
Hi,

What happens to the people who do so horrible investing their money that they go in the hole? How many will there be? Who will help them? Where will the money come from? Who’s taxes will be raise to fill in the “bad investment void”? Will Corporations do it now that they do not have to match the SS tax?

Lot of obvious holes in the system for people who are not as privileged as us and know just a little bit about investing. Ask someone in the inner-city if they know what DOW Theory is. Or Cup and Handle. Or Head and Shoulders. Or what P/E Ratio. Do they all have easy accessible computer access? Can they monitor the market on the computer daily like us? Can the interpret the reports? Make good fiscal decisions? Probably not. They are in a poor situation already now you want them to make a finical decision base on their vast education and experience. Sound like we a setting THEM up to fail. We (on this board) can take care of our selves. How many wealth people NEED to collect Social Security?

Was not Social Security designed to help the poor and disadvantaged and persons that had tragedies in their lives that effected them financially (death of primary bread winner).

I agree changes need to be made. But, giving more responsibility to people who are irresponsible in the first place or uneducated is a system to fail. I am planning my retirement without Social Security. If it’s there and I reach the age goody for me.

Good luck out their.

In 2003, less than 3% of the Thrift Savings Plan's $118 billion was invested in the small cap fund (S fund) and less than 1% was in the international fund (I fund). The S fund was up 43% in 2003 and the I fund was up 38%! Where was your money?

Just like what they did with TSP, they will most likely put it in a secure fund like the G fund. The government will play it safe like what they are doing with TSP. However, you already know the deal, safer ground = less return. Well, it sure doesn't change much since ss is in the same situation now.

Pyriel

02-04-2005, 05:29 PM

Show-me wrote:
Hi,

What happens to the people who do so horrible investing their money that they go in the hole? How many will there be? Who will help them? Where will the money come from? Who’s taxes will be raise to fill in the “bad investment void”? Will Corporations do it now that they do not have to match the SS tax?

Lot of obvious holes in the system for people who are not as privileged as us and know just a little bit about investing. Ask someone in the inner-city if they know what DOW Theory is. Or Cup and Handle. Or Head and Shoulders. Or what P/E Ratio. Do they all have easy accessible computer access? Can they monitor the market on the computer daily like us? Can the interpret the reports? Make good fiscal decisions? Probably not. They are in a poor situation already now you want them to make a finical decision base on their vast education and experience. Sound like we a setting THEM up to fail. We (on this board) can take care of our selves. How many wealth people NEED to collect Social Security?

Was not Social Security designed to help the poor and disadvantaged and persons that had tragedies in their lives that effected them financially (death of primary bread winner).

I agree changes need to be made. But, giving more responsibility to people who are irresponsible in the first place or uneducated is a system to fail. I am planning my retirement without Social Security. If it’s there and I reach the age goody for me.

Good luck out their.

The government bails out corporations without batting an eye. Will they bail out the poor? I'm afraid that we already have the answer. The poor will fend for themselves. The gap between rich and poor in this nation is steadily increasing ...

Mike

02-04-2005, 05:34 PM

I'm pretty sure federal revenue has been climbing since the recession ended. I'd have to do some digging on gov't sites to find the numbers, though.

That's the problem - people assume tax cuts = cut revenue. That isn't true. Reagan pushed through far bigger tax cuts than Bush did - and federal revenue doubled over his 8 years in office from ~ 500 billion to ~1 trillion. Yet there was a huge deficit - why? Because spending climbed faster than revenue did.

We're dealing with a similar situation now.

Regarding the point raised about people who don't have access to the info - that is precisely why privatizing must be voluntary. People who believe they have the knowledge are free to opt in. People that don't want to, don't have to. Another possibility for these folks is that the government can automatically invest the money into one of those low-cost "life" funds that automatically shifts money from mostly stocks into mostly bonds as the person gets closer to retirement.

02-04-2005, 06:13 PM

Mike wrote: Regarding the point raised about people who don't have access to the info - that is precisely why privatizing must be voluntary. People who believe they have the knowledge are free to opt in. People that don't want to, don't have to. Another possibility for these folks is that the government can automatically invest the money into one of those low-cost "life" funds that automatically shifts money from mostly stocks into mostly bonds as the person gets closer to retirement.

Mike, you know darn well that this is not a voluntary system. Maybe it will be voluntary for some people, over the short term. FERS was voluntary for some. Rather,it'san attempt to cut Social Security under the guise of it being broken. Anyone who doesn't see that is dreaming.

Hey Mike, why not privatize the entire government? Government by contractors? You know why? Cause they'd lose money. Those contractors wouldn't stand for the nonsense that federal employeesdeal with.

Mike

02-04-2005, 06:22 PM

Social security benefits will have to be cut anyway - the ratio of workers to retirees is declining over time.

As I said months ago before this became the political issue of the day, all they can do on the funding side is raise payroll taxes, tax benefits, cut benefits, or raise the retirement age (or raise the cap on income for the FICA tax, which is basically raising payroll taxes in another way). Private accounts = separate issue.

The payroll tax is already high enough - plus it hits the low income earners harder than the high income earners.

Private corporations wouldn't want the government under their jurisdiction - it's incredibly difficult to fire federal employees... much less get them to be productive. :P

02-04-2005, 06:37 PM

Mike wrote: Social security benefits will have to be cut anyway - the ratio of workers to retirees is declining over time.

As I said months ago before this became the political issue of the day, all they can do on the funding side is raise payroll taxes, tax benefits, cut benefits, or raise the retirement age (or raise the cap on income for the FICA tax, which is basically raising payroll taxes in another way). Private accounts = separate issue.

The payroll tax is already high enough - plus it hits the low income earners harder than the high income earners.

Private corporations wouldn't want the government under their jurisdiction - it's incredibly difficult to fire federal employees... much less get them to be productive. :P

OK....large picture here...

Why is the ratio of workers to retirees going down??? Hmmm....

The reason is because prior to 1980 or so it only took one income to maintain a household....then it two two incomes to maintain a house hold....now to maintain a household you have to have two full time workers and can not have children....

Just think about it how many couples do you know in their late 20s and 30s without children. Just 20 years ago that was unheard of...something must be wrong with John's pipe cleaner or something...now it is normal not to have children...that is because wages have not kept up with inflation....

Big picture....what would you invest in now? Hmmm...since we Americans can not go overseas to shop or recreate because of our great strong dollar what do we do...hmmm...We go gamble to try to make it big...ok normally I do not recommend stocks on this board....but look at the sin stocks. WPT is doing me good right now...

Good luck

MT

02-04-2005, 06:40 PM

Just wanted to do that e-mail to show you guys how you can use the news you bounce around each other to make some dough...think of the problem..then the cause and say...how I can I profit from this situation....if you can do that then you walk into some great cash...

I believe the next great hard asset will be water....

Think I am crazy but in 20 years I will resend this post to you, ha ha.

MT

cowboy

02-04-2005, 06:56 PM

I agree with you Saraho! Here is what my feeling is wrong with US economy. We have a $10,000 year poor man trying to live and a rich man trying to sell him a $50,000 vehicle. Guess what you run up, debt, unless your smart enough to stay away. The American farmer is getting approximately $3.20 on average for his wheat. My dad sold wheat in the early 70's for over $5.00 a bushel. The thing about roll over wealth is you can pass it on to the next person. Thats basically what has been happening in this country. If taxes raise they pass it on to you! If costs go up in manufacturing do they swallow it, no they pass it on to you.Can a farmer do this, no who can he pass it to. No one! Now, how do you get the money back to the farmer before you can't eat, you subsidize him first for 50 years, and then the inevidable is going to happen and the dollar goes down to keep the farmer out there, so you can eat. Guess who is now buying farm land, the rich are! They are fleeing the stock market and buying real estate. This whole process takes the land out ofthe hand of the poor from decade to decade as there is less farmers. MT is saying it's coming butno one can say when. Then there is all of the other factorsthat effect this such as you guessed it, government!

02-04-2005, 07:14 PM

Cowboy,

Here here...sorry about your family situation, however.

Another training soapbox event there but: You have to figure out...how can I make money from this???

The reason we no longer (sorry for the term here folks) need farmersis NATFA...we get much of our food from South of the border...but on the other hand...have you seen the price in food prices lately...reason they south of the border currencies and stock markets are just on freaking fire...look at Brazil...WOW.

Buy silver, coffee and coco....and if you not capability of that country specific EFTs.

Interesting enough...that food, housing and energy was taking out of the inflation index that is used to measure inflation....what is your three biggest expenses??? Food, housing and energy...this was also taken out of social security increases which is immorral, inhuman and cruel.

Wow, there are actually people on this board that can get pass the CNBC talking head and see that the man behind the curtain (economy) is a short fat guy that is three miles in on a marathon and is fading fast on us...chug chug chug...stop...fall and die.

MT

Show-me

02-04-2005, 07:53 PM

MarketTimer wrote: Just wanted to do that e-mail to show you guys how you can use the news you bounce around each other to make some dough...think of the problem..then the cause and say...how I can I profit from this situation....if you can do that then you walk into some great cash...

I believe the next great hard asset will be water....

Think I am crazy but in 20 years I will resend this post to you, ha ha.

MT

I have had that opinion for years. Fresh water is already a precious commodity in other countries and in our own Western States “water rights” have cause violent confrontations. Las Vegas passed a ordinance that new homes can not have traditional green lawns that require irrigation. They now have to landscape there yard to look like the desert. No watering of fairways on golf courses. Hotels are investing in water reclamation systems.

"IF ITS YELLOW LET IT MELLOW. IF ITS BROWN FLUSH IT DOWN" Meet the Fockers:l

02-04-2005, 08:04 PM

Show Me,

If I can use you as an example...you seem like s smart guy...you figured this out before a lot of folks have....did you make any investments in this area? Probably not. It is interesting that we say that is interesting and not...that is a way to make money.

Good luck out there.

MT

Show-me

02-04-2005, 08:22 PM

Don’t have the resources at this time(base is $40,000). Trying to fully fund TSP and become debt free on single income and building my own (energy efficient, because of high energy prices) house. (Not sub-contracting actually building it ourselves.) I am making small investments in silver bullion over the past year and continue to do so. I was listening the NBR on PBS and one of the guest mentioned the symbol for a gold trade stock. GLD on Yahoo. One share is 1/10 ounce. Makes it easier to trade and no handling of bullion for small investors like me. What ya think? Any suggestions.

cowboy

02-04-2005, 08:34 PM

I'm not worried about my family situation. What I'm telling you is in order to get the country back into shape you have to pay the hand that feeds you and the way they are currently doing that is by the way of the lower dollar. You don't need the American farmer? Get real! You think NAFTA is your answer toyour food problem!NAFTA is your Trade problem that yourcrying about.You can trade all the paper you want but you can't eat it. Three largest expenses, have you looked at insurance, Health and entertainment, wow! Now thats inflation. I bet not. The typical US american spends less of his earned income on food then any other nation and you are not eating silver. If you want to live off of Cocoa and coffee fine. But the truth is this, the US lost all or most of the livestock slaughter plants to Mexico and your actually eating American beef out of Mexico. Why? Because all the red tape in the US. Environmental, polution, conservation that you want to pass on goes into the price. These plants all go to Mexico because there is none of that! They have cheap labor too. Morell and these other plants just leave their larger plants in the US for show and a right off oftaxes to launder the money on their foreign investments.

The weak dollar is herefor awhile until, you heal the paper inflation you produced.Food is not inflated neither is energy. Housing maybe depends on where you live. I may not bea big shot trader like you MT but I bet I can be just as right as you just as often. Most people that trade stocks brag about their winners and forget about their losers they don't want you to seethe losses. I have not seen a stock guru yet that could repeat 2 years in a row.

By the way your too late in my opinion on the water idea! Not that I don't mind hearing from you. Take a look at Wind! You heard me wind! The cost of energy is not inflated, it's scarce.

02-04-2005, 08:47 PM

Cowboy,

Now you are scaring me. Calm down. I understand what the ecomomy has done to farmers...however like all industry in the U.S. the U.S. farmers are overpaid and it can be more cheaply replaced by outsourcingthatout like everything else. Who da though tech jobs would of been outsourced? Everything can be outsourced. Captilism is like a cancer...it eats the host.

Wind is a good idea however it will be like hydro and fuel cells loss you big dough in the long run. We need to bring nukes back to uncouple ourselves from these OPEC thugs.

Cowboy...sorry to hear about the American farmer...but you have to get in line with the American steel worker, car maker, textile worker, etc, etc...you are just another domonio that thought would never topple....believe it our not a believe a lot of gov jobs will be contracted out in the future...oh like the computer admin jobs??? Hmm should I be trying at another job....if you think a long my lines you will want to look at a job that would be hard to outsource, nurse, physical therapy, barber....everything else other then SERVICE type jobs will be gone within 20 years from the economy.

Good luck out there..

Morpheus

Show-me

02-04-2005, 09:16 PM

Bob Brinker on Money Talk radio show one or two weekends ago said the same thing about manufacturing job when asked point blank from a caller about where future job would be at. His replied was (paraphrased) “SERVICE, SERVICE, SERVICE. In the near future there will be almost NO manufacturing jobs in the USA due to expensive labor, taxes, materials, and benefits.”

Wait till Three Gorges Dam in China is online. It equals 18 nuc. power plants. Boy will the manufacturing pick up over there when that happens. I believe in ‘07 is when they will be fully online.

As farmers go poor poor farmers. Why do they all have new houses, new cars, new trucks, new tractors, new combines, RV’s, and take big vacations while I’m driven a 1990 truck and car and a 1997 van. Please tell me how hard they have it when they spend sooooo much time eating out at the coffee shop and complaining how bad they have it. Quit putting your land in CRP so the taxpayer can pay you to do nothing but bitch. Get in your new truck and cry to someone else poor farmers.

02-04-2005, 09:27 PM

Show Me,

Bob Brinker is pretty good however he all ways is behind the power curve in his calls. He saidbuy March 2003...however if you bought (I know you heard this before) around Halloween on October 2002 you would of been up for 2002.

I do not listen to the guy because he gets on my nerves...but he does a half decent job of making buy and sell calls. My sell call was 28 December. If I was a guessing man he wished he made the sell call today. However I have to agree with his service economy that you mention. You can read that every day in the paper but for some reason it does not click in our brains that hey when is my job next? I am safe, fat, dumb and happy.

Yes, once China finishes the damn and does not have to import oil anymore that is one more step to superpower status...I actually believe they are a superpower now but the big bully on the block does not want to admit he is going to have to become the beta dog and not the alfa dog. But once they can free up capital from purchasing over priced oil they are going to be a powerhouse. GDP of over 8.5% for the last four years...THANK YOU WALMART and our u.s. consumers that are up to their eyeballs in debt...they hold 35% of our debt...we do not hold any other debt...they are our bankers so that would mean...we are a rung under them now...

MT

cowboy

02-04-2005, 10:11 PM

Show-me wrote:
Bob Brinker on Money Talk radio show one or two weekends ago said the same thing about manufacturing job when asked point blank from a caller about where future job would be at. His replied was (paraphrased) “SERVICE, SERVICE, SERVICE. In the near future there will be almost NO manufacturing jobs in the USA due to expensive labor, taxes, materials, and benefits.”

Wait till Three Gorges Dam in China is online. It equals 18 nuc. power plants. Boy will the manufacturing pick up over there when that happens. I believe in ‘07 is when they will be fully online.

As farmers go poor poor farmers. Why do they all have new houses, new cars, new trucks, new tractors, new combines, RV’s, and take big vacations while I’m driven a 1990 truck and car and a 1997 van. Please tell me how hard they have it when they spend sooooo much time eating out at the coffee shop and complaining how bad they have it. Quit putting your land in CRP so the taxpayer can pay you to do nothing but bitch. Get in your new truck and cry to someone else poor farmers.

LOL! If you see a farmer of this type ask him what is debt is!! It is the same reason the US is loaned out to China! And as far as CRP you wanted conservation so they gave it to you. So show-me obivously you don't buy items but you stick in stocks. A farmer is no different then a manufacturer and has to have capital also. So do you know how old the average farmer is and what gender most of the land is in the US. It doesn't matter what you produce you have to have a buyer. All consumers will buy food they will not by the roll over products.

Show-me

02-05-2005, 12:20 AM

02-05-2005, 01:07 AM

saraho wrote: Chaplain wrote: Better for Big Brother to take care of us :s. You know, a worker's Utopia...

Until afew of months ago, no one seriously thought this issue would come to debate for another 20-30 years, when the coming doom will beat the gate.

Let's at least give this administration credit for attempting to start discussion (3rd rail of politics?).
SS is about redistribution of wealth, albeit, for a noble purpose.
Me thinks I am becoming a libertarian, what say you?

That' just me though, and my perspective isthrough my own narrow, biased and scratchy,foggylens.These arejust opinions,so let's keep up the discussion, it's good and healthy:).

No. I would not say that you are a libertarian because the individual rights of which you speak do not affect all Americans equally.

SS isa safety net for the elderly poor.

The only reason that this issue has come up is because of the massive federal deficit caused by the recent tax cut (which enormously benefitted the wealthy) and because of the costs of the Iraqi War.

Notice that we are not discussing rolling back the tax cut to reduce the deficit, since that would take money away from wealthy Americans. We are talking about taking money away from the poor elderly.

On the contrary, the USA is becoming an upper class utopia, whereredistribution ofwealthis well underway and continuing to prosper, IMHO.
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02-05-2005, 01:09 AM

saraho wrote: We should guarantee equal opportunity. Do we currently have equal opportunity to good health care? to good schools? to a good retirement system? Give me a break.

Governments do nothingBUT encourage people to do this or that through tax incentives.

There are government welfare programs for the rich ..and those for the poor. The welfare programs for the rich are not being touched in attempts to reduce the deficit.
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pyriel

02-05-2005, 01:36 AM

Cowboy, I am beginning to understand where you are coming from but just like what Show me said in his post, no one twisted your family's arm to sign those loan. You mentioned that you remember your dad getting $5 per bushel/barrel (whichever is which) back then.I guess what I am trying to say here is that you can't fault companies that go overseas because they are obligated to make money for their stock holders. The name of the game here is to make money.I'm wondering what would you rather see. Keep and make the goods here in US eventhough there will be a negative cash flow. If that is the way you are looking at on how to run a business, then you will fail.Like what I said awhile ago, we moveour money constantly here in TSP because we do not want them to be in a fund that is currently tanking down.

Additionally, farmers are dime in a dozen now a day. Please don't think that I am putting them down. What I am trying to say here is that what used to take 100 farmers to produced certain amount of crop years ago would only take 10 farmers now to produce them. This is a what we call economics my friend. Farmers upgraded their machinery and made more crops but now we have too much in the market. This is why you are getting a lower price today for the crops your family are making.

Pyriel

:?As for your WW, why did you have to bring up this very heated topics.

pyriel

02-05-2005, 01:44 AM

MarketTimer wrote: Show Me,

If I can use you as an example...you seem like s smart guy...you figured this out before a lot of folks have....did you make any investments in this area? Probably not. It is interesting that we say that is interesting and not...that is a way to make money.

Good luck out there.

MT

MT, Since you figure this out way back then and you seem to have the resources to fund such a venture, did you create a water business. If yes, then that is wonderful, if not, then I don't understand how you can bash show me with your remarks. I really think that you are a smart guy but does it make you feel smarter by bashing other people.

02-05-2005, 01:57 AM

pyriel wrote: Pyriel :?As for your WW, why did you have to bring up this very heated topics.
http://www.websmileys.com/sm/crazy/578.gifdo you really want to know? http://www.websmileys.com/sm/crazy/240.gif

02-05-2005, 02:24 AM

cowboy wrote:

LOL! If you see a farmer of this type ask him what is debt is!! It is the same reason the US is loaned out to China! And as far as CRP you wanted conservation so they gave it to you. So show-me obivously you don't buy items but you stick in stocks. A farmer is no different then a manufacturer and has to have capital also. So do you know how old the average farmer is and what gender most of the land is in the US. It doesn't matter what you produce you have to have a buyer. All consumers will buy food they will not by the roll over products.

Funny how you talk about something then a news item comes out about it...here ya cowboy...something else to kick your dog about (I guess that is country western humour). Or something to talk about by the cow patties...not to sure how that goes....Have a great day!

Bush Plan Would Up Defense, Cut Farm Funds

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Friday, February 4, 2005

WASHINGTON - President Bush will propose a nearly 5 percent increase for next year's defense spending while calling for cuts in payments to farmers.

02-05-2005, 02:29 AM

pyriel wrote: MarketTimer wrote: Show Me,

If I can use you as an example...you seem like s smart guy...you figured this out before a lot of folks have....did you make any investments in this area? Probably not. It is interesting that we say that is interesting and not...that is a way to make money.

Good luck out there.

MT

MT, Since you figure this out way back then and you seem to have the resources to fund such a venture, did you create a water business. If yes, then that is wonderful, if not, then I don't understand how you can bash show me with your remarks. I really think that you are a smart guy but does it make you feel smarter by bashing other people.

I owned Ionices when it merged into GE late last year...went up 45% in one day...I was not bashing the guy...I was using an example that everyone can see a good investing opportunity and not do anything about it...I currently own a much of water uliitiy companies...most overseas...have some investments in companies that changed air water to drinking water and another that can change ocean water to drinking water...I am not bashing anyone...I am trying to just get the brain juices flowing...you can find great ideas just by watching the news or living your day to day life.

I gave you other ideas....I can teach to fish...I can not give ya the fish...as the saying goes...ha ha.

MT

cowboy

02-05-2005, 02:46 AM

pyriel wrote: Cowboy, I am beginning to understand where you are coming from but just like what Show me said in his post, no one twisted your family's arm to sign those loan. You mentioned that you remember your dad getting $5 per bushel/barrel (whichever is which) back then.I guess what I am trying to say here is that you can't fault companies that go overseas because they are obligated to make money for their stock holders. The name of the game here is to make money.I'm wondering what would you rather see. Keep and make the goods here in US eventhough there will be a negative cash flow. If that is the way you are looking at on how to run a business, then you will fail.Like what I said awhile ago, we moveour money constantly here in TSP because we do not want them to be in a fund that is currently tanking down.

Additionally, farmers are dime in a dozen now a day. Please don't think that I am putting them down. What I am trying to say here is that what used to take 100 farmers to produced certain amount of crop years ago would only take 10 farmers now to produce them. This is a what we call economics my friend. Farmers upgraded their machinery and made more crops but now we have too much in the market. This is why you are getting a lower price today for the crops your family are making.

Pyriel

:?As for your WW, why did you have to bring up this very heated topics.Your are very correct! But your missing the point. What I am trying to get across to you is this. The dollar is in a slump because the economy, for the past 3 decades abused agriculture. When the dollar is down thisputs more money into agriculture and gets more money into the rural area in the economy which you people forgot about.It seems to me that the only way you get a low dollar is to start a war. Look at your history. Farmers are only 1% of the voting population but it is the united states largest industry. Wealth is produced there nationally. That is why china may be doing so well as they are producing natural wealth. One thing you forget about farming is this, if a farmer borrows to work his land and the price goes down who does he go to? No one, the government subsidizes him. See your companies can move out the farmer can't, he can also pass on the cost to you the farmer can't. He is where it all starts. This country is going to get worse why, because NAFTA opened free trade if your going to compete with these other countries your wages will go down and you will be a service oriented country. Agriculture is highly leveraged business. A dollar put in the Ag. economy will turn over twice the times as one delivered to a manufacturer. Farmers never got a higher price for their goods it pretty much stayed the same for the past 3 decades. The cost of production went up though. Any other business could not have survived. What I am trying to say is, if you want a strong country you have to have food. The best way to do that is keep it growing here. As soon as you start depending on foreign food your done as you will begin to starve. This is why I think you have a low dollar today and it will continue till were out of Irag or start another one.

02-05-2005, 02:56 AM

The bringing up the NAFTA "Free" Trade Agreement seems to have crossed his wires.

Cowboy there are probably a dozen industries right now that have the same tears in the soup complaints now. The only jobs left for us Gringos in 10-20 years will be service jobs....ahhhh....hmmm...."guest workers".....if you read the South/West U.S. papers you will notice that the Gringos that can not speak Spanish can not get jobs in the cooking, cleaning, construction, etc, etc type jobs because they can not supervise or communicate with their co workers...hmmm.

MT

02-05-2005, 02:59 AM

Hate to say it Cowboy but instead of saying how the countries that benefitted from NAFTA are greatly doing better...and the U.S. guys are doing so badly....maybe it is time to invests in all this knowledge and invest in the companies that you have all this knowledge that have taken off and make some dough...

by the way could you send me the symbols of those companies?

Mike

02-05-2005, 04:02 AM

I support free trade - with the lone exception being sensitive military technology (obviously we don't want to be sending over stealth and other things to hostile nations just to make a buck).

The problem is that there are many exceptions to "free trade". In this country alone, you could probably find at least a dozen subsidies being paid out to US companies / individuals to give them some sort of advantage. The two I can think of right off the top of my head are sugar and milk price supports. This is great for the small number of people / companies that produce these things, but it's horrible for the large number of consumers in this country (not to mention companies that require either sugar or milk as inputs for manufacturing something else, such as candy).

I think WW started this thread just to get the men fighting amongst themselves... last one standing gets to go out with her. :shock::D