And how did killing that goose that laid the golden egg work out for them? *

Please don't run off.  I'll keep this simple, and it's important that you understand:

Recently I read an article about the 2017 "Gini Coefficient" study by the German bank Allianz which ranked developed nations based on their level of income inequality.

Some brief background:  It was a little over a century ago that an Italian statistician, Corrado Gini, devised the method for measuring income inequality which we now call the Gini Coefficient.  It is a scale from 0 to 1, with 0 meaning everyone has the same wealth, and 1 means one person has everything and everyone else has nothing.  Obviously in the real world the Gini score will be somewhere in between.

In the current Allianz Bank Gini Coefficient study of 53 developed countries, the United States was the most unequal with a Gini of .81.  (Example:  Just 3 Americans, Warren Buffett, Bill Gates, and Jeff Bezos, have more wealth than the poorest 50% of all other Americans combined.)  Others with high Gini scores are Germany with .73 and Russia with .69.  Among the most equal are South Korea with a Gini of .54, China with .53, and Slovenia with .48.

Going back thousands of years, archaeologists have determined the relative concentration of wealth in various societies by looking at the size of their homes, the amount of valuables they had (such as pottery), and the size of their stables (the more affluent had the most large, domesticated animals, making them the most productive farmers).  Until modern times the most unequal they could identify was the Kahun society in ancient Egypt with a Gini of .68.

Here is their warning for us:  Throughout history, when things became as unequal as what we're seeing today, violence eventually erupted and societies collapsed.

When I've written on this topic before my conservative friends have just rolled their eyes and said, "Oh, here we go....rob from the rich, and give it to the poor."  "Income redistribution" they moaned.  "Socialism at it's worst."  

My point was that unless things somehow evened out, the ultra-wealthy will some day find themselves owning everything, but be under siege and fighting for their lives.  

IMO the wealthy would be smart to back new tax laws that allowed the middle class to keep more of what they earned, and be content with having for themselves a slightly smaller slice of a very big pie.  But instead what are they doing?  They, through their lobbyists, are about to get their wish of yet another tax windfall.  

A day of reckoning is coming.  How soon, I have no idea, but it's coming.  Wise up, America.

S

*According to the fable, a cottager and his wife had a goose that laid a golden egg every day. They supposed the goose must contain a great lump of gold in its inside, and in order to get the gold they killed her.  Having done so, they found to their surprise that the goose differed in no respect from their other geese. The foolish pair, thus hoping to become rich all at once, deprived themselves of the gain which they were assured day after day.

Penny wise and pound foolish

This just in:  Facebook has announced that early in 2017 it would begin repurchasing $6 Billion of its own stock.  The report went on to say that Facebook has amassed a sizeable stockpile of cash in recent years, currently $26 Billion in cash and other short term investments.  FYI, Apple currently has an estimated $200 Billion in cash reserves, mostly overseas, and Google has roughly $83 Billion cash on hand.

Other notable corporations with large cash stashes include Chevron with $43 Billion, Conoco Phillips with $45 Billion, Ford with $51 Billion, Exxon Mobil with $52 Billion, Cisco with $56 Billion, Microsoft with $73 Billion, GE with $122 Billion, and Berkshire Hathaway with $162 Billion, give or take a few coins.

Most of this isn't literally green cash sitting in a bank vault somewhere, but money placed in "short term investments".  These investments offer a very modest return, but with so little investment opportunities out there today, this is the best they can do.  Oh, and they're buying back their own stock with some of their moolah, too.

My purpose here isn't to scold them for being so profitable.  I'm actually quite happy for them.  I bring this up because the new Trump administration will soon begin implementing some of their campaign promises, including major tax cuts.  Some, of course, will go to the middle class, but as most taxes are paid by the rich, they will get the lions share of the new tax cuts.

The justification given for these tax cuts is that the rich, lets call them the "investor class", will use this money to fund new start up companies (hoping some will turn out to be the next Apple or Google), and to help existing companies modernize and expand.  In theory all this investment will create NEW JOBS!

Except....the investor class doesn't need any new windfall tax cuts to fund these new businesses.  They can't even find a good place to invest what they have parked around the world right now!

WE ARE ABSOLUTELY SWIMMING IN LIQUIDITY!  All a tax cut now will do is put more money in the hands of those who don't need it, widening the income inequality that already exists, and increasing resentment and hostility between the super wealthy (the 1%) and the masses.  This is called "killing the golden goose", or a short sighted action that destroys the profitability of an asset.  And can you imagine the shortfall (deficit) this will mean to the Treasury?  It's greed, pure and simple!

Instead lets spend that money on fixing our crumbling infrastructure (highways, bridges, ports, etc), or investing in a better educated work force.  The wealthy will definitely benefit from that, too, as they....as we ALL should. 

No, I'm not trying to spread some sort of socialist message here.  I'm not suggesting we take away what the wealthy already have.  I'm just trying to head off a revolution that may be coming sooner than we think if we don't wise up.  Just level the playing field so the masses can afford to buy what the wealthy are selling.

As my daddy used to say, "A little piece of a BIG pie is better than a big piece of NO pie."

S

Things we should be thanking Donald Trump for....

....besides some of the best Saturday Night Live skits ever!

Yes, The Donald has had much ridicule heaped on him this election season for his....umm....unusual ideas.  But he has also brought into the light some issues that had been largely underground for years.  You might have to look deep, but he's done us all a service and maybe secured for himself a worthwhile legacy in the process.  To wit:

TRADE AGREEMENTS  Most Americans don't understand trade deals.  We give a little, they give a little, we both get what we want....win/win, right?  Hardly!

Trade deals are driven by what's in the best interest of business, and not necessarily (rarely, actually) in the best interest of the American workers.  Why do you think millions of well-paying American jobs have have moved beyond our borders, and too much of what we've gotten in return are much-lower-paying warehousing and delivery jobs?  Because businesses can make more $$$$ doing business that way.  Screw US!

American businesses used to have America's interests at heart, but for decades now all they've cared about is making money for themselves, however/wherever they can.  If Carrier Corp hands out 1,000 pink slips in Indiana and hires a like number in Mexico, or Indonesia, etc, they don't care!  There's rarely even a passing thought of good 'ol America's best interest.  Their quarterly profits are up, their executive bonuses are up, their shareholders (many of them foreign investors) are happy, the job-gaining country is happy....the big losers are the 1,000 laid-off American workers.  

We need trade.  We can produce much more than we can consume ourselves.  I'm all for trade, if done fairly, but what we've negotiated recently are simply BAD DEALS!

OUR F___KED UP TAX CODE  Most of us only know "we" pay too much, and "the rich" pay too little.  That's all we ever hear.  It's hard to wrap our arms around that opaque concept.  Donald Trump put a real-world number on it.  How many of us had ever heard of a "loss carry forward" before Donald Trump's $936,000,000 business boo-boo?  That sweetheart tax deal has helped him (and many other of his uber-rich buddies) to avoid paying hundreds of millions (billions?) of dollars in taxes.  

That has led us to take a deeper look at our ridiculously complex 75,000 page +/- tax code, a code that got that way due to special favors granted by lawmakers to wealthy special interests in exchange for.....?
  

The rich usually deserve to be rich....they work hard, they work smart, they take risks....more power to them.  But when they can take their hard-earned gains and, with the signing of a piece of tax legislation, see their wealth explode with little additional effort on their part, that's just WRONG!  That's what "income inequality" is all about.  That, more than anything else, is what is killing our middle class! 

You're likely to ride off into the sunset next month, Donald, to take up company with Michael Dukakis, Walter Mondale, John Kerry, and all those other historical footnotes, but if your spotlight can somehow enable us to fix our tax code and trade policies, you'll at least have that as a legacy you can be proud of.

S

I think I nailed it....

....and I'm not exactly happy about it.

I've been saying for quite a while now that income inequality is the most important issue of our time.  I'm not looking at this on a micro level, liberal vs conservative, Democrat vs Republican.  This is more than "the 1% are greedy" or "the losers won't work".

Here's what we should IMO take away from this on a macro level this election season:  When enough people feel like they have hit bottom, that they have nothing left to lose, they will revolt.  They're now revolting, and it's real, if not (for now) violent.  I'm not saying the revolt is justified, or is right or wrong.  I'm just saying it's REAL.

Donald Trump is appealing to more than enough people to win the Republican nomination for President. He's talking about stopping American companies from laying off American workers and moving overseas, and about bringing good jobs back to America.  These are issues the down-and-out masses are concerned about.

Bernie Sanders is appealing to (almost) enough people to win the Democratic nomination for President.  I doubt Hillary Clinton, the old school legacy politician, is sleeping well at night.  Bernie is talking about our rigged economic system/tax system, our much-too-powerful financial interests, and, yes, income inequality.  These are issues the down-and-out masses are concerned about.

Can you imagine our bankers and our titans of uber-capitalism rooting for a Hillary victory this November?  Unlikely as it might seem, she might be their best hope.  

Today the revolt is polite.  Enough people are fed up with the status quo and are demanding a better deal.  They are making themselves heard...loudly...at the ballot box.  Unless the masses see their lives getting better soon, tomorrow's revolt might be more aggressive, dare I say even violent.

I nailed it.  I predicted this, but I'm honestly not happy about my insightful prognostication. I'm scared shitless, both for America and the larger world.

S

GOP debate recap

This is actually what I tuned in to see, but it was a bit more restrained.  Pity.  ;)

For those of you who are vaguely interested in politics, but not enough so to actually watch 2 hours of their regularly televised sit-com, I offer this debate recap:  Mark O. Rubio seemed cool and above the fray, Dr. Ben Carson, always the polite gentleman, showed....umm....good posture, The Donald seemed to have ratcheted down his mouth a couple of notches, Chris Christie was once again the 8-to-5 working guy's guy, Mike Huckleberry showed he was still the best orator, Ted Cruz had a memorable line, John Kasich seemed to be desperately struggling to keep his head above water, Carly Fiorina was chomping at the bit for a cat fight with Hillary C,  and Jeb Bush and Rand Paul rode off into the sunset (they just don't know it yet).

And the CNBC moderators were assholes.  What the hell was wrong with those folks?  Every question they asked was little more than "have you stopped beating your wife?"

For the life of me I can't understand why Dr. Carson is now the front-runner. Is he smart?  Yes, he's brilliant.  Does he act like an adult when the opportunity is there for a sleazy attack?  Yes, he's a class guy.  But IMHO his demeanor is more that of a statistical actuary than a leader.

I expect my leaders to be able to inspire, to work a crowd up into a force for action.  Such as....

"We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall NEVER surrender."  Winston Churchill

or "Mr. Gorbachev, TEAR...DOWN...THIS...WALL!"  Ronald Reagan

or "We have nothing to fear but fear itself."  FDR

Dr. Carson has a soft-spoken demeanor that is [to me] reminiscent of Jimmah Carter, and we all know how THAT turned out!  (He was absolutely run over by the scum-bag Washington professional politicians.)

Several of the candidates (Mike Huckabee and Chris Christie) seemed almost like they were "Democrat Lite" when they spoke of entitlements.  "Workers have BOUGHT their 'entitlements', they were not just given to them."  Gov. Christie even slapped us with the truth:  The money we put into our Social Security Trust Fund is GONE.  Over the past 50 years our "leaders" have STOLEN it.   We're not EVER going to see it again.   Fact!  

And Christie wants to jail the crooked bankers who almost imploded the world back in '08.  YES!

There was almost unanimity over how unhealthy our income inequality is.  This from Republicans?  Whoa!

Poor Jeb.  If you're a Jeb Bush fan, I'm sorry, but it's over for him.  The Bush dynasty has obviously ended with Dubyah.  Give Jeb a nice dinner and a gold watch and retire him.  Now.

Even Ted Cruz got a well-deserved round of applause from the audience when he called out the moderators for being unfair beyond belief.

And Donald Trump.  *sigh*  I think he'll lumber along for a while longer as a legitimate contender, but voters seem to be getting a little lot more serious about the issues, and The Donald hasn't really told us much yet about how he's going to do what he's promised.  I'm not sure if he can.  

My chuckle moment was when Trump skewered PAC's as the scourge of politics.  Ha!   So true!  But as he was the only one there not accepting PAC money, he was a lonely voice of one.  Touche Donald!

I think Mark O. will get a bounce from this debate.  Something about him, though, troubles me.  I'm just not sure exactly what.  I'm sure if there's anything there it will surface in time.

There you have it....my opinion, which ranks right up there with a big bowl of cold oatmeal.  ;)

S

Doing the wrong thing for the right reason

Tonight during President Obama's State of the Union speech that I'm not going to watch, he will request an additional tax on the wealthy in order to fund a cash distribution to middle class Americans. 

I read in the paper yesterday that by 2016 the 80 wealthiest people in the world will together own $1.9 TRILLION in assets.  Just last year it took 85 billionaires to equal that figure.  In other words, the rich are indeed getting richer.  The biggest gainers came from those with interests in finance, insurance, and health care.

"Well, yeah.  They're smarter, they work harder, and they deserve it", right?

Haha!  It seems by-and-large they got richer not by the sweat of their brow, but due to "multi-million-dollar lobbying campaigns to protect and enhance their interests."  They had connections.

That's the rub.  More people with more money to spend will mean additional profits for those who own the means of production...the wealthy.  Win-win!  Right now the wealthy are gradually strangling the goose that laid the golden (middle class) egg.  IMO we NEED more income equality, but just grabbing a chunk of the rich's cash isn't the way to do it.  

Aren't the foaming-at-the-mouth Tea Party types against government handouts?  Isn't a cash subsidy/tax break to the wealthiest just a high-class handout?  So why can't the Democrats and the Tea Party work together to end handouts?  (Love to be a fly on the wall in that conference room!) 

Come on Obama....wise up.  You're NEVER going to get a tax increase on the wealthy with the Republicans in control of congress.  But by holding the Tea Party's feet to the fire, making them produce on their promise to end government handouts, he just might have a chance.  End special favors, reform the tax laws, and income inequality will take care of itself.

And either the Tea Party will do what they promised, or they will be exposed as liars.  What's it gonna be, Tea Party?

Chameleon Man

It's funny to me how everyone today wears a label of one sort or another, usually "liberal" or "conservative".  I'll write one thing, and my conservative friends will scream, "He's a raving liberal".  Then a few weeks later I'll give another of my unsolicited opinions and my liberal friends will yell, "Oh no, he's sipped at the Tea Party well."  Truth is my opinions are usually based on a longer ranged, common sense, outcome based models.  Consider this:

I saw this in a recent online business journal....

Our income is grossly unequal and needs to become more balanced.

*I knew it.  He's gone raving liberal.*  Look carefully.  Look at the dates of the last time things got this skewed.  1928-1932, the beginning of The Great Depression.  When the massive, consuming middle class is held down, our economic system bursts under the strain.  We almost saw that in 2008, but were saved (temporarily?) to see stock market highs again today grow into the stratosphere.  Can this go on forever?  Does anything?

Look at our most stable period, 1948-1970.  Our largest employer was GM, and their average pay/benefits adjusted to 2014 dollars was over $50 an hour.  Today our largest employer is Walmart, and their average store employee makes $8.81.  Figuring in their executives and salaried workers, their average pay packet is still only $12.78 an hour.  Numbers like those don't have the buying power to keep our economy going indefinitely.

Beginning in about 1970 (see chart) we became enamored with the idea of "trickle down economics"....giving breaks to the more affluent so they can accumulate even more wealth and use it to create new jobs for an expanding middle class, or so the theory went.  As we now see, many of those new jobs were often bottom-feeding jobs, but *big shock* the 0.1% began their rapid rise to controlling 22% of our wealth.  Again, this can't go on indefinitely.  Never worked, never will.

Change tack:

We need to approve the Keystone pipeline ASAP.  *Oh Jeez....now he's a card carrying Tea Partyer.*  Why?  Because the oil will make it south anyway, only more and more will come here via railroad tank cars, traveling through towns and cities, where accidents and terrorism can bring down havoc on us all.  Common sense says moving oil by rail is NOT ideal.

Plus this is just one more component in some day making us energy independent.  That means more US dollars staying at home vs going overseas to countries that do NOT have our best interests at heart.  It will make us STRONGER, and it's at a time of economic strength that we can begin to phase out all the tax breaks, subsidies, and other perks the wealthy have used since the 1970's to gain a strangle-hold on the middle class.  Over time income will begin to level out, and in the long run we'll all be better off for it.

Is the US going downhill?  Unless we do something, yes, we probably are.  But does it HAVE to be this way?  NO, not at all!  We need to sit together, liberals and conservatives, look at things from a longer ranged perspective and not just from a "what's in it for me now" position, dust off our 'common sense' gene, and make some tough decisions.

It's the start of a new year.  Let's begin it with a new, can-do attitude.  Anyone have the guts to give it a try?  Think we can get any politicians to compromise for our common good?

S

Rarely are things as simple as they seem

"Liberated" from Facebook:

Counterpoint: On the surface the following statement makes good sense, but it isn't that simple. If you invent a better mouse trap, offer superior service, or just work harder than anyone else and make a fortune, good for you! You deserve it.

But in our country it has become acceptable to use your earned fortune to buy influence in Congress, resulting in special favors, tax relief, subsidies, etc being granted. In other words getting something you DIDN'T work for. The wealthy are being somewhat disingenuous suggesting "I worked for it, it's mine, you can't have it." Truth is they worked for SOME of it.

Take away all the special favors and there will still be income inequality (because some people DO build better mouse traps, offer superior service, and work harder) but it will not be anywhere near as pronounced as it is now. Our system of special favors to some needs to be changed.

S

"Starving to death in the Land of Plenty"

Have you heard that saying before?  It means while some are holding on for dear life, others are doing very well.  And it's a topic that polarizes like no other.

It's more commonly known as "income inequality".  The "have's" say they deserve their privileged position as they went to school, studied hard, and have diligently worked their way up "the ladder".  But over the past 20 or so years the "have not's" haven't seen a pay raise after factoring in inflation, and they are the ones that make up the consumer base that drives 2/3 of our economy.

Here's the problem:  This situation can't go on forever.  Eventually the system will implode, just like it did back in 1929 leading us into the Great Depression.  When we kill the goose that laid the golden egg, we're screwed.

They say we have a HUGE public deficit that requires us to cut spending, and at the same time the well off want their taxes cut, which would leave the deficit essentially unchanged.  The wealthy justify their requested tax cut by saying this tax saving would enable them to create more jobs.

That argument makes sense on paper, but in the real world it just isn't so.  Case in point:  Today I read a piece originally published in INC magazine that states large corporations can't find enough good projects to invest their $1.64 TRILLION cash cushion in that they're currently sitting on.  Even more money in a "job creation" fund won't create any more jobs.  More demand for goods and services will create more jobs, but until consumers have more money, they aren't in any position to buy.  It's a giant Catch 22.

If we're ever going to make a meaningful dent in our massive accumulated debt we're going to have to raise taxes on the wealthy because they are the only ones with any excess money.  Note I'm not saying it's "fair", or "right", just "necessary".  These are just pragmatic facts.  And "raising taxes" doesn't necessarily mean raising the tax rate.  It can also mean eliminating special tax treatment, and that just might be politically possible.

Wonder what the Vegas odds would be on that?

S

Economics For Dummies

Income inequality....everyone is talking about it these days.  And by "everyone" I really just mean those who can think, and those who don't limit their reading to publications that have some knocked-up starlet on the cover and ads about how to spackle over your wrinkles.

Just to be different, let's not look at it in liberal or conservative terms.  You know, the argument that "we earned it, it's ours, you can't have it" (conservative) or "the Man skims off all the profits and pays the workers a subsistence minimum wage" (liberal).  Let's be pragmatic for once.  How is income inequality REALLY affecting us, besides just politically polarizing us?

The Reader's Digest condensed version?....Not enough people have enough disposable income (income left over after just paying for the bare necessities) to buy enough "stuff" to justify business expansion.  Without business expansion no new jobs will be created and unemployment will remain high, which means many people won't have the disposable income to buy "stuff", which won't create business expansion....  It's a vicious circle.

But our unemployment rate is down from 10% in 2009 (?) to 6.3% today.  That's good, right?  

"Lies, damn lies, and statistics."  Many of those newly employed are working low paying retail / burger flipping jobs, paying a fraction of what they were making before the recession.  Or they are only working part time.  Many have given up looking at all and are living in mama's basement.

But we ARE buying stuff.  LOTS of stuff.  

Umm, sort of, but only by going head-over-heels in debt.  Household (consumer) debt is crushing the middle class.  We're living in a house of cards.  We can't go on like this forever.

So while the middle class hasn't received a raise in 20+ years (after allowing for inflation), the wealthy have seen their income rise by well over 200%.  So much that today the wealthy have lots of money, but no where to invest it.  

Publications such as The Wall Street Journal and The Economist estimate that in the US alone there is somewhere between 1 and 2 TRILLION dollars sitting on the sidelines in short-term accounts.  Worldwide they estimate as much as 20 TRILLION dollars is just sitting there.

That much money (or at least some of it) in the hands of a vibrant middle class could buy LOTS of stuff.  Stuff that would need to be manufactured.  Stuff that would necessitate the creation of MILLIONS of new jobs.  The middle class would again be a powerful consumer engine, and remember, our economy is 70% consumer driven.  Again, it's a vicious circle, but this time in a good way.

Now for an exclamation point lemme throw out some cliches:  "A rising tide lifts all boats".  If the middle class does well so will the wealthy, who own the means of production.  Win-win.
  
"A little piece of a big pie is better than a big piece of NO pie".  If we keep going the way we are....well, let's just say that's how revolutions begin.  Beware of the unwashed masses surrounding your house while carrying pitchforks and torches.

You think that couldn't happen here?  Maybe not directly, but in most parts of the world it's common.  Unemployment in the Euro zone for example is over 10%, and the natives are very restless.  Enough discontent around the globe will definitely affect us.

So, we just grab some of the rich folks money and pass it out to the less fortunate, right?  

Hardly!  That's how you kill everyone's incentive to work.  Reform the tax code, stop giving favorable tax breaks, subsidies, etc to those who don't need them.  There are probably other ways to level the field, too, but that alone would go a long way.

One last cliche:  The rich need to wise up and recognize they are  "killing the goose that laid the golden egg".

That's not a liberal or a conservative opinion.  That's a pragmatic fact.

S