Tuesday, September 28, 2010

Privatizing Social Security. Borrowing to save

It doesn't really make sense to borrow money from a bank in order to deposit money in a savings account, but this is what Bush's plan for privatizing Social Security would have done.

Glad it's now dead in the water, but other similar ideas are floating about.

Back before the crash of 2008, former President Bush came up with a plan to allow young people to pay slightly lower Social Security taxes in order to divert that money into private savings accounts for supplementing their Social Security when they reach retirement age.

Problem is, with less tax revenue coming in, Social Security would have to borrow money in order to continue paying out the same benefits for older people who are currently retired.

This situation of "borrow to save" would take place during a long period of transition until enough of us, who are currently at, or near, retirement age have died off.

After that, according to the Bush planners, there would be a panacea where private savings could play a larger role in people's retirement again. Kind of like the days before there was Social Security, only this time, it would be kind of a hybrid situation with some Social Security still intact. Bush apologists might call this a more "balanced" approach with private savings and government both playing a role.

Problem is, it's a long transition of robbing Peter to pay Paul until enough of the current generation of older folks dies off.

With smoke and mirrors, it might look like an improvement in America's dismal savings rate, but when money is being borrowed, even if just over a period of 20 years, or so, it cancels out what's being saved.

Increasing America's private savings rate is a good idea, but there are better ways to do this than the "borrow and pretend to save" plan for Social Security.

Why don't people just save more of their own money, aside from Social Security?

Before the crash of 2008, our environment for savings was abysmal. Interest rates from bank savings were (and still are) very low. Who would have wanted to save?

Saving isn't likely in a climate of low interest rates. That's the problem. Maybe interest rates are too low.

How did Americans save back then?

Buying real estate. That was people's "savings." Thus fertile ground for the real estate bubble. People using property as their savings. Low interest rates encourage this. I even remember someone writing a book with the title "Spend Your Way to Wealth."

While I'll admit I haven't read the book, I have heard that one thing it stressed was the wealth-building potential of buying a home. That was, of course before 2008.

Problem with the low interest rate / real estate bubble is the fact that it seemed like buying a home was the only sound investment one could make. No "diversification of portfolio" when everything else is "in the tank," so to speak. With stocks dubious, money in the bank paying practically no interest, starting a business risky; people would say, "lets buy real estate."

The bubble situation also lead to unaffordable housing as prices kept rising. When folks start spending well over 1/3rd of income on rent or mortgage, what's left over for savings?

Now that the bubble has burst, bank savings rates have improved dramatically, but not because interest rates are higher.

Why are savings rates so much better?

It's because people are scared shit less. After the crash of 2008, rainy day funds and things like FDIC look pretty darn good. It's just about protecting the principle now.

To permanently improve savings rates, it looks like we need higher interest rates. Rather than trying a gimmick like privatizing Social Security, higher interest rates could do the trick.

Still, nothing is a panacea, higher interest rates could also threaten to slow the economy. We'd have to learn how to survive and even thrive in a slower economy. We'd have to learn how to distribute the jobs in better ways. Less people unemployed, but also less people working overtime.

A more laid back economy? If one could afford the cost of living, I think most would go for it in a heartbeat.

Sunday, September 26, 2010

Very good column by Paul Krugman

About how the Republican's Pledge to America is likely to increase the deficit. See here.

Saturday, September 18, 2010

Pay the meter and set up a lawn instead of parking a car

Pay the parking meter, but do something more interesting with the space than park a car. How about a barbecue?

I visited this temporary park when it came to part of Holly Street in Bellingham. This happens in other cities as well. See Parking Day web site.

Bringing nature back to pavement is a clever idea, but AstroTurf or carpet might work better. I noticed the sod smelled like silage. Maybe because drainage isn't that good on pavement. Carpet would be easier to roll down as well.

I hear someone bought the sod after last year's Parking Day in Bellingham.

Friday, September 17, 2010

Consumer credit doesn't make much sense

Even though interest on savings in the bank extremely low, I just thought of a good reason for having a savings account. It can be for making purchases under, say $5,000. It's better to save up and buy something like a computer with cash, rather than use a credit card and pay that high interest rate.

If bank savings accounts can prevent people from having to use consumer credit for smaller purchases, that saves one a lot more money than just the measly interest rates they pay.

Consumer credit can be a costly way to go for small purchases, but debit cards, for convenience make sense. Debit cards backed with saving in the bank.

These days, even $1000 can be considered a small purchase compared to, for instance, a mortgage payment.

Getting a loan makes more sense for major purchases such as a house, or a new car (if one insists on driving a car), or in the case of a business, "plant and equipment."

But for small purchases, it seems much better to use savings and avoid credit card interest rates.

Saturday, September 11, 2010

One World Trade Center under construction. Almost forgotten

Construction site Dec. 2009. Photo from Wikimedia Commons. See below.

Listening to BBC News about the Ground Zero area, I heard in passing, that Freedom Tower was being built.

Why haven't we heard much about this?

The term Ground Zero conjures up images of a bomb crater. Does mainstream media just focus on negative?

So I went to Google.

Yes, Freedom Tower is being built, but it's real name is One World Trade Center. Will be the tallest building in America at 1,776 Ft. Impressive. Projected completion in 2013.

More attention is being paid to the 13 story Park51 cultural center; that place which people mistakenly call a mosque, near by.

Well, Manhattan is characterized as a dense urban environment so there is going to be great diversity of things nearby. That's what density and US cities tend to be.

My guess is the Port Authority of New York, which owns the land under One World Trade Center, is making it the tallest US building, in part, to prove that fear of terrorism shouldn't dictate what's built there.

I say hurray for the new building.

Actually hurray for both buildings. The big building at One World Trade Center and the little one at Park51 a few blocks away. 13 stories is "little" by New York standards.

Rather than complaining about an Islamic center near the World Trade Center site in New York City where so many things are crammed together, one might think Americans would be more upset that we don't have the tallest building in the world. One World Trade Center will be the tallest in USA, but the world's tallest prize goes to Dubai, in United Arab Emirates. That's where the impressive Burj Khalifa resides. At 2,717 Ft., Burj Khalifa is the tallest structure on Earth. By the way, it's in a place where Islam is the main religion so I think that must raise a few eyebrows.

Oh well, look what petrodollars can build. It doesn't bother me as I can appreciate a great accomplishment, but I still have a fondness for my own country of USA.

In keeping with a WASP (white Anglo Saxon protestant) tradition of modesty, I'll point out that One World Trade Center will not even be the tallest structure in USA. Yes, it will be the tallest habitable building, but North Dakota, of all places, holds the tallest structure.

North Dakota? Where's that? People might ask.

KVLY TV mast. Photo from Wikimedia Commons.

It's out there in the great plains between US states of Montana and Minnesota. That's where KVLY TV mast resides. 2,063 Ft. tall.

KVLY, is a Fargo TV station. Tower somewhere between Fargo and Grand Forks North Dakota. Said to be near a little place called Blanchard. Not where one might expect to find the tallest structure in USA. Its the second tallest tower in the world.

We do hear a lot of heated rhetoric these days, but America is still a good country. Part of its greatness is the diversity of its landscapes. From seemingly empty plains of North Dakota to the crowded streets of Manhattan where just about everything and everybody are in close proximity, America still offers a lot.

Friday, September 10, 2010

Easy solution to Ferndale teachers 6 minute request?

Add 6 more minutes to the student's lunch hour?

There must be more to this issue than meets my eye. Teachers in the Ferndale School District, north of Bellingham have postponed the first days of school by being on strike.

The issue - 6 more minutes of time to prepare for the day's lessons. At least according to a recent Bellingham Herald article, it looks like teachers are asking for a bit more time to prepare during the school day.

Seems like there's an easy solution to that problem which is in line with my shorter workweek philosophy. Couldn't they just give the kids a slightly longer recess and/or lunch break? How about letting school out 6 minutes early, or even just starting class 3 minutes later at the start of the day and ending class 3 minutes earlier at the end of the day?

Seems like the students wouldn't mind. No more money would have to be spent if this problem can be solved by just juggling the time differently within the school day.

I do realize that it may turn out to be more than just 6 minutes as some teachers are needed to supervise recess. Still, juggling time within the school day shouldn't be too hard.

"Quality time" for the kids versus just "quantity of time." While the kids play, a little more time for teachers to prepare for the classroom.

Of course I'm probably missing something. There may be state mandates that dictate down to the minute how much time kids must spend in class. Come on, things are getting a bit nit picky.

Maybe there's more to this issue than meets my eye. Today's Herald talked about differences over the health plan and some other issues as well. Money is tight.

Wednesday, September 08, 2010

An important upside from cutting government spending is no longer available

When interest rates were high, economists used to say that reducing the Federal deficit would lower interest rates and increase available capital for private lending so private enterprise could create more jobs.

Well, that mechanism no longer applies now that interest rates are at rock bottom in spite of record deficits.

The downside of cutting government spending still applies; reducing the size of government and it's employees as consumers in the market.

With less government spending, consumer demand drops since a lot of that demand is government purchases and the spending of public employees.

Does private enterprise have anything to fill the hole blown into consumer demand if government cuts back?

The old argument of lower interest rates no longer applies as far as I can tell. How can interest rates get lower?

What else is there to bolster consumer spending?

Maybe cutting government would have one long term benefit. When it brings a deeper recession, rampant deflation is also likely. Yes, deflation meaning prices coming down. Deflating the obese American economy, that is now on the life support of government spending. Deflating property values still farther, for instance.

This would be painful, but as things come crashing down, there might be an upside. If America was cheaper, our products and services would be less expensive on world markets.

Another way to cheapen America, without creating the social chaos that huge cuts in government would most likely bring, is to devalue the American dollar. Devalue the dollar by just printing more money.

If Federal Reserve prints lots of money to prop up government spending, a "soft landing" could possibly be engineered. A soft landing would basically be lower valued US dollars which would make imports to the US more expensive and exports from the US less expensive.

In the long run, maybe the US would be consuming less and producing more.

A leaner US indeed.

Tuesday, September 07, 2010

Better not to burn the Quran on 911 anniversary, or maybe burn all dogmas including the Bible

The pastor of that Florida Church who wants to burn copies of the Quran on the 9Th anniversary of 911 is acting out of anger. I can see maybe having a ceremonial burning of holy books and dogmas, including the Bible, but any burning would be an act of hostility. Sometimes one feels like burning holy books and dogmas since rigid interpretation of these things leads to so much war and hardship.

Burning the flag is a possibility also. How about tossing in the flags of all nations?

Still, if all we end up with in the end is a pile of cinders, what have we accomplished?

Friday, September 03, 2010

Rajni Bakshi: The Bazaar

Rajni Bakshi: The Bazaar.

Very interesting book. Lecture broadcast Sept. 2.

Excerpt from KUOW web site.

Around the world, grassroots movements are resisting free market culture. And yet societies around the world have also rejected communism. What if there was a middle ground between the two?

Tonight we hear from a voice unknown in the United States, but lauded in India. Mumbai–based journalist and activist Rajni Bakshi won India's biggest literary prize, the 2009 Vodafone Crossword Book Award, for her book "Bazaars, Conversations and Freedom: For a Market Culture Beyond Greed and Fear."

Bakshi says the traditional bazaar is that middle ground between communism and free market capitalism. She argues that the traditional marketplace — where vendors and customers compete, collaborate, bargain and gossip — represents a more socially responsible culture of commerce. Whereas the free market separates our economic activity from our social and ethical selves, she says activity in a bazaar is as much about forming values and ideas as trading goods.

Bakshi happened to be in Seattle visiting her brother when she took some time to speak at the Elliot Bay Book Company on May 19, 2010.

Thursday, September 02, 2010

My 2010 summer bike tour photos now on line

Looking at the forest through the trees across I-90 in Spokane Valley. What forest? That one's artificial.

2010 trip was another one around parts of Washington and Idaho. Then another trip to Vancouver, BC after getting back to Bellingham. Total of around 1,200 miles in 4 1/2 weeks.

At first I thought I was slowing down, putting on less miles per day than previous trips, but looking at the mileage, it's still a lot of miles. Not the 4,200 miles I did in 9 weeks of 1991 when I crossed USA by bike. That was 19 years ago. Maybe I am slowing down.

I'm I slowing down due to old age, or the digital age?

Good question.

Maybe a bit from "old age," but back in 91, I wasn't stopping so often to update my status on Facebook. No one knew what wifi was. In 1991 it was either 24, or 32 frames to a roll of film. Stopping to take pictures meant deciding if it was really worth one of the last 5 frames on a roll before getting to the next store and shelling out money for more film. Yes, those were the days.

Now I'm stopping every few feet to take a picture. Not really, but sometimes it seems like that.

In this 4 1/2 weeks, I took nearly 1,000 digital images.