Getting Richer

There are several very deceptive things wrong with the article about the rich getting richer.

There are reasons why this has to happen:

The top tier has money to invest and does so; the bottom tier does not, so just can not grow as quickly. In addition, inflation makes the absolute difference even larger. The same inflation rate on a larger amount of money has a larger absolute impact.

There is no limit to what the upper tier earns; all the other tiers are limited in what they earn by the tier structure.

If someone in a lower tier earns more than the tier limit, they move up. Except at the top, the highest earners in every tier are always leaving.

The study was over 30 years. Are we to believe that we are discussing the same people? The people in the lowest tier 30 years ago have moved on – obtained more skills, gotten better jobs and higher salaries. If the same people are still in the lowest tier after 30 years, they have a problem, not society.

Meanwhile, the lowest tier has constantly been replenished by new kids leaving the nest, immigrants, etc. It is no surprise these are at the bottom; starting at the top is not the usual way to success. Whether they stay there is the issue.

The results of the study are reported in manner that is deceptive and intellectually dishonest. If this is what the Occupy Wall Street movement is about, it shows their lack of perception.

Two ways to get better

Debbie and Frank are really in debt trouble and go to two counselors. The smooth talking counselor’s plan has multiple parts: increase their credit line; get money from a few strangers who have more money than they do; over the next 10 years they will have to spend less than they had planned to – more than they are spending now but less than they had planned on. Debbie and Frank are excited about this new way of saving and promise to plan on spending even more so when they cut back a little the savings are even greater. With this savings plan and the counselor’s optimistic projections about their future income growth, they will be in great shape in about 10 years if all the assumptions work out. The other counselor is not as popular with all their friends, seems be less optimistic and his plan is harder. He does not want them to increase their credit line. He wants them to stop spending more than they take in. He notes that their spending has gone way up in the last few years but their income has not – he wants them to go back to that spending level. And he doesn’t think that a slower rate of increased spending is the same as savings.

Compromise

Over the last few weeks, I have learned that I support terrorism, hostage taking, and those who hold a gun to the Government’s head; am in favor drilling for oil, rivers that burn, dirty air and water; am a racist; anti-education; against everyone paying their fair share of taxes; and generally an ignorant, beer swilling, gun toting, religious fanatic who only listens to my side of any argument.
I have apparently earned all of these labels not because I actually hold those opinions but because my opinions are radically different from most of those in the media and the entire Democratic Party. To be clear:
I do believe that a Government that spends 40% more than it takes in is not a supportable policy.
I do believe that there is a place for sound environmental policy. I just do not believe that that is what the EPA or the Department of Energy is doing. There is a middle ground between preserving the environment and stopping everything because there is a lizard crossing the street. And exactly what is the Department of Energy doing?
I do believe that no one should be discriminated for or against based upon the color of their skin. I also believe that when exactly the same guy tries repeatedly to kill us all, it is only reasonable and prudent to pay particular attention to guys like that.
I do believe that most teachers and other workers want to do a good job. I also believe that people should be evaluated and paid based upon their job performance and that there are some organizations that go overboard in protecting poor and unqualified workers only because they are part of that particular organization.
I do believe that everyone should pay their fair share of taxes. Whether fair share means that 50% of the people pay nothing for the privilege of voting and living in this great country while the other half make up the difference is something that needs to be determined based upon a policy more thoughtful than to “tax the rich” because they have money.
Most of all, I believe that all these issues should be debated based upon their merits. The current situation is that people I agree with present their positions – which admittedly can make your eyes glaze over – and the other side calls us names. There is no real debate between the positions – being able to hear both sides, hard as that is to do with the current media – would be a help to us all.

Sanity defined

The government borrows 40% of what it spends. One solution to living off of credit is to raise the credit limit while another is to not spend as much. The former is characterized as the reasonable thing to do to avoid an unthinkable outcome. The latter is a bomb throwing step toward economic calamity. Now that we have identified who to blame it only remains to implement the reasonable, moral and caring solution. Raise the debt ceiling for everyone: people with too much credit card debt – raise their borrowing limit; people who bought homes they could never afford – refinance and give them more cash to spend; national debt – borrow and spend. What could go wrong?

Who makes money on gas

A Newsday article notes that prices will go down 10-20 cents when the government imposed gas formulas expire for the season. Add the state/federal taxes that account for about another $.50 and the Federal printing press that is making the dollar sink and over 25% of the current price of gas is due entirely to the government. Government policy to discouraging the domestic production that could increase supply and lower the market price doesn't help much either. The price of gas is a dollar before an oil company produces a single gallon of gas, pays any of their hundreds of thousands of employees, or the small business guy who owns the station makes a nickel. The government's cut is the stable part of the price. Exxon does not make a dolooar profit on each gallon but the government does. There plenty of reasons why the price of gas is high but our government is the main one.

Debbie & Frank

Debbie and Frank are really in debt trouble and go to two counselors. The smooth talking counselor’s plan has multiple parts: increase their credit line; get money from a few strangers who have more money than they do; over the next 10 years they will have to spend less than they had planned to – more than they are spending now but less than they had planned on. Debbie and Frank are excited about this new way of saving and promise to plan on spending even more so when they cut back a little the savings are even greater. With this savings plan and the counselor’s optimistic projections about their future income growth, they will be in great shape in about 10 years if all the assumptions work out. The other counselor is not as popular with all their friends, seems be less optimistic and his plan is harder. He does not want them to increase their credit line. He wants them to stop spending more than they take in. He notes that their spending has gone way up in the last few years but their income has not – he wants them to go back to that spending level. And he doesn’t think that a slower rate of increased spending is the same as savings.

Could it Be?

The information clog might be breaking up. An editorial applauds the decreased Fannie Mae/Freddie Mac lending and concludes that we would be better off without the government in the mortgage guarantee business. An article describes the Dodd-Frank requirements for down payment and borrowing limitations related to income and other indebtedness. Ironically, these are the same lending criteria that existed for decades and were discarded by Fannie Mae and Freddie Mac in order to make it easier for everyone to own a home. Follow the trail. These agencies guaranteed the mortgages that met their non-criteria and called them sub-prime. The agencies were guaranteeing them so banks responded by making these absolutely secure, guaranteed by the US government loans. The agencies then bought the loans packaged them and sold the resulting securities that were based upon these absolutely secure, guaranteed by the US Government loans. As we are all so painfully aware, making loans with no credit criteria leads to defaults. As the loans defaulted, the securities plummeted in value and so did the derivatives which were based upon the government guaranteed securities. Increasingly, the finger is being pointed at the government’s involvement and attempt at social engineering. A new book on the financial crisis co-authored by a New York Times columnist/business and financial editor (!!!???), blames the central role played by Fannie Mae and Freddie Mac, as well as government policy that pressured banks into relaxing lending standards so that the "under represented" could buy homes they could not afford.
What is going on?