Category: Wealth

Scholarships to Avoid, and . . . College Isn’t the Best Idea for Everyone

“Now if Eb needs a diploma, he should go to college so he can become a vegetarian.” – Green Acres

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Please, calm down.  Show me where Bernie tried to touch you.

The Mrs. and I were off to Midwestia State (Home of the Fighting Red-Crested Yaks©) on Saturday to move The Boy into the dorms.  The reality is that he had left hours before us and was unpacked by the time we got there and had already managed to flirt with the girl working the dorm desk and lock himself out of his own room for the first time.  I saw the look in the eyes of dorm desk girl – “cute, but still a dorky freshman who locks himself out of his room two hours after getting a key.”

I was actually shocked they still had keys – I was expecting that they’d be subjected to retinal checks to get back in their rooms.  Until I heard that the floor had a shared bathroom.  A co-ed shared bathroom.  Imagine being in the midst of a growler when the girl of your dreams drops on by to leave the kids off at the pool?  I’ve been married forever, and I like to pretend that’s not something The Mrs. does – at all.

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I was surprised.  I was unaware that the diet of Deadpool® was entirely comprised of burning tires.

The Mrs. and I were there, really, for The Mrs. and not The Boy at all.

When The Mrs. had talked about The Boy moving away, it had started off with a matter-of-fact statement about “. . . when we drop him off at college.”

I had responded with, “Why would we need to go up there to drop him off?  He seems to be perfectly capable of carrying a few boxes to an elevator.  It’s not like we’re dropping off Stephen Hawking.”  This was, apparently, not the thing to say to a mother getting mentally ready to cope with her eldest son going off to college.  It doesn’t help that The Mrs. is also staring down the added mathematical certainty that her youngest child, Pugsley, will likewise be moving out within a handful of years.

She responded with:  “Of course we’re going.”

If you can put “icy” into a tone, this one was nearly at absolute zero.  I saw the molecules in her exhaled breath stop vibrating as they fell to the carpet and form a nice Ice-9 frost (look it up).  I could see that we’d be driving the hours required to get to Midwestia State (Home of the Whimsical Crotch Goblins®) the day the dorms opened.

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When I met Stephen Hawking, he told me that there are an infinite number of universes out there, and maybe even one where I was funny.  I responded, “Here’s a great joke:  Stephen Hawking walked into a bar.”  That one really made him mad.  Now I have to live in this Universe, where Kardashians aren’t fast food workers.

I can understand how The Mrs. felt.  It’s almost always a melancholy time when a child moves out, unless that child is Johnny Depp, in which case his parents were happy to be able to announce to their friends that their house was now aerobics-free as Johnny was now doing Pilates of the Caribbean.  I’m sorry.  I’ll admit that there were uneasy questions floating through my mind.  I thought the questions were about him, but in reality after reflecting, I realized the questions were really about me:

I thought the questions were:  “Is he ready?  Does he have the tools to go out into the world?  Will he make the right judgements?”

It sounds like those questions were about him, but they’re not.  Those questions are really about me.  A more truthful way to write them is:  “Did I prepare him?  Did I teach him enough so that he’ll be competent and safe?  Is he a good man?”

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The only thing I’m sad about is that he thinks steak tastes like chicken.

I think college is a good idea for The Boy, and I’ll get back to his specifics a bit later after Morpheus is done with him.

But I don’t think college is for everyone, and I think it’s really a horrible idea for some people.  I learned this from my association with a youth group.  I was discussing the future with one young, bright kid – he was a junior at the time, I think.  I asked him what his plans were.

“I’m going to become an electrical lineman.”  An electrical lineman is the guy who fixes the big wires on the electrical poles so you can charge your iPad© and watch Netflix® – it’s like a superhero who can chew Copenhagen®.  It’s technical work – you have to be smart.  It’s physical.  And most line failures happen during big storms.  So when your power goes out for an hour?  It’s a lineman who’s out fixing it in the rain or snow or ice or thunderstorm or temporal rift.

I stopped.  I was getting ready to give him my “you need to go to college” speech, but hesitated.  This young man had thought about it.  He loved being outside.  He hated paperwork.  He was very smart.  The average hourly wage for an electrical lineman is $30 an hour for a journeyman.  With overtime, he could be making $100,000+ a year in just a few years and live in an area near Modern Mayberry where most of the nicest houses are available for $200,000 or less.

It was a shockingly (intended) good choice.

Being an electrical lineman also offered some other benefits:  it’s not a career that you can do online.  You have to physically be there.  This is nice, so you don’t have to compete with a two billion or so people in China and India like you might if you were being a computer programmer.

This job has another advantage – it requires just enough certification that it shuts down people who would randomly try it, mainly because no matter how crispy the body is electrical companies hate to pay to have them removed.  But the young man in question wouldn’t have to compete with illegal aliens, either.

Being a lineman has a third advantage:  it is a basic service that you can’t outsource.  You can ship a factory nearly completely overseas – I’ve heard of just this happening – but the electrical infrastructure required to run the United States has to be in, well, the United States.

One final advantage:  you can start your own company, buy your own truck, and work the hours you want as a contractor to bigger electrical companies.  It’s a business where if you want to be a contractor or an entrepreneur, you can be without too much difficulty investment.

The nice thing about working with kids is they often teach you things, too.  The standard advice you give a bright kid with good values is go to college.  This is clearly the wrong advice for many kids.

A kid growing up today will face more challenges in employment than any generation in history.   Competition will take place in ways that I never had to consider during my career.  And this is after automation removed thousands of jobs from factories as machines replaced skilled workers.  In this new revolution, expertise from “knowledge workers” will be replaced by algorithms and databases that allow, for instance, computers to diagnose skin cancer at a 95% correct rate, versus an 87% success rate by actual human dermatologists.  I know it sounds bad for the human dermatologists, but I got a 0% correct rate since all I would do is look at the picture and say, “ewww, gross.”  Let’s see a machine beat that.

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Okay, maybe I shouldn’t be a doctor.

I’m not sure that there is, in the future, a truly safe job or career to go into, unless we experience Lord Bison’s Deep Fried Econopocalypse® (and if you’re not reading The Bison Prepper, you really should be (LINK)) and then the guy who makes costumes out of leather and football shoulder pads has probably got a good career ahead of him.   Owning a scrapbooking store?  Maybe not so much.

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Okay, I was going for Mad Max Mel, but this works.  I hear they worked out their differences and went to Hooters® afterwards.  Man, Jesus can put down the wings and Coors Light©.

What are the attributes of a safe job?  I mean, assuming Mel Gibson doesn’t show up at your house tomorrow?

  • Local – If you can’t do it over the Internet, that cuts out billions of people from getting that job.
  • Certifications Required – A job, like the lineman example, isn’t something that should be done by just anyone – it requires a minimum intellect as well as training and experience. Many medical jobs are similar.  I hate the way that we have, in my opinion, over-certified our world.  But you can use that to your advantage.
  • Other Bars to Entry – It used to be that you could give applicants for jobs an IQ test, weed out those that weren’t smart enough, and be fairly sure that you were getting someone who was at least smart enough (or not too smart) for the job. Now?  You have to use something that works like an IQ test, like a college degree.
  • Hard to For A Machine to Do – Blogging.   That’s hard for machines, right fellow humans?  I have been told that 93.2% of you like to hear that.

But there are ways that even “safe” jobs might be at risk:

  • Carpenter: Carpentry, in many cases, requires no certification – any illegal aliens have taken many of these jobs in certain areas.
  • Teacher: Why do we need all of these teachers?  We can get a YouTube® lecture up, and have a teaching assistant give the standardized test.
  • Store Associate:   Check out the product features on the Internet – seriously stop.  You’re not my supervisor.  Leave me alone!
  • Checkout Clerk: Self-service checkouts are pretty common now.  I refuse to use them, period, but I can see that I’m rapidly becoming a minority.
  • Johnny Depp’s Sinus Cavity Cleaner: Okay, this one is really a safe job.

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Okay, I’ll admit, she’d be perfectly acceptable working picking strawberries or in some sort of insect control responsibility. 

But there are other problems.  I maintain that too many people go to college.  In 1959, only about 45% of high school graduates went to college, and only 70% of students graduated from high school.  That’s a little less than a third of the US population.

In 2016, 84% graduated from high school, and 70% of those went to college.  That’s nearly 60%.  If you break down the math, almost twice as many people are going to college as a percentage of people in the United States.  There are only two possible conclusions:  either people have gotten smarter, or college has gotten easier.

Me?  I’m betting that college has gotten easier, since if you poke around a bit you can find that the average grade given to students at Harvard© is an A-.  It might just be my opinion, but the only thing competitive about Harvard® might be how much a parent has to pay to get a student accepted.

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See, if you build a new building on campus – not a bribe – call it Skank Hoe Hall.  But having your skank daughters get in because you’ve bribed a coach?  Yeah, that’s a bribe. Allegedly.

I’m pretty sure that the economy has no need of many of these college graduates in any role other than cashiers at Billy Bob’s Wiggle Striptease Hootenanny©.  Many of the degrees granted are not really economically valuable – 5% of degrees, for instance, are in “fine or performing arts.”  Last time I checked, we here in Modern Mayberry had our quota of mimes filled at our historical demand of zero mimes and there was a bounty on any mime caught within 5000 yards (3 meters) of the county courthouse.  There just aren’t very many jobs available in “fine or performing arts” to justify 5% of college students getting a degree in that field.  Thankfully, many of them have experience in their true field, food service.  I hear that Florida will have a degree in Pre-Barista© next year, so there’s hope yet.

One thing I did note in the hour I spent sifting through the data is that many degrees are more helpful, and, potentially more stable.  Health and medical sciences accounted for 10% of graduates, and those jobs are hard to replace with a machine.  You have to have people helping people.  Robots can diagnose, but at least for now, a doctor has to do the cutting, and a nurse the nursing, until Arnold Schwarzendoctor 2000™ arrives.

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That’s a realllllllly long thumb.

I would speculate that we have twice as many people going to college as necessary, and we could replace the expense and time wasted at college for many people simply by allowing employers to give IQ tests.  Yes, doctors and nurses need school.  But we have approximately 1,000,000% more anthropology degrees than required to maintain our civilization, and an infinite amount of Women’s Gender Studies degree recipients than required.

I advised The Boy on how he could take what he enjoys doing, and turn it into something useful.  Don’t compete with billions of people – find ways that you can provide higher value services to people in ways that have to be local and are hard to reproduce.  I think he has a pretty good plan.

Given the accelerating pace of change we’ve seen in the last two decades, I imagine that anyone starting a career in 2020 may have to make multiple changes during their life.  From what I’ve seen so far, I think The Boy is well prepared for school and the changes that he’ll see in life.  I think he’ll do fine.  It’s time to let that eagle fly.

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Unless it’s Putin’s Eagle.

Only 3% of Your Decisions Matter, or, Don’t Just Do Something, Stand There!

“We’re very lucky in the band in that we have two visionaries, David and Nigel.  They’re like poets, like Shelley and Byron.  They’re two distinct types of visionaries, it’s like fire and ice, basically.  I feel my role in the band is to be somewhere in the middle of that, kind of like lukewarm water.” – This is Spinal Tap

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Oh, I don’t need alcohol to make bad decisions.  But it doesn’t hurt.  Just ask Tiger Woods.

Life is filled with events.  Some of them are predictable, some not.  But I generally break the events that will influence the course of my life into three categories because I’m sitting in a meeting and it kind of looks like I’m actually working when I take blog notes:

  1. Certainties

Certainties are just as shown on the label – things that are certain to happen.  These are one extreme of the spectrum, for instance unless a race of aliens is intent on destroying humanity so that Bono™ doesn’t escape the Earth and infect the galaxy and drops a Moon-size batch of anti-matter into the Sun causing a solar flare that extinguishes life, the Sun will come up tomorrow.  Notice I didn’t say that the race of aliens was evil, in fact it seems entirely logical and rational and a good choice – Bono© as a trade for the rest of humanity.  Other examples of certainty:

  • Death.
  • Taxes.
  • Someone saying “Death and Taxes” when they write about certainties (at least every year since Christopher Bullock first wrote the phrase in 1716 in Ye Olde Bloge Poste on the Worlde Wilde Web).
  • Gravity.  Like Bono®, it also sucks.
  • Celebrities flying in private jets to protest global warming.
  1. Impossibilities

Impossibilities are things that cannot happen in this Universe.  Okay, it’s not a creative title, like calling your dog “dog” and your cat “cat” – and we both know people who have done just that.

The number of things that I thought were impossible were nearly zero when I was under age five or so.  Starships were only 20 years in the future.  I would own a tank.  And I’d marry Miss Roberts, my first grade teacher.  About the time I went to high school, the number of Impossible things started to climb.  I think this happens when you start experiencing disappointments in life, like the Space Shuttle.  I mean, why did humanity spend so much time trying to get to space with a ship that had the glide ratio of a brick?

I think my Impossibles peaked in my thirties.  After a divorce and NOT winning a MacArthur© Grant for my incredible ability to sleep on the couch while the kids watched Saturday morning cartoons, my view of what was possible shrank.  But as I grew older, I kept seeing the same pattern – if people tried things, they often achieved them.  There are, however, things that are really Impossible.  What are some Impossible things?

  • A Beatles® reunion.   A living Beatles™ reunion.
  • The molecules of Leonardo Dicaprio spontaneously rearranging themselves to form something useful, like a ham sandwich or a beer.
  • A good, new Star Wars® movie will be made during my lifetime.

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Is it me, or have John and George lost weight?

I think one of the really neat things about being human is the curiosity and creativity that allows us to think of things that could never, ever happen, like Johnny Depp learning to read.  It’s a great day to be alive!

 

  1. Things That Might Happen

Most things in life are neither Certain nor Impossible.  They fall into that grey area of possibility that makes life interesting.  I find it fascinating that so much of life consists of these contrasts – in between the chaos of fire Venus and the stasis of icy Mars lies, well, us.  The other day I heard an astronomer state if you take average star weight and the weight of an atom, you end up at about 50 kilograms©, whatever that is.  But the average human weighs . . . 62 kilograms®.  It’s almost like this place was made for us.

Hmmm.

Anyway, while not everything interesting happens in the middle, most interesting things happen in the middle.  But, in the interest of continuing to subcategorize, I see two types of events in that sweet middle region:

A.  Events You Can’t Influence

Sometimes, whatever’s going to happen is beyond your control.  Despite what you want or any action you might take, the outcome will be the same.  You can’t change a thing.  Call it fate.  It’s not certain that the event will happen, mind you, it’s just that you can’t control it.  Some examples are:

  • How much Oprah will weigh tomorrow morning.
  • Collapse of the global financial system.
  • Whether Ilhan Omar will join the Hair Club for Men.

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Baldness – I hear it’s more common if your family interbreeds too often . . . oh.  Sorry. H/T WRSA (LINK).

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So, this is a record – my first back-to-back meme.  Is that not MacArthur Grant® worthy?

B.  Things you can influence or control

Here is where it gets interesting.  In my option (and in my experience) most people can control more about their lives than they want to admit.  Personally, it’s scary how many things that I’ve tried to do in my life that I’ve accomplished, which makes me wonder if I haven’t aimed too low.  I’ve recently changed one of my goals to be horribly unrealistic (learn how to make a tasty pizza, or at least buy a tasty pizza) so I’ll keep you updated on the progress on that stretch goal.

But what sorts of things can you control?

  • Your weight.
  • If you shower.
  • If you smoke.
  • Your psychic power to make Taylor Swift love you using only your mind.
  • If you go broke.

Now, I didn’t say you have total control of your life, but some actions you take (not decisions you make, mind you, but actions that you take) can influence most things about your life, including how you die and when you die.

But even as beautifully written as the preceding was, it’s not the where the post is going to end up.  The point I’m getting to is, how many events that occur in your life, choices that you make, should you really worry about.

I’m thinking about 3% or less.

From my vantage point, most things don’t matter.  Examples?

  • Yellow or blue Post-It™ notes?
  • Romaine or iceberg lettuce?
  • Tom Brady’s 2015 clone or Tom Brady’s 2018 clone.

Most decisions that you make simply do not matter at all.  My personal difficulty is that I sometimes don’t process a decision like that.  I want to make the right decision so I’ll spend time researching and learning online about a purchase I’m going to make . . . of something I’ll use exactly once and then toss into a closet.  Heck, as an example tonight I’ve spent about half an hour trying to decide between one type of laptop and another.  Does it matter?

Probably not.

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What I did with the flowchart was just start with a random decision or event.  Does it matter?  I pulled out Pareto’s rule, and off the bat, 80% of decisions in your life . . . don’t matter at all.  Paper or plastic.  .556 or .762.  Drilling a hole in your head or spending time with five year old children.

That means that 20% of the events matter.  Cool.  How many can your actions influence?  I’m betting 80% of that 20%.  That’s a huge number and from my experience it seems about right.  You’re rarely a complete victim.  That’s 16% left.

Is it the effort worth it.  I came up with . . . 80% of the time, no.  The time and effort to manage every event, even just 16% of them, is a lot.  You have to let some things go, since even if it matters, it’s not worth your time to influence everything around you.

The math is simple.  97% of decisions in life you should make with either no care or minor care.  They just don’t matter.  The good news is that means if you manage and select the decision you make, you can live, more or less, the life you want by only dealing with 3%.

Why?  I find that things we think are important, that society tells us are important decisions or important actions are not.  Here’s what I’ve found:

  • We bought Stately Wilder Manor© about a decade ago. The Mrs. was living in Houston, and the house that we’d fallen in love with had cheated on us and was purchased by two doctors.  I was working outside of Houston, but we still needed a place to live, because we were going to move.  I kept looking.  I found a house.  Given that (then) the market was hot, I put in an offer.  The Mrs. had never even seen the house until the day we moved in.

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How do you get the dead hooker smell out of carpet?  Asking for a friend.

  • The last care I bought was a replacement for The Mrs.’ MUV (Mrs. Utility Vehicle). I was passing through a large city in Midwestia, stopped off at a car lot, and bought a car.  They delivered it to Modern Mayberry the next day.  Again, The Mrs. hadn’t driven or seen the new car.

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Okay, it’s not that bad.  But while The Boy was driving it some woodland critter ran straight into the side of it.  The dent does not look hooker related.

Within relatively broad parameters, most decisions, even decisions that society says are “big” decisions, don’t matter.  Which house we got didn’t matter all that much, we just needed a house.  Admittedly we are horrible neighbors, so it’s best if there are no pesky homeowner associations.

And I wasn’t like that on the first house I bought.  We must have seen dozens of houses over months until we found . . . the one.  The first car I bought, I agonized over the decision.  Until I found . . . the one.

Strangely, I didn’t spend nearly enough time selecting my first wife she who will not be named and that had a much larger impact than any house or car ever could to my life.  There’s a joke in here about test driving and rentals, but I’m just gonna skip it.

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It’s all the aftermarket add-ons that get you.

The point is not that I was young and stupid, although I really was young and stupid.

The point is:  Don’t worry.  Plan?  Sure.  Prepare?  Absolutely.  But like Pop Wilder always said, “Don’t pay interest on money you haven’t borrowed yet, son.”

97% of actions you take . . . don’t matter.  Don’t sweat them.  And don’t spend a second worrying about things you can’t change or influence.

But on those things you can?  Strike hard, like the fist of an angry god.  Never give up.  You can move mountains that way.  Feel motivated?  Good!

Now go out and get it done!  Oh, it’s Friday?

Kick back and get it done Monday.

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Okay, I did once upon a time pretend my toy Thompson submachine gun was a phaser®.  Once.

Financial Advisers, Christianity, and Elon Musk’s Hair

“It’s getting exciting now, two and one-half.  Think of everything we’ve accomplished, man.  Out these windows, we will view the collapse of financial history.  One step closer to economic equilibrium.” – Fight Club

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My financial adviser checked my balance – she didn’t manage to push me over. I’m sturdy and built low to the ground, The Mrs. says.

One of my biggest joys of having children is giving them unsolicited advice.  For example, my daughter, Alia S. Wilder texted me the other day:

The Unsuspecting Alia S. Wilder:  “ . . . also, Lars Úmlåüt (her boyfriend) and I met with a financial adviser about retirement and investment portfolios.”

The Evil John Wilder: (I Swear This Was My Actual Text Answer) “That’s like talking to a mechanic about your Gulfstream® jet.  You don’t have any money.  And this will be in next week’s blog.”

Yes, I really said that to her.  The idea of needing a financial adviser when you don’t have any money is like buying flowers when you don’t have a girlfriend, at least until the restraining order expires.  And The Mrs. was the one that christened Lars.  After he cuts his hair, we’ll have to think of another name.  Although if they get married, Alia S. Úmlåüt does have a ring to it.

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It’s rare that a picture describes a concept so completely.

But the financial conversation continued.

The Still Hasn’t Seen It Coming Alia S. Wilder:  “We have very little (money) but the financial adviser will help get us going in the right direction.  Life is going to suck financially, but you gotta live like no one else wants to, so you can have the future everyone dreams of.”

The part that I’ve italicized above is the part that scared me when I read it in her text message.  That’s nothing but pure sales pitch.  It’s a good sales pitch, too.  It sells the virtue of sacrifice now for future rewards.  And it is a philosophy I fundamentally agree with.  Deferred gratification is the key to most success – work hard now, and the benefits accrue over time.  I wrote about that here (“Be so good they can’t ignore you.”-Steve Martin Plus? A sniper joke.).  Steve Martin spent a decade learning and four years refining before he ended up in wild success.

To be great, you have to put in the time.  You have to work.  But the very best sales pitch will be like a virus – it will work into your brain.  When you have your potential client quoting you?  You have an effective sales pitch.  Back to the texting.

The Sage of Wisdom John Wilder:  “Get a 401k.  Invest in stocks.  Don’t mess with it.  Ten words.  It’s all you need to know right now.”

Alia and I had already talked about other investments – having a month’s worth of food around the house.  Being prepared for emergencies.  Having a set of jumper cables in the car.  These are small things, but they can do everything from making your life more convenient when you accidentally leave the lights on, to saving your life when that first aid kit pays off.

The Probably Getting Irritated Daughter Alia:  “We have a 401k.  We are starting the stocks.  And we’re treating investments like an expense.”

Investments like an expense?  Where did I hear that before?  Just from every financial adviser that tried to convince a Young John Wilder Who Had No Money to sign up for some sort of financial product.  Strong the sales force is in this one.  His sales technique was so good he’d managed to get a second slogan injected into Alia’s mind.

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The force commissions are strong in this one.

Not Going to Let it Drop John Wilder:  “No.  Just the 401K.  No other stocks.  Pay off your debt first.”

As someone in the “Alia owes money to” category, I think I’d be a bit irritated if my loan wasn’t being paid back while Alia was investing in Elon Musk’s latest venture, a time machine that only Elon Musk’s hairline uses.  But investing in stocks when you owe money (outside of a mortgage) is, well, silly.

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Or was it the future?  Musk’s mane mangles moments in the multiverse.

A 401k is different.

Why?  Many employers match some percentage of what you put in one.  The most common amount I’ve seen is a 50% match up to 6% of your wages.  Said differently, if you put in 6%, the company will put in 3%.  This is a good investment – you make an immediate 50% return.

Irritated As A Yak That Just Got Called A Weasel Noggin Alia S. Wilder:  “That’s what (Financial Adviser) is there for.  He works for (Company Name).”

Cool Voice of Experience John Wilder:  “No.  Don’t trust him.  No individual stocks.  Just 401k, and pay down your debt, until the debt is gone.  Then add more to your 401k.  Financial advisers are salesmen.  And this company (After Looking It Up)?  Whole Life Insurance?  STAY AWAY.”

Whole life insurance has two components – life insurance and some sort of investment.  It costs a LOT more than regular “term” life, but has the benefit of paying you back if you don’t use it.  How can I tell that whole life is a bad deal?  The salesmen get huge commissions.

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For the record, he’s also sad he got caught.

The Feeling Like Napoleon Retreating from Moscow Alia S. Wilder:  “No.  They do more than investments.  They look at the whole picture.  He said he was going for more investments if we moved forward.”

The Not Needing to be a Psychic John Wilder:  “No.  Stay away.  I’m sure he’s a nice guy, good sales patter, but you will regret dealing with people like that.”

Now As Defensive as the Maginot Line Alia S. Wilder:  “It doesn’t hurt to get information and a direction on our future.  (Company) is a Christian company for Christians to help with money management on all fronts.”

Rolling Like a Panzer Through The Ardennes John Wilder:  “Sure.  Just don’t give them any money or sign anything.  He’s not doing this for his own health or because he’s a Christian.  He’s doing it so you can help make his car payment.”

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Enough of this Nonsense Now, Has to Go Back to Work Alia S. Wilder:  “I appreciate your advice, Dad.  I love you lots.”

Won’t Let It Rest Because Apparently She Kept Thinking About It During Lunch Alia S. Wilder:  “So why are you so against investments?  If you don’t mind me asking.”

Sweaty Back from the Treadmill And Smelling Like Teen Spirit John Wilder:  “A 401k is an investment.  I’m in favor.  Paying off debts.  Also an investment.  Investments are smart, but individual stocks aren’t an investment, they’re speculation.  Stock funds before your debt is gone?  Stupid.  Using Christianity to sell a service?  Awful.”

What is an investment?  When you’re young and paying off debt, pay off the debt.  You need a financial adviser like you need a staff for your private lair underneath the volcano in the South Pacific.  And for most people, buying individual stocks is similar to gambling.  I heard one person make the comment – “I only invest in individual stocks if I can change the outcome.”  As I recall, he was on the board of several companies, so he yes, he really could change the outcomes.

The overall market is different.  It has had up years, and down years.  If I’m going to invest in stocks, I’m going to invest in aggregated stocks, like an index fund or a targeted fund, which is what I have in my 401k.  Yes, I have bought individual stocks.  And, yes, I’ve lost money on them – not enough to change my life, but enough to change my philosophy.

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There’s an eternity of good deals!

I’m not against Christian businesses – not at all.  I’m not even against Christian financial advisers – Dave Ramsey (at least on radio) talks about his faith, but doesn’t use it to sell his products.  Heck, the guy gives away his ideas on the radio daily.  Does he make money?  Absolutely.

What about Chick-fil-A©?  I love Chick-fil-A®.  The chicken sandwich is the best I’ve ever tasted, and it amuses me how people get bent out of shape that they give up a day’s worth of revenue every week because of their principles.  When I’m in a big city do I go to Chick-fil-A™ because they’re Christian?  No.  I go there because the food is great.  I go there because the employees are uniformly polite and neat.  I go there because the stores are spotless.

I’m not even against financial advisers in general – but when a financial adviser is attempting to “help” people who don’t have money invest?  I’m not a fan.  I’d prefer they charged a fee like other professionals – that’s upfront, and I think those people really are on your side.

I later called up Alia.  “Did you sign anything?”

“No.”

I relaxed.  The world isn’t short of people who want your money.  In some cases, they work really hard for it, like Chick-fil-A©.  In other cases, well, commissions are powerful motivators.

I’ll stick with the chicken sandwiches, they’re better with mayo.

Dang.  Now I’m hungry.

John Wilder is not a licensed professional adviser and you should probably think twice about taking his advice and consult with a competent adviser.  Unless you’re his kid, which you’re probably not.

Black Swans, Cute Girls from Poland, and Sexy Bill Gates

“All I want is peace – a little piece of Poland, a little piece of France . . .” – To Be or Not To Be

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These are Polish sports fans.  They were photographed at . . . oh, I’ve lost you already.

I went to seventh grade in a very small school district, I think there were, perhaps, 40 or 50 kids in my grade.  We were fairly remote, and the area wasn’t particularly well off economically so looking back, this was the end of the road for the teachers that weren’t locals.  When I was in seventh grade, I saw that my science teacher was reading a book.  Since I had ample time to read on the bus going to school every day, (Pa Wilder picked me up after football practice) and I was a pretty voracious reader.  I was always looking for a good book after I’d rolled through the science fiction section in the school library.

Young John Wilder:  “What’s that book?”

Teacher:  “Oh, this?  It’s called The Shining.  It’s pretty good.  Want to borrow it after I’m done?”

I’m sure he’d get fired today for allowing a seventh grader to borrow a book that only included cis-gendered characters in a heteronormative patriarchal un-handicapable-positive environment.  But it did start me reading Stephen King, and I read everything he wrote until he stopped snorting whiskey and drinking cocaine.  After that?  King’s nosebleeds decreased, as did the quality of his writing.  It’s probably in bad taste to suggest we start a “Get Stephen Stoned Again” movement, but if it gets him away from Twitter® I’m all for it.

Given all that, today I was amused when I got this in a text from my friend:  “The reason your writing is scarier than Stephen King is that your writing is more likely to come true.”

But reality is scary.  The future is scary.  And even though we can’t predict exactly what will happen, it’s fairly clear that we live in a vastly more interrelated society that exhibits technological wonders while it faces the challenges of a huge planetary population.  The paradox is, although humanity is more connected than ever before in history, that connection seems to have sharpened the divisions between peoples and ideology.  The dream was that communication would unite humanity.  The reality is that we don’t seem to like each other all that much.  Apparently the ultimate conclusion as we communicate in a superhuman fashion at the speed of light across the planet is that “those other guys are hooter-weasels.”  Hooter weasel wasn’t my first choice, but turd-yak© and rump-stooge© were already copyrighted by Disney™.

But back to scary:

The other day I was working out, and listening to a YouTube® video on the Polish Resistance during World War II.  Why?  I like history, and in some ways you can learn a lot about today from looking at the past, it seems that just like Albanian strippers attempting to fix a copier at an all-night hardware store, we just never learn.  I haven’t quite finished watching this video (since I ran out of treadmill) but will probably finish it tomorrow.  But one question struck me as I was listening:  what sort of change had the Polish people endured?

Warning, this video is over an hour long.  I enjoy watching stuff like this on the treadmill at lunch, because it makes me think and ignore the pain weakness escaping my body and how the English have no idea how to pronounce certain words.  Your mileage may vary.

The economy of Poland before invasion in 1939 was growing.  Like the rest of the world, the Polish income had dropped during the depression, but by 1939 it was higher than it had been in 1929.  Beyond that, between World War I and World War II Poland had greatly increased the number and quality of schools and had started flossing regularly.  Poland was doing okay.

Of course, being stuck between Nazi Germany and Soviet Russia is a really, really bad place to be.  Both countries invaded in Poland in 1939, and it was split up like a Hollywood couple’s kids, except Hitler and Stalin were mom and dad.  Yeah.

Immediately, the Poles buried rifles.  They didn’t plan for this, and didn’t have much time to prepare, so when they went to dig the rifles up later, they found that they had rusted and were useless.  As the economy of Poland was absorbed first by the Germans and the Soviets, and then by the Germans alone, Poland’s economy was shattered.  Poland’s labor was taken to make armaments, and Poland’s food was taken in large part to feed Germany and German troops.  Food became scarce.  What could be worse?  Oh, yeah, the war passing right over your country again.  When the Soviets invaded Poland the food situation eventually got better, but, let’s face it:  the communists have never really figured out the whole “feeding your people” thing.

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This is a real picture of a store in Poland during the communist years.  They actually told the people that they didn’t produce too much food, so that they wouldn’t be wasteful like the Westerners.

This post isn’t about Poland or Stephen King’s coke-filled sinus cavities.  This post is about change.  The Polish people were doing well, but then this big steam roller then proceeded to crush them, eliminate 20% of the population, and then oppress them over the next fifty years.

Did anyone in Poland predict that change?  Nope.

Massive, unexpected catastrophic change regularly occurs.  In society, the stock market, companies, and even personal reputations are built slowly, but lost in a flash.  This phenomenon is called Seneca’s Cliff, and I wrote about it here (Seneca’s Cliff and You) a long time ago.

Are there other examples of extreme catastrophic change beyond Poland in 1939?  Sure.

  • The Russian Revolution, which led directly to the Holodomor (In the World Murder Olympics, Communists Take Gold and Silver!).
  • The Depression and Housing Bubble were both examples of market crashes.
  • Myspace®. Not the company, that was bad.  But my page was just awful.
  • I could start on reputations of people, but, really, where would I end?

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Funny how times have changed.

Nassim Nicholas Taleb wrote about this phenomenon in his (quite excellent) book The Black Swan.  The really short version of his book is humans lived for tens of thousands of years in a linear world.  You could look around, and see that the height distribution in the tribe was a bell curve.  So was running speed.  Yeah, everyone who runs the 100M (3.2 miles) dash at the Olympics® can run it faster than I could when I was young.  But I could run a 40 yard dash in 4.9 seconds.  So, let’s say I could run 100 meters in 11 or 12 seconds at my peak being while pretending to be chased by a rabid Albanian stripper.  11 or 12 seconds is probably average for a high school athlete while not being chased by an Albanian.

The world record in the 100 meter dash is 9.58 seconds.

Yeah, my best time sucks compared to the world record, but the world record isn’t that far away from what I could run.  Now let’s take a look at wealth.

The average (which is pulled up by wealthy people) net worth of a family in the United States is about $700,000.  But the median (half the families above, half below) is $100,000.  But let’s use the higher figure for grins.

The best sprinter is about 25% faster than me.  Bill Gates is 14,285,000% wealthier than the average family.

To get the same percentage in a sprint as Bill Gates has in the pocketbook would require that I finish the 100 meter sprint that the world’s fastest person finished in 9.58 seconds in . . . 15.9 days.  (That’s 15.9 in metric days.)  People are simply not equipped to think about life like that, although Pugsley (my youngest spawn) does move that slow when I tell him to take out the trash.  Huge numbers and exponential quantities are not what we spent tens of thousands of years thinking about.

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What does it take to make Bill Gates the richest man in the world?  Jeff Bezos dating a floozy.  Sexy Bill Gates is for James at Bison Prepper (LINK).

How did Taleb define his Black Swans?

  • The odds would say that they’re extremely rare. Stock markets don’t collapse all at once when investors are rational, right?  Well, the odds are wrong.  Nonlinearity happens.  Investors panic in a herd.
  • Black Swans have huge consequences. The Great Depression likely led to World War II.  That’s a huge consequence.  These consequences are huge mainly due to overlapping failures – one part of the economy shuts down which pulls another with it.  And the longer a system has been forced into “stability” and not allowed to fail?  The greater the consequence.  An avalanche isn’t a single snowball – it’s a massive wave of snow.  It’s funny, but it used to be a joke that someone just making a big noise could cause an avalanche . . . and yet . . . at some point that individual snowflake is just enough weight to bring the whole mountain of snow down.
  • In hindsight, people believe it was obvious the Black Swan would happen. Why didn’t evil terrorists pilot a plane into a building sooner?

The Polish being invaded was a Black Swan.  Sure, it looks obvious now, but Britain and France guaranteed that they’d go to war if Poland was invaded.  Britain and France were completely unprepared for war.  But in hindsight . . . oh, that was the point.

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Javelin jokes?  Please spear me.

We have to live in this world of Black Swans.  Well, Bill Gates doesn’t, but you and I do.  How do we cope?

  1. Be awake. The world wants to lull you to sleep with Doritos® and Johnny Depp movies and food delivery boxes.  Don’t fall for it.  Look at the world through clear eyes.  See beyond your surroundings.
  2. Be honest. You can’t cheat an honest man.  Be honest with others.  Build real relationships. Be honest with yourself.  If you don’t understand that 40 year old you couldn’t beat 18 year old you in a 100 meter dash, you’re not being honest with yourself about your strengths and weaknesses.  Plan accordingly.
  3. Plan for what?  Don’t know.  Everything.  Anything.  Start small.  Three days.  Then Three months.  Then?  Three years.  But start.  The basics of financial survival and the basics of physical survival overlap.  Plan.  Think about what could happen.  You won’t be right, but you’ll be ready to react when the unthinkable really does happen.
  4. Remember, higher consequences are less likely. A fistfight is more likely than a gunfight which is more likely than global thermonuclear war.  Hurricanes are more common than civilizational collapse.  But the odds of civilizational collapse might be much higher than you think.
  5. Understand that the inevitable is . . . inevitable. You’re going to die.  The sun will come up tomorrow.  The Cubs® will never win the World Series™.  Oh, they did?  2016?  I must have been sleeping.
  6. Have a rainy day fund. The rainy day fund isn’t always in dollars, though dollars are super nice.  It can be a pantry full of food you eat.  It can be a massive safe filled with rare PEZ® dispensers.  It can be gasoline in gas cans in your garage, propane in your propane tanks.  Pop Wilder always said, “It doesn’t cost anymore to run off the top half of your gas tank.”  Build slack in your life, in your time, in your supplies.

Even in the darkest days, there is hope.  For Poland, it was an electrician who wanted workers to be treated well, and who also didn’t like communism.  Lech Walesa founded the labor union “Solidarity” in Gdansk, on September 17, 1980.  A year later over 30% of the Polish workforce belonged to Solidarity.  In the end, Solidarity forced the Polish government in 1989 to allow the first free elections since the 1930’s.

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Never underestimate the power of the ‘stache.

Shortly afterward and absolutely related to Walesa’s work?  Another Black Swan, the collapse of the Soviet Union brought about in part by Lech.  A Polish electrician helped bring down a superpower.  Okay, let’s be honest, a Polish electrician and $10 million in covert funding from the CIA.

Thankfully the CIA got that $10 million – the Pentagon would probably have bought, what, 16 hammers with that?  The Pentagon spending wisely?  Now that’s a real Black Swan.

Social Security Won’t Sink Us. But The Ship is Still Going Down.

“Here comes an overweight cat with dollar signs for eyes and a hat that says “Social Security” pouring a bucket that says “Alternative Minimum Tax” over a sad Statue of Liberty holding a “democracy” umbrella.” – Family Guy

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There’s this joke I heard about Social Security, but no one will get it.

When I was in junior high, our history class ended up with a long-term substitute teacher, Miss Vargas, for over a month.  Most substitute teachers just handed out word-search puzzles where you tried to pick out names of conquistadors, Thanksgiving foods, conquered Mayans, and famous cats that belonged to the Mayflower Pilgrims.  Since Miss Vargas had us for weeks, however, she actually had to teach.  Thankfully, she had a lesson plan.

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Not an original.  I could not resist.

She was a nice substitute teacher so our class didn’t beat up on her that much.  We could tell, however, that, whatever her degree was in, it wasn’t history.  Given the time and place I was going to school, it seemed like she was likely a chemically-damaged refugee from the 1960’s, and likely a former Leftist hippy.  Since we had caught her on some (rather) basic mistakes about American history, we weren’t shy about questioning the things she said.

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Not to mention when Abraham Lincoln “freed the penguins, dude” after signing the Treaty of Ghent at Woodstock.  At least class was interesting.

The lesson (at some point) took us to the New Deal.  The format of the homework should be familiar to anyone who was in school when mimeographs were a thing (look it up).  There was a term, and then the student was supposed to write down the definition.  It was a fancy way to force eighth graders to learn to skim texts for key words written in bold.

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But the smell . . .

One of the terms was Social Security.  I dutifully looked through the text until I found the boldface words Social Security.   In it was the definition that it was (more or less):  An insurance program founded to provide benefits to retired and disabled people.

The teacher, not feeling like grading the homework, decided to go through the definitions with us.  After Social Security she wrote on the board, A program created to redistribute wealth in the country.

With all of the righteous indignation an 8th grader who had fully consumed the Kool-Aid® of the Official Story™ of the Government-Approved© textbook, I proceeded to correct Miss Vargas.

She didn’t back down, and maintained that was the purpose.  Obviously, the event was significant enough that I still remember, and as I grew older I realized that, well, the burned-out hippy was right.  Social Security is a wealth redistribution scheme.  Heck, you can tell the program is socialist – it’s right there in the name.

The program was started in the depths of the Depression and rewarded those who hadn’t paid in with benefits they hadn’t earned.  I’d whine more, but that happened 80 years ago, so it’s like Madonna complaining about her virginity – that ship sailed a LONNNNNNNG time ago – nearly as long ago as when the Japanese bombed the Nina, the Pinta, and the Santa Maria at Pearl Harbor.  I know that you’re expecting that this is some sort of rant about how Social Security needs to be taken down because it’ll wreck the economy.  It isn’t a rant, and Social Security won’t wreck the economy.

According to the latest data I could find (there’s probably newer, but 2013 was close enough and I’m travelling) but an average couple, making an average wage paid in about $600,000 in Social Security taxes during their career and would receive roughly $600,000 in benefits – the system was in balance.  Of note, it’s kind of cute because the graphic assumed it was a man married to a woman and not an immigrant trans-porpoise which I understand is now required in California, as long as the porpoise signs a pledge to drive a Prius® and not to use straws.

Ahh, nostalgia for simpler times.

Social Security was roughly in balance in 2013, and could be put back into balance fairly easily with minimal effort, even though we’re facing a demographic bulge as the boomers retire.  As long as we can convince them all to take up chain smoking and they decide that anti-chemo is the new anti-vax, we’re fine.  Theoretically, there are the accumulated savings that Social Security has had during all of those years it was in surplus, but the reality is that all of those funds are just IOUs from Congress sitting in a filing cabinet in West Virginia in a converted National Guard Armory behind Buddy’s Chicken and Black Lung Shack®.  Doris has the key.

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It might look nice, but it still smells like the DMV and low motivation.

Yeah, the money going out of Social Security has already exceeded the money going in to Social Security, but it’s manageable.  A few tweaks to the tax, and a few tweaks to the benefit (two-for-one coupons at Burger King™ instead of money every other month) and it will work out.  Social Security, despite being a piggy bank continually raided by Congress for my entire life, won’t hurt us, at least not by itself.

That’s the good news.  I fully expect that if the only major obligations that the government had were defense, transgender reassignment surgery, and Social Security, we’d be fine.  Heck, even welfare for dachshunds that can’t find a job because of terrier privilege wouldn’t break us.  Even if Congress approved the Ocasio Cortez Guided Missile©, which is designed to approach every target from the Left, has a warhead that does nothing but make babbling sounds, and costs a billion dollars a missile, we’d be fine.

What will break us?

Medicare® and Medicaid™.

Those are the M&M®s that will crater our financial system.

From the 2013 data, the average couple could will pay in about $110,000 in taxes during their lifetime for Medicare, but will take out nearly $400,000 in benefits.  Where does that benefit come from?  I’d say our tax dollars, but let’s you and I be real – not one dime of deficit spending has ever come out of your pocket or mine directly in taxes.  It’s all borrowed into existence at this point.

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I was going to save this graph for Halloween, since it’s scarier than most zombie movies. 

From this projection, you can see that by 2024 Medicare plus Social Security will make up 12% or so of the GDP.  Add in 2% for Medicaid costs, and you’re up to 14% of the GDP.  Add in 4% for the projected interest payments due on the national debt, and that’s 18%, folks.  That leaves 2% at most for all of the rest of the spending on the economy before we run out of tax dollars.  But the rest of the spending (on things like defense) generally runs about 10% of GDP.  Through the magic of math, that means that we’ll need another 10% of GDP.  Just raise the taxes, right?

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Even during the “90% tax rate” 1950’s, the proportion of the GDP taken in taxes wasn’t any higher than today and resulted in more loopholes than there are bacon-wrapped shrimp at a congressional lobbyist’s party.

That means the Federal government spending alone will consume 30% of the GDP, of which at least 10% will be deficit spending.  Given a projected GDP of $26 trillion in 2024, that is an annual deficit of $2.6 trillion.  The deficit this year is projected to be $1 trillion or so, which is more money than some people make in their entire lifetime, so imagine one 2.5 times larger.

Through some sort of magical incantation worthy of Houdini’s proctologist, money has been pulled out of somewhere (The Worst Economic Idea Since Socialism, Explained Using Bikini Girl Graphs) and hasn’t created massive inflation.  Yet.  I guess that in Zimbabwe they managed to just print money like we’re doing now to get out of the problem.

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See, you too can be a trillionaire!

So, in the end, Miss Vargas was right.  Social Security was the start of a program that will do a great job of income redistribution, from a wealthy and prosperous society, to a society where everyone can be a trillionaire, and a good nickel cigar only costs a few hundred billion dollars.

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Thankfully Lincoln posed for this after getting back from Woodstock and before he retired to Gettysburg to make movies with George Lucas.

Black Holes, Money, Population, and 2050

“Using layman’s terms:  Use a retaining magnetic field to focus a narrow beam of gravitons.  These, in turn, fold space-time consistent with Weyl tensor dynamics until the space-time curvature becomes infinitely large, and you produce a singularity.” – Event Horizon

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I tried to explain the budget to my ex-wife, but she couldn’t grasp the gravity of the situation.

Right around the year 2002, I first heard of a geophysicist named Didier Sornette.  Sure, you say, with a name like that, he’s French, how smart could he be?  Well, let’s get this straight – I still blame the French for cigarettes, Leftism and the metric system, but Sornette is an original and first-rate thinker, even though the actual pronunciation of his name is probably “Dipstick Snort” because the French haven’t in the last 1600 years mastered spelling a word with any relationship to the way it is actually pronounced.  In addition to Sornette, the French gave us Sophie Marceau, so there’s something they did right.

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Even though Sophie Marceau played a villain, Bond© thought spending time with her was 00heaven.

Sornette is a geophysicist by degree.  He initially studied the physics of earthquakes.  Earthquakes, Sornette noted, don’t come about due to any single failure, but as a result of the microscope failure under pressure at LOTS of different places that at some point becomes critical.  The pressure builds up, and it’s not the first little crack in the rock, but rather the aggregate cracking that eventually releases the stress.  It does that all at once.

Sornette thought that he could use math to describe the behavior of rocks, and model it so he could understand earthquakes better.  He worked for twenty five years on doing this, and found that there was a mathematical “signal” was present before the earthquake occurred.  It wasn’t useful for predicting exactly when the earthquake would occur, but like everybody with a new tool, Sornette looked around and wondered where else it might be applicable.

Sornette looked at the financial system, specifically stock markets.  He noticed that stock market crashes looked a lot like earthquakes.  And, unlike earthquakes, financial crashes could devastate the world globally.  He switched his focus to that, using math to model the financial bubbles that led to the high values that then came crumbling down when the market finally crashed.

In 2001, he decided to take this modelling a step further.  What if, he asked (along with fellow researcher Anders Johansen) we try to model not only the financial system, but world population, too?

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Okey, I’m betting Anders Johansen-a duesn’t ictuoelly telk leeke-a zees. Prubebly. Bork Bork Bork!

The result was the paper Finite-time singularity in the dynamics of the world population, economic, and financial indices, or FEEnite-a-time-a singuolerity in zee-a dynemeecs ouff zee-a vurld pupuoletiun, icunumeec, und feenuonceel indeeces in Swedish.  That’s a really long title that could have been shortened to, Yo, something weird is coming, and I don’t mean your mother.  You can find a copy of the paper here (LINK).  It shows a May 29, 2018 date, but I don’t think there’s been any changes to it since its initial publication in late 2001.  I’ll warn you – there’s a wee bit of math involved.

The paper starts with the statement that for most of the known history of the human race, our growth rate hasn’t been exponential, it’s been far faster than that.  It took 1600 years to go from 300 million people in year 0 Anno Domini to 600 million.  To get to a billion total only took 204 years.  Double to two billion?  We did that in 1927.  Three billion in 1960, four billion in ’74, five billion in ’87, six billion in ’99, and seven billion in 2011.  Now as I write this in 2019?  7.7 billion people.  And only forty people are friends with you on Facebook®.

What allowed this population growth?  Knowledge.  The revolutions in agriculture (the first one, which I wrote about here:  Beer, Nuclear Bikinis, and Agriculture: What Made Us Who We Are), industrial, fertilizer, medical, and information have allowed the population growth to accelerate like it has.

Sornette and Johansen studied several data sets.  Population was one set, and another was the economic growth rate of the United States, as measured by the stock market.  Even though the Dow Jones Industrial Average© (DJIA) didn’t exist before Dow married Jones, several economists have created data on what the data might have looked like.  Is that a bit of a guess, like your mother’s weight since there aren’t scales that big?  Sure.  But, as we will see, it might be close enough.

Math is funny.  When you divide something by zero, you get infinity.  Several mathematical functions that describe things going to infinity do exist – we call those singularities.  The funny thing is that they appear to exist not only mathematically, but in real life as well.  They have real properties that we can predict, measure, and see.  One popular example of a singularity is the black hole.  Some scientist said, “Okay, gravity sucks, like your mom.  But what if something had so much gravity that it trapped even light, like your mom?”

That concept blew their minds, but it was there in the math in 1916 when Karl Schwarzschild solved Einstein’s equation and divided by zero.  A black hole is a singularity based around gravity – where gravity is so intense that we have no real understanding of what happens inside, like God divided by zero, liked what he saw, and said, “Yeah, this is the ultimate practical joke.”  But singularities aren’t limited to stuff that would only interest starship crewmembers.  Other singularities regularly occur in physical systems.  Earthquakes.

Stock market crashes.

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A scientific discussion of gravitation inside a black hole.

This wasn’t the first time someone calculated the date of a singularity based on population.  In 1960, the prediction was published in the journal Science that the population singularity would hit on (somewhat tongue and cheekily) Friday, November 13, 2026.  Didier and Johansen relooked at the data, and came up with an equation that they felt gave a better fit.

Their date for the singularity?  2052, +/- 10 years.

They then looked at the data (keep in mind, this was in 2001) and modeled the behavior of the DJIA©.  What did they find?  A singularity in 2053.

That was too close for coincidence.  Two different data sets show the same predicted end date?

Thankfully, Sornette and Johansen are wrong, right?  They certainly didn’t predict that the DJIA™ would be as high as 27,000 in 2019?

In fact, their prediction (in 2001) was that the Dow would hit 36,000-40,000 by 2020.  They did leave some weasel space, noting that, “. . . the extrapolation of this growth closer to the singularity becomes unreliable . . .”

It’s say that they were pretty close, and far closer than I was in the year 2001 when I would have predicted the aggregate stock value of the DJIA© in 2020 would be worth a less than a handful of ramen noodles and ten rounds of .22 ammo.  So they were far closer than I was.

One thing Sornette and Johansen noted was that the minor ups and downs would be of less consequence the closer we move to the singularity point.  What happens each week is less important than the overall trend, so the data errors associated with “creating” a Dow Jones™ index before there was one probably isn’t too much of an error.

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Here’s 100 years of stock market data, now with snarky comment. 

Another conclusion of the equations is that population, technology and wealth is intertwined.  The number of people that the world can hold is very much tied to technology.  When modelling prehistoric population, no fewer than three technological ages – have to be mathematically introduced:  hunting, followed by farming, followed by primitive technology are required to accurately model the actual population.

But when these intertwine, does the increased population lead to the technology, or do they feed on each other causing an explosion?

They feed on each other, causing an explosion in technology and population and wealth.  More people lead to more wealth.  More people leads to more technology to feed people which leads to even more people which produces more wealth which leads to . . . more people.  The end dates are similar because the functions of wealth and population are related.  You can’t have the super-exponential growth without the interactions.  Sornette and Johansen came up with approximately 2050 for the end date.  Ray Kurzweil (futurist) predicted the technological singularity would hit around 2045, which is pretty close.

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Bill Gates gave up lap dancing and stripping after pulling a hamstring at a bachelor party, and he had to settle for his second love – computers.

But what happens next?  What happens if and when the singularity hits?  The authors indicate we’re probably in it a transitional phase already – the population growth rate peaked in 1973, and so did the world per capita energy use.  Sornette and Johansen came up with some silly ideas of what’s next, but let’s be real:  no one can predict what happens after a singularity – dividing by zero changes every rule.

We have no idea what happens inside a black hole.

I know that many of you sense the same thing that I do – we are changing at a pace that is already fast but that seems to accelerate:  it’s faster every year.  This is the case, and I don’t anticipate that things will slow in the next decade or two.  Beyond that?  It’s anyone’s guess.

Oh, and if you’re wondering what happened to Didier Sornette?  He runs a group called the Financial Crisis Observatory in Zurich, where they try to observe financial budget growth in real time.  It’s here (LINK) and worth a few minutes of review.

So, if they’re right, it’s the best time to be in stocks, at least until the singularity occurs, the population collapses and the robots decide that to get rid of their pets . . .

Dow chart from here:  (LINK)

Bikini Economics, Guns, and the Problem with Free Stuff

“Good job, isn’t it? Type something will ya, we’re paying for this stuff.” – Ghostbusters

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I like guns.  And butter.  Especially cocoa butter.  Admit it – you’ve never enjoyed economics more.

Economics means choices.

One choice presented by Marxist economics professors to hung-over sophomores in college is between “guns or butter.”  This is a classic economic model.  In it, a choice is presented:  produce guns for defense, or food for the people, or another shot of Jägermeister© before Calc 201.  I added the Jägermeister® for the sophomores.  No one should have to learn 3-space vector calculus sober.

The idea is that there is some balance where government can feed people just enough so that they can make guns for beautiful Marxist bikini soldiers to take over the world with love and kindness and AK-47s.  In this fable, once the world chooses peace (that means Marxism), guns will no longer be produced and the glorious workers will now luxuriate in a worker’s paradise.

These are the deep thoughts of a dimwitted socialist like Kamala Harris, or of an overly caring 11 year-old who is earnestly trying to solve the world’s problems.  But I repeat myself.

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Don’t be mean to Kamala.  She already enough difficulty explaining to her husband why she’s in the top results for “slept her way to the top” on a Google® image search (this is true).

Just because Marxists were wrong about economics doesn’t mean that economies that there aren’t economic choices to make.  There are.  The biggest actual economic choice to make is whether to spend the output of that economy on building additional productive capacity or on Free Stuff.

Building additional production is investment in the economy.  Sure, Leftists like to use “investment” as just another word for Free Stuff, but investment, by definition, produces a return.  In the case of investment in an economy, after the investment is done the economy produces more than it did before.  Instead of dividing a finite economic pie between guns or butter, the genius of investment is that it creates a bigger pie for everyone.  By definition, that’s a win, because it also means more guns for everyone!

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There is a time to tell the truth, and a time to lie.  If she’s holding an AK, it’s time to lie.

This was self-evident in Western Civilization during the Cold War.  We picked the strategy that we invest in our economies so that they became larger, and we’d defeat Communism by out producing them.  In order to do that, we increased freedom of the free market so that instead of handfuls of production bureaucrats and commissars guessing what should be produced, millions of free people experimenting in an open economy would make that choice.  The winners were selected by the market, and even when things like the Hula-Hoop® or Justin Bieber became wildly popular, industrial capacity was increased all across Western Civilization (and Japan, which had largely adopted all of the winning parts of Western Civilization).

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I would try to Hula Hoop©, but last time the neighbor called an ambulance because they thought I was having a seizure.

We allowed this to guide our military spending, too.  Multiple companies competed to produce new jet fighters that were more capable, missiles that were more accurate.  The technical prowess of the military came not from a top-down dictate, but from the companies competing to produce better defense products.  Sure, some of them were horrible, but most of our equipment and doctrine was better than the Soviet stuff.  How much better?  Ask Saddam Hussein.

As the focus of our economy was growth, the economy grew.  How big did it grow?  It grew to the point where Reagan could consciously bankrupt the entire guns and butter Soviet economy through pretending that the Star Wars™ missile defense was going to make intercontinental ballistic missiles obsolete.  The economy of Western Civilization was such a potent weapon because it harnessed the ingenuity of everyone through capitalist incentives and rewards.  The system of capitalism was so obviously successful that China®, Inc. decided to copy it for their economy and get rid of the silly Maoist collectivism.  Keep in mind, capitalism does not mean freedom.

Economies still have limits.  There’s a maximum amount of “stuff” that the economy can produce, and certainly there’s a limit based on sheer physics, if nothing else, though we’ve yet to see it.  The real choice isn’t guns or butter, it’s investment versus Free Stuff.  It used to be that money mattered, but that was in the time before Modern Monetary Theory (The Worst Economic Idea Since Socialism, Explained Using Bikini Girl Graphs) fans tossed bottles of Jägermeister© into Congress and told ‘em to spend as much as they wanted.

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If Venezuela had a dollar for every time giving out Free Stuff worked, they’d have zero dollars.  Oh, that’s exactly what Venezuela has.  Never mind.

What Free Stuff do the Leftists want to toss out?

  • “Free” Healthcare – for everyone. Including illegal aliens.  You might think that they don’t give it away now – they do.  A pregnant illegal alien show ups to have a baby?  You get to pay for that right now.  I guess the good news is you don’t have to change it’s diaper.
  • “Free” Daycare – for everyone. Why?  Because who could be better at raising your children than the state.  They do such a good job at the DMV.
  • “Free” College – for everyone.  That kid that sat behind you with his finger up his nose, who talked about how he wanted to ride a tyrannosaurus on Mars?  When he was a senior in high school?  Yeah, he gets free college, too.  Although riding a tyrannosaurus on Mars does sound cool.
  • “Free” Income – for everyone.  Why not give everyone $1000 a month for free.  It won’t distort the economy at all.
  • “Free” Reparations – not for everyone. People who were never slaves would get paid by people who never had slaves, for the sin of slavery.  Makes about as much sense as the rest of this list.
  • “Free” Housing – just not in the gated communities where Congressmen live.

Oh, and don’t forget regulations, since regulations is another way to give Free Stuff.  They take freedom from the economy and create winners and losers.  The Green New Deal is an example of this – the idea of the Green New Deal has nothing to do with the environment – it’s all about creating a socialist economy.  In the words of AOC’s advisor:  “Do you guys think of it as a climate thing?” Saikat Chakrabarti asked. “Because we really think of it as a how-do-you-change-the-entire-economy thing.”

Regulations are used to change the economy.

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Take a look at all of the innovation spawned by Communism!

At some point Free Stuff will grow to encompass the entire economy leaving nothing for productive growth.  Ever notice that every Communist economy freezes at the technology level (outside of military technology) that existed when it went Commie?  Cuba is a great example, what with all of the vintage 50’s Ford® and Chevy© rust buckets and fine Soviet cars they have on the streets.  If only they would have waited until the 1970’s to go Communist they could have had Ford© Pintos™.  That would have made driving exciting!

The same thing happened in Venezuela.  PDVSA was a very profitable oil company before Hugo Chavez gutted it to provide Free Stuff to the Venezuelan people.  Now?  PDVSA is deeply in debt and incapable of producing as much oil as it did in 1998, despite having 77.5 billion barrels of reserves.

Yeah.  Free Stuff can make a country bankrupt.

The nice thing about this concept is that it also applies to individuals.  Every day each of us has a choice:  do we work to make ourselves better, or do we goof off?  The choice is an important one.

Do you invest time in increasing your capabilities every day?  Do your work to make yourself better?  I mean, really work?  Take Steve Martin’s advice – “Be so good they can’t ignore you.”  (“Be so good they can’t ignore you.”-Steve Martin Plus? A sniper joke.)

You have the choice.  And time is running out.  And I’m certain you can’t afford Free Stuff.

Sushi, Strippers, ATMs, Sears and Me

“Let’s go get sushi and not pay.” – Repo Man (1984)

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I prefer my 7-11® sushi with a side of WD-40® and a banana-bacon-shrimp Slurpee©.  Nothing says great sushi like sushi bought at a store where you can get gasoline and lottery tickets!

On Sunday afternoon I was finishing up work on the last post (The Bridge on the River Kwai Moment), and sitting at the dining room table with The Mrs., enjoying air conditioning and some coffee.  The Boy and Pugsley had hatched a cunning scheme whereby they were going to go into town to buy food, probably 7-11™ sushi.  Yes, I know, but when you live in Modern Mayberry sometimes 7-11© sushi is the only sushi if Wal-Mart® sushi is sold out again.

I assumed the position of the First Bank of Dadâ„¢, and rummaged through my wallet for cash.  Looking, I had a ludicrous number of single dollar bills – $16 in ones.  “Okay, guys, hope you don’t mind ones.  Here is $15 in ones, and a $10 and a $5.  That should keep you in raw fish and botulism.”

Pugsley laughed, “It’s like Dad went to a strip club and got too many ones from the ATM!”

The Boy stopped and immediately defended my honor, “What are you talking about?  Dad would never, ever . . . go to an ATM.”

That’s a direct quote.  Thanks, pal.

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I think if I were going to be a stripper, I think I would use the name Brax Thünderhyde, and dress as a construction worker.  Probably a building inspector – they’re sexy, right?  I hear chicks did clipboards.

This really happened, nearly word for word.  The Mrs. immediately started laughing, as did I.  I hadn’t been to an ATM since college, when I determined that an ATM was just a hole in your bank account that your money leaked out of.  When I was about 20, I found out through bitter experience that either I didn’t have enough money, discipline, or intelligence to have an ATM card, so I cut it up.  My life has been far better since then.  So, yes, The Boy was right, I’ve been to a strip club more recently than I’ve been to an ATM.

The ATM card was my first exposure to the concept that banks were certainly not on my side – I wasn’t their friend, I was simply a way for them to get fees.  ATM cards were a way to charge me to get my own money – I’d pay a $1 fee for $100 in cash.  That’s an immediate 1% for the privilege of using my own money, on those rare occasions that I had $100.  In the far more realistic case that I was pulling out $20, it was the same fee for $20, so that’s a 5% fee.  The good thing is that I could also check my balance at the ATM.

I was in college and could do calculus, but I certainly wasn’t smart enough to do basic subtraction.  Take $21 out of your account too many times?  End up with negative numbers in your bank account.  That led to the really fun set of fees – charges for having less than zero money.  Like the lottery, bank fees are a tax on bad math and poor impulse control.

After I had to pay overdraft fees the second time, I cut up the ATM card.  If it was Friday and I needed cash for the weekend?  I’d go down to the bank and cash a check.  That was it.  You can’t use an ATM machine if you don’t have a card.  This had two good effects – I had to plan how much I was going to spend on Coors Light® for the weekend, but, once I ran out of money, I had to stop spending.  No choice, no poor willpower.  I had to stop.  And if I had to check my balance without an ATM?  I could have a friend shove me really hard.

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But dumping the ATM card was a good one.

I haven’t had an ATM card (or even a debit card) since then, and don’t think I’ve paid a fee to a bank for anything other than mortgage interest in almost two decades.  I learned a big lesson from using an ATM: to the bank, I was the commodity.  I was nothing more than ATM transaction fees and overdraft fees.  My bad math paid their salaries.

That realization made me look around and observe how other companies viewed me.  I realized that entire businesses have been built around using consumers as commodities.  In the 1990’s Sears® attempted to get every financial dollar conceivable out of a consumer short of turning them upside down and shaking them to see if any singles were left over from the strip club would fall out.  How did Sears do this?

  • You could buy your clothing, hardware, crib, bed, refrigerator and lawnmower at Sears®.
  • You could also get your auto and homeowners insurance from Allstate©, which was owned by Sears®.
  • You could buy your house from Coldwell Banker Real Estate©, also owned by Sears®.
  • You could invest your spare cash with your broker at Dean Witterâ„¢, also owned by Sears®.
  • And anything you didn’t buy at Sears®, like Coors Light®? You could charge everything else with your Discover© Card – also owned by . . . Sears®.

When (in the late 1990’s) I realized that Sears® at one point or another owned all of those companies, it became clear to me that Sears® was attempting to get a piece of every dollar that I could spend that wasn’t given to directly to a mortgage lender.  They then sold off these businesses, and have been very successful since then:

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I kid.  Sears® remains every bit as relevant today as fax machines and slide projectors.

It was around the same time that I first heard the word “monetize.”  Taken literally, it means, “make into money,” and an example is what the Clintons did with the presidency and Jeff Bezos’ girlfriend did with Jeff.

But back to me.  It was the late 1990’s and a friend of mine had moved into the financial side of the business we were working at.  She mentioned that they were going to “monetize” the Werewolf Repellent® that our company made by selling it while it was still in our warehouses, and then lease the warehouse out to somebody else and rent back the space from the people we leased the warehouse from to store the Werewolf Repellent™ that we’d (by then) sold to someone else.  Our salesmen would (eventually) sell the Werewolf Repellent© to yet a different person, but the money would go to the person who now owned it with a cut to the person leasing our warehouse from us.  It was a way to make money without having to actually sell anything to a pesky consumer.

To me, the scheme seemed unnecessarily complicated, like trying to play a trombone using a vacuum cleaner, a live chicken, a brick, and a purple condom.  It was explained to me that this was a way that our Werewolf Repellent© could make money for us even when it was sitting in our own warehouse not repelling even a single werewolf.  I think they gave up on the idea when they found that the only money we were making from the scheme was due to accounting irregularities and by saving aluminum cans from the employee lounge.

When she was describing the scheme, I nodded and mumbled “okay” and pretended like I understood what she was talking about, even though I still didn’t get it.  But it did spark another thought.  If we could monetize our Werewolf Repellent© that was just sitting in a warehouse, then what was Sears® doing?  It was pretty simple.  They were attempting to monetize me.  I now had a word for it.

Capitalism works best when people look for ways to create better service for you so that you will give them your money.  This is the power of capitalism – people competing to make you happy.  This provides a springboard for innovation.  It provides a reason for people you’ve never met to cooperate with you to allow both of you to meet your goals.

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And I hear that their diet plan works great, too!

A rule of economics is that the more indirectly you do something, the easier it is.  If you had a rock to break, you could hit it with another rock until it broke.  It’s the simplest way, but it’s also the hardest.  You could get a steel hammer to break the rock, but now you need find iron ore and make the steel and form it into a hammer.  Much more efficient, but much more indirect.  Heck, you could create an entire chemical laboratory and make explosives, and taking your hammer and a steel chisel and put a hole in the rock, and then blow it up.  That’s the easiest, but it is the most indirect method yet.

Just like my bank tried to do when they created the ATM, the coming trend is to monetize cash.  It’s harder to remember to go to the bank on Friday to get cash than to get cash, anywhere, at any time.  From the standpoint of Wall Street, cash sucks.  If I want to go buy a six pack of crotch weasels and I use cash, the only people getting a cut are the crotch weasel store and the government – crotch weasel sales are taxable in Midwestia.  Governments have this monetization thing down.

Don’t get me wrong, there are a lot of products I’d miss, if they disappeared tomorrow, but monetization is also control.

  • Appetite: grow your own versus a buying food at a supermarket
  • Money: cash versus a credit card. Every credit card requires fees.
  • Emotion: Twitter® versus not being irritated at everyone.
  • Envy: Facebook© versus just being happy being you.
  • Attention: Netflixâ„¢ versus a book or this fine blog.
  • Lust: Ruffles®.  You know you want some.

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Okay, that might be an extreme solution.

Don’t think monetization is control?  What about EBT cards?  Legislators have even figured out how to give banks a share by monetizing poverty.  What happens if the EBT cards shut down?  Yup.  Monetization is control.  Ben Hunt has a good post (LINK) on how Facebook® is attempting to monetize money yet again to destroy cash (and Bitcoin) and give governments complete surveillance of every financial transaction – and Hunt thinks that it just might work.  (H/T Remus, at the Woodpile Report (LINK) – if you’re not reading the Woodpile Report – you’re missing out.)

If monetization is control, that means that if it can be monetized, it can be weaponized.

  • Stop the food – without a farm, you’re hungry.
  • Deny you credit, cancel your card – you’re not able to rent a hotel room.

Okay, the world would likely be better off without Twitter©, Facebook™, and Netflix® (you’ll pry the Ruffles© from my cold, dead fingers) but what would we do with our time?

Go to strip clubs?  I know you’re certainly not going to catch me near any ATMs . . . .

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The Funniest Post You’ll Ever Read About 401k’s.

“When I turned 14, I took fiduciary responsibility for my mother’s 401K.  We discussed it over Italian food.  I had my first espresso, it kept me up all night.  I fell asleep at dawn for five minutes and had a stress dream about the house burning down.  Pretty good birthday.” – American Dad

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The ear bud is playing a tape that says – in/out, in/out, so she doesn’t forget to breathe.

I was driving with The Boy back to Stately Wilder Manor on the way back from a fast food restaurant where he had consumed 3,000 calories out of his 10,000 daily calorie requirement.  That’s one thing I miss – I was the same when I was his age, but now if I look sideways at a bag of Ruffles® the button on my jeans has a high chance of becoming a weapon outlawed in California due to velocity alone.  Soon enough there’ll be a waiting period for Chips Ahoy™.

Out of nowhere, The Boy asked, “Why on Earth would anyone have a 401K?”

I’m used to random questions by The Boy at any point in any conversation.  In the middle of discussing the economics of a thorium-based fusion reactor, he’ll pipe up and ask, “Do you think fish ever get tired of eating seafood?  Oh, and what if we fed tuna mayonnaise, would that skip a step?”  Bonus points if you can identify the two movies those questions came from without using the Internet.  As The Boy is getting ready to go off to college, I suppose it makes sense.

First you get the khakis, then you get the job, then you get the girl, then the mortgage, then the divorce because your wife doesn’t agree that PCs are better than Apple© products and then you retire bitter and alone.  So you might need a 401k.

See, The Boy gets the “thinking too far ahead” thing from me.

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Admit it – this wasn’t just me.

I realized that it would be a fair topic for a Wednesday post, and probably a moderately fun one, too.  If you have a 401k, or are retired, I know that you’re thinking, “Why would I want to read about a 401k, anyway?”  Because it will be funny.  I promise – I’m a trained Professional Humorist and Certified Duck Yodeler.  You’re professional when people pay you to stop doing something, right?

401k’s aren’t taught in school, probably because no one would be listening, which still doesn’t explain why they have Band.  The advantage of being 16 is that you are immortal, and your entire lifetime is spread out before you.  A 401k?  Might as well spend time teaching about the best types of denture adhesive or why candy bars don’t cost a dime anymore.

But you’re not 16 anymore, at least not according to your FBI profile, so I can keep discussing 401ks without your mind wandering.  At least too much.

There are basically three types of retirement plans:

  • Have Very Wealthy Parents
  • Be a Part of a Defined Benefit Plan
  • Contribute to a Defined Contribution Plan

I prefer the first option, as should you.  Sadly, my parents were only of the “comfortably well off” sort rather than “mind numbingly” wealthy.  They selfishly managed to spend all of their money on themselves doing things that they liked.  All they left me with was years of love, encouragement, good advice, help with a college education, wonderful memories, and times just tough enough to build the character I needed.  They were awful.

Okay if your parents were losers like mine, you have to pay attention to the other options:

A Defined Benefit plan is something that, if you’re working in the United States, you’re already in.  Social Security is such a plan.  You contribute 7.5% of your income, which is matched with another 7.5% by your employer.  Then, Congress spends it on worthless programs meant only to enrich the people that vote for them and on bacon-wrapped shrimp.  Because who doesn’t like bacon-wrapped shrimp?

Thankfully, eventually if you live to age 107, you’ll receive enough money back from Social Security to subsist entirely on a diet of dog food and sawdust you gather from nearby construction sites.  And the dry dog food, not the wet – what do you think we are, the Bill Gates’ family?

Other examples of Defined Benefit plans are pensions and stealing office supplies from your employer.  I would discuss pensions, but unless you work for the government, pensions are as relevant as discussing attacks by a roving band of tyrannosaurus rex – it’s not going to happen in your lifetime.  If you work for the government, pensions are a never ending fountain of chocolate-covered strawberries that I also get to pay for.

The reason pensions became as rare as decent Stephen King novels after he quit cocaine and were phased out by most businesses is that the 401k, a Defined Contribution plan, appeared in the 1980’s.  With a 401k, a business can safely contribute just once to the employee, and then forget about them forever, making them even more disposable.  Eventually they’ll figure out how to make employees “single use” like a Keurig® coffee brewer but they’ll have to worry about the hole they’ll need to pop into your head – oh, wait, that’s Facebook®.  The biggest advantage for a business is if the employee decides to invest all of their 401k money in pantyhose and elephant rides it doesn’t matter to the business.  Once they match your contribution, they’re done.

But having a 401k is a choice, and I have one.  Why?

First and foremost, my employer matches my contributions.  I contribute 6% of my pay, and my employer contributes 3% on top of my current salary.  In my case, it’s like a 3% pay raise.  And these are pre-tax dollars.  Every dollar I put in my 401k lowers the amount of taxes that I have to pay right now, plus I get a free 50% of what I save invested.  I like that.

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Okay, mine are paid off.  I paid them off in 2013 – I paid payments ahead, but I kept a balance until December 2012 was over, just in case the Mayans were right.  That’s one way to stick it to the man.

When I invest in the various funds that my employer has to offer, then the amounts in my account grow tax free until I begin to pull money out.  At that point, I then have to pay taxes on the money I take out of the account for The Mrs. so she can selfishly spend it on insulin.

But there are downsides or risks to having a 401k as well.

  • There are a limited number of plans. What if I really want to invest in dirigible manufacturers instead of Apple®?  I’m sure dirigibles are coming back this year – rumor has it they’re going up.
  • A 401k is another way for Wall Street to monetize your life, which will probably be the focus of next Wednesday’s post. And we know Wall Street has your best interests at heart, right?
  • What will future tax rates be? When I begin to take money I believe that I won’t be paying as high a tax rate as today.  But I could be wrong.  I’ve just been itching to pay for health care for illegal aliens, so, there’s no telling.
  • A 401k is easy for government to confiscate: it would take exactly one law and some politicians have even discussed the idea.  Why should those that save their money be entitled to any of it?  Selfish, like my parents.
  • What will the market performance be? For my lifetime, the market has gone up and down, like Oprah©’s weight.  But it’s mainly stayed up.  Also like Oprah®’s weight.  Or dirigibles, which are kind of Oprah™ shaped.
  • What will inflation be? Will we become Zimbabwe with a nuclear arsenal and a better navy?
  • Perhaps one of the scariest comments I’ve seen with respect from this came from Arthur Sido (LINK) (I’m paraphrasing): “Your money will become worthless while benefits to those on welfare will increase.”  Well, I guess that’s one good way to achieve the goals of communism!

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I love it when Communists prove that it works this time.

But when I look at all of the risks above, I realize that I’m exposed to them already unless I completely invest in the three precious metals – gold, silver, and lead.

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My 401k doesn’t seem to accept .223 or 7.62 as a valid investment. 

One other advantage of the 401k is that it adds a significant amount of financial stability.  Most 401k plans allow you to borrow against them.  Financial advisors don’t like this, because they’d much rather you pay interest to a bank with headquarters in New York rather than yourself.  Also, sometimes you can’t add more money to a 401k after you’ve borrowed money against it.

A loan against my 401k has been useful to me on one particular occasion.  After my first wife She Who Will Not Be Named moved out she handed me a grocery sack filled with bills.  She then handed me a checkbook.  “I have no idea how much money is in the account.”  And then she walked out.

My loan from my 401k paid for the late payments.  Barely.  That experience allowed me to be able to answer this important question:

Why are divorces expensive?  They’re worth it.

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I shouldn’t complain, my divorce was better than most.  I just wish she hadn’t gotten my hair in the settlement.

The downside of a 401k loan is that you have to pay it back immediately if you leave that job.  If not?  The money becomes taxable that year – plus a 10% penalty tax is added on.

Now The Boy wonders if he can feed the 10% penalty to fish.  Go figure.

I am not a financial advisor.  I am a silly blogger that writes on the Internet.  If you use my advice, you certainly get what’s coming to you, which may include being impacted by an asteroid, eaten by a sasquatch, or financial ruin.  So there.

Currency Collapse Explained Using Sexy Bikini Girl Graphs, Part II

“You’re the one that’s collapsing.  Been sitting at that contraption for twenty-two years.  It’s time you tried a girl.” – The Addams Family

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It is related to the post.  I promise.  That makes it literature, so you have to like it.  It’s sophisticated and swanky.

This series of posts was inspired by a great e-mail from Ricky.  This is Part Two.  Part One can be found here (Big Swedish Coins, Italian Women Pole Vaulters, and the Future of Money, Part I).

Let’s – again – state the basic thesis in Ricky’s words:

“I’m right there with you that collapse is coming to our house of cards because of the way they were dealt.  But after all of the individual survival dramas play out, survival ultimately depends on a community rising from the ashes.  And the glue of a community is ultimately the deals made between its individuals.  And money is the encapsulation of those deals.

“So when the dust settles and the smoke clears and the phoenix rises from the ashes of the eagle’s nest, there’s gonna need to be a reset on money.  On what it is, and how it works.”

Last time we looked at the financial history of the United States up until the Civil War.  The first Civil War, not the next one (Civil War II Weather Report: Spicy Time Coming), I mean.

Just a few generations after the Revolutionary War, in the 1860’s, both halves of the United States defaulted on currency during the Civil War.  The North defaulted on gold redemption in 1863, and the South printed Confederate currency like they were trying to make the Founding Fathers look like that one sailor that stayed in his bunk reading the Bible when the Seventh Fleet hit Sydney.  My father-in-law swears that’s what he did, and no one with an Australian accent has shown up claiming to be The Mrs.’ long-lost sister.

Okay, after the Civil War, the United States is at least done with defaulting, right?  I mean, we started up the Federal Reserve Bank™ in 1913 to stop these sorts of shenanigans, so that must have worked?

No.  If the Federal Reserve ever pretended to have the mission of maintaining the stability of the dollar, it failed like one of Oprah’s diets.

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Ricky sent this one.  It’s perfect, with the exception that it doesn’t contain girls wearing bikinis.  I think . . . we can do better.  I think . . . we can Make Economics Sexy Again!

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See, fixed that for you, Ricky.  Graph is now 1000% better, unlike our currency.  You can see her toes are pointed down into the sand, which shows that the value of the dollar is lower.  Also, if I can point your attention to the years between 1950 and 1965 you can see what an amazing, um, time span that was.

In 1933, the United States had $4 billion in gold.  Sadly, it owed $22 billion in gold that it would have to pay off in just a four years.

Solution?

Make owning gold by your own citizens illegal, and make them hand it in on penalty of going to jail if they don’t.  After you’ve got those dollars, redefine the dollar so that it’s worth a lot less.  Presto!  You’ve stolen all the gold and then made the resulting “dollars” that your citizens have worth a lot less.  Then you can give your cheaper dollars to other governments in payment.  It’s like being Enron®, but with 100% less jail time, so it’s exactly like being a Kennedy.

So, yeah, I’d call that a default, too.

Finally in the 1970’s, the French decided that they could wake up from their wine and cigarette haze long enough to see that the United States was way short on the amount of gold necessary to pay all the debts that Johnson and Nixon created to get elected.

Defaulting on your currency is like a divorce:  once is a mistake, twice is a trend, and by the third time….maybe, just maybe, it’s you.  The French decided to be sneaky, and took all of their dollars, showed up at the bank, probably with a baguette under each arm, and requested gold.  The United States essentially said, “Umm, we didn’t think that you thought we were serious about that.  OMG, LOL!” and stopped giving anyone gold in exchange for their dollar.   My scoring:  yet another default.

Since August 15, 1971, the United States dollar is backed by our sterling record of fiscal responsibility, along with thousands of nuclear warheads.  As Pop Wilder always used to say, “You get farther with a kind word and a sophisticated professional military and thousands of nuclear warheads than you do with just a kind word.”

I would my own discovery, the John Wilder Rule of Sexy Economics™: “You get more attention with bikini girl economics graphs than with just economics graphs.”

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As careful study of this graph will show, the glorious years of 1970 led to the bare times to follow and a sensitive employment time in the early 1980’s.  Unemployment never looked so good.

So, that’s a little bit about money along with some recent history.  Looking at all of history, though, I’d say what happens with money depends upon the kind of collapse we expect to see.  For the sake of simplicity, I’ll break collapses into three sizes.  Why these three sizes?  As of the time of writing I’m a bit thirsty, and the local convenience store only has three drink sizes.  Here they are:

  • Medium: The definition of a Medium failure includes monetary easing.  It could also include a default that may cause economic hardship, but doesn’t impact the government of the country or the ability of a country to issue its own currency.  This describes all of the defaults of the United States.
  • Large: This involves the complete destruction of a currency.  Common examples are Weimar Germany or modern-day Wakanda©  In both cases, the currency imploded as the major engineering problem of the day was how to print more money, faster (hint:  the Germans only printed on one side to double press production).  In Germany, the change led complete dissolution of society and a rebuilding under . . . well, Literally That One Guy Nobody Can Mention.  In Zimbabwe, it led to complete destruction of the currency and eventual loss of power for the guy who had been President for as long as Zimbabwe had been Zimbabwe.
  • Big Gulp®: This is the complete destruction of the economic as well as political system.  Rome, long laboring under a fiat currency, finally imploded and left behind a smoking crater that took hundreds of years to fill.  Thankfully, refills are only $0.29 with purchase of the official mug!

So what happens to an individual in one of these failures?

In a Medium Failure, you can keep your currency, if you like it, but what cost $100 a few years ago probably costs $1000 now.  Everybody adapts and you can generally go about your business, but you’re poorer and not at all happy, and it looks a lot like the Housing Bubble of the 2000’s.  Another analogy: it’s like you were forced to spend way too much time with my ex-wife.

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The Housing Bubble can be seen pretty clearly here.  Somewhere.  Keep looking.  You have my permission.

In a Large Failure, ultimately the currency is toast.  Your money is gone.  But the country will restart the economy using either a new currency, or just by adopting an outside currency that’s moderated by someone marginally more adult than you.  Zimbabwe’s unofficial currency is the United States dollar, but there aren’t enough of them to go around, so many people use mobile currency that’s (more or less) run by cell phone companies.  When your cell phone company has a much better record of fiscal restraint than your government?  Yikes.

A Big Gulp© Failure is social collapse.  The biggest one in recent Western history is Rome.  The Roman Big Gulp® was so big that it spawned collapse after collapse in nation after nation as Rome shrank away from areas it could no longer afford to protect or govern. Great Britain is an example of the collapse.  After the last Roman Legion left people buried their money . . . and never dug it up.  Why?

The silver content of Roman coins in the late Empire consisted of waving a bit of silver over the top of the molten metal before a coin was made.  Rome had gone full fiat.  Roman coins, in the absence of Roman troops, were worthless.  Money itself was abandoned, and barter was the key, when local bandits and warlords didn’t just take what they wanted.

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You want a worthless currency?  This is how you get a worthless currency..

How do we get to these collapses, and how likely are they?

Medium Failure:  I think that there may be as high as a 70%-90% chance of a Medium Failure hitting the United States in the lifetime of the average reader.  The challenges we will face with medical care (More Budget Doom, The Rolling Stones, an End Date, and an Unlikely Version of Thunderstruck) and the possibility that the politicians won’t resist the lure of free money promised by Modern Monetary Theory (The Worst Economic Idea Since Socialism, Explained Using Bikini Girl Graphs).  Read the articles at the link.  They were written by a cool guy I know, but before he really focused on getting better.

As a reminder of how close this might be to happening, a penny costs about $0.02 to make, so to get your two cents worth only costs a penny now, and that’s after they took out all the copper.  The copper alone in an old (pre-1979) penny is nearly $0.02.  It would cost about $0.04 to make a copper penny today.  A nickel costs $0.06 to $0.08 to make.  A dollar in pre-1964 silver coins is worth $10.60 at the time of this writing, which tells you that we’ve really already failed at keeping the value of our money up.

Ricky points out some interesting alternatives to currency in some of the supporting links he sent.  Just like Zimbabwe leaned on cell phone providers to be less insane and more trustworthy than the government, Facebook® is betting that its new currency, named the libra (LINK) will be less insane than the dollar, and has the added bonus of having the word “bra” as part of its name.  Honestly, I would have thought that Facebook™ would have denominated its currency in selfies and named it the lookatme.

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Student loan debt makes you feel like you can’t afford much clothing, and you’re between a rock and a hard place.  And very fit and tan and covered with oil.

Large Failure:  Large failures are big.  I mean, it’s in the name “Large.”  It generally comes after really horrible financial malfeasance for years.  Our current medical payment system (which is really bad) will, if not fixed, lead to a large failure.  Other notable large failures?  The start and end of the Soviet Union.  North Korea.  Nationalist China.  The country is still a country, and, with outside help and a new government, can, after a generation emerge from chaos.

I think there’s as high as a 40-50% chance this will happen within the lives of the average reader.

Big Gulp© Failure:  What would lead to a modern Big Gulp™-Level, end of Rome type event?  Nuclear war.  Running out of hydrocarbons.  Meteor impact on George Clooney’s ego.  Catastrophic disease.  Reuniting the Spice Girls®.  Regardless of the cause, I could easily see a failure of this magnitude ending 90% of the human lives on the planet.

Big Gulp® failures might last 1,000 years, since the last one lasted 500 years.  That means, since the time of Christ, Western Civilization was in a Big Gulp™ failure for 25% of the time.  Still – it only happened once.  I’d give a likelihood of 5-10% of this occurring within the lifespan of the average reader.  Pray some of the Spice Girls© have bad tickers.

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Okay, these aren’t the Spice Girls™, but their ascending height from left to right is the perfect way to show that whatever lines are on this graph are going up from left to right.  I assume the thing going up is bad.

Checklist – Signs of a Currency Collapse:

  1. Gasoline is priced in goats.
  2. Bankers take cold pizza as mortgage payments.
  3. You can pay off your medical school student loans with the change from buying a candy bar.
  4. Bill Gates is bumming cash by cleaning windows of passing cars.
  5. $100 bills are too cheap to use as notepaper.
  6. Americans are caught sneaking into Honduras.
  7. George Soros begins laying off politicians and selling some on E-Bay®.
  8. The IRS starts giving a 25% discount for cash.
  9. Your financial adviser will have helped you get to a small fortune, but only if you started with a large fortune.
  10. You try to make a withdrawal at the bank and they tell you they have insufficient funds.

So, Ricky, there it is, Part I and Part II.  See you in Stockholm to pick up our Nobel Prize™!

Don’t forget to bikini wax.