"The fact that 50% of Americans are reliant upon the government for their income alone is a guarantee of bad things to come." ~Doug Casey  

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Hucksterism Gone Wild
Unmanageable Religion


Columbia  Weather


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ley
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July 31st, 2014

Coming to a bank near you. Higher interest rates on your savings. 
Tired of 0.05 percent or less on funds you deposit?  That number may rise. 

   ITEM: "US banks are steeling themselves for the possibility of losing as much as $1 trillion in deposits as the Federal Reserve reverses its emergency economic policies and raises interest rates. ... 'You essentially have frictionless non-interest bearing deposits funding much of the banking system today,' said Peter Atwater, former JPMorgan banker and president of research firm Financial Insyghts. 'There’s no financial incentive [for depositors] to stay.'" Bracing for Outflows

   Remember the long ago days when a person was encouraged to put money in a bank on a regular basis and let the "miracle of compound interest" build up the account over time?  

       There's not much incentive to park spare funds in a bank when they yield the piddling levels of return presently paid.  Maintain, say, a $5,000.00 balance in an interest bearing checking account and inflation will reduce it to $4,875.00 in purchasing power in just one year!  The loss may be partially offset by the small interest earned - maybe $3.00 for the year. 

        Some banks are already offering nearly 1 percent annual interest on demand deposits.  If the Federal Reserve allows interest rates rise, as currently expected, and competition for deposits increases - we may see savers at least break even with inflation.  No one expects those old lectures on "the miracle of compound interest" though. 


    WHY DO THESE QUESTIONS OF MONETARY AND ECONOMIC INSTABILITY CONCERN  US SO?  Because in our own lifetime we've seen the buying power of the U.S. dollar slide from $1.00 to 7¢ and we're worried about it reaching zero before we make our Grand Exit.  Such questions tend to focus one's attention.

    Over the years plenty of worrywarts have warned the end was near for the dollar, but life keeps chugging along as people adjust to the constant slide of dollar purchasing power.  Something always comes along to postpone the Day of Reckoning.  Most folks believe such a thing can never happen.

     Since the 1970s Doug Casey has been following the monetary/economic tangle and concludes financial bubbles are about to pop - bigtime. 

    "The best indicator of how much actual new money [the Fed is] creating—has gone from $500 billion to $4.5 trillion just in the last five years, and they’re still creating more. So they’ve shot all their arrows and when the economy turns down again—and I think it is in process of doing that now—there’s nothing they can do. They have already reduced interest rates to near zero, the Chinese and the Japanese aren’t buying any more government debt, and the official number is $500 billion a year of deficit now, so the Federal Reserve is going to be printing up money wholesale. This is a very scary thing, so yeah, I think we actually have reached the actual edge of the precipice."

    And when will balloons implode?  No one will say because no one knows for sure.  But the likelihood feel perilously close.  The biggest question of all is "How does the average bloke avoid the economic downdraft?"  If you have the answer we'd like to hear it.  

 EMAIL US HERE:
Wris
ley
.com.


    "Gross domestic product expanded at a 4.0 percent annual rate as activity picked up broadly after shrinking at a revised 2.1 percent pace in the first quarter."  ~Reuters News.

    WAIT!  Before everyone rushes into the street shouting "The economy is up FOUR PERCENT!" bear in mind news media are taking a little journalistic license here.  They mean that if the 2nd quarter GDP growth rate remained at that level for all four quarters of 2014 we could celebrate 4 percent.  But because of the slowdown in the first quarter the actual growth for the first HALF of the year was 0.9 percent.  That would be just over plus 2 percent for the whole year.  

    No wonder our eyes glaze when these reports come out.  And corrections constantly change the picture.  For instance, the first quarter was reported as a 2.9 percent contraction.  That's been changed to 2.1 percent.  Still a contraction. . . and still blamed mainly on bad weather. 

    Preachment doesn't solve much, but we're trying to persuade our kinfolk to take it easy throwing any spare money around right now.  That caution flag is flapping in a stiff breeze and we think individual safety lies in avoiding unnecessary debt and stuffing some extra dollars in a large sugar bowl.


Your addiction may lead to big money.
(For your survivors and their lawyers.)

    Michael Johnson's wife sued the R.J. Reynolds Company because of the death of her husband.  

  "Johnson died in 1996, aged 36, of lung cancer. He had been a chain smoker since he started to smoke aged 13, that is to say from 1973. The allegation against the company was that it willfully concealed from Mr. Johnson both the dangerous and the addictive nature of its product, to which he became helplessly and hopelessly addicted. After the jury awarded the widow $7.3 million, and his son by a former marriage $9.6 million, in compensatory damages, the plaintiff’s lawyer said that Mr. Johnson couldn’t give up smoking and smoked till the day he died. The jury also awarded $23.6 billion to the widow in punitive damages, an award that is unlikely to survive appeal."  Rewards of Addiction

< Theodore Dalrymple (pen name of a medical doctor) is appalled at the huge award a Florida jury gave the widow and son of a smoker who died of lung cancer. 

     The deceased began his smoking career in 1973.  Dalrymple contends the idea that smoking was deleterious to one's health was well known by then and the allegation the tobacco company "willfully concealed" information that its product was dangerous was nonsense.  Most smokers were aware there was a certain risk to constantly sucking smoke into one/s lungs.

     When will the survivors of alcohol addicts go after Jim Beam and Budweiser?  There's plenty of evidence too much booze is bad for the liver and may lead to a variety of other diseases.

      The objective is to empanel a sympathetic jury.


   Speaking of juries...

  The verdict is mixed on what's going to happen in stock trading.  Some Wall Streeters will swear the DOW is headed for the stratosphere and 20,000 is a reasonable expectation.  Others swear a serious correction is in the wind and the DOW may plunge sharply...soon.  Trader Mark Cook expects to see it drop to 13,600 sometime between now and next summer.  

   The reason we mention Mr. Cook's forecast is he has accurately called downturns in the past.  

    Often overlooked is the constant tug of war between stock buyers and sellers.  When there are more seller than buyers the prices trend down.  When buyers outnumber sellers prices trend up.  So it's all a matter of human activity...aided by a large number of computer software programs which automatically buy and sell at pre-determined price levels.   Trying to outguess trends is tricky business.   Good luck.


    Scary thought:  What if the deadly Ebola Virus jumps the Atlantic to the US?
Science has not yet come up with a cure. 


  In the late 1970s we met the fellow who concocted this upside down pyramid.  His name was John Exter, a New York banker with considerable experience.  Early in his career he organized and ran the Bank of Ceylon. (Now Sri Lanka.) 

  Serious money inflation was hounding the US at the time and Exter attended a gathering of economists and laymen one March weekend at a retreat north of Manhattan. 

  Exter had drawn up his famous upside down investment pyramid and it was fascinating to hear him discuss gold as the safest, most liquid asset with diamonds, real estate, and Municipal bonds in the least liquid category.

  Paper money and Treasury bills were the second most liquid holdings, he believed.  Government bonds, corporate bonds, and stocks were riskier according to his chart. 

   Exter is deceased and his pyramid is rarely discussed these days, but with the world's financial affairs in serious disarray we thought we'd take another look at his investment safety scheme to see if we can figure out how an experienced banker came to this conclusion. 


'TIL DEBT DO WE PART.
Debt is easy to get into...not so easy to pay off.

   WASHINGTON (AP) -- More than 35 percent of Americans have debts and unpaid bills that have been reported to collection agencies, according to a study  by the Urban Institute.

  These consumers fall behind on credit cards or hospital bills. Their mortgages, auto loans or student debt pile up, unpaid. Even past-due gym membership fees or cellphone contracts can end up with a collection agency, potentially hurting credit scores and job prospects, said Caroline Ratcliffe, a senior fellow at the Washington-based think tank.

   "Roughly, every third person you pass on the street is going to have debt in collections,' she said. Busy Debt Collectors.

Keeping up with the Joneses has made the USA a nation of debtors. Without it the American living standard would plummet.

      It's spooky, though, to think that roughly every third person one passes on the street is not only in debt but is being hounded by debt collectors because they have fallen behind in their payments.  How can anyone feel prosperous or even semi-secure in  a situation like that? 

      But the scariest thing is the possibility there will be a general awakening and people will start living within their means...that is, driving a car for a year or two after it's paid off - - cutting the use of credit cards to the bone - - saving more, borrowing less.  The already sluggish national economy would all but collapse.


  Came across this illustration while cleaning files over the weekend.  The Heritage Foundation worked it up last year.

   It's widely believed that the basic rules of logic and reason concerning the handling of finances does not apply to the federal government, and that living beyond income is absolutely necessary for government.  How the governing class proposes to do that year after year without creating a fiscal catastrophe defies imagination. 

   A liberal economist like Paul Krugman will explain that a growing public debt is okay - even healthful - as long as it remains at a relatively low ratio to the Gross Domestic Product.  Obviously, if the economy sputters for some reason and does not grow fast enough we're in big trouble, but Professor Krugman and his followers don't believe that will happen if the Federal Reserve continues to expand the money supply fast enough. 

   There is one worrisome detail the professor neglects to mention.  New currency is created to meet the demand of borrowing.  No nation can borrow forever without serious consequences.  The Fed's near zero basic lending rate will have to be adjusted upward in order to keep inflation in check and that will put the brakes on borrowing.

   Midterm elections are scheduled barely more than three months from now and it's unlikely  the Fed will nudge rates upward until mid or late November.  If then.  But it seems very likely that the growing monetary problems will definitely be on the political agenda well before the election of November, 2016.  It seems very likely that the next aspirants to the Oval Office must address the money problems and be far more conversant with fundamentals that the present occupant of that office.  

   If we get into a full-blown war before then all bets are off. 


Underbanked Americans.
You might be one of them!

  You may be in the crosshairs of your friendly neighborhood bank because you are "underbanked."  The new look at this segment of bank customers is prompted by the general slow growth banks are experiencing and they aim to go after the "underbanked" (and the un-banked) to get them to more fully participate in the array of services offered by the banking industry.

   For instance - you may have had a checking account at your favorite bank for years, but you don't borrow money from the bank, you don't have their credit/debit cards, you don't use any of their financial management services, you just park funds in the checking account and draw on that account as needed.  You are "underbanked". Roughly 20 percent of American bank customers fall into this category. 

   It's a tough world out there!  Even banks are forced to hustle harder to sell their services.  

   There is also the problem of the shrinking middle class! The Russell Sage Foundation notes that the average NET WORTH among middle class Americdans has shrunk to barely more than $56,000. 

   The modern method of determining where one stands is merely to add up all one's assets and subtract ALL of one's debt - including the balance on the mortgage, car, credit card, etc.  The result may be disappoining to middle class families. 

    The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation.  For households at the median level of net worth, much of the damage has occurred since the start of the last recession in 2007.  GOING BACKWARDS GOING BACKWARDS  


What causes American materialism?
Our staff curmudgeon is a retired huckster.  

   "Some people pass through life without accumulating a lot of unnecessary things, but the majority seem fascinated with acquisition.  And 21st century hyper-hucksterism makes it worse.  On our computers, radios, TVs we are overwhelmed with ads.  In our newspapers and other printed matter ads clog most of the pages.  Billboards ruin the landscape.  People even wear ads on their clothing!  They would never dream of  carrying a sandwich board in public, but they don't mind advertising beer or political views on their shirts.  It is impossible to escape advertising intended to persuade people to part with their money or principles. 

    "As a retired huckster I feel the urge to confess that I never believed my work was unethical.   Oh, sure, I felt a little twinge of guilt when I poured my heart and soul into a pitch for some product or service I would never buy for myself, but I had a mortgage to pay and mouths to feed so I did what I had to do.  

    " I advertised everything under the sun, although in the final years of my career as a huckster I drew the line at peddling financial services.  I just couldn't bring myself to hustle home equity loans and all the other loan traps banks peddle these days.  I also grew to hate the "no-money-down" car and furniture deals. 

   "Hucksterism has has always been part of Americana, but modern media have made the intensity of it frightening.  Billboards blink electronically or switch messages like venetian blinds.  Radio and TV machine-gun us with rapid-fire ads.  The vogue is "loud and fast."  Computers compress the announcer's spiel and even clip out the pauses where he or she breathed.  That's so more words can be shoved into your ears." Wild Hucksterism

   This observation was written in 2006.  The sheer volume of advertising is greater now.  


         "We take for granted that 16 ounces constitute a pound and that 8 furlongs (5,280 feet) equal one mile. No one questions there are 2 pints in a quart or 60 minutes in an hour. Weight, distance, time - there are precise standards for measuring almost everything. Except money.

         "Strangely enough, people are willing to measure their economic transactions with something that is based on no standard at all! The U.S. dollar." Re-establishing a Money Standard.  

 

  

 

  

  

 

 

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