December 3, 2012
In the recent past we noted the somewhat startling reality that “the single mom is better off earning gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.” While mathematics is our tool – as opposed to the mathemagics of some of the more politically biased media who did not like our message – the painful reality in America is that: for increasingly more Americans it is now more lucrative – in the form of actual disposable income – to sit, do nothing, and collect various welfare entitlements, than to work. This is such an important topic that we felt it necessary to warrant a second look. The graphic below quite clearly, and very painfully, confirms that there is an earnings vacuum of around $40k in which US workers are perfectly ambivalent toward inputting more effort since it does not result in any additional incremental disposable income. With the ongoing ‘fiscal cliff’ battles over taxes and entitlements, this is a problematic finding, since – as a result – it is the US government that will have to keep funding indirectly this lost productivity and worker output (via wealth redistribution).
As we noted before (details below):
We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and… have the same disposable income at the end of the day.
Naturally, the topic of wealth redistribution is paramount one now that America is entering the terminal phase of its out of control spending, and whose response to hike taxes in a globalized, easily fungible world, will merely force more of the uber-wealthy to find offshore tax jurisdictions, avoid US taxation altogether, and thus result in even lower budget revenues for the US. It explains why the cluelessly incompetent but supposedly impartial Congressional Budget Office just released a key paper titled “Share of Returns Filed by Low- and Moderate-Income Workers, by Marginal Tax Rate, Under 2012 Law” which carries a chart of disposable income by net income comparable to the one above.
But perhaps the scariest chart in the entire presentation is the following summarizing the unsustainable welfare burden on current taxpayers:
The punchline: 110 million privately employed workers; 88 million welfare recipients and government workers and rising rapidly.
And since nothing has changed in the past two years, and in fact the situation has gotten progressively (pardon the pun) worse, here is our conclusion on this topic from two years ago:
We have been writing for over a year, how the very top of America’s social order steals from the middle class each and every day. Now we finally know that the very bottom of the entitlement food chain also makes out like a bandit compared to that idiot American who actually works and pays their taxes. One can only also hope that in addition to seeing their disposable income be eaten away by a kleptocratic entitlement state, that the disappearing middle class is also selling off its weaponry. Because if it isn’t, and if it finally decides it has had enough, the outcome will not be surprising at all: it will be the same old that has occurred in virtually every revolution in the history of the world to date.
But for now, just stick head in sand, and pretend all is good. Self-deception is now the only thing left for the entire insolvent entitlement-addicted world.
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Full must read presentation: “Welfare’s Failure and the Solution”
I need some paper with ink on it. I could make my own but the market isn’t confident. In fact the market has so little confidence in my paper with ink on it that I am in danger of arrest and/or ridicule if I try to use my brand of paper with ink on it. I need some special paper with ink on it. What makes it special? Someone told me it was special and I believed them.
If I had some illuminated numbers on a screen I could always change those into some special paper with ink on it but, yet again, my own illuminated numbers on screens don’t give the market confidence. The illuminated numbers on screens that I produce make the markets disappointed and the ones that they give me have a tiny line, -, illuminated on their screens. This apparently means that the market is not just lacking confidence but is actually angry with me. Personally. They won’t give me special paper with ink on it.
And that sucks.
My landlord wants some paper with ink on it. The grocery store will settle for some average, circular metal with a random head on one side but prefers paper with ink on it, and I have none of either. Less than none thanks to -. Zero is not as low as you can go. Pepsi lied. I thought –1 apples was a stupid idea but I took a music degree, not economics. I could ask my boss for extra paper with ink on it but a multi-national just moved into town. Now the market is angry with him too. Suddenly he has so little paper with ink on it that I’ve been laid off.
The bank, though, they will swap some special paper with ink on it for nothing more than a promise. It’s a bargain.
I get the special paper with ink on it straight away and the moment that happens I become immediately more attractive to the opposite sex, probably to live on a white sand, palm fringed beach. I’ve seen the adverts. It’s as effective as beer. I might even get a free pen. Free!
How do I make that promise they want? Easy. I sign my name on a dead tree and simply give them that piece of paper with ink on it. Then they invent some illuminated numbers onto a screen and I get some special paper with ink on it personally handed to me by a machine. All I have to do is give them back more paper with ink on it than they give me. And I can worry about that tomorrow. Mine’s a coconut daiquiri . . . palm trees here I come.
Now I can pay my landlord, I can feed my children, I can feed the insatiable monster of consumerism that has been jammed violently into my psyche, like a bile pipe rammed into the gut of a live bear, since I was a small child myself. I’ll slowly forget that those bears, given a chance, commit suicide from the pain and have to be forcibly restrained, immobile for life, to keep the bile flowing. I’ll be surrounded by encouragement to forget that. Bears live a long time, though.
I could write some music instead, after all, I have collected a lot of –paper with ink on it so I could do just that but hey, who doesn’t want new sneakers at $300 a pop? Who doesn’t need a 64 bit quad core computer, that would have been a government-only super computer only ten years ago, just to watch YouTube? And who doesn’t like being super popular because they have paper with ink on it?
Money. Paper with ink on it, illuminated numbers on screens and signatures on dead trees are all just a means of exchange. Ridiculous, or otherwise they are nothing more than a promise from one side to another.
About 1100 AD King Henry 1st of England introduced notched sticks, known as ‘’tally sticks’’, as a form of currency. The Inuits used knotted chords, the Sumerians made marks on clay tablets. Everything from shells, leaves and even bones have been used before now. Just think, if we still used shells then everybody on the coast would be loaded. Maybe.
Probably weirder systems have occurred before now, only to be lost in the mists of history. The method itself is artificial, man-made and, when analysed, inherently ridiculous. And yet we run our very lives on that system, hanging on every pundit’s word, every market view on confidence, and every random number regurgitated by the machines. But in reality, at the core, it is a simple idea.
The constant in exchange contracts is trust between people. The exchange is essentially a promise and without trust no promissory system can work. The more complicated the system becomes, the less trust we have in it. Sometimes that may be because we just don’t understand it any more. Nobody gives easy trust to that which they don’t understand. Sometimes, though, the trust breaks down because the system is cheating, introducing complexity in order to obfuscate, hide and steal. Sometimes, maybe now, it’s both. Have you really read the myriad legalese small print you have given your promise to on bank accounts, auto insurance or health care? Would you understand them if you had?
Today the algorithm is the king of financial trading. Think of them as the deceptive bastard cousins of illuminated numbers on screens. They are ruthlessly effective at making a profit, when they work, and fiendishly complicated. In trading houses today you’re as likely to meet a Ph.D. physicist as a barrow boy from the East End or a wide boy from the Bronx. People can make a few trades in a few minutes; algorithms can make a few thousand in mere microseconds.
Speed is of such vital importance that banks will place their servers as close to the exchange computers as possible. Sometimes the tiny fraction of a second advantage a Wall Street based computer has over a New Jersey computer is enough to make a killing. And no one really understands how it works. Sometimes, however briefly, an algorithm will do the unexpected. It’s still just as powerful but it’s having the digital equivalent of a mental breakdown. The results can be price spikes, market crashes and have sometimes been a very real threat to the survival of the company that unleashed them. All in a few microseconds.
There is a pervasive feeling in the West today, exemplified by movements such as Occupy and UK Uncut, that the market can no longer be trusted. Some question if it ever could. It is a feeling that the promise is obtained through deceit and coercion, that the process is no longer even human let alone intelligible. It is a feeling that those not in the West have known for decades. Sometimes centuries. The market would argue that this is simply advantage but an algorithm, by it’s nature, is amoral. People, in the majority of cases, are not. Indeed, amorality is so rare in a balanced society that we make laws to penalise the aberrant few that engage in it. Social laws that is – for markets we seem to ignore those controls.
The term psychopath is only a badge of honour to another psychopath; and despite their media prevalence, they are rare. That they exist, and have an extensive, undue, negative impact because of their behaviour, is true. That they are the majority is not even close to true.
Some argue that the way the markets run themselves encourages the psychopathic personality, that it even rewards and values it as a profit generator. A food riot in Djibouti is irrelevant when considering whether to virtually hoard rice and wheat on Wall Street, especially if you care little about starving people. That may have been true once, it may even still be true now, but that no longer matters. The algorithm is king and the algorithm does not know what emotion or morality are. They exist to perform orders, just like the Nuremberg defence used by the Nazis, to make profits regardless of any other consideration. They do nothing else because they cannot do anything else, regardless of consequences. Maybe a deregulated market is not such a good idea after all? I still need some paper with ink on it, but I’m no longer sure that I want it.
As economic collapse approaches, the only question is whether it will remain in slow motion or take a dramatic turn for the worse. If we’re lucky it will remain in slow motion to give people and communities enough time to prepare as much as possible.
We only need to look at the chaos that occurred during the aftermath of Hurricane Sandy where hardly anyone was prepared for weeks without power, and they even had some forewarning. Unfortunately most people are still blind to the coming economic storm. They’re frogs in slowly simmering water getting ready to boil.
It’s one thing to prep for yourself, but if the economic collapse is sustained for a long period of time, it will take a tribe to survive as comfortably as possible. The bigger your extended survival group the easier it will be, and if you can encourage your greater community to move more toward self-reliance the better off you all will be.
If you’re a prepper who understands the severity of the coming events, now is the time to get your community involved. You don’t have to convince everyone the sky is falling, only the importance of more self-sufficiency just in case there is an unforeseen emergency.
Here are ten ways to help your community prepare:
Meet Your Tribe: This starts with forming your core group of local prepper friends. These people will share your understanding, have great ideas, and can share the burden of prepping. Then, at the very least, meet all of your immediate neighbors and size them up as to their mindset and ability. Organize fun and educational block parties to demonstrate and encourage the solutions outlined on this list. Finally, take some of your ideas to town hall meetings to seek broader cooperation and more volunteers.
Alternative Water Sources: Water is the most important element for survival. If the grid goes down, public water will be sure to follow. Locate private wells that can be switched to hand pumps or generators, or streams, rivers and ponds that can be piped and stored near your community. Create a map of these resources for everyone in your group of volunteers to keep safe if crisis strikes. Educate your neighbors with flyers or demonstrations at block parties about having back-up water supplies, rainwater and greywater use, and water purification methods. Encourage your neighbors to keep at least 3 days of drinking water stored in their homes.
Garden Projects: Encourage and help neighbors with their individual gardens and they’ll help you with yours. Hold neighborhood workshops with experts on composting, permaculture, aquaponics, small livestock, seed preservation, and canning. Stress the importance to the greater community of gardens in public spaces that are being wasted on grass that must be mowed at the taxpayer’s expense. With more of the local landscape turned into an edible landscape, the easier the community will be able to absorb the impact of economic collapse, particularly rapid inflation of food prices.
Local Food Co-Ops: Another very important element to local food self-sufficiency is becoming involved with your local food cooperatives. These typically include many of your local artisan farmers and organic gardeners. You may be surprised by how big the local food movement already is in your area, but it needs to be much bigger when severe economic crisis hits. Support them with your business and whatever skills you can bring to the table. Encourage your neighbors to join and participate as well. Not only will this help expand local commerce and food production, it also helps build a healthier community. A great resource to find local farmers in your area is LocalHarvest.org.
Barter Systems: If the dollar collapses (which most people predict will be the trigger of economic collapse), having a local system of trade will soften the impact tremendously. Even if you just begin with trading services with your neighbors, get the idea barter to spread. You may already have a local grassroots currency or barter exchange in your area. Many food co-ops already have them as well. If they don’t, there are plenty of resources that teach you how to start one yourself. The importance of laying the groundwork for such an exchange cannot be understated, and if the collapse miraculously evaporates, the barter system will still encourage local trade so the community flourishes. This is also a great way to identify team players with vital skills needed during collapse situations.
Alternative Energy: This is perhaps the most challenging issue facing any individual prepper as well as a small community as a whole. Virtually all areas are beholden to large interconnected electric grids and multinational oil companies for their energy. But as we saw recently with Hurricane Sandy, people without fuel or power go crazy after just a few short days. Imagine weeks and months without power or fuel. For personal preparation, it’s wise to at least have a generator, and perhaps some solar panels for refrigeration and electronics. Encouraging your neighbors to do the same may be the best you can hope for community involvement, but present ideas like generators for all essential services to prevent a breakdown of law and order. Work on implementing a community or co-op biodiesel refinery for used cooking oil, or a windmill or solar station for the back-up water supply, etc
Neighborhood Watch: All communities are unique and will require different levels of security in times of crisis. As we saw with Katrina and Sandy, the National Guard and the local police were no match for keeping the looters at bay. And, again, these were just temporary setbacks. A sustained economic crisis could bring many desperate people or worse – organized gangs – to your neighborhood. The cops will likely be preoccupied with much bigger concerns than your community assuming the locality can still afford their salaries. Start with a simple neighborhood watch to create a basic plan for deterring invaders. Make note of neighbors who are former military or hunters to recruit should things get dicey enough to require some firepower.
Food Bank: Everyone should have their own personal supply of survival foods. But you may also consider grouping with your tribe of preppers or a few neighbors to create a food bank where you can combine funds for bulk food storage. This food bank should consist of the most basic of foods like wheat, rice, and beans. This can serve as an “open only in case of an emergency” cache. Beyond that, helping out with your community food bank or other food programs for the less fortunate is also a way to help keep your community stable during the crisis.
Communications: Don’t underestimate the importance of maintaining open communication with your community. If the power goes off, it may not be long before phones and Internet are gone too. Emergency radios are great to monitor the “official” activity outside the community, but being able to speak to each other is vital to survival. Back up systems can be as small as your core group using walkie talkies, or as large as creating an alternative Internet connection. You can have one person get satellite Internet and they can beam it with a simple line-of-sight microwave panels to other hubs, perhaps a school. This sounds complex, but it’s not that difficult or expensive. Additionally, you could set up a community intranet that can at least communicate with each other if not the outside world. When meeting neighbors, don’t discount their skills if they’re a tech geek or working for the phone company, as they will be needed in a collapse situation. Again, having individual solar chargers for laptops and this system would have to be considered as well.
Medical: Big hospitals will likely be overtaxed during a crisis and they’ll certainly be a target of drug addicts who have nowhere else to get their fix. It may be unrealistic to form a small clinic in your community prior to a collapse situation, however, identifying the doctors, nurses, EMTs, veterinarians, and holistic healers in your neighborhood will go a long way in preparing. Additionally, encouraging all households in your neighborhood to keep a month or more of essential medications stored in their homes will be crucial to get through difficult times. If you’re lucky enough to find a few doctors who share your prepper mindset, creating a bank of strategic medicine (insulin and antibiotics) would be ideal as well. And don’t write off the hippie who knows how to grow quality cannabis….
These are all realistic preparations that you can do in your communities. They shouldn’t be motivated by fear of some potential apocalypse. Rather, it should be fun and joyful to get to know your neighbors and encourage the strengthening of your community.
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