Skip to main content

Diffusing the Pressure

Too many Americans are living stressful lives, with no savings and thus no safety net if they hit a bump in the road. I’ve read estimates that fully 70% have savings of less than $1,000.  While it is true that certain key economic statistics have improved in the past year, too many Americans still count on food stamps for their survival and too many are not employed or have been left behind in the move to technology-driven economy. And, while consumer spending has increased of late, which has created the sense of economic health, of concern should be that credit card debt levels are at all-time highs.

This week I read, with some degree of amusement, an article in the current edition of The New Yorker that describes how some of our nation’s wealthiest have adopted survivalist strategies to protect themselves and their families in the event that our society breaks down. These people realize that the massive gulf between the haves and the have-not’s is a real problem that if not resolved could have dire consequences. The thing is, the problem is eminently solvable, and the rich hiding out in the woods with guns and ammo is not the answer, nor will it work to protect them if things do break down.

I do believe that the recent tax law change and the Trump administration’s massive reduction in regulatory red tape both represent significant steps in the right direction to create the economic vibrancy that will continue to bring a better reality for more Americans. Yet, I fear that this will not be enough to solve for the aforementioned problems. That is why I think that the idea of a monthly government stipend sent to everyone whose income level is below a certain level makes great sense and will do wonders to diffuse the pressure faced by those at the bottom end of the economic totem pole, which if left unaddressed does truly threaten our society. As a devotee of the philosophy that incentives drive behavior, I would couple this plan with an incentive in the form of increased payments for those who are married and who remain married, understanding that families with intact parents make for a healthier society on many levels. Perhaps if $X was the monthly payment for every individual in that income category, perhaps the payment for a married couple would be $2.5X rather than $2X, and would increase to $3X for those married for longer than five years. Importantly, no additional payments should be made to families based upon the number of children they had, thus reversing a terrible incentive that has been in place for years.

If you’re wondering how these payments would be paid for given our already historically high national debt, the answer is newly printed money from the Fed.  Money printing is a perfect wealth tax, as it dilutes the value of all outstanding money proportionately, thus penalizing all wealth in the fairest way. And, perhaps best of all, it can be accomplished quickly, with no lobbying and without any vote of Congress. For those of you who might say that this is not within the Fed’s charter, I say that we live in unprecedented times, and all rules can and must be modified in the best interest of our nation.

Popular posts from this blog

Taxes and Hyperbole

There is a new tax code in the U.S., and this is indeed a “Yuuuge” deal. As far as I can tell, it is as close to an unmitigated home run for America as can be. Is it perfect? Of course, it’s not. The code retains its unwieldy size and complexity, largely as a result of compromises made in order to bribe congressmen and senators for their votes. Until we get term limits, it seems we’re stuck with a tax code that is big and complex. However, it does hit the mark on a few key issues: most every taxpayer will now pay less to the federal government (except those in states with ridiculously mismanaged economies who now will be forced to hold their state politicians more accountable); and our businesses, large and small alike, will remit less of their profits to the federal government and will be liberated to invest that savings into growth – which will surely create job and wage growth in the productive private sector.

James Harden - A Classic Case of Misunderstood Value

The last time I wrote on hoops was December 2013 when I presciently trashed Carmelo Anthony. The time has come to take out my poison pen once again to decry James Harden as a fraud. I know that Harden has amazing stats - third in scoring, first in assists, and that his team the Rockets have far exceeded expectations as they are currently the 3rd seed out west. But, I still maintain that he is an awful player.

The End of The Financial Supercycle

Since I graduated college nearly 35 years ago the yield on the 10-Year U.S. Treasury bond has declined from near 16% to today’s 2%-2.5% trading range level, and this tells an important story. The massive decline in yields on all financial instruments during this period, which I will call a “Financial Supercycle”, and the concurrent expansion of multiples and thus valuations, has led to massive wealth creation which has served to bolster the overall economy by literally infusing trillions of dollars of capital in the form of both found money (gains) and loans (recycled savings). In that same time, the field of finance and investments was red hot, growing dramatically in size and expanding in a multitude of ways, spurred by an abundance of creativity that spawned new ways to borrow and new ways to invest.  Innovations that have been introduced during this time and have heightened and broadened access to capital include entire financial markets such as the junk bond/high yield bond marke…