I saw the video equivalent of this article last might on Kudlow & Co. (a show I normally don't watch because I detest Kudlow)--the chart contained in this article shows that AT ANY TAX RATE, the rich (and everyone else) pay only 19.5% federal tax. This is known as Hauser's Law.
As soon as I can find the video of it, I'll post the link.
From the highest to the lowest federal tax rates laid out by Congress, we all only end up paying in about a constant 19.5% rate, because with every tax increase comes new credits and deductions to absorb the excess. In essence, we already have a flat tax system, so why not just take off the cloak and dagger and expose it to the masses?
Along with new credits and deductions to offset the increases, and creative use of existing credits and deductions, there is also disincentive to make more money, and to just sit tight on one's laurels (and on money already earned and taxed). Then, there's this little thing called wages, tips, and salaries--better known as "taxable income." Also known as ACTIVE income, and another deterrent to money-making and tax-paying. PASSIVE income (also known as investment, rental, or lease income) doesn't get taxed at the same rate as ACTIVE income, so it isn't subject to as many Congressional whims...and is the "rich" refuge of choice. Do you blame them? I don't--hell, I used to own rental property myself, and got handsomely rewarded for it by Uncle Sam.
If all currently low-income families had just one rental property, and it were rented continuously, they'd all potentially be millionaires NO MATTER THE TAX RATE. This is why knowing your tax code is the best way to fight poverty and end it once and for all. Opportunity lies within the fine print, so learn to read it.
Here are some good past articles I've written on how to make the tax code work for you: Timeless Tax Moves, Zero Tax Liability, Perks and Benefits, Work/Shop Tax Free, Underground Economy
For others, just enter "taxes" into the blog search bar. For all, just learn how to closely examine and understand your tax forms--1040 holds the most clues with the least restrictions. Start adding "A" and "EZ" after it, and you restrict your realm of possibilities. It's called a code for a reason--learn to decipher it!
Friday, May 23, 2008
Found in my inbox: In the Beginning
In the Beginning
In the beginning, God covered the earth with broccoli, cauliflower and spinach, with green and yellow and red vegetables of all kinds, so Man and Woman would live long and healthy lives.
Then, using God's bountiful gifts, Satan created Ben and Jerry's and Krispy Kreme.
And Satan said: "You want hot fudge with that?"
And Man said: "Yes!"
And Woman said: "I'll have one, too...with sprinkles."
And lo they gained 10 pounds.
And God created the healthful yogurt that Woman might keep the figure that Man found so fair.
And Satan brought forth white flour from the wheat, and sugar from the cane, and combined them.
And Woman went from size 2 to size 14.
So God said: "Try my fresh green garden salad."
And Satan presented crumbled Bleu Cheese dressing and garlic toast on the side.
And Man and Woman unfastened their belts following the repast.
God then said: "I have sent you heart-healthy vegetables and olive oil in which to cook them."
And Satan brought forth deep-fried coconut shrimp butter-dipped lobster chunks, and chicken-fried steak so big it needed its own platter.
And Man's cholesterol went through the roof.
Then God brought forth the potato, naturally low in fat and brimming with potassium and good nutrition.
Then Satan peeled off the healthful skin, sliced the starchy center into chips and deep-fried them in animal fats adding copious quantities of salt.
And Man packed on more pounds.
God then brought forth running shoes so that his children might lose those extra pounds.
And Satan introduced cable TV with remote control so Man would not have to toil changing the channels.
And Man and Woman laughed and cried before the flickering light and started wearing stretchy Lycra jogging suits.
God then gave lean beef so that Man might consume fewer calories and still satisfy his appetite.
And Satan created McDonald's and the 99-cent double cheeseburger.
Then Satan said: "You want fries with that?"
And Man replied: "Yes! And super size 'em!"
And Satan said: " It is good."
And Man and Woman went into cardiac arrest.
God sighed...and created quadruple by-pass surgery.
Satan chuckled and created HMOs.
In the beginning, God covered the earth with broccoli, cauliflower and spinach, with green and yellow and red vegetables of all kinds, so Man and Woman would live long and healthy lives.
Then, using God's bountiful gifts, Satan created Ben and Jerry's and Krispy Kreme.
And Satan said: "You want hot fudge with that?"
And Man said: "Yes!"
And Woman said: "I'll have one, too...with sprinkles."
And lo they gained 10 pounds.
And God created the healthful yogurt that Woman might keep the figure that Man found so fair.
And Satan brought forth white flour from the wheat, and sugar from the cane, and combined them.
And Woman went from size 2 to size 14.
So God said: "Try my fresh green garden salad."
And Satan presented crumbled Bleu Cheese dressing and garlic toast on the side.
And Man and Woman unfastened their belts following the repast.
God then said: "I have sent you heart-healthy vegetables and olive oil in which to cook them."
And Satan brought forth deep-fried coconut shrimp butter-dipped lobster chunks, and chicken-fried steak so big it needed its own platter.
And Man's cholesterol went through the roof.
Then God brought forth the potato, naturally low in fat and brimming with potassium and good nutrition.
Then Satan peeled off the healthful skin, sliced the starchy center into chips and deep-fried them in animal fats adding copious quantities of salt.
And Man packed on more pounds.
God then brought forth running shoes so that his children might lose those extra pounds.
And Satan introduced cable TV with remote control so Man would not have to toil changing the channels.
And Man and Woman laughed and cried before the flickering light and started wearing stretchy Lycra jogging suits.
God then gave lean beef so that Man might consume fewer calories and still satisfy his appetite.
And Satan created McDonald's and the 99-cent double cheeseburger.
Then Satan said: "You want fries with that?"
And Man replied: "Yes! And super size 'em!"
And Satan said: " It is good."
And Man and Woman went into cardiac arrest.
God sighed...and created quadruple by-pass surgery.
Satan chuckled and created HMOs.
Sunday, May 18, 2008
Getting Creative
Food inflation plus a recent trip to the nutritionist has led me down a rather interesting path.
First of all, I revisited my own article about meat alternatives. It seems Hubby needs to eat less meat protein and more vegetable protein, so to the web I went. I was trying to find recipes for foods we could both eat, given our food allergies and our new eating parameters set out by the nutritionist.
I came up with legumes--in dips, balls, loaves, soups, burgers, and I'm still looking. Lentils, beans of all kinds, and peas (even split ones) can be used for these recipes...and what do you know? Legumes aren't really touched by the food inflation we're all experiencing, so stocking up affordably shouldn't be a problem.
Are you looking for a way out of this food/budget nightmare? Try legumes instead of meat, eggs, bread/pasta, and dairy. I'm going to after I find some more interesting and allergen-free recipes to try.
Update: after some more looking, I found that (unfortunately) legumes must be purchased in organic form, because the plants are heavily sprayed with pesticides, and the legume seed has a thin pod or covering (that's easily permeated). I also found that in my particular health food store, canned beans are cheaper per pound than dry ones--go figure!
If thinking of trying legumes in place of meat, do check and compare prices PER POUND for dry vs. canned--you might find the same thing I did.
First of all, I revisited my own article about meat alternatives. It seems Hubby needs to eat less meat protein and more vegetable protein, so to the web I went. I was trying to find recipes for foods we could both eat, given our food allergies and our new eating parameters set out by the nutritionist.
I came up with legumes--in dips, balls, loaves, soups, burgers, and I'm still looking. Lentils, beans of all kinds, and peas (even split ones) can be used for these recipes...and what do you know? Legumes aren't really touched by the food inflation we're all experiencing, so stocking up affordably shouldn't be a problem.
Are you looking for a way out of this food/budget nightmare? Try legumes instead of meat, eggs, bread/pasta, and dairy. I'm going to after I find some more interesting and allergen-free recipes to try.
Update: after some more looking, I found that (unfortunately) legumes must be purchased in organic form, because the plants are heavily sprayed with pesticides, and the legume seed has a thin pod or covering (that's easily permeated). I also found that in my particular health food store, canned beans are cheaper per pound than dry ones--go figure!
If thinking of trying legumes in place of meat, do check and compare prices PER POUND for dry vs. canned--you might find the same thing I did.
Monday, May 12, 2008
More on the Oil Front: Subsidization By Country
Something else to factor into the high price of oil: government subsidization. Much like Big Pharma and high drug prices being borne by individuals in THIS country (as well as others, but not many), oil is going through pretty much the same thing--more affluent countries paying more per citizen, while smaller, less affluent countries paying less because they're being subsidized by governments.
Like Big Pharma and the "we-pay-for-research-and-development" scam here in the U.S., we're also paying for the "research and development" of oil resources too through UNSUBSIDIZED oil and gas purchases.
To give you examples of how drastic the swing in prices can be per country, I include some links here, here, and here (a video segment) for your perusal. Oil-producing countries pay the least (presumably to avoid civil unrest), while the biggest users pay the most. THERE IS NO CHANGE IN OVERALL GLOBAL DEMAND OR SUPPLY, ONLY THE AMOUNT OF SUBSIDIZATION, SPECULATION, AND CURRENCY WORTH.
If the gas playing field ever were to level out, meaning everyone paid their full share at the pump, prices would drop for the highest payers while climbing for the lowest payers. This is the same for food, drugs, and everything else that has global reach.
Update: Just for fun, I took the highest and lowest paid price per gallon (London @ $7.03 and Bagdad @ .05) and averaged them--it came to $3.54/gallon, which sounds like a fair share global price to me...if only everyone paid his fair share. Perhaps it's time for some civil unrest HERE!
Like Big Pharma and the "we-pay-for-research-and-development" scam here in the U.S., we're also paying for the "research and development" of oil resources too through UNSUBSIDIZED oil and gas purchases.
To give you examples of how drastic the swing in prices can be per country, I include some links here, here, and here (a video segment) for your perusal. Oil-producing countries pay the least (presumably to avoid civil unrest), while the biggest users pay the most. THERE IS NO CHANGE IN OVERALL GLOBAL DEMAND OR SUPPLY, ONLY THE AMOUNT OF SUBSIDIZATION, SPECULATION, AND CURRENCY WORTH.
If the gas playing field ever were to level out, meaning everyone paid their full share at the pump, prices would drop for the highest payers while climbing for the lowest payers. This is the same for food, drugs, and everything else that has global reach.
Update: Just for fun, I took the highest and lowest paid price per gallon (London @ $7.03 and Bagdad @ .05) and averaged them--it came to $3.54/gallon, which sounds like a fair share global price to me...if only everyone paid his fair share. Perhaps it's time for some civil unrest HERE!
Friday, May 09, 2008
…And So It Begins…
We have food shortages, high oil and gas prices, high food prices, businesses are going out of business, people are losing their homes, credit is tight despite low interest rates, our energy outlook is poor, and people are stealing high-value metals like copper, gold, and anything ending in “–ium” for quick cash—copper cookware, gold and silver jewelry, pennies, catalytic converters, you name it. Whatever’s portable is fair game.
What does it all mean? The clouds can’t get any blacker, can they?
It means there is a silver lining on the horizon in the form of a brand new leg up for the economy. The very same sorts of things happened back in the 70’s, and it led to the rip-roaring days of the 80’s and 90’s. The economic cycle has completed it’s roughly 30-year turn, and is starting anew again. It may take time before you actually see and feel it, but it will get to you. When it does, you’ll be making more money in less time using less personal energy than ever before.
In the meantime, let’s examine what the black clouds contain.
Food: Stores are rationing or running out of certain food supplies—mainly large bags of rice and wheat flour, and are either rationing what a person can buy based on prior buying habits, or are not restocking certain items at all due to unavailability. How long will it be before certain stores disappear for lack of stock, or lack of a reason for us to shop in them? We can get our non-rationed and non-food items elsewhere.
Rice is already being hoarded in major exporting countries, and for the first time ever, we’ll become wheat IMPORTERS. Oh, and get ready for $4/gallon milk.
Corn may or may not continue climbing after it takes a rest--it all depends on what Congress does about ethanol, what up-and-coming countries are choosing to eat, and whether or not acreage is brought out of the soil bank to plant more corn. If supply remains as constrained as it is today, the price climb will continue.
Remember WWI and II and rationing? Most of you may not, and I myself never lived through it, but I remember Mom and Dad’s stories. Many people have written about their own memories in books and articles, and some are over in the Dollar Stretcher index and archives. I HAVE personally lived through the odd-even gas rationing in California during the 70’s—if your car license plate ended in an odd number, you got gas on a certain day, and plates ending in even numbers got gas on a different day. As I recall, there was also some sort of Hawaiian sugar import issue, and this started the sugar beet craze. Schools stopped all field trips, and people were finding ways to do without other imports, like bananas. I was a young child then, so my memories may not be entirely accurate.
We may be making a return to those times, but not as completely—-for example, our aluminum pots and pans, chocolate, and sugar supply may be safe, but eggs butter, rice, wheat flour, milk, and meat may come under fire. If you were ever looking for an excuse to go vegetarian, I think this is it.
Retail businesses: Several major stores are having one heck of a credit crunch, and are looking at closing some stores, filing for bankruptcy, or just going out of business altogether if they can’t secure some sort of credit. This means big, empty holes in malls, shopping centers, and shuttered stand-alone stores with even more unemployed people. This also means a (thankful) deflation of the retail over-abundance balloon—fewer stores essentially duplicating each other’s selections. A towel is a towel, no? So why was there need for stores that specialize in towels, or even the entire domestics department?
As far as clothing goes, you’ve seen one red cable-knit sweater, you’ve seen them all—so why was it necessary to stock the same sweater in 10 different stores in the same mall, with brand name and price being their only difference?
And someone please tell me just how many flat-screen TV retailer we need, let alone stores that SPECIALIZE in electronics and flat-screen TVs!
Non-food and non-energy retail items are so far the only things not really hit by inflation, but they’re getting hit from within by lack of access to store operating capital.
For now, retailers are holding back on importing more inventories, seeing as how they’re having a hard time selling what they already have in stock. They are carefully watching and waiting to see how and what we buy.
Credit: Speaking of operating capital, banks are consolidating, going out of business, or filing for bankruptcy themselves these days (not at consumer level yet, but at Wall Street level, and it will trickle down), and this means a whole lot more is going to dry up besides retail choices. Whole nations, including our own, could go down in flames without access to credit—it’s what’s been keeping us running since the last Depression. This is already happening on a miniature scale to the many families who’ve been using their homes as an ATM for the past five years or so—we’re ALL learning lessons about devaluing assets, lack of access to capital (credit), and shaky future repayment futures due to iffy job outlooks. Now magnify this picture to include banks, businesses large and small, and nations.
Energy: Not only is oil predicted to go to $125/barrel, it’s also predicted to reach as high as $180/barrel, because major oil-producing countries are either “drilled out” or hurting for money to develop newer and larger finds. Russia, one of the countries having found new deposits in remote areas, is loathe to accept foreign assistance in getting this oil out of the ground because they don’t want to have to share profits. Nigeria, the only major producer that ISN’T drilled out yet, is pretty much always in a state of political upheaval, rendering itself sufficiently unreliable for anyone to safely depend on.
Meanwhile, the second- and third-tier producers, such as Mexico, are hurting for money to expand and modernize their fields, making the possibility of expansion next to nil—all these things in concert, combined with oil trader shenanigans, only serve to stifle supply and artificially raise value, regardless of actual demand.
Never mind that there might be some oil hoarding going on.
Countries that are hurting for money IN GENERAL will be down-shifting their production in order to assist raising the price of crude oil, making each barrel more pricier than the last, and you could very well see an $8.00/gallon price at the pump. By that time, we probably will have switched to metric, meaning you'll be buying gas by the liter, and the rest of Europeanification will begin. All of a sudden, the price of gas will have seemingly dropped by two-thirds, and so will the quantity—there are roughly three liters to the gallon.
Question: is it just me, or has anyone else out there also noticed the distinct LACK of refinery fires, outages, and refineries going off-line for maintenance this year? Now that oil's up over $100/barrel, maybe they no longer feel the need to jack up prices by manipulating local supply.
Isn't it strange how maintenance, fire prevention, and electrical service to refineries can greatly improve when oil reaches a certain price level?
Last night, I learned that my local electric utility is going to raise prices 20% starting July. I also heard about just how many people are going without electricity because they can’t afford it. Couple the unaffordability with all the foreclosed homes in the area, and I get a better picture of why rates are raising besides the increased costs of producing power in the first place (through gas and coal).
Where we are going from here: According to Louise Yamada (a commodity researcher) and commodity charts spanning the last 30 years from today, gold has topped out, oil is going to take a breather before climbing further, corn may also take a breather for awhile, and wheat is going to continue climbing for the foreseeable future. Here is a easy-to-understand video segment of her explaining it all, so turn up your speakers and watch.
Also, keep an eye on what Europe’s doing—it will be the best indicator of what’s to come over here in the future, like a shrinking population due to birth slowdowns, and our government on day having to pay people to have kids. Jobs will only be available for those with super-high educations (in the public sector) and for people whose families already own a business—anything in between will be rare and hard to come by, hence the breeding slowdown.
Why this is happening: the world is flattening, and more countries are becoming prosperous. This means they are able to eat better, eat more, and now have more money to demand more, whether it’s food, energy, merchandise, or whatever. Some day, we will reach a level where just about everyone will have “enough”, but it will take a lowering of First World standards and lifestyles to accommodate the rise of Second and Third World countries to accomplish this. Meanwhile, we have to endure the growing pains (or shrinking pains) that go along with it. With “enough” comes peace and contentment.
More of the world is demanding more FROM the world. The higher the price of something here in the U.S., whether it be oil, gas, or food, and whatever the reason for inflation (speculation, shortages, outages, etc.), the higher the SALES TAX placed on it. The less we use, the higher the price (and subsequent tax) will go until complete demand destruction occurs, and the market completely collapses from total lack of demand, along with prices. Basically, when the crowd moves on to something else, the excitement is over and monotony (along with low prices) rolls back in.
Welcome to Fair Tax Lite. This same sort of thing will happen if the Fair Tax plan gets enacted, only it will cover everything, not just food and energy.
We are making up for the severe loss of state revenues (property taxes from foreclosed homes) through increased taxes on increased prices paid for food and energy items. This is a small part of what the Fair Tax plan would bring us, and it would play right into the hands of those wishing to join Canada, Mexico, and the U.S.--the Europeanification and metricizing of this continent, the Euro-ing of the dollar to the Amero, and the firm latch to currency values for any kind of discounts—see my previous article on the death of the coupon.
The whole time I lived in Italy, I never saw a coupon or sales flyer from any store. Through friends and neighbors, people got the word about where to shop and what to do for lower prices. Mass mailings and newspaper circulars just don’t exist there, and this is probably the same for all of Europe. Guess what’s NOT coming from a store near you in the future?
What we can do about it: say goodbye to all that wretched excess that some will say made America great, and go lay in a store of flour, rice, beans, and powdered milk while you can still find them. Plant and use a Victory garden to fill out the rest, and the victory will be over food inflation. Find other sources or learn to live without those things that will go or already have gone into hyperinflation mode—plenty of people live just fine not consuming meat, dairy, eggs, wheat flour, etc., due to food allergies or personal preference, and so can you.
Learn to live without a car, or at least cut back car use drastically. Reroute your shopping and living so you’re either closer to work, or closer to shopping if you have good public transportation to work (since you won’t be carrying much to work, riding the bus or train there would work out better—lugging bags of groceries with a couple of small children in tow, and/or a sick cat to the vet just doesn’t fly on a public bus or train).
Take a look at what the Amish are doing: using gas- and battery-powered lamps for light, employing copious use of generators, hydraulics, and solar power (through skylights, solar tubes, and panels to recharge batteries), using ice to cool, feeding leftovers to a family pig or two (for slaughter, of course), subsistence farming and gardening, outsourcing electricity-consuming things like bookkeeping and computer needs, outsourcing any transportation other than horse and buggy, and relying on lots and lots of manual labor to get seemingly ordinary things done—you might say less mechanization and more perspiration.
For a better idea of how this “techno-less” life would be, here’s a book recommendation: Better Off—Flipping the Switch on Technology. It tells of one young man’s adventure as he transitioned from the high-tech, convenience-laden world of today to a simpler, more meaningful way of life. Along the way, he discovered that “labor-saving devices” don’t really save that much labor or time.
These will be the "good ol' days" as far as prices go. If and when you see prices dip, stock up...same goes for stocks and mutual funds as well as food and energy. Your retirement account will need all the help it can get now.
If you ever needed an ego boost or just wanted some positive recognition for being frugal, it’s coming. If you ever wanted an excuse for frugal living, this is it. If you aren’t frugal yet, now is the time—better late than never. This is why we frugalites hoard, and hoard money in particular: to take advantage of the soon-to-be-incredibly-marked-down excess at rock-bottom prices. We're bottom-fishers.
The bottom rung of Third World countries are always going to be hurting for food, redundant retailers are always going to be hurting to stay in business, and thieves are always going to be hurting for money, but if you concentrate on your own personal economy (stay out of debt and pay all bills on time and in cash), teach a man how to fish (as it were), practice your own “fishing”, and get and stay prepared, this too shall blow over in time. Who knows? You may even come out on the other side a better person--a better, wealthier, and wiser person as you enter the next leg of the economic cycle.
Lather, rinse, repeat--this will be happening all over again in about 30 more years. Make sure your children and grandchildren remember and learn from this experience.
What does it all mean? The clouds can’t get any blacker, can they?
It means there is a silver lining on the horizon in the form of a brand new leg up for the economy. The very same sorts of things happened back in the 70’s, and it led to the rip-roaring days of the 80’s and 90’s. The economic cycle has completed it’s roughly 30-year turn, and is starting anew again. It may take time before you actually see and feel it, but it will get to you. When it does, you’ll be making more money in less time using less personal energy than ever before.
In the meantime, let’s examine what the black clouds contain.
Food: Stores are rationing or running out of certain food supplies—mainly large bags of rice and wheat flour, and are either rationing what a person can buy based on prior buying habits, or are not restocking certain items at all due to unavailability. How long will it be before certain stores disappear for lack of stock, or lack of a reason for us to shop in them? We can get our non-rationed and non-food items elsewhere.
Rice is already being hoarded in major exporting countries, and for the first time ever, we’ll become wheat IMPORTERS. Oh, and get ready for $4/gallon milk.
Corn may or may not continue climbing after it takes a rest--it all depends on what Congress does about ethanol, what up-and-coming countries are choosing to eat, and whether or not acreage is brought out of the soil bank to plant more corn. If supply remains as constrained as it is today, the price climb will continue.
Remember WWI and II and rationing? Most of you may not, and I myself never lived through it, but I remember Mom and Dad’s stories. Many people have written about their own memories in books and articles, and some are over in the Dollar Stretcher index and archives. I HAVE personally lived through the odd-even gas rationing in California during the 70’s—if your car license plate ended in an odd number, you got gas on a certain day, and plates ending in even numbers got gas on a different day. As I recall, there was also some sort of Hawaiian sugar import issue, and this started the sugar beet craze. Schools stopped all field trips, and people were finding ways to do without other imports, like bananas. I was a young child then, so my memories may not be entirely accurate.
We may be making a return to those times, but not as completely—-for example, our aluminum pots and pans, chocolate, and sugar supply may be safe, but eggs butter, rice, wheat flour, milk, and meat may come under fire. If you were ever looking for an excuse to go vegetarian, I think this is it.
Retail businesses: Several major stores are having one heck of a credit crunch, and are looking at closing some stores, filing for bankruptcy, or just going out of business altogether if they can’t secure some sort of credit. This means big, empty holes in malls, shopping centers, and shuttered stand-alone stores with even more unemployed people. This also means a (thankful) deflation of the retail over-abundance balloon—fewer stores essentially duplicating each other’s selections. A towel is a towel, no? So why was there need for stores that specialize in towels, or even the entire domestics department?
As far as clothing goes, you’ve seen one red cable-knit sweater, you’ve seen them all—so why was it necessary to stock the same sweater in 10 different stores in the same mall, with brand name and price being their only difference?
And someone please tell me just how many flat-screen TV retailer we need, let alone stores that SPECIALIZE in electronics and flat-screen TVs!
Non-food and non-energy retail items are so far the only things not really hit by inflation, but they’re getting hit from within by lack of access to store operating capital.
For now, retailers are holding back on importing more inventories, seeing as how they’re having a hard time selling what they already have in stock. They are carefully watching and waiting to see how and what we buy.
Credit: Speaking of operating capital, banks are consolidating, going out of business, or filing for bankruptcy themselves these days (not at consumer level yet, but at Wall Street level, and it will trickle down), and this means a whole lot more is going to dry up besides retail choices. Whole nations, including our own, could go down in flames without access to credit—it’s what’s been keeping us running since the last Depression. This is already happening on a miniature scale to the many families who’ve been using their homes as an ATM for the past five years or so—we’re ALL learning lessons about devaluing assets, lack of access to capital (credit), and shaky future repayment futures due to iffy job outlooks. Now magnify this picture to include banks, businesses large and small, and nations.
Energy: Not only is oil predicted to go to $125/barrel, it’s also predicted to reach as high as $180/barrel, because major oil-producing countries are either “drilled out” or hurting for money to develop newer and larger finds. Russia, one of the countries having found new deposits in remote areas, is loathe to accept foreign assistance in getting this oil out of the ground because they don’t want to have to share profits. Nigeria, the only major producer that ISN’T drilled out yet, is pretty much always in a state of political upheaval, rendering itself sufficiently unreliable for anyone to safely depend on.
Meanwhile, the second- and third-tier producers, such as Mexico, are hurting for money to expand and modernize their fields, making the possibility of expansion next to nil—all these things in concert, combined with oil trader shenanigans, only serve to stifle supply and artificially raise value, regardless of actual demand.
Never mind that there might be some oil hoarding going on.
Countries that are hurting for money IN GENERAL will be down-shifting their production in order to assist raising the price of crude oil, making each barrel more pricier than the last, and you could very well see an $8.00/gallon price at the pump. By that time, we probably will have switched to metric, meaning you'll be buying gas by the liter, and the rest of Europeanification will begin. All of a sudden, the price of gas will have seemingly dropped by two-thirds, and so will the quantity—there are roughly three liters to the gallon.
Question: is it just me, or has anyone else out there also noticed the distinct LACK of refinery fires, outages, and refineries going off-line for maintenance this year? Now that oil's up over $100/barrel, maybe they no longer feel the need to jack up prices by manipulating local supply.
Isn't it strange how maintenance, fire prevention, and electrical service to refineries can greatly improve when oil reaches a certain price level?
Last night, I learned that my local electric utility is going to raise prices 20% starting July. I also heard about just how many people are going without electricity because they can’t afford it. Couple the unaffordability with all the foreclosed homes in the area, and I get a better picture of why rates are raising besides the increased costs of producing power in the first place (through gas and coal).
Where we are going from here: According to Louise Yamada (a commodity researcher) and commodity charts spanning the last 30 years from today, gold has topped out, oil is going to take a breather before climbing further, corn may also take a breather for awhile, and wheat is going to continue climbing for the foreseeable future. Here is a easy-to-understand video segment of her explaining it all, so turn up your speakers and watch.
Also, keep an eye on what Europe’s doing—it will be the best indicator of what’s to come over here in the future, like a shrinking population due to birth slowdowns, and our government on day having to pay people to have kids. Jobs will only be available for those with super-high educations (in the public sector) and for people whose families already own a business—anything in between will be rare and hard to come by, hence the breeding slowdown.
Why this is happening: the world is flattening, and more countries are becoming prosperous. This means they are able to eat better, eat more, and now have more money to demand more, whether it’s food, energy, merchandise, or whatever. Some day, we will reach a level where just about everyone will have “enough”, but it will take a lowering of First World standards and lifestyles to accommodate the rise of Second and Third World countries to accomplish this. Meanwhile, we have to endure the growing pains (or shrinking pains) that go along with it. With “enough” comes peace and contentment.
More of the world is demanding more FROM the world. The higher the price of something here in the U.S., whether it be oil, gas, or food, and whatever the reason for inflation (speculation, shortages, outages, etc.), the higher the SALES TAX placed on it. The less we use, the higher the price (and subsequent tax) will go until complete demand destruction occurs, and the market completely collapses from total lack of demand, along with prices. Basically, when the crowd moves on to something else, the excitement is over and monotony (along with low prices) rolls back in.
Welcome to Fair Tax Lite. This same sort of thing will happen if the Fair Tax plan gets enacted, only it will cover everything, not just food and energy.
We are making up for the severe loss of state revenues (property taxes from foreclosed homes) through increased taxes on increased prices paid for food and energy items. This is a small part of what the Fair Tax plan would bring us, and it would play right into the hands of those wishing to join Canada, Mexico, and the U.S.--the Europeanification and metricizing of this continent, the Euro-ing of the dollar to the Amero, and the firm latch to currency values for any kind of discounts—see my previous article on the death of the coupon.
The whole time I lived in Italy, I never saw a coupon or sales flyer from any store. Through friends and neighbors, people got the word about where to shop and what to do for lower prices. Mass mailings and newspaper circulars just don’t exist there, and this is probably the same for all of Europe. Guess what’s NOT coming from a store near you in the future?
What we can do about it: say goodbye to all that wretched excess that some will say made America great, and go lay in a store of flour, rice, beans, and powdered milk while you can still find them. Plant and use a Victory garden to fill out the rest, and the victory will be over food inflation. Find other sources or learn to live without those things that will go or already have gone into hyperinflation mode—plenty of people live just fine not consuming meat, dairy, eggs, wheat flour, etc., due to food allergies or personal preference, and so can you.
Learn to live without a car, or at least cut back car use drastically. Reroute your shopping and living so you’re either closer to work, or closer to shopping if you have good public transportation to work (since you won’t be carrying much to work, riding the bus or train there would work out better—lugging bags of groceries with a couple of small children in tow, and/or a sick cat to the vet just doesn’t fly on a public bus or train).
Take a look at what the Amish are doing: using gas- and battery-powered lamps for light, employing copious use of generators, hydraulics, and solar power (through skylights, solar tubes, and panels to recharge batteries), using ice to cool, feeding leftovers to a family pig or two (for slaughter, of course), subsistence farming and gardening, outsourcing electricity-consuming things like bookkeeping and computer needs, outsourcing any transportation other than horse and buggy, and relying on lots and lots of manual labor to get seemingly ordinary things done—you might say less mechanization and more perspiration.
For a better idea of how this “techno-less” life would be, here’s a book recommendation: Better Off—Flipping the Switch on Technology. It tells of one young man’s adventure as he transitioned from the high-tech, convenience-laden world of today to a simpler, more meaningful way of life. Along the way, he discovered that “labor-saving devices” don’t really save that much labor or time.
These will be the "good ol' days" as far as prices go. If and when you see prices dip, stock up...same goes for stocks and mutual funds as well as food and energy. Your retirement account will need all the help it can get now.
If you ever needed an ego boost or just wanted some positive recognition for being frugal, it’s coming. If you ever wanted an excuse for frugal living, this is it. If you aren’t frugal yet, now is the time—better late than never. This is why we frugalites hoard, and hoard money in particular: to take advantage of the soon-to-be-incredibly-marked-down excess at rock-bottom prices. We're bottom-fishers.
The bottom rung of Third World countries are always going to be hurting for food, redundant retailers are always going to be hurting to stay in business, and thieves are always going to be hurting for money, but if you concentrate on your own personal economy (stay out of debt and pay all bills on time and in cash), teach a man how to fish (as it were), practice your own “fishing”, and get and stay prepared, this too shall blow over in time. Who knows? You may even come out on the other side a better person--a better, wealthier, and wiser person as you enter the next leg of the economic cycle.
Lather, rinse, repeat--this will be happening all over again in about 30 more years. Make sure your children and grandchildren remember and learn from this experience.
Thursday, May 01, 2008
Three Little Words Limit Severe Consequences
Those words would be "indexed to inflation."
I learned a little tidbit from the Glenn Beck show that our government purposely mis-states our inflation rate because so much of its budgetary items (like social service payments) are...you got it...INDEXED TO INFLATION.
According to our government, inflation currently sits at 4%, while REAL inflation sits somewhere between 7-12%. This means things like Social Security checks, future IRA contributions made after this year, VA/military and retirement pensions with COLA (cost of living) allowances, all kinds of disability payments, and anything else tied to inflation via a COLA is about 70% lower than it ought to be.
Does anyone know if welfare benefits, AFDC, and food stamps are tied to inflation? This is one time I sincerely hope so.
By keeping the official rate of inflation artificially low, Uncle Sam gets to shell out so much less than he normally would. Meanwhile, the rest of us have to shell out more and more for necessities while Uncle Sam sits back and enjoys his discount spread (the amount between HIS rate and the real rate). This is how he makes money when everyone else is losing it in bonds and savings, and why our so-called strong dollar policy has been allowed to lapse--how else does one control inflation rate spreads than by letting our dollar slide? The lower the slide, the more Uncle Sam profits when the stated "official" rate is kept artificially low.
Don't be surprised if more and more stuff ends up going to the "indexed to inflation" camp in the future.
I learned a little tidbit from the Glenn Beck show that our government purposely mis-states our inflation rate because so much of its budgetary items (like social service payments) are...you got it...INDEXED TO INFLATION.
According to our government, inflation currently sits at 4%, while REAL inflation sits somewhere between 7-12%. This means things like Social Security checks, future IRA contributions made after this year, VA/military and retirement pensions with COLA (cost of living) allowances, all kinds of disability payments, and anything else tied to inflation via a COLA is about 70% lower than it ought to be.
Does anyone know if welfare benefits, AFDC, and food stamps are tied to inflation? This is one time I sincerely hope so.
By keeping the official rate of inflation artificially low, Uncle Sam gets to shell out so much less than he normally would. Meanwhile, the rest of us have to shell out more and more for necessities while Uncle Sam sits back and enjoys his discount spread (the amount between HIS rate and the real rate). This is how he makes money when everyone else is losing it in bonds and savings, and why our so-called strong dollar policy has been allowed to lapse--how else does one control inflation rate spreads than by letting our dollar slide? The lower the slide, the more Uncle Sam profits when the stated "official" rate is kept artificially low.
Don't be surprised if more and more stuff ends up going to the "indexed to inflation" camp in the future.
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