Source. Excellent advice, except for the last item. But the advice is incomplete. For a rather more complete analysis, see Some Principles of a Financial Conservative wherein I proffer advice that is rock-solid, absolutely free, and that also has the interesting property that few will follow it due to the social and moral decline of the nation.
The article from which I borrowed the above graphic sports this delightfully amphibolous construction: "It's really hard to be poor . . . ."
Reading those words, I thought to myself, yes, of course, you really have to work at being poor in this, the greatest and most prosperous nation ever to exist, a country that needs walls to keep people out unlike the commie states that need walls to keep people in. Anyone can avoid poverty if they practice he practices the old virtues and works hard. But then I realized that that cannot be the meaning intended in a sentence to be found in the left-leaning Washington ComPost.
No, I am not opposed to paying taxes. I am not anti-tax any more than I am anti-government. We need government, and we need to fund it somehow. It does not follow, however, that there must be an income tax. A consumption tax would be the way to go. But that will never happen.
Of course, the low inflation rate also provides the government with breathing room on the fiscal side. Low inflation keeps a limit on the increases that federal agencies are required to pay out to beneficiaries of programs such as Social Security. With the budget so tightly constrained by huge deficits, the low inflation data is essential to government planners.
More chicanery can be seen on the unemployment front. The government currently claims the unemployment rate to be at just 7.9 percent. But when calculating unemployment using the pre-Clinton methodology, SGS finds it to be around 22 percent. SGS does not exclude, as the government does now, all those who have left the workforce out of despair of finding a job, or those who who have accepted part time jobs in lieu of full time employment.
A world of politically manipulated 'official' statistics and misleading Government statements makes investment decisions more difficult. The result is that, despite falsely negative 'real' short-term interest rates and an abundance of debased cash, consumers and corporations continue to hoard cash. While the Dow has in fact surged in nominal terms, the leading U.S. equity funds continue to show significant outflows of investment funds. Rising stock prices have not convinced many Americans to get into the game. This should provide needed perspective on the current media euphoria.
A healthy skepticism about big government is as reasonable as a healthy skepticism about big business.
I saw someone on TV who claimed that comparing a deeply indebted household with the deeply indebted U.S. government is a false analogy. Why? Because the government, unlike the citizen, has the power legally to print money. No doubt that is true and a point of disanalogy, but what surprised me was that neither the speaker nor his listeners seemed to see any problem with printing money in response to a debt crisis. The problem, of course, is that when a government does this it in effect counterfeits its own currency and reduces the buying power of existing dollars.
This got me thinking about counterfeiting. Why can't I engage in my own private stimulus program? I acquire the requisite equipment, print up a batch of C-notes and then spend them in parts of town that I deem need economic stimulus. Better yet, I simply give out grants gaining no benefits for myself. Is there a difference in principle between illegal counterfeiting and the legal 'counterfeiting' that the government engages in? If they can 'stimulate,' why can't I?
But I'm no economist, so I may be missing something. I guess I don't understand how real value can be conjured out of thin air. In this electronic age, you don't even need paper and there needn't be any actual printing. Suppose the Benevolent Hacker breaks into your bank account, not to transfer funds out or to transfer funds in from a legitimate source, but simply to add zeros to your account. You are suddenly richer 'on paper.' You convert this new found wealth into new cars and houses for yourself. Wouldn't that stimulate the economy to some extent?
And then this morning I saw Krazy Krugman on C-Span, a.k.a Paul Krugman, writer of crappy op-eds for Gotham's Gray Lady, his worst and most vile being this outburst re: the Tucson shooting. Krugman is not at all concerned that the national debt approaches 17 trillion. After all, as he brilliantly observed, the U.S. has its own currency, and it can print money! Not one of the C-Span callers called Krugman out on the consequences of inflating one's way out of debt. Obama, said Krugman, "got cold feet." He didn't stimulate enough!
Meanwhile conservatives stock up on grub, gold, guns, and 'lead.'
When I study the writings of professional economists I sometime have to shake my shaggy philosopher's head. Try this passage on for size:
$16 trillion is the amount of Treasury debt outstanding at the moment. The more relevant figure is the amount of debt the federal government owes to people and institutions other than itself. If, for some reason, I lent money to my wife and she promised to pay it back to me, we wouldn’t count that as part of the debt owed by our household. The debt owed to the public is about $10 trillion these days.
What a brainless analogy! Suppose I loan wifey 100 semolians. She issues me a 'debt instrument,' an IOU. Has the family debt increased by $100? Of course not. It is no different in principle than if I took $100 out of my left pocket, deposited an IOU there, and placed the cash in my right pocket. If I started with exactly $100 cash on my person I would end the game with exactly the same amount.
But I do not stand to the government in the same relation that I stand to my family. Suppose I buy 100 K worth of Treasury notes, thereby loaning the government that sum. Has the Federal debt increased by $100 K? Of course it has. I am not part of the government. Whether the government owes money to U. S. citizens or to the ChiComs makes no difference at all with respect to the amount of the debt. The citizens plus the government do not form a "household" in the way my wife and I form a household. Citizens and government are not all one big happy family.
The analogy is pathetic.
The author would have you think that "the more relevant figure" is $16 trillion minus $10 trillion = $6 trillion. False, because based on a false analogy.
This shows how ideologically infected the 'science' of economics is. Only a leftist ideologue could make the collectivist assumption that I have just exposed. The Marxian "From each according to his ability, to each according to his need" is a viable principle at the level of the family, but it is pernicious nonsense on stilts when applied to the state in its relation to the citizenry.
Do you live in a death spiral state? Buying real estate or municipal bonds in such a state may prove to be a foolish move. Here is a list with each state's 'taker ratio':
South Carolina 1.06
New York 1.07
New Mexico 1.53
Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector.
[. . .]
The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios. Conning’s analysis focuses more on dollars than body counts. Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.
Given California's death spiral, why stay there? Victor Davis Hanson supplies some reasons. And I hope you Californians do stay there. Don't come to Arizona! You wouldn't like it here anyway. Too hot, too self-reliant, too 'racist' and 'xenophobic,' and every other citizen and non-citizen is packin' heat.
A short video. It explains the difference between discretionary and mandatory spending and why not even mandatory spending is covered by tax revenues. Mandatory spending comprises the entitlements and the interest on the national debt. A balanced budget is not possible given the way the government is currently structured. A re-design is needed. It must begin by a posing of the question: What is the proper role of government?
This philosophical question will be neither seriously posed by the people in power, nor answered. And so it is is to be expected that we will go off the cliff. I am talking about the ultimate cliff, not the one coming in early 2013 when $500 billion in tax increases and federal spending cuts are scheduled to kick in.
So you might think that Romney's loss is of no real consequence. It just doesn't matter who presides over the collapse. But if you are headed for a cliff and certain death, would you rather be mounted on a nimble Obama jackass or a plodding Romney elephant? In the long run we're dead. But later is better than sooner. There is more time to prepare.
And there is more time for the owl of Minerva to ascend and survey the passing scene until she too must pass away.
A reader writes, " I enjoy your philosophical and theological views, but unfortunately disagree with your political and economic views. I recommend large doses of Paul Krugman, beginning with Nobody Understands Debt. "
I got a kick out of that because I should think that the febrile Krugman is absolutely the last person to convince me of anything. I tend to see him as living proof that the Nobel Prize, except perhaps in the hard sciences, is a meaningless accolade bestowed by the politically correct upon their own. I consider the man a fool on the level of Nancy Pelosi, Harry Reid, and Joe Biden.
The column cited is one I read when it first appeared. Now, thanks to the reader, I have an opportunity to comment on it. But first we need to back up a step for a wide-angle view. Why is the national debt such a big deal to conservatives, but of relatively little concern to leftists? Dennis Prager provides a cogent answer in his new book, Still the Best Hope (Broadside 2012, p. 29, emphasis in original):
The Left's great fight is with material inequality, not with evil as normally understood. Thus, the Left has always been less interested in fighting tyranny than in fighting inequality. That is why Leftist dictators -- from Lenin to Mao to Pol Pot to Ho Chi Minh to Fidel Castro and Hugo Chavez -- have had so much support from Leftists around the world . . . .
This explains the Left's relative disinterest in creating wealth. The enormous and unsustainable debts facing the individual American states and the United States as a country from 2009 on have disturbed the American Right far more than the American Left [. . .] The reason is that the Left is not nearly as interested in creating wealth as it is in erasing inequality.
Prager's explanation fits Krugman well. The latter thinks that the focus on deficit and debt reduction is "misplaced." I disagree vehemently. Not only is this a very serious matter if we want to survive as a nation, but also one on which we all ought to agree. Left and Right will never agree about abortion, capital punishment, gun control, and a host of other issues, but one would think that when "money talks, ideology walks." Unfortunately our leftist pals will hold to their ideology even unto fiscal doom.
Krugman's 'argument,' if you want to call it that, consists in an attack on an analogy between individual and government debt:
Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.
This is, however, a really bad analogy in at least two ways.
Krugman's first reason is that families have to pay off their mortgages, but governments don't have to pay back what they borrow. First of all, it is false that mortgage holders have to pay back their loans. One can easily structure a mortgage in such a way that it is held indefinitely and passed on to heirs. One pays interest month by month without reducing the principal. There are also negative amortization loans in which the borrower digs his hole deeper month by month.
Ready for Krugman's second reason? It's a real winner: "Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves."
That's bullshit, which is presumably why nobody gets it except him of the simian countenance. It makes no clear sense to say that the debt is money we owe ourselves. So each of us owes a portion of the debt to every other one of us?
Suppose I decide to invest in treasuries, T-bills, say. I buy 10 at $10,000 a pop. What I have done is loaned the government $100 K. In return I get two things; a safe haven for my money and a bit of interest. There is probably no safer place to park your cash since it is, as they say, "backed up by the full faith and credit of the U. S. government," a phrase that means rather less than it used to, but still means something.
It is the government that owes me the money I lent it. The government, which is not to be confused with the citizenry. Furthermore it owes these debts only to those who loaned the government money by buying T-bills and T-bonds and such. It is simply not the case that we owe that money to ourselves. The government owes it to some of us. Only some of us get a return on that investment, and only some of us help the government out by loaning it money.
Now the interest paid by the government to foreign and domestic bond holders is money that is pissed away and can't be used for constructive purposes. The analogy with the homeowner is apt: money one spends on mortgage interest can't be used for constructive purposes. The truly foolish home buyer overextends himself and ends up losing his house to foreclosure. The U. S. does not of course face foreclosure, but it faces something analogously dire: turning into Greece -- or California.
The homeowner analogy is pretty good.
No analogy is perfect, of course. A perfect analogy would be an identity, and you can't compare a thing to itself --except vacuously.
Krugman is a hate-America leftist whose fetishization of material equality blinds him to obvious realities.
People are so easy to swindle because the swindler has as accomplices the victim's own moral defects. When good judgment and moral sense are suborned by lust or greed or sloth or vanity or anger, the one swindled participates willingly in his own undoing. In the end he swindles himself.
How is it, for example, that Bernie Madoff 'made off' with so much loot? You have otherwise intelligent people who are lazy, greedy and vain: too lazy to do their own research and exercise due diligence, too greedy to be satisfied with the going rate of return, and too vain to think that anything bad can happen to such high-placed and sophisticated investors as themselves.
Or take the Enron employees. They invested their 401 K money in the very firm that that paid their salaries! Now how stupid is that? But they weren't stupid; they stupified themselves by allowing the subornation of their good sense by their vices.
The older I get the more I appreciate that our problems, most of them and at bottom, are moral in nature. Why, for example, are we and our government in dangerous debt? A lack of money? No, a lack of virtue. People cannot curtail desire, defer gratification, be satisfied with what they have, control their lower natures, pursue truly choice-worthy ends.
I have been following your blog with great interest for a couple of years now and I feel honored knowing that there are people like yourself on this planet in our times. I live in the Ukraine and represent the post-soviet cultural enviroment where philosophy has been practically persecuted and distorted by Marxists. I have a Licentiate in Philosophy from University Urbaniana in Rome and teach philosophy at the Diocesan Seminary of Ivano-Frankivsk.
I've been asked recently if currency trading (Forex) and stock trading are sinful. I mean, if they are done as income generating speculation. I've tried to look up official Church documents and just generally search the Internet and it's resources but am unable to find a clear and logically consistent answer. I can see how people who received socialistic education (like everybody in the Soviet Union), can find speculation morally wrong and sinful. But many of my Western friends don't think this. There is a difference in the basic comprehension of the "market" in its most fundamental components and things that define it. There is a problem of "property" as it is understood differently in socialist and capitalist views. Then I think of the American situation with your president pushing forward so many things that were clearly defined as socialist in the country where I was born (SU). And the underlying concepts of "property", "market", "goods" etc. that are substituted with other even in the question of the health reform.
I am happy that you have noticed that the present administration of the U. S. government headed by Barack Obama has accelerated the move in the socialistic and totalitarian direction. The move in this direction has been going on for a long time, since F. D. Roosevelt at least, but since the 1960s has achieved a 'metastatic' state of growth -- to employ a cancer metaphor. The irony in all this is that we won the Cold War only to become more and more like the Soviet Union which we labored so mightily to defeat. (I am old enough to remember the anxiety here in the States over Sputnik and the suborbital exploits of your cosmonaut, Yuri Gagarin.) And like the SU, we may well collapse under the weight of our own fiscal irresponsibility, foreign overextendedness, and 'internal contradictions' -- to use a Marxist phrase. We are no longer "The land of the free and the home of the brave." We have become a land of wimps willing to sell our birthright for a mess of pottage, i.e., for cradle-to-grave security to be provided by an ever more intrusive nanny state. I am of course brushing in very broad strokes. The details of the situation are messy and complicated indeed.
You ask whether currency and stock trading are sinful. Such activities fall under the Seventh Commandment -- "Thou shalt not steal" -- in the Roman Catholic (RC) numbering of the Decalogue. The following, from the RC Catechism, is relevant to your question:
2409 Even if it does not contradict the provisions of civil law, any form of unjustly taking and keeping the property of others is against the seventh commandment: thus, deliberate retention of goods lent or of objects lost; business fraud; paying unjust wages; forcing up prices by taking advantage of the ignorance or hardship of another.192
The following are also morally illicit: speculation in which one contrives to manipulate the price of goods artificially in order to gain an advantage to the detriment of others; corruption in which one influences the judgment of those who must make decisions according to law; appropriation and use for private purposes of the common goods of an enterprise; work poorly done; tax evasion; forgery of checks and invoices; excessive expenses and waste. Willfully damaging private or public property is contrary to the moral law and requires reparation.
As I see it there is nothing morally wrong with buying and holding stocks and realizing a profit upon their sale. There is nothing wrong with buying and selling stocks in general. A stock is an equity. When I buy a stock I buy a bit of a company that produces goods and services, some of them indispensable for human flourishing. By buying stocks I contribute to human well being, not all stocks, but most. When I buy stocks I am engaged in a productive activity, not directly, but indirectly: I help fund a productive enterprise that produces food and medicine and books and computers, etc.
Same with bonds. A bond is a debt instrument. I loan you money so that you can engage in a productive activity such as open a book store. You pay me interest for the use of my money. That is perfectly reasonable and perfectly moral.
But what about day trading? This strikes me as morally dubious. Here what you are doing is playing a game in which you generate an income without directly or indirectly producing anything. It is entirely unlike buying a house when it is cheap, fixing it up, maintaining it, paying property taxes on it, and then selling it at a large profit. The profit, even if quite large, is justly acquired since one has engaged in activities with promote not only one's own good, but the good of others. One has improved the neighborhood by fixing up the house; one has made it available to others to rent; one has paid property taxes to support locals schools and fire departments, etc.
Currency trading? I don't know enough about the details of it to have a firm opinion, but I suspect that is shares the moral dubiousness of day trading. A Roman Catholic, I suspect, would consider it be "morally illicit: speculation in which one contrives to manipulate the price of goods artificially in order to gain an advantage to the detriment of others."
Let me add this. (I am now speaking for myself.)
1. There is nothing wrong with money. It is absolutely not the root of all evil. The most we can say is that the inordinatedesire for money is at the root of some evils. I develop this theme in Radix Omnium Malorum.
2. There is nothing wrong with making money or having money. There is for example nothing wrong with making a profit from buying, refurbishing, maintaining, occupying, paying propery taxes on, and then selling a house.
3. There is nothing wrong with material (socio-economic) inequality as such. For example, there is nothing wrong with Bill Gates' having a vastly higher net worth than your humble correspondent. And there is nothing wrong with the latter's having a considerably higher net worth than some of his acquaintances. (When they were out pursuing wine, women, and song, he was engaging in virtuous, forward looking activities thereby benefiting not only himself but also people who come in contact with him.) Of course, I am assuming that the inequalities have not come about through force or fraud.
4. Equality of outcome or result is not to be confused with equality of opportunity or formal equality in general, including equality under the law. It is an egregious fallacy of liberals and leftists to infer a denial of equality of opportunity -- via 'racism' or 'sexism' or whatever -- from the premise that a certain group has failed to achieve equality of outcome. There will never be equality of outcome due to the deep differences between individuals and groups. Equality of outcome is not even a value. We must do what we can to ensure equality of opportunity and then let the chips fall where they may.
5. We the people do not need to justify our keeping of what is ours; the State has to justify its taking. We are citizens of a republic, not subjects of a king or dictator or of the apparatchiks who have managed to get their hands on the levers of State power.
6. Private property is the foundation of individual liberty. Socialism and communism spell the death of individual liberty. The more socialism, the less liberty. The bigger the State, the smaller the citizen. (D. Prager)
7. The inidividual is the locus of value. We do not exist for the State; the State exists for us as individuals.
8. Property rights, contra certain libertarians, are not absolute: there are conditions under which an 'eminent domain' State seizure (with appropriate compensation) of property can be justified. "2406Political authority has the right and duty to regulate the legitimate exercise of the right to ownership for the sake of the common good."
9. Governments can and do imprison and murder. No corporation does. Liberals and leftists have a naive faith in the benevolence of government, a faith that is belied by that facts of history: Communist governments in the 20th century murdered over 100 million people. (Source: Black Book of Communism.) Libs and lefties are well-advised to adopt a more balanced view, tranferring some of their skepticism about corporations -- which is in part justified -- to Big Giovernment, especially the omni-intrusive and omnicompetent sort of governments they champion.
10. Our social and political troubles are rooted in our moral malaise, in particular, in inordinate and disordered desire. It is a pernicious illusion of the Left to suppose that our troubles have an economic origin solely and can be alleviated by socialist schemes of redistribution of wealth.
To wrap this up. I only hope that my question will not seem too naive, but I would really appreciate your input on the ethical aspects of trading. Thank you for your work and the blogging. It's like a breath of fresh intellectual sanity I get, every time I read your posts.
Rev. Iouri Koslovskii
Ivano-Frankivsk Theological Academy Assistant Professor 64 Vasylianok str. Ivano-Frankivsk 76019, Ukraine
о. Юрій Козловський Івано-Франківська Теологічна Акадеімя Доцент Кафедри Філософії вул. Василіанок 64 Івано-Франківськ 76019, Україна
I'm a first year undergraduate philosophy student with some very muddled political views. My father has always been a staunch supporter of the Left to the point of being prejudiced against all things on the conservative or Right side as 'religious' and 'money grubbing' . I never questioned any of his beliefs until perhaps a year or two ago. Now that I have began studying philosophy I cannot ignore this lazy neglect and the time has come to develop my own political views.
The next time you talk to your father point out to him that there is nothing in the nature of conservatism to require that a conservative be religious. There are conservative theists, but also plenty of conservative atheists. (I am blurring the distinction between religion and theism, but for present purposes this is not a problem.) Below you mention David Horowitz. The Left hates him for being an apostate, but his conversion to conservatism did not make a theist of him. He is an agnostic. Conservatism at one end shades off into libertarianism, one of the main influences on which is Ayn Rand. She was a strident atheist.
Opposition to conservatism is often fueled by opposition to religion. But surely one can be conservative without being religious just as one can be religious without being conservative. There is a religious Right, but there is also a religious Left, despite the fact that 'religious Left' is a phrase rarely heard. Here in the States a lot of liberal/left mischief originates from the Reverend Jesse Jackson, the Reverend Al Sharpton, and the Reverend Jeremiah Wright. (One may well doubt whether these gentlemen are worthy of the 'R' honorific, not to mention the 'G' honorific.)
As for 'money-grubbing,' you might point out to your father that there are money-grubbers on both the Right and the Left, and that there is nothing in the nature of conservatism to require that a conservative be a money-grubber. In fact, studies have shown that conservatives are much more charitable and generous than liberals/leftists. See Conservatives are More Liberal Givers. It is sometimes said that capitalism has its origin in greed. But this is no more true than that socialism has its origin in envy.
To feel envy is to feel diminished by the success or well-being of others. Now suppose someone were to claim that socialism is nothing be a reflection of envy: a socialist is one who cannot stand that others have things that he lacks. Driven by envy alone, he advocates a socio-political arrangment in which the government controls everything from the top, levelling all differences of money and status, so that all are equal. Surely it would be unfair to make such a claim. Socialism does not have its origin in envy, but in a particular understanding of justice and what justice demands. Roughly, the idea is that justice demands an equal distribution of money, status and other social goods. Conservatives of course disagree with this understanding of justice. What we have are competing theories of justice. Just as it is a cheap shot to reduce socialism to envy, it is a cheap shot to reduce a free market approach to greed.
It was namely for the philosophical content that I started reading your blog but I gradually became enthralled with your conservative views . They have uprooted many of my fickle Left-leaning political ideas . Now I am left increasingly uncertain about many political questions that I commonly held as beautifully obvious. I have began noticing the phenomenon of 'political correctness ' at University and am not entirely sure what to think of it.
Are there specific books you recommend for anyone who wants to find some sense in this Liberal climate ? I have been considering picking up some of Horowitz' writings.
I am glad that my writing has had the effect of opening new perspectives for you. Unfortunately, universities have become hotbeds of political correctness and indoctrination when they should be places where ideas of all sorts are critically and openly examined. I would recommend Horowitz to you, in particular, Destructive Generation, Left Illusions, Radical Son, and Unholy Alliance. He has also written a couple of books on the politicization of the universities. Among academic philosophers, I recommend the works of John Kekes.
And so is a hustler. Before you rush out and buy Richard Lustig's book about winning the lottery, ask yourself a simple question: why is this guy hawking a book if he has the winning lottery method? Writing a book is a lot more work than buying lottery tickets. His surname smacks of an aptronym: lustig in German means 'merry.' One imagines him laughing all the way to the bank with his book receipts.
The lottery is a fool's 'investment,' a self-imposed fool's tax: you willingly fork over money to the government beyond what they coercively take so that they will have even more wherewithal for all their wise and wonderful projects. And it is regressive: it affects mainly the the poor and innumerate, thereby insuring that they will remain poor and innumerate.
There are moral questions as well. It would be nice if we could agree on the principle primum non nocere, first do no harm, and nicer still if we could agree that that applies to the state as well as to individuals. State-run lotteries harm the populace as I have argued many times over the years. State-run casinos are even worse. But I know I am but a vox clamantis in deserto in a country filled with idiots becoming stupider and cruder by the minute.
If Mario Batali was really involved in tip-skimming, then he's a bum. I enjoy waiting on the occasional guest I allow into my house, but to have to make a living from such work is not an appetizing prospect. So I always tip properly when I am out. For some reason, pretty girls bring out my avuncular and paternal and generous side. You have just spent an hour giving this old man a massage and listening to his persiflage? Then you deserve a $10 tip, $20 at Christmas.
If state-run lotteries are a bad idea, as I have argued, then state-run casinos are even worse. But they are starting to pop up. Moral rot is at the root of all other rot. Overextended abroad, collapsing within, how long can we last? Bread and circuses are the people's pablum supplied by a government whose power and reach are its main concerns, not the common weal.
From the foreign perspective, the situation is clear: Rescuing the euro depends on Germany, which merely has to abandon its resistance to pooling debt. But this sort of "liability union" would not only contradict the so-called no-bailout clause of the European treaties, under which no euro-zone country can be held liable for the debts of another, but it would also be particularly dangerous for the Germans. As Europe's largest economy, Germany would shoulder the biggest burden and, in the end, could even be plunged into ruin with the rest of the euro zone.
Those who play lotteries, by the very fact that they play, demonstrate the irrationality and lack of financial understanding that in many cases would ruin them were they so 'lucky' as to win. And yet people persist in the illusion that everything would be fine if a huge sum of money were suddenly dumped on their heads: money that they do not deserve and have done nothing to earn; money that has been taken from their fellow rubes on false pretenses by an illegitimate state apparatus the net effect of which is harmful.
Primum non nocere: first do no harm. That ought to be, but is not, the first principle of government.
Twice the government has argued before the Supreme Court that Social Security is not insurance. In 1960, Health, Education and Welfare Secretary Arthur Sherwood Flemming submitted a brief to the courts stating: "The contribution exacted under the Social Security plan is a true tax. It is not comparable to a premium promising the payment of an annuity commencing at a designated age."
In a ruling that denied a man's property claim to Social Security benefits, the Supreme Court said, "It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments."
(This first appeared on the predecessor blog on 15 April 2005.)
Many supporters of the current Social Security system claim that it is a form of insurance. (See AARP Bulletin, April 2005, p. 38) I would like to ask these supporters some questions.
(Q1) If SS is a form of insurance, what eventuality does it insure one against? (Q2) If SS is a form of insurance, why are the premiums so large? (Q3) If SS is a form of insurance, why does one receive a payout even if one does not suffer the loss against which one is insured?
To answer (Q1), one might say that SS -- or at least the retirement program thereof -- insures workers against destitution in their old age. But if this is the answer to (Q1), then (Q2) kicks in: why are the premiums for destitution insurance so large? Surely only relatively few become destitute after retirement, and to keep them off of cat food, it is not necessary for everyone to pay huge insurance premiums. If a worker makes 90 K per annum and (with the help of his employer) pays 12.4% for the destitution insurance, then he pays $11,160 per annum for the insurance, which comes to $930 per month. I say that is a lousy deal.
It is a lousy deal even if you make only $45 K a year. Would you pay it you weren't forced to? ($90 K is the 2005, cap, and if you don't see that the worker is shouldering the entire 12.4% burden, then your grip on economic reality is weak indeed.) And don't forget that the 'cap' is not much of a cap inasmuch as it is temporary: it will increase. Indeed, a few short months ago it was $87,900. And not only will the cap move up, the retirement age will most likely be increased. What a deal! And don't forget this. If you are a blue collar worker who puts his body on the line to make a living, then you really get the shaft if the retirement age is increased. A seventy year old professor can function passably well at that age, but not so a seventy year old iron worker high up on a scaffold.
But of course, under the current system, one receives a payout whether or not one ends up destitute. As long as you have contributed for 40 quarters, you receive a payout regardless of how much or how little net worth or income you have at the time the payout begins. But then in what sense is SS insurance? If it is not insurance against destitution, what is it insurance against?
My point is that there is no clear sense in which SS is insurance. It is more like a retirement program. But if so, why aren't there private accounts? You have your very own SS number, but there is no account corresponding to it. What's worse, the SS trust fund has no money in it. What it contains are intragovernmental bonds.
Do you understand what I am saying? The whole thing is a bloody conceptual muddle -- which is part of the reason why there is endless partisan bickering over it. It is not insurance and it is not a retirement program. It is better described as an intergenerational wealth transfer arrangement with the the long-term sustainability of a Ponzi scheme. It takes money from the young who (most of them) need it and gives it to the old who (manyof them) do not need it.
I am not writing this out of self-interest. I've made mine. Any SS I get will be blown on computers, books and mountain bikes. I'm thinking about you young whippersnappers -- you ought to be outraged at this SS ripoff. Admittedly, my motivations are not entirely altruistic: I greatly enjoy thinking, writing, and 'bullshit management.'
What is the debt debate about? Senator Marco Rubio in this video does an excellent job of explaining the issue. You decide whether he deserves the 'terrorist' label proffered by Vice President Joe Biden. By the way, didn't Biden's boss give us a lecture recently about civility?
Meanwhile, changing the subject completely, I fail to understand the game of 'chicken' that the two houses are playing over debt. (Wasn't there a James Dean film that started that way, with bad results?). I would be interested in hearing your views in a post.
Here are some quick thoughts.
To understand what this wrangling is all about you must understand that the USA is a deeply divided country in which the common ground on which we formerly stood is shrinking. To borrow a phrase from Thomas Sowell, what divides us is a very deep "conflict of visions." The conflict concerns the nature and purpose of government, its size, scope and reach, what it can and cannot legitimately do. The Left favors, in practice if not always in theory, an ever-expanding welfare state which provides citizens with cradle-to-grave security. Although liberals don't like to be called socialists, and will retreat to an exceedingly narrow definition of 'socialism' in order to avoid this label, their tendency is clearly in the socialist direction and they have been marching in this direction since FDR at least. A perfect example is President Obama's health care initiative, popularly known as 'Obamacare,' which increases government control of the health care system. Particularly offensive to libertarians and conservatives is Obamacare's individual mandate which requires citizens to purchase health care insurance whether they need it or not, whether they want it or not. A clear indication of the 'visionary' and ideological nature of this initiative is that it is being forwarded at a time when the country simply cannot afford another entitlement program. But this hard fact cuts no ice with the ideologues of the Left.
The Right, on the other hand, resists the expansion of government power, championing the traditional values of self-reliance, individual responsibility, and limited government. This deep Right-Left conflict of visions plays out over a myriad of issues major and minor from guns to light bulbs to soda pop to circumcision to using federal tax dollars to fund abortion clinics, and so on.
Perhaps we should distinguish the political and the economic aspects of the conflict of visions. What I have just sketched is the political difference, the difference as to what the polis, the state, ought to be and ought to do. But there is also deep disagreement about economics. The Left favors central planning and top-down control while the Right looks to a more or less free market for solutions.
If you ask a liberal how to generate government revenue he will tell you to raise taxes while the conservative will say the opposite: lower taxes, thereby stimulating the economy. The creation of jobs will increase income, FICA, and sales tax revenues. Each side looks for 'facts' to support its overarching vison, which underscores the fact that what we have here is fundamentally a conflict of radically opposed visions.
In sum, we Americans are fundamentally divided and in a way that is irreconcilable at the level of ideas. We do not stand on the common ground of shared principles and there is no point in blinking this fact. Left and Right are riven by deep and unbridgeable value differences. And so any compromises that are reached are merely provisional and pro tem, reflecting as they do the fact that neither side has the power to clobber decisively the other and push the nation in the direction in which it thinks it ought to move.
And so it should come as no surprise that there is bitter wrangling over the national debt. Making it worse is the fact that on the Republican side there is a split between libertarians and true conservatives on the one hand and RINOs (Republicans in name only) on the other. A proper subset of the first group is the Tea Party folks whose central animating desideratum is fiscal responsibility. The Dems are more unified toeing as they do the leftist party line.
The Tea Party faction has rightly sounded the alarm concerning the national debt which under Obama is increasing at the rate of 4.1 billion dollars per day. (Under G. W. Bush the rate of increase was also unacceptable but much less, around 1.6 billion per day.) Unfortunately, their standing on principle could have disastrous effects. I mean the principle that the debt ceiling ought not be raised. The crucial fact here is that the Republicans do not control the Senate or the White House. So they really can't do much. What they can do is get themselves perceived as pigheaded extremists. If enough ordinary Americans come to view Republicans as obstructionists or extremist then then the Right will lose the 2012 battles and it will be all over.
The Boehner Plan is the way to go given the current political climate and the current distribution of power among the branches of government.
I saw the documentary In Debt We Trust on TV on one of the lefty channels. Trailer here. It is a typical leftist treatment of the problem of indebtedness, but interesting nonetheless. One of the people interviewed states that "Society preaches the gospel of shopping." That is the sort of nonsense one expects to hear from libs and lefties. First of all, there is no such thing as society. To think otherwise is to commit the fallacy of hypostatization. So if the sentence means anything, it means that certain people, advertisers primarily, urge people to consume recklessly. No doubt about it. But libs and lefties ignore the main thing, namely, the individual's ability to resist the siren song of the advertisers. If you are in debt, it is not 'society's' fault; it is your fault. Your ignorance of simple arithmetic and personal finance, and your refusal to control yourself are your responsibility.
Do I 'give a pass' to the predatory credit card companies, the subprime mortage scammers, and the payday loan sharks? No, but if it weren't for your weakness of will and financial stupidity they wouldn't be able to get a handle on you. Don't blame others, blame yourself.
If you want to know why so many Americans feel alienated from their government, you need only go to Target and check out the light bulb aisle. Instead of the cheap commodities of yesteryear, you’ll find what looks like evidence of a flourishing, technology-driven economy.
There are “ultrasoft” bulbs promising “softer soft white longer life” light, domed halogens for “bright crisp light” and row upon row of Energy Smart bulbs -- some curled in the by-now- familiar compact fluorescent form, some with translucent shells that reveal only hints of the twisting tubes within.
It seems to be a dazzling profusion of choice. But, at least in California, where I live, this plenitude no longer includes what most shoppers want: an inexpensive, plain-vanilla 100-watt incandescent bulb. Selling them is now illegal here. The rest of the country has until the end of the year to stock up before a federal ban kicks in. (I have a stash in storage.) Over the next two years, most lower-wattage incandescents will also disappear.
Banned on the Left Coast in the People's Republic of Californication! It figures. It's sad to see what has become of my native state. But I am fortunate to flourish in Arizona where bright sun and hard rock and self-reliant liberty-lovers have a suppressive effect on the miasma of leftists. So with a firm resolve to stick it to the nanny-staters I headed out this afternoon in my Jeep Liberty to Costco where not a single incandescent was to be had. So I went to Lowe's and cleaned 'em out. I bought four 24-packs. Three packs were Sylvania 60W 130V A19's @ $10.03 per pack and one pack was Sylvania 100W 130V A19's @12.02 per pack. Total: $42.11 for 96 bulbs. That comes to less than 44 cents per bulb.
The 130 volt rating means that I will get plenty of life out of these bulbs at the expense of a negligible reduction in illumination. A voltage check at a wall socket revealed that I'm running just a tad below 120 V.
Next Saturday I'll pay a visit to Home Despot Depot and add to my stock.
And now I am remined of what were supposed to have been Goethe's last words: Licht, Licht, Mehr Licht! Light, light, more light!
Written a few years ago, this entry from the old blog merits reposting.
As the economy stumbles, CD rates tumble, the stock market falters, gas prices soar, and foreclosures mount, I look at the bright side: less development, fewer sales of State Trust Lands, less destruction of desert and wildlife habitat. A temporary respite from the hyperkinetic rush to a universal pave-over. And less mindless zipping around in gas guzzling behemoths. I don't reckon there is much of a market for Escalades and Hummers these days. Out on U.S. 60 the other day the traffic seemed surprisingly light. People are feeling the pinch of higher gas prices. Good. Maybe they will learn to cultivate local pleasures, those of hearth and home. Maybe they will learn to slow down and walk. Or ride a bike.
Call me a green conservative. I have no patience with libertarians and other open-borders types who think economic considerations trump all others. To sacrifice quality of life and natural beauty to economic expansion makes little sense to me. But don't confuse me with eco-extremists like Dave Foreman who, in a book of his I read some years back, claimed that a bear and a human being have the same value. That is an equal but opposite form of moral and intellectual idiocy.
And then you have the Sierra Club, the members of which are mostly squishy bien-pensant latte liberals who refuse to work with Jim Gilchrist and the Minuteman Project because they stupidly think that anyone who insists on the enforcement of immigration laws is a 'racist' and a 'xenophobe.'
So it's a mess and I for one see little point in getting my blood pressure up over it. You've got Republicans who like cheap labor and Democrats who are hoping that a flood of illegal aliens will assure the permanent ascendancy of their party. Contemplative types like me laugh at those who piss their lives away in activism battling activists of some other stripe. I prefer to use the time and good health I have left enjoying as much natural beauty as I can while there is still some left to enjoy. A shot from my backyard:
What do you do when a beggar approaches you on the street? Do you give him money? I've given away food, but as a general rule it is foolish and wrong to give money to bums. Once, in downtown Phoenix, I came out of a rib joint with a box of luscious leftovers. A beggar approached asking for money for food. I opened the box, showed him the ribs, and said, "If you are hungry, you can have these." He thankfully accepted the gift and we both went away satisfied.
But if a bum asks for money, I refuse, sometimes adding, 'Get a job.' This isn't the Great Depression. There are jobs galore. That's why there is a Mexican invasion.
Beggars are for the most part scammers and liars. A bum in Hawaii once asked me for a quarter to make a phone call. I foolishly gave him the quarter. Later in the day, he passed me again and again asked for a quarter to make a phone call. (No, I am not hasty generalizing, I am illustrating a general proposition to the effect that bums are for the most part liars and scammers.) If you give beggars money, they will buy alcohol or drugs with it. Do you want to contribute to their further degradation? Do you want more inebriated people on the streets? Do you give any thought to what the bums do to others when drunk? But even if they use the money for a good purpose, by giving them a handout, you undermine what little work ethic they have.
It is not easy to be genuinely helpful to others. It takes thought, lest you make them worse.
Of course, I don't expect the typical liberal to understand this. For a guilt-ridden, feel-good liberal, one who substitutes emoting for thinking, one shows 'compassion' by contributing to people's dependence and degradation. It is not that liberals intend to degrade and make dependent, but that is the unintended consequence of their unthinking 'compassion.'
The conservative who refuses to aid and abet unproductive behavior is the man of true compassion. For he gives the bum a reason to cease his bumming. This is why the expression 'compassionate conservative' is ill-advised. True conservatism is compassionate by its very nature. The expression 'compassionate conservative' is a foolish concession to the Left, suggesting as it does that conservatives are not as a rule compassionate. It is an expression like 'articulate black,' which suggests that blacks are not as a rule articulate.
We are in deep trouble as Robert Samuelson ably documents in this troubling piece. So what does Nero Obama do? He fiddles while Rome burns and its legions get mired in Libyan sand and other sinkholes of the benighted and backward. Even if Obama the Irresponsible and every worthless Democrat were sent packing we'd still be in deep trouble. Meanwhile gold approaches $1500 an ounce. 'Lead' ain't cheap these days either. It is a bad sign when gold and 'lead' appear to be wise investment choices.
Overextended abroad, collapsing within. The bigger the government, the more to fight over. It's time for a return to good old American self-reliance. Make your plans and prepare for the worst.
Since men value power and prestige as much as the possession of wealth---indeed, these three `goods' cannot be completely separated---it is foolish to seek to establish an equality of wealth on egalitarian grounds. It is foolish first because it will not result in what egalitarians really want. It is foolish also because if we do not let men compete for money, they will compete all the more for power; and whereas the possession of wealth by another man does not hurt me, unless I am made vulnerable by envy, the possession of power by another is Inherently dangerous; and furthermore if we are to maintain a strict equality of wealth we need a much greater apparatus of state to secure it and therefore a much greater inequality of power. Better have bloated plutocrats than omnipotent bureaucrats.
This is a penetrating passage from a penetrating essay. Lucas is in effect pointing out a paradox at the heart of the egalitarian position. If the egalitarian wants to equalize wealth, perhaps via a scheme of income redistribution, then he will need to make use of state power to do it: the wealthy will not voluntarily disembarrass themselves of their wealth. But state power is of necessity concentrated in the hands of a few, those who run the government, whose power is vastly greater than, and hence unequal to, the power of the governed.
The paradox, then, is that the enforcing of equality of wealth requires inequality of power. But, as Lucas points out, the powerful are much more dangerous to us than the wealthy. Your being wealthy takes away nothing from me, and indeed stimulates the economy from which I profit, whereas your being powerful poses a threat to my liberty.
But I hear an objection coming: "Wealth is convertible into power since the wealthy can buy their way to political influence, whether legally or illegally." True, but the seriousness of this problem is a function of how intrusive and overreaching the government is. A government stripped down to essential functions offers fewer opportunities for the power-hungry. Note also that the wealthy may feel it necessary to buy influence just to protect themselves from regulatory zeal.
Here is how I define a welfare program. First, it taxes one group to support another group, meaning it's pay-as-you-go and not a contributory scheme where people's own savings pay their later benefits. And second, Congress can constantly alter benefits, reflecting changing needs, economic conditions and politics. Social Security qualifies on both counts.
Part of the problem with the SS system is that no one quite agrees on just what it is or is supposed to be. Some call it a Ponzi scheme. (Steve Forbes, Judge Andrew Napolitano) But obviously it isn't. Ponzi schemes are fraudulent in intent by definition. SS is not. What Napolitano et al. presumably mean is that it like a Ponzi scheme in being unsustainable. But that is not quite right either for it is sustainable if one is willing to do one or more of the following: raise taxes, limit/postpone benefits, reduce spending in other areas, increase the money supply thereby inflating the currency.
To call the SS system a form of welfare as Robert Samuelson does is closer to the mark but still wide of it. How can it be called welfare when the recipients of it (most of them anyway) have paid in a lifetime's worth of contributions? The average hard-working Joe who has contributed all his life via payroll taxes will bristle, and with justification, if he is branded a welfare recipient when he retires. He will insist that he has worked hard and long, and now wants what is due him: the money that was coercively taken from him plus a reasonable return.
So SS is not a welfare scheme either, Samuelson's slanted definition notwithstanding, though it is like one in some respects.
My understanding is that when it was originally set up, in the '30s, SS was envisaged as destitution insurance. The idea was that a decent society does not allow its members to fall into the gutter and eat cat food if through no fault of their own they end up destitute at the end of their lives. But of course if it is destitution insurance, then, like all insurance, the 'premiums' will be small relative to the payout, and only those who end up destitute would get a payout. But the system is nothing like this now. It has transmogrified into a retirement program, but one without individual accounts and the sort of fiscal discipline that they would bring.
So it's not a Ponzi scheme, not a welfare scheme, and not a form of insurance, if these terms are used strictly. (And if you are not using them strictly, then you shouldn't pretend to be contributing to a serious discussion.) Conceptually, SS is a mess, a mess that aids and abets all the unhelpful rhetoric that we hear on all sides.
If memory serves, Speaker Boehner (before he was speaker) called for means-testing. The moral absurdity of that should be evident, especially when espoused by a supposed conservative. You work hard all your life, you play by the rules, defer gratification, exercise the old virtues, and end up well off. And now the government penalizes you for having been self-reliant and productive. Disgusting. You expect that from a liberal. But from a conservative?
As one further indication of the conceptual mess that is the SS system, consider that the FICA tax is called a tax. It is no doubt a coercive taking, but what other kind of tax brings with it an expectation of getting one's money back down the line? Property owners pay real estate taxes to the county. But no one who pays these taxes expects to be able to pay a visit to the Assessor's office sometime in the future to recoup what he has paid. That's not the way a tax works. So why is the FICA tax called a tax? This is just another indication of the conceptual obfuscation built into the SS system.
Despite their name, liberals seem uninterested or insufficiently interested in the 'real' liberties, those pertaining to property, money, and guns, as opposed to the 'ideal' liberties, those pertaining to freedom of expression. A liberal will go to any extreme when it comes to defending the right to express his precious self no matter how inane or obnoxious or socially deleterious the results of his self-expression; but he cannot muster anything like this level of energy when it comes to defending the right to keep what he earns or the right to defend himself and his family from the criminal element from which liberal government fails to protect him. He would do well to reflect that his right to express his vacuous self needs concrete back-up in the form of economic and physical clout. Scribbler that I am, I prize freedom of expression; but I understand what makes possible its retention.
Taxation then is a liberty issue before it is a 'green eyeshade' issue: the more the government takes, the less concrete liberty you have. Without money you can't get your kids out of a shitty public school system that liberals have destroyed with their tolerate-anything mentality; without money you cannot live in a decent and secure neighborhood. Without money you can't move out of a state such as California which is 'under water' due to liberal fiscal irresponsibility.
Taxation is a liberty issue. That is one thought as April 15th approaches. Another is that the government must justify its taking; the onus is not on you to justify your keeping. Government exists to serve us, not the other way around.
It is perhaps only fitting that fiscally irresponsible people should get a fiscally irresponsible government. Before blaming stupid legislators and greedy lenders, take a hard look into the mirror. At least the person staring back at you is a person over whose behavior you have some control.
By turns we are too much the one or the other. We find it difficult to balance doubting and believing.
Properly deployed, doubt is the engine of inquiry, but it can also become a brake on commitment and thus on living. One cannot live well without belief and trust -- but not when they become gullibility and credulousness.
Whistle blowers such as Harry Markopolos have a hard time getting through to people who want to believe. Their intellects suborned by greed, otherwise intelligent people who were warned by Markopolos were taken to the cleaners by the avuncular Bernie Madoff despite the improbability of a legitimate 1% per month return in a market that safely permitted half of that.
They were skeptical of Markopolos while credulous of Madoff. A clear proof of not only the difficulty of balancing skepticism and credulousness, but also of the weakness of the intellect in the face of the torrent of the passions.
By the way, Markopolos' book, No One Would Listen, held my interest from the first page to the last. It lives up to its subtitle, "A Financial Thriller." A central lesson is that we should be deeply skeptical of federal regulatory agencies such as the Securities and Exchange Commission. It failed utterly to uncover the Madoff Ponzi scheme and dismissed the repeatedly-made Markopolos warnings. Liberals, with their tendency to believe in the salutary effects of an omni-intrusive and purportedly omnicompetent government, should heed this lesson.
Sloan Wilson's The Man in the Gray Flannel Suit appeared in 1955 two years before Jack Kerouac's On the Road. I never finished Gray Flannel, getting only 80 or so pages into it. It's a book as staid as the '50s, a tad boring, conventional, and forgettable in comparison to the hyperromantic and heart-felt rush of the unforgettable On the Road. Since how 'beat' one is in part has to do with one's attitude towards money, which is not the same as one's possession or nonpossession of it, I'll for now just pull some quotations from Horace and Sloan Wilson. The Horace quotations seem not to comport well with each other, but we can worry that bone on another occasion.
Quaerenda pecunia primum est; virtus post nummos. (Horace, Epistles I, 1, 53) Money is to be sought first of all; virtue after wealth. Or, loosely translated, cash before conscience.
Vilius argentum est auro virtutibus aurum. (Horace, Epistles I, 1, 52). Silver is less valuable than gold, gold less valuable than virtue.
The next morning, Tom put on his best suit, a freshly cleaned and pressed gray flannel. On his way to work he stopped in Grand Central Station to buy a clean white handkerchief and to have his shoes shined. During his luncheon hour he set out to visit the United Broadcasting Corporation. As he walked across Rockefeller Plaza, he thought wryly of the days when he and Betsy had assured each other that money didn't matter. They had told each other that when they were married, before the war, and during the war they had repeated it in long letters. "The important thing is to find a kind of work you really like, and something that is useful," Betsy had written him. "The money doesn't matter."
The hell with that, he thought. The real trouble is that up to now we've been kidding ourselves. We might as well admit that what we want is a big house and a new car and trips to Florida in the winter, and plenty of life insurance. When you come right down to it, a man with three children has no damn right to say that money doesn't matter. (The Man in the Gray Flannel Suit, Simon and Shuster, 1955, pp. 9-10)
The price of gold has topped $1300 an ounce. And this while inflation is low. The upswing is driven mainly by the fear of inflation. In order to handle otherwise unsustainable levels of debt, the government will resort to 'monetizing' it, i.e., printing money and causing inflation. By counterfeiting its own currency, a government steals real wealth from its citizens. Is this acceptable to you? If not, you may wish to register your disapprobation come November 2nd.
I have never made a budget in my life. Never having made one, I have never had to adhere to one. The budgeter is involved in a negative enterprise: he essays to control and curtail spending. He allocates so much money for this, and so much for that, and strives to stick to his limits. But positive methods are often superior to negative ones. If you want to lose weight, for example, it is better to exercise and burn more calories, while holding your caloric intake constant, than to eat less while holding steady on caloric expenditure. (Aside from the optimal course which is to do both at the same time.) Part of the reason for this is that it is harder to break an old habit than to begin a new one.
Similarly with budgeting. To budget is to approach your personal finances negatively when a positive approach is superior. Instead of setting limits to spending in various categories, specify target savings and investing amounts, and aim high. The Wealthy Barber has a chapter entitled "The Ten Percent Solution." As I recall, the author recommends investing 10% of gross income for long-term growth. That's chickenfeed to my conservative mind. We save and invest far more than this. The best way to do this, of course, is by automatic payroll deduction. You arrange for your employer to direct deposit some percentage of your income into the account of your choice. You then live on what is left over.
Why do you need a budget? If you are self-disciplined you will naturally watch your spending, and of course you will never ever use a credit card for its credit feature. You will use it only for its float, record-keeping, rebate, and convenience features. Allow me to brag so as to make a point that is very important for everyone. I have never paid a cent of credit card interest in my life, and in the last several years, each year I have received $300- $400 cash in rebates for the use of a couple of cards which charge me no fee for their use. The credit lines are huge but I go nowhere near them, and the interest rates I could not care less about. Not only that, but the 'float' makes me even more money. Let's say I have the use of $2,000 for six weeks. During that period the goods are in my possession but the money is at my disposal in a cash reserve account earning interest.
Suppose you are a leftie who hates 'corporate America.' What better way to stick it to the credit card companies than by becoming a free-rider?
So I ask again, why do you need a budget? If you are self-disciplined you will naturally watch your spending, and if you are not self-disciplined then you will lack the discipline to adhere to your budget. Or is this a false alternative?
When I was a graduate student, 'back in the day,' I lived on 2-3 K per annum. And then I got a job which paid for starters the princely sum of 12 K per annum. I said to myself: "Surely, I can save and invest half of that!" But attitude is everthing. Attitude and will and good judgment. For example, if you are inclined to become financially independent, then you would be a fool to marry someone whose idea of Nirvana is a wallet full of charge cards with unlimited credit lines.
The moral side of the economic problem is paramount to a conservative like me. Those who can deny themselves and defer gratification can become financially well-off in a stable political and economic environment such as we enjoy in these United States. But of course people will not deny themselves and defer gratification. So they must suffer the consequences. The problem is akrasia, weakness of the will. The fundamental problem is not predatory credit card companies, subprime mortgage scammers, and the payday loan sharks. For if you are self-disciplined, cautious, and diligent, they will not be able to get a handle on you.
Many are the goddesses that tempt the young, the romantic, the idealistic. Time's alchemy will cause the masks of some to slip and reveal the bitch Impecunia. Cirmcumstances straitened by devotion to one's art or one's cause are better tolerated in the days of youth. I do not advise that you abandon your high aspirations: they may be what is best in you. Just realize that you have to pay your dues if you want to play the blues. It don't come easy.
John Blofeld, Beyond the Gods: Buddhist and Taoist Mysticism (New York: E.P. Dutton, 1974), p. 153:
For the sake of wealth, people already well above the poverty line slave all their lives, not realising that withdrawal from the rat-race would immediately increase rather than diminish their wealth. Obviously anyone who finds the full satisfaction of all his material desires well within his means can be said to be wealthy; it follows that, except by the truly poor, wealth can be achieved overnight by a change of mental attitude that will set bounds to desires. As Laotzu put it, "He who is contented always has enough."
Via Mike Gilleland, we read in Sophocles, Antigone 295-301 (tr. Hugh Lloyd-Jones):
There is no institution so ruinous for men as money; money sacks cities, money drives men from their homes! Money by its teaching perverts men's good minds so that they take to evil actions! Money has shown men how to practise villainy, and taught them impiousness in every action!
Mike has the Greek for you purists and elitists.
The Sophoclean sentiment, however, is quite false. For a view with a much better chance of being true, see Radix Omnium Malorum.
One often hears that money is the root of all evil. But this cannot be true, since money is an abstract form of wealth, wealth is a good thing, and the root of all evil cannot be something good. Perhaps it is the love of money that is supposed to be the root of all evil. But this too is false. Given that money is a good thing, a certain love or desire for its acquisition and preservation is right and proper. To fail to value money would be as foolish as to fail to value physical health. Well then, is it the inordinate love of money that is the root of all evil? Not even this is true. For there are evils whose root is not the inordinate love of money. The most we can truly say is that the inordinate love of money is the root of some evils.
It is not clear to me why liberals have proprietary rights in the phrase 'socially-conscious investing.' Someone whose investment choices reflect a concern for individual liberty is of course also interested in the nature of the society in which he lives, and is therefore also 'socially conscious.' A champion of individual liberty wants a society in which there is more individual liberty and less government interference. To this extent, such a champion is also 'socially-conscious.'