I was a millionaire who paid next to nothing in taxes. I used to laugh it off. But when my president began chastising millionaires for not paying more in taxes, my conscience and my patriotism forced me to regret my greedy ways.
It did not help that Warren Buffett was cheering on President Obama and the White Whine Party to oppose Tea Party millionaires who want to keep their money. The pendulum had swung.
My saga began in late November 2010, when the Social Security Administration notified me that my 2009 income was $1,967,732.00. This amount is wrong; I will explain why later. But wouldn't you know? The SSA picked the one year of my tax-paying life that I didn't make more than a million dollars to say that I did!
(Serious readers take note: The previous sentence contains a wild exaggeration.)
I thought a fool's thought. I thought it would be a simple matter to correct SSA's records.
I went to the SSA website, downloaded Form 561-U2, and filed a request for reconsideration on Dec. 9. I even attached information from my tax return to make SSA's job easier.
I did not hear a word from SSA until March 9. Then, SSA replied that the error was due to incorrect information sent to them by the Internal Revenue Service. The letter also instructed me that it was my responsibility — not the SSA's — to contact the IRS and have it correct the error.
This is government at its finest. You wait three months only to be redirected to another government agency.
My next step was to call the IRS to seek advice. After explaining the situation, I was told that the error was mine; that I had keypunched the wrong number when I e-filed my return. The blame game ended, however, when I told the agent that I only file paper returns. Therefore, if it was a keypunch error, it was an IRS keypunch error — not mine.
After considerable study, the IRS called back and advised me to file an amended return. I asked how I could file an amended return when there was nothing to amend. My return, after all, was correct.
The agent then recommended that I dump the problem on the Kansas City office. That's where I had filed my paper return, and perhaps the Kansas City office could override the IRS computer.
It was May 23 when I wrote the Kansas City IRS office. They acknowledged my letter with their standard "45-day letter", which means "Don't expect any action for 45 days."
I got another 45-day letter.
I had the feeling that I was locked in a Twilight Zone curiosity shop that sold grandfather clocks. And for the worse, the clocks chimed but once every three months.
On Sept. 7, the IRS informed me that it had corrected the error. However, the agency failed to send me a transcript that I could forward to the SSA office. To get a copy of the corrected transcript, I had to call an agent. The waiting time alone was 45 minutes, and it took as long for the agent to correct the IRS computer record.
The SSA advised me on Oct.7 that their records had been corrected. It took 10 months and probably 50 hours of my time to correct a split-second keypunch error.
At the outset, I was amazed that the IRS data input system would allow such an obvious error. A clerk had entered a line item ($19,143.00) without inserting the decimal point. Thus, my income was inflated by $1,914,300.00. Bells and whistles should have gone off when this happened.
In this age of precision scanners, why is the IRS relying on keypunch clerks? It's not like Google hired monks to keypunch all of those library books!
The SSA and IRS computers obviously talk to each other. Why couldn't the SSA initiate my request? The SSA should have forced the issue if for no other reason than to discover how junk data from IRS corrupted its database.
Between the SSA, IRS and yours truly, at least 100 man hours were spent correcting this mistake. Maybe even 200 man hours. Maybe 300 man hours.
Like the taxpayers, the IRS and SSA workers are every bit as overwhelmed. It's no wonder. What I went through this year is a case study in poor management of both data and personnel.
To President Obama (and Warren Buffett), I would offer this advice. Before you criticize taxpayers at any level, you should go to the IRS and look under the hood. The search engine that you rely on needs repaired.
Friday, October 28, 2011
Friday, October 14, 2011
In a Colorful World, Sometimes Black and White Tells the Best Story
Netflix has changed its mind again! Netflix had planned to offer streaming video and then create a new service (Qwikster) to offer DVD rentals. Now the Qwikster plan has been shelved.
When Netflix went wobbly last month, I switched my movie rental business to a startup company called Bliter.com. Bliter only offers Black & White films. But even Bliter has undergone a change.
Recently, Bliter’s subscribers made it clear that this genre of films is actually White & Black, not Black & White. So Bliter, bowing to pressure, changed its name to Whackster.
“The Third Man” and “Citizen Kane” are considered by many critics to be the best films ever made. Both are B&W; both also feature Orson Welles and Joseph Cotten. Had they been shot in color, these films would be failures.
There is something intriguing about B&W cinematography. “Gaslight”, a thoroughly scary thriller starring Charles Boyer and Ingrid Bergman, relies on the mysteriously dimming gas lights in Bergman’s town house. B&W film accents the low lighting. Color film just can’t do this.
Thanks to B&W, Joseph Cotten is even more evil as a serial killer in Alfred Hitchcock’s “Shadow of a Doubt.” Can you imagine Hitchcock’s “Psycho” in color?
Not all B&W films are murder mysteries. Gary Cooper played Marshall Will Kane in the western, “High Noon.” Cary Grant played an overwhelmed nephew in the comedy, “Arsenic and Old Lace.” Humphrey Bogart stayed one step ahead of the Nazis in wartime “Casablanca.”
David O. Selznick won Best Picture Oscars in 1939 and 1940 for “Gone with the Wind” and “Rebecca”, respectively. Selznick obviously knew his media. GWTW had to be filmed in color; “Rebecca” had to be filmed in B&W.
B&W films add a touch of grit to the plot. Compare “The Bedford Incident” (Richard Widmark) to “The Hunt for Red October” (Sean Connery) or “Crimson Tide” (Gene Hackman). “The Bedford Incident” (B&W) keeps you on edge throughout; you feel the chill of the North Atlantic in this Cold War submarine chase.
Elmore Leonard’s short story, “3:10 To Yuma”, was first made into a movie in1957. Starring Glenn Ford and Van Heflin, the movie evolves as a morality play which is accented by B&W cinematography. The 2007 remake of the same name is in color, and not surprisingly, it is gunplay for gunplay’s sake. Russell Crowe and Christian Bale are sadly diminished by the relentless carnage.
Blood really shows up in color. Maybe that’s why directors avoid B&W nowadays.
Color film has its place. I cannot imagine “Lawrence of Arabia” or “Bridge on the River Kwai” not being filmed in color. Yet, Sir David Lean, the director of those masterpieces, shot “Oliver Twist” and “Great Expectations” in B&W.
Steven Spielberg did choose B&W for “Schindler’s List”. Can you imagine a color version? But for the life of me, I cannot understand why he didn’t rely on B&W for “Jaws” and “Saving Private Ryan.” The choice is so obvious.
David O. Selznick would have used B&W. So would have Sir David Lean. There, the “Davids” have it!
The studio system ruled the B&W era. For all of their faults, the studios gave us some interesting pairings of leading men and leading ladies (Claude Rains and Bette Davis, Humphrey Bogart and Lauren Bacall, et al.) If the studio system still ruled, there would be five “Meryl Streeps” instead of one. However, I am not sure that any of today’s leading men could match even Fred MacMurray (“Double Indemnity” with Barbara Stanwyck), let alone Clark Gable.
From the 1930s through the 1950s, actors knew how to act. They acted with their eyes, facial tics, and hand movements as well as with the way they delivered their lines. Eli Wallach was 92 when he appeared in 2010’s “Wall Street: Money Never Sleeps.” Though he has few lines, he is constantly acting—flinching and using his walking stick—while the rest of the cast just spouts rhetoric.
B&W also brought us the horror genre. Claude Rains was the “Invisible Man” (by H. G. Wells.) John Barrymore, Frederic March and Spencer Tracy have all starred as “Dr. Jekyll and Mr. Hyde” (by Robert Louis Stevenson.) Wells and Stevenson understood that the true horror is the evil lurking inside of us, not an otherworldly creature. B&W film allows for the transformation in ways that color cannot.
B&W rules!
Ten recommended B&W films:
When Netflix went wobbly last month, I switched my movie rental business to a startup company called Bliter.com. Bliter only offers Black & White films. But even Bliter has undergone a change.
Recently, Bliter’s subscribers made it clear that this genre of films is actually White & Black, not Black & White. So Bliter, bowing to pressure, changed its name to Whackster.
“The Third Man” and “Citizen Kane” are considered by many critics to be the best films ever made. Both are B&W; both also feature Orson Welles and Joseph Cotten. Had they been shot in color, these films would be failures.
There is something intriguing about B&W cinematography. “Gaslight”, a thoroughly scary thriller starring Charles Boyer and Ingrid Bergman, relies on the mysteriously dimming gas lights in Bergman’s town house. B&W film accents the low lighting. Color film just can’t do this.
Thanks to B&W, Joseph Cotten is even more evil as a serial killer in Alfred Hitchcock’s “Shadow of a Doubt.” Can you imagine Hitchcock’s “Psycho” in color?
Not all B&W films are murder mysteries. Gary Cooper played Marshall Will Kane in the western, “High Noon.” Cary Grant played an overwhelmed nephew in the comedy, “Arsenic and Old Lace.” Humphrey Bogart stayed one step ahead of the Nazis in wartime “Casablanca.”
David O. Selznick won Best Picture Oscars in 1939 and 1940 for “Gone with the Wind” and “Rebecca”, respectively. Selznick obviously knew his media. GWTW had to be filmed in color; “Rebecca” had to be filmed in B&W.
B&W films add a touch of grit to the plot. Compare “The Bedford Incident” (Richard Widmark) to “The Hunt for Red October” (Sean Connery) or “Crimson Tide” (Gene Hackman). “The Bedford Incident” (B&W) keeps you on edge throughout; you feel the chill of the North Atlantic in this Cold War submarine chase.
Elmore Leonard’s short story, “3:10 To Yuma”, was first made into a movie in1957. Starring Glenn Ford and Van Heflin, the movie evolves as a morality play which is accented by B&W cinematography. The 2007 remake of the same name is in color, and not surprisingly, it is gunplay for gunplay’s sake. Russell Crowe and Christian Bale are sadly diminished by the relentless carnage.
Blood really shows up in color. Maybe that’s why directors avoid B&W nowadays.
Color film has its place. I cannot imagine “Lawrence of Arabia” or “Bridge on the River Kwai” not being filmed in color. Yet, Sir David Lean, the director of those masterpieces, shot “Oliver Twist” and “Great Expectations” in B&W.
Steven Spielberg did choose B&W for “Schindler’s List”. Can you imagine a color version? But for the life of me, I cannot understand why he didn’t rely on B&W for “Jaws” and “Saving Private Ryan.” The choice is so obvious.
David O. Selznick would have used B&W. So would have Sir David Lean. There, the “Davids” have it!
The studio system ruled the B&W era. For all of their faults, the studios gave us some interesting pairings of leading men and leading ladies (Claude Rains and Bette Davis, Humphrey Bogart and Lauren Bacall, et al.) If the studio system still ruled, there would be five “Meryl Streeps” instead of one. However, I am not sure that any of today’s leading men could match even Fred MacMurray (“Double Indemnity” with Barbara Stanwyck), let alone Clark Gable.
From the 1930s through the 1950s, actors knew how to act. They acted with their eyes, facial tics, and hand movements as well as with the way they delivered their lines. Eli Wallach was 92 when he appeared in 2010’s “Wall Street: Money Never Sleeps.” Though he has few lines, he is constantly acting—flinching and using his walking stick—while the rest of the cast just spouts rhetoric.
B&W also brought us the horror genre. Claude Rains was the “Invisible Man” (by H. G. Wells.) John Barrymore, Frederic March and Spencer Tracy have all starred as “Dr. Jekyll and Mr. Hyde” (by Robert Louis Stevenson.) Wells and Stevenson understood that the true horror is the evil lurking inside of us, not an otherworldly creature. B&W film allows for the transformation in ways that color cannot.
B&W rules!
Ten recommended B&W films:
- The Night of the Hunter (1955)
- Lured (1947)
- Deception (1946)
- Ball of Fire (1941)
- Sunset Blvd. (1950)
- Grand Hotel (1932)
- Our Man in Havana (1962)
- Advise and Consent (1962)
- The Big Heat (1953)
- Hobson’s Choice (1954)
Friday, September 9, 2011
Finding the Next Tesla in a Dumbed-Down Society
Nikola Tesla, a Serb by birth, immigrated to America in 1884. He was 28. His education transcript listed “some college.” Mr. Tesla may have been fortunate to have ignored pursuing a college degree for his true genius might have been “dumbed-down” had he mastered the knowledge of electricity as was known and taught at the time.
Tesla’s inventions were critical to creating the alternating current electrical system that powers the world. He conceived the first electric induction motor in 1882. Then he went on to develop equipment needed to operate the electrical grid.
Tesla also mastered radio wave transmission. Although Guglielmo Marconi is considered father of the radio, Marconi’s work had more to do with the successful commercialization of radio than the underlying physics of radio waves that Tesla proved. Tesla demonstrated radio transmission a decade earlier than did Marconi. Tesla transmitted radio waves through the Earth as well as through the atmosphere.
Nikola Tesla was born at the right time. Had he been born 10 years earlier, he never would have met and worked with George Westinghouse (Westinghouse Electric Co.) to build the alternating current electrical system. Had Tesla been born 10 years later, America would have already accepted Thomas Edison’s plan to electrify America with the direct current system that Edison’s inventions were built around.
When Tesla and Westinghouse electrified the 1893 Chicago World’s Fair with alternating current and fluorescent lighting, the die was cast. AC power would be the electrical standard.
What amazes me most about Tesla’s work is that he transmitted electrical energy without wires as early as 1891. His laboratory was lit by fluorescent bulbs. But there were no wires, and the bulbs had no electrodes.
Steve Jobs, the brains behind the Apple Gadget & Widget Co., recently announced his retirement. Immediately, he was hailed by the business press as the greatest American genius since Thomas Edison.
Oh, puhleeeze.
The next time you wet your pants in excitement because your iPad or iPhone found a hotspot, consider for a moment that wireless technology is 120 years old. Nikola Tesla not only dreamed of making every spot on Earth a “hot spot,” but he envisioned wireless-powered trains, ships and vehicles. Tesla’s goal was to use the electrical charges in the ground, in the seas and in the atmosphere as the “grid.”
As usually happens, the constant inventor (ala Tesla) meets two roadblocks. First, technology cannot keep up with the inventor’s mind. And second, the investors want to milk the old patents for all they are worth. Society is then dumbed-down to accept the status quo.
Some of you, especially the disciples of Steve Jobs, are accusing me of blasphemy; I can hear you because I have a tPhone (Tesla phone.) No matter how much you adore Steve Jobs, he is no Nikola Tesla. Steve Jobs, like Nikola Tesla, was a college dropout. End of comparison.
Nor is Steve Jobs the next Tesla. But if Steve Jobs is the best candidate that we have to consider, then how do we find the next Tesla in our dumbed-down society?
My talking about electric currents and electric gadgets is nebulous. So allow me to re-phrase my question in a more practical sense. How do we find the next Red Adair in our dumbed-down society?
On April 20, 2010, a BP oil well in the Gulf of Mexico caught fire and exploded. It took five months to resolve the oil leakage. Throughout the five-month period, it was obvious that neither the oil industry nor the government had a man like Red Adair to rely on — a man who instinctively knew how to tame an oil well fire.
When Saddam Hussein set fire to Kuwait’s oil wells, environmentalists the world over declared that the flames would burn for years. Wrong again, Greenies. Red Adair extinguished more than 100 fires in short order.
Red Adair also should get credit for extinguishing all of Kuwait’s oil well fires. During Red’s career, he hit a slow spell when there were no oil well fires. So he decided to manufacture equipment based on his designs and sell the equipment to his competitors.
Red Adair dropped out of high school.
In our dumbed-down society, Nikola Tesla and Red Adair could never get jobs of importance. They would have no certificates from the Wizard of Oz to vouch for their genius. And neither of these men would suffer the ignominy of dumbing himself down just to get a foot in the door.
I predict that battery makers will be profitable for a long time to come. And I predict that President Obama will continue to promote non-flammable energy.
Tesla’s inventions were critical to creating the alternating current electrical system that powers the world. He conceived the first electric induction motor in 1882. Then he went on to develop equipment needed to operate the electrical grid.
Tesla also mastered radio wave transmission. Although Guglielmo Marconi is considered father of the radio, Marconi’s work had more to do with the successful commercialization of radio than the underlying physics of radio waves that Tesla proved. Tesla demonstrated radio transmission a decade earlier than did Marconi. Tesla transmitted radio waves through the Earth as well as through the atmosphere.
Nikola Tesla was born at the right time. Had he been born 10 years earlier, he never would have met and worked with George Westinghouse (Westinghouse Electric Co.) to build the alternating current electrical system. Had Tesla been born 10 years later, America would have already accepted Thomas Edison’s plan to electrify America with the direct current system that Edison’s inventions were built around.
When Tesla and Westinghouse electrified the 1893 Chicago World’s Fair with alternating current and fluorescent lighting, the die was cast. AC power would be the electrical standard.
What amazes me most about Tesla’s work is that he transmitted electrical energy without wires as early as 1891. His laboratory was lit by fluorescent bulbs. But there were no wires, and the bulbs had no electrodes.
Steve Jobs, the brains behind the Apple Gadget & Widget Co., recently announced his retirement. Immediately, he was hailed by the business press as the greatest American genius since Thomas Edison.
Oh, puhleeeze.
The next time you wet your pants in excitement because your iPad or iPhone found a hotspot, consider for a moment that wireless technology is 120 years old. Nikola Tesla not only dreamed of making every spot on Earth a “hot spot,” but he envisioned wireless-powered trains, ships and vehicles. Tesla’s goal was to use the electrical charges in the ground, in the seas and in the atmosphere as the “grid.”
As usually happens, the constant inventor (ala Tesla) meets two roadblocks. First, technology cannot keep up with the inventor’s mind. And second, the investors want to milk the old patents for all they are worth. Society is then dumbed-down to accept the status quo.
Some of you, especially the disciples of Steve Jobs, are accusing me of blasphemy; I can hear you because I have a tPhone (Tesla phone.) No matter how much you adore Steve Jobs, he is no Nikola Tesla. Steve Jobs, like Nikola Tesla, was a college dropout. End of comparison.
Nor is Steve Jobs the next Tesla. But if Steve Jobs is the best candidate that we have to consider, then how do we find the next Tesla in our dumbed-down society?
My talking about electric currents and electric gadgets is nebulous. So allow me to re-phrase my question in a more practical sense. How do we find the next Red Adair in our dumbed-down society?
On April 20, 2010, a BP oil well in the Gulf of Mexico caught fire and exploded. It took five months to resolve the oil leakage. Throughout the five-month period, it was obvious that neither the oil industry nor the government had a man like Red Adair to rely on — a man who instinctively knew how to tame an oil well fire.
When Saddam Hussein set fire to Kuwait’s oil wells, environmentalists the world over declared that the flames would burn for years. Wrong again, Greenies. Red Adair extinguished more than 100 fires in short order.
Red Adair also should get credit for extinguishing all of Kuwait’s oil well fires. During Red’s career, he hit a slow spell when there were no oil well fires. So he decided to manufacture equipment based on his designs and sell the equipment to his competitors.
Red Adair dropped out of high school.
In our dumbed-down society, Nikola Tesla and Red Adair could never get jobs of importance. They would have no certificates from the Wizard of Oz to vouch for their genius. And neither of these men would suffer the ignominy of dumbing himself down just to get a foot in the door.
I predict that battery makers will be profitable for a long time to come. And I predict that President Obama will continue to promote non-flammable energy.
Friday, August 12, 2011
The Dollar Is More Than Worth Its Weight In Gold
The year was 1970, and I had mastered the mysteries of Money & Banking, a core course for Economics majors. In retrospect, the Money & Banking course that I took was rather simplistic compared to what has happened since in the banking system.
In 1970, the dollar was backed by gold. Banks controlled almost all the money. Banks were open from 9 am to 3 pm on weekdays and until noon Saturdays. If you wanted money, you went to the bank.
The gold that backed the dollar was stored at Fort Knox, Kentucky. We knew the gold was there because we watched as James Bond and Pussy Galore thwarted Auric Goldfinger’s evil plan to ruin our gold. The dollar was as good as gold.
In 1971, everything I learned about the dollar came to an end. The United States unilaterally ended conversion of the dollar to gold. The dollar became fiat currency—money backed only by government decree.
In 1933, President Franklin D. Roosevelt ordered the American people to surrender their gold certificates, gold bullion and gold coins to the U. S. Treasury. They were paid $20.67 per ounce. A year later, FDR signed the Gold Reserve Act of 1934 which priced gold at $35.00 per ounce. The official price of gold remained at $35.00 per ounce until President Richard M. Nixon decoupled the dollar and gold on August 15, 1971.
When Kings got into trouble in the past, they called in the coins, melted them down, added an alloy, and issued new coins at the same face value. This is known as inflation. FDR did the kingly thing, only he did it with a pen filled with ink.
President Nixon had little choice but to end the gold standard. The nation’s inflation rate was rising to 6%. If foreign governments had demanded payment in gold bullion, the gold reserve would have been drained. There was also a fear that the Soviet Union and South Africa were sitting on huge gold reserves and would use their suspected hoards to destabilize western currencies.
The gold standard that backed the dollar from 1934 to1971 was, in reality, a fiction. The official price of gold was arbitrarily determined by a president who was desperate to expand the money supply and stave off deflation. That the official price of one ounce of gold remained at $35.00 through World War II and the great economic expansion of the 1950s and 1960s tells us that gold remained arbitrarily valued. The increase in our gold reserves during the period never matched the increase in the nation’s money supply.
Even valued at today’s high price, gold would be inadequate to back even the dollar. All of the gold ever mined is believed to be worth less than ten trillion dollars at the current market price. Gold would have to be valued many, many, many times higher to reflect its scarcity if used to back the world money supply.
When viewed in hindsight, one can make the argument that all money is fiat money. Money has always been worth what the king said it was. Gold and silver bullion reserves only give the appearance of underlying value.
During the past few years, investors have been buying gold bullion and gold coins. “Gold has never been worth zero!” is a popular ad slogan. Investors believe that gold will only rise in value because they mistakenly believe that gold is a standard of value.
Gold is neither priced by its scarcity nor by its cost of production. Gold pricing in today’s market differs very little from the Dutch tulip mania in the 1600s. Gold is priced by speculators who see no end to its rise. Gold hoarding is the latest fad, the latest asset bubble.
Gold has always mystified mankind. It is the one metal that does not rust or tarnish. When the Great Pyramid of Egypt is reduced to a pile of sand, the gold in Pharaoh’s tomb will be as shiny as the day it was crafted—assuming it’s still there. Gold has an eternal quality like nothing else on Earth.
To possess gold leads to avarice. Stories of avarice and greed abound in the Bible (Exodus), literature (Silas Marner), film (Treasure of the Sierra Madre) and history (Pizarro and the Incas). And most people believe there is a huge treasure of gold just waiting to be discovered (Lost Dutchman mine and El Dorado.)
If history is an indicator, then it seems that one thing is certain: Just when you get ready to enjoy your gold wealth, someone takes it away.
Web links
http://www.wellsfargonevadagold.com/confiscation-order.pdf
http://www.enotes.com/major-acts-congress/gold-reserve-act
http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/ess_nixongold.html
In 1970, the dollar was backed by gold. Banks controlled almost all the money. Banks were open from 9 am to 3 pm on weekdays and until noon Saturdays. If you wanted money, you went to the bank.
The gold that backed the dollar was stored at Fort Knox, Kentucky. We knew the gold was there because we watched as James Bond and Pussy Galore thwarted Auric Goldfinger’s evil plan to ruin our gold. The dollar was as good as gold.
In 1971, everything I learned about the dollar came to an end. The United States unilaterally ended conversion of the dollar to gold. The dollar became fiat currency—money backed only by government decree.
In 1933, President Franklin D. Roosevelt ordered the American people to surrender their gold certificates, gold bullion and gold coins to the U. S. Treasury. They were paid $20.67 per ounce. A year later, FDR signed the Gold Reserve Act of 1934 which priced gold at $35.00 per ounce. The official price of gold remained at $35.00 per ounce until President Richard M. Nixon decoupled the dollar and gold on August 15, 1971.
When Kings got into trouble in the past, they called in the coins, melted them down, added an alloy, and issued new coins at the same face value. This is known as inflation. FDR did the kingly thing, only he did it with a pen filled with ink.
President Nixon had little choice but to end the gold standard. The nation’s inflation rate was rising to 6%. If foreign governments had demanded payment in gold bullion, the gold reserve would have been drained. There was also a fear that the Soviet Union and South Africa were sitting on huge gold reserves and would use their suspected hoards to destabilize western currencies.
The gold standard that backed the dollar from 1934 to1971 was, in reality, a fiction. The official price of gold was arbitrarily determined by a president who was desperate to expand the money supply and stave off deflation. That the official price of one ounce of gold remained at $35.00 through World War II and the great economic expansion of the 1950s and 1960s tells us that gold remained arbitrarily valued. The increase in our gold reserves during the period never matched the increase in the nation’s money supply.
Even valued at today’s high price, gold would be inadequate to back even the dollar. All of the gold ever mined is believed to be worth less than ten trillion dollars at the current market price. Gold would have to be valued many, many, many times higher to reflect its scarcity if used to back the world money supply.
When viewed in hindsight, one can make the argument that all money is fiat money. Money has always been worth what the king said it was. Gold and silver bullion reserves only give the appearance of underlying value.
During the past few years, investors have been buying gold bullion and gold coins. “Gold has never been worth zero!” is a popular ad slogan. Investors believe that gold will only rise in value because they mistakenly believe that gold is a standard of value.
Gold is neither priced by its scarcity nor by its cost of production. Gold pricing in today’s market differs very little from the Dutch tulip mania in the 1600s. Gold is priced by speculators who see no end to its rise. Gold hoarding is the latest fad, the latest asset bubble.
Gold has always mystified mankind. It is the one metal that does not rust or tarnish. When the Great Pyramid of Egypt is reduced to a pile of sand, the gold in Pharaoh’s tomb will be as shiny as the day it was crafted—assuming it’s still there. Gold has an eternal quality like nothing else on Earth.
To possess gold leads to avarice. Stories of avarice and greed abound in the Bible (Exodus), literature (Silas Marner), film (Treasure of the Sierra Madre) and history (Pizarro and the Incas). And most people believe there is a huge treasure of gold just waiting to be discovered (Lost Dutchman mine and El Dorado.)
If history is an indicator, then it seems that one thing is certain: Just when you get ready to enjoy your gold wealth, someone takes it away.
Web links
http://www.wellsfargonevadagold.com/confiscation-order.pdf
http://www.enotes.com/major-acts-congress/gold-reserve-act
http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/ess_nixongold.html
Friday, July 22, 2011
Less Is More When it Comes to Congress
There once was a time when Congress did nothing and the nation prospered. From 1997 to 2007 — a full decade — the federal minimum wage remained at $5.15 per hour. Then Congress screwed up in a way only Congress can by mandating three successive increases.
In 2007, the federal minimum wage increased 13.6 percent to $5.85. In 2008, the wage increased 12 percent to $6.55. And in 2009, the wage rose 10.7 percent to $7.25 where it currently remains. All totaled, Congress jumped the federal minimum wage 41 percent from July 2007 to July 2009 — a two-year period.
The 2008 increase kicked in just a month before the financial panic in August of that year. The 2009 increase kicked in as the charts showed the bottom falling out of the economy. But of course, the rising unemployment rate during this period was just a coincidence.
When Congress hikes the minimum wage, that increase drives up wage rates across the board. A worker who made $7.25 per hour in 2006 felt pretty good making 41 percent more than the minimum wage. However, in July 2009, the same worker needed $10.15 per hour to have felt so good.
Unlike Congress, businesses cannot wave wands and escalate payroll wages by 41 percent in two years.
Congress enacted a series of unemployment benefit extensions when the recession started. These benefits can run for 99 weeks. But that was of no matter because Congress convinced itself that spending trillions of stimulus dollars would re-start the economy, and that the unemployed would all be back at work in two years.
We now know that plan did not work. Nevertheless, employers have been stuck with a big bill for unemployment insurance premiums.
Congress enacted the Davis-Bacon Act in 1931 mandating “prevailing wages” on federally funded projects. This gem of legislation has never been anything but a sham and a swindle. But it persists, and President Obama’s shovel-ready projects never got started, in part, because of these artificially high wage rates.
President Franklin Roosevelt pioneered shovel-ready projects — literally. The Works Progress Administration handed out shovels to unemployed men and told them to start leanin’ or start shovelin’. These “lean” and hungry diggers were never paid Davis-Bacon wage rates, however.
And then there was the passage of Obama Care — the national health insurance plan that Rep. Nancy Pelosi, D-Calif., promised to read after it passed. No one knows how much this insurance plan will cost employers.
If a company can afford a K Street lobbyist, it gets a waiver for its group health plan. For companies without such influence, they become prisoners of Obama Care and all of its unknowns.
Congressional meddling with private sector employment law has created massive unemployment. Perhaps for the worse, this meddling has chilled hiring for years to come.
The unemployment rate is trending upward again. If $3 trillion of deficit spending didn’t prime the pump, then a double-dip recession is a real possibility.
The recent job creation report was a big disappointment to the experts who follow these numbers. For June, an expected 90,000 jobs created turned out to be 18,000. For May, the jobs created were revised downward to 25,000. Numbers like these suggest that businesses are only replacing turnover, not expanding.
Businesses would hire workers if consumers started buying more. When UPS recently was asked if it planned to hire additional workers, the company’s spokesman answered, “Packages equal people.” That is a qualified “No.”
Consumers aren’t spending for two reasons. Their houses have dropped in value. And the corn-ethanol subsidies have driven up fuel and food prices. Consumers can’t borrow against their biggest asset. Consumers are spending more of their limited disposable income on food and fuel.
As I recall, the housing bubble and its subsequent collapse had something to do with Congress and its red-handed stepchildren — Freddie Mac and Fannie Mae.
As I recall, Congress loves corn. So much so, that the Capitol’s privies are stocked with bushel baskets full of corn cobs.
The mess we are in has been caused by Congress. Congress needs to quit meddling. Congress needs to take a lesson from the past — do nothing for 10 years.
But this Congress apparently won’t sit on its thumbs. This is a shovel-ready Congress. This Congress is determined to dig an even deeper hole.
In 2007, the federal minimum wage increased 13.6 percent to $5.85. In 2008, the wage increased 12 percent to $6.55. And in 2009, the wage rose 10.7 percent to $7.25 where it currently remains. All totaled, Congress jumped the federal minimum wage 41 percent from July 2007 to July 2009 — a two-year period.
The 2008 increase kicked in just a month before the financial panic in August of that year. The 2009 increase kicked in as the charts showed the bottom falling out of the economy. But of course, the rising unemployment rate during this period was just a coincidence.
When Congress hikes the minimum wage, that increase drives up wage rates across the board. A worker who made $7.25 per hour in 2006 felt pretty good making 41 percent more than the minimum wage. However, in July 2009, the same worker needed $10.15 per hour to have felt so good.
Unlike Congress, businesses cannot wave wands and escalate payroll wages by 41 percent in two years.
Congress enacted a series of unemployment benefit extensions when the recession started. These benefits can run for 99 weeks. But that was of no matter because Congress convinced itself that spending trillions of stimulus dollars would re-start the economy, and that the unemployed would all be back at work in two years.
We now know that plan did not work. Nevertheless, employers have been stuck with a big bill for unemployment insurance premiums.
Congress enacted the Davis-Bacon Act in 1931 mandating “prevailing wages” on federally funded projects. This gem of legislation has never been anything but a sham and a swindle. But it persists, and President Obama’s shovel-ready projects never got started, in part, because of these artificially high wage rates.
President Franklin Roosevelt pioneered shovel-ready projects — literally. The Works Progress Administration handed out shovels to unemployed men and told them to start leanin’ or start shovelin’. These “lean” and hungry diggers were never paid Davis-Bacon wage rates, however.
And then there was the passage of Obama Care — the national health insurance plan that Rep. Nancy Pelosi, D-Calif., promised to read after it passed. No one knows how much this insurance plan will cost employers.
If a company can afford a K Street lobbyist, it gets a waiver for its group health plan. For companies without such influence, they become prisoners of Obama Care and all of its unknowns.
Congressional meddling with private sector employment law has created massive unemployment. Perhaps for the worse, this meddling has chilled hiring for years to come.
The unemployment rate is trending upward again. If $3 trillion of deficit spending didn’t prime the pump, then a double-dip recession is a real possibility.
The recent job creation report was a big disappointment to the experts who follow these numbers. For June, an expected 90,000 jobs created turned out to be 18,000. For May, the jobs created were revised downward to 25,000. Numbers like these suggest that businesses are only replacing turnover, not expanding.
Businesses would hire workers if consumers started buying more. When UPS recently was asked if it planned to hire additional workers, the company’s spokesman answered, “Packages equal people.” That is a qualified “No.”
Consumers aren’t spending for two reasons. Their houses have dropped in value. And the corn-ethanol subsidies have driven up fuel and food prices. Consumers can’t borrow against their biggest asset. Consumers are spending more of their limited disposable income on food and fuel.
As I recall, the housing bubble and its subsequent collapse had something to do with Congress and its red-handed stepchildren — Freddie Mac and Fannie Mae.
As I recall, Congress loves corn. So much so, that the Capitol’s privies are stocked with bushel baskets full of corn cobs.
The mess we are in has been caused by Congress. Congress needs to quit meddling. Congress needs to take a lesson from the past — do nothing for 10 years.
But this Congress apparently won’t sit on its thumbs. This is a shovel-ready Congress. This Congress is determined to dig an even deeper hole.
Thursday, June 16, 2011
Can Americans Pay Down Our Debt?
How much is 1 trillion of anything? Let's count McDonald's burgers.
McDonald's sold its 100 billionth burger in 1993 and changed the sign to read "Billions and Billions Sold." The best guess I could find is that McDonald's now sells 4.6 billion burgers per year -- call it 5 billion. Thus, McDonald's has yet to sell 200 billion burgers.
At the current sales rate of 5 billion per year, McDonald's will not sell its 1 trillionth burger until the year 2173. Nobody alive today will witness the event.
If you exchange one McDonald's burger for each dollar of America's $14 trillion debt, then you're looking at a payoff date sometime in 4773 A(fter) D(igestion).
One trillion is such a huge number that the human mind cannot put it into perspective.
The human mind can understand one billion. McDonald's began franchising in 1953 and sold its billionth burger in 1963. McDonald's hit the 5 billion mark in 1969 and the 20 billion mark in 1976. People can understand 1 billion in total or even the rate of 1 billion per year.
Fortunately, we have computers that can count trillions as easily as people count fingers. Computers can easily design and compare an infinite number of plans to pay off the national debt.
Paying off a loan, however, is more than a math problem. A borrower must have that intangible quality -- integrity -- to honor the debt. If the borrower will not honor the debt, that's that.
It is my considered opinion that the American people do not have the integrity to honor the national debt. I cannot prove that Americans are as morally bankrupt as they are financially bankrupt. But I can provide events that draw me to this conclusion.
Fifty years ago, General Motors was the world's leading automaker. GM also excelled at building locomotives and diesel engines. GM was a powerhouse; its stock was as blue as a blue chip could be.
But then, GM rested on its laurels and eventually borrowed and overextended itself until the company had to declare bankruptcy in 2009. Blame it on the Corvair and Ralph Nader if you want, but GM's management forgot how to compete.
In many respects, GM's path to poverty mimics the nation's plight.
GM's Chapter 11 bankruptcy, though big, was not so big that the courts couldn't restructure the company. Bigger companies already had been through the system. But this time, the White House stepped in to override the bankruptcy court and dictate the terms of recovery.
Under bankruptcy law, the secured creditors are paid first. They have first dibs on the assets. In GM's case, the secured creditors were thrown a bone and told to take it or leave it.
The president of the United States all but ordered the nationalization of GM, a publicly owned company, and there was hardly a peep of protest. Forget tradition. Forget the "rule of law" that politicians always crow about. Forget the term "secured debt."
Federal bankruptcy laws were reformed in 1979. The laws were trying to keep up with the times. Bankruptcy was no longer something to be ashamed of. Bankruptcy filings were increasing, and the system needed reforming to speed reorganizations and liquidations.
Bill McLaughlin, former CEO of CB&T bank, explained to me in the mid-1980s that the bankruptcy law had become a "management tool." He was as right as he was succinct.
When the housing bubble popped, people walked away from their mortgages without regret. And the mortgage markets are still a long way off from normalizing.
From the White House to the poor house, Americans have shown they will not honor their debts. Can you expect with any reasonable assurance that Americans will pay off $14 trillion in Treasury Notes?
I could be wrong. We could have a turnaround. Or we could have another Pearl Harbor -- an event that stirs us to greatness. America does have a history of doing the impossible and doing it well.
I personally believe that $14 trillion is so big that it is mathematically impossible to pay it back in a reasonable time period. But I could be as wrong as wrong can be on this, too. I may be a finger-counting relic trying to conceptualize 1 trillion while ignoring the power of computers.
And I could be way off in predicting when McDonald's sells burger No. 1 trillion. You just never know about making burger predictions. What if people in India had a change of attitude about their sacred cows?
McDonald's sold its 100 billionth burger in 1993 and changed the sign to read "Billions and Billions Sold." The best guess I could find is that McDonald's now sells 4.6 billion burgers per year -- call it 5 billion. Thus, McDonald's has yet to sell 200 billion burgers.
At the current sales rate of 5 billion per year, McDonald's will not sell its 1 trillionth burger until the year 2173. Nobody alive today will witness the event.
If you exchange one McDonald's burger for each dollar of America's $14 trillion debt, then you're looking at a payoff date sometime in 4773 A(fter) D(igestion).
One trillion is such a huge number that the human mind cannot put it into perspective.
The human mind can understand one billion. McDonald's began franchising in 1953 and sold its billionth burger in 1963. McDonald's hit the 5 billion mark in 1969 and the 20 billion mark in 1976. People can understand 1 billion in total or even the rate of 1 billion per year.
Fortunately, we have computers that can count trillions as easily as people count fingers. Computers can easily design and compare an infinite number of plans to pay off the national debt.
Paying off a loan, however, is more than a math problem. A borrower must have that intangible quality -- integrity -- to honor the debt. If the borrower will not honor the debt, that's that.
It is my considered opinion that the American people do not have the integrity to honor the national debt. I cannot prove that Americans are as morally bankrupt as they are financially bankrupt. But I can provide events that draw me to this conclusion.
Fifty years ago, General Motors was the world's leading automaker. GM also excelled at building locomotives and diesel engines. GM was a powerhouse; its stock was as blue as a blue chip could be.
But then, GM rested on its laurels and eventually borrowed and overextended itself until the company had to declare bankruptcy in 2009. Blame it on the Corvair and Ralph Nader if you want, but GM's management forgot how to compete.
In many respects, GM's path to poverty mimics the nation's plight.
GM's Chapter 11 bankruptcy, though big, was not so big that the courts couldn't restructure the company. Bigger companies already had been through the system. But this time, the White House stepped in to override the bankruptcy court and dictate the terms of recovery.
Under bankruptcy law, the secured creditors are paid first. They have first dibs on the assets. In GM's case, the secured creditors were thrown a bone and told to take it or leave it.
The president of the United States all but ordered the nationalization of GM, a publicly owned company, and there was hardly a peep of protest. Forget tradition. Forget the "rule of law" that politicians always crow about. Forget the term "secured debt."
Federal bankruptcy laws were reformed in 1979. The laws were trying to keep up with the times. Bankruptcy was no longer something to be ashamed of. Bankruptcy filings were increasing, and the system needed reforming to speed reorganizations and liquidations.
Bill McLaughlin, former CEO of CB&T bank, explained to me in the mid-1980s that the bankruptcy law had become a "management tool." He was as right as he was succinct.
When the housing bubble popped, people walked away from their mortgages without regret. And the mortgage markets are still a long way off from normalizing.
From the White House to the poor house, Americans have shown they will not honor their debts. Can you expect with any reasonable assurance that Americans will pay off $14 trillion in Treasury Notes?
I could be wrong. We could have a turnaround. Or we could have another Pearl Harbor -- an event that stirs us to greatness. America does have a history of doing the impossible and doing it well.
I personally believe that $14 trillion is so big that it is mathematically impossible to pay it back in a reasonable time period. But I could be as wrong as wrong can be on this, too. I may be a finger-counting relic trying to conceptualize 1 trillion while ignoring the power of computers.
And I could be way off in predicting when McDonald's sells burger No. 1 trillion. You just never know about making burger predictions. What if people in India had a change of attitude about their sacred cows?
Friday, May 20, 2011
Even Ken Jennings Can Be Replaced By a Machine
In my last column, I touched on automation as a reason for improved workplace safety. Perhaps we should revisit automation as a job killer. This is not new. The most famous automation story is the Luddite Revolt of 1811 when English weavers set about to destroy newly-invented looms run by Jacquard’s punched card system.
Eli Whitney introduced the cotton gin in 1794. Whereas Jacquard’s machine replaced highly-skilled workers, Whitney’s machine replaced unskilled labor. And further, the cotton ginning machine did more to guarantee consistent quality than increase production. Hence, there was no revolt in America’s cotton belt.
Automation, nevertheless, continues its march. We accept it because it works.
When I visited the T. L. Smith factory in Milwaukee in the late 1970s, I expected to see machinists standing at their lathes turning out parts for Telsmith rock crushers. I always admired machinists and their ability to hone steel. But on that day in Milwaukee, the machinists were sitting in lawn chairs, reading the paper and drinking coffee. The machine tools were made by Cincinnati Milacron and, like Jacquard’s loom, were operated by a punched tape drive.
Fixed machines performing repetitive tasks are the easiest machines to automate. Machines that move in space and time present much more of a challenge. But the advent of global positioning satellites has made that task less difficult.
In the last few years, highway contractors have been fitting bulldozers with GPS receivers and computers. The highway construction plans are digitized in three dimensions and loaded into the onboard computer. The GPS controls tell the computer where the bulldozer is on the X and Y axes. A laser reference light provides the elevation reference (Z axis).
Studies indicate that computer-controlled bulldozers are up to 50% more efficient and use some 40% less fuel than their human-operated peers. The savings are obvious. Two bulldozers do the work of three; each bulldozer uses 30 gallons less fuel per shift.
Companies like Caterpillar are now designing bulldozers that will be totally operated by other machines. The bulldozer of the future won’t require an OSHA-approved, rollover-proof, soundproofed and air-conditioned operators cab.
The automated bulldozer always knows where it is in space, and it does not rely on a survey crew to set grade stakes as reminders. So the need of the surveyor has diminished. But surveying work has already diminished for another reason—the work of a four-man survey crew 30 years ago is now done by one man with an electronic instrument.
Machinists. Bulldozer operators. Surveyors. These are just three good-paying occupations that have to compete with machines.
We have the technology to replace air traffic controllers. Unfortunately, we will tolerate sleeping Luddites until an air disaster forces our government to have the will to do so.
When Boeing and Airbus began designing aircraft with seats for two pilots, a joke circulated around the industry. It went: The new planes are so sophisticated that the cockpit only needs two seats—one for the pilot and one for a dog. The pilot’s job is to feed the dog. The dog’s job is to bite the pilot if he reaches for the controls.
We’ll never see this happen because we think all pilots are like “Sully” Sullenberger. But the point of the joke remains.
Now that human medical scans are digitized, why do we need a radiologist to read the image? We don’t. The computer can read the image as soon as it is taken. The computer can see pixels that the human eye cannot.
Is there a limit to replacing humans with machines?
In February, the game show Jeopardy staged a contest pitting an IBM computer vs. the two biggest Jeopardy winners on record. The computer won.
Impressively.
Many faithful fans derided the computer as having an unfair edge—it could beep the beeper faster than a human. Well, so what?
Others derided the computer by saying that Jeopardy was essentially a memory test, and that a computer could memorize everything in print. Well, so what?
Jeopardy is a trivia test, not a simple memory exam. Remembering trivial facts is a very human pursuit. Programmed by humans to win a human game show, the computer displayed a degree of human intuition.
Is this not the same underlying concept as programming the Jacquard loom’s punched cards to weave patterns that are pleasing to the eye?
Machines will only become smarter. Machines will take away more human occupations. So what will humans of the future do for work?
John Henry (and Ken Jennings), we feel your pain.
Eli Whitney introduced the cotton gin in 1794. Whereas Jacquard’s machine replaced highly-skilled workers, Whitney’s machine replaced unskilled labor. And further, the cotton ginning machine did more to guarantee consistent quality than increase production. Hence, there was no revolt in America’s cotton belt.
Automation, nevertheless, continues its march. We accept it because it works.
When I visited the T. L. Smith factory in Milwaukee in the late 1970s, I expected to see machinists standing at their lathes turning out parts for Telsmith rock crushers. I always admired machinists and their ability to hone steel. But on that day in Milwaukee, the machinists were sitting in lawn chairs, reading the paper and drinking coffee. The machine tools were made by Cincinnati Milacron and, like Jacquard’s loom, were operated by a punched tape drive.
Fixed machines performing repetitive tasks are the easiest machines to automate. Machines that move in space and time present much more of a challenge. But the advent of global positioning satellites has made that task less difficult.
In the last few years, highway contractors have been fitting bulldozers with GPS receivers and computers. The highway construction plans are digitized in three dimensions and loaded into the onboard computer. The GPS controls tell the computer where the bulldozer is on the X and Y axes. A laser reference light provides the elevation reference (Z axis).
Studies indicate that computer-controlled bulldozers are up to 50% more efficient and use some 40% less fuel than their human-operated peers. The savings are obvious. Two bulldozers do the work of three; each bulldozer uses 30 gallons less fuel per shift.
Companies like Caterpillar are now designing bulldozers that will be totally operated by other machines. The bulldozer of the future won’t require an OSHA-approved, rollover-proof, soundproofed and air-conditioned operators cab.
The automated bulldozer always knows where it is in space, and it does not rely on a survey crew to set grade stakes as reminders. So the need of the surveyor has diminished. But surveying work has already diminished for another reason—the work of a four-man survey crew 30 years ago is now done by one man with an electronic instrument.
Machinists. Bulldozer operators. Surveyors. These are just three good-paying occupations that have to compete with machines.
We have the technology to replace air traffic controllers. Unfortunately, we will tolerate sleeping Luddites until an air disaster forces our government to have the will to do so.
When Boeing and Airbus began designing aircraft with seats for two pilots, a joke circulated around the industry. It went: The new planes are so sophisticated that the cockpit only needs two seats—one for the pilot and one for a dog. The pilot’s job is to feed the dog. The dog’s job is to bite the pilot if he reaches for the controls.
We’ll never see this happen because we think all pilots are like “Sully” Sullenberger. But the point of the joke remains.
Now that human medical scans are digitized, why do we need a radiologist to read the image? We don’t. The computer can read the image as soon as it is taken. The computer can see pixels that the human eye cannot.
Is there a limit to replacing humans with machines?
In February, the game show Jeopardy staged a contest pitting an IBM computer vs. the two biggest Jeopardy winners on record. The computer won.
Impressively.
Many faithful fans derided the computer as having an unfair edge—it could beep the beeper faster than a human. Well, so what?
Others derided the computer by saying that Jeopardy was essentially a memory test, and that a computer could memorize everything in print. Well, so what?
Jeopardy is a trivia test, not a simple memory exam. Remembering trivial facts is a very human pursuit. Programmed by humans to win a human game show, the computer displayed a degree of human intuition.
Is this not the same underlying concept as programming the Jacquard loom’s punched cards to weave patterns that are pleasing to the eye?
Machines will only become smarter. Machines will take away more human occupations. So what will humans of the future do for work?
John Henry (and Ken Jennings), we feel your pain.
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