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Archive for July, 2012

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If you would like to read something to sober you up real fast, then here is an informative diversion from your norm.

Forget what you think you know and have a bit of a read of this account about a real life SHTF (shit-hits-the-fan) situation.

http://shtfschool.com/

Surviving one year in a city surrounded by the enemy army and cut off from the rest of the world. I’m Selco and have been through this SHTF school I never wanted to attend during the Balkan wars 1992 – 1995.   (Selco, one year in Hell)

an inside view of the reality of survival under the harshest conditions. Real survival is not romantic or idealistic. It is brutal, hard and unfair.

How likely is this where you live…?

Who knows, and until it happens you can’t really know or do anything about it anyway.

But, sobering.

And if the SHTF, something you are better to know than not.

And better yet, perhaps what you need to know to ensure things never get that far in your country, town or community.

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Employment

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Dear Person Seeking a Job: Why I Can’t Hire You

~ Charles Hugh Smith      July 3, 2012

…..  [edited ~R]

I know you’re hard-working, motivated, tech-savvy and willing to learn. The reason I can’t hire you has nothing to do with your work ethic or skills; it’s the high-cost Status Quo – and the many perverse consequences of maintaining it.

Potential employers have to respond to the incentives and disincentives that exist in today’s world, and those do not favor conventional permanent employees.  The sad truth is that it’s costly and risky to hire anyone to do anything, and the total compensation costs the employer pays have risen substantially, even though the wages that employees see on their paychecks have stagnated.

“Bankable projects” that might generate profit and require more labour, are also few and far between.  There is very little real “new business” in a recessionary  economy: any new business is poaching from an established business. The new restaurant isn’t drawing people from their home kitchens, it’s drawing customers from other restaurants.  The only competitive advantage is to be faster, better and cheaper or have a marketing or technology edge.

But faster, better and cheaper usually means reducing the labour input, not increasing it.

Hiring an additional worker only makes sense if the new employee will immediately generate enough additional revenue to fund their own wage and overhead costs.

Most small businesses/proprietors don’t get handed a couple million dollars. They have to grow organically, one step at a time. Each expansionist step is fraught with risks, especially when opportunities to grow revenue are few and far between, and are generally crowded with competitors.  There’s a Catch-22 aspect to all this; small business can’t expand revenues without employees, but the costs & risks of having employees makes that a gamble that is often not worth taking.

Managing people is not easy and often stressful. Once a proprietor hires an employee, they must wear a number of new hats: psychiatrist, counselor, manager, coach, teacher, to name but a few. Frankly, who needs the stress.

If anyone out there thinks being an entrepreneur is easy or a pathway to the luxe life, then by all means, get out there and start a business, hire a bunch of people. I applaud your energy and drive, and sincerely hope you are wildly successful.

I hope you now understand why so many businesses only want to work with contract-labour/ self-employed people:

Having employees no longer makes financial sense for many small enterprises. What makes sense is paying someone a set fee to accomplish a set task, and that’s it.  The obligation of both parties is fulfilled. If the task isn’t completed, then the fee isn’t paid.

Revenues just aren’t steady enough in many cases to support a permanent employee. When the work comes in, then contract labor is brought in to get the work done. When it’s done, they’re gone, and all their overhead costs are theirs.

Self-employment places a premium on professionalism and results.

Unlike offices filled with managers and employees, nobody cares about your problems, conflicts, complaints about the common-area fridge or your attendence at meetings. Once you’ve been self-employed for a while, and you only hire/work with other self-employed people, then you look back on conventional work places as absurdist theaters of school-yard politics, tiresome resentments and child-parent conflicts acted out by self-absorbed adults.

Once you’re self-employed, your focus shifts to nurturing a productive network of clients, customers and like-minded, reliable, resourceful self-employed people who will give you work or work for you when you need help. Building trust and following through on what you promised to do become your priority.

The economy is different now, and wishing it were unchanged from 30 years ago won’t reverse the clock.

We have to respond to the incentives and disincentives that exist in today’s world, and those do not favor conventional permanent employees.  Except in sectors that are largely walled off from the market economy: government, healthcare, etc.

But these moated (bloated) sectors cannot remain isolated from the market economy forever, and what was considered safely walled off from risk and change will increasingly face the same market forces that have changed private-sector enterprise.

If you want security and a steady income, it may be more rewarding to build it yourself via highly networked self-employment.

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The Don

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Super scheme cannot continue in present form

~ Don Brash      Friday Jun 15, 2012

[edited ~ R]

This week’s report of the Financial Services Council makes it clear that New Zealand Superannuation will not survive in its present form. The Retirement Commissioner recommended that we raise the age of eligibility for New Zealand Super to 67 by 2033, starting in 2020.  Clearly, there must be a change.

Would it be feasible to reduce the generosity of New Zealand Super instead of increasing the age of eligibility?

At the moment, New Zealand Super is one of the most generous taxpayer-funded retirement schemes in the world and, according to the OECD, poverty among those over 65 is lower in New Zealand than in almost any other developed country.  But New Zealand Super guarantees only a pretty basic living standard, and even that depends on the superannuitant owning a debt-free home on retirement. The scope to reduce the level of New Zealand Super payments is almost certainly quite small if significant hardship among the elderly is to be avoided.

Maybe New Zealand Super could be means-tested?   Two problems:

– First, both Labour and National tried to means-test New Zealand Super in the 80s and 90s, by means of the surcharge, and both finally abandoned the effort because of the furiously hostile political reaction. Because it was widely perceived as unfair (I’ve paid taxes all my life, so I’m entitled) there was also widespread avoidance.  [screw it – that which cannot be sustained wont be.  And just because the babies get all whiney because they have been taken off the tit – tough…  ~R]

– And second, any form of means test does, for at least some people, constitute a strong disincentive to save: Why save if all it means is that I lose my right to New Zealand Super? 

Which leaves the option of increasing the age of eligibility, as countries all over the developed world are doing.

Many people will also advocate some form of compulsory saving.

Those calls, often made by those with a vested interest in having more funds under management, should be strongly resisted. To begin with, having more private sector savings only helps solve the future fiscal problem if New Zealand Super is means-tested and, as past experience shows, New Zealanders are very reluctant to contemplate that.

Even more serious, to oblige New Zealanders to pay into a managed fund instead of, say, paying off a home mortgage is totally counter to their interest. I’ve never come across a managed fund which consistently earns returns, after tax and fees, which come close to the rate of interest on the average home mortgage.

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At this point Don goes seriously off the rails, and suggests adopting a flawed expediant because adopting the correct solution is too hard

In my view, there are two things which are key to enabling older New Zealanders to maintain a reasonable standard of living in retirement.

First, we should maintain New Zealand Super as a universal benefit at its present level relative to the average wage (for a married couple, at 66 per cent of the average wage), but recognise that the age of eligibility must go up. In 2010, the Australians announced the age of eligibility there would start increasing in 2016, and reach 67 by 2023.

If we announced a change this year, we could start increasing the age of eligibility in, say, 2018, and reach 67 by 2025. Thereafter, the age of eligibility should be indexed to life expectancy.

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But, to his credit, he comes totally back on track here.

Secondly, it is imperative that we make housing more affordable in New Zealand. One of the reasons why most retired New Zealanders currently enjoy a reasonable standard of living is that most of them own debt-free homes. But owning a debt-free home has become well beyond the reach of most younger New Zealanders.

How do we make homes more affordable, so that the next generation of New Zealanders has a chance to arrive at retirement owning a debt-free home? The Productivity Commission was in no doubt that the most important factor in making homes more affordable would be to free up the supply of residential land – making sections vastly cheaper and enabling builders to gain economies of scale by building several houses at a time.

With fewer than five million people spread across an area greater than the United Kingdom, it is extraordinary that New Zealanders are expected to pay upwards of $200,000 for 500 square metres of dirt – equivalent to $4 million per hectare – even in quite distant suburbs.

Doing that would have a double bonus. Not only would many more New Zealanders be able to afford to buy their own homes, but we would be much more inclined to save from our current income if we could no longer rely on a continuing escalation of house prices to make us rich – surely a major factor in our poor savings performance over the last 20 years.

The result? A fiscally sustainable New Zealand Super scheme, younger New Zealanders having a good chance of owning a debt-free home by retirement, and more private sector savings to supplement retirement income.

Dr Don Brash is a former Reserve Bank governor and leader of the National and Act parties.

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I would add one caveat to the last part of his article:  

There has to be some form of structural/financial disincentives to the wholesale investing of capital in Housing.  Otherwise, simply making housing cheaper just makes it easier for Big-Money to swoop in and buy it all up.

Actually, there are quite a lot of mechanisms for structuring the investment environment that would make it prohibitive to merely invest/buy housing as a means of wealth generation.

I will get into that explicitly with a dedicated Post one of these day…

~R

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“Big Idea Solution”: Radically Lower the Cost Basis of the Entire Economy   ~ Charles Hugh Smith       [May, 2012]

….. [edited ~R]

Our choice is simple: either continue on the State-cartel path of complexity and rising costs that leads to a death spiral, or re-energize the forces of the market and community.

We are constantly told all our problems are too complex to be addressed with simple “big idea” solutions.

Complex problems require complex solutions, we are assured, and so the “solutions” conjured by the Central State/Cartel Status Quo are convoluted and complex.

The real “solution” is to see that complexity itself is the roadblock to radical reformation of failed systems. Complexity is the subterfuge the Status Quo uses to obfuscate while further consolidating their power behind the artificial moat of complexity.

Big Idea One: Radically lower the cost basis of the entire U.S. economy.

The cost basis of any activity is self-evident: what are the total costs of the production of a good or service? The surplus produced is the net profit which can be spent on consumption or invested in productive assets – or squandered.

Central States and cartels by definition face no market forces on their cost basis.

As a result, governments are intrinsically incapable of radically reducing the cost basis of their activity.  Cartels (e.g. the sickcare industry) by definition, profit by fixing prices and so rising costs are simply shifted to consumers, with the aid of an over-regulating, moat-building “complex” Central State.  As friction from the State and its crony-capitalist partners, the various cartels, inevitably rises, the surplus left to distribute via entitlements or invest shrinks.

The State has two mechanisms to counter this decline in surplus:

It raises taxes, and secondly, it prints money.

Both are short-term expediencies that inevitably lead to collapse.

As people retreat to gold and land to protect their wealth, the liquid capital necessary to invest in new ventures dries up, adding to the death-spiral.

In essence, the State and its cartels raise the cost basis by letting unproductive friction absorb all the economy’s surplus.

The State’s “solution” isn’t to reduce its own fiefdoms’ spending, or dismantle the high-friction cartels: it’s to print money.

The only way to lower the actual cost basis of the economy is to reduce the role and power of the Central State, dismantle its favored cartels and re-empower community and the market forces of innovation and competition. The Central State and its cartels are incapable of innovation or reducing costs because they dominate the market and the community.

Community must play a central role in lowering the cost basis.

The market cannot address all problems, much of value in human life is beyond the market.  The end result of an economy dominated by the State and cartels is a deeply and perniciously pathological society and economy.

Market forces in housing see the “solution” as wealthy Elites and corporations buying up all the housing and then renting it to recipients of State aid for high rents.

Co-ops, co-housing and a host of other community housing solutions that radically lower the cost-basis of housing are rejected because they don’t generate large profits. Their purpose is to lower the cost of housing while greatly enhancing its liveability and non-market value – “assets” that the market simply doesn’t recognize unless they can be exploited for high profit margins.

This is why both the non-market forces of community and the market forces of efficiency and profit must share the economy if the cost basis is to be radically lowered.

If people only make $10,000 in the market economy, the State’s solution is to redistribute or print $30,000 so their consumption can equal that of people earning $40,000.

The solution I suggest is to radically lower the cost basis of the economy so those earning $10,000 can live simply and well on what they earn.

This solution does not compute for the Central State and its protected cartels, as they would lose their dominance over the economy. They have chosen the death-spiral for our future, and that’s what we’ll get until we restore some equilibrium between the State, the market and the non-market commmunity.

………………………

Charles’ Low Cost Basis economy and my Deflation are essentially the same idea.

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I had been thinking of doing a bit of a sum up of the current situation myself, but some-one else has done it already.  

So, where are we up to…?  And why do I think we need to cut a few cancers out of our society…?   Read on my friend, and decide for yourself.

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The Many Ways Banks Commit Criminal Fraud

George Washington on 07/03/2012.  [from Zero Hedge]

The Libor scandal seems to be waking people up to manipulation and fraud by the big banks.

There are many other types of fraud they’ve engaged in as well …

Here is a partial list:

  • Pledging the same mortgage multiple times to different buyers. See thisthisthisthis and this
  • Engaging in mafia-style big-rigging fraud against local governments. See thisthis and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See thisthisthis and this.
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See thisthis and this.
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details hereherehereherehereherehereherehereherehere.
  • Participating in various Ponzi schemes. See thisthis and this.

But at least the big banks do good things for society, like loaning money to Main Street, right?

Actually:

  • The big banks have slashed lending since they were bailed out by taxpayers … while smaller banks have increased lending. See thisthis and this.

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Not to mention what the politicians get up to.  It’s hard to know which are the bigger crooks, or which comes first – the chicken or the egg.   Did the Banksters corrupt politics, or did the Politicians just show the way and open the door?

The whole Eurozone fiasco was doomed from the start.  The rules were always far too slack for it to ever work sustainably.  The British were awake to that from the start, they never wanted a bar of it.  What rules there were regarding deficits etc were rorted blatantly from the first year and just got more egregious over time.  Until we got to the situation with Greece where the politicians were conspiring with the Banksters (Goldman Sachs) to actively manipulate and conceal the true state of the books.  

Not that anyone in power wasn’t completely aware of the real situation.  But as long as there was some fig-leaf, some sort of plausible deniability (and the money kept flowing) everyone was totally prepared to look the other way.

At a minimum that is intellectual dishonesty.  Realistically it is also criminally dishonesty.  But hey, it’s good to be King right…?  (what I say goes, because I say so…)

To varying degrees it is the same everywhere.  Ponzi scheme piled on Ponzi scheme.

Here (in a country rated one of the least corrupt in the world) the government has stated there is nothing wrong with the current implementation of our Pension/Superannuation scheme.  According to the Prime Minister, the situation is entirely affordable and wont need any sort of review before 2020.

When we are already borrowing $100 million a week to finance the deficit spending, then NO, it is not currently affordable.  Liesagain.   Ponziagain.

The problem isn’t where to look to find the lies, fraud and corruption – the problem is where to stop.  It is systemic, endemic, universal.

At some point, if you find your self in a hole, you have to stop digging.  This shit will kill us.

STOP the FRAUD.

       START the PROSECUTING.

                 START the RESECTING

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Driving on Weed

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Impaired Driving On Weed: An Answer

~ Karl Denninger

…  [edited ~R]

Here’s the problem with these laws: There are questions about how, and at what level, cannabis use impairs driving ability. For a patient in one of the 17 states where marijuana has been legalized for medicinal use, how are you to know when it’s legal to drive? After consuming marijuana, should you wait 12 hours to drive or one day? When will your THC level be below the 5-nanogram threshold? The answer is complicated.   ~ Bloomberg

Of course it’s complicated.  It’s complicated for alcohol use too.

But we don’t care.  We’re more interested in posting up big numbers of “busts”.   Along with the fines, forfeitures, jailings and fees that all of this police-state tactical response produces.  Roadblocks, random sobriety checkpoints and similar are more intended to “show force” than they are to actually get impaired drivers off the road.

If we manage to decrease the crash rate somewhat while applying the boot to the neck of the citizens then that’s a nice side effect.  This is exactly backward.

There are already commercially-available reaction time testers that measure actual hand-eye coordination and thus impairment.  They map very well to driving ability and are roughly like a small handheld video game.

Equipping police departments with these would provide actual evidence of impairment and be cause-neutral.  Whether your impairment was caused by weed, booze, lack of sleep, prescription pills or simply old age, you either can react quickly enough to drive competently or you cannot.  The test is objective and maps to the actual skill required to operate at a reasonable level of safety.

This means, of course, that it would “catch” a lot of people who shouldn’t be on the road, but are – and many of them would be caught for reasons other than “intoxication”.

But this is how it should be – we should be insisting on a basic level of ability – irrespective of how it is achieved, or what substance/s you might have (or not) in your body.

This has not been adopted by the State and local “peace officers” because we no longer have peace officers – we now have “law enforcement”.

As a nation, as a people, we can and must do better.  The jackbooted Statist parties won’t propose and work to pass this.  They clearly consider public peace a side effect rather than a goal.

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An interesting alternative perspective. And shows how easily we can get caught up in a standard narrative about a subject, when there can often be quite rational alternatives to our current systems.  But we mostly keep arguing the same old tired and dead-end arguments about our problems because that is how the arguments were couched when we were first introduced to them.

Interestingly, that is a standard ploy of politicians and spin doctors too.  Capture a dispute by framing the parameters within which the debate is held.  Slant the playing field before anyone even gets on the field.

Impaired driving is a classic: how much alcohol or other drugs should be the legal limit?  But as Denninger say; what about other impairments?  It is very interesting sometimes to figure out the unspoken agendas in public-policy and laws.  Easy to put up a law that targets the young, reckless and poor.  Not so easy to equally police the rich, privileged and older.  

Not because it couldn’t be done on the street level, but because it wont make it past the formulation of legal process.  Politics… and Power… and Money…   ~R

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Lifted

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Aquarius's picture   Aquarius

Mon, 07/02/2012 – 07:08 | 2580085
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Now children,

We are all human beings of the same family, albeit all with differing potential and function. It is just that the system that we have installed favors the bankers and all that hangs off them.

So – we change the system, to one that is designed to optimize all our talents and needs, where one group doesn’t get penalized (genocided).

Problem is; that this takes Intellect and Compassion and Reason, and Courage, Honour, and Virtue.  Whatever, we also need some adults making the decisions; unlike those that we have today.

Economics is a Cult and “Leadership” a Protection Racket, while Bureaucracy  is a disease. Corporation are the Mercenaries, and Bankers are fungal Parasites.

It’s all about function!

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Lifted from the Comments section of a Zero Hedge Post

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