economics

Smoke and Mirrors

I know that I tackled this one 16 years ago, but after eighteen years of running this blog, there are very few topics that I haven’t mentioned. The left loves to claim that Clinton ran a budget surplus when he was President. That is false. The national debt actually went up every single year that he was President. The reason that they can claim this, is the money was moved from one account to the other.

Let me explain:

Let’s say that your wife is angry that you are spending all of your money on guns and booze, and is afraid that you are maxing out the credit cards. You show her the bank statements from the checking account, and low and behold, your balance is larger now than it was a year ago: “See?” you say, “We have a positive cash flow.”

But what you didn’t show your wife was that the only reason your checking account is larger is that you borrowed the money from the kids’ college fund. It’s cool, your kids are only 8 and 6 years old. You have more than a decade to pay yourself back. It will be fine. It doesn’t count as debt, because you owe it to yourself.

That’s going to cost you later, because your wife is going to be pissed when she gets ready to send the crotch critters off to college, but that’s a problem for future you to deal with.

Well, that is exactly what the government did. They took the money from the Social Security Trust fund and used that money to cover the deficit. Every administration since 1983 has used Social Security surpluses to mask deficits elsewhere.

Politicians love the unified budget because it lets them:

  • Spend more
  • Claim fiscal discipline
  • Avoid raising taxes
  • Increase total debt hidden inside trust fund obligations

Gen Z keeps bitching about how “Boomers” are making life hard on them because housing costs or something. This is not how the previous generations really screwed them. The Silent Generation (those born between 1928-1945- my parents’ generation) were young adults when President Franklin D. Roosevelt signed the Social Security Act in 1935, establishing it as part of the New Deal to help workers and the elderly during the Great Depression. The architects of this deal were the Greatest Generation (born 1901-1927), led by FDR.

What Social Security was, was a plan for the Silent generation to be made whole because the Greatest generation screwed up the nation’s economy. In order to prevent the silent generation from stringing people up from lampposts, the Social Security Ponzi scheme was invented. This permitted the Silent generation to be taken care of in their older years, despite the fact that the Greatest generation had wiped out everyone’s retirement nest eggs.

At the same time this was being done, FDR also eliminated the domestic gold standard. In 1933, Franklin D. Roosevelt:

  • Prohibited the private ownership of gold bullion
  • Stopped redeeming dollars for gold inside the U.S.
  • Devalued the dollar

But at this time:

  • The Greatest Generation (born ~1901–1927) were young adults
  • The Silent Generation (born 1928–1945) were children
  • Baby Boomers had not yet been born

So this step did NOT involve Boomers.

The greatest generation had spent all of the silent generation’s money on booze, coke, and hookers, so the silent generation was reimbursed by stealing the future earnings of their children, the baby boomers. Like all Ponzi schemes, the people who got in early made the most money, and those who got in late are paying the bills. The older generations got way more than they paid in, but have ignored how badly they shafted their descendants.

In 1971, Richard Nixon permanently ended the ability of foreign governments to convert U.S. dollars into gold and this is what truly created our modern fiat currency system. This is the event almost everyone refers to when they ask about “who eliminated the gold standard.” Who were the key players?

  • Richard Nixon (born 1913) → Greatest Generation
  • His advisors (Shultz, Connally, Burns) → Greatest & Silent Generations
  • Baby Boomers (born 1946–1964) were young adults, entering the workforce, or still teenagers.

Although Boomers didn’t decide the change, the fiat-dollar economy that followed became the system they lived their entire adult lives under, and which they defended politically as they took leadership roles in the 1980s–2000s. To understand how bad of an idea Social Security really is, let’s look at the math:

Let’s say that a person put $4100 per year into a retirement account that is earning 8% per year. This would simulate a person making $33,000 per year and the 12.4% Social Security tax is invested instead of being given to the government, who will quite literally spend it on booze and hookers. We will compare that to Social Security.

After working for 47 years, the person turns 65 and decides to retire. They have contributed a total of $192,700 into their account. If that money had gone to Social Security, their monthly benefit would be $2800. If they had instead invested that money as above, the balance on the account would be $1,856,890. It would earn $12,379 per month in interest. We have all been screwed out of our money.

So now generations that comprise the Millennials and GenZ are likely not going to get anything near what they are paying in, because all of it is gone. It’s been spent. That fund is nothing but a file cabinet full of several trillion dollars in IOU’s, but there is no money in there.

That is why the younger generations should be angry- they were robbed of their future earnings nearly 100 years before they were even born. They were born into a life of slavery. It wasn’t the Boomers who did it- it was the Greatest generation and the Silent generation- if you are GenZ, you were robbed by your great-great grandparents.

The system is insolvent. There isn’t enough money in the world to cover the debts created by that system. Currently, Social Security owes everyone about $75 trillion more than we have to pay- an amount that is double what our national debt already is- in other words our national debt isn’t $34 trillion, it’s more like $107 trillion. If you total all of the money in the world: every nation, every currency, every ounce of gold, it comes up to $134 trillion.

In other words, we are on the cusp of owing more money than actually exists. Even the official national debt of $34 trillion wouldn’t be eliminated if the government confiscated every 401k, IRA, 457 plan, and all other retirement accounts. The retirement accounts of US citizens are only worth about $31 trillion.

We are about to see a collapse of the US economy, and with it, the world economy. It’s inevitable.

By Divemedic, ago

Inheritance?

The left’s constant refrain is that rich people don’t get rich through hard work and wise decisions- they do so because of inherited wealth and privilege. There are multiple points of evidence to show that this is incorrect. Having a net worth of over $1.5 million places you into the top 10% of wealth in the US, and 79% of millionaires are first generation millionaires.

First generation millionaires share a few core characteristics:

  • setting ambitious goals
  • seeking mentorship
  • taking calculated risks
  • learning from failure
  • managing time effectively
  • diversifying their investments

Five careers produce the most millionaires:

  • engineers
  • accountants
  • management
  • attorneys
  • teachers

In other words, regular people. The Walt Disney, Elon Musk, Steve Jobs, Bill Gates types are the rare exception- those rare visionaries who shaped their industry. But that isn’t how the left sells it- they claim that people who are “rich” somehow cheated the system and stole the money from those who are poor.

That isn’t reality. Becoming part of the top 10% isn’t magic or cheating- it’s simply the result of hard work and math. To reach $1.5 million in 40 years at an 8% annual return, person only needs to save about $430 per month. If you were to start at 22 years old and contributed to an employer 401K plan that has a 1:1 match up to 5% of your salary, it would look like this:

  • You would contribute $215 per month, but because it is pretax income, it would reduce your take home pay by $167 per month.
  • Your employer would contribute $215 per month in matching funds
  • Your fund grows by the historical average of 8% (It’s an average. This year, my investments grew by 15%, but there were years when I actually lost money. Some years, like 2020, I doubled my money.)

If you do this, the year that you turn 58 you would have a value of $1.5 million in your 401k, even though it only reduced your take home pay by a total of $80,500 over that same time span. In exchange for not having that $167 per month, you can safely live out your retirement years as one of the top 10%.

It isn’t that hard to get there, and it doesn’t require luck or cheating the system. It just takes discipline, wise decisions, and time.

Some years it takes a bit of a calculated risk. For example, when the stock market crashed in 2020 as a result of the COVID shutdown, we saw this as an opportunity. We bought stocks with every spare cent we had. Since we were locked down for a couple of months, we also had fewer expenses. We went on a stock buying spree.

We watched as Royal Caribbean went from $120 per share to $25 per share and began buying. The average price we paid was just over $22 per share. The first buy was at $25 per share, and we bought $5k worth. We also bought shares in Darden Restaurants, Hilton, Smith and Wesson, and Marriott. When I sold my stock in 2021 to collect the profits, RCL was selling at $90 per share. Overall, we more than doubled our money.

By Divemedic, ago

Poverty Calculation

We always hear about poverty, but just how does the government decide what poverty is? In the 1960’s, a formula was created to define poverty. It was assumed at the time that food comprised one-third of a family’s budget, so any family that earned less than three times the amount of money that it took to buy food for the household was assumed to be poor.

Every year, the government calculates what they think it should cost to feed a family, then multiplies that number by three to arrive at a figure for the poverty line. How do they calculate that? How do they know what it costs to feed a family? Easy. They look at what it cost a family in 1963 to sustain itself, then adjust that number for inflation. Nowadays, there are idiots claiming that this number isn’t accurate- and I will grant you it isn’t- but they are using that to claim the new poverty number is 16, that is, a family needs to make 16 times what it costs for food in order to not be poor: $140,000 per year for a family of four. If you are poor, you should get government assistance. By this math, 60% of our nation would be living in squalor.

That’s ridiculous.

Where is that number coming from? The leftists claim that this is because the cost of childcare, Internet, and cell phones. First off, if you can afford cell phones and Internet, you aren’t poor. There are people all over the world who manage to exist without those things. Social safety nets are there to make sure people don’t starve. They aren’t there to buy Pizza Hut, video games, and cell phone porn.

The left is invested in making this economy look bad. They want Americans unhappy with the economy. There is an election next year, and Americans vote with their wallets. The press needs to hammer this home every day: “The economy sucks, but Joe Biden’s 9% inflation was the best economy in the past 50 years. Vote for us.”

Instead, let’s use the World Bank’s definition: Making less than $3.00 per person, per day. Under that definition, a family of four would be living in poverty if they had a household income of less than $4,400 per year. I will even be generous- we live in the richest nation in the world, so make that $10 per person, per day. A family of four who makes less than $14,600 is below the poverty line.

Would it suck to make that little? Sure it would. Being poor sucks. However, $10 per person, per day would make you more wealthy than 61% of the planet. That’s why we can’t afford to keep importing more and more poor people- they aren’t enriching us, they are dragging us down into poverty with them.

By Divemedic, ago

Class Envy

The left is pushing wealth taxes to the top of their agenda. This article from Reuters tries to make the case that Norway is an example of how wealth taxes can work. Norway is always used as the socialist dream, with all of the social programs that the left loves. What the left ignores is that Norway is not analogous to the US.

For starters, let’s recognize that Norway ranks among the world’s wealthiest thanks to oil, shipping, and fishing. In Norway, the government owns those industries. All of the profits from those industries gets funneled into a government wealth fund, which is in turn invested in companies in other nations, especially the US. However, Norwegian law says that they can only spend 3% of the fund’s $2.1 trillion balance each year. This means they need to find other forms of income to enable them to support the welfare state.

That means a wealth tax on unrealized capital gains. The entire nation is a welfare state, living off of investments made in countries with actual free markets. Since there are no nations that the US could siphon money from, this plan will never work here.

By Divemedic, ago

Alarm Bells

Alarm bells should be ringing with the news that the government sold $694 billion in Treasury securities spread over 9 auctions in only three days. Yeah, our national debt now stands at $38.2 trillion. The most alarming thing about this news is that T-bill yields are rising. The 10-year Treasury yield is now at 4.15%. At that rate, the interest on our debt will be more than $1.5 trillion per year. Since Americans only pay about $2.4 trillion in Federal taxes each year, we are edging closer to the point where our debt will begin to grow like a snowball rolling down a mountain.

The only way to keep the government solvent at that point would be to inflate the currency in order to pay it with lower valued money. At that point, inflation will be higher than interest rates, and it will no longer be financially possible to invest in government bonds. This will in turn cause higher rates, which will also create a need for higher inflation. In other words, hyperinflation is the only way out, but that will cause a complete collapse of the US dollar.

Anything you own that isn’t a physical asset will evaporate overnight: currency, stocks, bonds, bank accounts. As you can imagine, the government can’t let that happen, so what they will do to deal with it is the real question…

By Divemedic, ago

Whiny Children

Listen to this rant, then read all of the comments about how “Boomers” have ruined it for today’s youth because they used up all of the opportunity by living life on “easy mode.” .

In 1960, the U.S. homeownership rate stood at 62.1% of households, meaning a majority but not all adults achieved it through steady work. Labor force participation for adults 16+ averaged about 59% in the early 1960s, with prime-age men often exceeding 90%, though many worked multiple jobs amid economic growth. Poverty afflicted 22% of Americans in 1959 (around 39 million people), dropping to 14.7% by 1966 due to expanding opportunities and policy shifts, yet struggles persisted for the unskilled or disadvantaged.

As of late 2024, the U.S. homeownership rate hovers around 65.7% of households, higher than 62.1% in 1960 despite rising costs. Civilian labor force participation for those 16+ is 62.3%, up slightly from the early 1960s’ 59% average, though prime-age rates remain strong amid dual-income norms. The official poverty rate dropped to 10.6% in 2024 (35.9 million people), far below 22% in 1959, reflecting broader access to opportunities even as entry barriers feel steeper for youth.

So total people in poverty dropped, both in real numbers and per capita. Homeownership rates are higher than in 1960, and labor participation is up.

Now there are some of these kids pointing out that houses were cheaper in 1960, but they are missing that wages were lower, and houses are now much larger. They talk about “tiny homes” as if buying a 500 square foot house is something that they just invented a couple of years ago.

The original video poster is a student. Students are always broke. Living on Ramen noodles and hot dogs is what people do when in college. Get a roommate. Stop being a whiny bitch.

By Divemedic, ago

Econ Failure

Thought experiment: If this actually happened, how would it play out? What would you do?

Most people would stop going to work. So now what? How are you going to buy anything? Everyone quit, because they all have half a million bucks. What you don’t have is any food, electricity, water, or anything else that you need.

You see a guy with some food, so you offer him money for some of his food. He doesn’t want your money, he has half a million bucks and sandwiches. You are hungry, so you eventually get to the point where you offer him $50,000 for one of those sandwiches. Others see this and do the same.

Now dude is selling $50,000 sandwiches, but has no one to help make more. So he tries to hire someone, but because sandwiches are so expensive, he has to pay $45,000 per hour. Still, people do it because they need more money to buy things at the newer, higher prices. I mean, everyone is using their $500,000 a year to outbid everyone else. Prices are crazy high.

Now we have a nation of millionaires who are all paying $50,000 for a sandwich.

That’s how increases in the minimum wage work.

By Divemedic, ago

Property Tax Cuts

The Republican Legislature of Florida is proposing changes to the state’s property tax policy. There are a number of proposals that will make it to the 2026 ballot, and I have researched them so you don’t have to. I am going to break it down for you, using my own taxes as an illustration. Then you decide which is the one you want.

In my case, I pay about $6100 per year in property taxes on a $600,000 home. It breaks down like this:

  • $1700 goes to the county
  • $2000 to the town
  • $1900 to the school board
  • $400 per year goes to police, fire, EMS, hospital, and the water authority. This part is not an ad-valorum tax.

HJR 201 (Steele): Eliminates non-school ad-valorum property taxes for homesteads entirely. This would lower my taxes to $2300 per year ($1900 for the school board, $400 to police, fire, EMS, hospitals, and the water authority). This bill doesn’t prevent taxes that are flat fee based. Localities will likely switch to a non ad-valorum tax scheme, such as charging each property a flat fee as a tax.

HJR 203 (Miller): Phases out those same taxes over 10 years by adding an additional $100,000 exemption added each year. My taxes would go down by $500 the first year, $500 the second, and so on, until my taxes were finally about $2300 per year. This bill doesn’t prevent taxes that are flat fee based. Localities will likely switch to a non ad-valorum tax scheme, such as charging each property a flat fee as a tax.

HJR 205 (Porras): Exempts Florida residents 65 and older from paying non-school property taxes on homesteads. This one won’t change my taxes a bit until I turn 65, meaning that towns will simply raise taxes on everyone else to make up for the shortfall. Since those over 65 already get major breaks, many of them don’t pay taxes, anyhow. Politicians won’t face as much voter backlash. I think this is the one that politicians will love.

HJR 207 (Abbott): Creates a new 25% homestead exemption on non-school taxes — aiding current and first-time homebuyers. This one was trickier to decipher. I believe that it would lower my taxes by about $400 per year. It doesn’t prevent rate increases. I predict that localities will respond by raising milage rates. In the end, there will be no net change in what you actually pay.

HJR 209 (Busatta): Offers an extra $100,000 exemption to homeowners who carry property insurance, intended to ease overall housing costs. This one won’t make a huge difference. It would cut taxes by about $500 per year, but it would be an effective subsidy to insurance companies, who will happily raise insurance costs in response. It honestly looks like it was written by insurance companies.

HJR 211 (Overdorf): Eliminates the cap on “portability,” allowing homeowners to transfer their entire Save Our Homes benefit to a new property, even if it’s of lesser value. This one only lowers your tax liability if you sell your house and buy one of lesser value. I just went through this when I moved two years ago.

HJR 213 (Griffitts): Adjusts caps on taxable value growth — limiting increases to 3% over three years for homesteads (currently 3% annually) and 15% over three years for non-homesteads (currently 10% annually). This one won’t help now, it will just keep taxable value from growing as quickly as it does now. The loophole here is so large, you can drive a truck through it- there is nothing here that prevents localities from raising rates, the only cap is on taxable value. The net effect is that this won’t change your taxes a single cent.

In my opinion, HJR201 is the only one that will change anything, since a person owning a $200,000 house will wind up paying the same taxes as a person owning a million dollar house. To me, that is fair, since both are nominally receiving the same government services. Same services should mean same taxes.

By Divemedic, ago