Weekly Musings 6-5-11 from oftwominds.com
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For those who are new to the Musings: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books.
My Big Picture Concerns: Helping the Marginalized
When I line up stagnant wages, rising costs and an economy which is generally unfriendly to small business (those who think it's friendly have never started a business, hired staff, dealt with regulations, inspectors, tax law, litigation, etc.), my biggest concern is: what can we do, and what should we do, to help the rising number of people who are marginalized by these long-term trends and forces?
There are two ideologically "approved" alternatives: pay people to stay at home watching TV (welfare, extended unemployment, Medicaid, Section 8 housing subsidies, etc.) or costly and ineffective "job training" programs.
Paying people to do nothing is terribly debilitating, a "lose-lose" proposition. If you're unproductive and not involved in a meaningful cause or purpose, your work skills and spirit both atrophy.
Dependency is also debilitating. Dependency breeds the dangerous twins resentment and entitlement, neither of which is healthy for the individual or for society.
Therefore the best solutions are those which do not rely on dependency or paying people to do nothing but instead encourage small businesses to hire additional workers and unemployed people to become productive.
Lastly, solutions have to be cost-effective. The government can't (and shouldn't) pay people $20,000 a year to sit at home, and it also can't affiord to build "affordable housing" that ends up costing $200,000 per unit once all the true costs are tallied.
At the fringes of complete marginalization, homelessness is rising, for all the reasons we all know.
What I'm thinking about are local government-established camps which enable self-help and shared resources--an opt-in, no-frills form of "co-housing."
For example: a lot of homeless people are living in vehicles. Local governments typically have some surplus land available. It wouldn't take much of a setup to make mobile homeless more comfortable:
-- a safe place to park, with the understanding that residents are obligated to sign up to serve on work crews that provides security, refuse removal, etc. as soon as they move in--a choice that is voluntary.
-- regularly serviced portable toilets
-- a community kitchen and dining area, temporary at first but with materials provided for a permanent structure built by the residents (under supervision of qualified volunteers or a part-time city employee)
-- a set time for visits by community services that are already in place.
-- a managerial system staffed and operated by the residents, with city/county staff providing the initial organizational structure and liaison with existing city offices.
This is a sketch of how a city/county might provide opt-in, self-help service structure for the mobile homeless for a modest sum.
Yes, there are limits: severely mentally ill and predatory criminal elements would have to be identifed and channelled elsewhere. Homeless encampments are not for everyone simply because they're marginalized.
As for increasing employment, I'm thinking about programs which would be low cost to the government/taxpayers but which might actually encourage small business hiring, for example:
1. govt pays the employer share of Social Security for new hires
2. govt covers healthcare (by buying catastrophic-covergae health insurance (not Medicaid) for a new hire, covering one new worker per business.
3. govt provides liability legal insurance so risk of litigation is reduced to outright criminal behavior by the business owner.
Non-entrepreneurs have no idea how stressful it is to operate a business, no matter how small, in our extremely toxic and litigious society. Nuisance lawsuits drive legitimate businesses under on a routime basis. If the govt provided what amounted to legal insurance, that would remove a tremendous risk from starting a business and hiring people.
Instead of paying people $20,000 a year to sit at home and feel worthless, these subsidies to small business would cost around $3-$5,000 a person per year--a modest amount compared to "job training programs" that routinely cost $180,000 per worker and up.
Given the realities of our economy, I fear we might soon have 20 million workers with basically no chance of finding a conventional job. We need to change the business climate and make it as easy as possible to hire a new worker, instead of the current system, where potential employers face huge risks, costs and regulatory hoops to hire someone.
Thinking "worst case scenario" a moment, what if we paid everyone who wanted to work (20 million people) minimum wage to be useful to existing community groups such as churches and non-profits?
20 million people at $20,000 a year ($16,500 in wages plus Social Security and some minimal catastrophic-coverage healthcare) would cost $400 billion a year.
That is roughly 10% of the Federal budget, but it wouldn't require much additional spending since we already spend $160 billion on unemployment and other programs which would be redundant. The net increase in costs might be more like $200 billion.
Eliminating the grossest excesses of Medicare/Medicaid and Pentagon spending would yield more than $200 billion.
As the bloated, corrupt, unsustainable Status Quo unravels, we are going to have to deal with problems such as homelessness and intractable unemployment with new, cost-effective ideas which leverage existing community groups, self-help and opt-in opportunities to contribute and become useful. That would do a tremendous amount for the mental health of the increasingly marginalized citizenry.
There are no ideologically "pure" solutions, and no optimal solutions, there are only common-sense ideas to encourage what works over the long haul: small business growth and hiring, and encouraging people to contribute and be useful to their communities.
Dollar Reversal?
I was chastized in April as "dangerous" to my readers when I suggested the U.S. dollar might not be heading straight to zero as many in the financial blogosphere have concluded. Their view is so hardened that it strikes me as just another ideological position that is quasi-religious in nature, impervious to rational discussion.
Correspondent Clark P. kindly sent me some charts of the COT data (commitment of traders) on Treasuries which (without a lot of technical explanation) suggest that the dollar is set to rise significantly.
On a fundamental basis, let's examine this quickly.
Chart gold against any major currency. Gold has gained against all currencies in the past decade. It is self-evident that all paper currencies are falling against gold. The reason is also fairly self-evident: money and credit are both being debauched by central banks everywhere.
The Dollar (DXY) index is based on the dollar's value relative to other major currencies, the primary one being the euro and the next most heavily weighted being the Japanese yen.
A bet that the DXY will decline is thus a bet that while all currencies will continue falling against gold, the dollar will fall faster than both the yen and the euro.
Given the shaky foundations of Japan's economy and demographics and of the Eurozone's finances, is this a high-probability bet?
It seems self-evident to me that the odds favor the yen and the euro both declining faster than the dollar, for the simple reason that America's problems are well-known and less intractable than those of Europe and Japan, both of which lack America's energy resources and "reserve currency" status.
Those betting against the dollar here are betting on the yen and euro both rising. The basis for their faith in those currencies eludes me.
Sentiment is strongly against the dollar, and the forces manipulating the US stock market into a permanent rally are also working to push the dollar down, as the dollar and US stocks are on a see-saw: when the dollar declines, stocks rise, and vice versa.
But manipulation is ultimately akin to building a sand castle against the tide.
It may take into early next year for the dollar to firmly reverse, or it may happen sooner if the eurozone financial crisis cannot be swept under the carpet for another year. It's something to watch for.
From Left Field (a selection of interesting links)
From Bernie B, a fascinating look at rampant student cheating on the graduate level:
The Shadow Scholar
From D.S., a thoughtful essay that asks whether students are actually learning in the current system of higher education
Thanks for reading--
charles
