Debt: The Opiate of the Masses

Lately, debt has been on my mind. America has been addicted to it as long as I’ve been alive. Our government is in debt, companies are in debt, individuals are in debt… even my local CDD is in debt. Credit is a dangerous tool, one that is easily turned on the wielder. Thus the comparison to opioids. What may have a use in certain cases, especially emergencies, may become addictive and deadly if not managed properly.

Recently, I rejoined an ancient computer hardware forum, and some of the folks there were discussing credit. As is normal for me these days, I expressed my general aversion to debt, and extolled the wisdom of living with your means. The hostility this engendered was, perhaps, worse than if I had declared myself a worshiper of Lucifer. It was like I had personally run up to their homes and kicked their dogs. Or, perhaps more appropriate to the title of this post, as if I had suggest that the opium user should quit his habit.

A few of the forum denizens explained that it was better to buy expensive things on credit, if the interest rates were low, and then invest the cash at a presumably higher rate. And sure, playing the spread between interest rates is an old trick. But here’s the kicker: how many of them were actually doing this? I hear this excuse all the time from folks I know have little to no liquid assets. It’s a lot like the addict saying “I can quit any time I want.” They claim they can sell the car, or furniture, or whatever they bought on credit whenever they want, and that debt can have beneficial effects too.

If it truly worked this way in practice, there’d be a lot less bankruptcies and delinquencies, I think.

Perhaps some folks do play the spread between investment returns and low loan rates successfully, and there is nothing wrong with such a strategy, if well executed. But they are surely outnumbered by folks who use this as a quick excuse to load up on things they want, and can’t afford. It is the same with folks who claim they are using their credit cards for the points, or the rewards. Some people do this successfully (my in-laws play this game very well). But a hefty fraction use this to excuse their credit addiction, and wind up carrying balances, easily wiping out any gains from rewards or airline miles.

Another excuse is that credit cards are more secure than debit cards, for a variety of reasons. It’s easier to cancel a charge than to reverse a debit transaction, and the credit card puts an extra layer of defense between your savings and checking accounts (or wads of cash that can be mugged from you) on the one hand, and the merchant on the other. Again, there is truth to this. I actually employ such a strategy myself. I exclusively use a credit card for most medium-to-major purchases (and all online purchases), and have the full balance paid each month automatically, so balances are never carried and I don’t get charged interest. But how many folks actually do this, and how many use it as an enabling excuse?

Some quick statistics on credit usage:

The average household with credit card debt pays a total of $1,292 in credit card interest per year.

That’s $1,300 flushed down the toilet every year. The average balance held by folks who had credit card debt was $16,748.

The average auto loan balance, again for folks who have auto loans, was $28,948.

Probably worst of all is the average student loan balance of $49,905.

Finally we have mortgage debt, which averages at $176,222.

Now a lot of folks will balk at the mortgage debt figure, but the fact remains, as I’ve said before, that mortgage debt isn’t “good” either, at least not personal mortgages. In a business situation, the optics are a little better, as business is, in essence, always a game of calculated risk and reward. But this is a game that can screw over the individual very quickly. The worst case from a business perspective is that the business fails. If you don’t have personal liability for the business, well, it still sucks, but you’ll be okay.

Some folks may talk about the mortgage interest exemption, and the low rates of mortgages these days, and the fact that houses are just so damned expensive. These things are all true. And in my case, I still do have a mortgage (though it is much less than the average, at least). I regard this as a personal failure, however, and I would not recommend that others do it. Indeed, eliminating the mortgage is my highest financial priority. I picked up a considerable amount of extra work solely to pay this down as quickly as possible.  If my readers wonder why some days The Declination doesn’t get an update, there you have it. I’m probably pulling another 12-14 hour workday.

If I had it to do over again, I’d buy a travel trailer when I turned 18, park it on a piece of crappy land someplace, live on the cheap and stash my money for a decade. At the end of it, I’d have been able to buy a house, car, and anything I wanted in cash. And I absolutely mean that. The only reason I don’t now is that I have a family, and the place we are at is good for my family, and I’m pretty certain I can pay this off in a couple more years. Even then, this is no excuse. Getting a mortgage was a mistake, one I must mitigate as best I can.

Now, if you feel you can earn a better return on your money playing the spread between mortgage rates and investment returns, by all means, do so. But if you don’t have the liquid assets to pay it off at any time, it’s not a good idea.

Sometimes I suspect my grandfather’s generation, who lived during the Great Depression, was much wiser in this. They knew the dangers of debt, and the vagaries of banking. They didn’t trust the government or the banks, sometimes in almost comical fashion. One grandparent of mine was fond of stashing wads of cash in utterly bizarre places throughout the house, places no one would think to look. A family friend buried guns in a sealed box in the backyard, just in case the government ever decided to come for them. Another had stashes of gold he kept hidden. Folks from that era were far more suspicious and less trusting. And certainly, my grandparents were not fond of debt. Neither side of the family carried a mortgage, or ever financed a car.

We’ve come to the age when a smart man can rationalize away conventional wisdom in favor of his addictions. He can talk a good game, and tell himself it’s all okay, and what he is doing is supremely clever. But conventional wisdom survived some terrible times in history… and historically, spendthrifts often come to bad ends. And the rationalizations aren’t so different from the addict telling folks that he can handle his habit, and that he’s not really addicted. After all, he can quit any time he wants to, right?

Farewell to Thomas Sowell

So I’ve been out awhile for the holidays. Upon returning, I learned that Thomas Sowell is finally retiring, at the ripe age of 86. I had this to say elsewhere:

Thomas Sowell is retiring, and it’s something of a sad day. He’s 86, now, and he’s had a good run. We can’t ask anything more of this man. But for decades he has been a voice from the old Chicago school of economics. While others of this economic philosophy were experts in the arcane details (and make no mistake, Thomas Sowell was also), Dr. Sowell had a special gift: he could articulate the principles of the Chicago school in a way that the everyday layman could understand.

Many of us libertarian-minded folks learned the basics from Dr. Sowell’s books and videos. I remember his appearances with Milton Friedman and other Chicago school economists in debates, and he would come armed with a litany of facts, statistics, and prepared data. His opponents, most often, did not do their homework. He embarrassed many Socialists and Keynesians in such a way.

At the same time, he was always calm, collected, and respectful. You almost never saw him angry or frustrated. He was confident in his positions, but spent much of life learning and modifying them as he gained new data (it is little-known that he began his career as a Marxist, and only later changed his mind). He was less ideologically driven than most. And so I came to trust him on that basis. It takes a pair to admit you’re wrong, modify your position, and start over.

He came from a humble background, and rose to become the star of the Chicago school. In a day and age when American blacks often believe they can’t succeed, due as much to the toxic influence of Jesse Jacksons and Al Sharptons as anything else, Thomas Sowell stands out. And he possessed intellectual courage. If he had spouted the party line, and put his intellect to the service of Marxist race-peddlers, he could have had far greater fame, wealth, and power. If Obama could sling himself into the Presidency off of nothing, imagine what a mind like Dr. Sowell’s could have done, if only he embraced Progressivism? He chose to forgo these in the search for truth, and that alone is worthy of great respect, without even taking into account his many other accomplishments.

The Left, of course, reviled him for this. He could never be forgiven his sin of leaving the ideological plantation. As a friend of mine said this morning: “It’s been a Leftist rite of passage to call Thomas Sowell an Uncle Tom since the 1970s.”

I don’t know who will take his place, or if it could ever be filled. I can only wish him the best in retirement, and say thank you, for a great part of my own understanding of economics and philosophy began with him. He’s been an enormous impact in my own life.

The Politics of Envy

Francis enlightens us to the driving force behind modern politics, in America and around the globe. The money quote:

In a society in which some will prosper more than others, uncontrolled envy is the stimulus for unending conflict. A society that accepts rampant envy as somehow justifiable (or at least, ineradicable) will be lucky indeed if those conflicts remain non-violent.

Yet in contemplating the social order of the West, which routinely grants respect to the demands of the querulous, such that those who ask nothing of the State except to be left alone are mulcted without limit to satisfy them, what conclusion can we reach but that envy, in the First World, has become one of the ruling principles of society?

Envy is a sort of economic Cargo Cult, in which it is assumed that those who are better off are somehow stealing from those who have less. Of course, on occasion this is true. Many of the wealthy political class obtained their wealth through rent-seeking, government largess, or government-created monopoly power. That is, in effect, a form of stealing. But this is the truth made to serve a lie.

Much is made of the notion of privilege these days. SJWs will often explain that whites get more because of their whiteness, and thus some portion of their wealth must be confiscated, or some portion of jobs denied them, or other similar schemes of wealth redistribution. Those targeted are frequently the middle class, the regular working stiffs, who in aggregate, are far more likely to have been stolen from, than to be doing the stealing.

This is all lost on the envious. They see that some people have more than they do, or those for whom they agitate, and they demand that we share our wealth with them.

Appeals are often made to our Christian faith. Jesus was a pretty swell guy, they will say, and he helped the poor and the less fortunate. So we must do so also, or we are not good Christians. It’s an overly simplistic narrative, of course, but even so it is easy to dismiss. At no point did Christ tell us that charity ought to properly come from a distant government. Quite the contrary, Christ extolled us to give freely, which implies a choice… not a gun held to our head that says “give us 50% of your crap or else you’re not a nice person.”

Charity is no longer charity at all if it is done forcibly. It is theft, and it is done to satiate the envy of one person in order to serve a political agenda. Only, as Francis points out in his article, there is no satisfying the envious. They will always want more. And thus the demands of the envious continue to grow. They want more money, more benefits, more freebies.

Rather than allow a BBQ event to provide its leftovers to the poor, the clerisy demanded that the food be destroyed. It was not fit, they explained, to feed the poor, because of a variety of arcane regulations. This ties in neatly to the regulations that prevent charities from giving away expired canned food — even though canned food is safe for years after such dates. The food must be destroyed. People would love to clear their cabinets of expired cans to help the poor — indeed, in my youth I remembered that’s how they did food drives. They’d specifically ask for stuff you didn’t want. Better that it goes to a hungry person, than the garbage.

But not anymore. Expired cans are not good enough. Indeed, top of the line BBQ is not good enough either. One gets the sense that unless the poor are given five-star service from famous chefs, it is not good enough. This extends to toy drives. I remember when I was young that used toys your children didn’t want anymore would often go to the poor. Again, better that an old fire truck toy go to a child who would otherwise have a bleak Christmas than for it to find its way into the garbage. Now, toy drives specifically explain that everything must be new, in its packaging, and accompanied by its receipt. I have no doubts there is some government regulation, or de facto legal precedent (somebody suing because the toy was not new) for why this is true.

Envy is the ruin of any economic system. And charity that is directed by the government is no longer charity, but something else entirely.

Chinese Quality Control is a Plague Upon Mankind

Quality just isn’t a major priority anymore. Part of this, of course, is due to the rampant outsourcing, and the attendant difficulties that brings into play. You have one group of people designing a product, and another group from an entirely different country, language, culture, skill set and education level tasked to build it in a sweat shop half a planet away.

On top of that, as an article on Zerohedge tells us, continuous expansion of the money supply has resulted in an environment where quality is deliberately sacrificed in order to keep production lines open that, in our recessed economy, ought to be kept closed.

The combination has resulted in what I find, in my personal experience, to be an unmitigated disaster. Allow me to explain.

The house I currently own was a new construction home. It is modest, but also not the cheapest thing around either. We’ve had very little trouble with most of the home, as it was built with decent quality components, and the builder seemed to genuinely care it was done right.

But the appliances were another story entirely. The A/C unit has continually failed, necessitating a replacement of most major components. The coils developed a leak within 2 years, a large enough one that the unit had to be replaced. Then the fan motor froze due to a bad bearing, and this was part of why the capacitors went bad around the same time (they were also semi-defective themselves – the fan start up cycle was never quite right). Now the compressor is going bad, drawing far too much amperage, a sign of impending failure.

The unit is 3 years old. The A/C technician said he’s seen 20 year old units that didn’t look this bad. And it’s not like we overuse the unit — I keep the house between 78 and 80.

My father is an electrician, and he lamented this problem in his own line of work. There’s an old GE unit running at one of the properties he maintains that has been there since the 60s, and still has most of its original components. The owner is thinking about replacement only because regulations around Freon usage are forcing many property owners to upgrade otherwise functional units (thank the environazis for this one). So an older A/C unit has lasted more than 50 years, whereas my new one can’t handle 3. The government solution, of course, is to replace the good 50 year old units with defective new ones that will fail within 3 years.

You might say this is a fluke, except that in my neighborhood, several other units from the same manufacturer have had the exact same problems. Some of the residents bit the bullet and completely replaced what were, essentially, brand new units. One neighbor explained that it cost him $10k to have this done, but it was worth it for not having to pay hundreds of dollars in repairs every month.

But it’s not just the A/C unit. Our refrigerator’s water pump went out after 1 year. And then again after 3. Also, the produce doors are exceptionally low quality and prone to breakage with the slightest application of force. Then the dishwasher mounting bracket broke off.

The house was built fine. No trouble with the plumbing, or the construction, or the electrical wiring, or anything. The appliances were an unmitigated disaster. Of course, every part replaced on these appliances was labeled “made in China.” So much for Chinese quality control.

But it goes beyond that. We’ve bought three TVs in the last 5 years. 1 went bad after a mere 2 years. The Blu-Ray player we bought had a bad remote control that never worked right. One of the other TVs has a remote control where the volume buttons never worked. We bought a kegerator for the bar area, and the thermostat on it was broken out of the box (I ripped a thermostat out of similar unit and replaced it myself – better than spending the money to RMA it back to the manufacturer).

For my battery-powered power tools, about 1 in 5 batteries are completely dead out of the box. And another 2 out of 5 fail within 10 charge cycles. So if I want 2 operational batteries, I must purchase 5. It’s so bad, I’ve gone back to buying everything with cords again. Meanwhile, the old circular saw I have that dates back to the 60s still works, while the new battery powered one jams up every time, and has never worked quite like it ought to.

Meanwhile the microphone on my cell phone failed after 6 months. But, oddly enough, the speakerphone and Bluetooth still work, so as long as I want everyone else in the world to hear my conversations, the phone still works.

I’d say about half of everything we buy is at least partially defective, and around 20% of it critically defective (i.e. you can’t even use it in diminished capacity, or fix it). You might say “well, Dystopic, stop buying cheap brands.” Except that these are major brands. LG, GE, Samsung… if they can’t even get a handle on this, I don’t want to know how bad the off brands are. And never mind the fact that, for many types of products, the off brands and the name brands are built side by side in the same Chinese sweatshop factories anyway.

Then if I go through the drive thru after a hard day’s work, I’ll ask for a burger without mayo. That’s the only “odd” thing I ask for. No fucking mayonnaise. The mayonnaise failure rate for fast food is, in my experience, hovering around 20%. Sometimes I even get extra mayo instead of none. Remember that next time you see the “we need $15/hour” signs around your local street corner. I submit that if an aeronautical engineer’s aircraft fell out of the sky 20% of the time, you might not pay him very much… Or consider that $15/hour is pretty typical for EMS workers in my area. What if 20% of the time they got their directions screwed up and the poor victim died at the scene?

No, I’m not directly comparing my burger to those scenarios. If I wind up halfway down the road, and notice my burger has mayo on it, I won’t die. But nonetheless, the utter disregard for quality is ubiquitous and irritating. Besides the cost of having to return a product, or call the warranty service, or fix the damn thing yourself (more common for me), there is the waste of time dealing with these problems. My wife could have been doing any number of things this afternoon, but she was stuck dealing with the A/C technician repairing the defective, piece of shit unit for the third time this year.

And as I’m typing this, I realize that the soles on my three month old shoes are worn far too thin for the age of the shoes. I’ll have to replace them soon. I’ll try a different brand, of course, but I have no confidence that the next pair will be any better…

SJW Immunity

The other day, it occurred to me that I have finally become entirely immune to SJW attack. Oh, they can find out who I am and where I live easily enough. Some have already. But I am not concerned with attacks on my person anyway — I am well armed and capable of defending myself.

But they have, in the past, used economic means to come after me. They failed, but I sought to further diversify my income streams to render myself immune to future attacks. I can now say that I am invulnerable to this sort of attack. I have switched to private contracting for the majority of my income. Yes, I still have a day job also, but that is a matter of convenience. I have worked for them for many years, and it has been mutually beneficial. It is a good job. If SJWs were to somehow damage that relationship, however, I could increase my contracting hours by way of compensation and suffer no financial losses.

My debt load is reduced to a single mortgage which, in a few years (at current rates), will also be eliminated. Loan-to-value rate is heavily positive, so even in the event of a market crash, I could dispose of the remaining property. I have hoarded most of my disposable income for the last year to provide a cushion sufficient for a full year at current expense rates, even supposing I didn’t make a single dime for an entire year, and supposing my wife also lost her source of income.

The window in which they could have silenced me has passed. If you are a libertarian, conservative, or anywhere to the right-of-center, I suggest you do likewise. The discrimination against us is in the process of going from subtle, behind-the-scenes, deniable discrimination to open, outright hatred.

Strengthen relationships with friends and family. Forge new relationships with those of like mind. Stand in support of your fellows, and ask them to stand in support of you in turn. Rely on your own SJW-free networks for protection and succor. If you can, find sources of income that are completely free of Social Justice infiltration. Be willing to do odd jobs and one-offs as the situation demands — the days of being able to rely on a steady 9-to-5 job have long since passed. Keep that job if you have it, but cultivate backup plans and alternate income streams.

Most importantly, eliminate debt and avoid new debt where possible. If you can manage a debt-free life, you will be mobile and adaptable in ways that debt-ridden folks are not.

Dark times are ahead of us. Be ready for them.

Wealth is Political Arbitrage

A feel-good piece with a bit of virtue signalling tells us that the elitists and super-wealthy are starting to understand the common people, and sympathize with them.

Those weird billionaires who are turning into Marxists

Of course, this is all bullshit, and even the article admits they might have a self-serving motive. But the author nonetheless remains mostly fooled.

According to Chrystia Freeland, author of the 2012 book Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else, the phenomenon of the socially conscious billionaire is significant and good. “It is absolutely happening,” Freeland said. “After my book came out, a few billionaires quietly got in touch with me to say that they agreed that the current system isn’t working. It makes sense that the people who have benefited most from the economy have the greatest interest in making it sustainable.”

But it is clear the author of this piece has made a fundamental category error so profound, it shakes the very foundations of what it means to be wealthy in the first place.

So billionaires and ultra-rich 0.1% folks, or whomever, are encouraged to give up piles of cash, or pay higher minimum wages, or whatever the social justice warrior crowd is agitating for today. Then they come out and graciously say they are giving away billions of dollars in the name of income equality, or ending racism, or some other such thing.

But it’s all funny money. It’s all paper (or electronic, more accurately) based on a debt-currency system. Put simply, does anybody think that, if Warren Buffet’s ENTIRE liquid net worth disappeared tomorrow, that he would not be right back where he was in a few years? He would say to a banker somewhere “I am Warren Buffet, loan me $500 million for my pet project.” Done deal. Then he’d go to his lobbyist, or pet Congress critter, or some other government crony, and get favorable treatment for his pet project, ensuring its success against any would-be small time competitors.

His connections are worth more than any amount of funny money.

The liquid assets aren’t the real source of wealth for these people. Political arbitrage and connections — these are what make them wealthy and powerful. And as a government gets larger, the potential arbitrage, the rent-seeking position, is correspondingly greater. Meaning that even if their liquid net worth goes down, their immediate access to wealth and power — whenever they desire more of either — is greater.

Consider the example of College education. Government grants, cheap loans, and other instruments are made available to “help the poor people afford an education.” Except the cost correspondingly increases, and those associated with the University system and the government get richer.

So, paradoxically, this makes the billionaires richer, not poorer. Marxism means their power and position grows. They become the Inner Party, and you are still a Prole, and your $15/hour of funny money soon becomes just as worthless as whatever you were making before. Only, soon enough, college loans will be needed for even the most routine of work. So you’ll be tens of thousands of dollars in debt, working for minimum wage, and wondering just what in the Hell happened.

After all, the billionaires donated a lot of money, right?

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