Welfare straits
"There is a theory which states that if ever anybody discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable. There is another theory which states that this has already happened."
Douglas Adams (1952-2001)
Albert Einstein (1879- 1955), spent the last 30 years of his life attempting to unravel 'the blueprint for the mind of God'. Needless to say he was unable to complete his work before he died. However, this truth has now been revealed to President Bush II who stated that 'we have a calling from beyond the stars to stand for freedom.' This freedom will be enforced on most of the citizens of this world irrespective of race, color, culture, creed or whether they want the American version of freedom or not.
To the citizens of most capitalist pseudo-democratic societies the basis of this freedom will be an 'ownership society' which will provide the individual with more freedom, greater opportunity and more control over his or her own life. In other words, the benefits once provided by the welfare state will become reduced and even privatized.
To the leaders of the 20th century the rationale behind the welfare state was simple. When all the citizens depend on the state, they won't try to overthrow or destabilize it, and they will freely give up their fundamental liberties. Today the unyielding changes in the demographic balance of most socialist-capitalist societies makes the promised level of benefits impossible to provide. However, the real problem does not lie with the current generation of citizens who will stage mass protests against a reduction of these benefits. The real problem falls on succeeding generations who will have to shoulder a vastly increased burden of taxation, a burden of a size that may force them to seek sources of additional income hidden from the prying eyes of the State.
Add to this the historically high levels of debt of citizens and governments alike. In the past, debt has been repaid through rises in income and increases in inflation. Now there has been a meaningful breakdown between aggregate demand and employment growth. Jobs are not being created, or when they are, they carry a far lower earning potential than the jobs that have been exported. Personal debts will have to be repaid, refinanced or repudiated. Unfortunately, no government in history has repaid its debts. They have either devalued or reneged and all have passed the burden onto their own citizens.
National debt
The level of this debt is staggering. It took America 200 years to reach $1 trillion in national debt. It took six years to build that debt from $5 trillion to $6 trillion dollars. In less than two years the national debt soared another trillion dollars, reaching $7 trillion in January 2004. At the current rate, each day adds $2.5 billion more.
Therefore the present emphasis on the creation of an 'ownership society' with the commensurate reduction of the welfare state is the equivalent of Jean-Jacques Rousseau's dictum of "forcing men to be free."
There are two facts of which one should be aware. Census bureau data has shown that homeownership rates in the U.S. have been remarkably constant over the past 40 years, between 63 and 66 percent. However, by 2004 this rate had increased to 69 percent. USA Today pointed out that this spurt in home-ownership rates can be directly attributed to an explosive growth in 'sub-prime' debt granted to borrowers with poor or no credit histories. In fact, sub-prime mortgage activity grew an average of 25 percent per year from 1994 to 2003 and accounted for about nine percent of U.S. mortgages in that year. In that same year over 13 percent of households in the U.S. used 'payday lenders'. These are loans granted against an incoming paycheck at the end of the week with interest rates of up to 180 percent. This taints the overly optimistic expectations of the future direction of the property market.
Individual investors
The second item concerns the sophisticated American investor who has a vast array of funds to choose from. For example, in 1982 there were only 857 mutual funds in the U.S. market. By 1990 there were 3,079, 5,725 by 1995 and a massive 8,155 in 2000. Since then the numbers have slightly decreased but the choice has expanded into areas carrying a higher degree of risk. After all, in financial services it is very easy to accommodate increased demand-all that you have to do is to print more paper and appoint an investment manager.
Last year a survey by the National Association of Securities Dealers (NASD), which involved more than a thousand adults who performed at least one stock, bond, or mutual fund transaction between October 2002 and early April 2003, revealed that 69 percent of respondents said they were "somewhat knowledgeable" about investing.
Yet, of that total, 48 percent believed that their money is "insured against losses in the stock market." This exceeded the 38 percent who knew that their money is not insured against losses; while the remainder either "didn't know" or "weren't sure." Regardless of this level of sophistication, Wall Street is lobbying for the privatization of social security- and where America leads, the world follows.
As Bush II was sworn in as America's 16th second-term president, the plight of eBay portends the future. Its stock price declined by a total of 19.14 percent on that day. The company saw net profits rise by 44 percent to $205.4 million during October to December and declared a profit of 33 cents a share, but analysts had expected 34 cents. The high expectations were not matched by reality and it was punished.
What happens when everyone runs to the exit at the same time? Cycles repeat.
Douglas Adams (1952-2001)
Albert Einstein (1879- 1955), spent the last 30 years of his life attempting to unravel 'the blueprint for the mind of God'. Needless to say he was unable to complete his work before he died. However, this truth has now been revealed to President Bush II who stated that 'we have a calling from beyond the stars to stand for freedom.' This freedom will be enforced on most of the citizens of this world irrespective of race, color, culture, creed or whether they want the American version of freedom or not.
To the citizens of most capitalist pseudo-democratic societies the basis of this freedom will be an 'ownership society' which will provide the individual with more freedom, greater opportunity and more control over his or her own life. In other words, the benefits once provided by the welfare state will become reduced and even privatized.
To the leaders of the 20th century the rationale behind the welfare state was simple. When all the citizens depend on the state, they won't try to overthrow or destabilize it, and they will freely give up their fundamental liberties. Today the unyielding changes in the demographic balance of most socialist-capitalist societies makes the promised level of benefits impossible to provide. However, the real problem does not lie with the current generation of citizens who will stage mass protests against a reduction of these benefits. The real problem falls on succeeding generations who will have to shoulder a vastly increased burden of taxation, a burden of a size that may force them to seek sources of additional income hidden from the prying eyes of the State.
Add to this the historically high levels of debt of citizens and governments alike. In the past, debt has been repaid through rises in income and increases in inflation. Now there has been a meaningful breakdown between aggregate demand and employment growth. Jobs are not being created, or when they are, they carry a far lower earning potential than the jobs that have been exported. Personal debts will have to be repaid, refinanced or repudiated. Unfortunately, no government in history has repaid its debts. They have either devalued or reneged and all have passed the burden onto their own citizens.
National debt
The level of this debt is staggering. It took America 200 years to reach $1 trillion in national debt. It took six years to build that debt from $5 trillion to $6 trillion dollars. In less than two years the national debt soared another trillion dollars, reaching $7 trillion in January 2004. At the current rate, each day adds $2.5 billion more.
Therefore the present emphasis on the creation of an 'ownership society' with the commensurate reduction of the welfare state is the equivalent of Jean-Jacques Rousseau's dictum of "forcing men to be free."
There are two facts of which one should be aware. Census bureau data has shown that homeownership rates in the U.S. have been remarkably constant over the past 40 years, between 63 and 66 percent. However, by 2004 this rate had increased to 69 percent. USA Today pointed out that this spurt in home-ownership rates can be directly attributed to an explosive growth in 'sub-prime' debt granted to borrowers with poor or no credit histories. In fact, sub-prime mortgage activity grew an average of 25 percent per year from 1994 to 2003 and accounted for about nine percent of U.S. mortgages in that year. In that same year over 13 percent of households in the U.S. used 'payday lenders'. These are loans granted against an incoming paycheck at the end of the week with interest rates of up to 180 percent. This taints the overly optimistic expectations of the future direction of the property market.
Individual investors
The second item concerns the sophisticated American investor who has a vast array of funds to choose from. For example, in 1982 there were only 857 mutual funds in the U.S. market. By 1990 there were 3,079, 5,725 by 1995 and a massive 8,155 in 2000. Since then the numbers have slightly decreased but the choice has expanded into areas carrying a higher degree of risk. After all, in financial services it is very easy to accommodate increased demand-all that you have to do is to print more paper and appoint an investment manager.
Last year a survey by the National Association of Securities Dealers (NASD), which involved more than a thousand adults who performed at least one stock, bond, or mutual fund transaction between October 2002 and early April 2003, revealed that 69 percent of respondents said they were "somewhat knowledgeable" about investing.
Yet, of that total, 48 percent believed that their money is "insured against losses in the stock market." This exceeded the 38 percent who knew that their money is not insured against losses; while the remainder either "didn't know" or "weren't sure." Regardless of this level of sophistication, Wall Street is lobbying for the privatization of social security- and where America leads, the world follows.
As Bush II was sworn in as America's 16th second-term president, the plight of eBay portends the future. Its stock price declined by a total of 19.14 percent on that day. The company saw net profits rise by 44 percent to $205.4 million during October to December and declared a profit of 33 cents a share, but analysts had expected 34 cents. The high expectations were not matched by reality and it was punished.
What happens when everyone runs to the exit at the same time? Cycles repeat.
