John Galt

It seems rather odd but news reports seem to have confirmed the highly unbelievable story that Chase bank is limiting withdrawals and outbound international wire transfers.   Beginning on November 17th, Chase will limit cash withdrawals to 50k and while 50k may sound high for most individuals, if you’re running a business importing stuff from China or elsewhere, 50k doesn’t really buy you too much so not sure what gives here?

Essentially, the letter most businesses received seems legit and no one seems to know why.  Perhaps China has finally put their foot down and said no more borrowing?

Personally, I abandoned Chase bank shortly after the 2008 financial crisis and encouraged others to do the same.   You should have moved to a credit union where your money stays somewhat local and not used as part of a giant bank casino.   It would not be a bad idea to pull some emergency cash out and stuff it under your mattress.

I wrote this on August 16, 2009 and it may be finally coming to fruition:

When people realize that the money they thought they had in the stock market is gone, when they realize that their credit lines have been cut and when they have no cash on hand left to pay for fuel, groceries or medicine there will be a stampede at your local bank.   The first ones to get there and pull out some or all of their cash will get their money; the lazy, the ignorant, the socialized, the optimists, and the clueless will be left cashless.

Who is John Galt?


With Greece about to hose the European Union and the Fed announcing “challenging” economic future and joblessness, I can help explain my personal theory which ties into my Christmas dilemma.

In a nutshell, I don’t have anything to buy this Christmas for my immediate family. We own ipods, ipod touches, iPads, iPhone 4s’, iMacs, MacBooks, 55″ LEDs, Bluray player (which we never use), Netflix, two new cars, a near mortgage free home, and pretty much anything else you can think of: Xbox 360, Wii, etc.

We have so much stuff that much of it sits unused gathering dust. I asked the kids what they want for Christmas and they don’t know.

This brings me to the economy. If this is fairly common amongst my economic group then what more is there to buy? Sure, we could buy all the Apple gadgets in pink, blue, green and blue but that is just a waste of money. Questionably, everything has been a waste of money but I still save nearly 4k per month excess cash in addition to cash reserves, emergency reserves, 401ks, savings, IRAs and other valuable possessions.

The democratization of goods with the advent of capitalism means everything’s gets better, faster, cheaper and more available to everyone. What happens when we buy one of everything?

Where do we go from here? Each new device seems to replace a dozen others and now with Siri maybe I won’t need travel agents, admins, or 411 service, I just ask and I shall receive.

I’m starting a new series entitled, “Will Someone Please Explain…” which begs for an answer to life’s most complicated questions. While I spent 10 years in college studying three different majors, there are still many things in life that I just don’t understand.

One of those enigmas that is currently perplexing me is why the post office has such mediocre service or at the very least much poorer service when compared to something like a McDonald’s?

I have been to countless McDonald’s over the years (for the kids) at all time of day: lunch rush, dinner rush, breakfast and in many locations: free standing restaurants, inside Wal-marts, conjoined to gas stations, etcetera and I’ve rarely experienced slow service.  There have been a few times when there weren’t any fries ready but they were cooking in the fryer.  There has been the exception of ordering a fish sandwich at 3:00 p.m. when it takes a few extra minutes to cook it but contrast this with the Post Office.

No matter what time of day I go to the post office the service is either slow or slower.   It is a rare exception to go to the post office and not have to wait 15 to 20 minutes in queue to get something done.  I don’t understand why but I hope someone can tell me.

I have a few theories:  Most McDonald’s restaurants have young kids working behind the counter.  Most post office workers behind the counter are older and more senior.  It is ironic that a more experienced, tenured and highly paid work force at the post office haven’t improved efficiency at the post office yet a young inexperienced work force at McDonald’s can get a service turn around in under 3 minutes.  So does age make THAT much of a difference?

McDonald’s has obviously carefully documented and optimized their processes and come up with a method for easing customer purchases by devising the “combo” where a customer simply requests a “No.1” or “No.2” … or “No. 10” combo.  The price is clearly displayed on menu boards and options are available in supplemental menus.

Contrast this with the Post Office where there are four different types of envelopes for different types of freight speed and nothing to decipher what is needed to send items to locations.   There are an endless variety of stamps with different postage values on them to be used with specific envelopes.   Why not have a “No.1” combo which includes: 1 overnight envelope, 1 overnight stamp (for envelope), 10 stamps and a soft drink.   Okay, scrap the soft drink after you fix the 15 minute wait problem.

A “No. 2” combo includes: One three day envelope, One three day stamp, 10 stamps.    Actually, I’m not sure what the combos should contain because I don’t know what the most frequent purchases are at the post office, the only thing I am sure of is that every time I go there it is chaos.

I will concede that some of the people that go to the post office are generally illiterate people who don’t understand or know what they want and perhaps having a “combo” menu system will help.

Will someone please explain the post office to me?

Have you been paying attention to the mass movement to fight a war on contract law?   By now, you’ve heard of those dreaded AIG bonuses and while I agree it’s total crap that bonuses were handed out from government funds,  there is something to be said about contractual obligations and contract law.

Imagine if anyone could simply void a contract because they changed their minds or suddenly didn’t like a company.   Over the past week I’ve read three key articles that speak to the movement to invalidate centuries of contract law.

First, a bankruptcy judge in California has ruled that a city can void union contracts.

In the first ruling of its kind, a bankruptcy judge held the city of Vallejo, Calif. has the authority to void its existing union contracts in its effort to reorganize, holding public workers do not enjoy the same protections Congress gave union workers at private companies.

Secondly, there is pending legislation in Congress to give bankruptcy judges the ability to modify contracts with regards to foreclosures.

— Legislation that could provide a last-ditch option for Nevada homeowners facing foreclosure has passed the House but is facing a tougher time in the Senate.

The bill, an element of President Barack Obama’s housing recovery plan, would give bankruptcy courts the authority to reduce mortgages as part of an intense court-monitored plan to restructure homeowner debt. Even families who don’t declare bankruptcy could benefit because the law would add pressure on lenders to rewrite loans before homeowners turn to bankruptcy court.

Third, there is great talk of invalidating AIG employees contracts with regards to their bonuses.  Don’t get me wrong, I am AGAINST these payouts BUT if the company had a contractual obligation to pay then it had a contractual obligation to pay.

One of the cornerstones of capitalism is contract law.   Person A and Person B wanting to conduct business or agree to something do so under a contract and if there is an issue with performance under the contract then a judge & jury can be called upon to settle the differences.   Unfortunately, now we’re headed into a situation where a single judge somewhere may arbitrarily change the terms of a contract and essentially force one of the parties to perform unreasonably under the contract.  Worse yet is the power of the state to simply void contracts for the “benefit” of the people.

In my view, the four legs of capitalism are: capital (money), people, contract law, industry.   It seems the four legs are under assault and weakening day by day.  Capital is disappearing, people are being laid off, contract law is under attack and industry is on the verge of bankruptcy.  Only time will tell where the assault will lead everyone to at the end of the day.   Where is John Galt?

I got my Costco rebate check in the mail today and it’s a cool $800 but I won’t be spending much of it as I continue to hoard cash and food while I watch the economic crisis continue to expand like the blob over every facet of American life.

I had another philosophical debate with a friend this weekend over the housing mess.   The President’s plan to help stabilize the housing market is going to end in miserable failure  no matter how you do it:

1. If the government helps pay people’s mortgage, an instant moral hazard will be created.  Why should I pay my full mortgage when the government is partially paying someone else’s that made very bad decisions and choices?

2. If the government forces forgiveness on part of the loans and reduces the principle, how badly will investors get screwed?  This is changing the underlying principles of contract law and if contracts won’t be honored then all hell will break loose.

3. If the government props up housing prices then how will consumers ever be able to get affordable housing when the government is artificially propping up housing prices?  Is the new paradigm that you MUST pay inflated housing prices to live in a home?

No matter which way you look at the problem, there isn’t really a solution unless you consider issuing new currency and repricing all assets based on that new currency.   It’s going to be very painful…..

How do you put into words what shouldn’t or couldn’t easily be put into words? I had intended on posting this after Christmas and I had intended on writing a long treatise complete with a set of references (see below) but I decided that the math would likely be way over too many people’s heads and this article would be glossed over by 99% of the people reading it.

Instead, I’m going to tell you as easily as I can that “it’s over” and there isn’t much, if anything, that can be done about it. What is over? Well, the banking system is over, the stock market is over, the credit system is over and our political system may be over soon too. The best case scenario might be marshal law until the whole thing can be rebuilt brick by brick.

Let me state clearly that I don’t think the world will come to an end without these things because modern humans have survived on this planet for the last 200,000 years without much of a banking system but the world as we know it, experience it and live it is going to drastically change. Lol! That’s perhaps the irony, the recent presidential election was about “change” and people are in store for a change that they did not anticipate or expect.

I am seeing an apparent logarithmic deflationary decay in many of the numbers coming out all over the place and the “bad” information is accelerating exponentially. Real unemployment is running somewhere between 12% and 18% and the job losses are accelerating. Real GDP is 3% negative and getting worse.

Chart of U.S. Unemployment

Chart Courtesy of

Chart of Growth in U.S.Gross Domestic Product (GDP)

Chart Courtesy of

Let me try to summarize some key points:

If 80% of the wealth is controlled by 20% of the populous, what happens when those top 20% start losing money by the billions? Think of the cascading fractals from a self contained “economic ecosystem” that is in logarithmic decay.   All of the “solutions” offered by the government goons do nothing more than simply transfer the pile of crap from point A (the losers that caused the problem) to point B (the tax payer).   These solutions “solve” nothing.   I get the sense that the only thing that will “fix” the system is replacing it (e.g. a total collapse).

We’ll see how the next 12 months unfold.

News Sources: Japan, Australia, China, Canada, Russia, UK

References: Damping Ratio, Hoover Index, Benford’s Law, Zipf’s Law, Lorenz Curve, Pareto Distribution, Gini coefficient

Over the past couple of years I’ve contemplated starting various businesses but have been reluctant to do so for a variety of reasons. I briefly had a partnership in a consulting company many years ago but had to sell my portion off because of the heavy toll of commitments in my life at the time.

One of the primary reasons I was glad to sell at the time was because of the onerous cost of health insurance. It’s funny to think about it now because health insurance has gone up by at least 150% since those days years ago. I have no doubt that companies are crippled, or at the very least, have a huge albatross around their necks because of the health insurance mess. If you need a detailed example, look into the big 3 auto manufacturers for more detail.

One of the primary reasons I’ve stayed with a corporation is because of health insurance benefits, I would need to spend over $15,000/year to get the coverage that currently cost me about $1,500 per year. That’s right, the company picks up about $14,000 of my health insurance tab and that’s pretty good these days.

Imagine trying to start up a business and know that you’ll be immediately in the hole 15k to provide health insurance for ONE employee! Add a couple of more employees and you’re in the hole 45k for just the first year of starting a business!

Now if the government steps in with some sort of nationalized health care plan and picks up the $14,000 tab then I can start a company with 3 employees and know that I’ll only need to shell out $4,500 for health insurance; this is VERY manageable!

I’m not advocating social medicine since there will likely be deterioration of the medical system at some point but at the very least if my business becomes profitable, I can buy supplemental insurance to augment the benefits to a higher tier in the system.

Quite honestly, I’ve been spurned by the “free market” system of health care because it has never been given a chance to be truly free market. If the government is going to mandate “equality” in premiums and coverage then there is no free market. If I drive drunk, get speeding tickets, and act recklessly I can expect my auto insurance company to raise or cancel my auto insurance and not too many people would think wrong of the auto insurance company for doing so yet if I eat big macs every day, don’t exercise, consume alcohol and cigars daily, my health insurance provider has no recourse to cancel my health insurance or raise premiums without being accused of some type of discriminatory or predatory behavior. The health insurance company is expected to cover my heart attacks, liver disease and anything else wrong with me.

I’m willing to see what would happen in a quasi-socialized medicine world because we now have socialized banks, insurance companies and soon auto manufacturers and maybe social medicine will set them all free.

The New New Deal seems to be talked about a great deal these days and if President Obama will embark on massive infrastructure projects I’d like to request something be done about the frail utility grid. It seems anytime a snowstorm blows through the north or a hurricane blows through the south, there are millions of homes that are left without any power for days or weeks on end and this needs to change.

I would suggest we bury all those electric cables and while we’re at it, let’s run fiber to every home to get truly high speed internet access and please leave AT&T, Verizon and Qwest out of the project. Since we’re digging in new power lines and fiber, we might as well add new water pipes and sewer lines too. We should invest in some flooding pumps too to keep areas from flooding too badly.

Finally, there will be temptation to build new roads and freeways but with the auto manufacturers going bankrupt, there isn’t really that great a need. By all means, fix the crumbling bridges but lets not invest too much on roads and fossil fuel burning autos Let’s invest in high speed rail to replace dilapidated Amtrak.

The cost for all these things should be very low as there will soon be millions of unemployed workers out there willing to work on these projects. It’s perfect timing.

I dropped by a well established coin dealer this week to inquire about getting gold coins.   The local shop owner had a few American eagles and no Canadian Maples on hand.   He was selling gold for $109 over spot which is about a 15% premium.  He did have plenty of Krugerrand coins and was pushing hard to unload Krugs but they have a much lower content of gold 91.67%  within the coin itself even though the weight is adjusted to actually contain 1 oz of gold within total.

I prefer the Canadian Maples which are 99.999% gold first then the American Eagles which contain a similar composition to the Kruggerand.   Unfortunately, the US Mint seems to have stopped selling American Eagles and no one seems to have Canadian Maples.

There are all sorts of crazy rumours running about on the internet about what is happening to all these precious metals but I won’t cover them here but I will say that things seem to be unfolding very similarly to Ayn Rand’s Atlas Shrugged.   If you haven’t read that book, you need to put it on your book list!

Welcome to the new Socialized States of America.   With the US Treasury propping up Fannie and Freddie, the US Taxpayer  is officially “owner” of millions of foreclosed homes.   This pretty much concludes the socialization of America after repeated bailouts of savings & loan, airlines, dot com investors, investment banks, national banks, regional banks, and now housing.   Next month, we’ll likely bail out the auto manufacturers.

My real dilemma with all of this is that capital becomes misappropriated  into mismanaged, inefficient and obsolete entities that should be allowed to fail to allow capital to flow into those entities that have the potential to flourish.

Of course the US government didn’t have much of a choice as China is on the verge of a major banking crisis themselves largely due to their large error of continuing to buy US Treasury notes to the tune of nearly a trillion dollars.

HONG KONG (MarketWatch) — The People’s Bank of China, China’s central bank, has begun discussions with the finance ministry on ways to shore up its capital, The New York Times reported, citing three people familiar with the discussions.

The move could make it less likely that China will allow the yuan to continue rising against the dollar and accepting an injection of capital from the finance ministry could also reduce the independence of the central bank, the report said.

Halting the appreciation of the yuan could heighten trade tensions with the U.S., which has sought a stronger Chinese currency to reduce the competitiveness of Chinese goods and lower the U.S trade deficit, the report said.

The central bank is in need of capital because of its roughly $1 trillion purchase of U.S. Treasury bonds and Fannie Mae- and Freddie Mac-issued mortgage-backed debt.

The whole situation is totally disgusting  and just reinforces my personal belief that I need to make plans to retire outside the US when the time comes.   This country cannot continue to operate with these ponzi schemes because at some point it will all come crashing down taking everybody down with it except those who’ve cashed out.

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