Thursday, September 10, 2009

Economy Rant Warning: Retire When You Own Your Home

Here is an agrument for retiring "On Time". You who own your home, you need not work. Retire the day you own it. And here is why... (this is for the United States... other economies might not be driven to the same conclusions)... the foundation of the US economy is "The Home". This stems from the "American Dream" which is the "White Picket Fence" idea that took hold after the self sustained farming way of life got moldy at the turn of the 1900's. The American Dream for better or worse has propped up our way of life forever, since. Looking at it from this point of view, let's deconstruct everything from the construction industry, to mortgages, the SEC, business loans and credit cards in one sentence: you can't build a nation on people who get paid well. This is what is driving the market, which, said market, unfortuneately reacts willy-nilly to the needs of people. The market just tries to make moola.

What does it mean, "you can't build a nation on people who get paid well"? It means if you pay someone less, they will be more likely to have to take out a loan. Which creates the best investment the market has ever known... lending... credit cards and mortgages alike. So, perhaps what I should have said is "you can strenghten a market and crush the desires of a nation by causing people to earn not quite enough to make house payments and not enough to pay off a credit card so they have to pay interest on credit cards". These are the facts of this depression.

From the market point of view, people paying interest on credit cards equals a 80-90 percent profit margin. A great, almost guaranteed return on investment. Given the standard 10-15 percent you can get in any other market, Lending, in the US, is a vastly better investment than anything out there. You just have to have a ton of money to be able to do it. And the government is going to help you, if you do do it... because they want people to be paid less. Think about it. Big corporations pay better because when you put a bunch of people together, people start to talk about conditions at work, at home, can't afford this, should be able to buy that. They form a union (or not) and get better pay. But small businesses, start ups, home businesses, self-employed, they pay twice as much tax as big business. So, it is in the interest, literally, of the federal government, to drive people into small business, and to encourage lower pay. Maybe you've seen all the great small business assistance programs? Have you checked out the national minimum wage lately? Does that sound like a wage that will lead to an American Dream?

Now then, you have the credit card lenders at the ready to drive down worker wages so borrowing is needed, so they can provide expensive loans and thereby create a healthy market (great investment). You have the government wanting workers to make less so they will coincidentally pay more tax (small businesses actually pay both the biz side of taxes and the income side). The only thing left to do is shut off bank loans so everyone has to use credit cards. Voila. (read: walla!) You have a healthy market where workers make so little they have to use credit cards, and now take a look at the American Dream. THE most expensive thing you buy in your life and you've already been downgraded to "has to borrow" status by both the market and the government. So, you borrow. A typical home loan is paid off in 30 years of payments. By the time you pay it off you have paid three times what the sale price was, so the value of your house is demanded to be three times higher or you lose value over the life of your loan. But you do end up owning the house. You worked 30 years to own it. If you decided to "will" it to someone, you would erase their 30 years of needed work to own their American Dream. Let me say that again... you would erase 30 years of work that someone needs to do. That's solution number one. All the homes that have already been paid for need to not be returned to the "we're buying a home via a mortgage" game, they need to be willed over and over. Because if anyone returns it to the mortgage game you're actually causing 30 years of work for someone and causing more loss on loan to value to the future.

Solution B is this: if you have worked 30 years, or, lucky you, 20, to now own your home... quit your job. Let the ones who are working have your job (this ends unemployment), send you meals on wheels, and medicaid at your home, and, you just relax.

Your job, a job obviously capable of buying a house, becomes available, you are off the road during the commute, you are enjoying life, you've succeeded at the American Dream. Don't work another 20 years to sock away money. That's money that is needed by someone else to buy their American Dream. The point of all this is to say that when people finally own their own home, they should not be working any longer.

This alone will allow those eager ones, those who want to earn the American Dream to not only get paid for better jobs, it will put pressure on the mortgage companies, take away leaning on credit cards, (because jobs are now plentiful!), and the taxes paid during a healthy vibrant society are easily enough to cover the food and medication that stay-at-homes will need.

Is this a retirement socialism scheme? No. It's pure capitalism. When you buy something, you want the most for your money. Well, Americans who are buying the American Dream want the most homes they can buy in a generation of "work". That is, we want as many people to reach pure home ownership as possible. Capitalism says a vibrant economy will be able to support a mass of new retirees by paying out a few old crinkly twenty dollar bills in order to earn a vibrant national wallet as the new generation earns the crisp new fifties. They take over the jobs and roads and get settled into their American Dream chase. We need retirees and we need 'em now. Don't get me started on people who own two, three, five, six houses.

Why is there a scheduled retirement age? That's broken. It needs to be able to fluctuate like any scale within the system must. This system will not last either. If there are too few good jobs, those who have attained their American Dream need to vacate their job. Take themselves off the road and let the next gen support them. But if there are too many jobs, too many houses needing to be built, and not enough people, some of those will need to work. They have nothing to lose at that point.

The current system actually creates a government guaranteed way for credit card companies to continue to erode capitalism, and force more socialism into play, by reducing worker salaries. The FED says it is the best way to "curb inflation". What a powerful word. Inflation is actually necessary. It is just the swing of the pendulum in the other direction. Just like NASA we are only gauged by our ability to calculate acceleration, not velocity. That is the difference in the FED and the real market. The FED looks at what the current temperature is, they don't stand back and look at how quickly temperatures have risen or fallen. The cap on inflation has stayed in effect so long that people are now not aware of how much money they should be making. The average wage for a bus boy should be nearly $80 an hour to allow that job to be able to afford the American Dream. Why wouldn't you want the bus boy to have a family and a house? That is who "We The People" is. Bus boys. Bus drivers. Teachers. Coal miners.
Why $80 an hour, well if the FED had let the price of a loaf of bread go up to $12 where it should be, you'd understand. This in turn would have forced your employer to pay you more because you can just say, "hey, a loaf of bread is $12 bucks!" But capping the inflation puts a nice little blinder on the public, so everyone is cheery. "Hey, bread is only a buck". Why do I need to get paid more than $10 bucks an hour?

The answer to that is "because the American Dream costs 30 years". It's rocket science, so it's no wonder we're in the depression we are. We need to find the accelerometer and we need to breed it into our politicians so they know how to keep an eye on this stuff. Otherwise the US Constitution won't be worth the legal tender it takes to buy a copy of it.

But this new early retirement is going to ask you for a favor in return. You are going to have to take certain losses on home values as mortgages adjust. But here's the rub... what is the value of a home... what is it? it is the American Dream... when does that have value? only when The People are able to attain it... right now, people can't afford homes. So, there's no value in your investment if everybody can't get in on it. THAT is putting on a stadium rock and roll concert and then pricing the ticket too high for anyone to get in. The result of a rock and roll concert with only a handful of people in the stadium... has defeated the original intent... which was to get everyone in on the same rock-and-fricking-roll experience man! To get everyone into the American Dream.

Investments on lending will return to the type of interest as other items in the market, and a new scheme will pop up that drives people toward other shortfalls, to create pockets of gain by the largest market investors. The battle is to keep in front of the bubble and react to it like we know what we want this country to be. It's not going to be easy to convince people who own their homes to retire, but the first step is putting a plan in place that says, if you retire at any age, you will have the same guaranteed benefits, because hey, food is cheap and easy for this society to provide. You don't need a lot of medicine in your forties. You are freeing up jobs and creating the opportunity for the American Dream for another family. You are uncloggin our highways. Just go fishin dude.

1 comment:

  1. I'm not a hundred percent on your ideas, but I like your mind out-of-box perspective. And the reminder that we are not seeing the forest for the trees. Why do we do what we do? Search for the why, lest you become cattle as your time blows through the pasture.