This October, the Sharing Cities Network will launch the Second Annual Global #Map Jam to bring activists together in cities around the world to connect the dots and map: grassroots sharing projects, cooperatives, community resources, and the commons.
One of the 'targets' I've had my eye on in the market has been the Russell 2000, a small cap stock index comprised of the smallest 2000 companies in the Russell 3000 index.
The reason I've been tracking this index carefully, along with junk bonds, is that the small companies usually give you an advance heads-up on trouble soon headed for the larger cap companies and stock indexes.
As stores begin to hawk their holiday deals, Shareable reposts this 2009 piece about how Neal Gorenflo gave up holiday gifts and discovered a better way to bond with family.
An interesting list of a few not so common additions to the standard first aid kit. What additional items do you keep on hand that are not typically found in a first aid kit?
- Germany's Ailing Infrastructure: A Nation Slowly Crumbles
- Ebola outbreak: Sierra Leone lockdown declared 'success'
- Against Sharing
- New technique gets pure hydrogen out of splitting water
- The PetroYuan Cometh: China Docks Navy Destroyer In Iran's Strait Of Hormuz Port
- Scotland’s Oil Future Will Remain In British Hands
- Photos: 400,000 Protesters March To Prevent Annihilation By Global Warming
- Zero Percent Water
The Slow Money movement focuses on deploying capital, locally, to strengthen small food enterprises. Its goal is to improve the quality, dependability and sustainability of our food source, while financially nurturing communities and delivering an attractive return on investment to native investors.
Woody Tasch is the founder and chairman of Slow Money - in this week's podcast, he and Chris discuss the templates his organization is piloting across over 350 ventures in local food production, processing, distribution and marketing.
Daily Digest 9/21 - The Rise Of Unexpected Medical Bills, Can The U.S. Achieve Energy Self-Sufficiency?
- CIA Insider Warns: "25-Year Great Depression is About to Strike America"
- Why Federal College Ratings Won’t Rein In Tuition
- Slamming A Door On Hedge Funds
- Financial Criminals Have Been Fined Billions, but They Rarely Pay
- Paying Till It Hurts: After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn’t Know
- Can U.S. achieve energy self-sufficiency?
- This Scottish Island Is Nearly Free of Fossil Fuels
- A Land Under Waves
- A Kingdom Still Whole, but Far From United
- Scotland’s Attack on the Status Quo
- Texas man must pay $40.4M for running Bitcoin-based scam
- Bank of America using three intelligence firms to attack WikiLeaks
- H.R.24 - 113th Congress (2013-2014): Federal Reserve Transparency Act of 2013
- U.S. Faces Tough Struggle on Ground to Oust ISIS
- Life in Timbuktu: how the ancient city of gold is slowly turning to dust
- Lockdown Begins in Sierra Leone to Battle Ebola
Nearly a decade ago, Lisa Rohleder and Skip Van Meter of Portland dreamed up a low cost, high volume community acupuncture business model. They wanted to provide access to acupuncture for those that couldn't afford the standard fees and also to earn a sustainable living as practitioners serving lower income communities. In 2002, the first iteration of this model, called Working Class Acupuncture, was born.
As we learned in the prior chapter on debt, our nation has an historic, never-before-seen level of debt on the books.
Now some would say that it’s not reasonable to look only at debt, one also has to also consider the assets and total liabilities to assess the situation.
And they're right. After all, does it really matter if you have a million dollars of debt if you also have no additional liabilities but assets worth $10 million?
Not really, because your assets exceed your debts and liabilities, you should be $9 million in the clear.
What we're going to do in this chapter is look at both the assets and the liabilities of the United States so that we can assess whether the current debt loads are worrisome or not.
All right, let's begin here with assets. So what is an asset?
One definition is: Items of ownership convertible into cash; total resources of a person or business, as cash, notes and accounts receivable, securities, inventories, goodwill, fixtures, machinery, or real estate.
By this definition an asset is something of value that can be converted into cash or provides access to, or enhances a flow of cash.
If we simply say assets are bank deposits, real estate, a stock or a bond, and the physical stuff we own, we’d pretty much cover the vast majority of what we consider to be our assets.
A liability is a likely future expense for which one has an obligation to pay. Not just the absolute legal requirements to pay – which are the debts - but also any outstanding obligations.
To make this understandable, for a family, their assets would be cash in the bank, home equity and other real estate held, and the things in their home that they owned.
The family’s debts would typically be in the form of a mortgage, an auto loan, credit card debt, and perhaps student loans.
And future other liabilities of this family might include college educations for children that have not yet been fully saved for, or taking care of ageing parents whose own resources are insufficient to cover their future needs.
While “debts” are technically a type of liability, for the purposes of this chapter, when we refer to debt we’re talking about a fixed commitment of a known amount.
When we say “liability”, we’re referring to a future obligation to pay that is neither fixed nor accurately known.
We know that providing care for an ageing parent will cost a lot of money, but not how much because we don't know the duration of the expense or how much it will be in any given year.
We’re making this distinction between the terms “debt” and “liability” because the media – and even our government – often treat the two very differently, something Congress reminds us of every time they say that Social Security and Medicare can be modified at any time and therefore don't count the same as our national debt.
So how does all this stack up in terms of our total net worth as a nation?
To get a handle on the situation we're going to look at the net worth of households because on the public side of the story, as we saw earlier, the liabilities and assets of the US and State governments really belong to the citizens.
On the private side, the assets and liabilities of companies belong entirely to the bondholders and shareholders of the company, not the company itself.
And who holds bonds and stocks? Ultimately somebody does, which for the most part means a private citizen does.
Since we can pool citizens into households, we could examine household assets, deduct some relevant liabilities and get a decent view of where things stand.
The Federal Reserve tracks Net Worth at the household level and this data is routinely and widely reported in the media.
According to the Federal Reserve, Household net worth exploded by more than $20 trillion dollars between 2003 and 2008– an astonishing feat – before collapsing by $17 trillion dollars during 2008 and 2009.
And then again, between 2009 and 2013, the net worth of the country has increased again by nearly $20 trillion.
To put those numbers in context, the entire net worth of the nation did not hit $20 trillion until 1989 so the recent gyrations are akin to amassing and losing as much wealth as was accumulated during the first 300 years of history.
And these are NET assets, meaning debt has already been deducted so the Federal Reserve, and many in the media, take the position that with just over $77 trillion in net worth, Americans are doing just fine and our rapidly-climbing national debt levels are no cause for concern.
But before we get too excited about the astonishing wealth indicated here, there are two key oversights and a fallacy hidden in this report of which you should be aware.
As always, the devil is in the details. Before I address those I want you to observe this period here spanning from 2000 to 2003.
That dip in the Net Worth of households was due to the stock market collapse that ran from 2000 to 2003 and caused such great panic at the Federal Reserve that Fed Chairman Alan Greenspan lowered interest rates to the emergency level of 1%, thereby igniting the greatest of housing and credit bubbles in all of history.
That led to an even bigger crisis in 2008 that wiped out even more wealth, in response to which interest rates were lowered to 0%. Zero.
As in, as low as mathematics will allow.
Booms and busts. Bubbles and bursts. That's how the Fed prefers to operate.
These declines in total net worth lead to this observation: debts are fixed.
When you take on a debt, there it sits, growing larger until and unless you make payments on it.
Debts do not vary with general economic conditions or whether you get a raise or lose your job. Assets, on the other hand, are variable, sometimes gaining and sometimes losing value.
And so this leads to the next Key Concept of the Crash Course: Debts are fixed, while Assets are variable.
OK - Where did the $18 trillion in new wealth since 2009 come from? About 80% of that growth came from a rise in Financial assets and the remaining 20% came from growth in real estate and other ‘tangible’ assets.
When we look closer at the actual amount of household net worth there is today, we see that 83% of the total net worth consists of financial assets totaling about $63 trillion while the tangible assets are the remaining 17% and total around $14 trillion.
If we examine these assets a little more closely we see that the $63 trillion dollars worth of financial assets consist of things like pension funds, the assets of privately held businesses, deposits, stocks, and bonds, which we can roughly re-compose into these four main classes; stocks, bonds, cash or deposits, and the assets of privately held businesses.
The other bucket of $14 trillion dollars in tangible assets consists primarily of real estate, which is 69% of this bucket, and consumer durables which would be your car, your dryer, and your snow blower, if you have one.
For every single one of these assets, except cash, in order to liberate the wealth from these assets you’d have to sell them first.
One general rule of asset markets goes like this: Things go UP in price when there are more buyers than sellers AND things go DOWN in price when there are more sellers than buyers. Hold onto that thought for when we get to the chapter covering demographics.
Now let me expose two great oversights of this household wealth report.
The first oversight I wish to illuminate is that the data is presented as if it applied to our entire country in a fairly even and therefore useful manner. It does not.
As of 2010 The Top 1% owned 35% of ALL net household wealth AND looking at stocks only owns 42% of ALL the country’s financial wealth.
If you can’t see it, I apologize; the top 1% is represented by a very thin green smear at the top of the column there. So it’s great that our stock market keeps powering higher but for every trillion dollars it goes up, $420 billion of that newly-created wealth goes to only one out of a hundred households.
The Top 20% , which includes the top 1%, owns nearly 89% of ALL net household wealth and over 95% of ALL financial wealth in the US.
This means the bottom 80% of the citizens of this country, represented in yellow, holds only 11% of the total wealth of this country – and less than 5% of its financial wealth - and even within the remaining 80%, the distribution of wealth is similarly weighted nearly all at the top.
Oh, but wait a moment. The top 1% isn’t hogging everything.
If we look at debt, we see that the top 1% only holds 6% of the country’s debt. The next 9% own 22% of it; but the bottom 90% - that’s 9 out of every 10 people in the US – holds 73% of America’s debt.
So the rich hold almost all the wealth, but generously, allow the rest of us to hold the debt. Gee, thanks.
Given this tremendous disparity, I’m reminded that Plutarch once cautioned that an imbalance between rich and poor is the oldest and most fatal ailment of all republics.
More immediately, this helps us understand why the great credit crisis of 2008 worse than expected. Just as was true of the wealth gap in the late 1920s before the onset of the great depression, the severity of a crisis does not depend on average wealth, but the distribution of the wealth.
If a large swath of the population lacks the means to weather the storm, then the storm will be longer, and harsher than otherwise would be the case.
So what does it mean that 80% of our population possesses a meager 11% of the total wealth? For one thing it means that the recent efforts by the Fed to provide massive amounts of liquidity support to the biggest and wealthiest banks at the inflationary expense of the lower classes were not only misguided, but they were cruel and unusual.
This leads to an easy prediction to make: The wealth gap in the US will hamper our recovery and deepen the downturn.
The second and bigger oversight is that that the fed mysteriously does not offset the net worth of the nation by the general liabilities of the federal and state governments or private corporations.
Wouldn’t it make sense for the Fed to offset these against household wealth?
So let's look at those under and even unfunded liabilities.
What we're going to look at here are pension, retirement, and entitlement programs. At the state and municipal levels we find that pensions are under-funded to the tune of $4 trillion
What this means is that as money was taken in through taxes, states and municipalities actively chose to spend that money elsewhere in preference to putting it into pension funds.
Big promises and insufficient contributions were made at the same time.
What does it mean when we say that the state and municipal pensions are underfunded by 4 trillion dollars? How is that calculated?
The 4 trillion dollar shortfall is what is called a Net Present Value, or NPV, amount.
This is important so let's take a quick peek into this idea.
A net present value, calculation adds up all the cash inflows, in this hypothetical example $1000 per year for six years, and offsets, or “nets”, those inflows against all the future cash outflows.
Since a dollar today is worth more than a dollar in the future, the future cash flows have to be discounted and brought back to the present. We NET all the cash inflows and costs, discount them back to the PRESENT to determine if the thing we are measuring has a positive or negative VALUE. NET. PRESENT. VALUE.
This is the methodology used to calculate the status of state and municipal pension funds.
Growth in the value of the pension fund assets plus future taxes are offset against cash outlays to pensioners, brought back to the present, to indicate that in order for the pension funds to simply have zero value, $4 trillion dollars would, today, have to be placed in those funds.
An important realization about NPV calculations is that the future has already been largely taken into account so waiting and hoping for a different future result to emerge pretty much never works.
If we have to place $4 trillion in the funds today, but don’t do this, next year the shortfall number will be even larger.
The only way it could be smaller is if fewer people are collecting benefits or the fund’s assets outperform the assumed rate of growth that fed the NPV calculation.
Moving right along. Corporations are coming off the highest levels of profitability in decades but they too opted to underfund their pensions, to the tune of $4 trillion Net Present Value dollars, in preference for, uh, other uses for that cash.
Because pensions typically invest in bonds and stocks in a roughly 60/40 split any recessions or market declines will only add to the shortfall.
In part, the pension shortfalls are a direct function of the extremely low interest rates currently available – thank you Greenspan and Bernanke! – and also because the main stock market index - even though it is making new highs here at the end of 2013 - …is still languishing by historical standards if we inflation-adjust the returns over the past 15 years.
Since most pension funds assume a seven to ten percent yearly compounded return, and since stocks and bonds are not yielding anywhere close to that amount over time – even including the market run-up from 2011-2013 - the pension shortfalls are understandable.
But when we get to the Federal Government, that’s when scary numbers emerge. David Walker, the recently retired Comptroller of the US, and a personal hero of mine for valiantly and tirelessly working to raise awareness of the looming US government shortfalls, said of the US Government:
- It’s financial position is worse than advertised
- It has a broker business model
- It faces “deficits in its budget, its balance of payments, its savings — and its leadership.”
In my assessment he’s absolutely right. And here’s some data to support that. This is a table taken right from the US government annual report found on the treasury department website.
Again we are going to be looking at NPV numbers. The first is a nearly $16 trillion dollar shortfall representing the total US government Net position without including social security and Medicare.
Again, this means that ALL US government cash inflows PLUS the value of all government assets have been offset against known outlays to determine that, today, the US government would have to somehow obtain $16.1 trillion dollars to balance its liabilities and assets.
But that’s just 1/4th of it. Once we add in social security and Medicare, the shortfall suddenly balloons to $55 trillion dollars by the Treasury Department’s own calculations.
Whoa! Stop right there! That’s over 3 times GDP!! This means the US government is insolvent. Full stop.
Why is this not topic #1 on the President’s agenda? A country this far in hock has some real future issues and is potentially on its way to bankruptcy.
In case you are harboring the notion that there’s some money socked away in a special US government account, like a “lock box”, this picture shows George Bush standing next to the entire Social Security “trust Fund”.
There it is… the entire trust fund is a three ring binder with slips of paper in it saying that the US government has spent all the money and replaced it with … special treasury bonds.
Hold on there. Aren’t Treasury bonds an obligation of the US government? How can the government owe itself money? It can’t.
All government revenue either comes from taxpayers or borrowing so when the time comes to pay off those special bonds that money will either come from taxpayers in the form of higher taxes, or additional borrowing.
If it were possible to owe money to yourself and pay interest to boot, then we could all become fabulously wealthy by writing ourselves checks. But of course, this is a foolish, easily dispelled, notion,
At any rate, depending on which government agency’s numbers you use, the Federal shortfall is anywhere from $53trillion dollars to $85 trillion dollars.
This number is so large that it even scares small monkeys. And proving the point that you cannot grow your way out of an NPV shortfall, this number has grown by nearly $40 trillion dollars over the past 10 years, advancing during both strong and weak economic times.
After all, who else besides taxpayers living in households are going to pay off those liabilities? Nobody, that’s who. If the fed did perform this offset, because the federal government alone has a negative net worth that far exceeds total household net worth, the reported net worth would plunge below zero.
I consider it a blatantly silly practice to tally up the assets of the country while neglecting its liabilities, let alone its debts.
This is the same as someone with ageing parents and looming college bills claiming they are in good financial condition because they have a slightly positive balance in their bank account.
In summary, US households have a positive net worth if and only if we neglect to include liabilities into the mix. When we include those, then the picture turns quite negative.
Japan and Europe are in similar situations, driven by a poor combination of bad planning, failing to save, promising too much, again demographics, and low economic growth ever since the year 2000.
Because the liabilities are so silly, so large, you can count on them never being honored. But just because we write a liability off it does not mean it goes away. By giving retirees less, they or their families have to shoulder the burden of living within their means – something our government still refuses to do.
To really understand why future the future liabilities of so many developed countries are massive and growing larger, we need to quickly explore the topic of Demographics.
Thank you for listening.
If you are planning to build a compacted pond without a liner, it is a good idea to test the soil to determine the clay content. The clay content will tell you whether or not the existing soil can be compacted. If you have clay content of 30% or higher, you can be pretty confident that with proper compaction, your pond will seal.
- This is the start of a long constitutional wrangle for the UK
- Scotland’s ‘No’ Vote: A Loss for Pollsters and a Win for Betting Markets
- Super-rich rush to buy 'Italian Job' style gold bars
- Malaysian Flight M17 Crash Analysis, By The Russion Union Of Engineers
- The Enchanted Land Where Community College Is Free? Welcome to Tennessee in 2015
- The Next Crisis – Part one
- Commodities Suffer As Oil And Gas Takes Rail Priority
- Busy Days Precede a March Focusing on Climate Change
Sharing books you've read can be as enjoyable as reading them again, and for centuries books have frequently changed hands from person to person, library to library. But what if you could share an entire archive of books from the palm of your hand with anyone in earshot? I spent a week experimenting with a DIY PirateBox to see how it works, but first let's explore notable episodes in the history of book sharing...
Chris has been invited to give a public presentation at the College of Charleston in South Carolina.
The 2-hour event will leave lots of time for Q&A and interaction with Chris, and will focus on the declining availability of "The American Dream", as well as better paths for today's youth to consider taking.
Details on how to register for the event will be available soon.
Stanford University student Erica Knox went to see Bill McKibben’s “Do the Math” tour in November 2012. That’s when McKibben and 350.org launched a divestment movement to address climate change and challenge the power of the fossil fuel industry. Knox has been involved with divestment group Fossil Free Stanford ever since. “It’s definitely the group on campus where I feel like I’m actually creating change,” she said.
Modeled after the anti-apartheid movement of the 1970s and ’80s, the divestment campaign pressures universities and other institutions to sell their stock in fossil fuel companies. The movement has spread to more than 300 schools nationwide, as well as cities and faith-based institutions. San Francisco and Seattle, churches including the United Church of Christ, and small colleges such as Hampshire and Pitzer have already pledged to divest.
Divestment is just one strategy to combat climate change, says Knox, who is majoring in earth systems. But she says Stanford students can use their connection to the university’s $18.7 billion endowment to make a strong statement. “It’s important for us while we’re at a university with this kind of power and privilege to leverage that to actually make a difference.”Donald Kennedy: President Emeritus for fossil fuel divestment
Divestment is nothing new to Donald Kennedy. While he was serving as president of Stanford in the 1980s, the university divested from specific companies that supported the apartheid regime in South Africa. Now, the former president and current Bing Professor of Environmental Science and Policy is supporting the university’s decision to begin divesting from coal-mining companies.
Kennedy was one of 170 tenured professors who signed a letter addressed to President Hennessy and the Board of Trustees. The letter, which followed a university-wide divestment petition that gathered nearly 2,000 signatures, called for Stanford to divest from all fossil fuels, including coal, oil, and natural gas. As President Emeritus, Kennedy’s was one of the most prominent names supporting the request to divest.
Kennedy, whose research interests include global climate change, believes coal divestment is valid, as there are alternative fuels that could be substituted for coal. He hopes there will be “careful and thoughtful analysis of what might be done elsewhere in order to promote a more effective set of climate policies.” He’s in favor of actions like divestment that encourage companies to pursue “a more controlled approach to the very serious problem of climate change.”Amy Tomasso: Calling for climate change action now
Amy Tomasso, a Stanford urban studies major from Farmington, Conn., was drawn to Fossil Free Stanford’s focus on student activism and the momentum that divestment was gaining on campus.
Last year, the group met with the university’s Advisory Panel on Investment Responsibility and Licensing to request divestment from the top 200 fossil fuel companies. After months of review, Stanford’s Board of Trustees announced on May 6, 2014, that it had agreed to begin divesting its stock in coal-mining companies.
The announcement, which came sooner than expected, was a surprise to Tomasso and other activists on campus. It positioned Stanford as the first major university to make a commitment to divest from coal. Fossil Free Stanford organizers celebrated their victory while planning to push for divestment from all fossil fuels, including oil and natural gas. Tomasso says it’s important for young people to lead the fight for fossil fuel divestment because they’re the first generation who’ll be living through the consequences of climate change.
“Everyone can be an activist,” says Tomasso. “Everyone has things they care about and love. If you take a moment to think about them, you’ll realize that the call to action is now.”
Chris and I have been invited to Lima, Peru to present a full-day seminar titled "New Global Scenarios That Will Define Peru for the Next 20 Years"
Entrepreneurs, corporate executives and government officials will be in attendance. If you live in or near Peru, this will be a valuable "meeting of the minds" at which the future of the country (and South America, in general) will be discussed in detail.
Key focus of the event:
In this week's Off the Cuff podcast, Chris and Alasdair Macleod discuss:
- Independence For Scotland
- The implications of this week's historic vote
- Gold's Depressed Price
- The establishment benefits from a low price
- Europe vs Russia
- Why the EU holds a losing hand
- The Evils of Central Banking
- Creating worse problems than they're supposed to solve
- Subprime Is Back With A Vengeance
- House votes to arm Syrian rebels
- Inequality, Nick Hanauer and the Patriot's Moral Code
- Bank of England Panic! Scottish Independence Bank Run Already Underway!
- Why Money Is Worse Than Debt
- Libertarian ‘Utopia’ Styled After Ayn Rand Book Spectacularly Falls Apart Almost Immediately
- Toward making lithium-sulfur batteries a commercial reality for a bigger energy punch
- True Cause Of Fracking Leaks Found – Industry Breathes A Sigh Of Relief
- Plasmon-assisted radiolytic energy conversion in aqueous solutions
- Water-based nuclear battery can be used to generate electrical energy
- Obama delays key power plant rule of signature climate change plan
A nice discussion of the benefits of having a well thought out list of emergency supplies and tools in your car for those times when you get stuck with your car and help could be a long time coming
Tiny house villages are a new part of the tiny house movement, yet they hold a lot of potential to transform lives and communities. The idea behind these villages is straightforward: bring tiny houses together in one place to create communities that share land, time together, skills, support, and other resources.