Thursday, April 27, 2017

Guaranteed Minimum Income?

One of the wackier ideas of the early 21st century was the idea of "guaranteed minimum income".

When financial crises occur, people come up with all sorts of ideas to "solve" our problems, even if our problems seem, well, fairly trivial, particularly today.   While folks literally had to deal with malnutrition back in the 1930's, during the recession of 2009, the worst most folks had to deal with was losing an over-mortgage mini-mansion they had no business buying in the first place.

But just as the Great Depression brought the wackjobs out the woodwork, today we are seeing similarly bizarre ideas being floated around.  One of these is "Guaranteed Minimum Income."

The scheme - and it is a scheme - works like this, in theory.   (I say in theory as no one has tried this yet, and the half-assed "experiments" in guaranteed minimum income are little more than a windfall for a select few people - akin to lottery winnings.   Anyway, like communism, it is never purely applied, so the proponents can perpetually claim it was never given a fair chance.)

So, how it works:

The government gives every citizen a flat amount of money every year.  It could be enough to live on or enough to barely live on, or an amount that is really less than what you need to live.   The numbers bandied about have been in the range of $8000 to $16,000 or so, per person.   Everyone gets this check (or monthly checks) regardless of whether they are rich or poor, working or unemployed, drug addicts or homeless, or whatever.   There are no restrictions on what people can do with the money.  They can spend it going to college or on methamphetamine.

Proponents say that if you do this, amazing things will happen.  People will turns their lives around!  Homeless people will get jobs and houses!   Drug addicts will kick the habit!  Moms will go back to work as they can now afford day care!   Of course, the "data" for these assertions are based on anecdotal data based on very limited implementations of the idea.

The problem, of course is, who pays for it? and how does this affect the overall economy?  Say we decide to give everyone in the USA $10,000.   There are about 315 million people in the US, that amounts to 3.15 trillion dollars, or coincidentally, $10,000 per person (sarcasm light is ON).  The annual budget of the USA is 3.8 Trillion dollars, which amounts to about $12,000 per citizen.

So right off the bat, you see the big problem.   The annual budget for the USA would nearly double.  Or would it?  Proponents argue that this "guaranteed minimum income" idea would replace all forms of government handouts, including food stamps, TANF (welfare), subsidized housing, social security, and so forth.   No word whether this would include medical care, but in the countries it is being seriously considered, medical care is also provided by the government.

As I noted in an early posting, most of what the government spends money on, other than defense, is YOU - social programs that pay you directly, such as medicare, medicaid, social security, and various welfare programs.  This amounts to about 36% of the annual budget, or about a trillion dollars.  So the cost of "guaranteed income" would increase the annual budget by "only" about $2 trillion, or a 66% increase in spending - at a time when we are borrowing more than ever before.

Of course, this means raising taxes - or borrowing even more heavily.    For the very poor, this would mean a windfall of $10,000 as they basically pay little or no taxes.  Somewhere in the lower-middle-class it would likely be a break-even proposition, as people would pay $10,000 more in taxes, and then get a check back from the government for the same amount.   The wealthier would thus have to pay far more in taxes to pay for the subsidies to the very poor - as well as their own $10,000 kickback.

You see where this is going - redistributing the wealth.   Sure, they give it a fancy name and tell you it will do great things.  But the bottom line is, it is a scheme (in every sense of the word) to take money away from one group of people and then give it to others.  The idea that "everyone" gets the same amount doesn't not make it a wealth transfer scheme.

Would the idea work?  Of course not - any more than communism, which sounds swell on paper, never works in the real world, due to this sticky thing called "human nature."   People are not naturally altruistic, particularly people who claim to be altruistic.  Greed rears its ugly head, and of course, as you might guess, the people pushing this idea of "guaranteed minimum income" (or what we should really call it, "give me free money") are usually poor or lower-class folks, or politicians pandering to this group hoping for votes.   They are literally buying votes by promising bread and circuses - and we know how that works out for civilization in general.

Proponents claim that getting rid of all the layers of bureaucracy will mean huge cost savings.  You have a social security number?  You get a check.   But social security already works that way, and we have an army of people managing that program, trying to keep fraud and abuse at a minimum.  Hey, if you can get $10,000 just for breathing, if you can come up with a fake ID, you can get $20,000.  Or $30,000 if you can get two.   Or just keep someone chained up in your basement and cash their checks.  This sort of thing already goes on.   So no, there is no "savings" in cutting back on government oversight.  In fact, you'd have to expand government employment considerably to police such a system.

The big problem, of course, is that it would lead to inflation.   Like the arguments about doubling the minimum wage, the fly in the soup is that if you flood the economy with 3.15 trillion extra dollars, people will have more money to spend.   This does not mean people will go out and buy more stuff, only that since money is now less scarce, it will be worth less, meaning prices will climb.   Hey, if they are giving away money, it can't be worth much, can it?

So this "free money" advantage would be watered down - pretty much completely - by a corresponding decrease in spending power.

And human nature being what it is, most people won't suddenly "turn their lives around" or do great and noble things with this free money.   The guy living under the bridge asking for spare change won't suddenly become a heart surgeon, or even work at the drive-through at Micky-D's.  He'll simply spend the money on more cheap beer and drugs - as he already does with his panhandling money.   The problems of the poor and homeless are not lack of money.   Lack of money is the symptom.   Throw money at a poor person, they will remain poor, as that money will go through their hands like lightning.

In some smaller countries with smaller budgets and huge tax burdens, maybe such a scheme could be implemented, but I doubt it would work in the long haul.   Here in the USA, where a huge portion of our budget (16%) goes to defense (to defend a lot of European countries that have tiny defense budgets as a result), the staggering cost would be just too much, even if we lowered this "guaranteed income" to a mere $5,000 which would not really accomplish much for an individual.

Now, some countries have tried experimental pilot programs of this idea.   But the nature of the idea is, as I noted above, structured that you cannot "experiment" with partial guaranteed minimum income.  You either give it to everyone or no one.   Giving it to some is just stupid.

For example, some countries in Europe are talking about trying this in one city or one region.   This merely acts as a bug-light to attract people to that city or region.   Also, how much do you think rents and housing costs in that area will go up?   I strongly suggest it will be about the same as the guaranteed minimum amount.   People pay as much as they can afford for housing.  If they can afford more, they will pay more, driving prices up.   It is like all the subsidies and funny-money loans we offer for college - they drove the cost of college up, not down.

During the recession of 2009, gasoline prices went to all-time lows.   Why was this?  Did the price of oil suddenly drop?   Was the cost of refining or exploration lowered?  No, the reason was, demand dropped as people drove less.  The law of supply and demand is a beast that must be fed, and you see this every summer during the "driving season" when gas prices go up as demand goes up and goes down as demand goes down.   When people are willing to spend, prices go up.  When people stop spending, prices go down - to induce people to buy. 

The same is true with "free money".   In tight real estate markets like DC or New York, or San Francisco, housing prices are high because there is a limited supply and a lot of people with high incomes.   You are bidding against some guy who makes $250,000 a year and is willing to spend $100,000 a year on mortgage payments.  You lose.    If you raise everyone's income by ten grand, housing prices (and other prices) will go up, as people become more willing to spend.   It may, however, depress prices of more expensive homes, as the very wealthy, now taxes to pay for this scheme, may will find themselves with less cash to spend.  Again, this is a redistribution of wealth scheme, period, paragraph, end-of-story.

As I noted before, Ontario has a particularly unusual "experiment" in that 4,000 randomly chosen poor people are being sent checks for $16,000 each, or $25,000 for married couples.   Here's a hint to our friends up North:  Get a divorce!   Like many other social welfare programs, you collect more if you split up.   Here in the US, if your husband "left you" you can collect more in welfare (or could, in the past).  This lead people to make the logical decision to split up, so their family could live a better lifestyle.   Unintended consequences are the biggest problem with giveaway programs.

But randomly giving money away to people, or limiting the giveaway to certain provinces or cities or regions really won't test how such a system works.   You may be able to see how it works on the recipient side - and I am sure there will be anecdotal stories about how this money "turned my life around" - but since the effect of dumping so much money into the economy won't be felt, these experiments won't really tell the whole story.   And when $10,000 is the baseline income, then $10,000 means nothing - which negates the entire effect.   Few, if any, lives will be "turned around" when inflation wipes out the gift.

And of course, such limited and selective test programs won't measure how the economy will be affected by the dramatic increase in taxation needed to pay for such programs.   High taxes have been shown to dampen the economy, discourage investment, and encourage non-productive tax-avoidance strategies.   When you tax people enough, they either work underground or give up on working entirely.   I suspect under such a "guaranteed minimum income" scheme, a lot of folks would just collect the free money and then work off the books so they don't have to be part of the class of people who are actually paying for this scheme.   And of course, the very rich will Exile on Main Street, and move overseas or use other tax-avoidance strategies.   The middle-class and upper-middle-class will get socked.

Now, I know all you millennials hate your parents (after all, they are always nagging you about leaving dishes in the sink) but is this really the best way to get even with them?  Just because they won't raise your allowance is no reason to pass a law forcing them to give you $10,000.

All sarcasm aside, though, that's all this cockamamie scheme really is - a redistribution of wealth scheme.   And if you believe that "income inequality" or "wealth inequality" (which are two different things!) is the biggest problem in this country, and that money should be taken - as a matter of course - from wealthy people and just given to poorer people, well, this scheme is for you.

But hey, at least be honest about it, and call it what it really is - a redistribution of wealth.   Because "guaranteed minimum income" is really a deceptive label.  According to Investopedia, Income is money that an individual or business receives in exchange for providing a good or service or through investing capital.  It is not just money handed out willy-nilly for no reason at all.

What is sad to me, in this day and age, is that we still have people believing things like, "Hey, let's all vote ourselves a raise!" - which have been shown time and time again not to work.   Because if you think about it, if you take this irrational idea to its rational conclusion, you might as well give everyone $100,000 a year.  Or make everyone a millionaire, while you are at it.  Every man a king - why not?

The "why not" is that someone else has to pay for it, and that someone else will get mighty tired of paying for it, in short order.

And what "problem" this scheme is solving is increasingly unclear.  Will this lower our staggering rate of inflation?  Reduce our horrendous unemployment rate?  Bring down our sky-high interest rates?  Bring back the era of cheap gas?  Oh wait, we already have low inflation, low interest rates, low unemployment, and low gas prices.

"Guaranteed Minimum Income", I fear, would just screw up a perfectly good thing.

How the Something-for-Nothing Mentality Gets You in Trouble

When someone offers you something-for-nothing, chances are, you are going to be ripped-off.

We are traveling in the RV and listening to Pandora.  We let our subscription to Pandora expire so they do play ads occasionally.  The ads are interesting as they are for debt consolidation loans,  tax resolution centers, and debt resolution companies.  As I noted before, it seems Pandora panders to people immersed in debt culture.

At the same time, I noticed two articles on MSN News which are related to this topic. The first was by a young lawyer who went to work for a tax resolution company.  He describes his experiences before he quit, disgusted.  The company offered, for a fee, to negotiate with the IRS to have your back taxes and penalties reduced.

While the IRS will do this on occasion, it is quite rare.  The young lawyer quickly figured out it was a scam in that the operator of the boiler-room would call people and promise them huge reductions in their tax bills if only they would give them a credit card number to charge them some modest fees - of a few thousand dollars. Of course, later on they would say they tried their best but the IRS would not reduce the debt, but thanks will keep the thousands of dollars in fees.

Another article recounts the experiences of an "immigrant" who bought a house described as a "modest" house in Brooklyn New York - one of the hottest real estate markets today.  Of course, he bought the house years ago when Brooklyn was not quite the yuppie enclave it has become.

Anyway, his wife died of cancer and he was injured at work and can no longer make the mortgage payments.  Of course to me, the obvious thing to do is to sell the house, considering what properties in Brooklyn are bringing these days, and cash out and take all that big pile of money and move down to Florida and live happily ever after in over-55 park model community.

But once again, we have the "stay in the house" mentality raising its ugly head.  Rather than cut his losses and get out from underneath a mortgage he can't afford, he fired his lawyer and hired a debt resolution company which claimed they could stop foreclosure and rework the mortgage, forgiving tens of thousands of dollars of debt.

The mortgage workout company, of course, was fraudulent and had the poor fellow sign documents basically deeding the house to them.  The story does have a happy ending in that the con-artist ended up going to jail, although it is not clear whether the fellow get his house back or not.

What do all these stories have in common?  The common denominator here is not stupid people being taken advantage of, but rather greedy people being taken advantage of.  For some reason, in America, the mythology is strong that you can have debts forgiven or wiped out for no reason whatsoever.  All you need to know is the secret code words and handshakes, or hire the right people and suddenly thousands, or tens of thousands, or even hundreds of thousands of dollars worth of debt will be wiped out just as though you would erase it off a chalkboard.

I hate to break it to all of you but this is a fantasy.  Banks and other lending institution just aren't willing to walk away from huge amounts of debt for no reason whatsoever, when it is possible they can collect on those debts - even in part.  Sure, Donald Trump can force a cram down on his casino loans before walking away from them entirely and leave the banks holding the bag.  The big players get away with that because if the banks foreclosed on those mortgages they lose almost everything in short order.

But under modern personal bankruptcy code, lenders get a "workout" of debts owed and usually the bankrupt has to pay back or work out a schedule of payback of debts over a fixed number of years such as five years.  Since the lender has already collected a lot of interest, there's no incentive for them to reduce the balance on the debt.

Not only that, lenders have found from experience that when they do offer these sorts of deals, the borrower in question usually ends up going insolvent and ends up in bankruptcy anyway.  Since the lender has reduce the debt, they are given even a smaller slice of the pie in bankruptcy court.  So from the lender's perspective, there is no incentive to write off debts as all they're doing is shooting themselves in the foot.

Similarly with the IRS, there's little incentive for them to write down overdue tax bills.  Doing so only encourages more people to not pay their taxes and then try to negotiate something on the back end.  I have found that just calling the IRS directly usually results in resolution of any trivial matters as the people there are friendly and genuinely want to help out.  I strongly suspect they will turn down any settlement offers made by a tax resolution company just to discourage that sort of thing.  Not only that, tax bills are pretty easy for the IRS to collect.

Unlike MasterCard and Visa, the IRS can garnish your wages, attached bank accounts, and put liens on your property, all without having to go through bankruptcy court.  They have huge leverage on their side, so there's very little incentive for them to settle for pennies on the dollar.

I have found in some situations they are willing to waive interest and penalties for late payments or at least reduce the amounts in question, where there has been some sort of legitimate understanding.  But the actual tax amount due, they are pretty inflexible about that.

Again, this gets back to the poverty stories posting I mentioned earlier. Poor people and unsophisticated people - usually the same people - believe that there are secret tricks to getting wealthy and all you need to know the secret handshake or the right person to "get lucky" and become wealthy.

So they believe that companies will "write off" huge amounts of debt or bills without much fuss or trouble, mostly because they don't understand what the term "write off" even means.  I recall while working at both GM and United Technologies, hourly workers telling me that some huge horrendous loss that the company suffered was merely a "write off" for the company, as if somehow the company made a profit from its losses.

Well it is true you don't pay taxes on losses, and losses do offset profits and those reduce taxes on your profits, they are also just losses.  And if you have enough losses, you have no profits, which means of course you pay no taxes, but it also means you are slowly going out of business.  Eventually, company has to make a profit, something that many "" companies don't seem to realize.  It's also something that many poor and unsophisticated people don't realize as well.

If you have positive equity in your house, there is very little incentive for a mortgage company to adjust your mortgage and write off thousands of dollars in debt.  During the post 2009 meltdown, some banks actually did this in limited circumstances.  However the way it was handled was very haphazard and uneven.

I recall reading one story about a woman in Fort Lauderdale who bought a condominium at the height of the bubble.  She arranged for the mortgage holder to write off a huge portion of the debt. She then turned around and sold the condominium and actually made a $20,000 profit.  This illustrates why banks are reluctant to write down mortgage amounts.  It also illustrates that such write-offs are unfair, as they can profit the profligate, while punishing the thrifty.

(It is sort of like Ontario's experiment in guaranteed income which comprises sending $16,000 to random people in the province.  This is not really so much a guaranteed income program, but a lottery for a lucky 4,000 people in the province.   If I wasn't one of the 4,000, I'd be plenty pissed, that's for sure!  Similarly, randomly and unevenly "forgiving" debts is not fair, either, which is why it is not commonly done).

In addition, markets recover, much as they have since 2009.  Except for a few instances where people bought at hyper-inflated prices in huge bubble areas (or areas where mortgage fraud was common), most houses today are worth more they want they were mortgaged for in 2008.  So, you wait a few years and you have positive equity again.  If the bank writes down a big chunk of the mortgage, they end up giving away equity to the homeowner.  This is not fair to the bank, nor fair to those of us who chose to buy houses we could actually afford and put down proper down payments.

Regardless of whether mortgage write-downs were right or wrong, today they are a very rare beast - if in fact they were common at all, even in the depths of the recession.  If you give your money to a company promising to write down huge chunks of your mortgage, chances are you're going to be ripped off.  Either they are just a cover for a refinance company, or they're going to play one of these debt reduction scams which could result result in you losing your home or going bankrupt.

As noted in the recent article, many of these people are just outright scam artists, who bamboozled clients by telling them they need to sign over their house their company in order to reduce the mortgage balance.  This is just outright fraud and they are basically stealing the person's house.

Other debt reduction companies promise to reduce your debt load, but ask for a huge fee upfront and then tell you to "escrow" your normal monthly payments to them.  Rather than pay your lenders, they argue that they will hold that money in trust for you, and then negotiate with the lenders to reduce the balance owed.

Again, as outlined above, lenders have no incentive to to merely write off huge chunks of debt for no reason whatsoever even if an impressive sounding company with big ads on television calls them.  In fact, they may just hang up on such folks.

Again, theses debt resolution companies will tell you they tried their best, but failed, but thanks we'll keep the fee plus the money you put into "escrow" with them.  Now you are really behind on your bills and facing foreclosure and probably have to declare bankruptcy as a result.  Thus, you have not avoided bankruptcy but actually have made it worse and gave away what little is left of your hard-earned money to scam artists.

All of these scams that one thing in common.  They're very much like the invention broker scams I have talked about before, that have you sign contracts where they argue they will use "best efforts" to help you out of your situation.  With the invention brokers, they promise to use "best efforts" to market your invention.  One year later, they tell you they tried their best but didn't succeed and, by the way, thanks for the money.

"Best efforts" contracts are impossible to enforce.  There is no legal definition of what constitutes best efforts.  So long as they can point to one brochure they mailed out or one phone call they made they can argue they use their best efforts.  And of course, for the amount of money involved you can't afford to sue them anyway.  A lawyer will want $10,000 to $20,000 just take such a case, and $2,000 to $5,000 isn't worth suing over.  And oh-by-the-way you are bankrupt, so you can't sue anybody anyway.

Now if you think these sorts of organizations are scam artists and scoundrels and criminals, I have to agree with you.  And the fact that they advertise on the radio and television and billboards does make me sick. But then again lawyers and doctors have her ads on billboards these days, too - and I probably would advise against using the services of either.

And sadly, many unsophisticated poor people believe that if something is advertised on television or the radio or even on the billboard, somehow it has been vetted by the organization that puts up the advertisements and therefore it must be legitimate.  Nothing could be further from the truth.  As I noted in some earlier postings, some of the worst bargains in the world are advertised in the back pages of Smithsonian Magazine, a magazine published by an organization which is funded by the federal government.

And a lot of stuff appears on television which is, if not outright fraud, are at least real bad bargains.  If you see life insurance for seniors over 50 advertised by one of the former cast members of Happy Days, odds are it is not a very good bargain.  Henry Winkler - how could you?

And yes, we should rein in that sort of advertising and hold media outlets accountable for the advertisements they present.  And yes we should have stronger enforcement mechanisms to go after con-artist and fraudsters and even people just offering shitty bargains.

But guess what?  That ain't about to happen.  As a story about the mortgage reduction fraud illustrates, there are thousands of complaints about this sort of thing, but very limited resources to prosecute the offenders.  It behooves us as individuals to look after our own best interests as our first line of defense.
And to do this it isn't hard.  You just have to stop believing in the something for nothing mentality, as it always gets you into trouble.

As soon as you start thinking that there are easy ways to get out of your debt situation, you are prime fodder for some sort of con-artist.  If you think there is easy money to be made in MLM schemes, you're going to get ripped off. If you think you can make a lot of money by having special secret knowledge or knowing the right people, chances are, you are going to get fleeced.

So just stop believing in that stuff.  There is no magic get-out-of-jail-free card, just more misery piled upon misery.

Wednesday, April 26, 2017

Why There Won't be Facebook in Space

 The harsh realities of actually trying to be self-sufficient in space will negate a lot of personal freedoms.  We can't be a "spacefaring" civilization if we are spreading rumors and fake news and wasting time on social media.  People who believe in a flat earth cannot live in space.

A reader writes asking my opinion about "Alternative Technologies" such as that of Nikolai Tesla, Buckminster Fuller, and like.  While I admire these people as innovators and iconoclasts, I also realize that a lot of what they proposed was impractical.

This is not to say what they accomplished was nothing, only that sometimes leaders and visionaries have ideas which don't necessarily translate into practical applications, although they do influence society in one way or another.  For example, we are members of the Frank Lloyd Wright society, which entitles us to a discounted admission to Frank Lloyd Wright buildings as well as a subscription to their most excellent magazine.  Frank Lloyd Wright, as I noted before, was mostly a failure in his life as many his projects never got off the ground, and many of those did ended up being poorly constructed with leaky roofs and shaky foundations.

But the term "failure" in this instance is relative.  While many of his projects ended up being torn down or never built, and many the projects that were built ended up being remodeled or had severe structural or other issues, his role as a visionary was the most important aspect of his career.  More important than his actual buildings was the influence he had on modern architecture and design as well as his philosophy of architecture design and even life itself.

A whole host of modern architects all owe their careers to Frank Lloyd Wright whether they realize it or not.   I think most of them realize it.

Similarly, Nicolai Tesla's crazy ideas about charging the atmosphere for free energy never amounted to anything, and probably represented his mind going off the rails later in life.  However his contributions to electromagnetics are incomparable.  So much our modern society so much of our modern technology would not exist if not for Nikolai Tesla - or perhaps someone like him.

While some of these visionaries have failed in their own lifetime, their contributions to society is incomparable.  We have always relied on those with a vision of the future to guide us toward that future.  All of the technology we have today was indeed envisioned by others decades ago.   That vision guided us to the reality we have today.   And today, there are two almost diametrically opposed visions as to what our future will be - outward or inward looking.

If you read a lot of science fiction, particular older science fiction, the idea of leaving Earth in colonizing the planets or even distant stars is a common theme.  In most of these stories, it is posited that people want to leave Earth because Earth has become so unattractive.  Moreover, there is a tension between those wishing to explore the planets and those wishing to remain on Earth.  The latter are more interested in dividing up the pie that exists and looking inwardly as part of a dying society.  Those wanting to explore and move on are viewed as visionary had outward-looking, with an optimistic view of the future.

It is no accident that Elon Musk named his company Tesla after the visionary inventor.   Musk is no mere software or social engineering developer, but a man building serious hardware for both Space and Earth.  Electrical Engineering with a capital "E".   But today we see a dichotomy in the vision of the future between Elon Musk with his optimistic outward view of the future and Mark Zuckerberg and his inward, less optimistic view of the world.

Zuckerberg at Facebook envisions a future where we will all be captive to 3-D goggles and view our world through virtual reality.  We will interact with others and machines through a simulated reality.   In this view, there's no need to ever leave home or even look out the window, as whatever you want to see can be seen through virtual reality, preferably through a Facebook interface.

This view of life reminds me of the science fiction "The Machine Stops" (written in 1909!) in which society has devolved into an insular civilization where people live in windowless rooms far below the Earth and interact with each other through video screens and cameras and virtual interfaces.  No one bothers to travel anymore, and if they do it's through robotic vehicles and even robotic airplanes which have no windows as people are afraid to even look outside.  It is a world where society has stopped evolving and expanding and instead has turned inward on itself.  This is the Zuckerberg future.

On the other side of the coin are stories of mankind reaching out to colonize the Moon, Mars the asteroids and even Jovian satellites.  Or perhaps even other star systems.  As Elon Musk said, we must become a space-faring species in order to survive. This viewpoint also has a bleak outlook for mankind, and that it writes off the entire civilization of Earth as a dead end, fated to devolve into squabbling over increasingly finite resources and trivial political and theological differences.

These sort of science fiction stories posit that space exploration will be a new frontier or a new wild West, where hardy individuals will set out to explore the planets and other heavenly bodies to eke a living from the vacuum of space.

I'm not sure that either vision of the future is necessarily a rosy one.  As I noted in earlier posting, the exploration and colonization of space will be a horrendously difficult task.  Sure, we can boost people up into low earth orbit for months or even years at a time.  But that is only with the aid of regular supply rockets, bringing literally tons of supplies to the space station, including food, air, and water.  We are hardly even close to self-sufficiency in space.   And nowhere near the level of sophistication needed to not only survive in space without a constant stream of supplies from Earth, but be able to sustain technology as well.

But the technical issues pale in comparison to the social ones.  Not only will almost everything have to be lifted from the gravity well of Earth in order to establish civilization beyond the bounds of our atmosphere, but civilization itself will be fundamentally different from that on Earth.

Simply stated, in an environment where every breath is a precious commodity, there will be very little room for bullshit. Whether it is colonizing the Moon, Mars, or outer asteroids, people will have to work constantly just to survive. They'll be no room for slackers, welfare recipients, or even the disabled or handicapped.  It would be a civilization of eugenics and harsh realities. You would have to apply for a permit even to have a child. Any idea of free speech and your personal rights will be severely curtailed.

There would be no place in such a spacefaring civilization for people texting while driving or spending their hours on Facebook instead of working.  It'll be no place for fake news, urban legends, rumors and innuendo - perhaps not even for religion.  There would be no time, money, or resources available for people to indulge in virtual reality fantasies, much as Mark Zuckerberg proposes for those remaining on Earth.

And these are the harsh realities and harsh choices we faces face as a civilization.  Do we remain here on Earth and look inwardly and isolate ourselves with various electronic entertainment such as virtual reality?  Do we evolve our civilization into little more than a dividing up of the pie into smaller and smaller slices as the Earth becomes more and more populated?

Or do we expand to other planets and planetoids to to expand our civilization beyond our home planet -  but in the process give up much of what comprises that civilization?

It is interesting.  We have visionaries for the future with two dramatically different visions.

Of course, it is exciting as things I read about as a youth as science fiction are now becoming reality.  I can talk into a little box hardly larger than a pack of cigarettes and it converts my speech into the text you are reading right now.  This was the stuff of fantasy in my childhood.

Regardless of which envisioned futures, or both, takes place, it is a good thing that we still have dreams.  Mr. Musk, in addition to space exploration is also developing the vision of high speed "hyperloop" trains traversing the countryside.  Again this was a fantasy - a science fiction fantasy - of my youth.  It is fills me with fascination and wonder to see these things at least being tried.

Similarly, it wasn't long ago that things like wind is solar power or dismissed out of hand as foolish pursuits that could never supplant traditional coal, oil, natural gas, or nuclear power.  And perhaps they never will entirely, but now they're considered serious players in the energy marketplace.

And wild fantasies of solar powered homes with energy storage modules in the basement, which were the stuff of science fiction even back in the 1930', appear to be coming true today if Mr. Musk has his way.

Of course, this all could go horribly wrong and be unwound in short order.  None of these Technologies are making serious about some money yet, and many are only soldiering on because of government subsidies and tax breaks.  Simple changes to policies could bury these new technologies for another century or so.  We are poised to enter either a new age of wonderment or a new Dark Ages.

I can only hope that mankind proceeds with its visions, rather than being caught up in primitive belief systems of the past.  It defies logic that today more than ever we are still arguing over religious dogma in an era of high technology.  That the bulk of the population of the world is caught up in a life-or-death struggle over whose God is the right one, or whose political beliefs should prevail.   It is hard to believe we are on the cusp of such wonderful achievements, and yet also on the cusp of slipping back into the stone age.

And yet, it seems like we have been in this situation for decades now, perhaps longer.

What a beautiful it [could] be . . . .

Tuesday, April 25, 2017

"My Mom Does My Homework For Me"

Doing your children's homework for them isn't helping them at all.

When I was in grade school, and even high school and junior high, I remember some of the kids bragging - yes bragging that their mothers did their homework for them, as if this was some sort of special treat or way of getting ahead in life.   These were not the very smart kids in class, nor the children of the well-off, but usually the poorer kids from the other side of the tracks.

For some reason, their parents felt that school was all about "winning" - and that seems to be a trait of the poor in general, even though they win at little in life, at least not financially.   Anyway, I guess they felt that if they cheated a little around the edges, and did their kid's homework for them, the kids would get better grades and "win" at school.

Problem is, of course, if you don't do the homework yourself, you don't learn anything, and as a result, when it comes time for the quiz or test, well, you flunk.   So while the kid might get a few extra points for the homework part of the grade (usually a small part of the overall grade) they end up behind the other students in matters that really count - passing the tests which demonstrate real learning.

I am not sure parents still do these foolish kinds of things, although you regularly read online about some homework assignment that the parent was "helping out on" and he tried to use his old-school math skills for some sort of "new math" assignment, and not only didn't help their kid get an "A" but instead got them an "F".  And of course, they are outraged by it all.   I suspect these are parents who are actually doing the homework for the kid, not "helping" - because the child would likely have corrected the parent if they tried to do the work wrong.

It struck me that these parents from my childhood were the precursors of today's "helicopter parents" who try to shield their children from any sort of danger or problems, and then blame the schools when their kids get bad grades.  However, while traveling though Florida, I tuned into a "talk radio" show that was rather right-wing, and realized that the term "Helicopter Parent" is sort of a favorite of the far-right, who also likes to use the straw-man piƱata "Social Justice Warrior" to illustrate how silly everyone is today (except of course, those on the far-right who are the only people left who are rational -right?).

These terms are bandied about as if the majority of people today believe this way.  And indeed, with regard to "Social Justice Warriors" there is a bit of irony.   People on "alt.right" websites and discussion groups spend hours and hours online every day complaining about "SJWs" who they characterize as people who..... wait for it..... spend hours and hours every day online complaining about the alt.right.    In other words, it is OK for them to go online and defend their right-wing views, but anyone on the left who defends their views is an "SJW" and shouted down.

I subscribe to neither camp - they are both idiots.  If you think Bernie Sanders or Donald Trump are great political leaders, you are both insane, sorry!  And neither of you represents the viewpoints of the majority of Americans, who like it or not, are pretty middle-of-the-road people.  Get over it.  the vast majority of Americans are not Libertarians or Communists.   But I digress.

But getting back to helicopter parents, clearly this trend has been around a long time, as evidenced by my experience in school, a half-century ago (has it been that long?).   There have always been parents who were overprotective of their kids, or who insisted that their children "win" at everything they did in life, whether it was school, sports, or whatever.   Here on Retirement Island, we had to amend our annual Easter Egg hunt as some parents (again, the poorer ones) thought the goal of the Easter Egg hunt was to "win" as many eggs as possible, even if they mean bowling over toddlers and snatching eggs from the hands of small children or stealing them from others' baskets.   When confronted with this ill-behavior, the parents didn't not chastise their children, but congratulated them and chastised the event organizers for "interfering" with natural selection.  The culture of belligerence rears its ugly head once again. 

This obsession with winning at trivial things, however, might be part of a greater scheme.   It struck me that the poor and underclasses are obsessed with winning or at least appearing to be winning, and will drive themselves into the poorhouse to do so.   The sales of luxury cars, motorcycles, big-bus RVs, jet skis, penis boats, and whatnot are not necessarily the highest in rich neighborhoods.  The poor snap this stuff up like mad - paying for it all on time, of course.   They are more willing to go into hock over their heads to "win" at "who has the fanciest camper" at the RV park, who who has the loudest penis boat at the boat ramp.

And it goes without saying, these are the same folks trying to "win" at driving their car - weaving in and out of traffic to "get ahead" as if they were at a NASCAR race.   Got to get ahead - so you can "win" that coveted parking space close to the door!  Or better yet, get a bogus handicap medallion, and you can win every time!   Yes, people actually do this.

Again, this gets back to poverty stories and the idea that to get ahead in life, you have to "win" at any cost, and in order to do that, you have to take shortcuts or cheat.   Only suckers will actually play the game by the rules - all the real winners in the world cheat!

This belies a fool's vision of how the world works.  Yes, sometimes cheaters win, but oftentimes we find this out when they are caught and punished and end up losing everything.   Warren Buffet and Bernie Madoff are both famous "investors" but one actually did the hard work and the other cheated.  What was the end result?

In the end, you make more money from actually knowing something than from cheating on the test.  I recounted before a fellow Electrical Engineering student at S.U. who thought she could jump-start her career by memorizing the tests from the previous year (most research professors have little time to change their tests much).   Her career was short-lived once people discovered she really didn't know anything other than how to cheat on a test.

And maybe that is the difference between the rich and the poor.  The poor obsess about "winning" at things that really don't matter in life, and at the same time losing at the things that do matter in order to obtain a meaningless win.   The rich understand what is and is not important, and try to win only when it is necessary to advancing their real interests - not just advancing their appearance of winning.


Why do the poor spend so much on fences which serve no purpose?

There are many uses for fences.  They can be used to keep people in or to keep people out.  They can be used to keep your livestock from straying or your dog from running out in the road.  They also can be used for privacy to block someone else's view into your property.  Some fences also act as an acoustical barrier, shielding road noise or other noise from your home or business.  And addition to providing privacy from prying eyes looking inward, a fence can also block an unsightly view.  And in some instances, fences are even provided as an aesthetic decoration, particularly elaborate ones, such as stone or brick fences.

Fences also serve another use in that they demarcate a property line.  In some instances this can be useful in physical terms to prevent people from trespassing on your property or building structures on your property or putting possessions or other materials on your property.  They defined the space.

For many people, fences also serve a psychic need in defining the perimeter of their property line.  In that regard, you tend to see a lot of nonsensical fencing, particularly in poor neighborhoods in rural areas.  These are fences that are not contiguous, but rather have many gaps in them.   Clearly they are not keeping anyone in or anyone out or preventing the dog from running in the road.  They are not preventing theft or burglars but rather defying a psychic boundary of the property.

These are not privacy fences either.  We recently traveled through a rural part of Florida and noticed that many of the trailer homes by the side of the road (Route 301) had chain-link fences partially surrounding them.  There would usually be gaps of 10, 20, or even 30 feet between disjointed sections of chain link fence.  So clearly they were not intended to keep their pets for running onto the highway.

And since they were only three or four feet tall, they clearly were not erected with the intention of discouraging thieves and burglars, particularly since they were huge gaps in the fence.  Similarly, these gaps in the fence were by design, not by accident or due to lack of maintenance. 

And since chained link fence is open, they did not provide any amount of privacy protection to prevent prying eyes from looking into their house or to shield the view of the road.  Nor did they provide any kind of acoustical barrier.  And since they were chain-link they clearly were not decorative.

The question that hit me as we drove by miles and miles of these homes was why did people spend quite a bit of money to put up chain link fences around their trailers when they didn't completely encircle the trailer or provide any sort of closure.  They provided no aesthetic value, noise reduction, privacy or anything that I could see.  It puzzled me as to why people put up such fences.

To be sure, some of the properties had fences which completely encircled the property line, complete with a gate to entry.  At least such a fence, although very ugly, would be functional in that it would keep your dogs in and possibly people out.  But these fences seemed to be in the minority.  The majority of the fences encircled only part of the property, usually the part facing the road, with huge gaps where the driveway was located or just random gaps appearing at odd locations.

Why is it that poor people put up such fences?  I would think if your resources were limited, you would want to spend them on something other than a pointless section of chain-link fence which serves no purpose.  This puzzled me considerably.

Another feature that you will find in some slightly higher-end homes in rural areas is the decorative gate fence near the driveway. These are usually brick constructions on either side of the driveway sometimes with a concrete sculpture atop them. These are not supports for Gates or any other fence structure but merely ornamentation.  Again, I'm not quite certain what the purpose of these are other than the owner thought they made the house look more ostentatious.

New neighbors recently moved in and decided to put up a fence to keep their dog inside their backyard. As good neighbors, we agreed to pay for half of the portion on the bordering property line.  The fence serves no purpose in terms of keeping people in or out, but does act as a privacy shield.  Since there are few fences on the island, you can see across several properties if you are in the backyard.  It is interesting that with the fence in place, it not only provides privacy, but also defines a space in the backyard which makes it look more intimate and aesthetically pleasing.

We also installed a gate in the front of the house so that we can park the buggy by the side of the house and it is not visible from the road.  Thus, this provides an aesthetic improved by blocking the view from the outside.  Before, when you drove down the road you could see our buggy and garbage cans by the side of the house which was not very attractive.

Behind our house is a concrete fence which was put up by a neighbor many years before we moved here.  We have pressure washed and painted this face so it looks much nicer.  However, the point of that fence also seems to debatable other than perhaps to keep in a small dog.

It seems the fences serve some sort of psychological need that people have to define boundaries and define personal space.  We had the property surveyed before the fence was put up between our house and our neighbors, and I was surprised after the fence was up how much more property we actually had than what I thought we had.  When there is no fence in place, one tends to err on the side of caution and not intrude on a neighbor's property.   Or at least some people do.  I was chagrined, after the new fence was up, to discover that our former neighbors had been gardening on our side of the property line.

Of course, fences are not cheap, either to buy or to maintain.  While the new fence looks very nice, I'm sure in a few years it will turn gray and warp and need to be repaired.

As for the fences near the trailer homes along Route 301 in Florida, I'm still puzzled as to why someone would install a partial section of chain-link fence, other than to provide some sort of psychic boundary. The fence just not fencing anything in or keep anything out, but announces to the world where the property line is.

I would think, living so close to a busy highway, one would want some physical screening and acoustical screening to keep down the noise, headlights and the ugly view.  A few well planted trees would act as a barrier for all of these.  I would think that would be a more pleasant thing to have then interrupted sections of chain link.

But then again, a lot of what the poor do mystified me entirely.

Friday, April 21, 2017

Why the Media is Not A Good Source of Information

I could not find a photo of Deborah Reese anywhere online, so I will have to use this generic profile picture to represent her.   On the other hand, if you want to find a photo of her murderer, Ledell Lee, they are all over the Internet.   Funny how that works.

Recently a man was executed in Arkansas for a crime he claims he didn't commit.  The media doesn't much report about the crime, but the criminal.   We rarely hear about the actual details of the crime or the victim, but hear volumes about how the criminal got a bad deal in life - or how they got shafted by an unfair trial or how they were actually innocent.   We hear the criminal's story, again and again, but rarely the real facts uncovered at trial.   And we never hear the story of the victims.

While the media wants us all to be victims, when we actually are one, they treat us like, well, victims, and kick us under the bus.

The media reports that Lee was convicted based on "eyewitness testimony" which initially shocked me.  Eyewitness testimony of strangers is not very reliable.  Could a man go to the death chamber based on the photo ID by some people on the street?  It seemed incredible in this day and age.

But if you read the actual facts in the case, from his appeal decision, another story emerges:
William McCullough Jr. lived near the victim's house and had been home on the morning in question.   Sometime between 10:00 a.m. and 11:00 a.m., he heard a knock at his door.   McCullough went to the door and was met by a man who asked to borrow some tools.   McCullough gave the man a driver ratchet and a socket, which he promised to return.   The man did not return the tools.

At approximately 10:50 a.m. on the morning of the murder, Katherine Williams, the victim's mother, received a phone call from her daughter, who lived some four or five houses away.   A man had just knocked on the victim's door, asked if her husband was home, and inquired about borrowing some tools.   When the victim replied that she had no tools, the man left.   According to Katherine, her daughter told her that she was scared and “did not trust this guy.”   The victim promised her mother that she would be at her house as soon as she finished curling her hair.   Her daughter never arrived.

Andy Gomez lived across the street from the victim, and was also home on the morning in question.   While looking out his front window, he saw a man standing at the front door of the victim's residence.   He watched the man grab the screen door and “make a B-line inside just real fast.”   Approximately twenty minutes later, the man exited Debra's residence.   According to Gomez, the man made rapid-head movements, as if he was checking to see if he was being watched.   Suspicious, Gomez got in his car to follow the man.   He caught up with him on a nearby street, where he observed the man talking to a female with spirals or braids in her hair.

Glenda Pruitt lived at 128 Galloway Circle on the date in question.   A man she had seen four or five times and knew as “Skip” walked up her street.   Glenda, who wore her hair in long braids, had a short conversation with Skip as he passed by her house.   McCullough, Gomez, and Pruitt identified Lee in a photographic lineup as the man they had seen in the victim's neighborhood on the morning of her murder.

Debra's body was discovered in her bedroom at approximately 1:38 p.m. that same date.   Three one hundred dollar bills that Debra's father, Stephen Williams, had given to her were missing from her wallet.   This money had been part of a larger stack of crisp new bills Williams received in sequential order from the Arkansas Federal Credit Union.   At Lee's trial, the State offered evidence that, at 1:53 p.m. on the day of the murder, Lee paid a debt at the Rent-A-Center with a one-hundred dollar bill.   Of the three one-hundred dollar bills that the Rent-A-Center received on February 9, one of the bills bore a serial number that was two bills away from one of the bills that the victim's father had turned over to police.
* * *
During the State's case-in-chief, Glenda Pruitt testified that she saw Lee shortly after the murder when he passed in front of her house, which was located near the victim's residence.   According to Pruitt, she asked Lee, “Where's the fire?” to which he responded, “Well, you are always asking me for weed.”   Without objection, Pruitt testified that Lee responded that he did not use marijuana, but used cocaine.

During cross-examination, Lee's counsel questioned Pruitt regarding her beliefs and practices as a Rastafarian, particularly with regard to the use of marijuana.   He attacked her recollection of her conversation with Lee and whether that recollection was impaired by her use of marijuana.   During redirect examination, over Lee's objection, the trial court permitted the State to present the entire conversation between Pruitt and Lee.   According to Pruitt, she asked Lee whether he had cocaine “running all through [his] veins,” to which he responded, “Yes.   It is running all through me.”   Pruitt then stated, “Don't you know it (cocaine) is poison?” to which Lee responded, “I'm going to get some now.”
If you read CNN or some other "news" story, you read a lot about Lee and his problems and his allegations that he was innocent - without much discussion by the media of whether his claims were valid or not.  You have to dig to get the raw data, and the fact the "eyewitness" knew the defendant personally makes the identification more compelling.  Drug users tend to know their drug dealers, and no, a Rastafarian is not an unreliable witness as the defense alleged.  The serial numbers on the $100 bills seals the deal.

Nevertheless, the "innocence project" claims an "innocent man was put to death!" based on no evidence whatsoever other than claims by the decedent that he "dindonuffin".

Oh, right, I forgot to mention that several women identified him as having raped them.   We put away the right guy. 

But you'd have to dig to find that out.  If you read the media this morning, you might come away with the impression that an innocent man was put to death based on the eyewitness testimony of a few neighbors.  Such was not the case.   A vicious animal was put down, for the sake of the safety of the community.

Freedom - Our Greatest Asset, Our Greatest Weakness

Vladimir Putin has killed over nine journalists in Russia in the last few years.  It isn't as hard for him to control the narrative in his country.

The fellow who started a "Calexit" petition, to have California secede from the the United States has decided to give up and move to Russia.  Well, actually he moved back to Russia.  Or more precisely, never left, as he has a home there and a Russian wife.   But of course, Russia never meddles in the internal affairs of other countries and donchuforgetit!

But it illustrates how countries do indeed use influencers to shape public opinion in other countries.  We do it. The Russians do it. Just lately, the Russians have been better at it.

Calexit is just the lastest gag.  And they don't control these movements so much as give a little nudge here, a little push there.  The Internet makes this easier by providing a Greek Chorus of commenters on Reddit and Facebook and Twitter to reinforce notions that work against the best interests of the US - or any other country.

When the dust settles, it will be shown that Russia was pushing buttons on the Brexit vote - which as you may recall just barely passed.   We require 80% of our condo owners to vote to dissolve our condominium association.   The UK requires only a simple majority to dissolve itself from the EU.   Seems reasonable, right?   But all it takes is a push here, a tug there, and you can shape opinion.   People can be lead to believe anything.  Remember the buildup to the Iraq war?  Yellow Cake Uranium - and this was the mainstream news reporting this, not some weird website.

Think about any movement in the USA that is not only designed to run down our government, but run down our products, our productivity, our science, technology, and medicine - all arguably some of the best, if not the best in the world.   What better way to collapse a country than from within?  And if you read The Art of War, you know this is indeed the best strategy.  If the citizens of a country are dispirited and believe their country to be evil and weak, they will not rally to defend it.  They also will be more than willing to consider ideas that run down their own side and glorify the enemy.

Consider all the weird rumors and theories that have been bandied about in the last decade.   Anti-Vaxxers?  What better way to undermine confidence in our medical system than to argue that the greatest advancements in medicine are little more than poison.   One wag argues that half of all babies born in the next 20 years will be Autistic thanks to vaccines, and that Sesame Street is featuring an Autistic character to "normalize" us to this "new reality".    Until recently, a lot of people took this nonsense seriously.   People with no background in medicine, science, or technology have come up to me and told me they "know" all about this because they read a website and the Internet never lies.

Maybe the Russians aren't causing that movement, but they know what "useful idiots" are and how to manipulate them.   You can bet the Russian Troll farm has a regular member on the Reddit discussion group about anti-vaxxing who keeps priming the pump on a daily basis.  Hey, if people believe that Hillary Clinton chops up children in the basement of a pizza parlor, they will believe anything.

How about 9/11 "truthers?"  How do you think that sort of thing started - or what keeps it going?  The worst attack on the USA since Pearl Harbor - how do we turn this around so Americans think the government did it?   Well, just make shit up and put it on the Internet.  Catchy slogans like "Fire can't melt steel!" are easier to say, while complex arguments about metallurgy and steel hardness are of course, ignored (if it can't fit into one Tweet, it has to be a lie!).

While you're at it, might as well argue that anything bad that happens is a government conspiracy.   Kids mowed down in a pre-school by a psychotic with a gun?  Must be the government, right?   Never mind that this is the same government than runs your local DMV and FEMA and Fannie Mae.   For some reason, when it comes to conspiracies, they have their shit together!

Kids today believe that jet airliners disperse chemicals - for what reason I do not know.   Sounds like a stupid idea, but a lot of people actually believe this nonsense.  It is 2017 and people are having serious discussions as to whether the Earth is flat.  I think we are being baited here, folks!

And so on down the road.   Tell people that "the good old days" were better.   4,000 lb cars with gas-guzzling engines, no seatbelts and drum brakes were "better" than cars today, because they were "more reliable" - right?   Never mind the truth says otherwise.   The next time some yahoo tries to tell me carburetors are better than fuel injection, I'll ask him, "what are you, some kind of communist?"  Because if you want to go back to the "good old days" of primitive technology, Russia has you covered.  I know this as I used to own a Russian motorcycle - a time machine right from 1938.

It never ends, either.  Our food is bad, corporations are corrupt, the water is foul, people are divided, and so on and so forth.   Look around the world today - what do you see that is better?   Not much, do you?   Even Sweden - touted by Leftists as a socialist paradise - is struggling with immigration issues these days.   Our country is doing better than most, which is why people want to come here and leave their home countries.   Well, except the Calexit guy, but he was basically a Russian plant, anyway.

The problem with a lot of this nonsense is the 24-hour outrage news cycle.   The news loves a good "story" and most people watch network news - most of those watch Fox.   So the news reports a one-sided story, because to get both sides of a story takes days, months, or even years.   People get outraged for a news cycle or two and then forget about the details, other than they have a lingering anxiety and fear that the country is going to hell.  The next outrage story - usually at the next news cycle - reinforces this fear.   And our friends the Russians are always happy to chime on on social media to reinforce this feedback loop.

Then we have fake news.   Fake news is easily debunked, but the target audience isn't interested in complicated explanations as to why what they believe in is utterly untrue.  They see something on a fake news site and get outraged.   But within 24 hours, they've pretty much forgotten the story, but remember the underlying distrust of the government, the media, or whatever.   And lest they think to hard about what that outrage story was about, the fake news site presents a new outrage story to keep their mind off the old one.   Wash, rinse, repeat.

The net result is, whether it is fake news or real news, people have this building anxiety about their country, their government, their institutions, their employers, and their fellow citizens.   Colleges are going off the rails (well, not all of them).   Companies are evil and making "profits" which by themselves are evil.   The government is a "swamp" that has to be "drained" and it goes without saying that the court system and lawyers are all bad, bad, bad.

You keep believing this for a few years or even a decade, and you are primed for revolution.   You are ready to vote for anything because radical change is the only solution to our "problems".

Um, what were our problems again?  Was it the cheap oil, the low unemployment, the low inflation or the low interest rates?  Was it the record bull market?   What exactly is it that we need to fix so badly that requires our entire government be overthrown?   Oh, right, the tyranny of it all, having to pay the lowest tax rates in the Western world.

Ought to try living in Venezuela some time.  It might open your eyes!

Freedom by its nature is weak.   In a free society, people are free to say and do as they wish, and outsiders can easily influence our opinions if we let them.   But it is increasingly clear than our free society and the democratic institutions of the entire Western world are under attack from outside forces that are encouraging dissent and division from within.   Every Western country in the world has some sort of separatist movement it seems, as people want to divide up into smaller and weaker countries - something that enemies of freedom would find quite dandy, thank you.

Think about this before you get outraged over something in the news.   Are you being baited?  Is some story that runs down our government really an outrage or a scandal, or just shit that happened?   The water in Flint Michigan wasn't some grand conspiracy but just a massive screw-up in an impoverished town with old lead pipes.   But to hear some on the Left tell it, it is symptomatic of an indifference on the part of the government to the plight of the poor (never mind that the government spends more on the poor than on defense!).   And while it has taken far too long, the problem is, slowly being fixed.   Unlike the infrastructure, say, in Russia.

Of course, I don't watch network news.  And when I read something, in a newspaper, magazine, or online, I try to think about both sides of the story - particularly the other side which is not reported - before being outraged.   In fact, I tend not to be outraged about much anymore, even President Trump, who is turning out to be a pretty conventional Republican, in policy terms, unconventional only in his personality and tweeting skills.   And a Republican President isn't quite the end of the world, despite what the Sanders people would like to tell you.   Of course, they voted for Jill Stein, right?

Stories that run down our country, our government, our institutions - they are a sign of our freedom.  Such stories cannot be printed in Cuba, Venezuela, North Korea, China, Russia, Turkey, Philippines, Thailand, Egypt, Syria, Iran, and a host of others as well.   Well,  sometimes they get printed, but then people end up dead as a result - or at least jailed.

Enjoy your freedom.  People died so we can have it - the freedom to even run down our own country.   But bear in mind that it is all-too-easy to fall into a trap here, to start believing a lot of these stories, believing that freedom isn't all as great as it cracked up to be, and that countries with suppressive dictatorships are more effective and "get things done."

Nothing could be further from the truth! 

Thursday, April 20, 2017

Credit Scores That Finally Make Sense?

Traditional credit scores are pretty meaningless.  By the way, a 720 credit score is pretty shitty.

There is news today that a new type of credit score is being developed to compete with the "Fair Issac" FICO score, which has a lot of fundamental flaws.  I have written about credit scores before and why you shouldn't obsess about them and why they are considered "Intellectual Property" at least by the people creating them.

It is not hard to understand why the credit score was created.   Wading through page after page of someone's credit history (made all the worse by the poor formatting of these histories by the credit score companies) is hard to do.   How can Wally's Mattress World quickly understand whether the sucker, er, customer waiting in line to buy a new "select comfort" mattress is qualified to borrow a grand or two to buy it?  Salesmen have short attention spans, you need to cut to the chase.

The problem with the scoring system was it was pretty primitive.  It was based on a number of arbitrary criteria, some of which actually put you at higher risk for default.   Moreover, the scoring system encouraged "gaming" techniques that really put you at greater risk.

On-Time Payments is one of the major factors in traditional credit scores, which seems like a pretty simple thing.  You pay your bills on-time and you are a good credit risk, right?   Well, yes and no.   One reason that many people seem to have "sudden" financial crises, is that they can continue to make minimum payments on all their debts for years, while at the same time accumulating an increasing amount of debt - like a slow-growing cancer.   One day, they can't make the minimum payments, because the debt has grown too large.   And "suddenly" they are looking at bankruptcy, not six months down the road, or even a month down the road but today or tomorrow.   The day before, their credit rating might have been 770 or higher, and people were still loaning them money.   The traditional credit score could not foresee how the future could be catastrophic.

And a credit score should predict that - not just give a backward-looking review of finances, right?   So one major change with this "new" score is to track whether the consumer's debt is increasing or decreasing over time.   As I noted in my financial gauge package post, the rate of which you are accumulating or paying off debt is like an altimeter or rate-of-climb indicator.   Debt going up?  You are diving.  Debt going down?  Your financial situation is climbing.  Under the old scoring system, the score didn't reflect whether the person was taking on more and more debt, or paying it off over time.   This is a good thing for a lender to know.

Oldest Credit Line is on of the minor aspects of credit score that some folks liked to game (after reading about in on financial pages) sometimes called "age of credit history".  The system rewarded you if you kept that old Sears charge card that you got at age 18 active for the rest of your life - even if you didn't use it.   Closing dormant accounts, which is a good thing to do,  was viewed negatively by the scoring system, which is, of course, ridiculous.   Anyone who is practicing sound financial management skills doesn't leave dormant accounts open.   If you are never going to use a charge account again, why bother keeping it open and at risk for theft?   It is like a dormant bank account - use it or close it! (It is surprising how many people abandon bank accounts, which is why banks now charge monthly fees to drain them).   The new scoring system would place even less emphasis on this oddball criteria, or count the overall age of your credit history based on your lending history, not on how many accounts you left open.

Credit Utilization is another factor - a huge one, apparently - under the old system, which really was of little use to lenders.   If you had $100,000 in open lines of credit (such as credit cards) - which by the way, isn't hard to do - and "only" had $20,000 in credit card debt (which you were having trouble paying off) your score in this area could be higher than the guy with $10,000 in credit card limits and $5000 in debt, which he paid off every month.   Why?  His "credit utilization" was higher than yours, even as you were hopelessly in debt.

I have always advocated for keeping your credit limits low on credit cards.  One way I got into trouble with credit cards (and most people do) is to have huge limits on the cards which allow you to run up huge bills which cannot be paid off in one month.   This is not by accident but by design.  The credit card companies hope you run up debt and end up "trying" to pay it off for months or even years, at 22% interest, before you "roll it over" to a new card or a home equity loan.

Thus, I advocate keeping your limits to a reasonable amount - what you can pay off in a month, with maybe a small cushion for emergencies.   If they automatically raise this amount, call them and have them lower it.  The letter that says, "Congratulations!  We've raised your limit!" is not a sign of your financial acumen, but a deadly trap set for you by the bank.

Once again, sound financial planning is punished by the credit score.   And again, maybe this is by design?   After all, the people loaning you money these days don't want you to have a sound financial relationship with you - they want to ruin you, as they make more money today by utterly ruining people than they do with folks who pay off their balances every month.

So maybe the old FICO score was on-point.  It told lenders who were "suckers" out there and who they should offer ruinous credit to.   Perhaps.  Or perhaps it was a very poorly designed score in need of an overhaul.  Again, the new proposed score would take into consideration overall debt load, not just "credit utilization".

Inquiries is another area which seems rather arbitrary at first, but does make some sense.   Automated inquiries by banks and lenders are usually not counted.  But if you go around town shopping for loans over and over again, the resulting credit inquiries will count against you.  Not a lot, but a little, each.  The idea is, if you have been desperately looking for people to lend you money (and are turned down again and again) it should be a red flag.   On the other hand, if you are an astute consumer, and are trying to shop one loan against another, should this count against you?    Perhaps not.

New Accounts is related to inquiries.  If you have a lot of new recent accounts, it can count against your score, as the idea is you are taking on more and more debt.   This is an approximation, however, of whether you are taking on more debt or not, not an actual tracking of it.  And perhaps this was the only way the FICO people could track this in the past.   But on the other hand, if you were in some credit card pickle, and rolled over the balance to a 0% card, that would count against you as a "new account" even if it arguably meant you were making a good faith effort to get out of debt.

Available Credit is another factor and one which can sink a loan application in the real-world where banks actually read credit reports and not just the scores.   Yes, you can have a stellar credit score over 800 and still be turned down for a loan.   Why?  You may have too many open lines of credit.   If you have $100,000 in available credit card limits (again, not hard to do), you can quickly run up a crippling amount of credit card debt after the lender has loaned you a pile of money - and you may not be able to pay any of it back.   Again, under the old score, a lot of credit was often seen as good, while under the proposed new score, something viewed as less attractive.

Again, serious lenders actually read the reports, not just the scores.   The scoring system is a triage method to quickly screen applicants, not a means of automatically approving them for loans - in most cases.   If you have a low score, you are knocked out of the approval process.  If you have a high score, you pass that part of the application test.   But a lender will likely look beyond the score to see your overall picture - how much debt you have, how many open lines of credit you have, what your income is, and so forth.

You would think a great credit score would qualify you for a loan.  Think again.  Credit scores are merely a screening tool, not an approval tool.

For example, you would think with a credit score of over 800, I could just borrow as much money as I wanted to.  This is not the case.   How much you can borrow and whether you can borrow depends on your income (ability to pay back), your current debt load, and a whole host of other factors.   Your credit score is just a screening tool, not an approval tool.   Just because you have an 800 credit score doesn't mean you are pre-approved to borrow a million dollars, if your annual income is under $50,000.

Oddly enough, at one time in my life, I had well over a million dollars in debts (commercial mortgages, mostly) and my credit score was not nearly that high.   I did, however, have verifiable income in the six-figure range.   As it turns out, ability to pay back, in terms of available income, was more important than whether I still had my Sears credit card from high school.

Credit scores will never be an absolute thing.  Even under this new proposed score, there will still be people who find ways to "game" the system to try to improve their scores - maybe a point or two.   But as I noted in many, many postings, obsessing about your credit score, beyond a certain point, is fruitless.  Pay your bills on time, don't borrow more than you need, and it will take care of itself.

People who obsess about credit scores also are often the same people who obsess about borrowing money as if borrowed money was income or some special treat, and not an onerous burden to be paid back with interest.   It is funny, but the vast majority of Americans really are math-illiterate and think they can get themselves out of a jam by borrowing money or that poverty can be solved by borrowing money (and not to start a business, but to buy a flat-screen TV).

Consumer borrowing is just throwing gasoline on the fire of debt and poverty.  You can't borrow your way out of poverty and you can't borrow your way out of debt (in most cases).   And no, there isn't a "secret handshake" way of borrowing money and just walking away from the debt - even in bankruptcy.

So, this proposed new credit score is an improvement, but it still doesn't mean all that much.  If you are bowing down and praying at the altar of the almighty credit score, something is wrong in your life.  And yes, there are websites and discussion groups that some people visit daily just to discuss their credit score and how to improve it.   This is a distortion of reality and real life.

You are not your credit score.  You are not your debts!