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Buying Real Property

December 31, 2010 Leave a comment

I recently bought a house and I picked now to do it for a few reasons:

  1. Interest rates are low
  2. The Fed has just monetized $600 bn of US debt

One reason not to buy a house right now is:

  1. Housing is over a price sinkhole.

Now, reason #2 is a truly spectacular reason to invest in “real” property. This can be land, precious metals (especially silver), ammunition, seeds, etc – anything that you personally own that would be valuable to someone in a society where paper money is worthless. You have to actually have the commodity in your possession – not a voucher.

So why a house if they are over a sinkhole, and what do I mean when I say housing is over a price sinkhole? That’s two questions and I have two answers:

Why a house?

I bought a house because I can live in it and as money becomes worthless through massive inflation (due to monetizing the debt) I will be able to pay off the house very quickly with my worthless money. It is exactly for this reason that the government is taking the first steps to start hyper-inflation in this country to pay off its own debts. Also, inflation rates are set to rise all on their own. I do not believe the Fed will be able to lower them with any monetary tricks. This is because the bond market, which the Fed purchases US debt through, is going to hell when the US’s credit rating is lowered AGAIN (it was lowered earlier this year). In order to sell our crappy bonds, the incentives for someone to buy them will have to go up – that means higher interest rates. If nobody buys the bonds, then no money is raised. Therefore, the bond interest rates will go up and mortgage interest rates (which mortgages are a fairly large portion of what the bonds are based on apparently) will have to go up even more-so in order to cover. Right now the market for mortgages is very volatile.

What do I mean by “housing is over a price sinkhole”?

A marvelous combination of perverse incentives for banks brought to you by ridiculous regulation has caused a really spooky situation in the housing market. The prices appear to be stabilizing, but there are things afoot that will destroy them some more. I envision this like a house on top of a thin piece of crust over a sinkhole that is getting deeper and deeper. The people in the house don’t know it yet, but they will fall a long way when the crust finally breaks.

Here are the main ingredients:

Banks are insured for loans that default for the full remainder on the amount because the government has decided they are “too big to fail”. They don’t get this if they short sell or loan modify, so right now they face a situation where if a loan amount owed is for $200k and the property is now only worth $100k and they adjust to $100k or short sell for $100k they are out $100k. If, instead, they foreclose on it they get the full $200k and they can then resell it as a repo for $100k. They don’t want too many people to notice this – especially with new regulation committees that have sworn to give a shit watching – so they are letting people hang on and aren’t foreclosing as quickly as they could.

If they aren’t selling (and they aren’t much), and they aren’t modifying or foreclosing – the prices have pretty much slowed to a crawl on their downward trend. This lets the politicians say, “Look! Our bullshit Keynesian measures worked! Take that free market!” But in actuality, what they are doing is sending signals to homeowners that are underwater on their loans that it is ok to just stop paying their mortgages. This is a moral hazard because people are less afraid about being evicted than they should be. I say “should be” because what will happen is that the banks will foreclose on all of them at once, claim a massive loss, get bailed out by Congress again, collect their insurance payouts, and rake in massive profits while house prices plummet to new lows.

Now, you might ask, “Why don’t you wait until after that to buy a house? They’ll be cheaper then.” That’s true, but I don’t think they’ll drop more than $50k more and interest rates will have to massively increase for the bailout. So, I just borrowed $100k at 5% interest, but I could have waited and borrowed $75k (my guess) at 25 or 35% interest.

Another reason to buy a house is that money in the bank is useless now, and going to be even more useless in the next year or two when inflation explodes. A house has many uses that precious metals do not, and I’m sure I’ll find some sort of entrepreneurial use for it.

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Categories: Europe, The USA

The Holy Church of Western Government

December 29, 2010 Leave a comment

The Socialist View of Government

In the beginning, there was government. Government created the Earth and Seas and animals and finally people. People, being foolish and too ignorant to know better, took some of the Earth away from Government. By doing so, they created more food and wealth than what Government had intended them to make and this caused their numbers to increase beyond that which Government deemed prudent. To solve this, Government created war and taxes to pay for it. Through war, the numbers of people would occasionally fall back to what Government deemed prudent, and through taxes Government could starve those that survived in order to keep them from reproducing too successfully.

Then some people took the power of invention away from Government and created specialization. This allowed them to live in cities, which Government liked because it made them easier to affect en masse, but then they started trading with their neighbors and learning things like medicine. This caused their numbers to once again increase. Government found it difficult to stop this since the people tended to get along well with the people they were trading with, so Government took control of another invention of the people – Religion. Using Religion, Government was able to divide the people and set neighbor on neighbor and incite hatred (even though Religion said that sort of thing was bad. Government was powerful enough to force Religion to collude). Government jealously took back the power of invention.

Then people got tired of killing because Government made Religion tell them to, and for a while they went back to trading. This cycled a few times before finally Government convinced the people that they didn’t need Religion to kill each other anymore. They could do it just to appease Government. Government gave the people invention back so that they could find ways of being more efficient in killing each other – and they did – but they also found other things they liked using invention, particularly more medicines and more things to make them live longer and better lives.  In a fit, Government convinced one group of people it was their Government Given Right to slaughter other people wholesale – and they did. Then, when people had gotten tired of that, Government let them take a break for twenty years and then had them do it again.

Recently, people have become tired of this again, and are taking a break. They haven’t had any other such wars since. Many people have died in wars, but by comparison they have all been small matters. Government is still angry about the number of people inhabiting the world, and it is grumbling again….

The devout priests of the Almighty Government (politicians) try to appease Government by feeding it more taxes and giving it more control over the peoples’ lives in return for the wealth and power that Government provides. They do this today as it always has been done since Government created the world. Occasionally, the people take some of this control away from Government by limiting what they give to the priests. Government, knowing they are foolish and ignorant, have the priests try to gently goad the people back into compliance by raising taxes and limiting their power to collaborate – and especially by limiting their power to trade. If this doesn’t work, then once again Government will have the priests use war to coerce the people back into adherence; while at the same time, killing as many as possible because it is Government’s belief that there are and always have been entirely too many people around.

Categories: Politics

The Proper Response to Socialists

December 23, 2010 Leave a comment

Their world is uncertain and out to get them.

 

I’ve been thinking about socialists in an attempt to put myself in their shoes. There is a reason why the state controlling everything and meting out resources makes sense to them. First, I bit the bullet and watched some MSNBC, read some articles at the Huffington Post, Der Spiegel, etc and since I couldn’t agree at all with what they were saying, I just tried to get an objective feel for the person saying it. Granted, I have to also assume that some are just actors playing a part, but even so, assuming they are playing it correctly – that is still useful.

Some Observations:

  • They frown a lot. They literally have frown lines burned into their faces that have been botoxed, painted and pinched with surgery to look young and not frowney.
  • Unshakable self righteousness. The concept that they might be operating on inaccurate or incomplete assumptions is not a possibility in their minds.
  • Naked aggression towards anyone with a contrarian view. This manifests as hostile (e.g. These morons are so stupid…) or as belittling (e.g. Well, they’re just not smart enough to understand…).
  • They constantly threaten any among their flock to not stray from their view (e.g. Any of us are smart enough to see that, but they just don’t get it). That example is an example of their “othering” activities – i.e. you adhere to what we say and do, or you are one of those “others”, and you don’t want to be with those “others” do you?

This strikes me as “playground” behavior. These are the sorts of things that bullies use to push the weaker kids into their group where they can exploit and control them. The weaker kids then find other kids that are weaker still and exploit them. To do so, they use the above tactics.

Here’s a website that goes into great detail on the art of bullying.

I happen to agree with that website in that the bullying behavior rises out of feelings of inadequacy and fear. The critical question with socialists is what do they fear and why do they feel inadequate?

The “Hot Chick Dilemma”: This Dilemma arises because human beings tend to behave like electricity when faced with challenge – we take the path of least resistance.

How it works: hot chicks are afraid of getting a bad grade, and working on the homework to the point they get good enough at it to get a good grade is harder than talking sweetly to the dorky kid that can bang the homework out in no time with an A grade, so she takes the easy way out. Once the hot chick starts doing this, it is all she knows how to do, and she knows that’s a bad thing. Sooner or later she is fairly certain that it will be important for her to have these skills on her own, but now it’s too late. The moment to learn has passed and she perceives it as being gone forever. Now she feels like she is at a disadvantage. To make up for this, she will always look for expedients that are easy. She will start finding reasons why everything is unfair and will use this lack of fairness as a reason to try to get special treatment – think of it as a subsidy – because of her self-imposed disadvantage. Besides, talking sweetly and looking pretty to get pity is something she has perfected, so why not use it?

Socialists have a similar problem when faced with a free market. They immediately see that some people are already rich and successful and some people are not. Since almost everybody falls into the second category, the socialist is also in that category. There are two options – work hard, find a niche skill or product, take risks and become wealthy; or villainize those few that are rich and demand they just give up their wealth to everyone else. Usually, they are perfectly fine with working hard and finding niches – it’s the taking risks that scares the bejesus out of them.

Now, both the hot chick and the socialist are put into a predicament – one by relying on natural beauty to garner pity and the other relying on income disparity to garner pity. The proper response to this behavior is to tell them to “get a job you bum!” They will claim they are discriminated against and that they can’t. They will attack and belittle anyone who exposes them as beggars. You know, like bullies.

Bringing it back to the beginning:

How to handle these people?

Steps:

  1. Do not enable them – don’t let anyone do the hot chick’s homework for her. Don’t give one dollar out in welfare because the socialist wants it.
  2. Give them the pity they ask for. They are crippled, disabled people and you should treat them as such. Be understanding of their situation. Don’t belittle them because of their situation, and don’t try to fix it for them – just be understanding.
  3. For the socialist – assure them that some risks are worth taking and challenge them to find some. They take risks every day – for example: everyone speeds when they drive. Get them talking about that little risk they take. We can all agree it’s ok, so it should not cause an argument. This will get them more comfortable with risks.
  4. Point out a hole in their socialist doctrine and then talk about solutions – slowly turning to free market solutions.

Hope.

This seriously works. I am very proud to announce that I have gotten an ardent socialist friend of mine to, without ever talking to me or anyone else, come to the conclusion that free market solutions are preferable for the healthcare problem than government solutions. He even came to the conclusion regulation at the behest of the AMA is what caused skyrocketing costs all on his own.

I have another socialist friend who came to the conclusion – all by herself – that charity is superior to government welfare programs. We both agree that neither is perfect, but with charity you get more bang for your buck.

It took over two years to plant the seeds in these people, and they still regard themselves as socialists, but their behavior is changing, and that’s what matters.

Go get ’em!

Categories: Politics

Conflict Motivation: Revenge vs. Profit

December 15, 2010 Leave a comment

Hannibal Sacking Rome

People attack each other for two reasons – revenge and profit.

The first one is easy to understand. One group wrongs another or is perceived to have wronged the other and so revenge or justice is sought. Revenge has the added flavor of irrationality in it – which means people are not thinking rationally, but they are seeking to retaliate and they feel they are right to do so. Justice only comes in if they really are right to do so and if the punishment fits the crime (i.e. is not more extreme than the crime committed). Of course, the person that is retaliated upon may view the retaliation as being too extreme and so will seek retaliation of his/her own.

The second one is not so easy to understand and often causes the first. This is the more important of the two to understand, and so I will focus on it the most. There are two kinds of profit to be gained by attacking – material and political. The most important of these two is political profit. While it may be possible to make a big haul on loot, the political profit is what frightens enemies, warms supporters, and gains acute attention. This is what allows the conqueror to increase holdings and embark on more campaigns or gather other powerful people.

As an example of all of this, I would like to use the opening bank robbing scene in Batman: The Dark Knight. It starts off as a bank robbery – we understand this, and it is interesting, but it doesn’t “wow” us. We see a great deal of backstabbing amongst the robbers – these are attacks for material gain. At one point the bank manager threatens the Joker – which is our promise of revenge. However, afterwords, the Joker burns a large portion of money in front of the people he stole it from. Why? He does it because it is politically profitable. By doing that he shows these people that his priorities are more far-reaching than money. He shows them that he is willing to do what they will not, and that is why he should be leader. Basically, he is telling them “I can play your game better than you”. In this way, he has assaulted their sensibilities and their pocket books and taken from them their admiration.

In the old days, this was called “glory”. It was all that was needed to rule countries, move the populace to some action or even to prevent assassination just by virtue of the presence of the glorious person.

This is still true today. Glory is won today by overcoming adversity in a public forum. Take Obama for example: he was a bit of a nobody right up until near the end of the Democratic primary, and then when he won that he was pole vaulted into this sterling role that McCain couldn’t overcome – even with a female running mate. Obama still has his blind followers that follow for no reason other than they are chasing his glory.

The most interesting thing about glory, and the most important, is that how the glory is obtained has no bearing on the quantity or quality of the glory. A bloody conqueror that sets his throne on a pile of dead bodies is just as imposing as one that moves nations just by speaking. Most often, glorious people are a mix of the two.

Categories: Politics, Uncategorized