Facebook addiction

And I line my secrets up all one by one
I put 'em all away when I was done
And I would really love to hear your voice sometime
To close a little distance in my mind
I'm happy, can't you see?
I'm alright, but I miss you

                   Brandi Carlile  2005

          Let’s talk Facebook.  Although I know it's become fashionable to criticize it, overall I think Facebook is great. If you look at your list of friends you’ll find that the majority are people you really like, people you kind of like, and acquaintances from a happy time in your life.  Although there may be a few frenemies stuck in there, generally you won't have anyone you intensely dislike or hate. They won't friend you and you won't friend them. Because of Facebook you can stay in touch/knowledge with people that would have completely disappeared from your life.  And you can do it with virtually no effort.  The concept is both brilliant and simple.

But I think the best part of Facebook is how it enhances everyone’s self esteem, every single time, no matter what you say.  Here’s what I mean by that.

As you probably know, there is an endless stream of annoying comments on the site, just as there is a ton of intelligent and funny material.  Let's say someone posts the former.  I know everyone has their own list of what drives them crazy; some of mine are:

1)  Any post that tells you how to live your life.  Look, past 25 most people  aren’t changing, and if they are a 10 word comment isn’t going to do it;

2)  Any comment that makes absolutely no sense, except possibly to the sender.  I guess this is designed to show how mysterious and clever that person is;

3)  Any post by anyone who has already posted twice or more that day.  OK, once.

So let's assume somebody hits the jackpot and commits all three mortal sins at once.  For their fifth post of the day, they quote an obscure philosopher from 1850 which makes absolutely no sense, but as far as I can tell it’s advising me to be happy.  Now I read once that the average person has 150 Facebook friends.  Based on what I've seen the number is far higher, especially from my single friends. But anyway let's assume that our previous poster has 200 friends.  And within a 24-hour period of time 2 people hit the like button, and 2 other people write a favorable response.

The poster feels great.  100% of the people who responded to him have responded favorably.  He is not thinking about the other 98% of his friends who have not responded.   Maybe 20% or 50% of them that read the post think the same thing about it that I did, or maybe they already hid him from view.  But when we post, we never think about that.  If we did, we'd rationalize things and say that they all probably liked it but they were just too busy to respond, or maybe they just overlooked that one.  Regardless, the favorable response rate is 100%, every time, which encourages us to post more.  We’re like Pavlov's dogs.

I think my next blog will be about who is more powerful, Mark Zuckerburg or the President.  Things that keep me up at night.  Have a good night, everyone. 

 JR

Debt Catastrophe

Oh Lord, won't you buy me a Mercedes Benz?
My friends all drive Porsches, I must make amends.

                                      Janis Joplin 1971

Tonight I want to talk about the US debt situation, and the effect it will have on our economy.  You probably either watched or heard about the recent dispute that went on between Congress and the President regarding the debt negotiations.  From my end, I loved it.  It was pure theatrics.  The entertainment value was off the charts.  Neither side proposed a plan that would come remotely close to solving our debt problem, but that did not stop us from seeing more fake drama than a reality TV show.

Unfortunately, the issue is major and will ultimately have a catastrophic effect on our economy. So let's break it down.  The debt is not a Republican or Democratic problem; it's a math problem.  Fortunately, I passed third-grade math, so I got this.

Right now we owe about 14 trillion dollars to our creditors.  This simply means that we have spent more money than we have taken in, and we have to borrow to make up the difference.  This is no different than someone taking out a credit card and running up a bill that is larger than the amount of money that they make at work.   But instead of buying big-screen TVs and iPads, the government spends their money primarily (about 85%) on three things:  the military, Social Security, and Medicare/Medicaid.  The government receives money from taxing us. 

Not only do we currently owe the 14 trillion, but the number is rapidly increasing.  We spend approximately $3.6 trillion a year and we collect only about $2.1 trillion.  So each year the debt rises more than 1.5 trillion.  This is why the recent debt negotiations were such a joke.  They're talking about cutting a possible 1-2 trillion dollars over the course of 10 years, when our debt is 14 trillion and we add 1.5 trillion every single year.  We’re in serious trouble here, folks.

Now let me throw out one other thing to you.  When other governments lend us money, like China, who we owe more than 1 trillion dollars, we have the luxury of paying them back at incredibly low interest rates.  For example, the current interest rate on the 10 year Treasury bond is approximately 2%.  Imagine only having to pay 2% on your personal credit card.  What is the reason we have the luxury of paying back the money at such a low interest rate? It's because historically the dollar has been seen as the ultimate safe haven place to park your money.  Countries were willing to lend to us at such low interest rates because they considered the United States a sure thing to pay the money back.  As our debt situation gets worse and our financial condition deteriorates, I expect not as many governments will be so eager to lend us money, at least at such a low interest rate.

If this happens the United States will of course still have to borrow money for all our programs.  If the Chinas and Japans of the world are no longer willing to lend us money at 2%, we have to offer them a better interest rate.  The riskier your country's financial situation the higher the interest rate you have to offer.   That's why Greece was recently offering lenders 22%.

Right now we pay approximately $400 billion a year just on interest alone to our creditors.  If the interest rate just goes up 1 or 2% more, which I think is a lock, our interest payments will skyrocket.  Lastly, one other thing that I think is going to make the debt continue to get worse is Obamacare.  I think insuring 30 million additional people will cost far, far more than the Congressional Budget Office estimated.   We’re going to owe 25 trillion shortly.

I’ll discuss the 2 options the government has to avoid a financial catastrophe in another blog.  Have a good night.

JR

Dollar Destruction

Welcome to my first blog. I'm calling it the Midnight Blog for two reasons. First, it will always be done at around midnight.  Since I can never go to bed before 1:00 (a little leftover gift from college), hopefully I can do something productive in this hour.  Also, if what I write (actually speak, since I’m using voice recognition software) turns out to be absolutely ridiculous, I can always blame it on the fact that it's late and I'm tired.  Hey, at least my parents will read it.  There is not really going to be any rhyme or reason as to the topics that I write about; it will just be what I find interesting.  Some of the things that I will probably write about are finance, sports, politics, Judaism, music, and things that are completely random and bizarre.

So here…we…go…

You ain’s seen nothing yet, baby you just ain’t seen nothing yet, here’s something that you never gonna forget, you just ain’t seen nothin’ yet.

                                      Bachman Turner Overdrive 1974

So tonight we're going to talk about money, as this seems to be the issue of our times.  I know this one will be a little dry, but hang in there.  Basically, in a nutshell, a nationwide financial catastrophe is coming (that’s what the lyric above refers to, definitely not the blog).  This will be much more serious and much deeper than the previous recession.  The first few blogs will explain why this is going to happen and maybe give some advice about how to protect yourself.

Let's play Monopoly.  You just taught your seven-year-old how to play, and he's gotten his first taste of the feeling that money is important.  Unfortunately, the fake dollars in Monopoly are only good for purposes of the game.  They can’t buy anything else; it is the ultimate example of a weak currency. 

Think about dollars. Let's assume that one dollar can buy one Coke.  Knowing this does not tell us whether a dollar is a strong or weak currency.  We have nothing to compare it to.  Now what if I tell you that one dollar can buy 2 Cokes.  Since the second dollar can buy more, it is stronger than the first.  If you're my age you can remember when a quarter would buy a Coke.  Back then, instead of only buying one Coke, a dollar would buy four Cokes.  It's the same dollar as today.  However over time the dollar has weakened.  It simply doesn’t buy as much as it used to, or, put another way, you need more dollars to buy the same things.

Why is this important? It's one of the major factors that has, and is, destroying our economy.  It also destroys our personal finances.  Let's assume that you make $40,000 a year.  If all of the sudden the dollar gets weaker, your $40,000 can’t buy as much. You can't get as many Cokes as you did before.  Since you're not really planning on drinking 80,000 Cokes this year, the important thing to remember is you will now only be able to afford less of the things that you want to buy.  When the government inflates the currency (weakens the dollar) everything that you want to buy will cost more.  Think back to the example of Coke.  The car that used to cost $10,000 is now $40,000, just like the Coke you want to drink is now a dollar instead of a quarter.

The advantages of a strong dollar are numerous, and for most of our history were well understood by the government.  Historically we have had a strong dollar policy, which was one of the major factors in the prosperity of the US.  When you have a strong dollar, the money that you have in your pocket can simply buy more things.  It also leads to price stability, as you know from year to year what things cost, and prices will not skyrocket.   Unfortunately for us our government has been embarking on a weak dollar policy.  Their public statements deny this, but 100% of their actions have been designed to weaken the dollar.  I may discuss how they do this in another blog, but they include things such as printing money and keeping interest rates at unnaturally low levels.  They have been extremely successful, as the dollar has recently hit record lows against many other currencies.

So why would the government do this?  It is because the recent group of leaders does not understand how to grow an economy. When the United States dollar is weak compared to other countries, such as the Chinese renminbi or the Swiss franc, our exports are cheaper.  So for example the Swiss can buy our products relatively cheap.  The theory is that this leads to greater exports, which helps US companies sell more overseas.  The problem is it simply does not work.  We end up selling everything at a discount; basically the US is holding one big firesale.  Manufacturing still suffers.  Also, anything we import from another country becomes expensive.  You will especially feel this if you travel to another country.  Get ready to pay through the nose.  Actually, we should be used to it by now, as our weak dollar policy is causing everything right here to be exorbitant, such as gas, clothes, groceries, commodities, etc. 

It’s 1:00 A.M., and I know this is not exactly the most thrilling topic.  Have a good night, everyone.

                                                                   JR