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March 26, 2017

THIS WAS A NEW ONE.
A phishing phone call kept us on the line until the caller got too nosey.

   We thought we heard them all, including the "Hey, Grandpa, you'll hever guess what happened."  It was a scamster pretending to be a grandson with a cold. 

   Friday we heard from someone claiming to be an agent of the Federal court. He knew our name and said we had not appeared, as summoned, to service on a jury the previous Monday morning. We replied we had never NOT responded to a call to jury duty, and moreover, were exempt from such duty on grounds of old age.

   The caller said he had brought "our information" up on his computer screen. "What is your date of birth?" he asked.

   We weren't about to tell him, but asked him for a phone number so we could "clear up this issue." He provided a number plus names of two "agents" who could confirm the legitimacy of the matter. 

   It would have been fun to take the bait and find out what our "fine for non-appearance at court" would be and how the scamster planned to collect it. But our curiosity doesn't run deep enough to bother with it.   


Governments, like citizens, are expected to live beyond their means.
Not many expect a Day of Reckoning.

“We’ve spent the money. The concept of the debt limit is somewhat of a ridiculous concept.  I am hopeful that this is something Congress addresses before the [summer] break. I think everybody understands we need to raise the debt limit, and that’s something we’re going to do.” ~Steve Mnuchin, Secretary of the Treasury < "The concept of the debt limit is somewhat of a ridiculous concept" says Mr. Mnuchin.

      As a congressional vote on raising the public debt limit creeps into the spotlight we''ll hear more suggestions about  eliminating the debt ceiling altogether  and just borrow as need to cover annual budget deficits.  Someone will raise the old saw, "After all, we only owe it to ourselves."  

       This is not true, of course.  We have borrowed and spent the money.  Our descendants, including the unborn, will be stuck with the bill.  The line shouldread "After all, our chidren and grandchildren owe it to us."     


   ITEM:  "You’re probably going to die with some debt to your name. Most people do. In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875." < An acquaintance says that when he dies he wants to be "Five dollars overdrawn at the bank."  That's shorthand for wanting to check out at almost break-even between assets and liabilities'

      It hardly ever works that way.   After one's assets are sold to clear whatever debt remains the residue, if any, goes to heirs.  Happily, heirs may inherit net assets, if any,  but are not liable for unpaid debt owed by the deceased's estate.  It's up to Probate Courts to iron out complications.  

   "A columnist’s job is to tell readers things that they already believe. His function is purely confirmatory. What he confirms may be nonsense, and often is, but this is irrelevant. There is after all everywhere a boom market in nonsense."  ~Fred ReedFred Reed.

    "A boom in in nonsense," says curmudgeon Fred Reed , a columnist writing about columnists.  It's a timely touch at the moment  columnists are turning themselves upside down and sideways in attempts to explain to we-the-people how awful Donald Trump is and how inept Republicans are in attempting to replace Obamacare with something else. 

             We'd love to read a columnist arguing against the idea of the federal government running an insurance scheme in the first place.  Anyone remember when insurance was bought in the hope it would seldom be needed?  


        MEDICAL INSURANCE PREMIUMS: 
 People don't want to spend too much of their own money for medical services.

          After the federal government got into the medical insurance business people lost sight of the basic insurance principal - - that issuers of the insurance have to bring in more money in premiums than it pays out.  This accounts for the mess Medicare and Medicaid have become.  It's not unusual for much of the population to rush to the nearest ER for ingrown toenails and scraped knees.  Comedienne Ellen DeGeneres presented herself recently at an ER with a dislocated finger.  We haven't a clue what the total bill will be, but a competent Doc-in-a-box could probably have re-set the finger at a fraction of the cost of the Emergency Room with its costly overhead.  But with the flood of money available from third parties...including "endless" funds from government, thrift in buying medical services is rarely considered.

          . . . so the prices continue to rise.

   "University of Michigan economist Mark Perry discovered  illuminating numbers. From 1998 to 2016, the overall inflation rate was 47.2%. But for medical care services, prices went up 100%. And for hospital services, the inflation rate was 177%."  Medical Care Price Inflation

    The hot topic right now is not the steadily rising prices of medical care but of the complication of subsidizing sickness care INSURANCE.  Generations of us have been taught that medical care is a "right" whether we can pay for it or not, and no one has much interest in the economics of the issue.  Suggest that insurance companies must clear a profit in order to stay in business and eyes roll.  Point out that most customers (patients) of medical care pay only 10 percent or so of the actual of the cost after the insurance providers have been billed and the eyes will roll some more.  

     It's all about money...as usual.  Medicare, for instance, was founded on the principal of more people paying into the fund than drew payments from it.  A well-intended idea ruined by too many being attracted to a big pot of money.  Think of the providers who feel obliged to overcharge or the persistent phone callers trying to sell you a back or knee brace promising that if you're on Medicare it "won't cost you anything."

       We're lucky to live in the 21st century in which medical knowledge and technology have become so far advanced that life has been prolonged far beyond the norms of only a century ago.  Now we must figure out how to pay for it.  One thing that could make a huge difference would be for customers (patients) to stop leaving everything to third parties and take a keener interest in the prices of medical care.  It would also help if they put some effort into maintaining their own health at a higher standard.  Obesity should be the national exception, not the rule. 


"Take a look South Carolina’s government pension plan, which covers roughly 550,000 people— one out of nine state residents — but is a staggering $24.1 billion in the red."  ~Zero Hedge

   We'll go to our grave believing that excessive debt leads to ruin.  "Excessive" is the key word, here. 

   The idea of spending money one doesn't have is well rooted.  Students borrow huge amounts of money for their college training in the belief they'll land high paying jobs that will allow them to make good on their obligations. It was an attractive idea when it was launched but now is in trouble, having run up on the shoals of reality.

    Pension plans are another example of programs launched on a rosy scenario which now find themselves in big trouble. Where, for example, will little ol' South Carolina find $24 billion it needs to put its promises to pensioners in the black? It has boosted the cost of participation for eligible state workers, but is still in the hole.  

    Pensioners quite rightly expect government to make good on its solemn promise to make good on the pension plan even it requires drawing on general taxes - - yet layer upon layer of tax eventually builds to a limit of what the public will pay.  This is estimated to be roughly 50 percent of income, above which many more people will become tax cheats.  (By the time total tax reaches 75 percent of income we'll ALL throw in the towel.)

    Student debt, pension debt, public debt. . .it al must be paid, either by the borrowers or the lenders.  Prospects for future prosperity seem not to be as bright as political leaders promise.


     ITEM: " President Donald Trump made good on a long-time conservative goal in his first proposed budget Thursday morning, targeting the Corporation for Public Broadcasting and the National Endowments for the Arts and Humanities for complete elimination."  

       Well, no one expects President Trump's initial budget to get off the ground.  After all, the idea of cutting federal funds to PBS, NPR, the Endowment for the Arts and Humanities, etc., etc., is unthinkable.  How could a nation's citizens appreciate art and enlightenment if the government didn't spend millions of tax dollars promoting these things? 

         On the other hand, if the military budget to be sharply increased without adding to the budget deficit from whence will offsetting cuts come?  The liberal approach has been to let the deficits run.  The debate promises to be noisy and contentious.  

          This curious fact:  The U.S. Constitution calls for funding a Department of War but has nothing to say about spending tax dollars to entertain the masses.  Defenders of the status quo will argue in support of NEA, et al, because of their "vast educational programs."  Harking back to the Constitution, where is the mandate for the federal government to spend tax dollars in overriding the public educational tax supported programs of states, counties, and communities?    

            We await the furor with interest.    


THIS WILL IRRITATE  THE ANTI-GOLD CROWD.

   ITEM:  "By an overwhelming 56-13 margin, the Idaho House of Representatives today voted to end all Idaho taxation on precious metals, e.g. gold and silver coins and bars.

                      "Bill sponsor Representative Mike Moyle (R) and the entire Republican caucus voted for the measure. If the Republican-controlled Idaho Senate follows suit and Governor Butch Otter (R) signs the bill, Idaho citizens will better be able to use gold and silver as a form of savings which protects against ongoing devaluation of America’s currency."  Zero Hedge

                        One of these days this issue will wind up before the U.S. Supreme Court, although decide if gold is "money" is something jurists have avoided for a long time.   The hypocrisy of claiming a gold U.S. Eagle is legal tender for only $50.00, while it simultaneously fetches well over $1,200.00 in the market place, would be a juicy puzzle for the superior courts. 

                         Were you to pay taxes with a gold eagle or deposit one in your bank account, it would be legally accepted at its face value -  $50.00.  However, if you were given one for a piece of work for somebody the IRS insists you report it as income at its market metallic value, which is presently in excess of $1,200.00.  No wonder jurists run away when the subject is raised!


  The Ides of March had many economics newsletter writers predicting chaos of one kind or another today.  The changing status of the PUBLIC DEBT CEILING for instance.  It had been suspended in late October, 2015, to be reinstated March 15th, 2017.  

 It's a problem that must be faced...but not at this moment.  It turns out that Treasury Secretary Mnuchin has an arsenal of bookkeeping tricks to keep paying the federal government's bills for a few more months.  Congress must, however, belly up to the question well before the year is out and decide whether to drop public debt limitations altogether or set a new ceiling that will let them run their usual budget deficits. 

  And this is the day the Federal Reserve Open Market Committee is expected to nudge the federal funds rate up by another fraction.  Will the banks start paying as much as 1 percent on checking account balances above a certain level? Maybe.  But with price inflation running at 2 percent or higher, annually, those deposited dollars are losing purchasing power at the rate of 1 percent or more each year.