Money And Change

The Dangers Of A "Universal Basic Income" 
ZeroHedge.com       Jan 18, 2017 5:15 AM
Submitted by Nathan Keeble via The Mises Institute,

Finland has announced that it is conducting a social policy “experiment” which deserves closer examination. Through 2017 and 2018, Finland will provide a guaranteed basic income of 560 euros ($579)  to 2,000 randomly selected welfare recipients. This benefit will be subtracted from other, currently existing welfare benefits that participants may be receiving, and, crucially, the payments will continue regardless of any other income that is earned. If a participant of this program finds a job, the government will continue to pay them the 560 euros in addition to any other income.

The Finnish government hopes — and many believe — that this program will help to alleviate poverty as well as make inroads in reducing the country’s current 8.1 percent unemployment rate. This test trial is supposed to prove it, potentially opening the door for a full implementation of a universal basic income (UBI).

Why People Support a Universal Basic Income

The universal basic income is being considered as a partial or complete replacement to the current means-tested system of welfare. Under the current system, welfare recipients’ benefits taper off and eventually stop, completely, based upon how much income individuals independently earn. Naturally, this creates a disincentive to rejoin the labor force, because people fear a reduction in total income as welfare benefits are removed or if they believe the added income from a job isn’t worth the labor. Demonstrated very simply, if someone is currently receiving a total income of $1,100 through a means-tested welfare program, many will be less likely to seek a job which will result in similar income levels, as most prefer leisure to labor.
Supposedly, the UBI’s main innovation is that it manages to largely avoid this long standing failure. Since everyone would receive the established basic income regardless of other income earned, proponents believe that people would still have strong income based incentives to work. Some have gone even further, suggesting that the program will be a positive for employment because the financial cushion provided by a UBI will help people in the transition from unemployment to employment. For instance, a struggling entrepreneur or artist could, in part, rely on it while building support.

For these reasons, the UBI has gained support from the entire political spectrum, including libertarian-leaning think tanks like the Niskanen Center.

Where UBI Proponents Go Wrong

A universal basic income is not the god-sent welfare policy that it initially seems to be. It does not create incentive to work. It won’t help solve unemployment, and it will not alleviate poverty. The truth is that a UBI will exaggerate all of these factors in comparison to what would exist in a more unhampered market. There is even reason to think that it would be worse in the long run than traditional, means-tested welfare systems.

First, UBI does not eliminate the disincentives to work that are inherent in welfare programs; it simply moves them around. This program must be financed after all, and any welfare system, including the UBI, is necessarily a wealth redistribution scheme. Wealth must be forced from those who have it to those who do not. This means that at some point on the income ladder, people must go from being net receivers of benefits to being net payers of benefits.

The progressive taxation that is necessary to finance a UBI means that the more a person earns, the higher percentage of their wealth will be taken from them. The work disincentives are therefore still very much present in the tax system. They’ve simply been transferred onto different, higher income groups of people.

UBI Diminishes the Power of Consumers in Directing the Marketplace

The universal basic income shares another problem with traditional welfare systems. Far from promoting the unemployed from searching for work the market rewards, it actually subsidizes non-productive activities. The struggling entrepreneurs and artists mentioned earlier are struggling for a reason. For whatever reason, the market has deemed the goods they are providing to be insufficiently valuable. Their work simply isn’t productive according to those who would potentially consume the goods or services in question. In a functioning marketplace, producers of goods the consumers don't want would quickly have to abandon such endeavors and focus their efforts into productive areas of the economy. The universal basic income, however, allows them to continue their less-valued endeavors with the money of those who have actually produced value, which gets to the ultimate problem of all government welfare programs.

In the marketplace, wealth is earned by generating value. When someone buys a good, they’ve earned the money they are spending by having produced something else. This is not so with welfare programs like a universal basic income. Money is forcibly taken from those who have produced enough to earn it, and given to those who haven’t. This allows for people who aren’t producing wealth to continue to consume scarce goods. Eventually, all government welfare leads to the consumption of wealth, or, at the very least, a reduction in the amount of wealth that would have been accumulated otherwise. When entrepreneurs have less need to respond to the needs and desires of their customers, consumers will find themselves with fewer choices and with lower-quality choices.This means that overall welfare makes everyone poorer than they would have been in a free market.

How Finland Really Can Reduce Poverty

If Finland (or anywhere else) wishes to help alleviate poverty and unemployment, the best steps to take are in the directions of reducing the cost of living and creating conditions favorable to plentiful employment.

Charles Hugh Smith recently outlined the basics:

This may seem obvious, but the conditions required for work to be abundant and the cost of living to be low are not so obvious. For work to be abundant:

• It must be easy to start a business.
• It must be easy to operate the new business.
• It must be easy to make a profit so the business can survive the first few years and,
• It must be easy to hire employees.

All these factors require an environment of low-cost compliance with regulations, low tax rates, low costs of transactions, reasonable transport costs, reasonable cost of money (but not near-zero), reasonable availability of capital for small enterprises, local and national governments that actively seek to smooth the path of new enterprises and existing enterprises seeking to expand, and a transparent marketplace that isn't dominated by politically dominant cartels and subservient-to-cartels government agencies.

This matters because the number one cause of the high cost of living is artificial scarcity created and maintained by monopolies, cartels, and the government that serves their interests. Artificial scarcity imposed by cartels and a servile state is the primary cause of soaring costs in a variety of sectors.

In Scandinavia, as in most countries, its is becoming increasingly difficult to open and sustain businesses. In Scandinavia especially, labor unions exercise immense power over private business, pushing up costs and raising barriers to entrepreneurship and creating new businesses.

As has always been the case, it is necessary to create wealth before it is possible to redistribute it, and policies that encourage movement toward less productive types of work will fail to produce the wealth that government planners would like to spread around.

160 million Americans can't afford to treat a broken arm

Prashanth Perumal       BusinessInsider.com

A lot of Americans are really struggling.

The precarious personal finance situation of Americans has made news for years. It is something we've written about a lot at Business Insider. 

Elevate's Center for the New Middle Class wanted to look into the issue to find when an unexpected expense becomes a crisis for ordinary Americans. And t he results were pretty depressing. 

Elevate carried out a study based on a 10-minute online questionnaire surveying 502 nonprime (credit score below 700) and 525 prime Americans (credit score of 700 or above).
It turns out that nonprime Americans with credit scores below 700 are likely to be hit harder, and more often, by unexpected expenses than prime Americans. 160 million Americans come under the nonprime category, according to the study.

"A bill becomes a crisis for nonprime Americans at $1,400. For Prime, it’s $2,900," the study said. "An unexpected expense becomes a significant disruption to prime Americans when it is 53% of their monthly income. Nonprime Americans can only swallow a 31% impact to their income."
The study noted that many common expenses, such as covering the out-of-pocket on a broken arm, an apartment security deposit, or replacing a vehicle transmission, cost more than $1,400. 
"It’s hard for many to believe that unexpected car repairs can cause a major upset in a household’s finances," Jonathan Walker, executive director of Elevate’s Center for the New Middle Class, said. "Unfortunately, it happens all too often, simply because nonprime Americans don’t have the available resources to help absorb some of these financial shocks. This can cause a downward spiral on their daily finances as well as their credit history.”

The study's results add to previous evidence about the tightening personal finances of Americans. Two-thirds of Americans would struggle to cover a $1000 emergency expense. Half of Americans would find it hard to come up with even $400 to cover an unexpected expense, or pay over $100 a month for health insurance.

 What 12 'Financial Experts' Predict For The Economy in 2017 (Spoiler Alert: It's Ugly)
 
ZeroHedge.com      Jan 4, 2017 2:00 AM

Submitted by Daisy Luther via The Organic Prepper blog,

What lies ahead for the economy this year? Will the economy finally collapse as predicted by many or will the early positive signs in stock markets around the world continue and the global economy will flourish?
I’ve taken a lot of heat for being “gloomy” and for “fear-mongering” lately when I’ve said that President-Elect Trump is inheriting a mess of epic proportions and that we may still be in for a rough financial ride. While I do think that Trump is a far better choice than Hillary Clinton ever could have been, when a situation has been declining as long as ours has, it would take an absolute miracle to turn it around without some pain.
And it turns out, I’m not alone in my concern about the worst for our economic situation during the upcoming year.
Here’s what 12 prominent financial experts are predicting.Lawrence Yun is the chief economist at The National Association of Realtors® (NAR).
“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election. Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.” (source)
Gerald Celente is a trends forecaster who has a long history of accuracy. You can find his work at TrendsResearch.com. He predicts:
“We’re forecasting the economy is not going to rebound with the economic proposals that are in place now. . . . The global situation has created an environment for financial panic. The financial panic conditions have been in place for quite a while. What Trump’s victory has done is played it off for a little bit possibly, but on the negative side, you still have the debt and interest rates going up and the debt that has to be paid. On gold, we believe right now is near its bottom.” (source)
James Dale Davidson. He’s the economist who correctly predicted the collapse of 1999 and 2007.
“There are three key economic indicators screaming SELL. They don’t imply that a 50% collapse is looming – it’s already at our doorstep.” (source)
Marc Faber is an investment advisor and fund manager. He is the publisher of the Gloom Boom & Doom Report newsletter and is the director of Marc Faber Ltd. Last month, he wrote:
“2017 will be [when] the US Economic causes a World Economic Collapse! Trump can’t stop a dollar crisis, stock mark crash or gold and silver prices skyrocketing! “. (source)
Faber was also quoted in an article on The Sovereign Investor:
Mark Faber, Dr. Doom himself, recently told CNBC that “investors are on the Titanic” and stocks are about to “endure a gut-wrenching drop that would rival the greatest crashes in stock market history.” (source)
Harry Dent, Harvard economist, predicts the safe-haven of gold will be wiped out during 2017. From a conversation with Economy and Markets:
“While many economists will argue that gold is not in a bubble… and insist it will soar to $2,000, $5,000 and even $10,000, my research has said otherwise…I’ve never been more certain of anything in over 30 years of economic forecasting.”
Incidentally, here is his latest report.
Ann Rutledge is a fixed income analyst who is a regular writer for Forbes. She analyses economic patterns and feels the slide has been underway since 2013. Last year, she wrote:
“So, if you ask me whether we are going to have another global financial crisis in 2017…I would say the odds are good. This one probably started in 2013 and by now is well under way.” (source)
Peter Costa, president of Empire Executions, has taken the unprecedented step of pulling out of the markets ,believing that they are overpriced and that a major correction is on the way. In an interview, he said:
“I think that a lot of these stocks, big cap, small cap, they all got ahead of themselves. And I think that there will be a correction to bring them back to some sort of normalization in pricing and once it gets back there, I’ll be back in the market.” (source)
Chris Martenson, an economic researcher, wrote:
“GDP growth is very unlikely to support the rate of credit expansion that the Federal Reserve wants (or, more accurately, needs). And what will happen if it indeed doesn’t? A lot of painful, awful things – but central among them is a currency crisis.
Amidst the ensuing unpleasantness will be an awakening within today’s hyper-financialized markets to the huge imbalance now existing between paper claims and ownership of real things. A massive wealth transfer from those with ‘paper wealth’ (stocks, bonds, dollars) to those owning tangible assets (the productive value of which can’t easily be inflated away) will occur – and quickly, too.”  (source)
Michael Covel, a teacher of trend-following and financial strategy ,thinks the collapse will start in Europe and then spread to the rest of the world. He explains why in great detail, calling it chillingly “the next Lehman moment.”
“Deutsche Bank has startling leverage of 40 times. Leverage is the proportion of debts that a bank has compared with its equity/capital. That means Deutsche has 40 times more debt than equity/capital. Keep in mind that Lehman Bros. was only 31 times leveraged when it imploded in 2008 and sparked the worst global financial crisis since the Great Depression…France’s clear discontent with the EU can’t be overstated. The EU might survive Brexit. But a French divorce from the EU would be cataclysmic, both financially and politically. It would mark the official end of the EU. 
…Bank runs would spread as consumers sought the safety of cash well before the actual earth-shattering event took place. It would start in French banks… and the knock-on effects would spread to other European banks that have relationships with French banks. This would create a huge decline in confidence, leading to a European-wide decline in bank lending. 
And these bank runs would spread into a more widespread financial crisis in the global financial sector. Non-eurozone financial institutions in the U.S. and Asia would come under immense pressure because they too have heavy exposure to European banks. (source)
Alessandro Lombardi, a former global investment banking analyst wrote:
“Emerging markets are the soft underbelly of the global economy. Many analysts expect the election of Donald Trump to the White House will change the United States’ economic and monetary policies. This could worsen conditions for businesses in emerging markets that are financed in U.S. dollars. The result might be a global economic collapse in 2017.” (source)
Jim Rogers, who founded the Quantum Fund with George Soros, is on the record as saying:
“A $68 trillion ‘Biblical’ collapse is poised to wipe out millions of Americans.” (source)
 Andrew Smithers, an economist with an unsettling history of being prophetic, was quoted in the same article.
“U.S. stocks are now about 80% overvalued.” Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively. (source)
What do you think?Personally, I’m prepping harder than ever before.  I’ve spent too much time researching the collapse of Venezuela to sit idly by and let my family face the same hunger and desperation that is rampant there.
Right now, a few rocks are falling, warning of an imminent disaster. If you aren’t prepped, you still have time. Go here to learn more. If you wait until the avalanche begins, it will be unstoppable. You will have waited too long.
 
 
My suggestions are:

• Reduce your expenses to the bone. The less monthly overhead you have, the longer you can live on your savings.
• Start building an emergency fund. The rainy day may be here sooner than you think.
• Stockpile food, OTC medications, and other necessities. (Sign up here to get a free report on what they ran out of first in Venezuela. You can use this to build a collapse-proof shopping list.)
• Get prepared to protect your family. When the economy declines, crime increases.

We’ve been in a decline for years. Our national debt has reached monstrous proportions. Even if Trump is able to pull off a miracle and turn things around, there will have to be drastic cuts for this to happen. Painful ones. People will suffer.
And I’ll do everything I can to protect my family before that happens.