Math Is Hard

Interest rates are unsustainably low. This leads me to a thought. (I have one from time to time) How much money would one need in a passbook savings account to have an income of a modest $24,000 a year? Well,  the rate varies up to .85%. So the math is:

X * .0085=24,000. 

You would need 2.8 million in the bank. 

What this means is those who have been prudent and saved cannot live off their savings. The government is stealing from widows. Let me don my prophet hat, or rather let Isaiah in Isaiah 10 don his:

10 1-4 Doom to you who legislate evil,
    who make laws that make victims—

Laws that make misery for the poor,
    that rob my destitute people of dignity,
Exploiting defenseless widows,
    taking advantage of homeless children.
What will you have to say on Judgment Day,
    when Doomsday arrives out of the blue?
Who will you get to help you?
    What good will your money do you?
A sorry sight you’ll be then, huddled with the prisoners,
    or just some corpses stacked in the street.
Even after all this, God is still angry,
    his fist still raised, ready to hit them again.

Do the "powers that be" think they can get away with this? Yes, they do. 

But interest rates are not just low, they are not just at a low point in a cycle, they are as low as they have ever been in the history of the world. I have quoted Herb Stein many times, "What can't continue, won't continue." How long do we have? I have no idea. 

But sooner or later "the chickens will come home to roost," "the fecal matter will hit the air circulation device," or they that have "sown the wind and will reap the whirlwind." Pick your favorite cheesy cliché. 

Get ready. 

Paul Craig Roberts

Mostly this interview is Paul Craig Roberts view on the Russian Crisis. 

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remember those that are in bonds ...

The Bible tells us in Hebrews 13:3:

Remember them that are in bonds, as bound with them; and them which suffer adversity, as being yourselves 

Yes we should remember those that are in bonds, they risk losing their investment as interest rates go up. This is because, while the face value of a bond stays the same, as interest rates rise the amount that an investor will pay for that income stream drops. If the investor holds the bond to maturity they may not think they have a loss, but they have. It is particularly hard on those who buy bond funds as the loss is immediately priced into the investment. If the investor sells, the loss is realized for tax purposes. Yes, as the Bible tells us, those that are in bonds will suffer adversity. 

Bonds ... James BondsWhile in normal circumstances an investor would want a mix of assets, in the current investment environment holding any long term "paper" will lead to adversity, it is only a matter of time. So obey the Bible and feel sympathy for those who are bond investors, and avoid holding bonds as an investment. 

So I can almost see the frown on your face as you read. You are asking yourself, "Is he really saying that the Bible is teaching against bond investment at this time?" No, I am not saying that. I am parodying a certain style of pop theology popularized by Rick Warren. Warren will take a scripture, choosing the Bible version carefully, and use it as a linchpin for some other point. It is not that the point that the pop theologian advances is wrong, it is that the Bible verse quoted is not talking about that, just as the author of Hebrews is not discussing bond investment. 

As I continue my health series I will be discussing Rick Warren's entry into the health guru field. As should be no surprise Warren bases his diet on a misinterpretation of the Bible. The diet itself is not bad, but it has nothing to do with the Bible. I will review The Daniel Plan on Wednesday. 

Until then, obey the Bible and sell any bond investment you might have. 

Crimea Does Not Pay

I guess Russia will find our soon enough if its Crimea play pays. In the meanwhile here is a presentation on the crisis that concentrates on the real issues underneath it all—energy. 

Peak Oil?

This is an interesting presentation on peak oil. My predicition is that this issue will end suburia as we know it. I am old enough that I will not see this transition, but it will be a major issue for my grandchildren. In the mean time, energy prices will have a constant upward pressure as more people around the world get richer and richer. I do not think there will be shortages as coal is somewhat abundant. The chart on the right is one scenario for peak oil.