So let's say we go into financial ruin........

[tegator80]

Originally Posted by oragator1

I have been comparing us with Japan for about 4 years as the most likely path we would follow, but having said that, there are some important differences. We have a growing population, they don't. We have a younger population than them and we are more insulated from the world because we have natural resources and can grow our own food.

But the more pertinent question should be, what is the least crappy of all of our options, and as you state politically which one will be most likely to come to pass?
The belief that I have worked under (and this isn't economic by any stretch), is that there isn't a politician alive who wants to either be responsible for finally sending us over the cliff, nor is there one who wants to get voted out for cutting the things their people care about, hence the path that we are on. I am not counting on their altruism, patriotism, far sighted abilities etc, I am counting on their self interest leading them down a central path where they do just enough to keep both sides of the ledger happy and keep them in office.

As far as it being defensible, what is the better option? Cutting into a recession generally doesn't work, it depresses tax receipts and offsets the cuts, leaving us not much better on debt but worse on the economy. Letting the economy tank in 2008 might have meant too big to fail went away, some of the other systemic problems would have been wiped out, and 25-50 years form now no one would be idiotic enough to make the same mistake, but I could write pages on what that would have done to the economy both domestically and globally. The lost generation (hopefully not that long) is the penance for avoiding 1929. Any one of the three options mentioned (Keynesian, letting the market decide and Austerity) has its benefits, but all also have major drawbacks, they all stink.

Here is an article from Forbes of all places on why austerity isn't the answer, it addresses what has happened in Britain and makes some of the points I have made but in more detail. So if that isn't the answer and the horse has left the barn on letting things tank, seems we only have the one option left, other than inflating our way out or pounding more stimulus in, but neither of those are going to happen.

http://www.forbes.com/sites/abrambro...britains-mess/

Thanks for all of the points. My last question was rather poorly phrased. What I am asking is, if the Japan model is our strategy and Japan is our learning curve as to what works and what doesn't, then how do I (or we for those who are reading along) able to negotiate (not really defend) around years of malaise and stuck economies? That was a financial advice question.

[mocgator]

Man... I told everyone years ago to plan an exit strategy. A simple balanced approach.. but have a plan. It seems like many of you are at least starting to think about it.

Here is my advice... (given to me by someone much much smarter on such things) This is age dependent advice. If you're 22... good luck to you. Who knows what will happen to you.

If you are middle aged now is the time! Now is the time to buy the things you want for the rest of your life. Buy the things you want for retirement. If you buy things that you want to hold you don't need to worry about inflation. A friend and his wife dream of retiring to Napa one day. So they bought a house. They are over paying on the Napa mortgage to reach their goal. They don't need to worry so much about their 401K when they have their retirement home sewn up. And they have an asset at a lower cost basis than it will be in 15-20 years. Buy some gold (although that train has left the station for the big gains). Have broad equities to battle inflation. Buy long term things. Don't put dollars in your mattress what ever you do.

The losers in all of this will of course be the "poor". The fools who continue to vote the looters into congress to give them free toys. The toys will stop one day... and when you live paycheck to paycheck inflation is the most insidious tax of all for the "poor". Elections have consequences. Hope and Change baby!

Whatever happens ... I'll be here watching the show.... Because I've been saving like a fiend from the day I paid off my school loans.....

[oragator1]

Originally Posted by tegator80

Thanks for all of the points. My last question was rather poorly phrased. What I am asking is, if the Japan model is our strategy and Japan is our learning curve as to what works and what doesn't, then how do I (or we for those who are reading along) able to negotiate (not really defend) around years of malaise and stuck economies? That was a financial advice question.

Investing isn't part of my job so I can only speak for myself and how I invest, but for me the simplest explanation? Buy assets that have traditionally maintained or accrued value personally, like a home - it will maintain most of it's value through inflation and if your standard of living goes down a bit in malaise you will have it at today's prices and interest rates. And then international stocks in countries where the economy is doing well as well as countercyclical stocks here. I will probably bump my international percentage this year but that will be more due to the bull market here finally running out of steam than a tanking economy or malaise.
This is the "asset" argument is part of the argument for gold, problem is that gold has become so speculative and volatile that it's a far riskier investment than it once was - I remember reading articles a couple of years ago about how it was going to $2500 or $3000 and it's sitting at $1600 and change now. People are buying it for the wrong reasons and the price swings have become wacky, it acts more like a stock now than a commodity.

[Burke]

A lot of financial advisors are recommending that you pay off your house/homestead so that you won't lose it if you lose your job in the coming meltdown, as so many did during the Great Depression.

I disagree.

Refinance at the current low fixed interest rates (about 3%) with the smallest down payment you can get. Invest the equity and whatever else you have in precious metals.

When inflation hits, your payment being fixed in terms of real wealth will decrease and the value of your precious metals will soar.

Even if you lose your job, you can sell off enough precious metals to make your mortgage payments and be way ahead.

[Burke]

This is interesting:

"Since 2000, the price of gold has outperformed the price of Berkshire Hathaway stock by over 300%"

http://www.sovereignman.com/finance/...vesting-10874/

[QGator2414]

Originally Posted by G8trGr8t

150K is for 9 months though. That plus benefits that public workers get would be top 5 if you extended it over 12 months and included the benefits differential. And people say teachers are underpaid

Nothing from the OP makes me think they feel underpaid like a buddy of mine (who also wants to eliminate the choice of charter schools for kids)

That said it is always fun to calculate the value of a pension in this case to compare it to the private sector...

Let's assume the $75K salary does not increase for the rest of the OP's career...Let's also use 2% compounded yearly for simplicity for the time value of money...also I will assume the OP teaches in Florida as Florida has one of the lowest pension benefits in the nation from everything I know...

In Florida the multiplier for working 30 years is 0.6 so the yearly benfit for the OP at $75K would be $45K. I will use a 20 year annuity to assume a 20 year retirement...In that case the present value of the pension at retirement would be approximately $735K...Now lets assume DROP is still around so the OP works an extra 5 years to retire in their late mid/late 50's assuming they started teaching in their early 20's (I will keep the 20 year annuity value for ease and think it is still a fair time to value the pension at for someone retiring in their 50's). The DROP account at retirement would be worth approximately $278K... http://www.myfrs.com/portal/server.p...#participation

So we have a pension value of $1,013,000 for someone retiring in their 50's...

Also we should remember they have not had to contribute anything up until recently (correct me if this is wrong) in which they are asked to contribute 3%...So assuming they will have contributed $33750 assuming $75K was the salary over their last 15 years of work...

Now lets assume a private sector worker (probably not getting the time off, holidays, vacation and sick days either) started working at the same time and worked for $75K each and every year for 35 years and contributed 3% or $2250 with 2% coumpounded annually they would have an IRA worth approximately $113,000...

Back to the pension example...subtracting out the approximate $39K in contributions over the last 15 years gives a value of $974K to put the comparrison back on the same playing field...At 2% over 35 years to get a value of $974K one would have to contribute $19,482 each year...So the teachers salary really is almost $20K...

Again this is just an example using the OP's numbers...

[G8trGr8t]

So we have a pension value of $1,013,000 for someone retiring in their 50's...

gubmnt workers, the new 1%.

[QGator2414]

Originally Posted by G8trGr8t

gubmnt workers, the new 1%.

Not the OP but my buddy really irks me when compensation of teachers is discussed...

[cocodrilo]

Originally Posted by mocgator

If you are middle aged now is the time! Now is the time to buy the things you want for the rest of your life. Buy the things you want for retirement.

Hmm. Sounds like it's time to finally buy a new car. (Already retired.)

[G8trGr8t]

http://archives.subscribermail.com/m...6f30de375e.htm

http://www.usfunds.com/media/files/p...ial_Report.pdf

couple of good reads on gold and how Soros liquidated and shorted the yen to make another billion. sure would be nice if he was spending some of those billions he makes putting his money where his mouth is.

[shelbygt350]

First, ignore the govt published CPI (they keep changing it to be low). Costs for energy and food (as well as other staples) are going to sky rocket....maybe not 25% per yr, but more than 5%. Cash will become worth less and less.

In 10 yr a loaf of bread could cost $100.

Consider this, a few yr ago (2-3) a formula was calculated (cant recall who did it) that if USA did not drop gold standard back 40 yr ago, an ounce of gold would be worth $7,400

The result is a vast number of people living with a much lower standard of living, just like in most countries of Europe, Asia, So America, etc. Then there are the "very few".

The very few, like the Clintons, Gates, Buffetts, Pelosis, etc will live like kings and queens, just like royalty. They own/control all that you need. See Fidel. See Soviet Union. See Europe.

It will be very difficult for one person to come from the lower tier, strive to succeed and actually break thru the ceiling and become a member of the royalty. Politically maybe, but not based on Merit, nor business acumen, nor self determination.

What caused people to immigrate to the USA, in decades past, was the "opportunity to succeed". Today, people immigrate to the USA for the opportunity to suck off the teat of the taxpayer.