Gnomicon 146

If you have not already done so, you may wish to read the
Introduction to Gnomica.

Gnomicon  146
Tuesday 2 October 2012

Read gnomica 1-100 here!

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The question isn’t at what age I want to retire, it’s at what income.
George Foreman(10 Jan 1949 – )

Yes, when to retire?

Some nevvver want to.

Some can’t wait to do so

There are various considerations pro and con, of course, and, unhappily, not all of us can become spokespersons selling barbecue grills.

So, income is obviously a factor in the decision.  If one has the luxury of taking that into account!  What about savings and market arrangements (stocks, bonds, funds) for all those years that, statistically, we are all more likely than ever before to last.

Although a connection of these matters to government monetary policy may seem utterly remote or tangential at best, I think not.  It is central.

I am no fan of the Fed, and in particular its present head.  I don’t know how much genuine independence the man has in setting policy – i.e., interest rates – or how tightly tied  he is to the fine filaments of the political puppeteers, but what is happening in that arena is, to my economically unsophisticated way of thinking about and understanding such arcana, a cruel and wanton plundering of defenseless older people and retirees in order to ‘pump’ or ‘prime’ or ‘whatever-reductive-euphemism-you-want’ the general economy.

Let’s see if I get this – and please do point out my errors here!

The economy is in bad shape, and it is not recovering fast enough to look good politically for the election next month.  What we need is to goose it.  What better way to realize that agenda than to make money so cheap that business is practically being paid to borrow and ‘invest’ in the sluggish economy and consequent massive hiring … and, yeah, by the way, real good luck on that one!

Now consider this.

At the local bank the money market rate on funds gives all of 0.05% on everything below $10,000; above that, it jumps to a munificent 0.1%.  Straight savings accounts yield a magnificent 0.15% if one has $500,000 or more on deposit. So, if we assume an average couple’s annual cost of living of, say, $35,000 and a double FICA income of $20,000, the two of them need to earn $15,000 at a (at the very  best!) 0.15% return — and this would require that they have about ten million dollars (that’s $10,000,000) in savings accounts and/or money markets. How many of you and your retired friends have that kind of cash lying around?  You think?

All their life these people saved money in the not at all unreasonable expectation they’d be earning 3% to 4% — and (splitting the difference) on the theory of 3.5%, to cover that $15,000, they’d need around $425,000, a not at all impossible sum for a prudent couple to have saved over a lifetime of work.  Today, under the economy-rescuing agenda of the Fed propping up businesses many of which (e.g., banks and bankers) caused this mess in the first place, our couple would, on their $425,000 at 0.15%, earn about $637 – and that’s a dog that just won’t hunt in the $15,000 shortfall!

Well, I did say I was entirely unsophisticated in these higher fiscal-financial policy matters.

Back to basics with me!

Wanna sell barbecue grills?

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