Thoughts from the Frontline

Basic economics tells us all resources are scarce, but our demand for them is not. Hence we need methods to allocate the limited supply of each resource. A significant part of economics is the study of those methods.

“Being young and having no job remains stubbornly common. Wages for young people fortunate enough to get a job have gone down. Inflation-adjusted wages for young high school graduates were 11 percent higher in 2000 than they were more than a decade later, and inflation-adjusted wages of young college graduates (four years only) have fallen by more than 5 percent. Unemployment rates for young college graduates have been running for years now in the neighborhood of 10 percent and underemployment rates near 20 percent. The sorry truth is that a lot of young people are facing diminished job opportunities, even several years after the formal end of the recession in 2009, when the economy began to once again expand after a historic contraction.” – Tyler Cowen, Average Is Over, 2013 “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” – John Adams, 1826 “The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.” – Adam Smith “Debt drains away vital resources from economic growth. Fighting a debt crisis with more debt is doomed to failure, yet that is not only what global central banks did during the crisis but long after markets stabilized (though the crisis never truly ended, just slowed). This was an epic policy failure that continues today.” – Michael Lewitt, The Credit Strategist

“We of the sinking middle class may sink without further struggles into the working class where we belong, and probably when we get there it will not be so dreadful as we feared; for, after all, we have nothing to lose.” – George Orwell “A strong, educated middle class is what made America the greatest country in the world.” – Lincoln Chafee

“The ship of democracy, which has weathered all storms, may sink through the mutiny of those on board.” – Grover Cleveland, the 22nd and 24th president of the United States “It is your concern when your neighbor’s wall is on fire.” – Horace “The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment. Typically, high past returns simply imply that an asset has become more expensive and is a poorer, not better, investment.” – Ray Dalio, Founder, Bridgewater Associates

“Companies are doing everything they can to get rid of pension plans, and they will succeed.” – Ben Stein “Lady Madonna, children at your feet Wonder how you manage to make ends meet Who finds the money when you pay the rent? Did you think that money was heaven sent?” – “Lady Madonna,” The Beatles

“To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying -- – except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.” – Warren Buffett, Fortune magazine: “The Wit and Wisdom of Warren Buffett”

“The trouble with retirement is you never get a day off.” – Abe Lemons “Retirement at sixty-five is ridiculous. When I was sixty-five I still had pimples.” – George Burns “To be, or not to be, that is the question: Whether 'tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take Arms against a Sea of troubles, And by opposing end them.” – Shakespeare, Hamlet

I have been promising a review of Nicholas Eberstadt’s very important book, Men Without Work: America’s Invisible Crisis. The book is relatively short at 216 pages, but it is packed with meaty facts and insights. One of the reasons I seldom read an actual physical book anymore is because I can highlight text and make notes in my Kindle app on my iPad and then find those notes and highlighted sections on my Amazon page for later review. I actually highlighted 36 pages with 22,000 words from this book to go back and review. And while I will be using a lot of quotes in this letter, I hope this simply spurs you to order the book and read it for yourself. The “invisible crisis” that the author is writing about is at the very center of our economic and political turmoil.

“America was not built on fear. America was built on courage, on imagination and an unbeatable determination to do the job at hand.” – Harry S. Truman “Unemployment is a weapon of mass destruction.” – Dennis Kucinich “Ever since 2000, basic indicators have offered oddly inconsistent readings on America’s economic performance and prospects. It is curious and highly uncharacteristic to find such measures so very far out of alignment with one another. We are witnessing an ominous and growing divergence between three trends that should ordinarily move in tandem: wealth, output, and employment. Depending upon which of these three indicators you choose, America looks to be heading up, down, or more or less nowhere.” –Nicholas Eberstadt, “Our Miserable 21st Century”

“A tax loophole is something that benefits the other guy. If it benefits you, it is tax reform” – Russell B. Long “Corporate tax reform is nice in theory but tough in practice.” – Andrew Ross Sorkin “I hold it that a little rebellion, now and then, is a good thing, and as necessary in the political world as storms in the physical. Unsuccessful rebellions, indeed, generally establish the encroachments on the rights of the people, which have produced them. An observation of this truth should render honest republican governors so mild in their punishment of rebellions, as not to discourage them too much. It is a medicine necessary for the sound health of government.” – Thomas Jefferson, in a letter to James Madison. January 30, 1787 (230 years ago) “You say you want a revolution Well, you know we all want to change the world You tell me that it's evolution Well, you know We all want to change the world… You say you got a real solution Well, you know we'd all love to see the plan You ask me for a contribution Well you know we’re doing what we can. But it’s gonna be all right!” – John Lennon/Paul McCartney, the Beatles, 1968

“The values to which people cling most stubbornly under inappropriate conditions are those values that were previously the source of their greatest triumphs over adversity.” – Jared Diamond, Collapse, 2005 Tax reform means, “Don’t tax you, don’t tax me. Tax that fellow behind the tree.” – Russell B. Long, Democratic Senator from Louisiana, longtime chairman of the Senate Finance Committee (and a strong believer in capitalism who was a champion of tax breaks for businesses)

“We have a system that increasingly taxes work and subsidizes nonwork.” – Milton Friedman “You must be the change you wish to see in the world.” – Mahatma Gandhi “Real change requires real change.” – Former Speaker of the House Newt Gingrich