Part 10: Under Protest, Ross Cross-Dresses

Switching from a banking comedy (The EU is saved!) to a literary one, here is this week's chapter of my serialized comic novel "Four Bidding For Love." (Those who find absurdist humor and adult situations offensive, please read no further.)

     Being late was not in Kylie's nature, and being more nervous than usual, she'd arrived in San Francisco far in advance of the 2 p.m. meeting at the Craft Fair. Though she wasn't to meet Alexia on Union Street until 4 p.m., rather than wander aimlessly around a Craft Fair which did not interest her, she made her way to Union Street.
     Alexia's shop was the sort of tony boutique Kylie reserved for window-shopping only—dark-green woodwork and a whimsically designed sign reading "Well-Heeled Etc." With the confidence of the anonymous casual shopper she slipped through the door and located Alexia's selection of second-hand shoes behind the handbags and new footwear.
     Kylie had chosen her faded blue jeans and cream V-neck blouse carefully, for the pert college-girl informality made no claim to either rebel or upscale; gold-loop earrings and her one good pair of Raybans suggested that she was neither naive nor aggressive. She'd tied her dark hair back in a sleek black braid, and decided after much agonizing to wear a pair of worn black flats.
     As difficult as that decision was—for a woman who sold shoes for a living would discern an entire world in another woman's footwear—it paled beside the difficulty of selecting an outfit for Ross. For after much deliberation, she'd concluded he should not risk revealing his true identity during the negotiation, but should hide beneath the layered attire of a matronly woman.
     It was not easy convincing him of the wisdom of this deception, for he'd clung to the idea he could flit anonymously around the craft fair, keeping in touch with her by cellphone. Even worse, she could not reveal her true concern: that should the negotiations for the coveted T-20Z go poorly, Ross might physically accost this Robin and end up being arrested.
     Just as she thought he might be close to conceding, his huge wild-bearded friend Dewey appeared like the Devil's own tool-slinger—assuming the Devil's tool-slinger wears oil-stained blue overalls reeking of jet fuel, and fills an entire doorway with his cheery bulk—acting like a child on Christmas morning, excitedly begging Ross for the Canadian hand axe which had just arrived in the mail.
     Distracted by thoughts of disguise, Ross wordlessly complied, and Dewey practically squealed with delight—if a loud baritone can be said to squeal—at the shiny blade and handcarved handle. With an enthusiastic "The balance is perfect!" Dewey bustled out to the front porch and industriously set to testing the hatchet's sharpness by tossing it at one of the porch's round columns. The blade stuck in the innocent post with a satisfying thunk that brought Ross out of his chair with electric alarm. Rushing to the door, he shouted, "Don't bring down the building, for God's sake!"
     "Just testing it," Dewey remarked in a wounded tone, and Ross snapped, "There's an old board in the backyard. Use that."
     With the slump-shouldered pose of a reprimanded hound, Dewey withdrew his great bulk to the weedy backyard and retrieved a sun-stained old plank to the front porch, where he set the board upright and happily resumed throwing his new hand axe; each thunk was followed by a muted exclamation of glee, and Ross glanced at Kylie and shook his head.
     "Imagine getting that much fun from splintering wood."
     Kylie smiled, but behind her agreeable grin lay a scheming mind seeking a reason so compelling that Ross would finally agree to dress up as a harmless matron. Hiding her real concern, she'd quickly sketched out the absolute necessity of a female alter-ego.
     "This Robin is sure to notice another man skulking about," she warned, and Ross's brows knitted into deep furrows of anxiety.
     "OK, so I'll wear a hat and sunglasses."
     "And fool no one," she said acerbically. "Suppose this Alexia is skulking about, too, and decides to stalk you. And don't forget, she has telepathy."
     "Clairvoyance, not telepathy," Ross had countered tiredly. "Which means she'll know it's me even beneath a disguise."
     "No, she'd never guess you'd cross-dress," Kylie replied. "Never ever, I don't care how clairvoyant she is when she's bidding. Believe me, it's your best chance. And if you don't agree, fine; handle the negotiations yourself."
     Pressed by her ultimatum, Ross had finally relented, and Kylie took up the task with undisguised enthusiasm.
     "It'll be easiest to make you a big-butt, small busted middle-aged woman," Kylie had opined, and he'd protested in hurt dismay. "Look, if I'm going there as a woman, I want big boobs," he demanded. "If for nothing else, to offset my big butt."
     "Fine, but I don't have any big bras to stuff with tissue paper," she replied.
     "My ex-wife was pretty busty," he remarked wanly, "but I don't think I have any of her bras."
     "Guys are so obsessed with big boobs, even when they're undercover," she said disparagingly, and as she'd expected, this had shamed him into agreeing to use what was available: makeup to soften his Adam's apple and chin, one of her bras stuffed with tissue for a modest but visible bustline, a skirt to mask his lack of a waist and a shawl to cover his head.
     "I guess I'll fit right in with all the other ugly women in the City," he'd said sourly. "What about my facial hair?"
     "Shave close, and I'll pancake over the rest," she'd replied confidently. Leaning forward, she whispered in a husky voice, "Admit it. You've always wanted to be a woman."
     "In terms of my divorce, you’re right. If I'd been my ex’s lesbian lover, I'd have done much, much better."
     "If you'd been a better husband, you might have done better, too," Kylie had said, and instantly regretted it, for without intending to she'd launched an arrow that plunged straight through his heart.
     "As tasteless as this idiotic scheme is," he said wanly, "I'll do it to give you some backup in case this Robin is some sort of scoundrel like GreenDollGal."
     "Then let's get to work," Kylie replied in a light voice, for she considered it a tremendously entertaining challenge to transform such lumpish burly clay into a passable woman.
     A more recalcitrant subject could hardly be imagined, as Ross fidgeted and whined as if he were a circus bear being squeezed into a pink tutu. With much cajoling, Kylie managed to work him into an ankle-length lavender skirt, a long-sleeve blouse, and after some fretting over his prominent Adam's apple, a matching purple scarf round his neck.
     "I look like I'm dressed for winter in Siberia," he'd complained, but she'd just ignored him and rummaged through her small collection of hats until she found the sweetly feminine straw hat which her grandmother had given her "for college picnics." Grandma was from another era, and Kylie had wondered when the last co-ed had been invited on a picnic where straw hats with pink flowers were appropriate attire.
     Another poof or two of powder, a hefty squirt of musky perfume and a cheap pair of big sunglasses completed the disguise, and Kylie had studied the transformation of grouchy Ross into stiff-lipped matron with a critical eye before announcing her satisfaction. "Now don't forget to swing your hips a little when you walk," she'd admonished her reluctant undercover companion. "Don't swing your arms like a man, and when you smile, smile like a pixie."
     "Right," Ross growled. "Have you ever seen a big-butt battle-axe with a pixie smile?"
     "Many times," Kylie replied sweetly. "Now go practice your smile, Dearie, and I'll see you at the craft fair in a few hours."
     As Ross harumphed in futile protest, Kylie gazed perkily into his frowning powdered face. "It's all about getting the T-20Z, right?"
     At the mention of the Holy Grail of Small Appliances, Ross quieted and his resolve returned in full force. "See you there," he murmured. "Don't be late."
     "Your shoes!" she blurted. "I don't have anything you can fit in."
     "Don't try to get me in heels. I'm wearing sneakers, thank you."
     "Just wear your best pair."
     "I will," he’d reassured her and then muttered, "My best and only pair."

Next: Kylie, the Shocked Voyeur 


To read the previous chapters, visit the "Four Bidding For Love" home page.

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Snapback: Stockton, Calif. and All the Cities to Follow

Government promises to public employees have created "zero-risk" Wonderlands protected from the market forces of risk and consequence. These islands of privilege are snapping back to join the real economy.

Every government entity that reckoned it was moated from the market economy will be snapped back to "discover" risk and consequence. Let's lay out the dynamic:

1. Every government can only spend what its economy generates in surplus.

2. Every government transfers risk and consequence from itself, its employees and its favored vested interests to the citizenry and taxpayers.

3. Every government collects and distributes the surplus of its private sector to its employees, favored constituencies and vested interests.

4. Since the government (State) promises guaranteed salaries, benefits and entitlements to its employees and favored constituencies, these individuals believe they are living in a risk-free Wonderland that is completely protected from the market economy.

5. Risk cannot be repealed or eliminated, it can only be masked or transferred to others.

6. The Federal government and the Federal Reserve have pursued a policy of inflating serial speculative credit-based bubbles.

7. These bubbles inflated assets, profits and taxes, creating the illusion that blow-off speculative tops were "the new normal."

8. Speculative credit-based bubbles misallocate capital and incentivize malinvestment on a spectacular scale.

9. Once the bubble deflates, the capital is lost or trapped in illiquid malinvestments.

10. As a direct result of the dot-com bubble, Stockton's tax revenues (general fund) leaped to $139 million in 2001. As a direct consequence of the housing bubble, it jumped to $186 million in 2007.

11. This "new normal" encouraged the belief that the stock market would double or triple every decade into the future, generating 8%+ annual returns for public union employee pension funds.

12. The city government granted employees open-ended guarantees of lifetime healthcare coverage.

13. This meant that there was no limit on the cost of each employee's benefits.

14. As noted here many times, healthcare costs rise by 7%-10% every year, even as the economy which supports healthcare grows by 2% on average.

15. Healthcare alone will bankrupt the nation, and the bankruptcy of entities that promised open-ended healthcare is merely one manifestation of the coming bankruptcy of the entire sickcare/entitlement Status Quo.

16. Once the stock market reverts to the mean and is revalued to the "new normal" of global recession and low earnings growth, it will decline by 40% or more and yields will remain around 2%.

17. Pension funds earning 2% at best based on expectations of permanent 8% returns cannot sustainably pay the benefits promised.

18. If the city attempts to make up the shortfall annually, the services provided to the citizenry will be gutted. The risk and consequence of malinvestment and favoritism has been offloaded onto the citizens while those protected by the government moat live "risk-free" lives of guaranteed pensions and benefits.

19. The public-employee pension and healthcare benefits were separated from the market economy with this government guarantee: regardless of what happens in the real economy, you will be paid pensions and benefits that have zero exposure to the market economy and private-sector pensions/benefits.

20. In effect, the government has placed its employees and vested interests in a moated "risk-free" zone outside the market economy. The risk that is distributed to all participants in an open market (i.e. a democracy) is transferred to the citizens and taxpayers.

21. Any government that siphons off an increasing share of its taxpayers' disposable income (to distribute to the privileged few) in return for declining services will eventually be overthrown by the citizenry and taxpayers who must bear the full consequences of the city's mismanagement of their capital and income.

22. Every city, county and state in the U.S. which has secured a risk-free wonderland for its favored few will "snap back" into the real economy and face the discipline of the credit market and the "discovery" of price and value.

23. Risk cannot be eliminated by government mandate, it can only be transferred to others. No government entity can maintain a "risk-free" fortress outside the market forever. The moat around Wonderland will be drained or filled, regardless of what promises were made.

24. Government has no mechanism to transparently price risk, value and return on investment. The market will "discover" all these and re-set government services and salaries accordingly.

How Stockton went broke

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Resistance, Revolution, Liberation: A Model for Positive Change (print $25)
(Kindle eBook $9.95)

Read the Introduction (2,600 words) and Chapter One (7,600 words) for free.

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.
The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution, and it combines cultural, technological, financial and political elements in a dynamic flux.History is not fixed; it is in our hands. We cannot await a remote future transition to transform our lives. Revolution begins with our internal understanding and reaches fruition in our coherently directed daily actions in the lived-in world.

Read more...

The Real-World Middle Class Tax Rate: 75%

If we include all taxes, the real-world tax rate is much higher than the "official" income tax rate.

For those Americans earning between $34,500 and $106,000, the real-world middle class tax burden in high-tax locales is 15% + 25% + 5% + 15% + 15% = 75%. Yes, 75%.

Before you start listing the innumerable caveats and quibbles raised by any discussion of taxes, please hear me out first. Let's start by defining "taxes" as any fee that is mandated by law or legal necessity. In other words, taxes are what is not optional.

If we include all taxes, the real-world tax rate is much higher than the "official" income tax rate. These "other taxes" vary from nation to nation. France, for example, has a "television tax." It is mandatory, and since virtually every household has a TV this operates as a universal tax. The argument that this is "optional" is specious.

In every other advanced democracy, basic universal healthcare is paid by tax revenues. In the U.S., healthcare insurance is "optional" but this too is specious: in the real world, private healthcare insurance is mandatory because the alternative--having zero insurance--places your entire net worth and income at risk of catastrophic loss.

Having no healthcare insurance only makes sense if you have no real assets and a low income. At that point, your care will be provided by the taxpayer-funded Medicaid program, which is the default universal-care program in the U.S.

For this reason I consider the cost of private healthcare insurance in the U.S. the equivalent of a tax. We pay over $12,000 annually for barebones healthcare insurance, which amounts to about 15% of our gross income. Some countries pay for healthcare with a 15% tax, here we pay the 15% directly. There is no difference except the process of collecting the 15%. (The only real difference is that healthcare costs twice as much per person in the U.S. because the system is operated by cartels whose business model is fraud, opaque pricing and the elimination of competition via Central State regulation.)

Yes, the super-wealthy can absorb a $150,000 hospital bill, but the 99.9% cannot. Thus any claim that healthcare insurance is "optional" is specious.

Property tax is mandatory. Some countries have no property tax, others do. Once again, only counting social-insurance and income taxes as the "official tax rate" is horrendously misleading. For countries without property taxes, the revenues are collected as value-added taxes (VAT) or higher income taxes. One way or another, the services paid by property taxes in the U.S. are paid by other tax schemes in countries without property taxes. So property taxes must be included in any accounting of total taxes paid.

Many of us who reside in states such as Illinois, New York, New Jersey and California pay $12,000 or more annually in property taxes. That is about 15% of our household income.

Renters pay the property taxes indirectly, but to the degree that rents would be lower if property taxes were eliminated and the tax burden shifted to a VAT, then renters "pay" the tax just like property owners.

Employees looking at the paycheck stubs do not see the entire tax paid on their labor. Empoyees may wonder why their net pay has stagnated for decades. One reason is that the total compensation costs of employees has risen substantially.

To give but one example of many, Social Security taxes were once modest, 3% paid by the employee and 3% paid by the employer for a total of 6% of the wage. Now the total for Social Security (12.4%) and Medicare (2.9%) is 15.3%. Self-employed people pay the total 15.3% as "self-employment tax." This is the real-world tax burden of Social Security and Medicare.

The 15.3% Social Security/Medicare tax starts with dollar one of net income. The Social Security tax goes away above around $106,000 in income, the Medicare tax does not.

Most employees do not know how much healthcare insurance "tax" is paid by their employer. To the degree that wages would rise if the healthcare "tax" was not paid by employers, then employees pay for this "tax" indirectly. To act like it isn't a mandatory part of compensation costs is both specious and misleading.

The only transparent way to calculate the total tax burden is to count all taxes (or equivalent) paid by self-employed property owners. Not counting the indirect taxes of healthcare and property taxes is misleading to the point of blatant misrepresentation.

The basic Federal income tax gives each individual earner $9,500 in standard deductions and exemptions. The tax rate for all income above that is:
$1 to $8,500: 10%
$8,501 to $34,500: 15%
$34,501 to $83,600: 25%
$83,601 to $174,400: 28%
$174,401 to $379,150: 33%
Above $379,151: 35%

These rates are scheduled to rise at the end of 2012 unless Congress acts to maintain rates at current levels.

Many households have gigantic interest deductions stemming from gigantic mortgages, but let's set aside outsized debt-based tax deductions as far from universal.

Above a rather modest $34,600 in taxable income and up to around $106,000, the real-world middle class tax burden in high-tax American locales is 75%:

Social Security and Medicare: 15.3%
Federal income tax: 25% (28% above $83,600)
State income tax: 5% (mid-range)
Healthcare insurance: 15%
Property tax: 15%

15% + 25% + 5% + 15% + 15% = 75%

Clearly, the percentage of income devoted to healthcare insurance and property taxes declines as income rises. Someone earning $200,000 has not only dropped the 12.4% Social Security tax for income above $106,000, healthcare insurance and property taxes as a percentage of their income drops from about 30% for those earning around $86,000 to 15%.

We can argue fruitlessly about how many tax angels can dance on the head of a pin, but all the caveats and quibbles don't change the basic fact that real-world tax rate for the "middle class" earning more than $34,500 in taxable income in high-tax locales is a confiscatory 75%.

Please don't tell me the U.S. is a "low-tax" nation; I might suffer a breakdown that I couldn't afford due to exclusions in my "voluntary" healthcare coverage.

---

Resistance, Revolution, Liberation: A Model for Positive Change (print $25)
(Kindle eBook $9.95)

Read the Introduction (2,600 words) and Chapter One (7,600 words) for free.

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.
The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution, and it combines cultural, technological, financial and political elements in a dynamic flux.History is not fixed; it is in our hands. We cannot await a remote future transition to transform our lives. Revolution begins with our internal understanding and reaches fruition in our coherently directed daily actions in the lived-in world.

Read more...

Dear Person Seeking a Job: Why I Can't Hire You

Potential employers have to respond to the incentives and disincentives that exist in today's world, and those do not favor conventional permanent employees.

I know you're hard-working, motivated, tech-savvy and willing to learn. The reason I can't hire you has nothing to do with your work ethic or skills; it's the high-cost Status Quo, and the many perverse consequences of maintaining a failing Status Quo.

The sad truth is that it's costly and risky to hire anyone to do anything, and "bankable projects" that might generate profit/require more labor are few and far between. The overhead costs for employees have skyrocketed. So even though the wages employees see on their paychecks have stagnated, the total compensation costs the employer pays have risen substantially.

Thirty years ago the overhead costs were considerably less, adjusted for inflation, and there weren't billboards advertising a free trip to Cabo if you sued your employer. (I just saw an advert placed by a legal firm while riding a BART train that solicited employees to sue their employers, with the incentive being "free money" for a vacation to Cabo.)

The other primary reason is that there are few (to borrow a phrase used by John Michael Greer) "bankable projects," that is, projects where hiring another worker would pay for the costs of the additional overhead, labor and capital and generate a reason for making the investment, i.e. a meaningful profit.

There is very little real "new business" in a recessionary, deflationary economy: any new business is poaching from an established business. The new restaurant isn't drawing people from their home kitchens, it's drawing customers from established restaurants.

The only competitive advantage in a deflationary economy is to be faster, better and cheaper or have a marketing and/or technology edge. But marketing and technological advantages offer increasingly thin edges. The aspirational demand (driven by the desire to be hip or cool) for a new good or service has a short half-life. As for technology: miss a product cycle and you're history.

Put these together--higher costs and risks for hiring people, and diminishing opportunities for expansions that lead to profit--and you have a scarcity of projects where hiring people makes financial sense.

Faster, better and cheaper usually means reducing the labor input, not increasing it. In a deflationary economy, it's extremely difficult to grow revenues (sales), and as costs continue climbing inexorably, the only way to survive is to cut expenses so there is still some net for the owner/proprietor to live on.

Consider the tax burden on a sole proprietor who might want to hire someone. The 15.3% Social Security/Medicare tax starts with dollar one. After the usual standard deductions, the Federal income tax is 15%, and 25% on all earned income above $34,800. My state tax is around 5%. Since every other advanced democracy pays basic healthcare coverage out of tax revenues, the $12,000/year we pay for barebones healthcare insurance is the equivalent of a tax. That's 15% of our income. Property tax is also $12,000 annually, so that's another 15%.

Above $35,000 in income, my tax burden is 15% + 25% + 5% + 15% + 15% = 75%. You can imagine how much money I would need to clear to be able to afford hiring someone. The number of businesses that generate huge sums of profit are few and far between, and the number of businesses that scale up from a one-person shop to mega-millions in revenues is also extremely limited.

The potential employer is faced with this reality: the money to hire a new employee will come out of my pay, at least at first. Hiring an additional worker only makes sense if the new employee will immediately generate enough additional revenue to fund his/her own wage and overhead costs, the added expense of supervision and a profit substantial enough to offset the risks.

I should stipulate that my knowledge of hiring people and being an employer is not academic. My partner and I launched a business in late 1981, in the depths of what was at that time the deepest recession since the end of World War II. We had a very diverse ethnic workforce and did millions of dollars of work. Rather than make a fortune I lost $50,000 and had to mortgage the house we'd built by hand to make good all debts. I exited in 1987 with my personal integrity intact: nobody lost money working for us.

The losses were basically the result of me pushing the outer boundaries of my experience and thus my competence in an unforgiving, very competitive environment. The learning curve in business is steep and pricey.

I have also been involved in saving/managing a small non-profit organization that had expanded payroll far beyond what the organization's revenues could support.

What newly minted employers understand that employees rarely understand is that the overhead costs of hiring even one person do not scale at first. To hire one person, even part-time, the employer needs to set up a complex infrastructure to manage the payroll taxes and accounting, and comply with a variety of statutes. If the employer does not follow the many laws regarding labor, witholding taxes, workers compensation, liability coverage, disability insurance, unemployment insurance and so on, then the employer is at risk of penalties and/or lawsuits.

If a business does $1 million in gross receipts a year and already has five employees and a manager, it's not that burdensome to hire a seventh employee--the framework is all set up. But the cost of setting all that up for employee #1 is not trivial, especially when you realize the complex machinery all has to be overseen and managed.

In the Silicon Valley model, a couple of guys/gals work feverishly in the living room/garage until they have a product/service to sell to venture capital. If the pitch succeeds, the VCs give them a couple million dollars and they hire a manager to sort out all the paperwork, management, etc.

Most small businesses/proprietors don't get handed a couple million dollars. They have to grow organically, one step at a time. Each expansionist step is fraught with risks, especially when opportunities to grow revenue are few and far between and are generally crowded with competitors.

Thirty years ago the employer's share of Social Security tax was not today's 7.65%; it was much less. Worker's compensation rates were lower, as were disability and liability insurance rates. Adjusted for inflation, healthcare insurance was half (or less) of today's absurdly expensive rates. To pay someone a modest $20,000 annual salary today would cost at least $30,000 in total compensation costs, and if the employee is middle-aged or requires family healthcare coverage, it could easily exceed $40,000. That sum many be trivial in the bloated $3.7 trillion Federal government or in Corporate America, but in millions of small businesses that $40,000 is the proprietor's entire net income.

In other words, as costs of hiring anyone to do anything have climbed while revenues have stagnated, the threshold to hire an employee keeps getting higher.Back in the day, I could hire a young person out of high school for a modest cost in overhead, and the work-value they produced to justify the expense was also modest. I could afford to hire marginal workers and as long as they didn't get in the way too much and ably performed basic tasks then I could afford to have them on the payroll.

The same was true of older workers, veterans living on the beach who wanted work, etc.--I could afford to give all sorts of people a chance to prove their value because the costs and risks were low.

That's simply less true today. The costs and risks are much, much higher.

Liability has become a lottery game where anyone with assets or income is a target for "winner take all" lawsuits. I would have to be insane to hire someone to work around my property on an informal basis: if the person injured himself, I would face the risks of losing my property to the legal defense costs and potential settlements that exceed the homeowners' insurance policy.

In an office environment, I could be sued for harassment or for engendering a "stressful work environment." If you think these kinds of cases are rare, you need to get out more.

Simply put, the feeble hope of increasing revenues does not even come close to offsetting the tremendous risks created by having employees.

There's a Catch-22 aspect to all this; small business can't expand revenues without employees, but the costs/risks of having employees makes that a gamble that is often not worth taking. The lower-risk, lower-cost survival strategy is to automate everything possible in back-office work and free up the proprietor's time to grow revenues that then flow directly to the bottom line.

Managing people is not easy, and it's often stressful. Once a proprietor hires an employee, he/she must wear a number of new hats: psychiatrist/counselor, manager, coach, teacher, to name but a few. Frankly, I don't need the stress. I would rather earn a modest living from my labor and avoid all the burdens of managing people. (In my case, that included bailing workers out of jail, loaning them my truck which was subsequently rolled and destroyed, and a bunch of other fun stuff.)

I am not embittered, I am simply realistic. I enjoyed my employees' company, even the one who rolled my truck and the ones who managed to get into trouble with the law. But I got tired of meetings and all the wasted motion of office management, and I got tired of taking cash advances on my credit cards to make payroll.

If anyone out there thinks being an entrepreneur/small business proprietor is easy and a surefire pathway to the luxe life, then by all means, get out there and start a business and hire a bunch of people. I applaud your energy and drive, and sincerely hope you are wildly successful.

I hope you now understand why so many businesses only want to work with contract labor/ self-employed people: having employees no longer makes financial sense for many small enterprises. What makes sense is paying someone a set fee to accomplish a set task, and that's it, the obligation of both parties is fulfilled. If the task isn't completed, then the fee isn't paid.

Revenues just aren't steady enough in many cases to support a permanent employee. When the work comes in, then contract labor is brought in to get the work done. When it's done, they're gone, and all their overhead costs are theirs.

It's extraordinarily difficult to generate revenue in a deflationary economy, and extraordinarily difficult to scrape off a net income as expenses such as taxes, insurance, healthcare, etc. continue climbing year after year.

Self-employment places a premium on professionalism and results. Unlike offices filled with managers and employees, nobody cares about your problems, conflicts, complaints about the common-area fridge or your attendence at meetings. Once you've been self-employed for a while, and you only hire/work with other self-employed people, then you look back on conventional work places as absurdist theaters of schoolyard politics, tiresome resentments and child-parent conflicts acted out by self-absorbed adults.

Once you're self-employed, your focus shifts to nurturing a productive network of clients, customers and like-minded, reliable, resourceful self-employed people who will give you work/work for you when you need help. Building trust and following through on what you promised to do become your priority.

The economy is different now, and wishing it were unchanged from 30 years ago won't reverse the clock. We have to respond to the incentives and disincentives that exist in today's world, and those do not favor conventional permanent employees except in sectors that are largely walled off from the market economy: government, healthcare, etc.

But these moated sectors cannot remain isolated from the deflationary market economy forever, and what was considered safely walled off from risk and change will increasingly face the same market forces that have changed private-sector enterprise.

If you want security and a steady income, it may be more rewarding to build it yourself via highly networked self-employment.

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Resistance, Revolution, Liberation: A Model for Positive Change (print $25)
(Kindle eBook $9.95)

Read the Introduction (2,600 words) and Chapter One (7,600 words) for free.

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.
The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution, and it combines cultural, technological, financial and political elements in a dynamic flux.History is not fixed; it is in our hands. We cannot await a remote future transition to transform our lives. Revolution begins with our internal understanding and reaches fruition in our coherently directed daily actions in the lived-in world.

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Sorry, Bucko, Europe Is Still in a Death Spiral

Replacing old impaired debt with new impaired debt does not generate growth. Borrowing more money will not reverse financial death spirals.

Sorry, Bucko--Europe is still in a financial death spiral. Friday's "fix" changed nothing except the names of entities holding impaired debt. We can lay out the death spiral dynamics thusly:

1. Growth was dependent on borrowing money and blowing it on consumption and malinvestment. Replacing old impaired debt with new impaired debt does not generate growth.

2. Borrowing more money to pay the interest on past borrowing will not generate growth. Money must be borrowed to pay the interest and additional money borrowed to fund current consumption. As interest increases, this creates a geometric increase in debt and interest costs.

3. Borrowing more money to fund current consumption is a death spiral, as the interest payments eat up future revenues, starving productive investment and future consumption.

4. Borrowed money must be backed by either collateral or future income streams. The collateral remaining in malinvestments (villas in Spain, etc.) is either impaired, near-zero or simply non-existent. There is no legitimate collateral on which to base more borrowing.

5. Future income streams are already committed to paying interest on past debt and mandated consumption (entitlements, government payrolls, etc.), so there is no legitimate collateral on which to base more borrowing.

6. Interest rates will rise as investors question whether their capital will be returned in full or if it will be returned in depreciated currency.

7. Export-based economies will contract as China's expansion slows to a crawl. Future projections of national income are overly optimistic.

8. As income is bled off to pay rising interest, there is less money available for consumption or investment. Without investment, income declines. As taxes rise, there is less private-sector income available for either investment or consumption. This is the "austerity death spiral," and borrowing more for State malinvestment will not halt it.

The more money that is borrowed to maintain Status Quo consumption, the higher the future interest payments. This is a financial death spiral.

9. There is no collateral for more borrowing, but "growth" depends on more borrowing.

10. Transferring bad debt to central banks does not mean interest will not accrue: interest on the debt still must be paid out of future income, impairing that income.

11. Lowering interest rates does not create collateral where none exists.

12. Lowering interest rates only stretches out the death spiral, it does not halt or reverse it.

13. Centralizing banking and oversight does not create collateral where none exists.

14. Europe will remain in a financial death spiral until the bad debt is renounced/written off and assets are liquidated on the open market.

15. Anything other than this is theater. Pushing the endgame out a few months is not a solution, nor will it magically create collateral or generate sustainable "growth."

16. The Martian Central Bank could sell bonds to replace bad debt in Europe, but as long as the MCB collects interest on the debt, then nothing has changed.

The Martians would be extremely bent when they discovered there is no real collateral for their 10 trillion-quatloo loan portfolio in Europe.

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Resistance, Revolution, Liberation: A Model for Positive Change (print $25)
(Kindle eBook $9.95)

Read the Introduction (2,600 words) and Chapter One (7,600 words) for free.

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.
The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution, and it combines cultural, technological, financial and political elements in a dynamic flux.History is not fixed; it is in our hands. We cannot await a remote future transition to transform our lives. Revolution begins with our internal understanding and reaches fruition in our coherently directed daily actions in the lived-in world.

---

Read more...