Monday, August 30, 2010

A little update on the homestead and why the US is short on jobs.

Things have been busy and a little hectic, but that's not news I guess.  We successfully got through my fiftieth birthday, so that was fun.  But I am glad to be past all the extra hubbub and get on with the business of making, improving and running the homestead.

I got the basics up for our grape arbor.  It's not much, just some galvanized cable strung between several steel fence posts, but the grapes are much happier since they are no longer laying around on the ground.  The four peach trees and four apple trees that we planted last year have done well and gained a good bit of height and girth.  The electric fence has kept the deer from eating them down to nothingness. 

Most of the trees and bushes we planted this spring have done well.  One of the pear trees died, and one of the paw paw trees died above the graft.  So the root stock took over and is now doing well.  More than likely, the root stock will not make fruit as tasty and large as the named variety that was grafted on top.  But we could get lucky and get a sport that's even better.  We lost a couple fall red rasberry bushes.  All the blueberry bushes came through nicely.  The hazelnut tree/bushes are all doing well.  Someday, we'll be able to almost feed ourselves.

The garden got away from me again this year, and the weeds have really taken over.  Grasses in particular are tough to break their reproductive cycle.  Despite that, we have plenty of tomatoes, the corn is doing splendidly, we have picked several watermelons (none quite ripe yet, but still tasty and refreshing), plenty of beets, carrots and beans that we're not keeping up with.  The cucumbers have pretty much given up, after being swallowed up by the watermelon vines that are attempting to take over the earth.  But Christina did get quite a few jars pickled.  The Yukon Gold potatoes are wonderfully delicious and produced a good yield.

We cut, split and stacked another year's worth of firewood, and we always stay a year ahead so it's nice and dry and seasoned when we burn it.  Isaac worked like a champ at splitting and stacking.  We broke the log splitter a couple of times, but nothing serious.  30 minutes work with the ancient Lincoln arc welder made it better than new.  I don't know how people can get along in life without a welder.

The shop still wants some finishing work, which I anticipate will get done this winter as I have time.

The big push is get the kitchen renovated, especially the exposed/exterior walls.  They desperately need insulating, so the pipes don't freeze, again.  And the people too.   As you can see from the pictures a few posts back, we have deconstructed a bunch of the kitchen already.  Wow is that tedious.  Tearing drywall and paneling off goes well enough, but then you have to digest the wreckage into garbage bags, suitable for the garbage removal service.  Cheap wood paneling is a pox on humanity.

The kitchen had 4 or 5 layers of stuff on the walls.  From oldest to newest, plaster/lathe, drywall, paneling, more paneling, and drywall again.  There was a token/pretend amount of fiberglass insulation in about 1/3 of the walls.  What were  these people thinking?  I work best under deadline.  Winter is coming.

Now, to change gears completely and talk about the job situation.  About a decade ago, my blinders fell off, and I suddenly became very interested in economic theory and practice. I became aware of some disturbing trends in how the government manipulates our currency and "manages" the Federal Deficit.

Back when we were worried that South and Central America would become politically unstable, and the USSR would fill the political vacuum with communism, I started to watch a certain number or metric if you will.  This number was highly predictive of when any given dictatorship was about to be overthrown, or have a coup, or something equally bad.  This metric was the ratio of government debt to GDP, or gross domestic product.

With rare exception, we could predict with pretty good accuracy,  something BAD was going to happen if this ratio went much above 1.00.  That is to say, if you're a dictator, and the entire economy of your country produces a million dollars worth of goods and services in one year, and if you, the government/dictator owed, in total, much over a million dollars, that was a very bad sign.  If you were smart, you would pack your bags and move to Switzerland before some commie funded fanatic whipped the public up into a frenzy and you get shot in your bed.

The alarming thing is, we are now them.  We as a nation have become enslaved by our debtors, and by the debt itself.  Of course, there is no definite magic line that, once crossed, things blow up politically.  But the bigger the number, the higher the risk.

Japan is one of those rare exceptions, with a debt to GDP ratio of almost 2.  The reason it "works" for them is the government owes most of the money to the Japanese ordinary citizenry.  No currency exchange rates to cause problems.  And, so long as they like to keep the money tied up in savings long term, the government can slowly chip away at it.  I put "works" in quotes because the Japanese economy has experienced trivial to zero growth in the last decade, primarily due to the debt.  This is not something we should strive to attain.

So, as a general rule, we don't like it to be over 1.  Below 1 is much better.  In the US, during WW 2, we piled up historically high levels of debt.

We got away with it then, because the war in europe destroyed a large percentage of the manufacturing base/infrastructure.  The whole world pretty much had to buy manufactured goods from us (mild oversimplification) because we were the only ones left standing.  And US citizens made heroic sacrifices to push the war effort along, like no new cars or hair dryers for the duration of the war to allow this huge surge of resources to flow into the war effort.  All the pent up demand after the war drove manufacturing in the US to unprecedented levels.

For many years after the war, every president/congress reduced the debt/GDP ratio, until we hit Ronald Reagan.  Every administration since then has made it worse.  If you ignore the funny accounting methods, it appears that Bill Clinton reduced the actual deficit, which is technically true.  But if you count all the "off budget" items, he doesn't fare so well after all.

The debt/GDP ratio peaked at about 1.2 during the war, and bottomed out at about 0.35 under Nixon, Ford and Carter.  Here's a nice graph for those visual thinkers:

Debt to GDP ratio over time

Unfortunately, our fearless leaders have borrowed their way into a much larger hole (in absolute terms) and as a percentage of GDP, nearly as bad as during the height of the war.  There are key differences this time around.  We didn't recently bomb europe to pieces, so their manufacturing base is just fine thank you.  And for the last two decades, we have been steadily losing manufacturing jobs and infrastructure to asia.  I also feel that the current crop of citizens in the U.S. will be unlikely to make big sacrifices gracefully.

Depending on who you talk to, our current debt/GDP ratio is now pretty much exactly 1.0.    I can assure you, our economy is not going to perk up in the next 5-10 years.

How are we going to dig ourselves out of the hole this time?  The government's current solution is to raise taxes, which will throw the brakes on the economy.  This will truly be THE jobless "recovery".  Here's a nice article describing the problem facing the small business person (who supplies 2/3 of ALL the jobs in the US):

This is why there are no jobs...

So, whatever your station in life, you should plan on not getting a raise, getting your hours cut, losing more benefits all the time (like health insurance) or losing your job altogether, and your government getting more and more voracious in their appetite for tax revenue, user fees, speeding tickets and other creative ways to squeeze money out of the citizenry.  If this turns out not to be so in your personal case, I am exceedingly happy for you.  Hope for the best, but plan for the worst.  Get out of debt, reduce risk.

Good luck and may the force be with you.

Oh yeah, and fire all of your incumbent congressmen and senators this fall.


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