Don’t Quit Your Day Job – Personal Finance, Economics and Investing

Everyone’s got prison on their mind!

With Bernard Madoff in the news due to his 150 year sentence for running a massive ponzi scheme, the floodgates have been opened in terms of the number of prison related articles in the news. In this article I’ll share with you some of them I found most thought provoking, and maybe I’ll even throw in a few thoughts of mine. Today I offer you this offbeat post about prison.

The article “If You Don’t Have One… Get One” has been featured in the 211th edition of the Carnival of Personal Finance! Check out the carnival, and the hosting site, Green Panda Treehouse. The theme is a good one too…

“Of Risk and Men”, an article about the state (and the state of the budget) of California, was featured in the 71st edition of the Money Hacks Carnival. Check out the carnival, and the host, The Canadian Finance Blog.

If I told you that increased fuel efficiency leads to more fuel consumption, what would you think?

Jevon’s paradox states that increases in the efficiency of the use of a resource lead to the increased usage of that resource. Throughout history, examples of this effect in action can be found. This brings me back to the topic of the gas tax. If you are of the belief that we need to reduce our consumption of gasoline, increased efficiency (and attempted legislation to increase efficiency) alone will only lead to more gasoline usage. If less gasoline usage is the goal, only a tax on gasoline will make it happen.

In my mind there are two issues that need to be addressed in any successful health care overhaul. First, costs have to come down so health care stops costing $7,900 per person and increasing at a rate faster than inflation. Second, access to health care needs to be expanded to include the 21 to 46 million people without insurance. Since it is my opinion that the health care system needs an overhaul, what should that overhaul look like?

Government participation in the private insurance market is a trojan horse for a single payer system.

The debate that needs to happen is not private options versus a public option in insurance, it’s private options versus a single payer system. No, private insurance will never go away completely, but any public option will soon become much larger then originally planned under a public option. Private insurance will become relegated to supplemental programs which build on top of (and react to the inefficiencies of) a government run plan.

No matter what the final estimate for Health Care reform is, it will cost a lot more.

The bills being written already carry price tags so high it’s mind boggling… $1 trillion over ten years, even $1.6 trillion over ten years. A large number like that seems to convey honesty and straight-talk, yet probably only scratches the surface of what will be a much higher bill. Recall: Social Security was sold to the American public as a 1% tax on the employee and employer, scaling up to 3% on each in 1948. How close are the rates to 3% now? Well, employers and employees both pay 6.2% in tax and Social Security is now the largest expenditure in the federal budget.

Where did the estimate of 46 million people in America without health insurance come from? You probably have health insurance through your employer or through some other means. However, there are people in this country without insurance. What does it mean, and why is the number’s background not nearly as scary as the number itself? Read on…

Can states default on their debt? The state of California has been in the news recently because of a $24.3 billion gap in funding. Is it possible that we may soon hear of a state actually going ‘bankrupt’? What are the economic and political ramifications if California takes such a step?

There are three ways for a government to pay for debt: issue new debt, collect taxes, and cause inflation. Inflation is a ‘hidden tax’ on a populace- it decreases the value of future money, and allows governments to pay off their current debt with devalued money. The United States dollar, as the world’s reserve currency, gives the United States a unique temptation (opportunity?) to pay off their debts in a currency it can print. What exactly is inflation, though? And if you believe inflation is on the way, how do you set yourself up to counteract it?

One of Milton Friedman’s most influential and revolutionary theories was his challenge to the traditional Keynesian consumption function, which includes simple after-tax income as a variable in the consumption. Friedman countered, however, that those who consume today take future taxes, price increases, salary increases, and other factors into account. This is summarized in his Permanent Income Hypothesis. More specifically, this counters that people consume based off of their overall estimation of future income as well as opposed to only the current after-tax income.