Numbers #7: Let’s talk about minimum wage

I think that there should be a “minimum” wage because a person’s labor is worth “something”. Obviously that “something” is what’s up to debate. How did the minimum wage come about? Here’s some history:

Minimum wage laws in 2015 for U.S. individual states,

Background information on the minimum wage:

Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage

Changes to the Minimum Wage Law over time:

During the 1960’s, one of minimum wage’s main target audiences,  if I may call them a target, was the teenager who took the minimum wage jobs created by the birth and expansion of the fast-food industry, along with the bag boy at the supermarket, the paper boy, the errand boy. Unfortunately, the babysitter which was a girl’s job (vast majority of the time) was not covered by even minimum wage laws and she “got what she got” and we’re talking cents an hour not dollars an hour.

Here’s one way to look at the minimum wage in 2015 at $8.25/hour in Illinois:

  • Red peppers @ $2.00/ea= 4 peppers
  • S. domestic first class stamp @ $.49= 16 stamps for $7.84
  • McDonald’s BigMac pounder @ $3.99= 2 burgers
  • order of McDonald’s fries, large size @ $1.89= 4 orders of fries
  • bus rides on Chicago CTA @ 2.00 per bus ride, no transfer allowances= 4 bus rides
  • bottle of nail polish (I know this one is a bit ridiculous, but so is the price of nail polish these days!)= 1 bottle (maybe) the price runs from $8 to $10 would you believe!
  • haircut at a department store beauty salon, not a fancy boutique one, $28.00= 4 hours of work @ $8.25/hr for $30.00 plus a tip
  • can of soup, Healthy Choice $2.49= 3 cans of soup
  • box of Cheerios cereal, 8.9 oz. approximately $3.50/box= 2 boxes
  • loaf of bread, Brownberry approximately $4.50/loaf= 1 1/2 loaves

Before you jump all over me, yes, these are brand name foods, yes, you can get them on sale, yes there are coupons sometimes available, yes there are generics. I’m just trying to make the point of “value”.  Question: What does a U.S. dollar buy in 2015? Answer: Not Much, especially if you are living on a fixed income such as Social Security and are depending upon savings interest for added income! Oh, that’s right, there is NO interest income right now and there has not been for a very long time.

Speaker of the House: A Void Causes Concern

Update July 2016: Since I posted first posted this article in October, 2015, we are now entering the final stages of the U.S. presidential election. I decided to include this posting on the Daily Post “Admire” page because I feel that Paul Ryan is to be admired. He stepped into an ambiguous, contentious situation, left a position as chairman of the Ways and Means Committee that he desired and instead “filled the void.” I have NO desire to get “all political” about this. I do not know any of the details that surrounded Mr. Ryan’s final decision to assume the Speaker position. I just want to thank him for risking his political future in order to restore some stability in the U.S. Government’s system.

John Boehner leaving the House of Representatives as Speaker of the House and the subsequent void of an immediate successor are a cause for concern. The Speaker of the House is the second in line to succeed to the Presidency of the United States. Vice President Joseph Biden would be the first person to advance to the Presidency if events or situations deemed it necessary. In my lifetime President Kennedy was assassinated and President Reagan was shot. Vice President Lyndon Johnson was sworn in as President on the Presidential airplane,  in Dallas, Texas, on the day that President Kennedy was declared dead.  In Reagan’s situation, I remember General Haig (then Secretary of State) speaking to the Press and asserting that the situation was well in hand. What was scary and important about his statement to the Press is that General Haig was NOT Vice President of the United States. The impression was given that someone other than the Vice President was “in charge.” Here’s an article from the Washington Post about the event.

The Constitution of the United States clearly spells out the succession path to the Presidency of the United States in a time of necessity. Actually the United States Code  lays out the specifics of the succession.  Evidently, there has been recent discussion about changing the succession to the Presidency. Here is a white paper written by the Louisville Law Review in 2013. Obviously there has been concern over the years about the U.S. Constitution’s succession designation plan. The succession plan was amended several times over the years.

What is very frightening to me, as “Joan Q. Public” (or John if you prefer), is the total chaos of our Federal Government. Just reflecting upon the fairly recent domestic economic chaos that U.S. citizens have experienced, e.g. the dot com crash in 2001, the 2007-8 housing crash, and the years of zero interest being paid on savings accounts, it seems people are literally watching our government and economy disintegrate. By the way this is not commentary aimed at any one individual or political party. It is obviously my reflection upon a totally dysfunctional government system.

Getting back to the Speaker of the House situation, according to the U.S. Constitution, the President Pro-tem of the Senate would be the third in line for the Presidency. There is a legal succession “written on the books.”  Here’s an article from the Salt Lake Tribune.

What amazes me is the challenges to our fundamental “laws of the land.” Perhaps I’m just paying more attention these days. Perhaps I’m just questioning what’s being said and not blithely accepting everything as the truth and/or lawful and/or “the way it has to be.” The pendulum is always swinging, right and left, never really still or is it? Funny thing I think the pendulum may be “still” right now. With all the momentum, chaos, dissent, seemingly irrational movements in the stock markets, perhaps the world is like a deer caught in the headlights, frozen in time, just doesn’t know what to do in the path of the possible elimination. Yikes how morbid. I pray we snap out of it very soon for everyone’s sake and well-being.


And now in the center ring: An Asset Bubble!!!

The Great Recession period is spoken of as a “liquidity” bubble.  See my blog posting It’s a credit crisis, It’s a liquidity crisis! It’s a solvency crisis!.  Are we now in an asset bubble that is bursting?   This craziness in the world economies and the financial markets made me think of the Lawrence Welk  TV (television) show. What a great entertainer he was and what a great family entertainment TV show he literally orchestrated. Lawrence Welk was a “big band” leader. Welk used a “bubble machine” while playing some of his orchestration pieces. Here’s a YouTube clip example of the opening of  a Welk TV program.

But I stray from my subject…

The asset bubble that we are now experiencing is seen, by some,  as a result of all the easy, cheap money provided by the governments and large financial institutions to solve the liquidity/solvency crises that emerged during the 2008-2009 financial crisis. In other words, all the quantitative easing (QE) programs implemented to stave off another Depression like that experienced during the 1930s.

What is an asset bubble? The Wall Street Journal article dated May 11, 2015, discusses The Federal Reserve Asset Bubble Machine:

Faith in the Fed’s easy-money policies has encouraged a dangerous complacency. The mantra on Wall Street is that good economic news is good news for the markets, but that bad news is also good news, because it will encourage the Fed to keep rates lower for longer. This has led to one of the longest rallies the U.S. stock market has ever experienced, without even a 10% correction.

The latest “bad news” of course has been the decline in China’s economic growth.  How does China’s economy affect us in the U.S.? Here’s an article from
U.S. Stock-Index Futures Decline After Steepest Slump Since 2011

For a little historical perspective on economic bubble machinesFrontline, that great documentary film company, has listed five famous bubbles at their site:

  • Tulip mania (1630’s)
  • The Mississippi bubble (1719)
  • The South Sea bubble (1720)
  • The Roarin’ 20’s in the U.S. (before the 1929 crash)
  • The Japanese bubble (1980’s)

As always, where are we, the individual investor, when these bubbles burst? As much as we may or may not consider ourselves speculators vs. investors, I’m afraid everyone is morphing into a little of both. After all what can one do when his/her savings are earning zero interest!


Back to the future, using U.S. Post Office as Bank

If you’re not familiar with the movie “Back to the Future”, it is a fun flick where Michael J. Fox (the protagonist) joins forces with a “mad scientist” played by Christopher Lloyd. They use a DeLorean automobile as a time machine so that Fox can travel back to the 1950’s. Well, it appears that the U.S. banking system might travel back a bit in time in an effort to offer basic banking services to the public.

Once upon a time, the United States used its postal office system to allow citizens to save money! Isn’t that a novel idea!

So here’s an interesting development. Apparently there is some consideration and discussion occurring in the U.S.Congress regarding reinstating the use of the U.S. post office as a banking mechanism for those who do not “bank” with any of the chartered banking institutions. As an aside, I’m happy to hear that “the Congress” is doing something besides trying to impeach President Obama.

First a little history lesson:

The Smithsonian Museum offers a little insight into the past “banking” role of the postal office. Banking at the post office. offers commentary about our “postal banking” past and perhaps future.

For those who enjoy the nitty gritty details of the law, here’s a copy of the Postal Savings System Act of 1910.   Post Savings System Act of 1910

“One of the biggest problems in banking today is the large and ever-increasing population of the unbanked…” Here’s an essay by Mehrsa Baradaran, published in the Harvard Review, that explores the return to postal banking.

“Would the U.S. Postal Service Make a Better Banker for the Poor?”  Finally, here is an argument presented by Bloomberg Business News in 2014.

All in all the rationale for bringing back basic banking services to the U.S. postal system makes sense to me. Between the concern for TBTF* money center banks, no access to financial institutions in a locale or neighborhood, and perhaps onerous criteria required to open financial accounts at a bank preventing such access, using the Post Office to make a savings deposit as well as mailing a letter (the old-fashioned way) solves a pressing problem. With all the “talk” about easier access, better access, more access to education, jobs, transportation…you name it, this solution sounds like a no-brainer. And that of course depends upon the service being run honestly, rationally, and efficiently.

*too big to fail

Bitcoin and the Perception of Value

To quote Dorothy from the movie The Wizard of Oz, “Toto, I’ve a feeling we’re not in Kansas anymore..”  The CFTC (Commodity Futures Trading Commission) has officially designated bitcoin (a virtual “currency”) as a commodity. Why is this such a big deal? Well, the CFTC historically oversaw the futures markets for physical commodities such as agricultural crops, e.g. corn, wheat. Here’s a short description of what the CFTC does:

“The CFTC’s predecessors in the Department of Agriculture date back to the 1920s, but the Commission was formally created as an independent agency in 1974. The Commission historically has been charged by the Commodity Exchange Act (CEA) with regulatory authority over the commodity futures markets.  These markets have existed since the 1860s, beginning with agricultural commodities, such as wheat, corn and cotton.

Over time, the markets regulated by the Commission have grown to include contracts on energy and metals commodities, such as crude oil, heating oil, gasoline, copper, gold and silver, and contracts on financial products, such as interest rates, stock indexes and foreign currency.

In the aftermath of the 2008 financial crisis – caused in part by the unregulated swaps market – President Obama and Congress charged the CFTC with reforming this market. The agency now also has regulatory oversight of the over $400 trillion swaps market, which is about a dozen times the size of the futures market.”  Source: Commodity Futures Trading Commission

Bitcoin is included in the U.S. Code Chapter 1 – COMMODITY EXCHANGES (9) Commodity:

“The term “commodity” means wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by section 13–1 of this title) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in.”  Source:  Cornell University Law School

The big deal about bitcoin is that it is virtual not physical. You can also say that about the derivatives marketplace since derivatives are a financial vehicle or instrument not an agricultural product. Anyway, there is no physical item that one can touch. There is no actual metal (or otherwise solid) coin that one can handle or count. Bitcoins are derived, “minted”, produced, and accumulated from NOTHING! Someone created computer code to “manufacture” the bitcoin. You can search the Web for many stories about bitcoin and other virtual attempts at creating virtual currency, I will not attempt to recreate a listing of links in this posting.

However, this vintage of virtual coin has graduated to become recognized by the U.S. Federal Government through the CFTC.

“In First Action against an Unregistered Bitcoin Options Trading Platform, CFTC Holds that Bitcoin and Other Virtual Currencies Are a Commodity Covered by the Commodity Exchange Act”

Source:  Press Release CFTC

Who would have thought that wampum*, gold coins, silver dollars, fiat currency would evolve into electrical magnetic impulses existing on a computer hard drive, in a portable telephone, or in “space” so to speak as in the Internet “cloud.”

* wampum. Unabridged. Random House, Inc. (accessed: October 05, 2015).

The dream of some is that the United States Federal Reserve Bank be abolished. The essence of virtual currency is that it is not controlled by any government or country’s regulations. Is that a good thing or a bad thing? It’s way too complicated for me to say. As I journey through our financial system…and I know that many of you WordPress readers are traveling along with me…thanks for your support! Anyway, the idea of “control” enters into any financial equation I think, virtual or physical. The attraction of bitcoin to many is that it has a finite maximum amount of bitcoins that can be “minted.” So one could say, is that in itself not a “control?”  Well, before I get really philosophical, it’s a fascinating evolution of an international currency, I call it “international” because no sovereign government has created or minted it. Any currency only has “value” if others perceive it has value. In the end it’s all about “perception”!

If you are interested, I have several previous postings that address the CFTC governing issue concerning the 2008 financial crisis and derivatives in general:



Eye Crosser #12: Who Prints the Money? U.S. Treasury or The Fed?

Who really prints the U.S. currency: The Federal Reserve Bank (the Fed) or the U.S. Treasury? I have seen and heard writers, journalists, and others, say that the Fed prints U.S. currency. For me, this is a bit like the difference between the Federal debt vs. the Federal deficit of which I have blogged about in an earlier posting. I think I finally understand the difference but “wait a minute”, let’s look at this again???

So here are three articles concerning the relationship between the Federal Reserve Bank and the United States Treasury Department.

Courtesy of the Federal Reserve Bank of New York:  How Currency Gets into Circulation

  • Paper currency is printed by the Bureau of Engraving and Printing (a division of the Treasury Department)
  • Coins are minted by the United States Mint (a division of the Treasury Department)

Here’s a nice article written by Aaron Task in Yahoo! Finance:  No, the Fed Does NOT ‘Print Money’: Just Explain It

  • The Fed controls the money supply.
  • The Fed lends money to the banks.
  • The Fed sets the fed (federal) funds rate.

John Carney of The Atlantic puts forward an interesting argument that The U.S. Government Cannot Ever Run Out of Money! Here are three points from his article:

  • The United States enjoys unlimited overdraft protection from the Federal Reserve Bank.
  • Rejecting a check written by the government of the United States would probably violate the dual mandate of the Fed to pursue maximum employment and price stability.
  • Would having the Fed credit the account of a bank that presented a check on the U.S. Treasury Department’s empty account amount to the incurrence of new debt in violation of the debt ceiling?

So it appears that the U.S. Treasury Department prints the currency but the Federal Reserve Bank controls the flow of the money.