Prison reform: Apparently it’s a bad idea to put everyone in jail?

The U.S. has a problem.

Um, everyone is in jail.


Oops, we imprisoned everyone.

How did this happen? What caused it?

Well, let’s look at the historical data.



More people have been incarcerated since 1980 than ever before in U.S. history, and if this policy worked, you would think we would have a lower homicide rate that correlates.



But it doesn’t correlate.

Here is an overlay of the two for better comparison.


Despite the dramatic rise of incarceration rates since 1980, it was a whole decade later, not until 1990, that it took for homicide rates to go down.

I chose homicide rates instead of say, violent crime rates because it is a better indicator of crime than property theft or all criminal activity combined. People tend to report murder and there is better documentation of that particular crime than something like domestic violence or rape.

Who is in prison?



  • Black men make up only 13% of the US population, but constitute 40% of prisoners. (Source, Source)
  • In contrast, white men make up 64% of the US population, but make up 39% of the incarcerated population. (SourceSource)
  • Men make up 50% of the population and yet, they are 82% of prisoners. (Source)
  • 64% of jail inmates have a mental health problem (Source)


What crimes are being committed?


Overwhelmingly, violent crime is the #1 reason for imprisonment.

What can be done to reform prisons?

  1. Rehabilitate the prisoner
  2. Make sliding scale bail

1. Rehabilitate the prisoner

In a 20 year study on prisoner rehabilitation, evidence was shown that a program of “cognitive behavioral therapy,” reduced recidivism rates in prisoners. The findings are as follows:

  • Without treatment, 82% returned to prison
  • With treatment, 61% returned to prison

With treatment we see a drop of 21% in recidivism rates. (Source)

What is cognitive behavioral therapy?

Briefly, CBT is changing your unhelpful or dysfunctional thought patterns in order to reduce negative or unwanted actions or emotions. Healthy thought patterns are taught to the client, as well as effective emotional regulation skills. The idea is that when thoughts are changed, behaviors and emotions follow.

For example:

Rob has a problem with how to effectively manage his anger. His girlfriend made a comment he perceived as offensive, so he punched a hole in the wall of their home. Rob feels terrible about scaring his wife and damaging the house.

Rob sees his therapist who suggests they do a “behavioral experiment.” Next Rob gets angry, the therapist suggests he physically leave the room, and try to distract himself from thinking about what he is so angry about, until he feels calmer. Then, at his next session, he compares how the experiment went.

Next session, Rob comes in and he explains that he carried out the behavioral experiment when his wife upset him again. He explains that when he got angry, he left the room and played solitaire on the computer until he calmed down. Then he returned to his wife, and while he did raise his voice, he did not resort to violence this time.

The therapist asks him how the experimental behavior went compared to his status quo reaction to anger. He admits that it went much better in the experimental condition because he didn’t feel regret that he had gotten violent or scared his wife. The therapist asks if he would give the technique a try again next time. He agrees that he would be open to trying the experiment again in the future.

This is a very simplified example, but it provides an idea of what cognitive behavioral therapy might look like in a particular instance.

Rehabilitation is not without controversy though. Many people find it morally wrong to offer easy access to mental health care for prisoners, when non-prisoners don’t get the same benefit.

I have a few things to say about that.

For one, I think everyone should have easier access to mental healthcare, prisoner or not. That is a failing of government as well as our culture as whole. $23,000 is spent per prisoner on incarceration facilities, per year. Over the past 20 years, this spending has increased and outpaced spending on essential government services such as education and public assistance. (Source) It begs the question, if we spent the money being funneled into prisons on non-prisoner social services, would we see a decrease in crime rates?

We don’t have an answer to that because it hasn’t been done, but isn’t it worth trying something other than continuing the status quo?

2. Make sliding scale bail

Bail as it is currently being utilized discriminates against the impoverished.

For example:

James allegedly possessed cocaine and is in jail awaiting trial. His bail is set at $25,000. Luckily, James has his own paper business and has enough money to pay some of the bail, which makes him less of a credit risk to the bail bondsman that gets him out. He can also pay back the bond because he has a high enough income.

Chris is not so fortunate. He also allegedly possessed cocaine and is in jail awaiting trial. His bail is also set at $25,000. The problem is though, Chris works as a temporary laborer and only has $500 to his name. The bail bondsman is less likely to give him the full bond considering his employment is spotty, he doesn’t have very much up front cash, and he is a high credit risk. He’s also unsure if he will ever be able to pay back the $25,000 to the bondsman anyway. Chris has little choice and stays in jail until his trial begins.

People like Chris make up an overwhemingly large percentage of those imprisoned. In New York city alone, 31% of non-felony defendants stay in jail because they cannot post the $500 bail. (Source)

After getting out of jail, people like Chris are less likely to be able to find a job or keep the one they had. Employers don’t tend to want to hire people who have a criminal record. It also difficult to find housing because of the same reason. This increases the likelihood that the ex-prisoner, guilty or not, is going to end up homeless.

Another thought I couldn’t find much research on was, does going to prison make an otherwise functional citizen more likely to commit crime?

My intuition tells me that it does. Prisons are more likely to breed violence or abuse and I have a hard time believing a person is not negatively impacted by that. I imagine going to prison is a trauma and like most people who experience trauma, there are repercussions. I think people coming out of any abusive environment are at higher risk of becoming abusive themselves.

If people like Chris were given a reduced bail, according to their income level, he would be less likely to be at risk for committing criminal acts because he would spend less time in the highly mentally disruptive prison environment.

Bail was originally supposed to exist to reduce the likelihood that someone was a flight risk by exchanging their money for their freedom before their trial. Presently, it allows people with money who are dangerous to be set free and those with less money who are not dangerous to be imprisoned, as well as, potentially creating more prisoners out of those who are jailed and poor, but innocent of their crime.

Why are teachers paid so little when athletes make so much?

Teachers see us, sometimes, more than our own parents when we’re growing up. Day in, and day out, they get up at the crack of dawn, and begin arranging their classrooms, preparing for standardized testing, and writing lesson plans. This also includes administrative and teachers’ meetings. Then they teach for 8 hours or more. This is the part we see. But their work doesn’t end there. In the afternoons, some teachers work to help with extracurricular activities. Then stay late into the evening working too, returning emails, doing administrative tasks, and dealing with sometimes difficult children, and sometimes even more difficult parents. And their nights at home and weekends are consumed with grading papers, and preparing for the next day’s lesson.

I’ve never met a teacher who wasn’t completely overworked.

So why do we pay teachers so poorly, but athletes make so much?

Well, let’s dive into some data.

How much do teachers really make compared to athletes?


Teachers make a median salary of (except special education) of $51,640. All occupations in the US economy make a median income of $36,200. But what does “all occupations” mean? Does that include part time workers or only full time workers? I couldn’t find that information anywhere, but I assume it means part time as well as full time because when I looked up the median income in the US, meaning, (how much the largest amount of people are making), working full time median income in the US is $51,939. (Source)

How can that be? If this were the case, teachers would be making pretty close to the US median. Well, they are. Myth busted. In the US, that’s a solid middle class salary. BUT the BLS statistics don’t include real numbers of hours worked versus actual salary received.

Maybe we can find the answer if we look to the actual number of hours teachers put into the job per week.

In a Bill and Melinda Gates Foundation survey, teachers were polled on the number of hours they work daily. The average was 10 hours and 40 minutes a day. That’s 53 hours a week. If that’s the case, that means teachers’ real wages are $18.74/hour or, approximately $39,000/year. Because teachers are only paid for the times they are at school, not hourly, the salary appears higher than it actually is. The number of hours worked lowers the salary.

Some might say this measure is cheating the system. I actually find it to be more accurate. If you work more hours for the same salary, it makes sense to me that that should be included data in what your real salary is.

Job growth for teachers is approximately 6%. The median amount of job growth across all occupations in the country is 6.5%. This means that the job growth is just keeping up with the growing population. (Source)

And now we have our second answer, possibly the bigger answer.

Supply and demand. There are more teachers in the economy than are needed in the workforce. Sorry, but this is what the data says.



How does that work? 

Using the graph above for reference, allow me to use an example. Say I’m a receptionist. In this make believe economy, there are 215 available labor hours for receptionists in the economy needed by employers. Some employers are willing to pay a little more for better workers, some employers are willing to pay a little less, maybe they can only afford that, or maybe they think that’s what receptionists should be paid and they don’t really care about attracting the best workers, they just want the job done. After a while, an equilibrium will be reached. The average wage settles around $15/hour because that’s as little as receptionists are willing to work for, and employers are willing to pay. If employers offered $14/hour, I wouldn’t go work for them when I know other employers are going to pay $15/hour. That $14/hour employer has less of a good labor pool to choose from. This employer has a labor shortage. But say there’s an employer willing to pay $16/hour. There are more applications coming in for that job, and that employer gets to have his pick of the litter. This employer has a labor surplus.

The average, the standard for receptionists, settles to $15/hour per 215 billion labor hours available. This equilibrium, in this perfect, theoretical economy, means all the employers who want receptionists have them, and all the people wanting to be receptionists have jobs. The job growth keeps up with the population and economic growth.

On a macro level, if we generalize this to teachers, if teachers were overpaid, there would be more demand to become a teacher and less jobs to go around for the number of people who want to be teachers. This would cause the wage to go down for teachers until it reaches the equilibrium. Schools could pay their teachers less, the more teachers are knocking down their doors to becoming teachers.

The opposite would be a labor shortage. If there were too many seats available to become teachers, and not enough teachers applying or going to school to become teachers, schools would raise their offered salaries. This is because it causes a greater likelihood that people will apply to become teachers or go to school to become teachers, knowing there’s more money in it. Wouldn’t you rather take a job that paid more than a job that paid less?

I do have some good news, though. I have a hypothesis that teachers will get paid more in the future. I predict a teacher shortage as more and more baby boomers retire. This is because the majority of teachers, 39.4% have worked over 15 years, on average. This, combined with fertility rates stabilizing in the US, will most likely create a lot of open seats as far as opportunities for teachers looking to enter the workforce, causing the wage to go up in order to attract more workers.

The baby boomers retiring is going to change the population in the US that are contributing to social security, taking social security, and the availability of jobs. Especially in 2025, when the height of the baby boom will reach the age of 65. In 2010, we saw our first spike in the number of retirees, who turned 65 that year since the first spike in population during WWII.



What about athletes? Why do they make so much more than teachers?

Well, they actually don’t. In fact, they make less.


Compare this with the median salary a teacher makes of $51,640. It is about $6,000 less than teachers make. Another busted myth.

However, athletes see the same job growth rate as teachers, 6%. (Source) Also, only 1 in 3,000 high school athletes make it into the professional industry.

What about star athletes?

This combined with the physical demands of the job, cause the highest paid workers, major league professionals to be paid higher. They have a unique, highly specialized skills that allows them to be more in demand, and higher paid as a result.

Careers are also cut short, the average athlete only being in commission for a few years before injury takes them out of the industry, or retirement.

The number of jobs in athletics was only 13,700 versus 1,517,400 for teachers.

Another reason teachers are paid more than athletes on average, is because being an athlete doesn’t require a degree at all, while teachers require at least a bachelor’s degree in order to get a job in teaching.

Cool general information.

Fastest growing occupations



Fastest declining jobs


Highest paid occupations


Lowest paid occupations


If you notice, the lowest paid jobs require the least education, and the highest paid occupations require much more education and have the most highly specialized work.

Top paid occupations

  1. Physicians
  2. Surgeons
  3. Oral and maxillofacial surgeons
  4. Internists
  5. Obstetricians and gynecologists

Lowest paid occupations

  1. Food preparation and serving workers
  2. Shampooers
  3. Cooks in fast food
  4. Dishwashers
  5. Dining room and cafeteria attendants, and bartender helpers

Should the physicians make less than food preparation and serving workers? Both are certainly hard work. But this is more of a moral question than a scientific one.

Why I fucking love talking about inflation, deflation, banking, the Great Depression and GOLD

Did you see this shit?



I love old graphs. The farther back they go, the better. That way, you can get the big picture perspective on a subject. The problem with a lot of graphs is people think if they see a big line go up on a graph over the course of 5 years, that means something really, really bad happened or is going to happen. The truth is, 5 years is usually not enough data to make a generalization.

If a broker claimed that, if I invested with them, I would get a return of 150% because they had made that over the course of 5 years, I would tell them to fuck off and ask what they made in the previous 50 years. 5 years doesn’t tell you shit about an investment.

As you can see in the chart, historically, deflation and inflation were, most of the time, balancing each other out. But sometimes it’s not.

Why is that?

A lot of the time, it’s because of war and other forms of government influence. For example, in the chart, you can see around when WWII started and ended there was inflation, followed by a ton of deflation. Inflation and deflation work like weights on an old scale. If the market was a conscious brain, it would always be striving for balance, or as economists call it, equilibrium.

What goes up, must come down.

If you have a monopoly on the currency, though, then you can control it… at least most of the time. Most governments do this with some form of a central bank. Several small, island nations don’t have central banks though. (Source)

Equilibrium is a beautiful economic concept that makes me think of birds flying in formation without needing to talk to each other, or order in chaos, or even just human nature.

Equilibrium is the balance between the forces of supply and demand. It’s the point in a chart where the price is equal to the quantity.

Here’s a hot pic:


But along with market equilibrium AND human nature, comes the exceptions and the outside forces that can effect it.

Like, an entity, such as a government, that has a legal monopoly on currency. (Source) For example, the Federal Reserve in the U.S., instituted in 1913. They can set incentives to cause banks to lower or raise interest rates and they are the only ones allowed to print/inflate/deflate the currency. Which has been paying the bills for a long time. It has also been paying for the rapid rate American imperialism around the world.

And I think people might like it that way.

Having a national bank that is both private and public does have its advantages. For instance, people don’t know they’re being “taxed” in a way. The government doesn’t have to raise taxes, cut spending, or borrow from elsewhere to afford things. They can inflate the currency, by printing more of it into the marketplace, making it less valuable.

Here’s an example:

Say I have 3 Babe Ruth baseball cards and there’s only 100 in the world. It’s a rare baseball card, so it’s worth a lot of money. There were only 100 printed in the world. But say whoever prints baseball cards decides to print 1 trillion Babe Ruth baseball cards. Then what happens? Suddenly, my 3 Babe Ruth baseball cards are worth less money now, because all my friends on the block also have 3-5 Babe Ruth baseball cards. Now nobody is interested in buying a Babe Ruth baseball card, and there are so many of them, so people start using them as kindling for fires, because they’re more valuable as kindling.

That’s what happened, except with currency during the Weimar Republic (Germany). It would take wheel barrows full of paper currency to buy a loaf of bread, it was worth so little. So some found it more valuable to burn for warmth. That’s an extreme example of inflation: hyperinflation. But it hopefully shows an easier understanding of the concept.


Historically, this happens a lot during wars. I’m pretty sure, because war is really, really expensive to fund. War isn’t the only reason, by far though.


War means inflation will go up, usually, because they go off the gold standard to “afford it.”


Always being at war makes unemployment a thing of the past!!!… Maybe?

What do gold and silver coins have to do with anything?


Throughout history, since 600 B.C. to be more exact, (source) people have been using gold and silver on and off as currency. Off during times of war, when inflation is needed to pay the expenses of the war, and back on when the money becomes worthless because inflation has become too high.

The cool thing about commodities, like gold, is that the one that holds it value the most usually out competes the other monetary forms over time, historically. (Source) Hence, it’s historical popularity.

Lydian Lion coin. The world’s oldest coin, from what is now known as Turkey.


This is an example of how it would work.

I would go to the bank with my paper $1 bill. Legally, I could go to my banker and say, I’d like to take out the equivalent of 1 paper dollar’s worth of silver. The banker would then weight out the silver, and give me the equivalent of 1 U.S. dollar piece of paper’s worth of silver, a certificate. I could then turn around and use it to pay for some groceries or something, or I could do the reverse.

I could go to the bank with my silver, and say, I’d like to get as much paper dollars as I can for this ounce of silver. Then, in return, the banker would give me a $1 paper bill, which I could then go buy groceries or something with.

And most people preferred to carry around the paper rather than a piece of metal. Just for convenience sake. Kind of like how plastic credit cards are easier than carrying around $1,000 in paper dollars these days.

Modern banking and the fractional reserve system

One of the issues I think will be seen as primitive in the future is how we have done banking historically.

I’m a fan of full-reserve banking, regardless of the doomsday naysayers who are akin to fortune tellers. And when I say full-reserve banking, I am meaning banks have to have an account with your name on it, and keep that money in your account on hand.

Wait a minute, banks don’t actually HAVE my money in my bank account?

No! It’s loaned out to other people! Complete strangers!

Which leads us to…

Modern banking, fractional reserve banking, which began with gold and silver roughly like this, in the 17th century:

Someone would go to the banker with something valuable they had, such as silver, which can be made into things or used as a store of value abstractly, like we do with paper currency. The banker would hold it for me and I would pay him to store it there, much like a storage unit.

That is full reserve banking.

But after 100 people did that, the banker would be left with storage unit after storage unit of valuable assets, just sitting there doing nothing.

So, he gives some of my silver to another person. The banker will charge that person interest, a borrowing fee, that builds and builds the longer he goes without paying it back, plus the fee/interest. The banker will get a cut AND I won’t have to pay the storage fee anymore.

That sounds like a deal.

The borrower goes out and buys materials to build a fishing net. Suddenly, he can catch way more fish to feed his family AND there’s fish left over to sell to others who don’t have nets or maybe aren’t very good fishermen but they’re good at something else they’d like to spend time doing. In exchange, people are giving the borrower money that not only pays back the amount borrowed, but ALSO the interest/banker’s fee, and ALSO more money (profit).

Everybody’s happy.

And that’s how it’s still done today, except with paper currency, not tied down by any value instrument at all. We call it fiat money and fractional reserve banking.

(Source: Money facts; 169 questions and answers on money – a supplement to A Primer on Money, with index, Subcommittee on Domestic Finance; U.S. Congress. House. Banking and Currency Committee.)

What the hell is fiat money?

Fiat money is a government mandate on what is declared legal tender. It is given a government determined value and is not tied to anything, such as a store of value, a commodity, anything. It is not representative money like gold certificates.

Here’s what’s weird though.

Fiat money has been used throughout history, and always fell out of favor and crashed due to inflation.

To put it in historical context, the world using fiat currency, as it does now, is not new, and it has only been since 1971 that we’ve been 100% using fiat money. Other countries had fiat currency around for sometimes as long as 100 years and sometimes only 20 years.

It has crashed before throughout history, and that doesn’t mean it can’t crash again. I think people get the idea that the government will take care of everything and smarter people are in charge so things like economic collapse won’t happen anymore.


What goes wrong historically with banking

Now the banker is making the same deal with 70 of the 100 customers he has storing valuable assets in his storage (bank) where he is loaning out their assets in return for more money.

But I want my valuable asset (silver) back. Maybe I want to use it to make jewelry, maybe I want to give it to someone who desires it in exchange for something I desire like bananas or a massage. Anything.

No problem.

So the banker goes to get my silver. But he already lent it out to someone else who is using it and he’s waiting for them to pay it back.

Now the banker is faced with a dilemma.

He decides to borrow another customer’s silver to give to me while he waits for the silver/money to come back from the person who is borrowing my original silver.


Things just got more complex.

What if 70 out of 100 people do that though? What if 70 out of his 100 customers wants their assets back?

Well, he just doesn’t have them.

And that’s the problem with fractional reserve banking. People eventually want their money/silver/valuable assets back at their convenience. They don’t want to wait on someone to pay back the banker who can then pay you back. And if 70 of the 100 people who are customers want their assets back all at once, the banker doesn’t have the assets to give it to them, and the bank goes bankrupt, has to close, and everyone has lost the assets AND money they put in.

That’s a run on the banks.

That’s what that looks like historically, that’s what it looked like during the Great Depression, and that’s what that looks like in modern day banking. BUT it’s a little different in modern banking and money.

The government requires banks to carry a certain, very small amount of deposits, only 4-6%. But we also have FDIC insurance, which is where the government guarantees that up to $250,000, you will be able to take your money out of your account, whenever you want, because they have the power to print limitless amounts of money, in case the bank doesn’t have it.

Regardless, throughout history, we keep doing it over, and over and over and the same thing happens: bank failures aka banks go bankrupt. There are long periods of time where they don’t go bankrupt, but eventually, they do.


That’s a financial fraud to me. It’s the same idea as Social Security and insurance. There’s no Social Security account with your name on it, holding all the money you’ve paid into it throughout your life. The money you are paying now goes to the people collecting Social Security NOW.

Insurance and social security requires a pool of more money coming in than is going out. A legal ponzi scheme, that if a private company does, they go to jail.

Which is why social security is about to become insolvent too, if something isn’t done to fix it, by someone much smarter than me.


If I run a bank and everyone is dropping off silver or gold, and more are dropping off assets than they are taking out, everyone looks like they’re getting richer. There’s more to lend and more profit can be made potentially and everyone is betting on more and more people to drop off their valuables, which the customer eventually plans to take out and retire on.

That’s what happened during the Great Depression.

Everyone who had invested their pennies or fortunes, depending on who you were, thought profits would go up forever, that the country was in a new age of progress, and so they invested more and more.

In 1913, the Federal Reserve Act instituted the Federal Reserve, and reduced the amount of gold backing the dollar had from 100% to 40%. This caused a fuckton of inflation.

Inflation made the economy look great. Everyone was getting credit and loans at unbelievable interest rates. Cities seemed to be built in a day. Everyone was getting jobs right off the boat, everyone saw their standard of living go up from where they had been before, and the stock market was booming. There seemed to be an endless supply of capital. Capital meaning something that increases the ability to make something. For example, a construction truck to build a house, or investment money from your uncle, or the stock market, or a credit card.

However, what goes up, must come down.

Eventually people wanted to collect and the money wasn’t there.

It started when Great Britain didn’t have the tax revenue to go to WWI, so they went off the gold standard.

Bold, underline, put. in. red. Blame the Brits!

There was a (compared to how we know it turned out later) “small” run on the British sterling, which caused Britain to put in exchange controls on their money that weakened the gold standard greatly, and caused a huge amount of inflation, because gold being tied to a currency stabilizes it so there’s not too much inflation.


Side note about how a gold standard works:

There is a limited amount of gold in the world, except what hasn’t been mined yet in the ocean, because the world doesn’t know how to mine for it yet. Because there’s a limited amount of gold, the price is relatively “fixed”. When tied with paper currency, we can, for example, say 1 piece of paper equals .5 ounce of gold, and we can keep it that way, because the price doesn’t fluctuate very much, without government intervention. But, that’s usually the way it goes.

Anyway, back to WWI and Great Britain and how them going off the gold standard started the Great Depression.

This worked like a domino effect on the American economy and then in the rest of the world later. I imagine because the history and economy of America and Britain are intertwined moreso than we were, at least at that time, with other countries.

So everybody panicked and took their money out of the stock market and the banks all at once in response.

Overnight, banks went bankrupt and the stock market had the biggest crash it had ever seen before.

This is an inflation adjusted, long term historical look at the stock market in the U.S.


Look! The stock market will go up forever!!!… Maybe?

As you can see, if you’re reading this, you’ve probably witnessed worse crashes happening to the stock market than the Great Depression. Isn’t that crazy to think? But more about that in another post.

Deflation during the Great Depression

The Federal Reserve responded to the crash by raising interest rates, in the hopes of increasing the demand for dollars. This just made the situation worse, as raising interest rates causes more deflation!

People started hoarding their money. They couldn’t trust to put it in the stock market or the banks because they could lose it. Businesses had to stop hiring and had to lay people off because they lost all their money that was in the bank. They had to close their shops because the investment money dried up when it was lost in the stock market. As people took their money out of the banks, there was less paper money in the marketplace, which made it more valuable. People didn’t spend what they had very much and knew it would be more valuable the next day anyway so they continued to hold onto it.

All of this compounded on itself and made the deflation even worse, a deflation spiral downward.

Look at the Great Depression and how peoples’ incomes dropped after the stock market crash.


With no gold standard holding us back, growth in the economy will go up forever!!!… Maybe?

In 1934, Congress passed the Gold Reserve Act, devaluing gold to 40% of its real value. Probably because they were hoping that devaluing gold would cause people to hold less gold, and inflate the currency more. That’s just conjecture though.

Unemployment: Great Depression vs. Great Recession

15% of the GDP was lost during the Depression, compared to the 1% that was lost during what is now called the Great Recession of 2007-08. 25% of people during the Great Depression became unemployed. 1 out of every 4 people you knew was unemployed. Compared to the Great Recession, which had a top unemployment rate of (by the government numbers) 5%. I think it was higher, however, because most sources I have read have stated such. Some saying it almost reached the height of the Great Depression.

Here is an alternate unemployment rate measurement. The larger measurement that shows a larger unemployment rate includes long term and short term discouraged workers, who were taken out of the official government measurement as recently as 1994.


How America got out of the Great Depression: War

In 1934, the government nationalized all gold by ordering the banks to give their gold supply to the U.S. Treasury. They also suspended exchanging paper money for gold.

They raised the maximum income tax rate from 25% to 79% and the minimum income tax rate went from .375% to 4%. To put it in perspective, currently the maximum income tax rate is 55% and the minimum is 0%. Regardless, raising the income tax didn’t help get the country out of the Great Depression. Neither did President FDR’s New Deal. Not even a blip on the recovery radar.


And then World War II broke out.

The U.S. used to have a defense policy, meaning, don’t attack unless attacked first. Then the Japanese government bombed Pearl Harbor, and that sounded the alarm that it was time to go to war.

I think culture cannot be underestimated when it comes to things that seem to be laws like laws of economics. Americans, having seen their country under attack and fellow citizens killed in cold blood, became focused on justice and patriotism.

Men seemed less concerned about the huge national debt and new hefty taxes and instead ran to their local government offices asking what they could do to help the war effort. Sometimes this meant enlisting, sometimes this meant signing up for a large government contract.

The war was good for employment

As more men enlisted in the military and more businesses began to switch from whatever they were building before to war goods, unemployment numbers began to decline sharply from 25% to under 10%. Not only that, but as men were going to war, businesses, who had previously fired women who were working if their husbands already had jobs, were employing a whole 50% of the population (women) that they hadn’t been employing before. So then the employment numbers looked REALLY good. Everybody seemed to have a job, and a good job, a manufacturing job that produced real “stuff,” unlike the services based economy we have now.

There was more money entering the marketplace, trading hands within the country and outside of it, growing the economy. Or at least looking that way.

Women, employment, and equality

It is my opinion that the war also helped raise women’s standards of equality.

It used to be that men worked all week and handed over their paychecks to their wives on payday, so that she could pay the bills, go grocery shopping, and use it to basically run the household, while he headed to the bar to kick up his feet with his male pals at the end of the week. The women raised the children, the men helped make them, maybe played with them for a while, but mostly spent all their time working long hours, trying to do their part to contribute to the household.

I think both roles are respectable, and I cannot say for sure which one was more difficult because I never lived that life, but from what I have read, women didn’t really have the glory the men got, regardless of how much work they put into the children and the household at large.

Now, with WWII, they were more independent, making their own money, not relying on a man financially, which is currently the #1 reason women stay in abusive relationships with men today. They are dependent on them financially, or at least feel stuck. I think financial freedom, whether you’re a woman or a man, can also contribute to your social freedom. Maybe that’s just my American values seeping out subconsciously, but that’s at least what it seems like to me.

The social stigma of a woman having a job, while not eliminated, was reduced, because everyone was so focused on the values of justice and patriotism, which seemed to override previous values that a woman’s role is to be head of household, except on her tax return. In that case, the man is head of household.  So again, doing the work without any of the glory that a man got.

Now women could physically, practically prove they were just as capable as men by literally doing the work men had previously done. Which in my opinion, subconsciously planted seeds in people’s minds that women could possibly be capable of doing things men could do and sufficiently.

How did the government pay people to fund the war?

They went $321 billion more in debt.  They taxed, spent, inflated, and borrowed.


This is U.S. debt in terms of percentage of GDP

It’s hard to see that well because the bottom chart is zoomed out but do you see how closely it matches in with the very first inflation/deflation graph I showed you?


I overlaid the U.S. historical inflation rate with the inflation adjusted price of gold to see if there was a correlation. I know it’s hard to see clearly but it was the best I could do. To me, the peaks and low points seem to line up the closer we get from the 1970s on.


What happened in 1970? 

The country went off the gold standard completely. This caused inflation to rise, and stay inflated for what looks like the longest amount of time since 1650. It seems that as inflation rose to high levels again, the price of gold skyrocketed. Also in 1970, it became legal for private ownership of gold again. The high spike might be due to that too. It’s hard to say because there are so many variables someone smarter than me would have to control for.

What happened in the 1980’s that caused the price of gold to drop so drastically?

The central bank raised interest rates and gave incentives to banks, who typically do the same thing when the Federal Reserve does something. It’s a complex process that involves buying treasury bonds that I would love to cover in a different post.

As interest rates rose, it made less sense to own gold. It made more sense to hold on to your money and put it in savings. People sold their gold because it was at an all time high and became very wealthy if they sold at the right time.

How deflation is bad

The bad part though, was that GDP shrunk. There was less money going around in the marketplace. Business didn’t hire as much because it made more sense to hoard the money, considering it could be more valuable later. The unemployment rate went up.

How deflation is good

The Federal Reserve was destroying dollars to make the currency rarer, and and it became more valuable. Foreign countries bought U.S. dollars in the hopes that they would gain more value tomorrow.

How inflation is bad

The reason they raised interest rates was to control the inflation rate that people were afraid was rising too fast and too high.

High inflation means higher prices, especially on commodities such as food and energy, which is why oil prices went up to very high levels in the 70’s and the government had a failed policy of rationing, which is also something I’d love to cover in another post because this one is already incredible long.


In 1970, the U.S. went off the gold standard, remember? Also, inflation has stayed up since then. Prices have also gone up.

High inflation discourages savings because the money becomes less valuable over time, and if the inflation rate is higher than the interest rate you would get on a savings account, the money’s value gets eaten away and there’s no real incentive to keep saving.

How inflation is good

Inflation is good for paying off debt and racking up debt because you can pay it back with inflated dollars. There’s more money in the marketplace going around, printed by the Federal Reserve and expanded by the banks. Say I have a student loan debt of $8,000 in 1980. By the time I pay it off in 2000, 20 years later, my income is $50,000 and $8,000 seems like nothing, so I pay it off.

Here’s another interesting one on the price of gold historically.

Notice that when inflation goes up, the price of gold goes up. That’s because paper dollars are becoming less valuable and gold is staying relatively the same, since there is a more fixed amount of gold in the world than paper. I will show you what it looks inflation adjusted too.



This one is inflation adjusted gold prices. Notice also how when interest rates go down, gold prices go up. That’s because the currency becomes more volatile, so people will buy more gold, increasing its value, because there’s less gold in the marketplace, and gold becomes a more stable, reliable place to store your money over a long term horizon.


And here’s historical interest rates.


And here are interest rates overlaid with gold prices.


The one exception to gold prices going up and down with interest rates was during the South African and Yukon discoveries of gold. That makes sense to me because finding a fuckton of gold is going to make everyone start buying up all the gold they can get for free, by mining it. So when regardless of when interest rates went down, the price went up. That seems to be the only time though.

However, there was also the discovery of gold in California and Australia in the mid-1800s. I wonder why interest rates went up AND gold prices went up at the same time. You would think with more gold circling the marketplace, the price would go down, because of inflation.

Well, let’s see how much gold was actually mined, and how much it was worth at its height, and how much was actually found. That way we can determine if the amount found was enough to flood the marketplace and reduce or increase the price.



$2,000,000,000. 2 billion!

It seems to me that California and Yukon didn’t find all that much gold. So I guess my hypothesis is right that interest rates are almost always matching up with the the price of gold.


I couldn’t find a graph for it, but they found a measly $2,000,00o in today’s dollars.



South Africa

I find this number hard to believe, but the value of the gold found in South Africa was, $750,800,531,800. Wow, $750 billion.

Worth more than over all the gold in the world ever found, COMBINED, by 1930.


And that, my friends, is why interest rates didn’t affect gold prices during the South African gold rush. It flooded the market with gold, causing the price to increase when it was discovered, and crash harshly once it was all mined, because there was more in the market place, which caused the price to go down. It became worth less because there was much more of it in the economy.


What does homelessness in America look like?

As children, we are encouraged to be independent. When you become an adult, it’s OK to abandon your family and friends for a job in another city. I’ve heard many people stop to talk to homeless people and angrily tell them to get a job. As if former criminals who can’t pass a background check can easily bootstrap themselves and get employment. As if someone without an address can get a US identification card and show proof of their identity when applying for a job. As if homeless shelters are not overcrowded and bedbug-ridden to the point that it makes more sense to sleep outside.

46% of the homeless population has severe mental illness and/or drug/alcohol addiction.

How much has been spent over time on helping homeless people find housing?


Well that seems pretty good that it’s been going up, even after having been adjusted for inflation.

What the hell happened in 1985 though?

President Jimmy Carter increased housing spending when he was president, which President Ronald Reagan slashed next term back down to pre-Carter spending. Sweet.

What percentage of the 2015 Federal Budget was spent on housing?




I once met a woman who had worked doing homeless outreach. When I asked her what homeless people needed the most, she said, “homes.”

The short story of Bernie Madoff OR The biggest fraud in history

Bernie Madoff ran an investment firm that required more money coming in than was going out. He cut huge checks that were hard to believe, because the whole thing was too good to be true.

Then the financial crisis happened around 2008, and people started taking their money out of their investment accounts because they were losing 37% of what they had put in. However, when people went to pull their money out of their accounts, they couldn’t, because it didn’t exist in the first place.

Bernie Madoff became a great scapegoat to the government and population at large. The judge, in fact, said that “the message must be sent that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll.”

Bernie Madoff became the face of the near end of capitalism, and a show of how greedy capitalism makes people do morally bad things.

And what he does was truly horrible.

It was fraud, plain and simple, which we already have laws on the books for. But when it came to prosecuting him, the government used him to set an example, and he was sentenced to a ridiculous 150 years in prison and restitution of $170 billion.

Not to say he didn’t deserve a big punishment, but murders have an average punishment sentence of 20 years. I think after everyone lost their savings and retirement in the 2007-08 financial crisis, people wanted blood, revenge, and justice to make themselves feel less helpless.

So that is the short story of the biggest fraud in history.

If you don’t have healthcare in America, then fuck you

With the exception of two other countries, out of all the OECD countries, the U.S. doesn’t have universal healthcare. That’s fine. The U.S. doesn’t have to do everything the OECD countries do. But the current system? There has got to be a better way. Something. Anything. It’s better than, “bite down on this piece of bark.”

Here are some statistics for fun: Yes, the United States is #3 on the list of healthcare spending per capita ($8,608 per person). But Norway ($9,715) and Switzerland ($9,276) are in the top 2, and they both have universal healthcare. In fact, 58 countries in the world have universal healthcare, and they’re all near the top of the healthcare spending per capita list as well.

Healthcare is simply expensive.

The U.S. is #10 on the list of wealthiest countries in the world with a median household income of $53,657.


60-65% of healthcare spending goes to the poor, the disabled, children, senior citizens and veterans. These populations require more health care than the other 35-40% of the population. Poor people have higher rates of health problems, as well as the disabled and senior citizens. Children require vaccines and check ups, and veterans are dying while on a waiting list to get medical care at VA hospitals.


The U.S. does spend the most as a percentage of our GDP, by far.


“Of 17 high income countries studied by the National Institutes of Health in 2013, the United States has the highest or near-highest prevalence of obesity, car accidents, infant mortality, heart and lung disease, sexually transmitted infections, adolescent pregnancies, injuries, and homicides.”

Here are some good things:

We are good at medical technology that’s really expensive. We are better at treating people with cancer, diabetes, high cholesterol, and high blood pressure than other developed countries. We’ve also received more Nobel prizes in medicine than any other country in the world.

So it’s not all bad. But that stuff is really, really expensive.

Some more unfortunate facts though?

62% of people in the U.S. file for bankruptcy due to medical debt. 1 in 4 senior citizens declare bankruptcy due to healthcare expenses. And 43% of those people have to sell their homes or mortgage them.

My thoughts as to why healthcare is so expensive is that we have way more unhealthy people than healthy people. 2/3 of the population is overweight or obese. American food tastes good, but it’s garbage food that belongs in the trash if you want to live.

With insurance, Medicaid, Medicare, and Social Security, it requires more money coming in than is going out. This is the definition of a Ponzi scheme. So insurance companies cut corners. They raise their prices, pay medical field workers such as doctors less (leading to physicians leaving the industry), and cover less services.

There is no better solution to fixing the American economy. Sorry.

Sure, we have safety nets like social security, welfare, medicaid, medicare, and unemployment programs. The U.S. is middle of the road to the lighter end of tax rates compared to other industrialized nations.

tax rates world ranking 300k


Here are the real numbers on how taxed we really are:

We have a 35% corporate tax rate, 0-12% corporate tax rate for state-local taxes. The global corporate tax rate, for comparison, is 24%. (Source)

We have a 0% to 55.6% income tax rate that includes federal, state and local taxes. (Source)

Payroll tax pays 15%-19% for social security and 2.9%-3.8% for medicaid/medicare. (Source)

25% of the GDP goes to taxes. (Source)

I’m not saying the country should have higher tax rates. But I do think that having moderate tax rates and fewer safety nets than other industrialized countries shows a lack of efficiency in how the money is being spent.

This is which taxes make up the government’s tax revenue:

2010 Federal Revenues Pie


Your income tax and your employer’s payroll tax bill make up the majority of the pie. Even though we have the highest corporate income tax among the OECD countries, it still makes up a small percentage of the revenue. Corporations are already taxed 39% of their revenue/profit. Making it higher, in fact, does causes businesses to move their operations elsewhere, where costs are cheaper, so they don’t have to decide to raise their prices, and lose customers who come across a cheaper product made overseas.

Here’s how our taxes are spent:


This sucks.

It really fucking sucks. Because what are we going to cut? The biggest pieces of the pie are health, social security, and defense. It might be nice to have less of an imperialist boot in the face of every country on earth, but even if we cut half of that, it’s still only 8%, and that money would probably need to be swallowed up to pay for social security and healthcare for people who really need it.

I also find it sad that 16% is spent on military but only 4% on veterans. I’ve never been in the military. I don’t know what that’s like. But I imagine watching your friends die in front of you for some rich politician’s political aim deserves more than 4% of the entire budget. Especially when 16% is being spent on starting or maintaining more intervention. I think if you work any job where your risk of dying or being injured is high, you should probably have more benefits than someone working a cushy white collar office job where they sit at a computer all day like me.



It makes sense to me more now why we are so in debt. Because who wants to deliver the bad news? So we keep borrowing, printing, and inflating.

What about raising taxes on the rich? (There’s a graph for that too.)


The rich actually do pay the majority of the taxes.

Let’s go over the list of why all the great solutions are not great solutions at all:

  1. The U.S. doesn’t pay income taxes that are too high OR too low. It’s more moderate to light, compared to the rest of the world.
  2. Income and business taxes already pay 40% of what they earn.
  3. Corporate taxes make up only 8% of the government revenue but they are already taxed 39% on what they make. Too much and they could move overseas, resulting in higher unemployment, meaning even less tax revenue, and people needing to collect on government programs even more. Detroit is an example of this.
  4. Wasteful spending is not the culprit. The majority of taxes are being spent on healthcare, social security, and to a lesser degree, defense.
  5. The rich already pay the vast majority of the taxes. 97% if the tax revenue comes from the richer, top 50%.

I thought when I started this, after I dug into the research, I would be able to find the most common sense solution. Now, I don’t.

But what I have gotten out of the research, is that any politician giving you any of these solutions is full of shit and just trying to get votes to stay in power OR they’re uneducated on the real research on the topic.

Another thing I understand more now is why we borrow so much money from China and Japan. It buys time until someone smarter than us comes up with a better solution.