Sweden is generally viewed as the most cashless country on the planet — so cashless, in fact, that authorities are getting a little worried about it.


In that Scandinavian land to the north, fully 36 percent of the people never pay for anything with cash — in Sweden, the currency is called the kronor — or use it only once or twice a year.  In 2017, only 25 percent of Swedes pay with cash at least once a week, down from 63 percent in 2013.  The amount of cash in circulation, generally, has fallen precipitously.  Some restaurants and shops don’t accept cash under any circumstances and post “no cash” signs in their windows, and even some bank branches don’t carry cash.  (Bank branches without cash?  What do tellers do?)

So, what’s the concern?  It centers on the elderly, who are accustomed to paying with cash and who might not be comfortable with paying with plastic or their cell phones — or even have access to those payment methods.  The decline in cash acceptance and cash use generally is being examined by Swedish government and the Swedish central bank to determine whether steps should be taken.

Will America eventually reach a similar point?  I hope not.  I like the idea of having a little cash in my pocket, in case the technology breaks down.  Sometimes it’s just easier to pay with cash, too.  And if you are an advocate for personal privacy, cash is a nice option because of its anonymity and untraceability compared to, say, a credit card swipe.  And there are some things that are always done with cash, and presumably always will be:  how would people looking for a handout or bus fare get along in a cashless society?


On The Roller-Coaster Ride

If you’ve got some of your retirement savings invested in the stock market, as many of us do, the last few days have been unnerving.  The market had an historic run up, and then it went down again.  Yesterday, where the Dow Jones Industrial Average at one point had dropped 1600 points, was an especially wild ride.

704254-001When the market behaves like this, what’s a normal investor, who’s not an insider or a financial kingpin, supposed to do?  You can get dizzy just reading all of the different views of what is “really” going on.  Some people say it’s just a predictable correction after years of historic gains.  Some say the Trump tax cuts have overheated the economy and the market is reacting to that.  Some say we’re long overdue for a bear market.  And some say the Federal Reserve Board hates President Trump and his focus on the stock market as a proxy for his presidency and just wants to bring him down low.

(The last theory, in which the Fed would be intentionally manipulating the market for overt political purposes, is especially troubling — and even in these conspiratorial times, seems pretty unbelievable.  To buy that theory, you’ve got to conclude that the Fed’s dislike for President Trump is so powerful that they are perfectly willing to take actions that torpedo the retirement portfolios of millions of individual investors just to give the President a black eye.  Could bureaucrats really be so disdainful of average Americans?  Call me naive, but I find that incredibly hard to believe.)

So what’s really happening here?  Beats me!  My guess is that the run-up has been so significant that there are lots of people out there who thought it was time to take their profits, and the downward movement caused by those sales then triggered some market-decline benchmarks that automatically produced further sales and caused the sharp fall — but that’s just a guess.  Maybe somewhere on Wall Street somebody knows the real answer for sure, but I doubt it.  The stock market is so complex, so huge, and so prone to human reaction that it’s difficult to explain these downward spikes.

So, to put the question again, what’s a little-guy investor to do?  If you think saving money for retirement is prudent — if you don’t, you probably wouldn’t read this post in the first place — and you need to find a place to put your money until the retirement day comes, there really aren’t many alternatives to the stock market that can produce a meaningful return.  Most of us aren’t offered opportunities to invest in real estate deals or development projects, and we probably wouldn’t be comfortable having a big chunk of our money invested in such illiquid things, anyway.  Bond yields are low, and banks pay next to nothing on CDs.  So where else are you going to put your money?  This reality suggests that basic, brute economic forces are going to continue to make the stock market a preferred investment option for people and businesses, not just in the U.S. but also abroad.

But you’ve got to recognize that the stock market is a long-term investment, and it’s going to be a roller coaster ride.  When you’re on the coaster, it’s pretty hard to get off on the highest hill, and you don’t want to exit the car and move onto the tracks at the bottom, either.  You just hold on, scream when the cars start that big downward move, and feel your pulse racing until the end.  Or, you can simply close your eyes, recognize you’re on the ride and there’s not much you can do about it, and focus on other things until your circumstances make you a short-term investor and there are true decisions to be made.

Who knows what this current jittery period will bring?  It’s time to hang on tight.

Happy New Tax Year! (Time To Move?)

With the turn of the calendar page to January, it’s not only a new year, it’s a new tax year, too.  And since Congress enacted, and President Trump signed into law, a host of changes to the federal tax code at the end of 2017 that take effect in 2018, people are starting to take a close look at what the tax law changes will mean — and whether they should move to a different state.

hg-salt-blog-finalYes, you read that right:  the new tax laws might cause people to move.  Why?  Because one of the things the law changes is the rules that apply to deductions for payments of state and local taxes.  Before, there was no limit on the deductions for state and local tax payments; now the deduction is capped at $10,000.  Advocates of the recent tax changes argue that the unlimited deduction had the effect of minimizing the impact of higher taxes in certain states.  Now, higher income residents in the high-tax states will feel more of the true impact of the state and local tax bite in their states.

According to CNN, the deduction for state and local taxes primarily helped taxpayers who earned more than $100,000 a year, who received almost 90 percent of the benefit of the deduction.  Moreover, the impact of the deduction was focused on high-income residents of high-tax states.  California and New York residents alone received about one-third of the benefit of the deduction, and more than half of the value of the deduction was focused on tax filers in just six states:  California, New York, New Jersey, Illinois, Texas, and Pennsylvania.  California’s top marginal state income tax rate, incidentally, is 13.3 percent.  In contrast, some states, like Florida, have no state income tax at all.

This difference in state incomes taxes — and the financial consequences it produces — is what is causing some people to forecast that the change to the deduction taxpayers might cause some taxpayers to vote with their feet and flee the high-tax states for tax-friendlier destinations.  And some politicians in the higher-tax states, such as New Jersey, have taken notice and are reconsidering their taxing strategies as a result.

Is changing the deduction for state and local taxes a good thing?  Of course, you’ll get different views on that issue, but some economists argue that anything that muddles the ability of a consumer to determine the true cost of an item interferes with the “invisible hand” and the optimal functioning of the economy.  Will bearing more of the brunt of high state taxes cause Californians to pick up and move next door to Nevada, which has no state income tax?  This year we might begin to find out.

Many Americas

Recently I was up in Detroit, gassing up the car at a service station at an exit just off one of the freeways, when I noticed this provocative sign on a tire business across the street.

Commerce doesn’t lie.  The business owner obviously thinks that theft of wheels from parked cars is a sufficiently widespread problem that advertising about the ability to help victims of the thefts will generate additional sales and revenue, and you have to assume that there’s a factual basis for that belief.  I thought:  “Really?  Wheels on cars parked on public streets are being stolen, and police haven’t caught the perpetrators of such brazen criminal activity?”  The sign, and the real message it was sending, made me uneasy.

The sign was just one more bit of tangible evidence that we don’t live in one America any more, if we ever really did.  Instead, there are lots of different Americas, dealing with lots of different issues.  Where I live, we thankfully don’t have to worry about coming out to our car and finding all of the wheels taken by wheel theft gangs.  In this particular neighborhood of Detroit, however, there is obviously a different reality.

This shouldn’t be a revelation, of course.  Read the news and you quickly understand, intellectually, that there are pockets of the country where the heroin epidemic is raging and leaving families devastated, where the local economy has been bottomed out and there are no jobs to be had, and where the relations between police and the local populace has been poisoned, and there are parts of America where people are concerned because housing values are too high, where companies are concerned because they just can’t hire enough high-tech workers, and where people are lining up to spend a thousand dollars on a new cell phone.  And don’t get me started about how different places like Hollywood, or Washington, D.C., seem to be from the rest of the country.

And yet, when you live in your own world, it’s easy to view everything from your own personal experience, and wonder why people could possibly have different perspectives on the issues of the day.  The next time I feel that kind of self-absorbed conceit, I’ll think about that unsettling sign in Detroit and try to remember that there are a lot of people in this country dealing with lots of issues and problems that I’m not even aware of — much less affected by.  America is a diverse place not only in terms of its population and demographics, but also in terms of personal experience.  We shouldn’t forget that.


Flippy’s Takeover

Out in California there’s a “fast casual” restaurant called Caliburger.  As the name suggests, hamburgers are one of the staples on its menu.

448b016b00000578-4905576-image-a-2_1505977728222Caliburger’s Pasadena location has a new worker called Flippy.  Flippy is a quiet, methodical, highly reliable worker who doesn’t take up a lot of space, because Flippy is actually a robot.  Made by Miso Robotics, Flippy’s design is simple — it’s a robot arm, bolted to the floor in the restaurant’s kitchen next to the grille.  Flippy has a spatula where his hand should be, and he’s programmed to flip burgers and then put the cooked burgers onto buns.  A human assistant puts the meat down, Flippy does his burger-flipping thing, and then the human worker finishes dressing the burgers to fit the incoming orders.  The fact that Flippy has only a spatula hand make it easy to clean and maintain.

Flippy sells for $60,000.  Caliburger was one of the investors in the company that manufactures Flippy, and it got one of the first devices.  It has pre-ordered others, and it plans to install them in a number of its restaurants.  And, of course, Miso Robotics will look to sell Flippy to other burger-oriented restaurants.

Each burger-flipping robot will be performing a job that used to be done by a human being.  At about $60,000 a pop, Flippy seems expensive — until you figure that, with many states and cities raising the minimum wage, it wouldn’t take many months of operation before Flippy starts to pay for itself.  And Flippy is never going to miss work, or show up late, or complain about its hours, or become distracted by talking to a co-worker.  And Flippy is not going to need health insurance, or file a claim against his restaurant employer for violating a federal or state statute, or advocate for wage increases, either.  Until legislators start legislating about treatment of robots, Flippy is a lot easier for employers to deal with.

Welcome to the future.  And good luck finding that entry-level job that pays the ever-increasing minimum wage that is supposed to be an economic panacea and allow a fast food restaurant worker to support a family of four!

Amazon Primed

Amazon — that massive, gushing river of deliveries that has fundamentally and forever changed the modern retail business — has announced that it is looking to build a second corporate headquarters somewhere in North America.  Cities like Columbus are jockeying for position and hoping that they get picked to host the Amazonians.

amazonLanding Amazon and its “HQ2” has got to be tempting for just about any city.  You can look at what Amazon has done for Seattle, where its corporate headquarters is located, and see what having Amazon might mean.  Amazon employs 40,000 people on its Seattle campus, it uses an enormous chunk of the available Seattle commercial real estate, and it calculates that, since 2010, it has contributed $38 billion to the Seattle economy.  The proposed “HQ2” is being presented as a similarly enticing proposition for job-hungry municipalities.  It is supposed to create as many as 50,000 jobs paying an average of $100,000, and also produce $5 billion in capital investment in the first 15 years.

As Seattle’s experience demonstrates, these don’t appear to be pie in the sky numbers.  Instead, Amazon has a proven track record of doing what every city wants from a leading corporate citizen — it creates good jobs that are filled by people who pay their taxes and it injects money into the area, which in turn creates jobs at the companies that provide the services that Amazon and its employees need.  Sure, there might be some drawbacks — Seattle real estate has become pretty expensive — but most cities would gladly accept that problem in order to tap into the Amazon river of tax revenue.

Amazon has released a list of detailed criteria that will be applied in its search for the right location for HQ2.  It’s looking for a metropolitan area of at least 1 million people, close to an international airport, with good roads, schools, and mass transit.  Oh, and it also needs up to 8 million square feet of office space.  And the modern world being what it is, we can expect Amazon to look for competing cities to produce packages of tax incentives, tax deferrals, and available development funds designed to entice Amazon as it makes its choice.

Columbus, where several Amazon data and distribution centers have located in recent years, is expected to compete for the prize, and Richard has written about San Antonio’s hope that it wins the crown.   We can expect the big boys, like Chicago and Dallas, to put in significant bids, and struggling cities like Detroit would no doubt see the Amazon initiative as a chance to really turn things around.  And don’t forget that Canada is part of North America; Toronto is said to be interested, too.  In all, about 50 metropolitan areas meet the 1 million population cut-off and would be in a position to compete for the prize.  Bids are due by October 19.

Hey, Amazon!  Come to Columbus!  You’d like it here!

A Tale Of Two Jobs

The New York Times published an interesting story over the weekend that compared two jobs, and in the process provided some insight into how the economy is changing and what it means for workers trying to get ahead.

The two jobs were janitorial jobs:  one held by a woman working at Kodak in Rochester, New York in the 1980s, and the other by a woman currently working at the Apple headquarters in Cupertino, California.  The two women earned about the same amount, adjusted for inflation, and performed the same kinds of work.

mop-and-bucketThe Kodak worker, however, was a full-time employee of the company.  She received more than four weeks of paid vacation annually as well as a bonus payment, and the company also reimbursed some of the tuition she paid going to college part time.  When the building she was charged with cleaning closed down, the company found her a different job.  The janitor at Apple, on the other hand, doesn’t work for Apple at all; she works for a service that Apple contracts with to keep its buildings clean.  She can’t afford to take a vacation because she can’t afford any lost pay, and there are no opportunities for bonuses or transfers to different work at Apple.

Although the Times article veers off into the unusual story of the Kodak worker — who ended up taking computer classes, getting transferred to a professional job in information technology, and ultimately becoming the chief technology officer at Kodak — the more interesting point is the macroeconomic lesson.  As the Times describes it, American companies have “flocked to a new management theory:  Focus on core competence and outsource the rest.”  The Times article notes that the outsourcing approach has made companies “more nimble and more productive, and delivered huge profits for shareholders,” but “has also fueled inequality and helps explain why many working-class Americans are struggling even in an ostensibly healthy economy.”

There’s no doubt that outsourcing has been a huge trend in the American economy.  But what the Times presents as a kind of optional management theory designed to reap windfall profits for shareholders while shortchanging working-class Americans seems to me to be more of the inevitable consequence of the cold hard reality of global competition.  The business world has changed, and companies that want to compete with low-cost providers overseas have to keep their intellectual capital while cutting costs wherever they can.  Outsourcing is one result of that reality; the disappearance of company-funded health care benefits and pensions, the rise of employee-funded retirement plans, and movements of company headquarters to the states and cities that offer the most favorable tax abatement schemes are some of the others.

The proof of the cold hard reality is in the outcome:  Apple is thriving, while Kodak — which once was one of the most successful, innovative companies in America — has gone through bankruptcy, laid off thousands of workers, and repurposed itself into a much smaller concern.  Kodak may have paid a price for its generosity.  And for workers, the lesson is clear:  do what you can to become one of those intellectual capital assets that companies want to keep around.