Update – Social Isolation

It’s been a while since I’ve done an actual update right? I usually just repost my Quora answers here and don’t really do actual blog posts anymore.

Well, that’s probably because for the past 2 years nothing especially interesting has happened in my life besides depressing things. In Jan 2018, I made a life-altering mistake to take out 3 personal loans to dump into crypto – because I thought it was only a temporary dip – turned out to be a full on crash – I lost 80% of my crypto money – including $80k in profit. that means I had lost in total about $150k in crypto – a fact I verified by looking at my Gemini ballances. In order to pay back the loan, I was forced to renovate + sell my SF apartment. Then I subsequently lost the proceeds / profit of my SF apartment in a massive crypto scam (QuadrigaCX). So I ended up in Vancouver with basically nothing, no money/savings, no job, no friends, and desperate for a place to live. At the time I needed to find a place fast so I looked on craiglist, and found the cheapest place that was stiill in Vancouver and the landlord knew that I was in a desperate situation and took advantage of me. 

I only lived in that Vancouver place for like half the year, since I was traveling in Korea/San Francisco/Toronto other times and moved out early. The place was terrible, it was a one room that I had to share with 5-6 other housemates, the bed was crawling with bugs when I got there, and the landlord was a total asshole. I was so sick of that landlord. He was completely paranoid, he installed a kitchen camera to take videos of people to make sure they are following the house rules which is ridiculous and probably illegal, always blamed me for breaking house rules, fined me several times for things as small as leaving dishes in the sink too long, raised my rent because I ‘used too much electricity’, took all the rent in cash (probably evading taxes I figure), and to top it all off, he took 85% of my security deposit in the end. I should have known. He wrote in the contract that he was entitled to all my security deposit if I broke any house rules – I didn’t read the contract carefully enough as I was desperate at the time – and gave him two months rent ($1800 CAD) for first + last month’s rent. Then in Feb, he asked me to pay the month’s rent and I told him, I thought he just deduct it from my security deposit and he said ‘that’s not how it works’. In retrospect, I should have known he was trying to get more money from me. It doesn’t make sense for him to ask me for more money since that security deposit included the last month’s rent. Anyways like a sucker, I paid him. Later that month I moved to Burnaby as I found a new place – MUCH better – not only living by myself, but now in a nice high rise building with a lovely balcony and view as well – the space is also MUCH bigger – it’s a big studio and the rent was only $500 more. But my landlord kept hounding me. Somehow a piece of garbage I had thrown out before, came back into the house and my landlord of course blamed me for it, so I had to pay $40 in Uber rides just to go back to my old apartment and throw out that piece of garbage. Then later that month I had to give him back the keys as my contract was up. He asked me to also give back the copy of the contract he had gave me for some reason. This was weird – he already had a copy of the contract why would he ask  for mine? Anyways just like a fool – I gave him the keys and contract back and he told me he was keeping the majority of my security deposit because I had ‘broken too many house rules’ which makes NO sense as I was only in the house half the year anyways! and it’s not liike I broke those rules on purpose. What I should have done was kept the keys from him until he gave me back my security deposit – what could he have done? evict me? I was already out of that place. Call the cops? I didnt do anything wrong. I should have stood up for mysellf more. Instead I let my landlord bully me and take all my money – like a sucker. Got scammed right after getting scammed. What a fool I  am.

I also finally got my taxes done – it was really complicated because of the QuadrigaCX scam last year – I ended up writing off a total of $576,000 CAD – I can apply half as capital losses to my capital gains in the future indefinitely. In addition – I finally sold the rest of my crypto holdings for $48k last month – this was when BTC finally went back up over $10k. I took the chance and sold everything. This was much less than what I could have gotten had I sold last summer – I would have made at least $55k-60k had I sold last summer – but I was a fool back then and was waiting for $100k for some reason. This year I wanted to really make amends for some of my previous mistakes I made over the past 2 years. One of those mistakes was holding crypto too long. So anyways, I took a loss of about $72k USD – I had initially invested $150k USD in crypto, but after subtracting everything I got out of crypto during the last 3 years, my total loss was $72k USD (or $96k CAD). That’s additional capital losses I will claim on my next year’s tax return, giving me a total of (($570k + $96k) / 2) = $333k CAD I can apply to capital gains in the future. This is probably enough to cover any capital gains for the next 20 years for me. 

In addition, I also decided to reconcile my relationship with my old friend Ethan – the main reason being that it was difficult to meet a friend who shares similar interests. Yes, I know I wrote a massive blog post about this guy in May 2018 about how much of  a douchebag he was – but I came to realize that I can probably put up with this just to have somebody I can talk to about tech, asia and games – it’s quite difficult to meet a good friend like that actually. So this was another mistake from the past 2 years I mended. 

 Speaking of making friends – yes it has been very difficult to me making friends in Vancouver. Part of the reason is because I work from home, so there’s no coworker ties to introduce me to new friends, which is how I made my best friend Tony in San Francisco. Another reason is the meetups in Vancouver are not as big as the meetups in SF even, and definitely not as big as the ones in Seoul. The last time I went to a meetup was last Oct, and the last time I met up for an actual event with my Vancouver friends was last June. That’s a long time ago. After last Oct, I was consistently busy after then. Nov – I was in San Francisco / took a Bahamas trip with my family. Dec – I was in Toronto / Orillia. Jan – I was in San Francisco, then I had to take a trip with my gf since she visited me in Vancouver, to Banff. Feb – I had to deal with moving all my stuff over to my new Burnaby apartment – took at least 2 rental cars over the course of 2 weekends to do it. And now this month – first I had to take a trip to Arizona  for a company retreat and then – coronavirus pandemic – can’t really go outside or go to any events much. 

So yeah.. quarantined just like everyone else at the moment. It doesn’t affect me all that much since I work from home and  am an introvert so its not too much of a lifestyle change from me – but it does make it even more difficult for me to meet anyone new in Vancouver. In addition, I have no idea when I can visit my gf in Korea. We’ve been trying to do video calls consistently but of course, I need to physically meet her sooner or later. I really hope the COVID-1 9 pandemic will subside soon but who knows – currently it’s affecting everything from our social relationships to the stock market (which I am currently shorting at the moment because I think a recession is inevitable at this point). I haven’t met anyone I know physically in almost a month (last time was my co-workers in Arizona). We’ll see how much longer this can go on, but it really feels like we’re living in a dystopian / post apocalyptic world where everyone outside are essentially infected zombies. 


The United States crises

The United States, though being the wealthiest, most influential and most powerful country in the world, for all its strengths, has its weaknesses as well. Being an economist, I want to discuss three points in particular that I’m worried about concerning the U.S’s future and status as a superpower. In this article, I argue that if the U.S government keeps on maintaining the same policies as the last 20 years, it will gradually wane and may even go bankrupt.

1) Medicare, Social security, and healthcare expenditure: Right now, it is projected that over 77 million baby boomers will retire within the next 2 decades. This will have a dramatic affect on the cost of Medicare and Social security. The congressional budget office predicts that if we maintain the same level of health care benefits, health care costs will soar to about 40% of government spending in 2020 and gradually cause the U.S debt level to be 100% of its GDP, if we extend it to 2085, the projection is that debt will reach 600% (!) of U.S GDP. That is truly a scary number. It is directly a result of a pay-as-you go system, where seniors retire and push the costs of their retirement to future generations. To close the fiscal gap, the solution is to cut medicare benefits by 2/3s (a scary thought), double income taxes (another scary thought) or cut government spending by 134% (not feasible nor possible). Another solution is to privatize social security and medicare entirely, or to raise retirement age to around 70. Either way, something has to be done in the near future.

2) Taxes: Despite Americans thinking that they pay too much tax, actually from an economists point of view, they don’t pay enough. The optimal amount of marginal tax rate in the highest bracket is determined to be about 40-50% (where marginal revenue is equal to marginal benefit). Right now, with the Bush tax cuts, they are about 35%. When you compare taxes in the U.S to that of Canada or Europe, Americans actually pay much less tax. Another thing is that the U.S has no VAT (value added tax) at the federal level. Some states have no income tax, no sales tax, or both. The US provides farm and gas subsidies that are much higher than other developed countries (which is same thing as not getting enough tax). All these low taxes have the effect of not producing enough revenue for the government. As a result, we run into the same problems as in 1), how can the federal government or state government pay for retirement and healthcare benefits without having enough tax revenue. At current levels, clearly it’s unsustainable, and its clear that eventually taxes will have to be raised.

3) Pensions: State governments are in crisis right now, not only is the country in a recession, but they have to pay large amounts of pension benefits to many people, part of this is due to a loophole where the highest salaried government job determines what pension you get. As a result, people can ‘double dip’ and earn six figures while also receiving six figure pensions. Clearly this is unsustainable, and the reason why many states are on the brink of defaulting. California for example, has already had to slash its budget on many expenditures such as education, raise tuition levels, etc, and it’s still in a big hole. Again, mostly because of unsustainable pension payouts. New Jersey is predicted to be the first state to default, according to its expenditures, in the next decade, pension payouts will constitute 100% of the state expenditure (!).

All of these points raise truly terrifying prospects for the future generation of Americans. The situation in the U.S is bleaker than that of many other developing countries, because of the way Americans have been living on a life of low taxes, a pay as you go health care system, and broken pension costs. Eventually these issues will have to be dealt with, if politics prevent any of these solutions that I mentioned, then the U.S will be on its way to bankruptcy, and having unimaginable debt levels. Truly, something will have to give eventually, it’s only a matter of time. Let us hope that politicians will (eventually) put country ahead of politics, and aim to reform the broken pension, health care, and tax systems.

Edit: Now that it’s certain that current tax rates will continue (actually lower because of the 2% reduction in payroll taxes), the projected deficit with current spending levels and tax rates is projected to be $55 trillion by the time that a person my age will retire (around 2050).

L.J. Kotlikoff, 2006, “Is the United States bankrupt?” Federal Reserve Bank of St. Louis Review, 235-250.
Alan Auerbach, “Deja vu all over again: On the dismal prospects for the federal budget”, NTJ 2010.


Political views

Related to my previous post on equality, given the light of the recent elections in Toronto, and the hostility towards the newly elected conservative leaning mayor, I feel I am somewhat a minority as a moderate.

Canada historically has been fairly liberal compared to the United States, their country was formed by a group of government officials at a table, Confederacy, establishing the beginnings. In contrast, the US was established through a war of freedom and independence. Naturally, it is not surprising that Americans tend to be more conservative and right leaning in their views towards freedom and equality. Canada is contrasted as a capitalist-socialist country. I use the term socialist as the definition of socialism is an ideology that the government should provide utilities, social welfare, and own enterprises that compete on the market. This is all true for Canada, especially the last one (ie. Petro Canada, LCBO, etc). So for me to say that liberals are socialist, that’s because they generally are.

At my college, the University of Toronto, being an academic university in a left leaning city, it is not surprising that the majority of my colleagues are liberal. And why not, college students have the most to gain from liberal policies. Most don’t work and don’t pay any taxes, and are progressive, wanting to help everyone.

I used to be a liberal as well. But gradually, the impact of my internship and economics and exposure to American politics have left me to be a political moderate, or in Canada, a ‘conservative’. The reasons are fairly simple to me, but may not be to many of my colleagues. Younger people tend to be more progressive. Yes, liberal policies sound good on the outside. It sounds good to be able to help everyone, to make everyone more equal, to support progressive causes, to have the government supply services, improve roads + transportation + public goods + healthcare, to have the rich give to the poor. That all sounds good right? The Democratic party is so forward thinking to take care of everyone and support equality.

Then I looked a bit deeper into things. The more power you give to government, the more authority they will have over you, and the less freedom you have. The more you try to make everyone equal, the more it tends towards communism. The more you let government supply, the less you let business and private enterprise supply. And private businesses tend to be more efficient than government. Remember the government doesn’t have to make profit and because of this, they have no incentive to serve the people whereas businesses do in order to gain revenue. And of course, higher taxes to pay for these new services and expansion of government. Remember that when you tax high income individuals, you are taxing the economically most productive workers in the economy, and taking their hard earned money away to give to poor people who presumably have more incentive to be lazy and unproductive because of this redistribution of wealth. I would rather have private enterprise supply those services, and have the government do less, cut spending, cut taxes, and keep the inequality gap the way it is. It may sound like I’m being bigoted and selfish, but when I think of the idyllic time of the 1950s, a great prosperous time, it was mostly conservative policies and atmosphere that worked the way it should.

And so, the new mayor Rob Ford takes office, and I hope that Toronto should become more conservative if he enacts his policies, as I know politicians often lie and deceive. Most of my colleagues are disgusted at his election, as they should be as liberals, but as for me, I don’t have a problem with it, I just want to implore more people to realize the long term implications of their ‘progressive’ views, what it entails and that Mr Ford fulfills his promises.

To further expand on what I’ve said before about the role of government in society, there’s always a tradeoff in the role of government. I personally believe that the government should only provide services that the majority of people would want. For example, defense, healthcare, and education are common public goods that the government provides because most people want them. At the same time, people also have the choice of going with a private good instead (except in the case of defense). Medicare competes with private health insurance, though it only benefits a segment of people (people over 65). Private universities provide a higher quality education at a higher cost than public universities.

On the other hand, too little government means that inequality and corruption will abound. A good example is the United States during the late 1800s – early 1900s, where people like J.P Morgan and John Rockefeller amassed huge sums of wealth, while poor people were literally dirt poor. You think today’s inequality is bad? Back when there was no social security and safety net, the top 1% earned about a million times more than the average worker. J.P Morgan was so powerful that his wealth and influence could actually be measured as a percentage of the US GDP, he had a sizable influence during President Roosevelt’s administration, and he single handedly saved the US financial system from collapse during the Panic of 1907. In this era, huge monopolies such as US Steel and Standard Oil existed, basically causing widespread corruption in all levels of the government and private enterprise. In the absence of government intervention, this kind of corruption and inequity will be tremendous. This is what pure capitalism with no government intervention would have looked like. What we see in the USA right now is reformed capitalism, or capitalism with post-FDR social reforms in place, to mitigate this kind of greed and inequality (though it still exists).

The main thing is that if you want the government to provide you a service, then the majority must agree, the service must also be provided to everyone, and the cost comes from taxpayer’s pockets. On the other hand, if the majority disagrees, and if that service is one that benefits you more than others, then it is efficient to have a private company provide you that service. Consider the example of getting your driveway paved. Suppose the government raises taxes in order to provide a service to everyone of getting their driveway paved whenever they want. Clearly, some people are better off than others because some people have bigger driveways, get their driveways dirtier more often, etc. In other words, it’s not efficient for the government to provide this service. It’s better off to do it yourself or to hire a private company to do it for you, at your own extra cost.

Ted Sorenson once said that “The difference between Republicans and Democrats have always been that the former cares more about property, and the latter cares more about people”. I would extend that to say that the difference between liberals and conservatives is that liberals believe more in social welfare at the cost of higher taxes, and conservatives believe more in individual responsibilities at their own personal cost.