The Market Ticker
Commentary on The Capital Markets

We have long passed the point where you can simply lie more often, more-outrageously and with greater emphasis and hope for good things to come of it.  The "paper it over and pretend it never happened" nonsense has gutted economies worldwide.

Here is the truth and it cannot be evaded: If you spend more than you take in you create debt.  That debt must be serviced and ultimately must be paid down.  The servicing of the debt requires that you spend somewhat less in the next period of time, and the paying of the debt requires that you spend exactly as much less as you overspent previously; between these two you must spend materially less than you overspent previously.

This is true no matter if you're a government, a company, or an individual.

There is no way around this.  It is simple arithmetic.

There is exactly one way that spending more than you take in will create a better future for whatever entity does it.  That requires borrowing to build something that will return a greater output than the cost of the debt plus its servicing costs.  Whether that is worth it on an analytical basis requires determining how long it would take to save the money first instead of using debt to fund it; you then have two scenarios which can be analyzed in totality; one in which the asset can produce in a shorter time frame (because you can build it right now) and the second in which it produces in a longer time frame (because you save to build it somewhere down the road.)  In both of these analysis one must also take into account the risk that the asset fails to produce more than it costs.

Take a college education.  If you save (or earn) the money to attend and you either fail to complete the course of study or are unable to find a job that requires your degree when you graduate while your funds are lost you have no future burden as a consequence.  That is, you expended the money (that could have been spent on something else) but you are no worse off, other than the lost labor and time to accumulate the funds to attend.

If, on the other hand, you borrow to attend college and either fail to complete the course of study or are unable to find a job that requires the degree you are screwed; you now have a forward obligation to pay for something that has little or no real-world value in improving your quality of life.

Which is the correct choice to make given that when you begin college you have two unknowns, neither of which you control: The first is the risk of an unforeseeable incident disrupting your education (e.g. illness, accident, etc) and the second is that despite diligent application of your talents the market for your degree will shift out from under you in the intervening time or the value of the degree (e.g. the expected salary) will fail to materialize.

How can you possibly know what the market is for a given profession four, five, six or eight years into the future?  That's 20% of your life when you graduate college; think back on that time and how much has changed in the world during it!

Worse, most overspending, especially by governments (but also to a large degree by people) is not spent on productive assets.  The person who borrows to buy a Corvette isn't buying a productive asset in doing so.  Oh sure, they may need a car, but a $20,000 sedan is a car; the other $50,000 was borrowed for the explicit purpose of consumption, which produces nothing.

Likewise government spending on social programs produces nothing.  It is therefore always more expensive to borrow for such spending than to tax and save.  It simply allows the government (or person) to pretend they can fund some sort of consumption today that in fact they are unable to fund.

And this brings forward my central point both on Greece and the rest of the horsecrap in the media and so-called "economists:

This isn't just semantics. There's no reason, in law or logic, why a Greek default necessitates an exit from the euro. The European Central Bank pulls this trigger by choosing -- choosing, please note -- to withhold its services as lender of last resort to the Greek banking system. That is what it did this week. That is what shut the banks and, in short order, will force the Greek authorities to start issuing a parallel currency in the form of IOUs.

You're not lending if the money was borrowed to consume.  You're financing with no hope of ever getting an honest repayment of principal and interest -- which means you are stealing by depreciating the value of everyone's holdings and that theft continues forever due to interest expense; it is not a one-time thing that happens when the deficit is incurred and then stops.

A truly independent ECB, willing to do whatever it takes to defend the euro system, could have announced that it would keep supplying Greek banks with liquidity. If the Greek banks are deemed in due course to be insolvent (which hasn’t happened yet), that doesn't have to trigger an exit, either. Europe has the wherewithal and a bank-rescue mechanism that would allow the banks to be taken over and recapitalized. These options are foreclosed because the supposedly apolitical ECB has let Europe's finance ministers use it as a hammer to extract fiscal concessions from Greece.

It now appears from exit polls that the Greeks have voted "NO", which means the charade now has to be unwound.  And make no mistake, that was coming anyway as the end of the rope was clearly in sight and there was no knot to stop you from falling off the end either.

But the first key to sustainable fiscal policy is to stop lying, both to ourselves and others.  The simple fact of the matter is that deficit spending is unsustainable always and everywhere and is particularly so when it goes to consumption, whether through pensions, medical care, food stamps or similar programs.

We're headed down Greece's road in the United States despite claims to the contrary, and if we don't cut it out we're going to find out exactly how bad -- and how soon --  their problems can be repeated here.

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This made me sick to my stomach to read.

Code has atomized entire categories of existence that previously appeared whole. Skilled practitioners have turned this explosive ability to their near total benefit. Bookstores exist now in opposition to Amazon, and Amazon’s interpretation of an electronic book is the reference point for the world. For its part, Amazon is not really a bookseller as much as a set of optimization problems around digital and physical distribution. Microsoft Office defined what it was to work, leading to a multidecade deluge of PowerPoint. Uber seeks to recast transportation in its own image, and thousands more startups exist with stars in their eyes and the feverish will to disrupt, disrupt, disrupt, disrupt.

I've been writing software since approximately 1976.  I began with Fortran-66 and one of these:

Yes, for real, one of those.  No bull****.

My first "real" program that did a real thing?  A subroutine that played the game Battleship.  I'm not kidding; the control cards that went in front of the deck called the main routine from drum storage, which was the "referee."  You and another player stuck your decks in with those control cards in front, and shortly thereafter the referee ran both and produced for you (on green-bar paper!) each of your subroutine's moves and the results.

My deck was close to 6" thick when I got done with it.

Next up was this:

But I really didn't do much of note with it; it was the Tandy line, which were Z-80 based instead of 6502 (incidentally, not only Commodore but the Apple II was based on the 6502 processors) that really got me into "hard-core" coding. 

My first "real" piece of code on the Tandy machine was my decision to 're-implement' Space Invaders -- the arcade game.  It took six months; the assembler had to be loaded from cassette tape, as did your code -- there were no disk drives of any sort, floppy or otherwise.

Since then I've written and supervised the implementation of dozens, even hundreds of pieces of code.  Some simple, some not-so-simple.  Some were control systems for entire national networks of machines, others more-local, still others database drivers and similar.  The software that animates The Market Ticker, called AKCS, is actually the third ground-up implementation of a discussion-based environment -- the first being on the aforementioned TRS-80, the second being on Unix, and the third here.

If you manage to slog through that long piece by Paul Ford you might be shocked to realize that most of what people talk about as "coding" really isn't.  It's analysis paralysis; the ever-present confab in Vegas, Atlanta, NY or wherever where people argue endlessly about this and that.  Just deciding on a platform and implementation parameters can be damn near impossible in many cases.

But it doesn't have to be.

I worked for a "startup IPO" firm for quite some time, and one of the tasks I had as a group manager was implementing a control system to sit on top of another group's software, along with the various infrastructure I was responsible for, and make sure it all was functional, giving the operations people a clean way to see status, drill into it and if necessary dispatch people to fix it.  This was a national system and thus had plenty of challenges; the architecture was such that it had to be doubly-redundant to each node with the backup only operational if the need arose, as lack of connectivity meant lack of revenue.  On the other hand the backup facility was cheap to provision but very expensive to actually use.

We could have spent months in meetings and debates on architecture, but we didn't.  Instead I took upon myself writing about half of the architecture over a long weekend and then coupling in other components.  Call it management by dictator if you wish but it was up and running within weeks, instead of months or years -- and it worked.

MCSNet, my ISP, originally ran on a business management package that was written for general purposes and targeted in an entirely different industry.  It worked very well, but wasn't designed to run an ISP.  As the company grew the limitations got to be more and more-severe, including the lack of a tightly-built credit card billing automation facility complete with its attendant security issues.

So at a given point the decision was taken to reimplement the entire thing.

But Paul Ford's process isn't what happened that time either.

Instead, what happened is that I told Marcus, my #1, that I was going to lock myself in my office for a week, and that unless the building was on fire or some calamity of similar severity was occurring I was not to be disturbed.  Having scoped the problem (since I lived with it daily since the firm was literally "just me" in my apartment!) I was reasonably sure that I could have the framework of a replacement operating within a few days.

Many pots of coffee and little sleep later, that's exactly what happened.

It might not have the most-elegant code in the world but it took what was a fairly serious pain in the ass and reduced it to a nearly-painless process, complete with much-enhanced audit trails and performance.  What once took an hour or so (e.g. new account setup, reactivation if someone paid after being cut off, etc) was reduced to mere seconds.  And while a second redesign would have been inevitable as this was a character mode implementation (the web was young at the time, of course) the second iteration of it used Postgres as its back end -- yes, back in 1998 -- and totaled a mere 35,000 lines of code, all in "C".  Yes, I still have it.

Note that this software ran literally everything on our cluster, including billing customer management, operational control and the like.  Oh sure, there were shell scripts here and there, off-the-shelf components (E.g. SNMP responders) that were plugged into it and a separate accounting package that swallowed the data this thing produced so as to produce ledgers, tax forms and similar, but this nice, compact piece of software ran a multi-million dollar company and its complete computer room full of machines that provided services to well north of 10,000 customers on a daily basis.

Well, you say, that's small potatoes in today's world.  Maybe -- but it did that on hardware that today you carry in your pocket in the form of a Samsung Galaxy phone.  The cluster was comprised of Pentium (yes, the 90Mhz processors!) and Pentium Pro (the 200Mhz sort) machines, all connected together on a switched LAN with the CMS software directing what ran where and when.

I've seen the sort of paralysis in other firms when it comes to "code"; I won't name names because it would simply take me too long to do so.  But I will note that this isn't coding, it's outrageous self-serving bull**** with people that have far too many letters behind their names who seem to think that justifying that sheepskin requires attendance at conferences and blowing other people's money on their personal bonfires.

I'm sorry folks, but it's just not that complicated -- unless you insist on making it that way.

Oh by the way, AKCS, the software that you're using to read this column?

It totals 23,000 lines -- also in "C".

It's just not that hard if you can actually think.

But most people in this so-called "industry", when you get down to it, can't.

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If so then I challenge you to take on the medical monopoly system.

You can read here if you wish or I'd be happy to brief you, including the facts and figures.

Fact is that if you do take this on, and win (and then execute on what you say) our Federal, State and Local budget problems will all be solved without having to raise a single tax.

In fact, you'll be able to cut taxes -- by a lot.

What say you, The Donald?

PS: There are dozens of additional articles that have rolled off the timeline, but are still in the archives.  You're welcome to access them all on request -- have your office contact mine smiley

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2015-07-04 07:10 by Karl Denninger
in Editorial , 498 references
 

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Frankly Mary, you're out of your ****ing mind. And I'm being polite today.

In light of various global changes, I note the need to update teaching about Catholic sacramental theology in two simple but important ways. I urge us to implement these changes ahead of official reworkings that may be some decades away. Catholic theology is done by a variety of laborers in the vineyards: some who are part of the institutional church and others in the larger Catholic community. These observations come from the latter with the hope that the former might also implement them.

Urge eh?  Let me guess -- that "urging" will come with a bunch of torch-bearing harpies of various sorts screaming for government intervention and calling names?

Ah yes, that has already started over on Facebook, where this was posted.

So let's step back for a second, because there's a wee problem here.  See, marriage as the Catholic Church defines it happens to be the same way that virtually everyone else defined it too for the previous 5,000 years or so of recorded history.  In other words there is no such thing as "heterosexual marriage" because under Catholic doctrine there never was any other sort; the word "marriage" is defined as the union of one man and one woman and from a Catholic perspective is defined as that sacrament -- not a secular arrangement.  Now it just so happens that the Catholics made a rather grievous error and slept with the Devil, in this case the State, by adding a legal stamp to their sacrament that didn't actually comport with what they taught.  Specifically, the Catholic Church only allows you one valid heterosexual marriage in your lifetime as long as both of you are alive.  Claiming mere mistake is not sufficient to get a "do-over"; you must be able to document defect at the time you contracted it.  The State, on the other hand, will grant you as many times through the divorce court grinder as you're willing to tolerate before blowing your own head off.

By profaning a sacrament in this fashion one might think that God could get*****ed off.  I have no idea if he did or didn't; I'll leave debate on that point to those who are arrogant enough to believe they can speak for him.  But the fact remains that the recent Supreme Court decision amused me greatly in this regard, because ever since the advent of divorce on demand, a feature of the so-called "rise of feminism", the Church has been profaning itself in the United States millions of times a year on a quite-literal basis and the irony of such -- and what happened -- is obvious.

You may call anything whatever you wish but you may not arrogate to yourself the power to define away the meaning of words that have held fast for over 5,000 years.  And incidentally, you may wish to pay close attention to what the Supreme Court actually held, for in the future you're unlikely to prefer the state you're now in.  I speak specifically of the fact that the Supreme Court turned what was formerly an unalienable human right into a mere privilege through the demand that one be issued a license.  Rights require no license; they create no affirmative obligation except to be left alone and they cannot be conditioned on burdening another, as that is in fact enslavement of the other person.  Gay and straight people alike had that available to them prior to this ruling; as a consequence of your petitioning and screaming that has now been destroyed for everyone, gay or straight.

You'll discover the foolishness of your celebration soon enough; I'm sure of it, given what just happened to the Christians that got in bed with the Devil of the State on this issue.  I will be chortling when you find that said "license terms" become more and more constrained but are perfectly fine under the very demands you raised so long as everyone is equally-burdened.  "One Child" policy anyone?  Oh yes, that and more just became explicitly Constitutional thanks to that decision and the fun is already starting with a polygamous set attempting to argue for a three-way.  It'll get better from there given Kennedy's opinion, I assure you.  You're welcome.

As for Holy Orders you're free to disagree with the Church there too.  But you're not free to demand, or try to organize a lynch mob to demand, that they change.  You may not understand it and you may not care but the Church believes there is a fairly solid theological basis for the constraint that has much to do with the gender of the person that got nailed on a tree quite some time ago along with the nature of transubstantiation.  If you don't believe in transubstantiation you're not Catholic; it is the primary dividing distinction between Protestant and Catholic faiths.  While there is debate about Holy Orders once again you're not free to demand that the Church's doctrine comply with your beliefs.  You are free to set forth and establish your own church if you cannot find one that suits your needs, although with dozens of nominally-Christian sects in the United States alone I suspect that simply looking a bit harder would bring you somewhere in alignment with your views.

Why do I bring all this up at all, given that I rarely go into the theological world in this column?

Quite simply it's because the so-called "movement" that pushed for Gay Marriage is not about tolerance.  It's about demands -- specifically, demands that are direct violations of what 230-odd years ago a small cadre of brave men signed their own death warrants to deliver to us in the nascent nation called America.

The First Amendment, without which this nation would not have been formed, guarantees not only the right to speak freely, including most-notably speech you find offensive (nobody ever tries to censor speech that they don't disagree with), it also guarantees the right to freedom of religion.  The First Amendment was first for a reason; without it none of the other recognized rights exist.

The First Amendment means that religious orders of various sorts are all free to exist side-by-side and they're also free to both have whatever beliefs and constraints on their sacraments that they wish while both speaking and acting on them.  You, for your part just as I for mine, are free to choose that which most-closely aligns with our own personal belief system, and if we cannot find a match that is acceptable we're even free to go start our own, new religion.

But what we're not free to do is issue demands to other faiths.  I have no more right to demand that Jewish people start eating ham sandwiches than you are free to demand that the Catholic church alter its catechism to suit your particular preferences.

Such arrogance is mentally deranged to put not too fine a point on it, for such demands are now being coupled with the use of force; a violation of the very precept when it comes to speech and religion on which this nation was founded, and, I might add, implicate the highest law of the land.

And that, my friends is where the bigotry comes in.  It's not in the Catholic Church, despite their views that some find arcane or even silly and offensive.  You're free to join, leave, or turn up your nose.  Nobody in the Catholic Church is trying to force you to come and supplicate yourself before the altar; that remains a choice and one that is respected by those inside the doors, whether you decide that is a path you wish to follow or not.

On the other hand those screaming about so-called "Gay Marriage" and similar are of an entirely different view.  They have demanded to change the meaning of words that have stood for thousands of years and now they have displayed what was only spoken of in hushed tones before the recent Supreme Court decision: They intend to try to force the Catholic Church, and others who are Christian, to honor and pay homage to their redefinition of these words by demanding modification of their sacraments and beliefs under pain of government sanction should those demands be refused.  In fact this has already begun in the form of said force being leveled against bakers of cakes and takers of photographs.  It will be mere months, if that, before a Catholic Church is attacked for its refusal to marry a gay couple.  Count on it.

That is not religious freedom, it is jackbooted tyranny and bigotry of the highest order.  It is what this nation was formed to explicitly stop, as such intrusions into the religious beliefs of the people were utterly common in the colonies, undertaken in the name of the King.  The arrogance and outrageous nature of these demands requires a response from those who believe that the sacrifice of our forefathers and those who founded this nation created something good, different and worth defending.

I'll be polite this time, although I'm not at all sure why I should:

Get off my lawn.

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