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Commentary on The Capital Markets- Category [Musings]

From the comments on a previous post, and a question that has been asked more than once....

I note that Karl often advocates that we individuals in the United States should reform the corrupt ways of our government by starving it Atlas Shrugged style. I, for one, would like a little more insight on Karls opinion about how that would work.

A fair question.

Here's my view: Americans, in general, refuse to confront what the 'culture of more' really means.

Let's look at the statistics.

If you are in the top quintile, which means you have an income of more than about $90,000 in your household, you are the effective funding source for the government.  If we extend that down to the 4th quintile we comprise approximately all federal revenues.

That is, if you are in the lowest to middle quintile you are a net sink on the government, not a net source.

That threshold is approximately $55,000 a year in family income, or around $30,000 if you're a single person.

Now let's talk about what constitutes privationpoverty, or, if you prefer, "need".

In this country you may think you're poor if you have a family income around $50,000 but you're not.  What you don't have is a (newer) Lexus, Mercedes, or similar.  You don't live in a swanky area near or in a big city.  You can't go out for steak and lobster every night.  You don't take fly-away vacations to wherever you wish.  In short, you don't have the trappings of being "rich."

But you probably do have a $100+ cell phone bill, you probably do pay upwards of $100 for "cable TV" (or satellite), you probably do drive a car newer than five years old and you probably do have some designer clothing in your closet -- and likely quite a bit of it.  You probably do have a large-screen TV in your living room, and likely another one in at least one bedroom and you probably eat out at least once or twice a week, with most of you "eating out" daily at your job rather than bagging a lunch in with you.  If you have kids they probably have $300+ mobile devices in their hip pocket before they have a driver license (which you paid for), another $100/month cell bill, video game consoles and a whole bunch of $50 video games, they're dolled up like Dancing With The Stars contestants, you believe they're entitled to a college education irrespective of how they fund it (and you'll give up all your financial information and put them, yourself or both into debt to get it) and more.  Most of you with a couple of kids live in a vastly larger house than the one I grew up in, about 1,200 square feet for four of us; hell, most couples with a townhouse (and no kids!) have more space than that.  You most-certainly have plenty of decent-quality food to eat, you most-certainly have flushing toilets and hot showers, you most-certainly have a means of getting around and you most-certainly are not, by any rational definition of the word, impoverished.

So here's the question for you: Are you willing to compromise what you claim is important to you in terms of personal and national integrity, never mind liberty, so you (and/or your family) can have the privilege of living in a swanky part of town, with two parents working and shoving the kids off into daycare, driving that Lexus and otherwise living better than 95% of the world's population does?  In short the deal you've made is about privilege, not "need", and in exchange you source the funds for the scams!

That's the choice, you see.  So long as you are a net producer you are the problem because you enable the addictions and stupidities.  You make possible the government spending.  You make possible the lies.  You make possible the inflation, the Fed's actions, what Wall Street does, the gouging of people at the doctor's office and hospital, the blatant rip-offs by police officers confiscating property from people who have done nothing wrong and even the shutdown of an entire town searching for one guy who took a shot at two cops while, in a single weekend, a dozen or more people are shot in Chicago and nobody lifts a damned finger.

Yes, you're responsible for Obama being able to occupy the White House with a questionable pedigree, issue illegal executive orders modifying legislation (a power he does not have but has arrogated to himself) and more.  You were equally responsible, irrespective of your vote or political party, when Bush did the same crap and Clinton before him.  You're responsible, if you're one of those producers, for all the things you whine about when it comes to both foreign and domestic policy.  

It's all you, because without you there is no funding to do any of that.

I know the riposte that will come: The government will simply ratchet down on you if you cut your earnings back voluntarily and you'll wind up in the street.  

In a word: smiley

Here's why -- it's already true that the first three quintiles of earnings in terms of household income are net sinks; that is, their effective household income is higher than their nominal income.  That is, they are net consumers.  And I already pointed out where the threshold is -- and that's from the CBO's data, not mine.

The government cannot ratchet down on you if you choose this course of action because there is nothing to take (everyone below that line is a net sink on government resource) and they would have done it already if they were able.  They know damn well that if they try it a majority of the population is now incentivized to rise up and revolt.  That is the math, and those in the government are fully aware of it which is why you have everyone screaming at you to "work harder", "make more" and similar.  It is not about your success, it is about you volunteering through your own expression of greed and avarice to screw everyone else, most-particularly your children, grandchildren and those not yet born just as long as you are led to believe you can get "yours."

You choose folks.

I used to be one of those guys who got writer's cramp stroking checks to the IRS but eventually I came to the above conclusion -- there was no way to keep doing that and sleep with myself at night.  I was enabling it as certainly as is someone who allows another to live under their roof and/or protection that refuses to contribute to the common benefit of the household and instead drinks or drugs themselves into a destructive stupor.

I decided to change my way of life in that regard as I found enabling national stupidity to be an outrage I could no longer sit for.  Voting and personally lobbying for change, along with working in the political process (for both "major" and third parties) delivered no net positive change nor was there any apparent on the horizon.  Quite the opposite, in fact.

I believe there are but two ways to resolve this dilemma, the illegal way and the legal way.  The illegal way is to simply not pay taxes and hope they don't come after you; hide income, sell drugs, whatever.  It might work and it might not, but if it doesn't you are pretty likely to go to prison.  After all if you're going to be a net producer The Devil insists that you produce for him!

But the legal way and the one that the government can't do anything about is to reduce your family income to be under the threshold where you are a net producer.

If you live in a high-cost area you may need to move.  So what?  If you have a spouse that is hung up on material things and the trappings of wealth or living in a swanky location you may have a personal problem in that you decided to be with the wrong person.  I cannot answer whether that is true for you but I can tell you that if you are driven to the acquisition and holding of wealth for someone else then you're cuckolded or worse.

If you personally are hung up on such things then just shut up and suck up what comes to you because you've made a deal with The Devil on the premise that he will help you at other people's expense.  That never works out in the end.  Ask all the medical folks who took the deal offered them: Play along with the government scam and medicine will go from being a solid middle-class (middle quintile) income to one in the top quintile -- Hippocratic Oath be damned.

Those very same doctors are now crying poverty, refusing to see Medicare patients because it doesn't pay enough, crying about "cost management", malpractice insurance and being "forced" to become part of a hospital staff rather than an independent practitioner.

The beast they got in legion with turned on them and screwed them in the ass, as it always does.

My answer to those people's complaint is simple and succinct: **** you -- a decision to screw everyone for a little piece of the scam, which is exactly what you decided to do, earned the wage now being paid.

When you make a deal with The Devil you always get ****ed.  It might not happen immediately but it most-certainly will happen and when it does you have nobody to blame but yourself because you tried to exploit others -- that is, do an evil thing for your own personal aggrandizement and wealth.

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I wrote the other day on a bestselling author who had written an op-ed on a person who sideswiped his parked car.  He was lamenting that the police observed that "People just aren't honest anymore."

His challenge was to ask the person who hit his vehicle to prove that wrong.

I went after him, and I believe justly so, pointing out just a handful of the myriad scams and frauds (that is, dishonesty) that permeates literally every nook and cranny of our society today.

Jason has written some pretty decent little puff pieces for Fox as of late.  But I gotta tell you -- I still think I'm spot on with my commentary, and here's why.

The simple fact of the matter is that it is Jason, and you, and I, and the rest of us, that make all these scams and schemes possible.  We do it through our silence, we do it by participating, we do it when we advocate for or support forcibly taking someone's money to hand to another in the form of food stamps or AFDC, Section 8, Medicaid or otherwise.  We do it when we go along with Obamacare or even allow the "traditional" health insurance rip-off model to function.  We do it when we accept the claim that "2% inflation" is proper, even though that is admitting to the wanton and intentional destruction of value of what we have previously earned and, absent such intentional interference purchasing power would increase as technology improves instead.  We allow politicians to run ponzi schemes that must mathematically fail and impoverish our children, grandchildren and those not yet born -- screwing our own kids.  We are complicit and thus to blame because we do not cast our wooden shoes into the gears of the machine, destroying it or at least slowing it down.

It's only when our car gets ripped up that we write columns about honesty -- or the lack thereof.

And therein lies the gist of my post, and the message behind it.

My decision to sell MCSNet was a long-considered process, just as was my decision to get the hell out of Chicago.  As with my decision last year to close down most of the forum all of the various factors, including where I am in my life, what I see on the road ahead at a personal level, how much flexibility I want (and expect to need) during the months and years ahead and how I both need and want to spend the remaining sand in my hourglass (given my inability to know how much is there until it is almost gone, as is nearly-always the case) bears large on these sorts of decisions.  No small part of any such decision for me is whether I believe I'm playing the part of Don Quixote or whether I'm advancing an important idea.

It's a funny thing, really -- I've written recently about 3+ Sigma events and that one should not ignore them, a lesson I learned in my 20s (and then I promptly didn't follow my own advice a couple of times in my 30s.)  While I would not change the outcome of those disasters, as on-balance I'm very happy with them with the benefit of hindsight, the fact remains that they were quite-arguably objectively wrong decisions without that benefit.  Who knows where I'd be today had I made a different decision at those critical times; what I do know is that I wouldn't be here.

We all have one life, and there are no do-overs.  But for those of us who have children, and the author that I was commenting on does (as do I), what we do extends beyond ourselves.  

If we take seriously the exercise of the greatest power mankind has -- the power to create life -- then I allege that to saddle our progeny with knowingly-fraudulent institutions and practices when they are too young to understand or do anything about them is an outrageously damnable thing to do.

I can defend walking off and disconnecting to the extent possible if you discern that you're not making headway on positive change.  Others, including your children, can follow that example and while it is by no means a perfect solution it has a positive delta.  I can especially defend it if, predicated on both your personal assessment and life you decide that winding it down to the extent practical will bring an increase in the number of times you smile (or better) in a day.

But what I can't support is complaining only when you get reamed by the very processes and societal "norms" that you exploit and countenance in your daily life, and which will screw your kids.

It seems that more than a few people simply didn't get it.

Maybe, with a bit more reflection, you will.

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It's amusing to me that when you start down a path confirmation bias starts to show its head even among things you have no actual control over.

PS: My 3-Sigma+ series of events just turned into an easy 4, and probably a 5.  Damn.

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2014-10-10 10:38 by Karl Denninger
in Musings , 547 references

Do not ignore 3+ sigma outlying events in your life.

They are rarely a result of random chance.

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Odd, mystical and wonderful things have been known to happen....

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