A balanced budget amendment would have prevented the Wall Street bailout, the stimulus, the GM bailout, Obamacare, 2-3 simultaneous never-ending wars, and the unlimited $$$ guarantee for Fannie Mae. It would also incentivize the government to keep as many tax-paying jobs in this country as possible.

Any wonder why certain parties hate the idea?

I think there's a mathematical calculation for EVERYTHING.

Having said that, the graphs provide history, exponents provide future costs.

There seems to be a few other variables that are unpredictable.

Otherwise, I think you could calculate an approximate Crash date based on some of this data.

But could you model the variables in the calculations to find the blow up OMG date?

Saying we "may" go five years, but not ten...just seems so "guess like"

I don't know...Great Ticker--food for thought!

Everything you have written is true, and the outcome if we don't change is unavoidable. However, Change can only happen when change is the ONLY option.
There is no stopping this derailment, we will have to pick up the pieces and start over when it happens.

I see the current budget debates much like King Solomon offering the two mothers half of the child, and our leaders fighting over who gets the bigger half.

Sadly enough, I'm beginning to believe our major political players', on both sides of the aisle, primary concern is the best strategy to pin blame on the other party for the inevitable sad state of affairs when it is time to win 2012 elections.

Karl, I want to pre-order Leverage today off Amazon, but before I do, I want to ask if there are plans for TF members to get a special deal. Not a special price -- I would pay twice the cover price -- but perhaps signed copies or something like that? If not, I will pre-order ASAP.

Bigbluffer wrote..

I see the current budget debates much like King Solomon offering the two mothers half of the child, and our leaders fighting over who gets the bigger half.

More like which side gets stuck with the ass-end.

Final result will be the same - both halves will be dead.

Judge, there is probably not going to be a good way for me to do a special deal, as I would have to register for sales tax in Florida and then be obligated to file and remit from that point on.

And I HIGHLY doubt that even with my author's discount from Wiley, I could beat Amazon's price. They're VERY competitive.

I do not know what sort of tour, if any, they will want to arrange. I will, of course, sign a copy for anyone on the forum who wants a signed first edition; you'll have to figure out how to get to and from me.

We just haven't done the promo work yet - you might want to wait a bit until I have a handle on that, which should be soon.

This is a great start on the Federal Government side of things.

The big GOTCHA is that the Ponzis dont need a Federal Gov to put us all in the asset bubble/crash ride. Whenever malefactors went leveraged and futures with the tulips, the South Seas Bubble, etc etc, the players got burnt.

The world financial industry has gone black box leveraged with off shore entities, and SIVs. It was the Ponzis in the financial industry that drove the demand and supply of crappy mortages. They have more schemes running that have not seen the light of day.

I think Karl would sign some if they were mailed to him with a prepaid return package. Of course it could overload his mailbox, and then he might have to drive to the Post Office. He could let us know, and we could donate for gas.

Lehman- 300b in claims and assets worth $65B, 21B of which is in cash to pay out. That's $235B in losses the creditors are going take- that almost snuck by over the weekend.

Mr. D, great post and summary of what the actual problem is. Unfortunately there are way too many "smart" people who won't look at it, never mind actually try to understand it. Take the following blog post. This is from a guy who runs a trading room. Notice that his premise is that the government is like a business and needs to grow to get better. Lots of luck with that.

http://www.tradesight.com/tradesight-blo....

Karl, why no corporate tax?

Karl, I am saddened to say that you are flagellating a deceased equine. It would be a better use of your time to do a post on how to properly buy a crash helmet. The crash it is a-coming.

Sutluc, because corporations pay no tax. Ever. They simply pass it on to consumers. Assess taxes where they lay and quit hiding them.

Karl, thank you for explaining this in terms that I can easily understand. If I go on a TF cruise...Im buyin' you a bunch of drinks. Gonna be bangin' a gold star again soon.

Thanks

Point taken.

all one can say is BRAVO.

and hope that it does not map to Geronimo

as we go over the falls.

i have passed this ticker on and encourage all to do so.

Good read. I hope we stop, now.

But, I am not betting on it.

bob

Good post and plenty of strong opinions. I like this blog.

OK, let's look at the idea underlying the first graph: dGDP/dCR. Here is a little table.

dCR	dGDP	value
 1	  2	  2	Good, $1 debt produced $2 GDP
 2	  1	 1/2	Not good, $2 debt produce $1 GDP 
-2	 -1	 1/2	Bad, GDP shrunk, but debt shrunk faster
-1	 -2	  2	Awfull, GDP shrunk fast, debt not so much.

I took the idea appart like this on purpose, so that I can illustrate further.

Quote:

The following facts are in evidence and cannot reasonably be disputed:

Perhaps not by reasonable people, however, I challenge anyone to name 5 people in the Congress, White House or Supreme Court who would not dispute at least some of them. But OK, they are mostly lawyers, they are trained to reasonably dispute everything. Most economists would reasonably dispute some of them, too. Krugman disputes 1), 3), 4), 5), most of 7), makes some creative assumptions to get around 2), agrees with the premise, but not methods of 6) and 8). That pretty much covers it.

It is not that Krugman is not a intelligent and reasonable man, mostly, but he has his pet theories and academic reputation to protect. And as far as the pain is concerned, he is trying to chart a course to make it bearable. Will it work? Probably not, but stating the obvious is not enough. At least 95% of people, businesses, and institutions can survive on 10% less the first year, and another 10% the following year. Banker's bonuses for 2010 alone could subsidize the remaining 5%, so that they do not have to cut into the bone. But people naturally want to protect what they have; on the other hand, 15 million people is a pretty good army, and they will not starve voluntarily and without putting up some kind of fight. So Krugman has a theory. Lenin had one, in his time, Hitler had another, there is plenty of examples.

Karl said it before for various topics. We need to start showing up in Washington in very large numbers, and someone needs to organize it - quickly, so it has to be someone who already has an audience. Also, a less extreme plan would help. It doesn't need to be fixed completely. Just get us through the next 10 years for round two.

Awells, I believe you have it wrong, the graph isn't a division, its a subtraction.

dCR	dGDP	value (dGDP - dCR)
 1	  2	 +1	Good, $1 debt produced $2 GDP
 2	  1	 -1	Not good, $2 debt produce $1 GDP 
-2	 -1	 +1	Deleveraging, good or bad?, GDP shrunk, but debt shrunk faster
-1	 -2	 -1	Awful, GDP shrunk fast, debt not so much.

Again Awells, your "pick it apart" is addressed in the article itself, with the second chart, where what you posit doesn't happen. Never mind that only once - during the crash itself - has debt gone down.

Genesis wrote..

But remember, government revenue can only go up as GDP does in a sustainable fashion. That's because government by definition gets its money by imposing tax upon production. If taxes rise faster than GDP does the attempt to raise taxes fails over the intermediate term for the same reason that debt cannot rise faster than GDP (you can think of taxes as simply an interest payment on GDP if you wish; mathematically they're identical.)

So... taxation must occur at the time of production. That makes sense. I've been in a torches-and-pitchfork mood about the huge money that Wall Street has made during and since 2008, but that money is already made and moved beyond taxation.

And, if you raise taxes now and GDP tanks, there's nothing to tax. Do I have this right?

Great post, KD.

Pretty much.

There's also the other problem - America has never managed to obtain more than ~20% of GDP in taxes, no matter the rate. Interesting statistic and I suspect a PhD paper could be written on it, but actually validating whatever you claim to find might be a bit tougher.

Genesis wrote..

America has never managed to obtain more than ~20% of GDP in taxes

Interesting. So even during the 90% rates of the 50s-60s, it was never more than 20%.

If you want to avoid the problem with debt contraction, define it this way:

(dGDP - dDebt)/|dDebt|.

That is, divide by the absolute value. For positive dDebt, that reduces to
(dGDP/dDebt - 1). However, for negative dDebt, it becomes the negative of that (1 - dGDP/dDebt).

The number is thus always positive when GDP changes more than debt (in the case of contraction, it means GDP contracts less than debt).