If You're Older Than 40 And Reading This...
The Market Ticker - Commentary on The Capital Markets
Login or register to improve your experience
Main Navigation
Sarah's Resources You Should See
Full-Text Search & Archives
Leverage, the book
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. For investment, legal or other professional advice specific to your situation contact a licensed professional in your jurisdiction.


Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility; author(s) may have positions in securities or firms mentioned and have no duty to disclose same.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must be complete (NOT a "pitch"; those get you blocked as a spammer), include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.

Considering sending spam? Read this first.

2015-06-04 08:00 by Karl Denninger
in Editorial , 8861 references Ignore this thread
If You're Older Than 40 And Reading This... *
Category thumbnail

... you're likely to either be eating out of a dumpster in your old age or be (literally) eaten.

If you currently have counted more than 65 revolutions around the sun in your life then you may avoid this, but only through the most-macabre of means: you'll die of something else first.

Let me explain: If you're between 40 - 65 you have somewhere between 20 and 45 years remaining on this planet, statistically speaking.  Oh sure, some of you will do better, some worse, but those are the numbers.

This means you must manage at least 20 years without things going to hell if you're on the older end, and 45 years if you're on the younger.  What are the odds?

Well, the US Government (backed by the Fed) in what has been and continues to be described as a "recovery" destroyed about 6.3% of the value of the currency last year alone.  That is the value of every dollar that exists in currency and credit (that's a stunning $59 trillion dollars folks!) was impaired by 6.3%.

To put this in perspective and real dollar terms that is $3.7 trillion dollars of value destruction or approximately every penny the federal government spent.

Looked at another way the Federal Government emitted $1.08 trillion to cause that currency destruction but the reality of arithmetic turned the harm done from $1.08 trillion to $3.7 trillion, a multiplication of 3.43x!

Now let's look out 20 years.  Let's presume that this year, which the CBO and other policy people say will in time be considered a good year, is equaled every year for the next 20.  That is, we have no more bad years (of which the CBO says we will have many, starting in another 2 or 3 and continuing thereon forever!)

I'm being very optimistic in this projection, in other words.

That $59 trillion is going to have a real value of $17.3 trillion in today's dollars 20 years from now; it will have had roughly 70% of its real value literally burned to ash.

With the remaining value we will try to pay Social Security and Medicare benefits, just to name two, without which about half of the population is literally without funds -- or medical care.

Do I need to tell you how much is left in 45 years?  Ok, I will: $3.78 trillion.


If you want to know why the American consumer (that is, the common man) has watched everything go "poof" in front of them since roughly 1980, this is the reason.  Contrary to the protests raised by various people in government that "we're not really in deficit trouble" and similar nonsense this is the arithmetic that cannot be evaded; math isn't a topic of debate, it just is.

Will I be ok when this happens personally?  Maybe.  But if not that's all right; I had a pretty decent run, and if the reality of the situation is that between my attempts over the last number of years to get people to wake the fuck up and put a stop to this crap fail and I also fail to find a way to remain in reasonable comfort as my time on this planet (probably another 35 years, more or less) draws to a close I have no quarrel with the fact that I've had a good run and due to that failure to change trajectory my time has expired.

How do you feel about this?  More the point, whether you're rich, poor or somewhere in the middle unless you're ridiculously rich (as in, "have billions") having six percent of your wealth today in real terms left 45 years out means you will be eating out of a dumpster and living under a freeway overpass -- which will likely be crumbling around you in a vista something akin to "Fury Road"!

Oh, I know, you'll call me a "downer" and say that "we've always found a way", "technology will save us" or "the markets will go up monstrously and thus you'll outrun it."

Uh huh.  The markets have not outrun it from 1980 to today.  They have papered over it with more and more debt, but eventually that debt has to be paid and in the meantime it has to be serviced.  That servicing cost eats more and more of the productive output of society until it exceeds income at which point all of that hidden value destruction is revealed.

2000 and 2007 were a small piece of the overall economy and market detonating in this fashion.


Yeah, I know, housing was a big deal.  No argument.  It was much larger than the tech wreck as a percentage of the economy.

But as a percentage of the whole neither was all that large.  Fixed residential investment in 2007, that is housing, the year before it all went to hell totaled $688 billion out of $14.478 billion in GDP or 4.8% of the total.

Got that folks?  Less than 5% of the entire economy blew up everything, threatened to destroy the entire US economy and every large bank (according to Bernanke, Paulson .et.al.), caused the S&P 500 collapsing from 1576 to 660 (a loss of about 60%) and was only "arrested" by a literal doubling of federal debt and allowing banks to lie about the value of what they held, a lie that continues today.

Today, one dollar in five, or four times that much in percentage terms is spent on health care throughout the United States in a monopolist, rigged system that is more unstable by several orders of magnitude and more dependent on federal intervention and tampering with the value of our currency and credit than the housing market was!  The solution to said problem is right in front of us yet nobody will even discuss it at the political level, say much less introduce a bill.  State governments, for their part, will (if pressed) tell you there is literally no agency that does or will take up even blatant behavior that ought to be considered a criminal violation of consumer protection statutes if it occurred in the medical sector.

Medicine isn't the only place this problem exists, but it's the most-critical to resolve simply due to its size as a percentage of the economy.

I don't know how much time we have before ordinary people -- or for that matter just traders -- figure this out at a critical mass level.  I have no idea if it will come before or after the majority of the nation is scavenging dumpsters for something to eat.

But I do know the math tells me a meltdown at a scale four to five times greater than any we've seen in this nation's economic history, including 1929 and 2008, is inevitable unless we stop this and with every day that passes the amount of accumulated damage that there is no way to evade grows at an ever-increasing, indeed exponential, rate.

Go to responses (registration required to post)

No Comments Yet.....
Login Register Top Blog Top Blog Topics FAQ
Login Register Top Blog Top Blog Topics FAQ