Still, No Talk About Cost-Push
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2019-02-11 10:06 by Karl Denninger
in Macro Factors , 177 references Ignore this thread
Still, No Talk About Cost-Push
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In virtually every circumstance the the issues that face people who are working in some fashion can be reduced to "cost push".

This used to be widely understood by economists.  It no longer is.

The reason is political, not factual.  It's not a mistake, it's an intentional act.

In other words they're lying.

Witness this article on CNN, complaining that tax refunds are down 8% on average this year.  Last night while out with a friend after debugging a computer problem most of the day I saw a "news" report on the TeeVee in the establishment saying the same thing and blaming the Trump/GOP tax bill for it.

Unmentioned, of course, is that the rates of tax due dropped and so did withholding tables.  In other words over the last 12 months people have had more money in their paycheck.  Not a huge amount per month, of course -- maybe $50 or so -- but over a year that's $600.

Well, now tax time comes and there's $170 less in your refund.

Hmmm... you got $600 through the year jackass!  What did you do with it?  You're net $430 to the good and this is a "crisis"?

There was not one mention of the bracket and rate changes that led to you having more money all year long, nor that those who are whining now blew the cash during the year.  In other words the TeeVee "reporter" was claiming there was a reason for a cryfest over someone intentionally shooting off their own big toe.

Sorry, but no.

Then there's this one, also from the Communist News Network:

Denver is so expensive that teachers have to get creative to make ends meet

(CNN) For 14 months, teachers in Denver have been negotiating with Denver Public Schools for more pay. On Saturday, the Denver Classroom Teachers Association said talks had broken off and they'll walk on Monday.

Yes, it's about money, many have told CNN. But it's also about the uncertainty of living paycheck to paycheck. It's about the necessity of taking on a second or third job. It's about the untenability of carrying on this way much longer.

At least the headline is right.

But not one single byte of digital ink was spent exploring why Denver is so expensive.

In other words why is it that a $50,000 salary isn't more than enough for a family of four to live on; indeed, one of the profiled teachers has no housing expense at all as that single person lives with their parents!

Remember, we've been told that there is no inflation issue over the last 30+ years.  Well, if there's no inflation (increase in the cost of living) then why is it that all these people have huge amounts of student debt and why is the cost of living so damn high?

One of the two has to be false.  Either all those "struggling" are lying or there has been massive inflation.

Inflation, I remind you, is always and everywhere a monetary phenomena -- and as a result, since Congress is in charge of the Federal Reserve (they not only enabled it originally they control the law governing it) and the regulation of banks that emit credit and thus expand the money supply it is entirely within the responsibility and control of Congress that has, in fact, led to this circumstance.

In other words, as I pointed to my late father in the 1990s, you voted for this **** and as a result you already spent the ****ing money.

You can't spend the same dollar twice.  The outright fraud peddled by people with their "MMT" nonsense is exactly identical to claiming you can.  Ditto for those who says "deficits don't matter", or that we should "use" deficit spending to "prop up" this or that.

The price of all of this is inflation and by definition inflation drives up the cost of living in nominal dollars.

You can't fix this by "giving" people raises because that, in a government job, also results in more dollars being introduced into the economy, especially when any part of it comes from the Federal Government that simply prints it into existence through the Treasury market.

When it comes to schools it's even worse since they're typically funded to a large degree by property taxes.  There's a municipality I'm extremely familiar with that has seen negative real estate prices on a nominal (not real!) basis for more than 20 years as a direct consequence of ridiculously-ratcheting property tax levies.  This is a place where some 15 square miles of island with a huge percentage of it either deeded open space or an airport where there are no houses "requires" more than 20 full-time cops yet it has nearly the lowest property and violent crime rate in the nation. Indeed on a scale of 1-100 (100 being safest) this township rates 95.  The rate of overall criminal activity in this township on an annual basis is three per square mile, one-sixth of the average for the state and and one-eighth of the national average.  Yet they need more than 20 full-time cops to "police."

Their idiocy in school levy is similar.

Denver has the same basic problem as does damn near everywhere else.  There's no accountability -- that township spends a crazy amount per-capita on cops for which there is no demand as there is no crime for them to investigate and arrest perpetrators.  They simply "need" all those cops.  Likewise, Denver has a crazy cost of living because just like most areas because they "need" to spend all this money on schools yet there is no evidence that any of it actually improves educational outcomes.  We also "need" to spend nearly $4 trillion a year in this country on "health care" most -- about 3/4 or more -- is siphoned off through fraud, felony, extortion and price-fixing.

All of these things and more have driven the cost of living in real terms through the roof.

The problem isn't that teachers only make $40,000 or $50,000 a year.  That's pretty good money.

It's that a family of four can't live on that because all the pie-in-the-sky "free money" games have driven up inflation whether reported or not.

It shouldn't be like that and absent fraud and felony it wouldn't be.  Productivity is by definition deflationary; the definition of improving productivity is doing more with less!  Therefore if productivity expands at 2% a year (for example) then what you used to have to pay $100 for now costs $98!  So why is it not $98, but $105?  Because someone stole the other $7 from you, that's why.

The answer is to collapse price, not increase wages.  Increasing wages simply steals more by forcing more credit and currency into the system and prices will rise further.  You can't win that game; you can try to take it from the "rich" but the rich always get their hands on it first and thus they can (and do) evade the impacts more than you can as a common person.  That's just a function of how capital works; the first person to get their hands on emitted credit can evade a part of the inflationary impact while everyone else bears the full price.  No matter how you try to structure this you as a common person lose because some bank gets their hands on it first.

The only answer to stop this is -- again -- to collapse price.  While not all of this problem lies in education and health care a huge percentage of it does and resolving 80% of most problems can be tackled in one or two places.  The remaining 20% is harder because it's more-diffuse but if we resolved the 80% then teachers making $40,000 or $50,000 a year would be doing just fine.

Look to top right and read the pinned articles -- the answer lies there, and only there, simply because that's where the 80% is.  As just one example (which would monstrously collapse total cost of living and property tax levies) you could start right here.  And no, you cannot tax your way out of this because you already spent the damn money over the last 30+ years; the math supporting that fact (not opinion) and the catastrophe that we are facing within the next six years if we do not cut the crap now should also top your "required reading" list.

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User Info Still, No Talk About Cost-Push in forum [Market-Ticker]
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Back when I still cared enough to engage with some of the morons at work, the contentious school levy that the school board successfully turned neighbor against neighbor was up for it's 3rd time on the ballot. This is the one where they cancelled sportball and clubs after it failed the 2nd time. A doughy, haggard old broad had decided to take a swipe at me because I was against the 3rd attempt to pick my pocket with a dismissive "Oh, you just hate kids." I told her "No, I don't hate all kids....just yours." You would have thought I just pissed on one of her car tires by the look on her face.

"I'd like to live just long enough to be there when they cut off your head and stick it on a pike as a warning to the next 10 generations that some favors come with too high of a price." -Vir Cotto Babylon 5
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I'm now wondering how that Island you speak of is going to fare in the upcoming SHTF/Collapse.
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"The only answer to stop this is -- again -- to collapse price."

That ain't ever happening voluntarily --- so as long as the ignorant masses are the majority. Why? Because the population today reminds me of what the population probably looked like just before Noah built the Ark.

I've come to the firm belief that the "only [true] answer" is an asteroid or some other Malthusian level event. The answer is a "collapse", alright --- a collapse in population.

Unless and until Earth experiences a massive die-off, the situation only shall worsen.

"As the days of Noah were".

Did you ever stop think about the story of Noah and the wicked, wicked world --- and what kind of a collapse in population is sometimes necessary?

Forget about if the story is actually true or not regarding whether Almighty God caused a Great Flood which wiped clean the Earth. Because what's factually true is that there are over 250 separate accounts from diverse cultures all around the globe that tell of how a Great Flood wiped out wickedness. Even the Choctaw and other Native Americans have accounts of a Great Flood.

I don't have to believe in a global flood, but I do believe all of those stories tell me that mankind gets to a point where total collapse becomes necessary; call it, "creative destruction"...

History repeats, because it has to repeat.. I can only hope that the Marxist Nephilim all experience a die-off very soon...

Please: the Grand Solar Minimum can't get here fast enough --- maybe we can get a mini-ice age. Or maybe a pole flip; or maybe our Sun....The Sun is going to wake up in about a year and a half and sunspots should be generated aplenty. Last time it was a Great Flood. Maybe this time it'll be an X25 kill shot from the Sun...

We need an EMP New Deal...

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A True American Patriot!
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It gets interesting; there are places in Chitcago which are similar; due to some interesting distortions in the way property taxes are done and some "tax-free" grants to places like shopping centers that have collapsed there are certain areas where properties have zero or near-zero values yet $10 large or worse (in a few cases MUCH worse) in property tax levies.

You can only drive the value of real estate to zero; once you do that, or get close enough to it where the tax levies times a couple years = market price people stop paying and wait for the tax sale and eviction because there's no point in paying; you're sinking more than the value of the property into it in taxes in less time than it takes for them to go delinquent, be sold off and a foreclosure prosecuted. If it gets bad enough nobody will buy the tax certificate since while that gets them a clean title they also get the forward tax obligation and it's not worth it; you can't rehab, rent it out and make the numbers work!

The embedded losses in these areas that are accrued but unrecognized are going to be epic and IMHO there's literally no way out of the box for most of them -- it's gone for too long and absent HUGE whacks to the property tax levies, which could only happen if you fired half the municipal and county employees (including TEACHERS) there's no way out of the box.

Winding it down.

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Farmingdale, NY
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Eventually, they will engage in a biblical response. They will, of course, see a day of JUBILEE.

Time is up.

I hate to burst your bubble, but there is no Santa Claus, the tooth fairy does not exist and American justice does not involve the courts.
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But a JUBILLE (forgiveness of all debts) won't work in the current USA, well it would work, just not in the way people think.

Today just about every debt is someone else's asset, so if we did a complete jubille you would have no money in the bank anymore, no stocks or bonds as they are all debt. Even the money in your pocket would be just about worthless.

What I think you really want would be Bankruptcy that is very easy on the debtor, something that destroys bad debt but leaves productive debt alone. It would still wipe out billions/trillions of assets which is what I think is needed.

Think of how stupid the average person is, and realize half of them are stupider than that. - George Carlin

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"Chicago" has been run by gangsters for a long, long time. Where is only one answer, one solution.

The solution is found in an old Humphrey Bogart movie.

Have you ever watched the movie, "Key Largo"? Johnny Rocco was the gangster from Chicago who used to run that city.

And now, fast forward 70 years, there's a Johnny Rocco government goon(s) running every major U.S. city.

So what's the answer? Watch very closely what James Temple (the man in the wheelchair) prays to God for... and that's the answer.

Everybody who has any integrity left should be saying this prayer to God, so Washington D.C. and all of the Johnny Rocco politicians can get what's coming to them, and get it good and hard.

And that's about all I have to say for now.
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saint louis
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It would be much preferable to these dumbasses to just have the federal government take your entire paycheck and then in February of the next year give you back what you deserve to keep.

I think its time we ask ourselves if we still know the freedoms that our founding fathers intended for us. Ronald Reagan 1964
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New Jersey
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These are the same groups that say that most illegal immigrants flew in and overstayed their visas. they completely ignore the 15-25 million completely undocumented illegals and call you a ******* for even suggesting they are wrong.the same people that say oh there is no evidence that people are voting in someone else's name. they purposely misconstrue the question and give a bull**** answer . how much of this country and our governance is based on this? where is this game plan heading ? have any of these idiots even thought about what happens if their wishes come true?
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Huntsville, AL
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how much of this country and our governance is based on this?
probably most of it, at the city, county, state, and federal levels

where is this game plan heading?
it's heading towards the complete destruction of the constitutional republic.

have any of these idiots even thought about what happens if their wishes come true?
no, because they think they can control the chaos.
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Our kids go to private schools.

My friends kids homeschool.

We pay in the taxes, and get 0 benefit.

Yet the local School Board sends mailers out to everyone saying that "Private schools are why your school is failing!"

They really want the extra federal money.

For the taxes, I "paid" in this year. Of course, I kept a few thousand more so I was OK with that. My neighbor and half the guys that work for me are very angry. They view it as a tax hike. They also paid in less.

People are stupid.
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Scottsdale, AZ
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The states waste money almost as fast as the feds. When I saw the increase in Medicaid spending here in Arizona, I just wonder if they can ever stop it. They just implemented a $32 registration tax on our cars and then claimed the money was being used to fund the state police. Since we have limited highways, and a smaller state patrol then most states, I knew that had to be BS. We have to have close to 2 million vehicles registered and that adds up to a lot of money. I told our investment advisory board that it had to be healthcare and obamacare was the culprit. Today I learned that it is Medicaid and the doubling of it in the past 10 years shows that the states can't keep up with the leeches. I have never seen an article that shows the growth of Medicaid under Obamacare. It almost seems like they have buried it so that the folks don't know what is happening. All this money is being stolen from the people to fund the new leech society.

I know someone in Illinois that owns a commercial office building, single story with about a dozen suites in it. His taxes are over $70,000 a year. He told me that a lot of the people he knows that own these kinds of properties and how many have had the buildings torn down in order to avoid the massive taxes. We are on the edge in this country and so many people just can't see it.
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Pacific Northwest
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When most of the country is content getting welfare as opposed the satisfaction of producing, it will be a race to the bottom with politicians promising them more and more. Socialism is on the horizon.

Do we even need brick and mortar schools anymore? Education seems just a jobs program for adults that want a paid, entire summer vacation.

@AZ-- I sold all my land, besides my farm. Taxes, insurance etc obviated any potential capital gains. On one piece in Snohomish county, WA I wanted to put in a concrete pad with water and electric for a trailer/camping spot near family. $28,000 for the hook ups. $5,000 just to get permission to put in a septic system. **** that.

The dam will break: civil war, Weimar, or the Even Greater Depression.
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These Denver teachers must be a bunch of liberal Illinois transplants...
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crap chicago
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Karl...the boobobsie generation of today has no "clue" of time value of money. So they save a buck on 01/31 and they got to pay 25 cents on 12/31. That three quarters disappeared "weallly" quickly, I guess.

Anyways, chiming in from the ghettos of Chitcago. Got a house in beautiful Mountain Home AR, which I use 7 months of the year (You know, that nasty resident equation in ****illinois). I pay one eighteenth in property taxes as a similar SQF in ****illinois.

Only reason I still have to be here: clients for over 25 years. Have a lot of clients with incomes of $250K and up...with $500 in their checking account...and those 2nd year state troopers making $125K living off the government tit.
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"Do we even need brick and mortar schools anymore?"

Bingo. Why waste time sending your kids to be indoctrinated in SJW-ism by adults who couldn't get a better job, when they could learn online from experts in the field instead?

Government schools are dead men walking.
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The refund shrinkage rants in the office and on social just demonstrate the stupidity of those ranting. What really matters is your total tax load for the year, not how much you over paid all year. Yes I have to pay in this year, but it wont be until April. But at least that money was in my bank account all year, and not an interest free loan to Uncle Sam.

But most dont actually budget anymore. At best they manage spending to their paycheck. But they dont actually plan beyond that. They heard tax cuts but didnt take time to understand the mechanics, or recognize what happened to their pay checks.

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Emg wrote..
Government schools are dead men walking.
Don't think so.

Do you realize just how much political power the teacher unions have? Besides, gov't is the LAST place one should expect to cut any program (or number of employees) even when the program is clearly demonstrated to be actually counterproductive to the intended mission and is hellaciously more expensive than what the private sector could do it for.

I expect gov't schools to be around until all of the "we need bigger gov't" folks are dead or until the gov'ts of the states/counties/cities totally collapse (and even then, the feds may well pick up the slack, unless they too have collapsed).

". . . the Constitution has died, the economy welters in irreversible decline, we have perpetual war, all power lies in the hands of the executive, the police are supreme, and a surveillance beyond Orwells imaginings falls into place." - Fred Reed
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"Do you realize just how much political power the teacher unions have?"

Doesn't much matter, if there are no kids in the schools.

At a minimum, you're going to see all the better-off parents remove their kids from schools to learn online instead, at which point much of that political power goes away.
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"complaining that tax refunds are down 8% on average this year"

This is especially irritating for this life-long libertarian Enrolled Agent tax pro. Roughly 80% of our clients are seeing tax reductions--some by as much as 40% (Self-Employed, eligible for the new Qualified Business Income Deduction, with kids under age 17), with only 20% seeing tax increases--and "usually" not by much (with a few notable exceptions). The MSM is doing their usual Pravda-like reporting with a complete failure at truth-telling.

Worse: very high income earners (sometimes "wealthy" and sometimes not) in high-income and/or high-property tax states are taking it in the chin. One will likely pay $100k more in federal taxes, like for like vs. '17, due to the loss of the SALT deductions. (For Geeks: the 39.6% advertised marginal rate drops to 37%, but the loss of the SALT deduction at a 13.3% marginal CA rate costs them .37 x .133 = 4.9% in tax savings. Their income was already well over the point at which the Alt Min Tax phased out, so where before their combined advertised max fed/state rate was 48%, it's now 50.3%.)
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Just North of Detroit
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Emg - When people pull their kids out of public schools in sufficient numbers to threaten the system they will make it illegal to do so.
Those kids are a source of income for them they won't allow to go away.
Some people will migrate - most won't.
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Close brick and mortar schools, and where would all the kids go?

It isn't education, it is daycare.
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It isn't education, it is daycare.

Bingo. Once they started teaching to the test, and not teaching to learn.

Tests which the instructors don't have to pass, I should note.

The rise of Makerspaces again is a good opportunity for kids to get hands on with science and engineering.

All my parent friends talk about the "socialization" aspect, but I've never been keen with subjecting kids to a majority of their day spent with sociopathic narcissists in a place where the instructors can no longer discipline poorly behaving kids.

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St. Louis
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I'm a new member, and this is my first post.

This reply is for "Click" re: As in the days of Noah....

Good points, and yes, I believe there will be a(nother) "washing" of the earth, soon. I have formulated a theory about what caused what appears to be a "global flood" similar to Noah's. Every 6XXX years, the earth passes through the Milky Way's "Galactic Plane". This is a plane of immense gravitational forces. The earth passes through this plane such that the gravitational forces act in a south-to-north direction, and leaves the earth rotating about a slightly different axis (a "pole shift"). As we are passing through, the gravitation forces move the water to the northern hemisphere, which basically "floods" the northern hemisphere while creating a "drought" in the southern. This is not a "global" flood, but rather a "focused" flood, depending on the orientation of the earth as it passes through this plane. Remember that the earth is still rotating during this event.

I've named this theory the "Isaiah Shift", as selected verses were my inspiration for study, and the resultant pole shift. Rest assured, this theory is based on physics, logic, and observation, NOT religion.

Noah and family were not the only humans left after the shift, but they were the only ones left in their locale - they thought they were the only ones. There were many others that survived, and this explains why there are over 250 "peoples" that mention the flood in their history.

This theory explains the formation of the Grand Canyon. when we pass through the plane, water backed up against the Rocky mountains, and left a new layer of rock until it finally cut through and formed the Canyon.

Also explains many other things that have scientists "baffled" - like how the moon can orbit the earth without the orbit decaying. Explains the Yellowstone Diatom "evolution", which was NOT (different Diatoms before/after glacier formation and recession). Explains all of the different cultures/languages. Explains the mummified sea lions 600km inland Antarctica. I could go on and on....

My website is

Thank you for your consideration,

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