This weekend's Tickers have exposed the same thing on Tickerforum that is rife throughout the country and political class.
In response to pointing out the mathematical facts relating to money, credit, debt and the compound nature of interest (and thus debt), there has been a persistent call for the impossible.
As just one example, a call for The Fed to simply print money at some ridiculously low interest rate, however much it needs to (ignoring that all money is in fact a bond on future tax collections, and therefore is debt and increases the base subject to that exponential growth) to "inflate away" the debts that people can't cover. (Never mind that prices rising while wages do not, while taxes ultimately must increase as foreigners demand more to buy and hold bonds bankrupts you anyway.)
Folks, there is really no point in attempting to provide the mathematical reality to you, or anyone else, when the incessant response to such an attempt is to simply ignore the mathematical facts and demand that which is impossible.
It is akin to expecting that magical Unicorn to appear, or appealing to Santa Claus for your wish.
It isn't going to happen.
I recognize full well that expecting people to actually think and verify the mathematical facts of a matter is considered "uncouth" these days. After all, we can all be skinny, beautiful and have an erection any time we like, just so long as we send $19.95 to the address on our TV screen.
There are, unfortunately, two groups of people on this planet.
Group #1 includes people like Buffett, who understand the principle of compounding (anything.) Whether it be population growth, interest, debt, or earnings, they learned the power of exponents early in their life and it "stuck". They, as I, when presented with something like "GDP grew 5% last year", instantly extrapolate that outward some period of time and start to mutter under our breath. When we hear of 3% population growth annually, we become alarmed. When we hear of oil demand going up 2.3%, we freak out.
Group #2 hears the same number and thinks "oh that's not much."
Group #2 is 99% of the population of the United States and this must change.
The power function is in fact the most important mathematical concept in the universe. It is the factor, standing alone, that dashes all of the dreams of politicians, engineers and the "pumpers" of various schemes alike. It is the reason the housing bubble could have never succeeded. It is the reason the Internet bubble was doomed to pop. It is the reason that Madoff could not maintain his Ponzi scheme. It is why "just a little inflation" always winds up in a deflationary bust. It is the reason that irrespective of what our President, Treasury Secretary or Chairman of The Federal Reserve want, the pain that we MUST take simply gets worse - and at an ever-increasing rate - the longer we delay in taking it.
Bubblevision this morning on CNBC said that "redemptions" forced Madoff to confess because he ran out of money. Nonsense. The power function did that - in fact, it guaranteed that he would run out of money.
In fact, CNBC has their anchors around the desk this morning arguing that this was a "great scam"; that absent the downturn in the market he would have gone to his grave without having to give up his secret.
Well, perhaps, but eventually it would have been exposed, and the bottom-line reason is not due to the market crash this last autumn - it is the inevitability of the power function that always brings down Ponzi schemes.
When history is written on how we wound up in this mess and why we the people refused to demand the politicians stop doing the insane, certainly this will be a major component. It is not simply about greed, it is about a blanket refusal to sit down, take 5 minutes with a piece of paper and calculator, and think a situation through.
We just won't do it, either individually or in our Media, who is allegedly charged with pointing out the truth.
Instead, we listen to people who appear on the Boob Tube or those who have letters after their names, even when what they speak of is utter rubbish - and they know it.
Remember Dick Cheney - "Deficits don't matter"? Uh huh. They don't matter forever, right? What he really said was "exponents don't matter."
Pull the other one, DICK.
To those of you who are reading this and have taken the few minutes it requires to sit down with a calculator and "get it", congratulations. Your job, should you choose to accept it, is to get 100 people each to also "get it".
Take your calculator with you.
It requires just minutes for the light bulb to come on. Take any small growth rate (say, 4%) expressed as a decimal (1.04) and raise it to the 100th power (that is, 100 years of compounding.)
Your "little" 4% growth rate turns into fifty times whatever you started with, not the four times increase you might (if you're not conversant with the power function) expect. If that's an annual population growth rate for a city, and you start with 1 million people, there are now 50 million people in that city, not four million.
Will they fit?
By the way, it gets a LOT worse if the percentage growth is even "somewhat" higher. Do that exercise again for 7%. Make sure you're sitting down and do not have a mouthfull of coke - or coffee - when you push the buttons on that calculator.
Maybe - just maybe - that's enough to start a fire somewhere and get something done about all this, because in fact, the power function is the most important function in the mathematical universe, and it limits all attempts to have "growth forever." Refusal to acknowledge mathematical facts leads to pain, and lots of it, because mathematics never - never - lies.
I'm not confident, because far too many of you are still looking for the Unicorn that craps Skittles, and are absolutely convinced that he is just around the next corner.
I wish you the best of luck in your quest.
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