The Market Ticker
Commentary on The Capital Markets- Category [Editorial]
2017-03-11 05:00 by Karl Denninger
in Editorial , 614 references
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I have been prodded by readers over email to write on this for the last few days (while I'd been out hiking on the AT, incidentally -- guess how much I give a crap about "technology" and "tracking" while out there having a nice walk in the woods with only the bees and bears for company?)  But, since people keep asking, here it is:

My one-word summary: Meh.

Somewhat more-lengthy summary:
smiley

Want a bit more detail?  Ok, if you're too dense to be unable to do understand the above two.

There is nothing in there that surprises me or is news. 

In fact, if you've read this column for any length of time at all you are well-aware that I've highlighted these very "vulnerabilities" on dozens of occasions.  I put the word "vulnerabilities" in quotes for a reason: You don't care, and neither does anyone else or devices like "Smart TVs" would not have one person using them, "Alexa" would have never sold a single unit and the various fruity things would not have nearly 50% market share in the United States.  Facefart would be a zero -- literally -- as would LinkedIn and SNAP would have failed to price their IPO.

The manifest weight of the evidence is that the American people do not care that they are product.  They do not care that the very fact that they are on Facebook causes all sorts of data to be associated with them personally by name and then sold to anyone who cares to buy.

This probably includes people with nefarious intent; as I have pointed out before on these very pages if you were a terrorist and wanted to target, oh, say, military members, or police officers it would be trivial to determine with a very high degree of certainty who those people are and exactly where they live by buying said data sets and correlating them, and it would not be difficult or expensive to do it either.  That would make your intended evil deed quite easy to carry out.

It's a damn good thing there really aren't that many terrorists out there who can put together cells totaling a few hundred people inside the US and who don't care if they get "caught" (because they're prepared to die for their cause) or we'd have a really severe and immediate problem.  A problem, I remind you, that you have each individually created by using these "services", by believing "free and always will be" means what it says and more.

But I do know with utter certainty what we do have in this country and the evidence for it is clear, convincing and without question: A bunch of companies that have, will and do buy the very same data, run the very same correlation analysis and then use that data to screw you up the butt on a daily basis costing you thousands of dollars a year you would not and should not be spending otherwise.

How do we know that's absolutely true?  Because if it wasn't then Facesucker and other "social media" firms would not exist as exactly zero of them could generate any meaningful amount of revenue.

Someone's paying the bill that makes same possible and the "someone" is you.  If you think you're not you're certifiably insane.

I hope you like buttsex because you're sure as hell getting plenty of it from these companies; that the CIA is playing the same game is neither surprising or, for that matter, "news" -- if you've been reading The Market Ticker, that is.  After all you created that target-rich environment for them and you continue to make it more-so on a daily basis!

Will Wikileaks latest cause you to delete (not just stop using or suspend) your Facesucker account?  I bet not, and I bet you know it too. Will it cause you to delete your Snapchat account? No.  LinkedIn?  You're joking, right, despite their record as one of the worst when it come to spamming and data mining.

What it will do is lead to yet another round of those who read these pages making excuses.

Quit with the faux "surprise" or even "outrage." You can stop this crap right now by every one of the enabling firms and have been able to do so for years by simply sticking up the middle finger and refusing to prostitute yourself in order to preen on "social media" and similar.  You haven't and you won't, so let's cut to the chase, shall we: STFU and swallow -- you've not only consented in the past you're doing it right now, today and as a result we know exactly what to call this.

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2017-03-09 06:00 by Karl Denninger
in Editorial , 567 references
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This last week marks four separate instances of something that has broken here at the house which I could have "called someone" and would have likely cost me a ton of money during the last few months -- but in each case the cost of the repair was either nothing or just a few dollars.

The first was my oven, right around the holidays.  It stopped heating, which is a real bitch when you're in the middle of making food.  Usually that's the heating element, which is typically $25 or so to buy (and can be changed by anyone who can successfully use a screwdriver in under 30 minutes.)  The element in this case was in fact bad, but in addition there was a fuse in the back of the oven which had also "cooked."

It didn't fail from overcurrent (a short) it failed from a bad connection which heated it up enough for it to pretty-much catch the fuse holder on fire.  Cost of the repair?  $5 for a new fuse holder and $25 for a lower element.  The "snowflake" solution would have been to buy a new $1,000 range/oven combination.

Next up was my pool pump.  It had a small leak in the center section between the motor and pump body.  If you call the pool guys they'll come out and replace the pump.  If you don't fix the leak promptly, incidentally, you will be buying a new motor because the water will get in there and destroy it.  Well, a few years ago I put a VFD drive motor in, which (incidentally) has cut my power consumption for the pool by some 80% -- but that damn motor is expensive!  A complete pump assembly, with motor?  $1,000 -- plus the pool guy's labor to put it in, which is a couple hour job with wiring and pipe.

The actual problem is a $20 shaft seal.  A full kit of seals, including the O-rings you disturb to get to the shaft seal, costs about $30.  Time to repair?  An hour, since I didn't have to unwire anything and the last time I had the plumbing apart I intelligently put unions in so I could disconnect the pump and filter with reasonable ease.  The "snowflake" solution would have easily topped $1,000 with labor - probably $1,200 or so.

Next up was about a week ago.  The dishwasher stopped running mid-cycle with a "door open" fault shown on the display -- but the door was latched.  Most of the time this is bad news; the control board is usually dead, and they're not cheap.  Well, the unit is 10+ years old, so I expected the worst.  Opening up the control board area I found a bad connection that (again) overheated and had cooked one of the wires and the trace on the board it plugged into.  But it was salvageable: A short length of tinned (marine-grade) stranded wire, my soldering iron, some shrink wrap and hot glue to tack it all back in place and then disassembly of all the other connectors to tighten them up so I don't get a repeat because the next incident will definitely fry the controller board beyond repair and the dishwasher is back in business.  Cost?  $0, plus about an hour of my time.  Snowflake solution?  New dishwasher: $500+.

And then there was the most-recent.  I have my home automated and when I go to bed I push a button and it drops the temperature in the house by a few degrees, since I like a cool house to sleep.  Well, a few hours later I wake up and the AC is running.  Uh..... that's not good, considering that I don't feel particularly cold air coming out of the vents and in fact I'm warmer than I should be -- and no, I'm not drunk.  I wait a few minutes and it's still running.  Step outside and find the outside unit has the fan running but no compressor.  Crap.  Shut it off at the disconnect, go to bed, deal with it in the morning.

Next morning I opened it up, expecting very bad ($$$$$$$$) news.  See, if the fan is running on the outside unit then power is good and so is the ($10) contactor -- which means you're odds-on to have an open in the compressor motor itself (inside the sealed part) which totals the outside unit.

Nope.

One of the wires from the contactor to the run condenser had apparently succumbed to corrosion internally (untinned wire, thanks for nothing you jackasses!) and, once it got compromised it burned up.  In the process of trying to light itself on fire that wire burned the insulation on a few other wires, but fortunately the manufacturer was kind enough to leave sufficient length to cut off the damaged part and reterminate them.  I had to make up one jumper, but I happen to have some 14 fully tinned marine-grade wire to do that with, plus crimp-on disconnects and the proper crimping tool.  Total cost of the repair?  $0.  The "snowflake" solution could have been anywhere from an honest repairman charging a couple hundred bucks for the service call and a crazy markup on the replaced wiring to something really awful, $3-4,000, if you got a dishonest guy who claims the condenser is bad -- a ruse that utterly nobody who failed to check it out themselves would detect.

So let me see if I can count this up: That's under $100 worth of actual repairs and somewhere between $2,000 and $5,000 in avoided expense because I'm not a "snowflake."

Let's put this in perspective for you:

For the average family that's roughly 10% of their annual disposable income.

These sorts of "emergencies" aren't all that uncommon.  In fact they're routine.  Most households have at least one "good one" a year, whether it be the range, the microwave, a water heater, car, washing machine or similar.  Another "good one" for you to get screwed by is the rotary spring on your garage door; they break, and cost about $30-40. I've seen $500 repair bills to change one which is a pure rape job given that I can replace one in under an hour, but the garage door places get it from people who are afraid of doing it themselves because when the spring breaks your car is trapped inside the garage!  The newer 4-stroke weed whackers require a valve adjustment roughly annually -- a 15 minute task if you know how to do it and a $100 bill from the local small-engine guy if you don't.  A material percentage of the failures in appliances and similar are due to manufacturer decisions to save 15 cents when the item is made but most of the time they're fixable for very little money if you know how.  If not they can be very reliable budget-wreckers.

All of this expense comes because we got rid of shop class, the average 18 year old can't change his own oil and has no idea how to use a voltmeter or a soldering iron.  Instead of using one's head and looking into things we now just "call someone" and play around on Facebook and Snap.

Look, if you like buying a new range every 10 years or so (when you can easily get 20+ out of one), a new dishwasher five years earlier than you should need to or worse, a new AC unit at half of the lifetime it should be expected to last then go right ahead and be stupid.

They'll be happy to take your money.

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2017-03-01 09:00 by Karl Denninger
in Editorial , 677 references
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Yeah, I watched it.

And I read it too, just to make sure I didn't miss anything.

I didn't.

There were no details.

There was nothing concrete.

There was, in fact, nothing.

The market roared, and currently stands at all-time highs across the board.  On...... what, exactly?

Let me point out that exactly nothing was said about the one issue that must be addressed: Medical monopolies, which is a nice "roll off the tongue" way of saying violations of anti-trust and consumer protection laws that have been going on for 30 years, are causing cost to go up at ~9% a year, are all violations of existing law and thus can be stopped by Trump irrespective of Congressional interference and which will bankrupt the nation within President Trump's first term if not stopped now.

Governor Snyder of Michigan has been whining of late of the "impact" on his state of block-granting Medicaid.  He took the Medicaid expansion, of course.  He knows what 9% compounded does to your budget.  He hasn't given a crap about what that scam has done to the cost of auto insurance in the state, nor to property taxes which wind up going to pay the public pension medical costs and have driven real estate taxes on modest homes to levels that make you blanche and are completely unaffordable for those on fixed, modest incomes.  The first (of thousands) of pension detonations, which caused a reduction in those pensions of more than roughly two-thirds, just happened in NY State, incidentally, taking what was a rational middle-class income and turning it into one that might pay the winter heating bill.

That of course is what happens when your pension gets tossed into the PBGC; your benefits are immediately reduced to whatever money is left in the fund on an actuarial basis.  And why did that happen?

Because those pensions were set up for a market that had 5% Treasury rates -- that is, a normal lending system -- and a medical system that consumed 3-4% of GDP instead of the 19% it consumes today.

What you have is a medical scam that is consuming 5x as much money (with 80%+ of it being stolen) and a Fed that has driven short-term Treasuries to under 1% and held them there for ten years.  As I pointed out at the time the Fed did this the bond laddering that pensions and other actuarial-based institutions must use means that while the initial impact of this in the first couple of years is muted because of the fact that only a 20th or 30th of the portfolio rolls over this also means that over time the damage accumulates every year and remains for the same 20 or 30 years!

It's impossible to get rid of that damage once it occurs because if you sell those bonds out early you crystallize the loss and this bankrupts you on an instant basis.

Yet the "stock market" roars...... and the pensioners are going to buy the products and services made by these companies with "record" market valuations with money that comes from........ what, exactly?

Salesforce is a fabulous example.  This is a company that just posted a nice (~25%) revenue gain on a comparable quarter basis.  However, it trades at 279X earnings, over 7x sales and more than 8x book value.  You'd think it has a great operating margin and net profit margin to post those sorts of numbers and have this kind of valuation.

You'd be wrong.

The company has an operating margin of 1.56%, or roughly that of a grocery store, and earns only 0.61% on assets.  Worse, it has just $1.72 of cash per share on hand!

Are you nuts?

Of course you are.  And so are a lot of other people.  This sort of firm and "stock performance" is what has driven the market to all-time record highs.  It is "animal spirits" writ large, and the last few months all on Trump.

What is Trump going to do to make those values reality?

Seriously folks -- please provide detail, eh?

There isn't any, because there can't be any.  There is exactly one thing he can do to head off disaster and that's break the medical monopolies.  If he does not, and he will not then either the states have their heads blown off by Medicaid block grants and are all screwed blind or the Federal Government has its funding system collapse as we try to take a $1,400 billion (37% of federal spending) expense on Medicare and Medicaid and turn it into a $2,000 billion one within the next four or five years.

That adds $600 billion a year to the deficit now and forevermore by the time Trump's first term is over and that's before any of his other spending increases hit the deficit too.

It won't happen because it can't.  Tax rate cuts will simply make it worse by reducing revenue.  Even if he gets 3 or 4% GDP expansion it will be measured against grossly increased deficits which mean the real GDP rate will be negative since GDP must be normed against debt issuance by the federal government.  Last year this was good for a -5% GDP rate as the gross issuance was roughly 7%, and GDP in nominal terms was 2%.

2 - 7 = -5; that's first grade arithmetic.

In addition if he was to take that action the market would immediately crash.  Why?  Because the entire health sector would be cut by 80% in market valuation and the rest of the market would go with it.  He won't do it because he has married his Presidency to the rise in the stock market since the election and anything that threatens that will not be done -- which is exactly how you get an even bigger bubble and by forcing the continuation of the expansion of said bubble it is also exactly how you get a collapse

So have fun folks, because unlike the Tech bubble of 1999 which was all in one sector or the Housing Bubble of 2008 which I remind you was centered in a handful of financials this time it's everywhere and it will go on right up until someone pulls the bullcrap whistle loud and long.  I have no idea exactly when that will be, but I do know how to figure middle-school arithmetic and that there a train wreck up ahead and should be driving market prices down given the refusal by both sides of the political aisle to do anything about the fraud and theft that has destroyed any resemblance of budget sanity and stability.

You know.... sort of like 1929 and unlike 20/21 where we had a President and Fed that did what had to be done and turned what could have easily been the fiscal destruction of the nation into the most-violent crash and recovery ever recorded in American history, and yet one that economic and market "pundits" completely ignore.

So Hell it will be folks, and it won't be short and ultimately good for the nation and economy either.

Bonne chance mes amis.

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2016-11-12 05:00 by Karl Denninger
in Editorial , 17240 references
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Let me make a few observations.

First, eight years ago, and again four years ago, America elected a President.  Fully half, give or take a couple of percent, disagreed with the outcome.

There were exactly zero riots, fires, "mass protests" and similar following that outcome despite the fact that half the population vehemently disagreed with it.

This time around, not so much.

Now I want you think very carefully about the following.

Most of the land mass of this nation is owned and resided upon by people who are in "red" (that is, the winner this time) areas of the country.  With the exception of certain urban centers and right along the Mexican/Texas border there are very few "solid" blue areas.

Those urban centers consume roughly 90% of the energy and food in this country yet they comprise 5-10% of the land mass.  The "red" areas produce 95% of the food and energy this nation consumes and occupies 90-95% of the land mass.

Do you really think that doing something like eliminating the last pieces of the structure our founding fathers put in place to prevent tyranny of the majority from being able to take hold is a good idea?

A little history lesson: Prior to the 17th Amendment ratified in 1913 it was impossible for the Federal Government to shove any program down the throats of the 50 states.  That's because the state legislatures had effective control of the Senate and could recall their Senators.

The House was elected by the people, the Senate was elected by The State Legislatures (and could be recalled by same) and The President was elected by the Electors, which were voted for in the popular vote.

The latter provides a modest but real increase in the representation of "flyover" states; that is, those with lower population counts.  In other words it is a check and balance in the ultimate tyranny of democracy.

Yes, I said democracy is ultimately tyrannical -- because it is.

America is not a Democracy.  It is a Constitutional Republic.  This is very important; in a democracy 50%+1 can render the 50%-1 slaves by mere vote.  Those who are in the minority in a democracy have no rights at all.  Democracy is best represented by two wolves and a sheep voting on what's for dinner.

We are all minorities in some form or fashion.  If you're gay, black, yellow, male, female, whatever -- all it takes is some other set of groups to get together and decide to oppress you, and in a democracy you're ****ed.

America's founding fathers put in place two systems to prevent this.  The first was the bicameral legislature; a House elected by the people at large and a Senate elected by the State Legislators.  This structure guaranteed that a landmass that amassed 50%+1 of the population (not even in the same state or states!) could not band together and shove down the throat of the States any policy measure because you needed the concurrence of more than half the state legislatures, where each were delegated but two votes to their Senators who were accountable to said legislature, to pass anything at all.

This evaporated with the passage of the 17th Amendment.  Now you only needed 50%+1 of the people in a given state to pass anything you wanted and they could all live in a tiny percentage of the land mass -- such as is the case with Illinois where more than half the population lives in the immediate area of Chicago.

What came right after that?  Prohibition, shoved down the throat of the States, less than 7 years later!

What also came after it was an unbridled expansion of the Federal Government into state affairs.  Indeed, virtually everything became a "legitimate" federal matter.  Why?  Because it was impossible for the States to prevent it.

Do you think the founders were wrong to do what they did, and the 17th Amendment corrected that?

If you believe so then please consider this.

 

Ever drive through small town America?

Hell, how about "not-so-small-town" America?

Many of these towns look like something out of a WWI or WWII European war movie.  There was one factory or maybe two, but now it sits empty, weeds growing out of the parking lot as high as your head, all the windows are broken out and the roof has caved in.  Over on the outskirts there's a Walmart that pays $9/hour, but only offers 20 hours/week.  The factory paid $30/hour, full-time, plus benefits and food, power, medicine and beer cost half of what it does now. 90% of what formerly were little diners and shops in the "center" of the town, which might have one actual traffic light, are gone -- boarded up and often literally falling apart.  There might be one bank left, a branch of a big national chain, and maybe an antique store.  Maybe.  All the factory jobs left for China and Mexico and everything else died when the middle-class incomes to support them disappeared.  We did that as a nation with our "progressive" and "global" agenda driven by the 50%+1 that live in the closest big city 200 miles away.

The locals who used to work in the fields within 10 or 20 miles from that town are all unemployed too.  Why?  Because the illegal Mexicans came and we refused to throw them out.  They work for a few bucks a day in cash, no taxes, no unemployment, no nothing.  No American can live on that; the embedded cost of just trying to stay alive would leave you with zero.  But the Mexicans work hard and then sleep 10 to a single-room apartment, which incidentally is a total ****hole as you'd expect given that density of occupation.  They don't care; it's better than what they had in Mexico, you see, and they can Western Union home some of the money.  This is the face of "immigration", mostly illegal, that really exists in this country.  They brought their third-world ****hole here and while it's a little bit better than what they had in the process of doing it they dragged us into the gutter with them.

The people who lived in that town did and most who are still there do go to church every weekend, and some go again during the week, usually on Wednesday.  There's usually one, sometimes two churches.  Every one of them has the word "God" or "Christ" in the name on the front.  They mean it when it comes to their faith and in addition that's where all the local people shake hands, exchange chit-chat on the last week and, for younger people, it's where they meet one another.  You know, girls and boys.  Yeah.  Faith is real there, you see, and it's Christian. But from your point of view that's deplorable and that "those people" don't like the idea of making a wedding cake for a gay marriage is deserving of a federal lawsuit and loss of the bakery (which is, as a result, now closed -- putting yet more people out of work.)  The people who live in these towns don't see your point of view as a civil rights matter but rather as attacking God.

What was left after the factory was displaced isn't enough to run a "service economy", which is why it never showed up there and the old business buildings are all boarded up.  Nobody can afford $8 lattes on a $9/hour wage for 20 hours a week and nobody would want them if they could.  There's probably a McDonalds on the outskirts, and a couple of self-serve gas stations with a convenience store.  It sells cheap beer and lots of it to the locals who have nothing to do but drink and then go to church and pray for forgiveness for last night's 12 pack.  None of the jobs at any of these places, except maybe the store manager, makes more than $9/hour and Obamacare has forced all the regular workers down to 20 hours a week on top of it.  Try living on $180/week gross sometime -- before FICA and Medicare is taken out, never mind gas for the car and the rapidly-escalating car insurance bill -- and you might understand.  Yes, I know the car is 15 years old and runs like crap.  What do you expect on under $1,000/month of income?

This is what 40 years of sending jobs overseas with "trade deals" did.  It's what Amazon did.  It's what Walmart and its Chinese supply line did.  It's what "progressive America" did, and then to add insult to injury the teachers in the public schools tell all the kids that Mommy and Daddy are bad people and hate both the planet and their own kids because they don't drive a $30,000 Prius or a $60,000 Tesla.

This is everywhere in rural America.  Get in your car and out of your comfort zone some time and you'll see it. It's not far from wherever you are.  I've driven through dozens of these formerly-alive places in the last six months -- every one of them dead today, but full of real people.  I never met one such person that was a racist, xenophobic *******, but they're not very happy, and the people they're unhappy with are those very same folks you wanted to keep in office in Washington DC.

If you think the destruction of small town America is confined to farms you forget the other half -- energy.  Would you like your lights to work?  Many of those small towns are dead because of the insanity of our energy policy -- or lack thereof, tied to left-wing whackjob nonsense.

Now you want to add insult to injury when they show up to vote, exactly as civics tells them we have a right to do, and a large number of you in the cities did not show up.

They bought into the message of bringing American jobs back to America and ejecting those who have no right to be here.  You call them xenophobic, racist and small-minded -- they call it a shot at decent employment for the first time in 30 years.

They believe in the Henry Ford model of American business, and they're not wrong to do so.  Make the product here, pay the people well enough to be able to afford it, and you'll do just fine.

They win the election, in short, and you lose.

Then you decide to be a sore loser and loot, burn, beat people, issue threats, cry, whine on social media and try to obstruct everything by any means possible -- legal or not.  You bus people in to "protest" and riot, you "petition", you raise hell in short -- oh, and all this after you implored the other side to "respect the outcome of the election" and lambasted them for suggesting they might want to merely count the ballots twice!

Note again, as I pointed out above, that eight years ago, and four years ago, these very same people were on the losing end of your stick exactly as they had been for the previous three decades yet they did none of the above.  They understand duplicity and your double-standard quite well, seeing as they did the honorable thing and respected the outcome twice in a row despite getting screwed sequentially both times.  The only thing your brand of government offered them in the end was Medicaid or worthless "health insurance" through the exchange; the former has no doctors that accept it within 20 miles and the latter has a $5,000 deductible before it pays anything, which is utterly laughable when you consider these folks have a gross wage of under $1,000 a month.

Now the question:  Are you prepared for the possibility they might decide en-masse that they're done with this crap -- and with you?  That they're not going to take it any more?

What if the people who live in the "red" areas, that is, those who produce the food and energy that are consumed to the 90th percentile in the "blue" areas, decide they're not going to do that for the blue areas any more?  What if their middle finger goes up, in short?

Remember, we allegedly do not permit slavery in this country any more -- which means that which someone owns they have the right to sell - or not sell.  They have the right to produce - or, more to the point, not produce.

What if the people who peacefully conceded the result of two elections over the last eight years despite vehemently opposing the outcome decide that if the "blue" folks can riot, loot, beat people who vote the "wrong way" and similar they will not accept any further election result that doesn't go their way, and instead of rioting or burning things they will simply shut off the flow of food and energy to said "blue" areas?  After all, you don't value them at all -- you consider them subhuman, racist, xenophobic, deplorable and irredeemable -- all at once.

I'll tell you what happens if they take that decision: Every major city in the country would go feral within hours.

Within days those cities would not be blue, they'd be blackened and reduced to ash as those very same "protesters" you like so much loot, burn and shoot at each other trying to get the last scraps of food and fuel remaining.  They would then probably try to come out of the cities and take by force what had been denied them, only to run into a major problem - the "red guys" have more guns, they know the land because they live there, and more importantly they actually hit what they aim at, having had plenty of practice feeding their families with deer, wild boar and similar.  Mr. Gang Banger against Mr. Deer Hunter isn't a very fair fight, when you get down to it.

Oh by the way there's a phrase for what this would mean, if you haven't figured it out by now: Civil War.

Is that what you want?

It's where your actions are headed, if you keep doing what you're doing -- and nobody knows exactly where the tipping point is.

Better think long and hard, those of you in the "blue" places who are running this crap.  You do not have a snowball's chance in Hell of being able to grow enough in the way of crops on the landmass you control to feed a tenth of your population and every squirrel in your trees would be shot dead and eaten within an hour after this began.  Silent spring indeed.  Never mind the fact that most of you "wonderful snowflakes" couldn't shoot, skin, butcher and cook a deer -- or even a squirrel -- if you had to.  Never mind that a good 80% of you couldn't manage to run one mile if you were being chased by someone interested in eating you.

The day that cellophane-wrapped chicken stops showing up in the grocery store is literally the day 90% of Blue America starves.

Nobody in their right mind wants such an outcome.  But where do you think this all goes if you keep it up, eh?

Every bit of it has been enabled by the 17th Amendment and tyranny of the majority -- a tyranny you wish to increase by doing things such as abolishing the Electoral College.

There's a very good reason our founding fathers designed a Constitutional Republic instead of a Democracy.  They understand the problem with democracy: It doesn't work.  Democracy always ends up leading to riots and civil war, because exactly what the blue folks are doing now escalates until everyone starts shooting everyone.

A Constitutional Republic avoids this outcome because even a very large majority cannot infringe the rights of everyone else -- even when the majority lives in big, concentrated places like cities.

That was the magic sauce of the original design in our legislature and Presidency.  It's why we have an Electoral College -- to provide a bit of "overweighting" to those places that are utterly crucial to the cohesiveness and survival of the nation as a functional republic -- that is, a bit more balance against tyranny of the majority of 50%+1.

We got rid of the biggest check and balance with the 17th Amendment and I have, for decades, maintained that whenever America finally is declared dead and done, and the book is closed, that will be written in as the reason our nation's political system failed.  It's the only Amendment we cannot reasonably repeal, because to do so would require the sitting Senate to vote itself out of a job.  I'm sure you can figure out how likely that is.

But we can avoid doing more violence to our Constitution -- and we had better, or the outcome, given the annals of history available to anyone who cares to look, is quite certain.  If you want to see how this turns out should you keep pressing the issue go have a look at the map of how many states Trump won .vs. Clinton, or how the county-by-county map looks.  You'll see a lot more red of various shades than you will blue.

The bottom line?  Go ahead and be a sore loser.  Go ahead and whine.  Go ahead and try to change what our representative process led to.  Go ahead and decide to loot, burn and beat.  Refuse to accept the result of the election, if you insist.  Hell, go ahead and try to threaten or even bribe the electors!  Make sure you tear down the last little bit of foundation and structure inherent in the design of the legislature and executive of the United States.  Who needs it; it's all in the name of being "progressive", right -- even if when counted by landmass, counties or states the election was a landslide for Trump.

Just don't be surprised, if you keep it up, that at some point, given that you're utterly reliant on those you're abusing for the basics of life -- the loaf of bread, the gallon of gasoline, the electricity that powers your lights -- they decide they've had enough.  That day your supply of cellophane-wrapped meat and plastic bag full of bread disappears like a fart in the wind.  There comes a time when those who you've put the boot to for so long, and then try to deny the ability to change things peacefully through the representative process our founding fathers gave us, decide that despite their religious beliefs and good manners they're not going to service you on their knees any more.

Don't be dumb enough to think you can keep doing what you've been doing forever because you can't and if you go too far there will be no warning, no second chances and no saying you're sorry.  It'll just happen starting with one final stupid act -- and then we all lose.

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2016-10-15 05:00 by Karl Denninger
in Editorial , 4379 references
[Comments enabled]  

Go back and read this Ticker, and the link in it on the actual budget deficit we ran last year (no, it's not the nice number you see at the top of the MTS.)

The budget deficit was in fact $1.4 trillion -- not the claimed $587 billion (which is bad enough, incidentally.)

Last year the Federal Government spent $1,417 billion dollars out of $3,854 billion, or 37% of every dollar it spent, on Medicare and Medicaid.  This was a 9.3% increase over last year's expenditure of $1,296,731 (million), all-in.

But inside this figure are even-more damning numbers.

Payments to the health care trust funds were up 13.4% (!)

Spending on CHIP, the plan for poor kids, rose last year by an astounding 56%.  While the total spent was only $14.3 billion that rate of rise is utterly astronomical by anyone's measure.

Don't believe for a second that administrative expenses are under control, which is a claim often made for Medicare and Medicaid: They were up 32% last year for the primary hospital insurance trust fund.  No, that's not a misprint.

Hospital benefit payments for Medicare?  Up 8.4% -- the bright spot, believe it or not.

Medicare Part "D" (drugs)?  Sit down: Up 26.2% to a total of $95.2 billion.

Folks, at this rate of change within the next four years Medicare and Medicaid will consume just over $2,000 billion a year, or $2 trillion -- an increase of $600 billion a year in spending.  

Let me remind you that last year taxes (receipts) rose by a paltry 0.55%, and at this rate of increase over the next four years government revenue will absorb only $72.9 billion of that $600 billion in additional spending -- and this assumes that absolutely nothing else in the budget increases in cost at the same time, an utterly fanciful notion.

In other words there will be at least another $500 billion of additional annual deficit, and likely far more than the $600 billion denoted here, bringing the total to more than $2 trillion in actual deficit being run per year.

If this pattern were to continue for 10 years then Medicare and Medicaid would rise to $3,448 billion, or for all intents and purposes all of the $3,854 billion the government spends now!  Worse, increased tax revenue would absorb only $184 billion of that additional cost -- for all intents and purposes ZERO.

For those politicians and others who claim Social Security is going to blow at roughly the same time, no it won't.  Social Security payments (for retirees and disability) rose 3.2% last year while for both retiree and disability tax receipts rose at a 5.2% rate.  Yes, on a cash basis Social Security ran a deficit last year but the rate of increased tax revenue was higher than the rate of spending growth and Social Security has a $2.8 trillion dollar Treasury security cache it can redeem to cover the shortfall.  At present rates Social Security may have issues in the future, but for right now it is stable.

MEDICARE AND MEDICAID ARE NOT AND THEY ARE WHERE THE ENTIRE PROBLEM RESIDES.

We will not manage to get through the next 10 years at this rate and in fact will not get through the next President's term.  If we do not put a stop to this right now the stock market will collapse and lose up to 90% of its value, all pensions will collapse and at best be able to pay 50% of what was promised (are you a teacher, firefighter or police officer?  Bend over because law or no law you are screwed.)  The bond market will collapse as the spiral of debt will be clear to everyone and nobody will be willing to buy a bond from anyone at any reasonable interest rate, which will instantly destroy the value of all outstanding long-term Treasury debt by as much as 50-70%, government entitlements will collapse (to put that in plain language they will go to zero or effectively so) and real estate values will collapse as demanded interest rates on mortgages will make the 1980s look like a Girl Scout Party.

And by the way it is not possible to tax our way out of this and certainly we cannot do so by "taxing the rich", as is often claimed.  If you confiscated all of the money made by those who make more than $500,000 a year you would not even close the deficit gap for one year.  Of course if you did that the amount of money those who make over $500,000 a year would choose to make next year, and thus be subject to said tax, would be no more than $499,999, and thus you'd get zero in tax from them via this approach in year #2.  Anyone running a "pay your fair share" claim is lying and they know it; again, that's the math.

We must -- and can -- stop this crap with existing law.  Specifically, by applying 15 USC Chapter 1 to all parts of the health care industry.  This will collapse the cost of care for both the government and private parties by as much as 80% and permanently end and reverse the budget problems it is causing -- for the federal government, for state and local pensions, and for private firms and individuals.

I have been writing and speaking on this since I ran MCSNet in the 1990s.  It has been a focus of this column since it was formed in 2007, including in this column written in 2012.  We have willfully and intentionally, as a nation, ignored this issue for the last decade and we are now facing the destruction of our economy, our markets, our government, our society and our way of life if we do not put a stop to the pillaging of our economy and people NOW.

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