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2022-11-12 07:00 by Karl Denninger
in Corruption , 760 references
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It's really not very complicated when you get down to it.

First, all items in an economy respond to supply and demand.  If there is zero demand there will be zero supply and thus no price.  But for any amount of demand above zero there is a price, and to the extent demand exceeds supply price rises until equilibrium is established, either by it simply costing more or additional supply showing up as there's incentive to provide it.  The opposite is also true.

The problem with so-called cryptocurrencies is that they have zero inherent value of any sort.  That is, the fact that I can solve a mathematical problem and prove I did through a cryptographic signature doesn't have value; there is no utility, per-se, in doing that.  Leaving aside that all such designs are inherently and intentionally ponzi schemes (that is, the "founders" always get the first of whatever it is at zero cost or nearly zero, then sell them to others at ever-higher prices) if anyone can use leverage without prior disclosure and thus become an emitter of credit into the stream they can move the price in either direction on command.

Of course their benefit and thus, for most, their motivation, is to move it higher.

But what if there the alleged "dollar" exchanged and thus which set the demand level doesn't actually exist?

If I can take a customer's "funds" and blow them on something else then until and unless I am forced to immediately remove that from the so-called "cryptomarket" where it was I have in fact emitted more dollars in the context of the cryptocurrency.  The problem at its core is that I had no legitimate way to do that and thus the alleged "demand" -- and price response to it -- is a fraud.  In the United States banks have an allegedly limited license to do this, that is, it is legitimate, and so does Congress through deficit spending.

Nobody else, however, holds the power to do so in a legal fashion yet the common theme is that it keeps being exposed.

You must therefore assume that all of the alleged "value" of said crypto "assets" is in fact nothing more than smoke.


Because if it was possible to make a reasonable return running an exchange without doing this -- that is, the fees charged for the service covered costs plus a profit -- then those doing it legitimately would be VERY interested in finding and outing every scam immediately.  The reason for that is obvious: The scammer operates with what amounts to a digital printing press and the non-scammer does not; ergo the honest operator cannot compete in such a market as they will always lose to the scammer.

The facts, however, are that the so-called "mainstream" exchanges are not diligently looking for and exposing the frauds and the reason why not is transparent: They profit from it too even if they don't personally engage in it.

But if you profit from a scam even if you don't engage in it then you must expect that there will always be said scam and worse, since during the time it is unexposed there's nobody interested in stopping it there is no pushback to put a stop to it and in fact that takes over as the largest, if not the only mechanism by which price actually moves.

In other words ex the scamming the "value" of said "token" is, for all intents and purposes, zero.


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2022-11-11 07:00 by Karl Denninger
in Macro Factors , 1256 references
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We call it.... "crazy Ivan" - Hunt for Red October

Except this is November, and the crazy came out of the CPI report.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in October on a seasonally adjusted basis, the same increase as in September, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.7 percent before seasonal adjustment.

The index for shelter contributed over half of the monthly all items increase, with the indexes for gasoline and food also increasing.

If you were short into this there was no getting away from what went up your backside; a literal 100 handles went into the Spoos within seconds and I'm quite sure if you'd been short you would have been gapped over, so a stop would have gotten you exactly no protection.

The problem in the "better than expected" report is in that bolded line and in fact that's a high going back all the way through April on a seasonally-adjusted basis.  Food away from home also was up at the seasonally-adjusted high, where it has been for the last three months sequentially, so there's no love there either.  Note that the latter is often subject to fairly long supply lines and contracts which delay the impact of movement both ways, and thus that it is lagging is no big shock.  Food at bars and restaurants has been up less than food at home over the last 12 months and thus you can expect it to continue hitting the index for quite some time yet.

The 900lb Gorilla in the room this month is fuel oil, which is, as many people do not know, #2 diesel.  It was up a stunning 19.8% on the month and stands at 68.5% up from last year this time.  Anyone expecting the consumer experience to improve with that record has rocks in their head, never mind those who use it for heating that are about to get a visit from the proctologist this winter.

Incidentally if you are one of them and your supplier is screwing you on price go to a truck stop (or any rural fuel place that sells to farmers for off-road use) and bring jerry cans.  They sell dyed fuel for use in the refer units.  Its the same thing and if its cheaper to buy it there than pay whatever the guy with the truck wants to bring it to the house your decision should be obvious. 

Piped gas relaxed some, which is good news if you use it, but its still up 20% on the year.  A huge percentage of people use that for heat, so there you go.  Oh, and guess what is used to generate electrical power?  Uh huh, which is why electricity is up 14.1% on the year.

If you remember me talking about "Owner's Equivalent Rent" and how it falsely stated that there was no inflation while home prices shot the moon you can see the inverse of that right now in the OER number which is up 6.9% on the year.  That which held down inflation figures for years is now going to prop them up for years, like it or not. There is no evidence that rents, on the other hand, is relaxing at all.  Anyone who thinks The Fed can ignore 32.6% of spending in the economy has rocks in their head; they most-certainly will not, and that's what shelter comprises.  Annualized its up 6.9% so no, we're not "winning" on inflation.

Transportation services (you don't need to get to the store and go to work, right?) were up strongly as well; 15.2% on the year (yikes) with car insurance being up big.  That which you're forced to spend there you won't spend anywhere else.

Interestingly enough  I see some evidence of softening in the hotel pricing market, which is likely due to demand destruction -- after all, their interest picture looks like yours, so absent that they'd be raising prices.  This should be paid attention to, particularly over the "snowbird" season in the next few months as it might be a leading indicator.

Oh, don't worry about health insurance: It's only up 20.6% on the year, and the BLS claims its also less than 1% of spending.  Sure it is.

Who's also having trouble maintaining prices?  Sportball, surprisingly.  Down 17.7% over the last year.  Whadda ya mean those $10 beers and $20 parking fees are too much?

And so, as they say, it goes.

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2022-11-10 12:57 by Karl Denninger
in POTD , 227 references

Gee, looks like our elections doesn't it? smiley


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2022-11-10 07:00 by Karl Denninger
in Politics , 629 references
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If there's one take-away from the results of 2022's war (politics, at least thus far) is this: Trump is a crappy General and if he's not ditched 2024 is doomed.

Of course anyone with a brain knew this after 2020; the man was a gutless bully which also was obvious to anyone who had one bit of common sense well back to 2016, but then again neither the media or anyone else in the political punditry wanted to either admit or discuss it.

January 6th was the culmination of man without a sack from top to bottom, and yet still a huge part of the population continued to buy kneepads, to the point that there was a severe shortage of them for those who wanted them for mundane reasons -- like work in their attic or replacing their roof.

Yet two years after that fiasco -- a man who maintained he was cheated yet lacked the sack to arm up and go prove it, yet claimed to be "the guy" who should sit in the left seat with his finger on the button of nuclear holocaust for the world, a good part of the GOP voter base still bought his obese, germophobic BS.

Tuesday, November 8th, 2022 has now come gone. We'll see if that fantasy has finally been broken.

The usual recriminations are out.  Kansas had an independent on the ticket who got about 2% of the vote.  Milton Wolf is blaming said candidate in Kansas for all the abortions and breast-chopping off girls that are likely in the state over the next four years.  Notice what's missing and what's present: Only "approved" parties have a right to run for office and those who run don't have the responsibility to put forward a winning platform on their own; if someone else runs and the "preferred" person by someone's view loses it's not the losing candidate's fault they lost.

Uh huh.

Here's what people don't want to face: The extremes of abortion on both sides are a political third rail; nobody except for the nutjobs is in either of those camps.  The GOP tried to spin the Roe-v-Wade decision as a mandate to ban abortion entirely under all circumstances and got their teeth kicked in -- justly so.  If they had left it alone as a state-specific issue and come out strongly for that, rather than trying to press the USSC win onto the national stage several races, including Pennsylvania's Senate race and Michigan's Governor, would have been walk-off victories.  Instead both were losses and in that regard the Republicans literally sucked-started a political shotgun.

If you run on "abortion is murder" -- or can credibly have that position pinned on your campaign you lose.  Note that murder is a very-specific word; murder is always and everywhere a criminal offense carrying long prison sentences or capital punishment.  It therefore leaves no woman who can find any reason to undergo such a procedure, ever and under any circumstance, any possible path to vote for you since you are by your clear statement threatening to throw her in prison.  Would you vote to voluntarily go to prison?

There are plenty of people who try to link this to things like an ectopic pregnancy, which is never viable and, unless removed, is almost-certain to kill the woman.  That's BS and everyone knows it; there is not one so-called "trigger law" that mandates that a woman die if such was to happen and no such law would be constitutional.  However there are myriad other corner cases that remain -- and attempting to label all of them murder is how you lose elections.

The Republicans continue to refuse to face this fact and boy did they amp it up this time -- with the entirely-expected results.  No more than a tiny single-digit percentage of child-bearing age women will agree that there are no circumstances under which she might want to terminate a pregnancy short of her being dead if she doesn't and will accept being convicted of murder and thrown in prison if any of those other circumstances  -- like being raped, for example, or if the fetus is discovered to be horribly defective and cannot possibly live a reasonable life by any rational definition, never mind bankrupting both her and her partner before dying horribly -- arise.

If you're one of the people pressing that position in public, no matter the venue but especially if you were doing it in a political context you are the reason that the election turned out the way it did.  You caused it; you cheered it on and stoked the crazy, now you get to live the curse.

The really ugly part of that stupidity is that it meant we had no political debate at all about what is arguably the fiscal issue on the table and one that threatens to blow up the Federal Government within the next few years.

Tell me, America:  How many candidates ran on a platform that had as its primary feature ending the medical monopolies and, as a result, adding 15% to your actual disposable personal income?

Oh yeah, there would be side effects: One in five, roughly, would lose their job and of course they would be vociferously opposed.  But the other 80% would have basically the entire Bidenflation economic impact removed from their personal finances and not just once -- permanently.  What percentage of those people do you think would have voted for said candidate, assuming he or she didn't blow their own head off by bringing abortion into it?


There was not one candidate who did so that I'm aware of.

Not one.

Not one Democrat (of course), Republican or Libertarian for that matter who ran on something like this.

Nor did anyone that I've seen actually run on enacting legislative hard-stops on ever pulling any of the 2020 crap again including against their own authority should they try to do it.  DeSantis claims he did but in fact he closed things just like everyone else and while now taking credit for "reopening faster" the fact is that he has not stated that he was wrong originally.  Of course there is also his refusal to enforce the fines in his pet legislation, including against entirely-intrastate entities such as The Straz in Tampa where there was no federal jurisdictional question.  Therefore it must be concluded that he doesn't think he was wrong, he not only supports he demonstrably abuses laws through selective enforcement and further, despite having the capacity to prohibit blockage of treatments by pharmacists and physicians that has not been taken care of either.

Where were the candidates, incumbent or otherwise, stating clearly that no more of that crap will happen, ever again, period?

Zero incumbents who actually did slaughter people -- including shoving Covid-positive patients into nursing homes when we knew damn well that was rather likely to kill the residents, lost their job.  It certainly doesn't help that the Republicans ran a caricature of Satan in several contests, including Michigan -- but the fact remains that in those states where that sort of insanity happened at their specific direction and said governor was on the ballot they were all reelected.  Ditto for those who cost kids two years of education (I remind you that they all cost the kids a full semester, basically.)  Never mind the "squad" folks who want to get rid of cops -- and we've been witness to entire areas of cities burned to ash over the last two years, along with skyrocketing crime.  Pritzker, who signed and in weeks will implement a ban on cash bail, was reelected despite Chicago's weekly "shot clock" standing as evidence for how bad it already is.

People are trying to spin DeSantis' win as some sort of referendum on "freedom."  It was no such thing; Crist was a and remains a washed-up nutjob who had no realistic chance in the first place.  The "bench" issue with crazies is not uniquely Republican and as such DeSantis' win is equivalent to what would have happened if he ran against Bozo The Clown so spare me the accolades.

I thought we'd probably wake up and find ourselves with a clear GOP majority in both the House and Senate, and as a result there would likely be a nice market rally (gridlock tends to produce one) with a deferment of the Trump question for another few months, albeit with him likely announcing intent within a week or so.

While the House appears to be definitely GOP even with undecided races, the Senate is, as I pen this, undecided although I don't see how the GOP loses all three of the remaining to-be-decided contests.  Nonetheless without at least two wins its still 50/50 with Kamala as a tiebreaker and it shouldn't have been close.

All of that happened because Trump was in the game and the GOP's bench was both garbage and spewed crap about throwing women in prison -- but for the Oz debacle in PA Fetterman would have been roadkill three months ago.  He wasn't, and the reason he wasn't is that a literal nutjob -- yet another celebrity cardboard cutout -- was on the ballot opposing him.

Further, and perhaps most-importantly: If you back anything of the current "GOP" power structure at this point, including most-particularly those who took in and spent hundreds of millions of dollars on the promise of a "red tsunami" and instead produced a bit of blood-tinged piss -- you're nuts.

We, like every other nation's citizens, get the government we deserve.  Unfortunately what we now deserve plausibly includes the black flag going up.  That's by no means certain yet, but the odds have risen dramatically -- and our actions, and inactions, are why.

It's always darkest just before it goes pitch black.

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2022-11-09 07:00 by Karl Denninger
in Politics , 937 references
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It is done.

Now we find out whether politics is indeed the peaceful version of physical war or that barrier is, at least in the United States, gone.

If you think about it for 30 seconds or so (assuming you haven't ruined your ability to do that with Instragram and similar) you will recognize that politicians and indeed the formal political process has long declared, all the way back to the founding of America and likely far longer, that this is in fact true.  

Carl von Clausewitz once said "War is politics by other means" but in fact he had it backwards -- its the other way around.

Politics is war without the killing and physical destruction of the property held by your opponent.

You think not?

  • Let's campaign for this politician or that.

  • I'm going to fight for ($15 minimum wage | green energy | black lives | whatever-handout-du jour)

  • I'm going to defeat my opponent (in office, in political views, etc.)

  • My opponent is going to throw Granny down the stairs (including ads of stick-figures doing so)

  • My opponent will get you nuked, literally ("Daisy" anyone?)

  • My opponent is a {fascist | Nazi | Communist | Socialist | etc} - the implication is that if you vote for the opponent they will kill you, imprison you or destroy and/or confiscate your stuff.  All three are what happens in a war.

Why is it that we have entire nations (e.g. Brazil) where they can count all the ballots within hours of the polls closing but we can't?  There's nothing complicated about running a hard-to-cheat and entirely-fair election that produces irrefutable results within hours when you get down to it.  It simply requires:

  • Everyone votes during a single-day fixed window of time.

  • Everyone who votes dips their finger in indelible ink so you cannot vote twice.

  • Everyone showing up to vote must present reasonable proof of citizenship.  In a nation where close to ten percent of the persons in the nation on a given election day have no lawful right to vote due to being here illegally, a visitor or green-card holder, and ten percent is materially beyond the margin of victory for most races, no balloting is legitimate unless every voter is verified to be eligible to cast their ballot.  Since ballots are secret (they cannot be tied to an individual person by design, otherwise there is no privacy in how you vote) there is no way to cure a ballot cast by an ineligible person after the act.  It therefore it must be proved at the time of ballot issue.  Period.

  • Other than serialization of the ballots issued to a voter and tabulated (so "X" ballots were issued, "Y" were spoiled and retained and therefore "X - Y" must be in the tabulation for said precinct or other voting location and "Y" must be in the spoiled container) no means of tracing which voter got what provably-unique ballot is possible.  Therefore nobody can tie a specific vote to a specific person but it is absolutely proved that "X" people voted, each person who did so only did so once, and "X" ballots are present.

  • All votes are made onto a physical, tamper-evident thing (the easiest and cheapest is paper of a specific type, bond and with security features embedded in it, no matter how tabulated) which is retained and able to be inspected by anyone at any time to verify that the tabulation of votes was "as cast."

  • All votes are tabulated and counted only (1) after the polls close and (2) no results are permitted out of the counting room(s) by any means whatsoever until all counts are complete and the polls books verified as balanced.  This makes impossible determining how a race is going to turn out in advance and thus you can't "find" or change votes after the fact since nobody has any way to know what the count is or will be until the opportunity to add, subtract or modify the votes as cast has been foreclosed.

  • All tabulating, printing and related election software must be open-source including the operating system and all OS/device libraries and drivers, the configuration files that control its operation are signed with a maintained certification chain (as with TLS certificates) the issuing CA keys are under lock and key except when used to issue same, and said media containing same can only be withdrawn and used under direct physical observation of poll watchers by all parties on the ballot.  Any violation of the security of said signing certificates results in their immediate revocation without exception.  No election operations or tabulating machine may have connectivity outside of the physical room it is in by any means whatsoever, no such hardware capable of same (e.g. Wifi, bluetooth or other than physical wired links) may be present in the room, no such equipment may be visible from outside the room by any means (e.g. through windows) that allows its operation or the material fed into it to be observed beyond the four walls, once the polls are closed and tabulation begins nothing may enter or leave until it is complete and any person or entity that violates any section of this provision is subject to summary public execution without exception.  This means anyone can verify that (1) the software has no "back doors" in it, (2) the configuration files (e.g. ballots, where the "marks" have to be, etc.) are as-claimed, (3) the configuration file was in fact issued by who it allegedly was and is valid and (4) nobody has screwed with any of this from outside the place where polling or tabulation occurs and if someone tries it verification fails and said equipment will refuse to operate on said tampered-with file.

  • All election materials, including the code, configuration files and physical ballots cast, sans outer envelopes which may contain a signature or return address in the case of absentee ballots, are public domain post-election subject only to reasonable requirements to prevent tampering or destruction.  Any person or entity may examine same at any time and no election materials may be tampered with or destroyed for a period of at least ten years.  Physical ballots shall be made publicly available in high-resolution scanned image form, along with the evidentiary basis behind the poll books to prove they balance against said ballots on a precinct basis, no later than ten (10) days post-election and all configuration files, operating systems and other code on an "as-used" basis shall be publicly available as of the date of certification of results.

That's it.

If you want to argue that there needs to be some exception for people legitimately unable through no fault of their own, and not able to be mitigated by their planning and choice, to vote on the given day (which everyone knows a year or more in advance) then that's fine.  That can be accounted for under this system; all such "absentee" voting must have a verified reason for issue, once issued you are removed from the poll books for the next election used for in-person voting (so you can't show up and request a ballot on election day) and none of the absentee ballots can be inspected in any way including the outer envelope, opened, validated as acceptable (e.g. bearing signature, etc.) or otherwise have their security violated until the polls have closed.  Once the polls have closed then said ballots are treated as any other; they go into the counting facility, their poll book is validated (e.g. there cannot be more absentee ballots in envelopes than there were validated requests) post closure of the polls they are opened and from that point forward are subject to the same rules as an in-person ballot except that a spoiled ballot (is unsigned, not filled out, etc.) is discarded and recorded as such.  The risk of an absentee ballot being spoiled and not redeemable is on the person voting absentee; if you're going to use that path then you are the one with the responsibility to make sure you don't screw it up and spoil your ballot because once-issued to you there is no way to replace or cure it.  There can't be a cure process or its entirely too easy to cheat.

You can't do "early voting" and have all of this work because someone's voter registration and thus their registered party is public.  The SOS will sell lists of same to anyone who asks (and political candidates do ask all the time); this is ordinary election and political work and there's nothing wrong with it.  If I am a candidate where in the district I want to expend my funds is something I can learn from the registration of voters and that's a perfectly-legitimate thing for me to do, and thus all candidates, even third-party candidates, do so.  You can't both allow such records out (and there's no way to maintain them as "secret" if you have "registered" party affiliation) and have early voting without information about likely margins being available, imperfect though it may be, days, weeks or months ahead of the contest date.  For this reason it must be banned.  Convenience does not trump integrity in a free and fair system.

Why am I posting this now?

Because there was no point in doing it ahead of time; nobody was going to change anything in time for it to matter but that this be addressed is utterly critical as the above, at the top of this entry, makes clear.

If trust in said process is lost then Carl von Clausewitz' words threaten to become real.

If I cannot prosecute my "war" when it comes to ideas by political means without bloodshed or breaking people's stuff you leave people with a serious beef against one another in terms of how a city, county, state or nation should be run only one other option to resolve their differences -- physical war.

If you ever destroy the trust of even a few percent of the population in the integrity of the voting process you wildly raise the odds of such a violent outcome.  There will always be a few nuts who claim their election was "stolen" and perhaps it was (Hillary, Abrams, Trump but whether they really believe that or simply are sore losers is easily determined by whether they pick up arms and go seek to prove it.  Funny how none of them have done that here in this country eh, and no, January 6th wasn't that.  Not even those arrested, prosecuted and sitting in prison, except perhaps one or two crazies, truly believed their actions were going to lead to a second Trump term and everyone knows it.

We've all seen plenty of sore losers in our lives and politicians are no exception.  Giving one a second bite at the apple is nuts, but then again a good part of our population is indeed crazy, especially today where you can reach for a pill bottle -- or a phone -- and immerse yourself in whatever brand of crazy you prefer.  But the entire point of an election is that if crazy wins then you deserve crazy, so there you have it.

Those who seek to destroy the integrity of this process must be denied the capacity to do so, and if they will not voluntarily desist then they have chosen the path by which the dispute is resolved.

Make sure they all understand that.

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