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2018-11-09 08:20 by Karl Denninger
in Editorial , 249 references Ignore this thread
The Disturbing Microcosm
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I had an interesting experience the other day.

Was having a beer in a place I haven't been before -- it's new.  I found myself in a conversation on many topics, one of which was sort of, tangentially, the economy and markets.

The comment was made that Trump was great, and look at the market.

I pointed out the actual budget deficit of $1.27 trillion last fiscal year.

In other words, 6.23% of the economy.

Of course the market will go up (fast!) when you have a ~3% 10 year Treasury rate and are increasing money supply at 6.23%.

For a while.

Just like it did in 2004-2007.

But it will also crash.

Just like it did in 2008, 2000, and every other time the government -- any government -- has done this.

There is only one place you can get $1.27 trillion out of the budget and balance it.  Health care.

You can cut the entire defense department to zero and not get there.  Of course you can't cut defense 100% and nobody would every really suggest that -- in their right mind or not.

Yet Medicare and Medicaid, or in the "as spent" Medicare and Medicaid services, totaled $1.466 trillion last fiscal year ending September 30th.

If you fixed the medical monopolies that would collapse price by 80%; you'd not spend $1.17 trillion of that.

That's within $100 billion of the budget being balanced.  It's the only way to get there as it's where the money is being spent massively in excess of tax receipts -- virtually in fact the only way to bring Medicare and Medicaid spending in line with tax receipts is to kill the monopolies so they return to the ~3-4% of the economy they were before the monopolists took over (down from the almost 20% they are now.)

Now cut the fraud in the Social Security Disability program -- money paid to people who can and do run marathons, say much less be able to work, and you'd be the rest of the way there.

But math doesn't matter to people infested with either Democrat or "MAGA" disease.

The facts don't matter to either group -- which is 90% of the population.

You may as well give up folks; this particular version of insanity is going to destroy this country, it's going to do it soon and neither side of the aisle will face basic arithmeticwhich makes neither of them worthy of associating with.

It's sad -- but true.

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Greenrebellion
Posts: 514
Incept: 2009-01-03

Los Angeles
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I don't disagree with the larger premise here, but isn't there some double counting going on?

Here's what I mean, let me know which premise is wrong:
Government spending via deficits inherently expands the money supply
Expansions of the money supply are generally inflationary
Real GDP is reported net of inflation.

So it is not fair to say that if the GDP is growing by 4% and deficits are greater than that, then the economy is actually shrinking. Real GDP is net of inflation and thus we can not also take the full deficit spending out of GDP.
Sundance
Posts: 3
Incept: 2017-07-29

Rockford, WA
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That's EXACTLY the situation I encounter on any social occasion and conversation turns to politics/economy - whatever. When you start to make a case using basic math, they look at you like a NPL and continue blabbing on with the prevailing mind-numbing memes. Sickening how gullible, stupid and easily deceived people have become.
Tickerguy
Posts: 154908
Incept: 2007-06-26
A True American Patriot!
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Green: GDP reporting is a massive fraud. I've written on this many times.

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Winding it down.
Nickdanger
Posts: 724
Incept: 2011-06-12

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I've tried talking about the medical/pharma industry corruption and price fixing, and peoples' eyes just glaze over. They have been fed the "health insurance" bs for so long that they just can't comprehend that prices could be affordable without insurance if it all crashed and burned. It's easier to just not bring it up.

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Grammar: the difference between knowing your **** and knowing you're ****.
Aquapura
Posts: 784
Incept: 2012-04-19

South of Canada
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I wouldn't call it an interesting experience as it's commonplace almost every time I strike up a conversation with anyone. Pre-election talking to a co-worker and he said verbatim I didn't vote Trump, but damn, he's good for my 401K. This coming from an MBA who should know enough about finance to recognize the error of that comment. Repeat that conversation to a friend thinking he'd immediately notice the folly and that friend says something akin to, Yes...this is why Trump (and the R's) are going to win on Tuesday.

Politics, finance, etc. are topics I find interesting and do like to discuss casually but my friend group is basically zero for bringing up that stuff. Guess I'll just talk sportsball at the watering hole.
Rickyd
Posts: 761
Incept: 2009-07-07

Ontario, Canada
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Try talking to people about this...

https://www.federalreserve.gov/monetaryp....

...I always ask..."The Federal Reserve has over 4 Trillion Dollars on their balance sheet. Do you not see this as having influenced the good times as well as being inherently BAD?"

I usually get blank stares.

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"That day is coming again, for the same reason -- willful and intentional blindness toward a grossly over-extended economic picture fueled by debt accumulation that cannot permanently continue as a simple function of arithmetic."

Karl Denninger
Mangymutt
Posts: 726
Incept: 2015-05-03

Vancouver WA
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"The facts don't matter to either group -- which is 90% of the population."

Thus ending 98.7% of all real conversations of real subjects that really matter.

I do not disagree with Karl and many of his tickers regarding a potential civil war and one that will be fought through violence and blood shed. And on one hand I hope we get it as it will be over quickly with a decisive winner. But this is the elephant in the room, with a monkey juggling chain saws, on his back. And if we can not even get "Smart" people to discuss this and end it, we have no choice but to start rationing the resource that go along with this ridiculous fraud. And guess what follows that?



Bearcubs9497
Posts: 7
Incept: 2017-02-01

Huntsville, AL
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It's impossible to combat normalcy bias, so I no longer try. No one wants to hear it, and I am tired of the ridicule. So, !@#$ them. They had their chance.

So, instead of proselytizing about impending doom , most of my efforts are now focused on scenario analysis and planning/response.

Some of the things I contemplate:

1. Best Case
2. Worst Case
3. Probability of each, and whatever's "in-between"
4. Who can I trust
5. Who's on my short-list
6. What crap to procure
7. Skills assessment (how useful am I, how useful are friends, family, acquaintances)
8. What are my likely roles post SHTF

Whether any of it helps, at all, I've no clue. However, it's infinitely better than just being fat, stupid, and lazy.

Goforbroke
Posts: 7466
Incept: 2007-11-30
A True American Patriot!
Time to feed the chickens.
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Quote:
I found myself in a conversation on many topics, one of which was sort of, tangentially, the economy and markets.
Rut roh! I wonder if this person realized just what he/she had stepped into!

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Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our Light, and not our Darkness, that most frightens us. -- Marianne Williamson
Wa9jml
Posts: 256
Incept: 2017-04-29

DeKalb, Illinois
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Most of my old friends are Progressives. They are all firmly convinced by network news that the Russians stole the election from Hillary. They are also filled with a consuming hate of Trump. So, I am worried that this political crap is going to end some friendships going back some 45 years. Most of them are intelligent, well educated and comfortable in their retirements. There is no dealing with people who are irrational, and filled with hate and envy.

Now, I am not enthused about Trump for many reasons. Chiefly his failure to act to end the medical monopolies, and greatly increasing the already bloated "defense" budget. But I can deal with his mistakes rationally, and not fall into the trap of being consumed by hatred.

I seem to be like the Lone Ranger in this regard.
Quik49
Posts: 5186
Incept: 2007-12-11

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My experience is along those same lines of glazed over eyes....then I use the example of car insurance...as in... Look at your vehicles and notice that the ones that are worth or cost the least are the less expensive to insure...as in you are insuring something that costs less...so if your cost of care is less then the insurance is less...it's not about the cost of insurance its the cost of what it is covering. It amazes me how many people simply DO NOT GET THAT. When I explain it that way, it seems the light bulb goes off then....

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Long Vaseline....

Riverrat10k
Posts: 174
Incept: 2009-10-23

On a rock in the river
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I have tried to quit arguing about politics at all.

I try to immediately change the subject to healthCARE becoming affordable if we spend less on it, i.e."return to the ~3-4% of the economy they were before the monopolists took over (down from the almost 20% they are now".

I am with the rest of you, many don't care and the rest don't get it.

I did have to jump in when a retired college professor I know started talking about eliminating the electoral college. I tried to explain to him the concept of the tyranny of the majority with the wolves/sheep/dinner analogy and how the EC helps put each state in a REPUBLIC on a more equal footing. Don't think he got it.

He is as self-assuredly ignorant as anyone I have met.

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A motion to adjourn and go fishing is always in order.
--me channeling Heinlein
Whitehat
Posts: 781
Incept: 2017-06-27

The People's Republic of New York
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what is truly sad is that when explaining this to the center and slightly left of the bell curve people who have common sense, they actually get it. as long as they are that last vestige of the common sense folks, patiently explaining with the correct metaphors works. they truly get it and apply the knowledge by extension. the so-called intellectual class and educated right of the curve people just cannot seem to grasp it. these are the smart people. we are ****ed.

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There are two ways to be rich: One is by acquiring much, and the other is by desiring little.
snow, seasons, distance and dirt roads: SSDD
"Be not deceived; God is not mocked; for whatsoever a man soweth, that shall he also reap" (Gal. 6:7)
Tdurden
Posts: 687
Incept: 2015-01-29

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Quote:
I've tried talking about the medical/pharma industry corruption and price fixing, and peoples' eyes just glaze over. They have been fed the "health insurance" bs for so long that they just can't comprehend that prices could be affordable without insurance if it all crashed and burned. It's easier to just not bring it up.


Looking out of the window in my office building in central Ohio, I can see Cardinal Health, Care Works and on a clear day if I squint, I can maybe see some outfit called CoverMyMeds. I drive by probably another dozen huge facilities that are health care and/or health insurance related and a lot of it does nothing but push paper or scrape revenue off of transactions. None of us are going to convince the tens of thousands of people working there in those buidlings that they aren't "needed" by society.

This is much like the divorce industry. There are millions of jobs that are totally dependent on the misery generated in and around that 50%+ divorce rate.

All of this only stops when the mathmatically certain collapse happens. If you live in a densely populated area, you need to move. Soon. If you need some motivation, go to your closest Walmart on the first day of the month. Now imagine all of those "People of Walmart" scared and hungry.

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"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
Pancake
Posts: 5
Incept: 2018-11-05

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Do you still think Medicare cost growth is on track to cause a federal disruption by the end of Trump's term? By "disruption" I mean a cutback of at least 10% of total budget spending, in an area other than healthcare. For example, closing of overseas military bases. Putting development projects for a military ship or airplane on indefinite hold.
Bearcubs9497
Posts: 7
Incept: 2017-02-01

Huntsville, AL
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"All of this only stops when the mathmatically certain collapse happens. If you live in a densely populated area, you need to move. Soon. If you need some motivation, go to your closest Walmart on the first day of the month. Now imagine all of those "People of Walmart" scared and hungry."

Yep.

Aztrader
Posts: 8115
Incept: 2007-09-10

Scottsdale, AZ
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Starting to think that elections are nothing but a RA RA game to pick sides and see who wins. Days after the election, votes magically appear and these clowns now want to count them. They probably had to wait for the ink to dry....
The truly sick part of this was that this election was based more on division then any I had seen in my lifetime. People want to believe the economy is great and that Trump did it. I will give the confidence win to Trump and that's all. After eight years of Obama race pimping every opportunity and attacking the country when possible, Trump reversed that tone.
The issue of talking math with someone that doesn't have the basic intelligence to understand it can be fruitless. Our country has been so dumbed down that it's hard to talk sense to anyone. You argue a point regarding healthcare and the only thing on their mind is when do I get my free stuff. They don't care that the country is broke or how it got there. They think that if you fix this problem, it may cost them lost benefits so they aren't interested. Too much free crap has been handed out and now it's almost impossible to take it back. The left constantly attacks the right on this issue and nothing gets done. I think that we need a major blow up to wake people up. I would love to see the whole federal system go down for 2 weeks to see the end result. The takers would most likely riot and this would give us a clear picture of how bad this welfare society is today. Our education needs a complete revamp because they don't seem to be teaching anything of relevance anymore. College kids voting for socialists is scary when you see how large their voting block is.
Pancake
Posts: 5
Incept: 2018-11-05

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Medicare cost growth at, your number was calculated from observations not predicted, I remember it as 16.5%. Currency inflation at 10%. Tax collection declining by some% because boomers retiring and increased regulatory friction. These two curves walk away from each other, yes. But bump currency inflation up to 15% and the walk-away is small enough most of the legislators could expect to keep on doing business as usual for their remaining lifetimes. Retirees get delays for years and opiates instead of joint replacement surgeries, like the British National Healthcare Service. Hospitals and assisted living facilities seize more houses in collection proceedings. Is this right or have I missed something?

What from broad history is the maximum currency inflation which people will tolerate before changing behavior like Zimbabwe or Venezuela? The Jimmy Carter era middle class perception of inflation was before my time of being aware of politics, but I don't recall talk of the bulk of the middle class doing anything qualitatively different. No large moving of USD savings into stocks, land, metals. Just hold and accept the loss. Meanwhile the mainstream media beats the drum for self-loathing and thus self-abnegation, already a systematic Darwinian problem for the human species, so nearly all voters continue to obey. I'm just not seeing qualitative political change coming from the mainstream. Do you?
Tsherry
Posts: 1471
Incept: 2008-12-09

Spokane WA
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I was out on a project site this morning before the snow started in earnest.

The project happened to include a street widening, which impacted neighbors on both sides of the street. One contractor was telling me about the "extras" that some of the homeowners were getting, like new fences, driveways, sprinkler systems, when the city just caved into nit-picky, bull**** requests, and 'damage' caused by the project.

I replied that the area voted heavily Democrat, and they liked their free stuff. They had a good laugh at my offhand comment, and then when I prompted them, they started noticing that the ****ty houses all had much nicer cars, boats and etc. than any of them did, then they shut up.

Winter arrived today here; the roofs, cars and yards are white, the cold fog of early today turned solid. I'm convinced that there won't be a fix, Trump won't do the necessary, he will do the popular...for him. The D's will foam and spittle and do even less. Meanwhile coffin corner arrives, and most of the country is watching DWTS.

We're.Completely.****ed.

I will probably spend the weekend updating a preps inventory, and finding what else I'm missing, even though I've been 'prepping' for all of my adult life in one form or another. Probably look at programming some Baofeng handhelds I picked up. Probably buying a few more bang sticks before the WA law goes into effect on 1/1/19.

As wise sage Rubius Hagrid said, "There's a storm comin', Harry, and we best be ready when she does."

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Omne mendacium est.
Aztrader
Posts: 8115
Incept: 2007-09-10

Scottsdale, AZ
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Just saw this article. Says a lot....

https://www.cnsnews.com/commentary/teren....
Mangymutt
Posts: 726
Incept: 2015-05-03

Vancouver WA
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Tsherry - Although I like the four distinct seasons that side of the state has I sure do not miss the winters and the snow....And the stupid drivers :)

Although I have seen it, as I am sure most of us have, the level of greed people can have when it comes to Uncle Stupid doing projects. Yes I get emanate domain and I strongly believe people should be fairly compensated for any loss of property or rights to their property but it seems like the last couple few decades people have gotten more greedy and Uncle Stupid, well he has just gotten more stupid.

If your project is going to encroach on someones property and the home owner had a preexisting sprinkler system, drive way, fence what have you, sure the fair thing to do is replace it in kind. But I know the type of people you speak of they drive their fancy Denali with spinner rims, but their yard looks like a pasture. And they demand a sprinkler system ALL the way around the house. A sprinkler system that wont be working in a couple years, but of course that is not the point, is it?

You say "I'm convinced that there won't be a fix," That is because there wont be one. Your project is small potatoes compared to the medical issue, but your state, county and city government will happily hand out those goodies, because it is not their money, it's yours. Of course the bond will roll over and never be paid off so your kids and grand-kids will also get to pay for someones useless sprinkler system.

Prepping is a good way to go, especially up in your neck of the woods, because as you said winter is a coming.

Enjoy the snow LOL.
Whitehat
Posts: 781
Incept: 2017-06-27

The People's Republic of New York
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@Tsherry -- you want to see a similar dynamic, but at the city level come to PRofNY.

after hurricane Sandy, the federal dollars started rolling in to fix supposed damage from the flooding. yes, some stuff was flooded, but other things like our Brooklyn Battery Tunnel simply needed to be re tiled due to the normal wear and tear of use and age. its systems were already aged and in need of replacement. the Sandy flooding exceeds what we locals referred to as the 9-11 bucks. after that tragedy so much other infrastructure unrelated to the tragedy was rebuilt, renovated and replaced or new installs completely from scratch. it astounded people how much of the Sandy dollars were to fix things that were just worn out and for the most part neglected.

this is the game. wait for a tragedy and everyone jumps on board and starts the grab fest. the 9-11 bucks created so much economic opportunity and allowed our useless city to dig itself out of an economic slump. funny as these dollars were beginning to dry up a new tragedy unfolded for the city to make up for over half a century of neglect, Sandy. the attitude extends in all directions. in my neighborhood and most others, people neglect their property obligations such as paving as some utility work is bound to occur and look, new sidewalks on someone's dime. maybe it is our ****ed up monetary policy that creates this mentality as many people live in their houses here and do as little as possible while of course having all of the lifestyle toys. you have houses where people owned them for forty years, needing every system redone, exterior, kitchens and baths shot, their pets pissed all over the place and the ****ing things go up in value by factors of seven or more. the free money mentality makes people seek it everywhere in every situation and many say if they do not grab it, someone else will.

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There are two ways to be rich: One is by acquiring much, and the other is by desiring little.
snow, seasons, distance and dirt roads: SSDD
"Be not deceived; God is not mocked; for whatsoever a man soweth, that shall he also reap" (Gal. 6:7)
Calsdad
Posts: 21
Incept: 2012-11-27

Massachusetts
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The money that flows out to projects seems to flow everywhere. Read this article on Chateau Heartist - where they ask the question "how do this left wing websites that nobody reads stay in business - and how do these people make so much money?"

https://heartiste.wordpress.com/2018/11/....

I've been spending some time recently on blogs and sites where there is extensive talk about "white nationalism" (in the positive) , and try to bring up the fact that the whole of the leftist universe is built on pilings made up of funny money - and all most people do is argue and complain and bitch that "you must be a libertarians or something".

Seriously - the retards runs deep ,VERY deep. I am definitely losing hope that there's any way out of this without a lot of people just ending up dead.

Orionrising
Posts: 83
Incept: 2017-01-26

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In demonstration of the point that medical tech should DECREASE in cost exponentially... There is now a company selling Bluetooth EKGs that work with your cellphone. They have been running radio adds. $100
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