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2024-06-08 07:37 by Karl Denninger
in Musings , 634 references Ignore this thread
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This needs to be said and get wide exposure.

There is no such thing as infinite money, and utility value gets seriously skewed when people's lives and health are involved.   Nonetheless the calculation has to be made and honored when the government is involved, like it or not.

Let's make it personal -- I'll use myself as this way nobody can attack me as "trying to do it to someone else."

I'm 60 (for real, not for this article.)  I go the doctor because I have a pain that won't go away and has no known source, tests are run, and after much poking, prodding and testing he comes in, sits down with me, and says "dude, you have serious cancer."

I ask him what can be done and he rattles off a "standard protocol."  I let him talk and then ask two questions as a pair: How much does this cost, and what are the odds it succeeds and I no longer have cancer, not just that it "extends my life" with some set of serious quality damage?

He hems and haws, but I push him on it and eventually the answer comes:

There's a 20% chance it actually renders me cancer-free; some additional percentage, perhaps quite a bit, that it extends my life but I still have cancer and ultimately it still kills me, although perhaps a year or two later.  The cost is $200,000 (leave "insurance" out of it for now) whether I win against the odds or lose.


I have one kid.  $200,000 would be enough to allow her, assuming she can stick it in Treasuries at 5%, to withdraw 10% of that ($20,000) each year and with the earned interest it will last 12 years, running out part way through the 13th year.  Being an inheritance and well under the cap that inheritance would be tax free (although the gains from the Treasuries are not, so there would be some small amount of tax due.)

Now unadjusted for outcome I can either spend the $200,000 or I can accept my mortality and gift her 12 years of relatively trouble-free life -- or (almost-literally) as a lump sum the purchase price of a house to live in.  Note that the actuarial tables say I have about 20 years left assuming that I am otherwise (but for the cancer) average.

Adjusted for the odds of success that's not $200,000, its $1 million and over a 20+ year lifetime at a $50,000 a year distribution rate (in other words enough to live a simple life as a single person with no work required) there is no risk of running out at all; in fact at the end of said 20 years there will still be $950k+ in the account.

Now for me as a person adjusting for the odds of success is rather idiotic because this is a binary outcome -- I either win or lose the bet.

But on a societal level it is not a binary outcome; it is a statistical fact that for each older person we treat with such a thing, where they are beyond child-bearing and child-raising years that money cannot be spent on younger people and it is a net lose to society as a whole.

But -- but -- you say, that's my money and I have a right to do with it what I want!

You're correct if its your money that you personally created through value addition and have stashed.  It doesn't matter why you believe that's the right choice for you and the odds are irrelevant.  Indeed even if the odds are statistically zero you still have the right to spend your funds as you wish.  Nobody has a right, in reality, to claim against you that which you earned with your own hands and mind -- although we have plenty of politicians and others who think they do.  Nonetheless if you honor private property rights at all then you must accept that if Bill Gates wishes to blow his money on expensive yachts -- or medical care that has no odds of success -- that's his right.  Its his money, and he has every right to choose how it's spent.

But at a public policy level its a different game entirely because it is never your money and there everyone else does indeed have a right to control it because the value you intend to expend is collectively owned.  Governments cannot create value -- they always and everywhere distribute that which is created by the citizens and the reality of life and nations is that young people must both prosper and ultimately replace themselves -- and those who do said prospering and replacing have to be the productive members of society who can and choose to put more value on the table than they consume or your society, government and financial system will ultimately collapse as a mathematical certainty.

The point is that these funds on that success-adjusted basis, when looked at from a societal level rather than individually, are sufficient to allow a mother to stay at home with two children in a married family while the husband goes off to a modest job.

Note that I'm not talking about handing out a check either -- created value is fungible to a huge degree and thus this can and should result in a cost of living reduction for everyone in society, which once again enables that two-parent, two child, one-earner stable home.  Nobody gets written a check but that older person has to accept their mortality and either attempt inexpensive paths of resolution (which may be likely to fail) or do nothing and allow nature to take its course and the current systems pandering to this usually-futile course of action, which increase parasitic loss in the economy, must be allowed to wither away and disappear.

This reality, which cannot be argued against as it is a function of mathematics and thus is fact without legitimate point of debate, is anathema to politicians because old people vote more often than young people and building asset bubbles is much easier than building value.  The problem is that asset bubbles are not actual prosperity -- they are frauds.  Building value, on the other hand, requires hard work.

Further, both private and government interests love to cater to creating value-destroying systems because it is always easier to steal than create.  If it wasn't nobody would ever steal anything, but of course we know that people do.  The entire "health care" system  today other than for trauma, where clearly restoring someone's ability to be productive where but for said treatment that loss would be permanent is such a parasitic system and in fact on a purely analytical basis destroys rather than creates value.

We've spent three decades+ doing the former and my generation -- yes, mine -- is largely responsible for allowing it to happen and cheering it on.

What's the current housing (and stonk mucket) bubble crap all about?  This.  Never mind medical; the simplest solution is to tell people that if personal lifestyle choices led to the condition nobody but said individual is responsible for the cost, prosecute everyone who gets involved in any sort of price fixing and throw their asses in prison for 10 years under long-standing (100+ year old) law and let the market sort it all out.  It will, rapidly, but about one person in six or seven currently employed will have to find a new line of work.  Let the asset bubbles collapse instead of trying to prop them up and accelerate them and young people will regain the capacity to form families and produce the next productive generation instead of only those who don't give a fuck about anything except fucking being the ones who do so, which is where we are now and which is destroying the national fabric at an exponentially-accelerating rate.

Exponential curves are a bitch and they always feel like a free lunch when you start down those paths.  They never are and if you don't voluntarily abandon them they always end in disaster.  We've been playing this game now for more than three decades and it must stop right here, right now because the cross-over point between "free lunch" and "aw shit"  is now in the rearview mirror both fiscally and societally generally.

We'd better have this conversation and debate and decide on how we're going to collapse said bubbles and all the non-productive employment they've generated, or we're in for a very, very bad time.

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