If Paul Krugman is Your Uncle, Borrow Another Twenty From Him Quick

Mid-term elections are approaching. Democrats will soon be talking about white privilege, rape culture, the high cost of abortions, animal rights and windmills. Anything but the economy and the security of the world. When forced to discuss the economy the story will be that Bush handed them an epic disaster, their quick and thoughtful actions prevented total collapse, and that any remaining pain is solely a result of the rich screwing you, which they work tirelessly to prevent.

The truth is that they were handed an epic disaster that they delayed a few years while creating an even more epic disaster. Far from being the enemies of the rich, the Obama administration has helped them to plunder the next 3 generations. And the middle class continues to collapse.

Unemployment rates are easy to game. Let’s look at the percentage of people who are working. The increase starting in the 60s corresponds to both a growing real economy and women entering the workforce. The decline starting in the late 90s corresponds to Chinese labor competition, and later, the collapse of the housing bubble followed by financial manipulation on a grand scale. The trend is sharply down now.

Percentage of People with Jobs

Chart8

Democrats like to tell you that all pain is the result of the government not “doing enough”. A chart of historical taxes and spending shows that the government has never done more. Indeed the government grows pretty much nonstop, including through the Regan “small government years”. But the real growth has come over the Bush 2 and Obama administrations.

Yet the job situation is dire.

Perhaps government can’t create jobs, at least with financial manipulation.

Receipts (blue), Spending (red) and Deficit/Surplus (green)

Chart1

Perhaps it was the war. We’d be in great shape if we didn’t waste all the treasure on war.

Medicare (blue), Social Security (orange), Military (grey), Treasury (yellow)

Chart3

The military is one of three big ticket items, the other being Medicare and social security. Obamacare and interest on the debt will be the fourth and fifth in future years. Or more correctly they would be if there were any conceivable way to actually fund these things at the levels promised and expected. Which there is not.

But this chart also tells us that military spending doesn’t change all that much from administration to administration, hasn’t grown nearly as fast as Medicare and social security, and would have to be taken nearly to zero to offset growth in other spending.

It’s interesting to look at the impact of the 2013 budget sequestration. You might remember that as the time when national parks were being closed because of deep budget cuts. Or so we were told.

Of course these charts don’t reflect the fact that underlying economy is growing over the long term. The government should collect more tax and spend more because there is more real wealth. This chart shows taxes and spending as a percentage of GDP.

Receipts (blue), Spending (red) and Deficit/Surplus (green) as % of GDP

Chart2

This chart is certainly not as scary as the first one. But when you run a deficit for many years, the total debt grows quite substantially:

Holy Shit

Chart4

Politicians, economists, the New York Times and other liars like to explain that government debt is “different”. Especially US government debt. Unlike the $20 you borrowed from your uncle and the debt that that is causing sky high taxes and job loss in European social democracies like Greece, we don’t have to pay ours back.

We can just keep borrowing forever.

We’re different.

Only the ignorant and uncaring would object to this. Remember the debt ceiling showdown? Democrats are deeply caring folks who only want to preserve parks, and the GOP wants the government to default because the rich would benefit. Somehow.

Surreal.

The Obama administration has inadvertently undermined the intellectuals explanation for magic debt by borrowing so much that it is now easy to model why this will end badly – in exactly the same way it has ended badly everywhere else it’s been tried.

The government borrows by issuing bonds, which pay interest. The interest is paid out of tax collected. In the chart below, the green line is actual interest payments. These are relatively low because the federal reserve is pursuing a policy to keep interest rates effectively zero. But notice what happens if interest rates go to 6% – the dark blue line. Interest payments are now as large as defense or Medicare, at about 30 cents of every tax dollar collected. 8% makes interest payments the largest single budget item. The US now owes so much money that returning to a historically typical interest rates will trigger a budget crisis.

This is where the possibility of default become real. Democrats confuse minor reductions in spending, which reduce the possibility of default insignificantly, with real default, which comes from  spending too much.

At least when they can frighten voters.

Interest Payments (dark red) Vs. Receipts (blue) at 8%
 Chart6

Why not just keep rates at zero and borrow forever? The usual reason to raise interest rates is to control inflation (https://mikezintel.wordpress.com/2012/11/29/eggville/), which occurs when the supply of money in the economy grows faster than the real economy grows – making the purchasing value of the dollar fall. While the conditions for massive inflation have been present for years, it’s not occurring – least as measured in the traditional way by the price of a set of goods and wages.

There are 3 dominant forces in the American economy today: Chinese competition holding wages and consumer good prices down, massive debt at the federal and individual levels and massive money printing. Individual debt prevents the usual Keynesian “stimulus” (massive money printing) from working because consumers – wisely – don’t want to take more debt even at low rates. China keeps the money printing from producing classical inflation. The extra money results in waves of massive asset price bubbles in stocks and housing.

The real irony of the Obama presidency is that its monetary policy allows the very rich to borrow for free and to profit from the bubbles, even as the middle class loses jobs and the economy sputters. The system allows the very rich to steal from retired middle class savers and several generations of their children.

In 2008 when Obama took office the federal debt stood at around $10,000,000,000,000 , or about $35,000 per citizen and about $100,000 per taxpayer.

Today the debt is almost  $18,000,000,000,000, $55,000 per citizen, $151,000 per taxpayer.

The job market has not recovered.

Savers are being wiped out.

Our children’s children’s children are being wiped out.

The very rich are getting richer.

Presidents can’t wait for their terms to end so they can join the very rich.

Let’s talk about white privilege, rape culture, the high cost of abortions, animal rights and windmills why don’t we.

Mike.

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Eugene Robinson’s First Draft

http://www.washingtonpost.com/opinions/eugene-robinson-obamacare-is-here-get-used-to-it/2013/10/07/486dfbe8-2f7e-11e3-bbed-a8a60c601153_story.html

While Republicans were throwing their silly tantrum, Obamacare became a fact. There is no turning back.

Progressives know that there is no better way to expand the reach and control of a peaceful government than to make people dependent on it for their very life, and to destroy alternatives. And the point of Obamacare, to be sure, is exactly that.

The legislative and bureaucratic excesses needed to pass and ram this thing down the throats of the country will certainly result in a GOP supermajority in the future. But no matter, because other countries have demonstrated that a dependent country cannot unwind the dependency, and future governments will fight over who can best manage a sprawling, failing system.

Fuck you, suckas.

Many people oppose Obamacare now, but soon the country will be dominated with low skill, low wage unemployable people wanting someone else to pay for their healthcare.

Fuck you, suckas.

One of the brilliant deceptions of Obamacare, that we used to ram this thing down your throats is that we can sell it as a private system, unlike the hated by knuckle-dragging, gun-clinging, bible thumping Midwesterners who fear the Canadian and British “government” systems.

Of course, the system we have created is unstable. As it collapses, we will replace it with single payer.

Then we can really start to control costs by rationing care.

Fuck you, suckas.

Eugene.

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Macroeconomics for Dummies in the age of Bullshit, Hold the Bullshit

Most thinking people correctly understand government to be not just “the things we do together”, but a system that confiscates property from some people and gives it to other people.

For many decades, this process was explicit. Taxes were collected from some and given to others.

Welfare transfers wealth from working middle class families to mostly unemployed poor families. Later, as the long term effects of welfare and the liberal attack on families took effect, the transfer was from working middle class families to unemployed single mothers.

Medicaid transfers wealth from working middle class families to unemployed poor old people.

Social security, on the surface, transfers wealth from working middle class families to unemployed old people. But due to an bookkeeping fraud that would land a CEO in jail, the story is more complex. Assume in one year the government collects a total of $100 from all social security payroll deductions, and pays out $75 to seniors. Social security was designed from to collect vastly more taxes than are paid out. The $25 goes into the general fund, where is it spent on Welfare, Medicaid, military and other things. A note is made that the “trust fund” is owed $25, to be spent on social security in the future. The money is gone, but the commitment and expectation to pay it in the future remains.

The trust fund doesn’t exist.

Social security was the beginning of the truly massive transfers of wealth from future generations to current generations that are too common now.

Bush amped up the generational wealth transfer with deficit spending – borrowing – as we correctly understand it. In amounts much larger than can possibly be paid back. Ever. Deficit spending is what is ruining Western Europe in slow motion.

But the real action is in monetary policy.

One of the jobs of the government is to maintain a “stable dollar”. The mechanism of doing so is to add or remove dollars to the economy via bank lending so as to as to keep the purchasing power of dollar more or less constant. The federal reserve watches the price of a set of goods and services and adjusts the money supply accordingly. The problem is that in the post Clinton economy – the last the adults were in control – the economy hasn’t responded in textbook fashion.

The money supply has increased due to deficit spending and monetary policy but the price of many goods and services has not increased. This is likely the result of the downward pressure on wages from globalization, and increases in business efficiency due to computers and the internet. But all that extra money is creating asset bubbles, which subsequently collapse. These bubbles transfer far more wealth than any of the traditional programs.

And they are completely out of control.

The stock bubble was a preview of the damage that would be done by the housing bubble. The housing bubble transferred amounts even greater than a life’s savings from some working middle class families (the ones holding the bag with underwater properties and huge debt), to other working middle class families (the lucky ones), and to the financial and construction industry.

The Obama administration, unable to reverse the multi-generational impact of the wealth transfer caused by the housing bubble collapse, is trying to re-inflate the bubble by doubling down on the Bush policy with truly frightening amounts of both deficit spending and expansionary monitary policy.

This is currently causing a transfer of wealth from old people with fixed income investments to stock holders (the current bubble). But the largest transfer is to parents from their children, and from their children’s children, who will inherit a mountain of debt, chronic high unemployment and a stagnant economy.

Obama of course doesn’t tell you this. He blames the rich. In his worldview there is enough wealth for everyone, but the rich are hanging on to too much of it. Given the magnitude and complexity of the US economy, this is a believable explanation.

It seems reasonable. The rich have nice cars.

It is of course wrong. The math doesn’t work. Not even close. And the next bubble will be the entire United States of America.

This is what the baby boomers, insatiable greed and bullshit have done to us.

Mike.

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A Pocket Guide to Orthodox New York Times Liberalism

NYT Liberals aspire to a social laissez faire live and let live society. They are ever vigilant not just to outright intolerance and oppression of the unfortunate, the weak or the out of the mainstream, but even to the more subtle and dangerous behaviors of condescension such as holding a door rather than slamming it in someone’s face.

NYT Liberals aspire to create a world of universal freedom via the mechanism of obtaining absolute power over others that they will then use to prevent authoritarianism from trampling on freedoms.

Except their authoritarianism, of course.

This leads to some self-inconsistent positions. Some of these positions are obvious and reasonable, such as the necessity of a vulgar personal attack on the 18 year old daughter of a conservative women running for vice president of the United States on a ticket that was competing with – in the words of great NYT Liberal Harry Reid – “a light-skinned African American with no Negro dialect, unless he wanted to have one”.

Occasionally NYT Liberals’ relentless battle against the oppressive patriarchy has to be suspended to obtain the power needed to resume the relentless battle against the oppressive patriarchy.

But sometimes the choices are not as simple. Hillary Clinton, a lifelong card carrying member of the NYT Liberals, with honors, found that she too was cast aside too when she threatened the ascension to power of a charming black liberal.

Blacks may soon discover their proper place with respect to Hispanics in the NYT Liberal quilt of victims. Votes matter in the quest for repressive tolerance.

Years of organizing coalitions of overlapping groups of the unfortunate, the weak, the out of the mainstream and the oppressed, in the pursuit of absolute authoritarianism that can be used to promote universal freedom and choice have produced a matrix of victims and oppressors so complex that nobody really knows where they stand.

In order to simplify this, the following short self-evaluation can be used to determine any social groups relative standing in the victim/oppressor matrix (VOM).

Each person starts with VOM score of 100. When all factors have been considered, an adjusted VOM score can be determined simply.

Victims have lower scores. Oppressors, higher:

Men = 100 Women = 100
Baptist/Protestant + 10 +7
Catholic +7 +10
Mormon +15 +12
Atheist /  Buddhist   / Yoga -15 -15
Scientologist 0 0
White +15 +4
Black -7 -10
Hispanic -10 -13
Asian Indian 0 0
Asian Chinese / Korean +6 +3
Single mother N/A -25
Absent father +10 N/A
Hunter / NRA member +17 +3
Feminist -9 -6
Gay man -9 N/A
Lesbian N/A -7
etc. -2 -2
Redneck +8 +3
Beard / Goatee -4 -2
Prius driver -5 -5
Volt driver 0 0
Leaf driver -7 -7
Suburban driver +8 +1
Hummer driver +14 +14
Rich celebrity -12 -12
Rich businessperson +15 +22
Insane shooter of soldiers in Texas +3 N/A
Insane bomber of liberals in Boston +20 N/A
TOTAL
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Getting on the Right Side of History

Recent polls have shown that public support for gay marriage is at an all-time high. Skeptics of gay marriage are clearly in a bind. On one hand it is clear that many advocates of gay marriage are actually anti-marriage and view gay marriage as clever attack on traditional marriage. But it is also increasingly clear that some consider gay marriage to be a celebration of lifelong loving commitment and seek the social reinforcement that marriage was designed to produce.

The clever thing about gay marriage as an attack is that it makes impossible to separate the two. Objecting to the former makes one simply – mean – in the context of the latter.

It’s time for the backward to throw in the towel. To get on “the right side of history”. To get hip and cool.

For the good reason that some gays want acceptance of commitment.

Celebrate that.

At the same time, this wasn’t what marriage was invented for, and survived thousands of years for, across civilizations around the entire planet for.

Duh.

Marriage is a tradition designed to curb the wandering tendencies of men with the carrot of a loving lifelong intimate friendship and the stick of divorce court and child support. For the purpose of being fathers to their children. Because the outcome for children is statistically better – much better – when children are raised in a family by their biological mother and father.

At some basic level, everyone knows this. But we choose to ignore it. Sometimes for good reasons.

What we need is a new tradition.

Let’s call it Childarage. It will be like marriage was in that we’ll design social ceremony designed to reinforce the permanence of it. The joy of it. The responsibility of it. And central to the positioning will be that exists for the intention of raising children born to a mother and fathered by a father – like in the mostly usual way.

You’ve got to be a bit lawyerly when dealing with liberals.

Mike.

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The United States of EggVille

Imagine a society where the only thing of value is eggs. This is a society where food, transportation, retailing  – everything except eggs – are in infinite supply and therefore effectively free. The only thing people value, produce and trade is eggs.

One day EggVille decides to introduce a currency to facilitate the sale and purchase of eggs without involving actual eggs. A convenience. At the time of introduction of this currency there are 10 eggs in existence. And so they introduce ten dollar bills, and peg the price of eggs at one dollar each.

The following month 5 more eggs are produced, and none consumed. Now there are 10 dollars but 15 eggs. The people with the dollars discover that they can negotiate a lower price for eggs, since there are more eggs than dollars. The price of eggs falls. People who loan dollars profit beyond the interest rate charged because they get paid back in more valuable dollars – dollars that can buy more eggs because eggs are cheaper. And people in debt discover that they actually owe more in terms of buying power than they expect.

This is called deflation.

The village elders of EggVille decide that the solution is to issue more dollars. One additional dollar per egg. The price of eggs remains constant – since there is no actual demand for eggs, and the number of dollars tracks the actual production of eggs.

But the people of EggVille discover that eggs are tasty, and begin to eat them. As they eat them, the price rises, since there are fewer of them. The village elder decide, wisely, not to expand and reduce the supply of dollars as eggs are consumed since the price should go up. They are more valuable. And a higher price will incent more people to create them.

Now the elders have a problem. They can’t figure out how many dollars should be issued to achieve price stability except for changes in supply and demand – where price stability isn’t desired.

So they create the Federal Reserve, and empower it to control the supply of dollars, based on all kinds of complex simulations.

Unfortunately the elders, in an attempt to stay popular, borrow money from the neighbor village, GiantEggLand, and give it to the people of EggVille in exchange for exactly nothing. Now what should happen is that this is highly inflationary. More dollars for the same number of eggs. So prices rise. But this isn’t what happens, because GiantEggLand has the ability to produce truly massive numbers of eggs for a very low cost, owing to their large population of peasants.

So for a while this works. The people of EggVille get free dollars to purchase cheap eggs. And the people of GiantEggLand get richer.

But eventually EggVille owes far more to GiantEggLand than they can possible hope to repay.

But the wise elders discover that by issuing truly massive numbers of dollars – far more dollars than makes sense given the number of eggs, they can “repay” loans in increasingly worthless dollars.

This is called inflation.

Because it is so fundamentally broken and dishonest, the elders need to cloak it in a fancy sounding name.

This is called quantitative easing.

It’s so fancy that you can’t understand it. You simply have to trust Paul Krugman.

The elders, seeing that this would eventually cause the dollar to be become worthless, and realizing that GiantEggLand would stop loaning anything to EggVille, or demand a 50% interest rate to compensate for the worthless dollars, bought gold.

The elders will be OK.

Pay attention to the price of gas. You are getting poorer because the dollars are becoming worthless.

This is how we will “repay” the 16 trillion. In worthless dollars.

The rich will be OK.

Mike.

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Post Election Bullshit

Liberals, having gone bare-knuckle to win the election, are trying to quickly pivot to a conciliatory can’t we all just get along message. But they can’t bring themselves to do it.

So we get a lot a lot of condescending passive-aggressive stuff like this: A Letter to Condescending Liberals Bashing Imaginary Conservatives

Conservatives take this advice at their peril. Which is of course the intent.

This election was not fought on substantive matters. And not because there is a shortage of them. The federal government now spends more money than any other government – indeed any other organization – in the history of humanity. And that same government owes more money than any organization in the history of the planet earth. Debt in America at the federal, state, municipal and personal levels is genuinely staggering. And even that doesn’t tell the story of committed but unfunded forward liabilities. There is simply no model going forward where this debt can or will be repaid.

That would seem to be a substantive issue.

We have issued so much debt that people are not really buying it anymore. The government literally creates dollars and sells them to itself. Even though the inflationary effects of this policy are being partially covered up by China’s downward pressure on wages, fall in the value of the dollar as result of this policy is reflected directly in the price of imported gasoline.

That would seem to be a substantive issue.

The USA has substantial amounts of domestic energy. Cheap energy is a major input to economic output and jobs. The “science” behind global warming collapsed over the last 10 years. Green energy hasn’t really worked out.

That would seem to be a substantive issue.

The Obama administration passed a truly massive bill – by way of deception – that a majority still oppose. This bill will, by design, fundamentally restructure the relationship between Americans and the state.

That would seem to be a substantive issue.

A decent chunk of this debt was added over the last 4 years in an attempt to increase economic output and employment based on controversial Keynesian economic principals. It didn’t work. Or perhaps it did, but the real economy is in vastly worse shape than we understand. Youth unemployment is high. The manufacturing and resourcing jobs that have traditionally provided blue collar men and their families a path to the middle class are declining quickly and perhaps permanently. Far too many children are born without fathers and impact is tragic.

It feels like there might a few substantive issues here.

We didn’t talk about many of those things. We talked about Romney’s wealth. About Romney’s dog. About taxpayer funded contraception. About Romney’s wealth. About the “war on women”, whatever that is. Paul Ryan tried to talk about budgets, entitlements, and actually having a fiscally solvent future. That didn’t work. We talked about the rich, and how uncaring they are. We talked about corporations being people, whatever that means. We talked about racism. We talked about gays. And Romney’s wealth. We talked a lot about tax rates, but never with much honesty. And Romney’s wealth.

Now the story is that the GOP lost and will keep losing because the ranks of the young, smart, kind, enlightened are growing as the number of old, white, stupid, angry and mean men are shrinking.

The inevitable triumph of good over evil.

Bullshit.

Here’s how team Obama won the second term, and how they will keep winning until conservatives wake up and fight back.

Character assignation: Recall the way George Bush was treated in the second half of his presidency. Village idiot. Liar. Hitler. Now one might assume that this was an overreaction to an unpopular war. But the anti-war, anti-Patriot Act and anti-Gitmo movements evaporated over night when Obama won. Obama replaced waterboarding with remote control death. No anti-remote control death movement emerged.

Some of this can be attributed to people simply giving Obama time to unwind the wars. But some of it was manufactured outrage. Just like Obama’s manufactured outrage in debate #2 that was offered rather than information on dead Americans in Libya.

But the next assignation, Sarah Palin, can’t. Obama was clearly ahead in the polls when Palin arrived on the scene. Taking no chances, the left set aside their historic crusade against misogyny and set out to destroy the entire Palin family. The attacks on Bristol Palin were especially vulgar and cruel. That the left was able to effectively use the “war on women” meme 4 years later demonstrates an impressive level of ruthlessness and hypocrisy.

Herman Cain got the message pretty quickly. Drop out or have your family destroyed in public. No matter than Herman was black. And threat to the liberal establishment will be destroyed.

Romney got $300,000,000 worth of negative ads. “Romney: He’s Not One of Us” style ads.

The democrats have a formula. They keep decent people from running by making the personal cost very high. And it works.

Propoganda: Men oppress women. Whites oppress blacks. Businessmen oppress everyone, because they are greedy and uncaring. The Tea Party is racist. Fox news viewers are dumb. Southerners are dumb. And racist. Midwesterners are dumb. And violent. Christians are dumb oppressors. Oil is evil. Government is kind. Government is scientific. Government is fair. Government is efficient. Government is the defender of the weak against the oppressors.

These messages are repeated often. Without evidence. They are woven into movies. Into comedy. They are reinforced in schools.

And it works. Brainwashing works.

Lies: The Obama administration, and Obama himself, lie with ease. Indeed one of the great Obama skills is the ability to say things that sound both completely reasonable and believable to casual listener, and absurd to the informed listener. The worst of the lies are probably not the most blatant ones, that he will only accept public campaign financing, he will cut the deficit in half, “I will not sign a bill that adds one dime to our deficits – either now or in the future”, he hasn’t raised taxes, Fast and Furious was a Bush era program, the GOP wants to increase military spending, Romney’s tax cut is hike on the middle class, that there no evidence that Benghazi was a terrorist attack, and many others.

The most damaging lies are the ones where Obama presents a position “held” by conservatives that is in fact held by nobody because it is ridiculous. He states that the GOP “wants dirtier air” and that “we’re told by our opponent that since the government can’t do everything, it should do almost nothing”. Obama clearly hangs with a very odd and rare crowd of conservatives. Perhaps they are from the South. Or the Midwest.

Now that the dirty campaigning has worked, the democrats are again whitewashing history to make it seem that they were the gracious voices, driven, perhaps, to flight hard only because “everyone does it”.

Believe it at your peril. Which is of course the intent.

Mike.

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