Morning Reading

A few articles you may’ve missed this week that are worth your time:

William Anderson wrote an excellent article on the demise of ESPN.

Pater Tenebrarum outlines the faltering money supply and credit growth and what it means in Moving Closer to the Precipice.

JP Morgan sounds the alarm on the debt and warns on a financial crisis (the same week the Federal Reserve warned on a financial crisis  as well). Did you see this in the mainstream media? Probably not.

Mark Yusko also warned on a financial crash citing demographics as destiny.

Michael Snyder wrote Handout Nation in regard to the ever increasing enrollment in government assistance programs.

Meanwhile USA Today reported on household debt exceeding the levels it reached in 2008.

All worth your time…

Write A Check, Mr. Zuckerberg

Mark Zuckerberg this last week called for Universal Basic Income during a commencement speech he gave at Harvard.

Here is the question for Mr. Zuckerberg – why don’t you write a check? Simple as that. If this is what you believe the right thing to do is – then sit down and write the check and it will be off and running. In reality, Mr. Zuckerberg has no actual interest in doing that – he has considerable interest in the government borrowing the money to do so and no doubt personally growing even wealthier from investing in the financialization of the credit provided to fund such a thing.
We will all grow poorer while Mr. Zuckerberg and his friends grow wealthier – but the greed is draped in compassion hence it will be popular.
Sometimes societies just collectively go insane…

Buy Buy Buy

The Federal Reserve warns about ‘financial instability.’

Buy Buy Buy

Hard data crashes.

Buy Buy Buy
Soft data crashes.
Buy Buy Buy
Chinese credit rating lowered.
Buy Buy Buy
Trump presents a budget.
Buy Buy Buy
Trump budget DOA.
Buy Buy Buy
War with ISIS?
Buy Buy Buy
War with North Korea?
Buy Buy Buy
Anyone else see what is lining up here?

Our Situation

The United States has a serious and perhaps lethal problem – debt. We are the people rolling over our credit cards to new credit cards with the introductory rate every month in order to avoid making the payments that we do not have the money to make. We have promised far more than we can deliver. As Charles Hugh Smith point out yesterday, “$20 trillion at 5% interest requires an annual interest payment of $1 trillion–one-third of all federal revenue. $30 trillion at 10% interest would consume 100% of all federal tax revenues, leaving nothing for all the programs, obligations and promises of the central state.”

This does not include what is conservatively believed to be an additional $80 trillion in debt that the United States owes which is off the books (debt the Federal government chose to stop counting in the 1960’s because it was politically inconvenient to do so). Over a hundred trillion dollars in debt, everything in. This is just out and out theft, stealing from your children and grandchildren and if you are young enough from yourself.
Note that this number does not include city, district, county and state debt.
Trump has released a budget plan that cuts the welfare state considerably. It has zero chances of passing. Even then the Trump plan takes ten years to just balance and that ‘balance’ does not include the debt which is off the books – debt which is now accumulating at an annual rate which exceeds the entire Federal budget itself. It is a bad joke. Yet if DC attempted to actually honestly balance the budget there would be guillotines – people want what they were promised.
We have created a fictional universe which is underpinned by our ability to (digitally) print endless quantities of dollars, introduce those dollars into the system as credit and place near zero interest rates on that credit. This system requires that interest rates never rise and the budget never balance or there will be riots in the street and revolution in the air. In the meantime zero interest rates continue to savage savers and pension plans thereby making it harder and harder to retire therefor placing greater burdens on the government and accelerating the problem. All equilibrium has been lost.
The ‘Let us just raise taxes” argument is null and void – the people making that argument vastly overestimate how many tax dollars are out there to be seized and vastly underestimate the actual debt. If you were to tax everyone making $200,000 or more per year and take everything they had – real estate, brokerage accounts, cars, art, everything – you would still be about $5 trillion short on balancing the actual accumulation of debt each year. There is simply no way to tax this to balance and any argument that you can tax this to balance is disingenuous in the extreme.
Where does this all end? The most likely out come is the monetization of the debt, i.e. printing money to pay bills as they come due. I am no soothsayer but monetizing the debt will be universally unpopular with everyone excepting those who would be facing guillotines if they cannot pay the bills. Monetizing the debt will not last long. After that? Probably something akin to guillotines. There will be endless unhappy people.

You and I are Unspeakably Wealthy.

Every once in a while, I think about the incomprehensible material wealth of modern society. The way you and I live. That’s vague and lofty, so let me be more specific.
 
I had a bowl of beef stew for lunch. I sat reading articles longer than I intended so the bowl dried kind of brown and hard. I put it in the sink, turned on the hot water, let it flow and overflow, and then then grabbed the dishbrush to scrub away the crust. Simple.
 
But that quart or or two of hot water had to first come to me clean through delivered pipes, and then be heated, and sit in a tank, just waiting for me to turn a knob. Any impoverished waif could do it. But, how miraculous is that process?
 
Billionaire John D. Rockefeller would have had to expend far greater resources to get a clean-ish bowl placed in the sink. A servant would have had to draw water from the well. There would have to be a kettle boiling, or at least simmering.That would have taken another servant to relay some wood or load some coal to the iron stove. And smoke would filter through the house.
 
John D might have been the richest man in the world or close, but his life was a campout compared to ours. Would you rather be a billionaire in the early 20th century or a commoner today?

The Corruption Of The Welfare State

A report from the Federal Reserve was issued late last Friday – Report on the Economic Well-Being of U.S. Households. To quickly summarize the report it is alleged from the data collected that 28% of the respondents claim that their income for the last twelve months was less than $28,000, 44% claim they would not be able to cover an unexpected $400 expense, 23% claim they cannot pay all of their monthly bills and 25% claim they regularly skip medical treatments because they cannot afford it.

This is a problem, this is a major problem. These numbers constantly get worse and worse. Let us look at why it won’t get better.

The American Left, as much as they crow about inequity and wealth distribution and the evil 1%, are almost wholly responsible for this situation not being repaired. Let me explain to you why that is. The welfare state as we know it exist almost entirely due to credit. If the credit were to vanish the welfare state would also vanish within hours – for the continued existence of the welfare state depends on that credit being available day after day after day.

Most American Leftist tend to think the method by which wealth is transferred within the welfare state is that the government takes ten dollars out of their paycheck and gives two dollars to this person in need and two dollars to that person in need and so on and so forth.

That is not how it works. There are nowhere near enough tax dollars to pay for the welfare state that has been created. The welfare state runs of off never ending credit – credit that is consequently financialized via rehypothecation and collateralization and Credit Default Swaps and any number of instruments. What this adds up to is a perpetual bleeding out of the wealth from the poor and middle class to the top 7%.

During the eight years of Obama the poor lost 45% of their net wealth, the middle class lost 30% of their net wealth but on average billionaires doubled their net wealth.

The American Left let this genie out of the bottle and they have no means by which to get it back in the bottle without also destroying the welfare state they so cherish. There is a reason that you only ever hear Leftists address fiscal policy (taxes and spending) and ignore monetary policy (where the actual wealth transfer to the 7% takes place). There is a reason that nearly all of the super wealthy are in favor of the welfare state and constantly argue to expand the welfare state – the credit required to fund the welfare state is free money to the wealthy. I am well aware that Bernie Sanders and Elizabeth Warren are never going to bring this up just as I am aware that MSNBC is never going to explain to their viewers how the welfare state is nothing more than a wealth transfer to the 1% via monetary policy – but that is what it is.

The more you know…

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