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Death By Debt

Wednesday, June 8, 2011, 10:50 AM

One of the conclusions that I try to coax, lead, and/or nudge people towards is acceptance of the fact that the economy can't be fixed.  By this I mean that the old regime of general economic stability and rising standards of living fueled by excessive credit are a thing of the past.  At least they are for the debt-encrusted developed nations over the short haul -- and, over the long haul, across the entire soon-to-be energy-starved globe.

 

The sooner we can accept that idea and make other plans the better.  To paraphrase a famous saying, Anything that can't be fixed, won't. 

The basis for this view stems from understanding that debt-based money systems operate best when they can grow exponentially forever. Of course, nothing can, which means that even without natural limits, such systems are prone to increasingly chaotic behavior, until the money that undergirds them collapses into utter worthlessness, allowing the cycle to begin anew.

All economic depressions share the same root cause. Too much credit that does not lead to enhanced future cash flows is extended.  In other words, this means lending without regard for the ability of the loan to repay both the principal and interest from enhanced production; money is loaned for consumption, and poor investment decisions are made. Eventually gravity takes over, debts are defaulted upon, no more borrowers can be found, and the system is rather painfully scrubbed clean. It's a very normal and usual process.

When we bring in natural limits, however, (such as is the case for petroleum right now), what emerges is a forcing function that pushes a debt-based, exponential money system over the brink all that much faster and harder. 

But for the moment, let's ignore the imminent energy crisis.  On a pure debt, deficit, and liability basis, the US, much of Europe, and Japan are all well past the point of no return.  No matter what policy tweaks, tax and benefit adjustments, or spending cuts are made -- individually or in combination -- nothing really pencils out to anything that remotely resembles a solution that would allow us to return to business as usual.

At the heart of it all, the developed nations blew themselves a gigantic credit bubble, which fed all kinds of grotesque distortions, of which housing is perhaps the most visible poster child.  However, outsized government budgets and promises, overconsumption of nearly everything imaginable, bloated college tuition costs, and rising prices in healthcare utterly disconnected from economics are other symptoms, too. This report will examine the deficits, debts, and liabilities in such a way as to make the case that there's no possibility of a return of generally rising living standards for most of the developed world.  A new era is upon us.  There's always a slight chance , should some transformative technology come along, like another Internet, or perhaps the equivalent of another Industrial Revolution, but no such catalysts are on the horizon, let alone at the ready.

At the end, we will tie this understanding of the debt predicament to the energy situation raised in my prior report to fully develop the conclusion that we can -- and really should -- seriously entertain the premise that there's just no way for all the debts to be paid back.  There are many implications  to this line of thinking, not the least of which is the risk that the debt-based, fiat money system itself is in danger of failing.

Too Little Debt! (or, Your One Chart That Explains Everything)

[Note: this next section is an excerpt from a recent Martenson Blog entry, so if this seems familiar to any site members, it's because you've seen it before.]

If I were to be given just one chart, by which I had to explain everything about why Bernanke's printed efforts have so far failed to actually cure anything and why I am pessimistic that further efforts will fall short, it is this one:

 

There's a lot going on in this deceptively simple chart so let's take it one step at a time.  First, "Total Credit Market Debt" is everything - financial sector debt, government debt (federal, state, and local), household debt, and corporate debt - and that is the bold red line (data from the Federal Reserve). 

Next, if we start in January 1970 and ask the question, "How long before that debt doubled and then doubled again?" we find that debt has doubled five times in four decades (blue triangles).  

Then if we perform an exponential curve fit (blue line) and round up, we find a nearly perfect fit with a R2 of 0.99.  This means that debt has been growing in a nearly perfect exponential fashion through the 1970's, the 1980's, the 1990's and the 2000's.  In order for the 2010 decade to mirror, match, or in any way resemble the prior four decades, credit market debt will need to double again, from $52 trillion to $104 trillion. 

Finally, note that the most serious departure between the idealized exponential curve fit and the data occurred beginning in 2008, and it has not yet even remotely begun to return to its former trajectory.

This explains everything.

It explains why Bernanke's $2 trillion has not created a spectacular party in anything other than a few select areas (banking, corporate profits), which were positioned to directly benefit from the money.  It explains why things don't feel right, or the same, and why most people are still feeling quite queasy about the state of the economy.  It explains why the massive disconnects between government pensions and promises, all developed and doled out during the prior four decades, cannot be met by current budget realities.

Our entire system of money, and by extension our sense of entitlement and expectations of future growth, were formed during and are utterly dependent on exponential credit growth.   Of course, as you know, money is loaned into existence and is therefore really just the other side of the credit coin.  This is why Bernanke can print a few trillion and not really accomplish all that much, because the main engine of growth expects, requires, and is otherwise dependent on credit doubling over the next decade.

To put this into perspective, a doubling will take us from $52 to $104 trillion, requiring close to $5 trillion in new credit creation each year of that decade.  Nearly three years has passed without any appreciable increase in total credit market debt, which puts us roughly $15 trillion behind the curve.

What will happen when credit cannot grow exponentially?  We already have our answers; it's been the reality for the past three years.  Debts cannot be serviced, the weaker and more highly leveraged participants get clobbered first (Lehman, Greece, Las Vegas housing, etc.), and the dominoes topple from the outside in towards the center.  Money is dumped in, but traction is weak.  What begins as a temporary program of providing liquidity becomes a permanent program of printing money needed in order for the system to merely function.

Debt and Europe

The debt situation in Europe is fairly typical of the developed world and mirrors the debt chart of the US seen above.  There's entirely too much debt, and most of the unserviceable amounts are concentrated in certain spots (i.e., PIIGS), while the amounts owed are concentrated in the German, French, and British banks.

This New York Times graphic did an excellent job of summing everything up:

(Source - click to view larger graphic at source

Here is a slightly less-complicated image that expresses the same dynamic:

 

If everybody owes everybody else, then kicking the can down the road only works if there's more wealth, more growth, and sufficient economic activity down that road to service the past debts. If any one participant drops the baton in the debt relay race, the absurdity of the situation becomes unavoidable and the cause is lost.

When we hold this view, it is abundantly clear that adding more debt along the way only increases the burdens and is therefore ultimately counterproductive, although it does grant the gift of additional time to avoid facing the truth.  

When all of the most indebted countries are stacked up, we see that all but Russia carry a total indebtedness greater than 100% of GDP and that nine are carrying debt levels higher than any that have ever been repaid historically.

(SourceNote: 260% debt-to-GDP is the all time record for repayment, accomplished by England between 1815 and 1900, but required both massive cuts in spending and an industrial revolution. 

Without mincing words, the world does not face a crisis of liquidity, nor a crisis of insufficient debt, but one of entirely too much debt.  That's the entire predicament in three words:  too much debt

More debt is only going to compound the predicament, yet that is what the world's central banks and political structures are busy manufacturing.  More debt.

Of course, debt is only one component of the story; there are also liabilities to consider.  The above chart merely graphs the legally defined debts involved.  If we bother to add back in the liability components, which are pensions, social security and government medical plans, the predicament is seen to be three to six times larger: 

Whereas the prior chart showed all debts incurred by all sectors of each nation, the above chart only displays government debt and liabilities.  For reference, the red bars, above, are the amounts that you read about in the paper when commentators note that the US, for example, still has a debt-to-GDP ratio that is under 100%. It's a comforting tale, but not an accurate description of the situation.

Again, there are no historical examples of any country ever digging itself out from so deep a hole, and yet we find that the entire developed world has bravely pushed itself deep into unknown territory, seemingly without any serious discussions about whether or not this made sense.

Where We Are Now

So here we are, just a few weeks away from the end of the second round of quantitative easing (QE II) , with massive public debts and liabilities having only grown larger instead of shrinking during the Great Recession, everybody in nearly the same boat, and no clear plan for how all the sovereign debts will be funded from current productive cash flows (i.e., existing GDP).

This is why so many commentators, myself included, are convinced that more thin-air money printing is on the way. My thesis, laid out back in early March is that the Fed will stop QE II on schedule and that the financial markets will react exceptionally poorly to this loss of support. Commodities will tank first, then stocks, then bonds; from riskiest and most-leveraged to least.

It is time to face the music; the levels of indebtedness now require permanent support from thin-air money in order to avoid a deflationary collapse. Given this reality, we explore key questions in detail in Part II of this report: Understanding the Endgame:

  • How will the global debt crisis play out?
  • What does a world economy without growth look like?
  • What steps should we, as individuals, need to take in preparation?
  • How can investors safeguard their purchasing power during the coming rout in the finanical markets?

Click here to access Part II of this report (free executive summary; paid enrollment required)  

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97 Comments

Bytesmiths's picture
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Minor Nit?

Perhaps this is just a minor nit, but the problem isn't debt so much as it is interest.

The three major western religions all used to forbid interest on debt, and had periodic "debt jubilees," sort of a general bankruptcy. Without interest -- especially compounded interest -- debt is not such a bogeyman.

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Without interest there would be no debt (or very very little).

Bytesmiths wrote:

Perhaps this is just a minor nit, but the problem isn't debt so much as it is interest.

The three major western religions all used to forbid interest on debt, and had periodic "debt jubilees," sort of a general bankruptcy. Without interest -- especially compounded interest -- debt is not such a bogeyman.

The problem is without interest you have no debt.  Not necessarily a bad thing, but it does make it harder to do big things when you have to save to get them.   Without interest who would risk their hard earned savings with no reward but all the risk of losing it when it's not paid back?

"debt jubilees" are simply large society wide defaults.  Once you get to the realization that it's all going to collapse, who do you save?  The lenders (few) or the borrowers (many)?

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1st Class

Dr. M,

This is one of the most to-the-point, and approachable reports you've put out since the Crash Course itself.
All my gratitude for tying this stuff together in such a cogent and simple fashion.

Cheers,

Aaron

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From One Pocket To Another...

Thank you for a really great analysis. I've already started sharing this article amongst my friends. Hopefully some will want to become enrolled members.

One thought I had while reading this - and obviously it doesn't really make the grim picture anywhere near bright enough to save the day - but I always wonder... How much of the total personal, local, state, national, international debt is debt that can be dissolved if another debt is repaid?

And by that I mean, suppose people owe money on homes, and if they pay up,  an investor that lent the money is able to repay loans taken out to invest that money, and the institution that gave out that loan to the investor is paid, and thus they are able to make up pension obligations to a fund, etc. going on in a circular, incestuous manner.

Now obviously it's wrong to just print money out of thin air. And two wrongs don't make a right. But since the Fed was printing - it seems to me that at least a little of the massive generations-built, exponential overhand of debt might have seen some reduction if Fed had instead given trillions to those at the bottom of the chain to ignite the spark of repayment, to get a debt-dissolution cycle rolling - not to the favored entities at the top of the chain, which doesn't do anything for anyone else further down that chain... Anyways, a moot point.

Poet

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Debt

Lotsa debt, but how did it arise? Somebody got all that money, unless people were sitting around burning trillions of dollors of currency.

Poor people? Nope, they're still poor. The money isn't there.

Middle Class? Nope, most of them live paycheck to paycheck, or maybe have a few months cushion.

Rich people? BINGO!

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We have all partied hard....

ProudCorporateTool wrote:

Poor people? Nope, they're still poor. The money isn't there.

Middle Class? Nope, most of them live paycheck to paycheck, or maybe have a few months cushion.

Nearly all of it consumptive debt.  So yes, people are naturally poorer since they used it for fun instead of future production.  How about large screen televisions, surround sound systems, new kitchens, houses, cars, ipads, ipods, vacations, ...  The list goes on and on, and a whole lot of that was done by middle and lower classes through the magic of debt.   Then you also have all the pensions, food stamps, medical programs, solar subsidies, grants, educational loans, wars - also much of that to benefit the middle and lower classes. 

So, everyone benefited, the rich benefited more because they didn't need the money to spend on consumption, so it went into investing, buying production, and making even more loans to others.  But we, meaning all of us, particularly western cultures, have benefited immensely from pulling future consumption into the present.  

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Now We're Talking!

Dr.M wrote:

If everybody owes everybody else, then kicking the can down the road only works if there's more wealth, more growth, and sufficient economic activity down that road to service the past debts. If any one participant drops the baton in the debt relay race, the absurdity of the situation becomes unavoidable and the cause is lost.

Just beautiful!

Thanks for the great write-up.

Best....Jeff

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Alpha Mike wrote: Dr.

Alpha Mike wrote:

Dr. M,

This is one of the most to-the-point, and approachable reports you've put out since the Crash Course itself.
All my gratitude for tying this stuff together in such a cogent and simple fashion.

Cheers,

Aaron

What Aaron said.  Chris has an amazing ability to mine tons of data ore and refine it to pure gold nuggets of useful information.

Travlin 

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System Corrupt

"this means lending without regard for the ability of the loan to repay both the principal and interest from enhanced production; money is loaned for consumption, and poor investment decisions are made."

The system is corrupt when the same people lending the money also are betting or selling those failed loans for another set of profits, yet transfer the risks to the tax payers because they whine to the government that their "too big to fail."  Something's seriously flawed.   We're being hijacked by the unfettered greed that we as a society has allowed so blindly in the trival pursuit for the American Dream.  That carrot stick got old long ago for me.  As an economic novice, I was observant enough to recognize this BS long ago and stopped playing the great American Deficit game.  I've been free of credit card debt for over 11 years...feels liberating not to be beholden to the banks) and owe no one except the student loan that I will be unfortunately paying off until the day I die.  Saving is my motto, perhaps why the economy sucks cause I'm not buying anything...I'm saving for harder times to come.  Capitalism in it's current debt-driven form is unsustainable and like all great Empires before ours have failed so too shall ours. 

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China Warns U.S. Debt-default Idea is "Playing with Fire"
   
China Warns U.S. Debt-default Idea is "Playing with Fire"
 
By Emily Kaiser
 
June 08, 2011"Reuters" - --SINGAPORE - Republican lawmakers are "playing with fire" by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China's central bank said on Wednesday.
 
The idea of a technical default -- essentially delaying interest payments for a few days -- has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.
 
But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.
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Hall of Mirrors

Upon their triumphant return to the Emerald City and the Wizard's chamber, Toto opens a curtain, revealing the Wizard to be an ordinary man (Frank Morgan) operating a console of wheels and levers while speaking into a microphone

http://en.wikipedia.org/wiki/The_Wizard_of_Oz_(1939_film)

The Prince of Illusions.

Let me see. Everyone owes everyone else a huge amount of computer digits? Dont you get it? It is a Cosmic Joke.

It is the physical constraints that will get us in the end.

Meanwhile we obsess about this abstraction. This obsession will have acute consequences. It will make graphs jiggle up and down like (UU).Cool

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Gross debt misleads

Look at net debt Chris... Japan on a net basis is one of the largest creditors in the world as a % of gdp. If one government agency owes a trillion and the other owns it, whats the use in focussing on the former.

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ny times source shaped as pentagon and star of david

hmmm,  the flow of money in the NY times article is the shape of the star of david...hmmm  are they trying to TELL US SOMETHING????????

The Central Banks (banksters) have been doing this to countries for thousands of years...its the same game. 

Thomas Jefferson said:

"If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered."

outstanding article,  we america wake up?  Please God please.

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DEUS X MACHINA

DEUS X MACHINA wrote:

hmmm,  the flow of money in the NY times article is the shape of the star of david...hmmm  are they trying to TELL US SOMETHING????????

I think the Star of David has 6 points, the NYT article shows 5........hmmmm

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The lighter side of dark

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Thomas Jefferson "quote"

That quote from TJ is bogus. Not that I disagree with the content, but there is no evidence TJ ever wrote/said it.

http://www.snopes.com/quotes/jefferson/banks.asp

From http://www.monticello.org/site/jefferson/private-banks-quotation:

"The first part of the quotation ("If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered") has not been found anywhere in Thomas Jefferson's writings..."

DEUS X MACHINA's picture
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oops the masons use that one

masons use that star...my bad

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thomas jefferson

I don't care who said it...it's the TRUTH!

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Sorry, gotta call out an ignorant comment

DEUS X MACHINA wrote:

hmmm,  the flow of money in the NY times article is the shape of the star of david...hmmm  are they trying to TELL US SOMETHING????????

What is the NY Times trying to tell us DEUS X MACHINA?

Oh by the way...this is a star of David, perhaps you'd like to see it in yellow?

EDIT: Your correction crossed my post but agree, send this kind of stuff to controversial topics. 

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Digression

Maybe we should allow this thread to get back on track. This conversation doesn't seem to do justice to the original work. Deus Ex, your speculation is way off kilter, and you'll find that the appropriate place for these types of things is the Controversial Topics folder.

Unless you care to back your assertions with some hard evidence.

Cheers,

Aaron

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I SEE IT EVERY DAY

That star is on every dollar bill in this country...don't bother.

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DEUS X MACHINA wrote: I

DEUS X MACHINA wrote:

I don't care who said it...it's the TRUTH!

"The problem with quotes on the Internet is that it is hard to verify their authenticity"   - Abraham Lincoln

A. M.'s picture
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Honest Abe

DIAP

LMAO!!!
I love it!

Deus Ex, read more.
You can tell us until you're blue in the face what appears where - without some sort of proof of neferious goings on, it's moot - and the appropriate place for it is the CT folder. Go there now, start a new thread, and educate us all.

Cheers,

Aaron

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Total US Credit market debt chart

Add a mark where we went off the gold standard and all becomes clear.

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Zero sum game

You missed my point (and the simple truth about the economy). Money is a zero sum game. If you spend it, it goes to somebody else. Your flat screen TV doesn't have $500 locked up in it - the $500 went to the maker. The money spent on the vacation isn't locked up in pictures or something - it went somewhere. The money that "undeserving" people who got a mortgage based on mortgage brokers cooking their application numbers so the broker could collect huge fees went somewhere.

My point stands. The money is sitting in the billionaires & millionaires bank accounts. All we need to do is loosen up all that dough via taxation. Maybe we can go back to America's Golden Age, the 1950's, when the top marginal tax rate was 91.7% Amazingly, even with those "terrible!" tax rates, there were still lots and lots and lots of millionaires around.

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quotes

If it's so "truthful" why do people have to lie about Jefferson saying it? LOL

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ProudCorporateTool wrote:You

ProudCorporateTool wrote:
You missed my point (and the simple truth about the economy). Money is a zero sum game. If you spend it, it goes to somebody else. Your flat screen TV doesn't have $500 locked up in it - the $500 went to the maker. The money spent on the vacation isn't locked up in pictures or something - it went somewhere. The money that "undeserving" people who got a mortgage based on mortgage brokers cooking their application numbers so the broker could collect huge fees went somewhere. My point stands. The money is sitting in the billionaires & millionaires bank accounts. All we need to do is loosen up all that dough via taxation. Maybe we can go back to America's Golden Age, the 1950's, when the top marginal tax rate was 91.7% Amazingly, even with those "terrible!" tax rates, there were still lots and lots and lots of millionaires around.

Jim Puplava has spoken about this point extensively.  In the 1950's, no one paid 91.7% of their income in taxes.  Numerous tax breaks were available in that period of time so the effective tax rate was substantially lower.

Nate

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Nate

Nate wrote:

ProudCorporateTool wrote:
You missed my point (and the simple truth about the economy). Money is a zero sum game. If you spend it, it goes to somebody else. Your flat screen TV doesn't have $500 locked up in it - the $500 went to the maker. The money spent on the vacation isn't locked up in pictures or something - it went somewhere. The money that "undeserving" people who got a mortgage based on mortgage brokers cooking their application numbers so the broker could collect huge fees went somewhere. My point stands. The money is sitting in the billionaires & millionaires bank accounts. All we need to do is loosen up all that dough via taxation. Maybe we can go back to America's Golden Age, the 1950's, when the top marginal tax rate was 91.7% Amazingly, even with those "terrible!" tax rates, there were still lots and lots and lots of millionaires around.

Jim Puplava has spoken about this point extensively.  In the 1950's, no one paid 91.7% of their income in taxes.  Numerous tax breaks were available in that period of time so the effective tax rate was substantially lower.

Nate

Unfortunately, the tax breaks still exist, but the brackets are much lower.  Plus, the wealthy don't make much in taxable income, it's all capital gains.

Doug

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ProudCorporateTool wrote:You

ProudCorporateTool wrote:
You missed my point (and the simple truth about the economy). Money is a zero sum game. If you spend it, it goes to somebody else. Your flat screen TV doesn't have $500 locked up in it - the $500 went to the maker. The money spent on the vacation isn't locked up in pictures or something - it went somewhere. The money that "undeserving" people who got a mortgage based on mortgage brokers cooking their application numbers so the broker could collect huge fees went somewhere. My point stands. The money is sitting in the billionaires & millionaires bank accounts. All we need to do is loosen up all that dough via taxation. Maybe we can go back to America's Golden Age, the 1950's, when the top marginal tax rate was 91.7% Amazingly, even with those "terrible!" tax rates, there were still lots and lots and lots of millionaires around.

What about all the money the banks make by charging interest on loaning an asset they neither own nor hold?

I know quite a few millionaires who earned their wealth legitimately. 

I also think it's complete bullshit that the government feels that other people are entitled to what I earn.

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dollar crash

I don't see how the dollar could crash any further even with more printing because CREDIT will collapse faster.  If the bond market crashes, interest rates will be too high to borrow and borrowers on VARIABLE rate interest will be destroyed.  We cannot afford to have our creditors turn off the spigots.  I see DEFAULT on the debt as our only option

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Of rich men and potatoes.

Isn't the internet wonderful? I can take issue with anyone and not have my lights punched out. I shall resist the temptation and take issue with the facts.

Dogs said:

I know quite a few millionaires who earned their wealth legitimately. 

I also think it's complete bullshit that the government feels that other people are entitled to what I earn.

The first statement has to be challenged.

My boss is whinging like a stuck pig about how much money I extort from the company, got through hard negotiation by my Union. And the other debt slaves in this country would agree with him. So, If I am making a lot of money through hard work, long hours and a muscular Union; How long would a millionaire have to work to get a million at my (High) rate of pay? Answer : several lifetimes and then some with no misfortune along the way.

So how did he get rich? He got rich by risking other peoples money. He has his hand in everyone elses pocket. He is skimming the system that is maintained and run by the peons. I can quote numerous examples of people who innovate and are a valuable asset to their civilization, but how hard would Billy Gates have to work in order to be able to look me in the eye and say " I worked hard for every penny I own. And by the way, your rate of pay is exorbitant." 

My ex-brother-in-in law was a self made man. He worked very hard. But did he work that hard? No I mean truely. No, he risked another man's money. (Who probably made it by risking another man's money, who got it by skimming the system  etc.)

I have in mind the starving children of the Irish Potato Famine. Call me a sentimental old fool if you will, but I just do not have the stomach for it. So I pay my taxes and support the system.

And make preperations for me and mine to weather the storm.

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Michael Ferguson
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I disagree with your analysis

Your graph on the total U.S. Credit Market Debt is impressive.  However, I'm not sure that it is very informative.  What is relevant is not the growth in the absolute debt, but rather how does this debt compare as a percent to GDP?  During the period from 1970 to 2006, you show the total debt increasing 16X and during that time GDP increased ~13X.  In other words, debt to income increased some, but not dramatically.

Your next graph is a bit more troubling.  However, aggregating debt of various types does not necessarily give us a useful measure.  In the case of government debt, in the U.S. it was higher as a percentage of GDP after WWII.  But sustained inflation decreased it into insignificance by the early 1990's.  This was done without surplus budgets.  Rather, it was done simply by keeping the deficit below inflation rate + GDP growth.  The recent propensity of the Federal Reserve to purchase Treasuries is a game changer as well.  If this is a long term change in monetary policy, it defangs much of the concern over Federal Debt.

Corporate debt, on the other hand, is not directly tied to GDP, but rather to retained equity and asset to debt ratios.  Corporate America is now surprisingly liquid, with enormous coffers full of cash.  They could pay off much, in some cases all, of the debt, but they won't in these uncertain markets.  I can't blame them.  They may need it in the future and its availability is uncertain.

Consumer debt was at a historically high level, but it is coming down.  With increasing mortgage defaults, general bankrupcies and the dedication of many families to debt reducing austerity programs, the consumer debt market, by and large, is not looking good.  But, in the long term, it is healing itself.

As I'm sure you know, in the U.S. the debt of financial institutions is rather fictitious.  Because it is tied to equity through reserve requirements, the healthier the bank, the larger the debt.  Large financial institution debt, due to the reserve requirement regulation, is actually a sign of a healthy debt market.

What your graph does demonstrate clearly is that the various nations are in significantly different places debt-wise.  What will happen when debt can't grow exponentially?  Debt does and always will grow exponentially, because the GDP that drives it grows exponentially.  It has been growing faster than GDP and, therefore, either GDP must grow faster or the growth in debt will need to take a breather as measured as a percent of growth in GDP.  Actually, mostly, the former will happen.

In the final analysis, growth in GDP per employed person must match growth in GDP or one of two things must happen.  If GDP per employed person is growing faster than GDP, then unemployment will increase.  If GDP per employed person is growing slower than GDP, we will reach full employment and GDP growth will be labor constrained.  What has been happening for quite some time is that GDP per employed person has been growing faster than GDP. 

In fact, if we produced our 2010 real GDP with the 2001 real GDP per employed person rate, we would be employing every person who is currently officially unemployed, every person who is not officially unemployed but who could be convinced to work and we would still be shy about 12,000,000 workers.  In other words, all unemployment, measured against 2001, is technological unemployment.  Furthermore, real GDP per employed person, over the 2007 to 2010 time frame, grew at an annual rate of 3.6%.  This is a very large part of the reason that the economy has recovered but the unemployment rate has not fallen.  If we get back to full employment, our GDP would gain about 5.5%. 

Lastly, if you talk to anyone in robotics, expert systems and artificial intelligence, they will tell you that there is an enormous backlog of unimplemented capability that will increase the real GDP per employee at an even faster rate in the near future.

What does this all mean?  It means that any consideration of debt that assumes a long term GDP growth in the 2.5% to 3.0% (which is virtually everyone) is going to be very, very wrong.  At an absolute minimum we should be expecting a couple of decades of 4.0%+ growth and probably significantly more.  The issue dominating the public discourse will be substantial and accumulating technological unemployment.  However, it is currently at 9.0% in the U.S. and it cannot get much higher before action will need to be taken.  When it does, unless that action is to outlaw robotics and office automation, the GDP will skyrocket and the debt will become manageable.  In reality, the likely action will be monetary in nature. 

A very cursory treatment of a very complex analysis.

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No Default

The US Government will not default. I have nothing to back up this statement other than my own human nature.

If I was deeply in debt and sinking into a hole of debt and could not get out, and I had a machine in my house to legally print money, I would slowly and quickly print my way out of debt to save myself.

I would asume our government would think the same way, unless there is a New World Order that needs to be established and has been planned and decreed, then a default would be a  good and timely event., Then a  new monetary exchange system could be put into place to alleviate the broken one. Until then I think the Feds will keep printing their way out of debt.

If you need to, go ahead and copy and paste this into the controversial topics forum.

Tom

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Not all rich people skimmed from others.

ArthurRobey wrote:

So how did he get rich? He got rich by risking other peoples money. He has his hand in everyone elses pocket.

This is not the case for many small businesses.  I worked my butt off for 10 years - like 80 hr. weeks and my partners and I paid our employees before we took anything, and often each month we got nothing.  Many small business millionaires took large risks, and low pay for a very long time for a delayed return.  Had I simply worked at a salaried job for those 10 years and saved a fair amount I would have ended up only slightly less well off, had a much easier life, and not near the stress or risk.  Many small business owners do the same, some make it big, some loose it all.  It's quite easy for folks who have never run a small business to think it's all easy and never realize the huge sacrifices and risk taken to hopefully come out better later.

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Dogs_In_A_Pile wrote: I

Dogs_In_A_Pile wrote:

I also think it's complete bullshit that the government feels that other people are entitled to what I earn.

I think that depends on how much you make (if you make less than say $60,000 I agree with you). I also think that this debate over who works harder -- union workers versus business entrepreneurs -- and therefore, who "deserves" the money more, depends on how the money is made, and that of course varies widely. Unfortunately I think there is a lot of ideological baggage left behind by the free market worship that has dominated recent capitalist theories (typified in the Austrian school), which purports that no matter how the money is made, as long as it is made in the free market, then it was made legitimately, because ultimately, the free market will sort it all out and things will even out to their maximum efficiency due to the wonderful supply / demand curve (and all of its inherent assumptions which turn out to be highly tenuous). Of course this Austrian approach is overly simplistic and does not in any way acccount for externalties or energy, or the workings of any other biophysical processes underlying how economies actually work, so it's basically false. Therefore, there is indeed a difference between a banker making money by skimming and ripping unsuspecting people off, even if it is done so in the "free market", versus a hypothetical entrepreneur who makes money (in the free market) by devising a new gadget that improves energy efficieny by 40% and therefore he reaps monetary rewards from this as everyone buys his product.

I think it is entirely reasonable (and necessary) to presume that someone who owns billions of dollars of assets should be paying very high taxes to the government so that others can be entitled to a large portion of that wealth. In this day and age there should be no billionaires. They should be taxed back down to reality, regardless how they made that money; otherwise we have the wealth concentration problem, which in the past was addressed by outlawing "usury" (the making of interest off money, which leads to wealth concentration because the more money you have the more money you make). Usury is still banned in Muslim cultures. Economists believe that they have now solved the wealth concentration problem so that the rich can get richer, but at the same time the poor can also get richer by participating in the creation of new wealth, and this new wealth comes from a growing economy. Of course, on a real inflation-adjusted basis, our economies aren't growing, and it seems likely that they never will again ever, on a global scale. Therefore, the littlle guy can't make new wealth from a growing economy, because it isn't growing anymore, but the ultra rich billionaire is still reaping profits from wealth concentration due to the very low tax burdens they pay (thanks to Reagan). So we are back at the age-old problem of usury and wealth concentration, once again! I argue that many of our current problems are also due to this, as well as resource and energy scarcity, and debt buildup. These factors are all coming together at the same tiime.

Despite what most economists believe, that wealth which is held by the billionaire was not produced by him (or her, in the case of Blythe Masters); rather, it was taken from the planet. Yes, taken. Economies do not produce wealth. They actually DESTROY wealth to a significant degree, and then they take and transform the remaining wealth into goods that we find useful, and then we create an economy around these things. Since, as Chris is pointing out, we are nearing the crunch in terms of overall resource scarcity, then that billionaire's wealth is by definition diminishing the wealth-reaping opportunities for the rest of the population, because there are now only so many resources available to go around (as opposed to say 100 years ago when they were basically limitless, when Austrian ideology was being formulated).

But just handing blank checks over to poor people, that money being derived from the wealth taken from taxes from the billionaires, isn't very stimulative for efficient allocation of labour resources, is it? That's verging on communism, and we all know how that works (or, how it doesn't work -- no one has any incentive to work). So then how do we deal with the unavoidable high unemployment resulting from a cessation of economic growth (it takes much less labour to just maintain an economy rather than grow it as well). Are we to have, say, only 30% of the workforce actually working, and then those workers pay taxes to support the rest of the 70% deadbeats because there isn't enough work available? No way, that has NEVER worked in the past and it will never work now! The solution is to reduce the work week to 3 days and the work day to 6 hours. Therefore, the remaining wealth opportunities will still be available to 90% of the workforce, and they will still have an incentive to go work (because there will be no blank checks), and there would not be massive taxes on workers because everyone would be working; taxes would be about what they are now, even less, for the average working person. Couple this with much higher taxes for high earners (the billionaires and multi millionaires), and ban usury, such that wealth concentration doesn't get out of hand, and also ban central banking and fractional reserve banking, and again empower the government to issue its own debt-free interest-free currency, and that's the solution! Oh, and get off oil too.

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Arthur Robey wrote: Isn't

Arthur Robey wrote:

Isn't the internet wonderful? I can take issue with anyone and not have my lights punched out. I shall resist the temptation and take issue with the facts.

Dogs said:

I know quite a few millionaires who earned their wealth legitimately. 

I also think it's complete bullshit that the government feels that other people are entitled to what I earn.

The first statement has to be challenged.

My boss is whinging like a stuck pig about how much money I extort from the company, got through hard negotiation by my Union. And the other debt slaves in this country would agree with him. So, If I am making a lot of money through hard work, long hours and a muscular Union; How long would a millionaire have to work to get a million at my (High) rate of pay? Answer : several lifetimes and then some with no misfortune along the way.

So how did he get rich? He got rich by risking other peoples money. He has his hand in everyone elses pocket. He is skimming the system that is maintained and run by the peons. I can quote numerous examples of people who innovate and are a valuable asset to their civilization, but how hard would Billy Gates have to work in order to be able to look me in the eye and say " I worked hard for every penny I own. And by the way, your rate of pay is exorbitant." 

My ex-brother-in-in law was a self made man. He worked very hard. But did he work that hard? No I mean truely. No, he risked another man's money. (Who probably made it by risking another man's money, who got it by skimming the system  etc.)

I have in mind the starving children of the Irish Potato Famine. Call me a sentimental old fool if you will, but I just do not have the stomach for it. So I pay my taxes and support the system.

And make preperations for me and mine to weather the storm.

Well Arthur, the operative word was 'legitimately'.  They wouldn't be my friends otherwise.  So your challenge just took a quixotic turn - but if it makes you fell any better, tilt away.  Just remember the windmill wins everytime.

I also know quite a few millionaires who are rat bastards - they sound more like the types you cited and are associated with.  They are not my friends.

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Theft is much easier than work....

Mark_BC wrote:

Unfortunately I think there is a lot of ideological baggage left behind by the free market worship that has dominated recent capitalist theories (typified in the Austrian school) ...

Are you sure it's not a whole lot of baggage left behind from the Progressive/Socialist schools that believes a persons labor is not his own?  That the others have a right to steal via government?

Mark_BC wrote:

Therefore, there is indeed a difference between a banker making money by skimming and ripping unsuspecting people off, even if it is done so in the "free market", versus a hypothetical entrepreneur who makes money (in the free market) by devising a new gadget that improves energy efficiency by 40% and therefore he reaps monetary rewards from this as everyone buys his product.

In a truely free market, where people are free to choose what money they use and where sound money is available the big evil banker scenario is much less of a problem.  Without free money being generated at the expense of those forced to use it, the unproductive "banker" types are unlikely to be a problem and certainly not as big a problem as they are today.  With sound money those that don't produce society valued services are unlikely to succeed in the long run.

Mark_BC wrote:

In this day and age there should be no billionaires. They should be taxed back down to reality,

This is the mentality that really worries me.  Who gets to decide what is too much?  It's theft, pure and simple.

Mark_BC wrote:

Despite what most economists believe, that wealth which is held by the billionaire was not produced by him

I agree many billionaires today did so by playing the system of fiat currency and government influence, but like most progressive, you want to fix the symptom instead of correcting the underlying causes of the problems.  If you want the little guy to succeed allow sound money, less favouritism via regulation and government involvement.

Mark_BC wrote:

The solution is to reduce the work week to 3 days and the work day to 6 hours.

Sorry, but this is the stupidest thing I've heard.  We have too many unproductivity people so to solve the problem we should make those that produce less productive?.   Why not just not work at all?  This is the same logic as if you have too much debt to solve the problem you just add more debt.

Tell me, why is it that most progressives what to tell the world how they must live, instead of trying to make the world better by setting an example and encouraging needed change.  I guess it's just not as easy as stealing from others. 

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So....... WHY did you do it?

rhare wrote:

ArthurRobey wrote:

So how did he get rich? He got rich by risking other peoples money. He has his hand in everyone elses pocket.

This is not the case for many small businesses.  I worked my butt off for 10 years - like 80 hr. weeks and my partners and I paid our employees before we took anything, and often each month we got nothing.  Many small business millionaires took large risks, and low pay for a very long time for a delayed return.  Had I simply worked at a salaried job for those 10 years and saved a fair amount I would have ended up only slightly less well off, had a much easier life, and not near the stress or risk.  Many small business owners do the same, some make it big, some loose it all.  It's quite easy for folks who have never run a small business to think it's all easy and never realize the huge sacrifices and risk taken to hopefully come out better later.

So.......  WHY did you do it?

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rhare wrote: ArthurRobey

rhare wrote:

ArthurRobey wrote:

So how did he get rich? He got rich by risking other peoples money. He has his hand in everyone elses pocket.

This is not the case for many small businesses.  I worked my butt off for 10 years - like 80 hr. weeks and my partners and I paid our employees before we took anything, and often each month we got nothing.  Many small business millionaires took large risks, and low pay for a very long time for a delayed return.  Had I simply worked at a salaried job for those 10 years and saved a fair amount I would have ended up only slightly less well off, had a much easier life, and not near the stress or risk.  Many small business owners do the same, some make it big, some loose it all.  It's quite easy for folks who have never run a small business to think it's all easy and never realize the huge sacrifices and risk taken to hopefully come out better later.

Amen.  Unfortunately, those who've never done it will never get it. 

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Damnthematrix wrote: rhare

Damnthematrix wrote:

rhare wrote:

ArthurRobey wrote:

So how did he get rich? He got rich by risking other peoples money. He has his hand in everyone elses pocket.

This is not the case for many small businesses.  I worked my butt off for 10 years - like 80 hr. weeks and my partners and I paid our employees before we took anything, and often each month we got nothing.  Many small business millionaires took large risks, and low pay for a very long time for a delayed return.  Had I simply worked at a salaried job for those 10 years and saved a fair amount I would have ended up only slightly less well off, had a much easier life, and not near the stress or risk.  Many small business owners do the same, some make it big, some loose it all.  It's quite easy for folks who have never run a small business to think it's all easy and never realize the huge sacrifices and risk taken to hopefully come out better later.

So.......  WHY did you do it?

I would venture because he's someone who values his independence and values the freedom of self-determination and making his own future, who has the courage to face failure or success based on his own actions, and who has the capacity and willingness to work harder and smarter than many others for the opportunity for success and wishes to be rewarded accordingly.  There's nothing wrong with being a salaried worker but it's simply wrong to put down those who work for themselves and to attribute their financial success to some form of dishonesty. 

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Michael Ferguson: Ignorant & Dismissive Of Crash Course

Michael Ferguson

ASSUMPTIONS OF GDP GROWTH
Based on your assumptions that GDP will continue to expand at a 5.5% rate, and your assumption that the economy will continue to grow...

You obviously have not watched the Crash Course.

Or you are entirely dismissive of it without even bothering to address the issues raised by the Crash Course, despite the fact that this entire site is built around the Crash Course.

You brusquely make assertions without attempt to refute what Dr. Martenson has carefully laid out, fact by fact, statistic by statistic. On how GDP is calculated. On the crushing debt based on expected future growth from a nation that has peaked in spending and youth, demographically speaking. And on the limits on growth imposed by peak oil, peak resources of many kinds, etc.

Please, look at these chapters (preferably ALL 20 of them) before responding. The Crash Course is the basis of our discussion here. Just as you would not present a paper at a science conference without first having some familiarity with the topics all participants are grounded in, or join a group of strangers discussing something without first familiarizing yourself with their precepts, I would urge you to get familiar first.

All of the Crash Course leads one to the conclusion that the future is NOT one of growth, but of economic contraction.

Without directly refuting Dr. Martenson's theses, which are supported by facts and figures, and which the vast majority of us have come to agree upon, your mere statements are just conjecture.

ASSUMPTIONS OF TECHNOLOGY
Technology may increase worker productivity, but because workers can do more with technology, technology actually reduces the need for workers to accomplish the same task. What was done by hand is done by machine. What took hours to hand-enter takes second to do now. But the primary fruits of productivity boosts do not belong to the workers. They belong to the owners of the technology.

All of economic history has taught us that. Which is why we see the extremes of income inequality that we do today, and so many people out of work. Sure, GDP and productivity per capita rises, but most of it accrues to those at the top.

While relieving workers of labor may allow them to seek other labor, that in itself makes other assumptions, primarily that there is other labor available for the redundant workers. What we see increasingly here in the United States is that the lower cost labor in other countries allows workers there to take up the work at all levels, from unskilled to skilled to highly-educated. All of this is made possible by technology - the Internet, global supply/logistics, a common language of business, etc.

I'm not a Luddite. But most definitely I know that technology is a tool useful for both good and bad - not a glorious vehicle of assured economic deliverance.

Poet

Michael Ferguson wrote:

Furthermore, real GDP per employed person, over the 2007 to 2010 time frame, grew at an annual rate of 3.6%.  This is a very large part of the reason that the economy has recovered but the unemployment rate has not fallen.  If we get back to full employment, our GDP would gain about 5.5%. 

Lastly, if you talk to anyone in robotics, expert systems and artificial intelligence, they will tell you that there is an enormous backlog of unimplemented capability that will increase the real GDP per employee at an even faster rate in the near future.

What does this all mean?  It means that any consideration of debt that assumes a long term GDP growth in the 2.5% to 3.0% (which is virtually everyone) is going to be very, very wrong.  At an absolute minimum we should be expecting a couple of decades of 4.0%+ growth and probably significantly more.

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Ao, you said it great!

Damnthematrix wrote:

So.......  WHY did you do it?

ao wrote:

I would venture because he's someone who values his independence and values the freedom of self-determination and making his own future, who has the courage to face failure or success based on his own actions, and who has the capacity and willingness to work harder and smarter than many others for the opportunity for success and wishes to be rewarded accordingly.  There's nothing wrong with being a salaried worker but it's simply wrong to put down those who work for themselves and to attribute their financial success to some form of dishonesty.

ao, you said it great.  And while I'm very independent and that was certainly a driver, the rewards that I could get later were a big driving factor.  I used to have a picture of a Jet hanging on the wall as inspiration.  I'm a long ways away from ever having a Jet (not sure you can afford to fly one in the future anyway), but I'm certainly not complaining about where I've ended up.  I can say my idea of success has changed overtime.  It's no longer the toys but more the freedom to do what I want, and to express myself how I want, and to work the way I want. 

Just in the last 20 years since I started I can see the many impediments that have been put up for anyone trying to bootstrap a company the way we did.  Chris has even talked about this in some of his blogs. There are so many rules and laws that you cannot do anything without being in violation of the law in some way.  It kills creativity and rewards those that are firmly established.  I want others to have the ability to do as I have, to push themselves to the limit.  Government that steps in at the slightest problem promotes dependency - like an overprotective mother.

Damnthematrix, you really confuse me.  You appear to be an independent person.  You built your house the way you saw fit.  You live your life the way you want.  I don't understand how someone so independent and driven can advocate taking that opportunity away from others.  If your never allowed to make mistakes (and I've made some big ones), your never allowed to grow.

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Damnthematrix
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really guys....

rhare wrote:

Damnthematrix wrote:

So.......  WHY did you do it?

ao wrote:

I would venture because he's someone who values his independence and values the freedom of self-determination and making his own future, who has the courage to face failure or success based on his own actions, and who has the capacity and willingness to work harder and smarter than many others for the opportunity for success and wishes to be rewarded accordingly.  There's nothing wrong with being a salaried worker but it's simply wrong to put down those who work for themselves and to attribute their financial success to some form of dishonesty.

ao, you said it great.  And while I'm very independent and that was certainly a driver, the rewards that I could get later were a big driving factor.  I used to have a picture of a Jet hanging on the wall as inspiration.  I'm a long ways away from ever having a Jet (not sure you can afford to fly one in the future anyway), but I'm certainly not complaining about where I've ended up.  I can say my idea of success has changed overtime.  It's no longer the toys but more the freedom to do what I want, and to express myself how I want, and to work the way I want. 

Just in the last 20 years since I started I can see the many impediments that have been put up for anyone trying to bootstrap a company the way we did.  Chris has even talked about this in some of his blogs. There are so many rules and laws that you cannot do anything without being in violation of the law in some way.  It kills creativity and rewards those that are firmly established.  I want others to have the ability to do as I have, to push themselves to the limit.  Government that steps in at the slightest problem promotes dependency - like an overprotective mother.

Damnthematrix, you really confuse me.  You appear to be an independent person.  You built your house the way you saw fit.  You live your life the way you want.  I don't understand how someone so independent and driven can advocate taking that opportunity away from others.  If your never allowed to make mistakes (and I've made some big ones), your never allowed to grow.

See......  you know zilch about me, and then make assumptions.

In a previous life, I ran one of the most successful photographic studios in my city of ~1 million.  For over twenty years.  I won more awards than I can remember, and eventually became the President od the QLD division of the Australian Institute of Professional Photography.

I had a picture of a Ferrari on MY wall........

I worked my arse off, and now I regret every minute of it.  Sad hey.......  I really wish I'd discovered this alternative lifestyle thirty years ago instead of ten.  It was all bullshit.....  pretense and wankerism.

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Jim Shores

The debt is a fraud created by fraudsters unlawfully with us as collateral.  They can be convicted of a crime, the debt dismissed and their ill gotten assets forfited.  That is the bottom line!

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rhare wrote: Are you sure

rhare wrote:

Are you sure it's not a whole lot of baggage left behind from the Progressive/Socialist schools that believes a persons labor is not his own?  That the others have a right to steal via government?

When did I say that a person's labour is not his own? I actually said that the government should steal LESS of that person's labour, via reduced taxes for the middle class and poor. Then, when you start making upwards of a million dollars, your taxes go way up. Boohoo, you'll get none of my sympathy. Oh the horror!!! 70% taxes for over a million dollars salary! You can only keep $300,000 of it?!?!?!?! How can anyone live on $300,000?!?!?! What's the point of even lifting a finger if you can only keep $300,000 a year?!?!

rhare wrote:

In a truely free market, where people are free to choose what money they use and where sound money is available the big evil banker scenario is much less of a problem.  Without free money being generated at the expense of those forced to use it, the unproductive "banker" types are unlikely to be a problem and certainly not as big a problem as they are today.  With sound money those that don't produce society valued services are unlikely to succeed in the long run.

I have yet to be convinced of any of that, it seems more like wishful thinking from Ludwig von Mises' imaginary thought experiments than reality (that somehow the corrupt entities are going to bankrupt their own way out of the system???? Get real). I still can't figure out the free market libertarians. On one hand they preach free and unregulated markets, believing that these will somehow sort themselves out on their own as some mystical equilibrium is reached. But then, as is easily predicted, the market players get bigger and bigger through unregulated consolidation (after all, it's a free market!), until those big megacorporations lobby hard and long enough to governments until they eventually get control of them, and then they become the government, then they end all regulation, except for those regulations in favour of the megacorporations, and then the markets lose all semblance of free markets. Then the libertarians come out screaming bloody murder about how we no longer have free markets and it's all the socialists' fault (we are currently about as far away from socialism as you can get). It's all the gub'ernment's fault.

Don't get me wrong, I understand the benefits that free markets can bring in terms of price discovery (although the negative externalties must be somehow factored into this, otherwise free markets are not efficient), it's just that free markets must be carefully regulated, or you will quickly no longer have free markets anymore.

And what is "sound money"? Gold and silver? They have a long history of abuse from bankers and the wealthy too.

rhare wrote:

Who gets to decide what is too much?  It's theft, pure and simple.

When you make more than a million dollars a year, the government decides this is too much, as the representative of the people who elect it and hold it accountable (exept in cases when that government has been completely taken over by megacorporations, like the US). Now you're not going to get any argument from me that the US government ISN'T a fascist two-party dictatorship intent on stealing your wealth, but that's only because Americans allowed free market capitalism to run away on them and morph into fascism.

And I hope you understand, as I have pointed out, that someone who makes a billion dollars -- it doesn't matter how they made that money -- is "stealing" that amount of assets away from everyone else because there are now less things left in the world for everyone else to use. "Steal" is too strong of a word though. What I mean is that labour, entrepreneurs, markets, the economy, whatever you want to call it, do not "produce" anything; what they do is TAKE IT, from the natural world. When this happens there is less resources available for everyone else to take and convert into wealth. A perfect example of this would be fishing. Shouldn't someone who makes millions depleting fish stocks pay a very large proportion of that wealth back in the form of taxes, because now if I want to go catch those fish I can't; they are no longer in existence. Since all fishing we currently engage in is depletive (no one produces any fish, even fish farms, since you need to feed the farmed fish 5 pounds of small food fish for every pound of big fish you "produce"), those fishermen "stole" our ability to make money ourselves from fishing.

rhare wrote:

I agree many billionaires today did so by playing the system of fiat currency and government influence, but like most progressive, you want to fix the symptom instead of correcting the underlying causes of the problems.  If you want the little guy to succeed allow sound money, less favouritism via regulation and government involvement.

But if there is not enough energy, food resources, or other resources left available on the planet then there is no way the little guy can succeed. That is essentially what this whole post from Chris is about (forgve me for putting words in your mouth Chris since you may disagree with me). Our economies CAN'T grow anymore! So how can the little guy succeed when he is just struggling to make ends meet? There may be a very few number of romantic rags-to-riches fairy tales to inspire everyone else who is living in poverty, but statistically, very few people can achieve this success in an economy that is no longer growing; it just isn't possible. Unless a whole new energy game emerges, like solar energy, for example.

rhare wrote:

{The solution is to reduce the work week to 3 days and the work day to 6 hours.} Sorry, but this is the stupidest thing I've heard.  We have too many unproductivity people so to solve the problem we should make those that produce less productive?.   Why not just not work at all?  This is the same logic as if you have too much debt to solve the problem you just add more debt.

Then you tell me what those people are going to do with their time when the economy is no longer growing? What are they going to build? Are they going to dig ditches then fill them back in again? My 3 day work week example was purely speculative that this is how much labour would be needed to simply maintain an existing economy rather than growing it, but it's probably around that number. Do you not agree that if continual improvements in technology allow goods to be produced with less and less labour, then shouldn't we be realizing those advances by working less and less to achieve the same standard of living as before? SInce we must now still work as much, or more, as we always have, then where is that wealth going? Answer -- it is being accumulated by the very wealthy. "Why not just not work at all?" Because there is work that needs to be done! How else are things going to be manufactured and food put on your plate? How else are you going to get money to live? You go out and work for it!

And again, I reiterate the fact that people (labour) do not produce anything. They take and transform. The problem is not that we don't  have enough "productive" workers, the problem is that the wealth they reap is not being allocated fairly, it is being stolen by the wealthy via our banker ponzi scheme, and our debt problem is forcing our "productive" labour efforts to be allocated towards promoting economic growth in order to attempt to make a return for that debt (which of course is no longer working), ie to make our economies bigger, rather than making our economies better.

rhare wrote:

Tell me, why is it that most progressives what to tell the world how they must live, instead of trying to make the world better by setting an example and encouraging needed change.  I guess it's just not as easy as stealing from others. 

Maybe, because we have an understanding of how the physical and biological world works to support our economies, and we see that there is no way that it can continue on the basis of the old outdated economic theories that have dominated thought up to now, and new ways of thinking are required? And aren't you doing the same thing by promoting your belief in free markets? And why do you assume that I do not set an example and encourage needed change? And how do I steal from others? Isn't the multi billionaire who pays very little in taxes the one who is concentrating wealth and stealing it from everyone else?

doorwarrior's picture
doorwarrior
Status: Silver Member (Offline)
Joined: Oct 13 2009
Posts: 166
I worked my arse off, and

I worked my arse off, and now I regret every minute of it.  Sad hey.......  I really wish I'd discovered this alternative lifestyle thirty years ago instead of ten.  It was all bullshit.....  pretense and wankerism.

Is this how you made the money to afford the lifestyle you live today? Or was everything just handed to you for free? Is it pretense for people to want to do well for themselves and to be a productive member of society? Or are you saying that your lifestyle is the only one that counts, the rest of us wankers are beneath your high ideals?

I own a small business and I have never used anyone's money to make my way.  I made then reinvested my own money to help my business grow.   I am proud of my business and my contribution to society by supporting 9 families. I suppose I could live in a small house, produce nothing of value to society and throw insults at hard working people over the internet if I wanted to assume I was better than everyone else. But where would that get me?

So many of you want to bash on business owners but we are the backbone of whats left of this economy. Taxing us to death just means we won't hire or give  benefits. Yes I do think I should make alot more than my employees. After all without  my business  their jobs would not exist and there is no way any of them would be able to do what I do or they would.

I do agree that the top 1% is out of control but don't sitck all business owners in the same boat.

Rich

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
WHAT exactly is a productive memvber of society?

doorwarrior wrote:

I worked my arse off, and now I regret every minute of it.  Sad hey.......  I really wish I'd discovered this alternative lifestyle thirty years ago instead of ten.  It was all bullshit.....  pretense and wankerism.

Is this how you made the money to afford the lifestyle you live today?

This place owes me $150K.  That's it.  That's all I was worth after working 20 years for the banks and the taxman.

doorwarrior wrote:
Or was everything just handed to you for free?

I said I worked my arse off....

doorwarrior wrote:
Is it pretense for people to want to do well for themselves and to be a productive member of society?

That's precisely the point is it not?  WHAT exactly is a productive member of society?  One that consumes the planet to death?  Like I used to to?

doorwarrior wrote:
Or are you saying that your lifestyle is the only one that counts, the rest of us wankers are beneath your high ideals?

Well of course my current lifestyle is the only one that counts for ME.  What you do is your business, but I don't think too many people on this site will survive the shitstorm that is coming, whereas I'm pretty confident I will.  So you decide what's right, I'm over it.

doorwarrior wrote:
I own a small business and I have never used anyone's money to make my way.  I made then reinvested my own money to help my business grow.   I am proud of my business and my contribution to society by supporting 9 families. I suppose I could live in a small house, produce nothing of value to society and throw insults at hard working people over the internet if I wanted to assume I was better than everyone else. But where would that get me?

Without knowing what it is you do, I can't comment.

doorwarrior wrote:
So many of you want to bash on business owners but we are the backbone of whats left of this economy.

The economy IS the problem from where I stand.

Mike

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1290
Not a free market as long as money is manipulated.

Damnthematrix wrote:

See......  you know zilch about me, and then make assumptions.

...

I worked my arse off, and now I regret every minute of it.  Sad hey.......  I really wish I'd discovered this alternative lifestyle thirty years ago instead of ten.  It was all bullshit.....  pretense and wankerism.

And what assumptions did I make?  I said you seem like an independent person.  You have shared info about your house and what you have done, and you have shared a bit about how you live?  Exactly what assumptions did I make?  Then you went off on this rant? about what you did and how successful you were and how you decided to change.  This seems to make my point exactly.  What I asked was how you can be independent, have done lots of things, and then seem so eager to control how others have to do things. You have advocated in quite a few threads for laws and regulations to limit peoples choices. 

I'm sorry you regret your life - but at least it seems you were basically free to choose how to live it.

Mark_BC wrote:

I have yet to be convinced of any of that, it seems more like wishful thinking from Ludwig von Mises' imaginary thought experiments than reality (that somehow the corrupt entities are going to bankrupt their own way out of the system???? Get real).

So which is more wishful thinking:

  1. People will look our for their own well being.
  2. A person (or small group of people) given power over others will act in a benign fashion.

Mark_BC wrote:

I still can't figure out the free market libertarians. On one hand they preach free and unregulated markets, believing that these will somehow sort themselves out on their own as some mystical equilibrium is reached. But then, as is easily predicted, the market players get bigger and bigger through unregulated consolidation (after all, it's a free market!)

First, show me a free market in the last 100 years?  In the US and most (all?) of the world are central banks manipulating money supplies via set interest rates, printing, etc.  Also, we continuously add laws and new regulation in this country by the 10's of thousands of pages per year.  Exactly how is this a free market.

But, there is no mystical equilibrium.  Given a sound money (ie. one that is not manipulated - gold/silver are an example), and free exchange between individuals, each person will tend to look out for themselves.  Some will make mistakes, some will be swindled, but the majority will be diligent about their money and property.  Note this is a natural human behavior to protect ones family and property.

So, if you have a sound money, then when you save to buy things or to invest you are much more likely to be careful with it, because you could lose it if you make a poor choice.  That is the individual will be careful with what they do with their property since they might lose their hard earned savings.

Compare that to what we have with fiat currencies.  You can save all you want, but when money is freely printed and handed out to the politically connected banks and individuals, their is no one looking out for how the money is spent.  It's free after all, so you do silly things like lend it to everyone to build houses.  After all you can't lose because their is always more free money available.  It's this moral hazard created by fiat money that is the basis of the problems we see today.  Then you have the government backstopping the large players from losses.  Fannie Mae, Freddie Mac, Sally Mae, FDIC, PBGC - all these entities encourage risky behavior because no one is going to pay the price, it will be distributed among the populace.  This is another place we see moral hazard because it allows the "self serving" behavior to occur (a natural act) without the associated responsibility (risk).

Mark_BC wrote:

until those big megacorporations lobby hard and long enough to governments until they eventually get control of them, and then they become the government, then they end all regulation, except for those regulations in favour of the megacorporations, and then the markets lose all semblance of free markets

If we had a limited government, that is a small government with limited power and not taxing the populace or printing money to hand out to the favored few, would we have lobbyists?  The idea is for the power to be with the people, not the government because of the abuse.  This is again a place where you are attacking the symptom instead of the root cause.   Large government with lots of programs, regulations, etc result in the corruption we see today.  Any time you give a person power over others you will see that power abused.

Mark_BC wrote:

we are currently about as far away from socialism as you can get

Really?

  • Centrally managed money system.
  • Government managed healthcare - ~60% of all healthcare is paid by government.
  • Centrally controlled education system.
  • ...

I would say we are much closer to a socialist system than we are a true free market.  Name one thing in your life not currently regulated/legislated by some government entity in the US?

Mark_BC wrote:

it's just that free markets must be carefully regulated, or you will quickly no longer have free markets anymore.

Do you not understand that regulated means NOT FREE?

Mark_BC wrote:

And what is "sound money"? Gold and silver? They have a long history of abuse from bankers and the wealthy too.

True, which is why you don't want governments mandating what is used as money.  You want that to be free as well.  Any participants in a transaction should be free to choose their own exchange medium.  That way when you have a medium being abused, participants can choose something else.  Gold and Silver (or other metals) make a good system because they meet the criteria of money (see the crash course) - but the primary reason is because they cannot be created out of thin air.

Mark_BC wrote:

When you make more than a million dollars a year, the government decides this is too much, ...  but that's only because Americans allowed free market capitalism to run away on them and morph into fascism.

The reason we have fascism is because we allow the government to make those type of decisions.  When you concentrate power over others it always ends badly.

Mark_BC wrote:

A perfect example of this would be fishing. Shouldn't someone who makes millions depleting fish stocks pay a very large proportion of that wealth back in the form of taxes, because now if I want to go catch those fish I can't; they are no longer in existence.

Resource depletion is a serious issue directly related to population.  I don't believe any governmental system will stop or repair damage done because of overpopulation. That includes any redistributive system which are only a band-aid for the short term.  After all, what difference does it make if you overfish and share the profits, the fish are still gone.  However, your fish example is a good because it shows what happens when governments interfere. Did you know most governments provide huge subsidies that encourage over fishing?  Without those subsidies much of the damage we see could not occur because fish would be too expensive to exploit when the fisheries become less productive.

Mark_BC wrote:

Our economies CAN'T grow anymore! So how can the little guy succeed when he is just struggling to make ends meet? There may be a very few number of romantic rags-to-riches fairy tales to inspire everyone else who is living in poverty, but statistically, very few people can achieve this success in an economy that is no longer growing; it just isn't possible.

So now is the time more than ever we need to end the manipulations that are hiding the true costs.  That includes money, subsidies, legislation etc which hide the true costs from investors and consumers.  We need a free market to allocate dwindling resources to where they are most desired.  Central planing also has the unfortunate side effect of limiting the number of ideas that will be tried, where as a free market may result in completely new and different approaches to the problems we face.  I trust a few billion people trying many combinations to find something that works than a handful of bureaucrats.

Mark_BC wrote:

Then you tell me what those people are going to do with their time when the economy is no longer growing? What are they going to build?

Are you trying to tell me we don't have enough things to be done in this country that everyone who wanted to work could?  I look around and see crumbling streets, bridges, and other infrastructure.  I do not know of a single business that doesn't have more work than they can do.  This is yet another problem created by government manipulation.  In this case it's minimum wage laws and welfare programs that limit the hiring that can be done by artificially restricting the number of jobs available or providing incentive not to work.  After all, if you can collect unemployment benefits that pay more than you can make, why work?

Mark_BC wrote:

And aren't you doing the same thing by promoting your belief in free markets? And why do you assume that I do not set an example and encourage needed change? And how do I steal from others? Isn't the multi billionaire who pays very little in taxes the one who is concentrating wealth and stealing it from everyone else?

When you take from someone against their will, no mater if they are rich or poor it is stealing.  You can do it under the guise of government, but it's still stealing from one person to give to another.  I hope the above shows why I promote free market ideals.  It's because I believe we do not currently have a free market (and have not had since at least 1913), and that the distortions caused by government and monetary influence are the root of most of the problems we now face.

Mark_BC wrote:

Isn't the multi billionaire who pays very little in taxes the one who is concentrating wealth and stealing it from everyone else?

Not sure how you figure out that the wealthy don't pay taxes.  Since the top 3% pay nearly 50% of all taxes, exactly how is that paying very little?  Don't get me wrong, I believe we have system that benefits the wealthy and that's what I would like to see changed, but as long as we have government doling out favors and limiting choices, we will continue to see the wealthy benefit.

guardia's picture
guardia
Status: Platinum Member (Offline)
Joined: Jul 26 2009
Posts: 592
Re: I disagree with your analysis

Michael Ferguson wrote:

Lastly, if you talk to anyone in robotics, expert systems and artificial intelligence, they will tell you that there is an enormous backlog of unimplemented capability that will increase the real GDP per employee at an even faster rate in the near future.

I am one of those "anyone", and you are wrong

Samuel

DEUS X MACHINA's picture
DEUS X MACHINA
Status: Bronze Member (Offline)
Joined: Mar 6 2011
Posts: 28
central banks are swapping our real money for their fake money

Arongance: 

you won't be laughing when you are using your 100 dollar bills for toilet paper. 

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