Guest Post: No Way Out

Tyler Durden's picture

Submitted by Doug Casey of Casey Research

No Way Out

I really dislike sounding inflammatory. Saying that things are going to
go terribly wrong runs a risk of being classed with those who think
the world will end in December 2012 because of something Nostradamus or
the Bible says, or because that’s what the Mayan calendar predicts.

This is different. In the real world, cause has effect. Nobody has a
crystal ball, but a good economist (there are some, though very few, in
existence) can definitely pinpoint causes and estimate not only what
their immediate and direct effects are likely to be (that’s not hard; a
smart kid can usually do that) but the indirect and delayed effects.

In the first half of this year, people were looking at the U.S. economy
and seeing that some things were better. Auto sales were up – because
of the wasteful Cash for Clunkers program. Home sales were up – because
of the $8,000 credit and distressed pricing. Employment was up – partly
because of Census hiring, and partly because hundreds of billions have
been thrown at the economy. The recovery impresses me as a charade.

Let’s get beyond what the popular media parrots are telling us and
attempt to derive some reasonable assumptions about how things really
are and where they’re headed.

A Brief Summary of Our Story So Far….

Before we get to where things stand at the moment, let’s briefly look at where we‘ve come from.

That a depression was in the cards has been foreseeable for decades.
The distortions cranked into the system in the ‘60s – the era of “guns
and butter” spending by the government – resulted in the tumult of the
‘70s. Things could, and one could argue should, have come unglued then.
But they didn’t, for a number of reasons that have only become clear
in retrospect: 

  • Interest rates were allowed to rise to curative levels;
  • The markets were non-manipulated and so, as they became quite depressed, were left to send out real distress signals;
  • The U.S. was still running a trade surplus;
  • The dollar had only come off the gold standard in 1971 and was still relatively sound.

Then, starting with Reagan and Thatcher, the world’s governments
started cutting taxes and deregulating. The USSR collapsed peaceably.
China, then India, made a shift toward free markets. And on top of it
all, the computer revolution got seriously underway. All told, a good
formula for recovery and a sound foundation for a boom.

But sadly, taxes, government spending, and deficits soon started
heading much higher. Despite the collapse of its only conceivable
enemy, U.S. military spending continued to skyrocket. Monetary policy
encouraged everyone to take on huge amounts of debt, much more than ever
in the past, and everyone soon found they could live way above their
means. The stock, real estate, and bond markets got pumped up to
ridiculous levels. The main U.S. export became trillions of paper
dollars. Worst of all, the U.S. devolved into just another country,
undistinguished by anything other than a legacy of a high standard of
living.           

The standard of living in the U.S. is now going down for these reasons,
and others. But most disturbing to the average American is the falling
position of the U.S. relative to the rest of the world. In brief,
Americans won’t take kindly to the notion that they can’t continue
earning, say, $10-40 an hour, for doing exactly the same thing a
Chinese will do for $1-4 an hour.

What’s going to happen is that the Americans’ earnings are going to
drop, while those of the Chinese are going to rise, meeting someplace
in the middle. Especially when the Chinese works harder, longer, saves
his money, and doesn’t burden his employer with all kinds of legacy
benefits, topped off with lawsuits. This is a new threat, one that
can’t be countered with B-2 bombers. It’s also something as big and as
inevitable as a glacier coming down a valley during an Ice Age.

This, along with other problems presented by the business cycle have ushered in the Greater Depression. 

How Long Will the Greater Depression Last?        

Let’s briefly recap two definitions of a depression, along with a
couple of examples, with an eye to seeing how things may evolve from
here.

One definition is that a depression is a period of time when most
people’s standard of living drops significantly. Russia had this kind of
depression from roughly 1917 to 1990, so more than 70 years. A second
definition is that it is a period of time when economic distortions and
misallocations of capital are liquidated. Russia had this kind of
depression from 1990 up to about 2000. It was very sharp but relatively
brief.

The difference between these two examples is that, during the first,
the state was in total – or even increasing – control. By the time of
the second, the country had greatly liberalized. As a result, the
depression was a period of necessary and tumultuous change, rather than
drawn-out agony. A depression can be a bad thing or a good thing,
partly depending on which definition applies.

Today, things are problematic in Russia for a number of reasons that
aren’t germane to this article. But people can own property,
entrepreneurs can start businesses, and the top tax rate is 11%. The
depression of 1990-2000 resulted in greatly improved conditions in
Russia.

Let’s look at a couple of other examples: Haiti and Mozambique.

Haiti has been a disaster since Day One and has no current prospect of
improvement. The billions of dollars Obama is idiotically about to send
them will evaporate like a quart of water poured into the Sahara – just
like the billions of aid and charity that have gone before it. Worse,
it will eliminate the necessity of Haiti making meaningful reforms.
Additional aid actually precludes the possibility of liquidating
distortions, misallocations of capital, and unsustainable patterns of
life. It’s counterproductive.

Mozambique went through a long and nasty civil war from about 1970 to
the early ‘90s. The war made conditions worse than anything even Haiti
has seen. But when it came to an end, the Mozambicans changed things
simply in order to survive. The place is hardly a beacon of the free
market today, but duties and taxes have been reduced, most parastatals
have been privatized, and entrepreneurs can operate. It’s a good sign
that the country is drawing foreign investment but very little foreign
aid, which always just cements people in their bad habits while
ensuring government officials stay in office.  

Why do I bring up these examples? Because it’s clear to me the U.S. is
heading in the direction of Russia before 1990, or Haiti today. Not in
absolute terms, of course. But everything the U.S. government is doing –
raising taxes, increasing regulations, and inflating the currency – is
not only the wrong thing to do, but exactly the opposite of the right
thing.

This is really serious, because the government is the 800-pound gorilla
in the room. What governments do makes all the difference – actually
the only difference – in how countries perform. How else to explain
that Haiti and Singapore were on pretty much the same level after World
War 2, and look where they are now.

To my thinking, the U.S. is now clearly on the path Argentina started
down with the Peron regime. Cause has effect. Actions have
consequences, and the result will be much the same. Except I believe the
descent of the U.S. will be  much faster, much scarier, and will end
in a much harder landing than that experienced by
Argentina.               

I say this because there’s no realistic possibility the Obama regime is
going to change course. To the contrary, they’re likely to accelerate
in the present direction. They believe the government should direct
society – as do most Americans at this point. They feel government is a
magic cure-all and not only can but should “do something” in response
to any problem. Most complaints aren’t that they’re doing too much, but
that they’re doing too little. Everything on the political front,
therefore, is a disaster. There’s absolutely no prospect I can see that
it will get better, and every indication it will get worse.

I’m not going to try to predict what will happen in the 2012 elections,
but it’s fair to say the last several elections are indicators of the
degraded state of the average American. What are the chances they’ll
make a 180-degree turn, in the direction of someone like Ron Paul? I’d
say close to zero, and libertarianism will remain a fringe movement, at
best. Will Boobus americanus vote for someone who says the government
should actually do less – much less – in the middle of a
crisis? Especially if the current wars expand, which is quite likely in
this kind of environment? No way.

Simply, the chances of a reversal in what passes for the philosophical
attitude of this country are slim and none. And Slim’s left town. While
there are some who hope for an improvement on the political front, I
think that’s very naïve.

The Tea Party movement? Its ruling ethos appears to be a kind of
inchoate rage. I sympathize with the fact that many seem to be honest
middle to lower middle-class Americans who see their standards of living
slipping away and don’t know why, or how to stop it. They feel bad
that it’s no longer the America portrayed in Jimmy Stewart and John
Wayne movies, but many are quick to blame the changes on swarthy
immigrants. They’re desperately looking for a political solution. These
folks tend to be highly nationalistic and atavistic, with a tendency
to worship their preachers and the military. I just hope some popular
general doesn’t get political ambitions…

The only bright spots – but these are very major bright spots – are in the areas of individual savings and technology.

As things get worse, the productive members of society will redouble
their efforts to save themselves by producing more while consuming
less; the excess will be savings. Those savings create a pool of capital
that can be used to fund new businesses and technologies.
The problem here is that with the dollar losing value quickly, the
savers will be punished for doing the only thing that can really
improve the situation. And they’ll be discouraged by wrongheaded
propaganda telling people to consume more, not to save. Funding new
business and technologies will be harder with more regulations. But
still, people will find a way to set aside a surplus. And that is a
factor of overwhelming importance.

As are breakthroughs in science and technology. Don’t forget that there
are more scientists and engineers alive today than have lived,
altogether, in all of previous human history. These are the people that
will wind the main stem of human progress. And their numbers are going
to grow. So there’s real cause for optimism.

The problem is that most young Americans now go in for things like
sociology and gender studies, whereas the up-and-coming scientists and
engineers are primarily Chinese and Indians who, even if they get
advanced training in the U.S., tend to go back home afterwards. Partly
because the U.S. discourages hiring non-Americans for “good” jobs, but
mostly because they can see more opportunity abroad.

So, how long will the Greater Depression last? Quite a while, at least for the U.S.

But wait. Aren’t there other bright spots? How about the dollar?

The Dollar

Over the years I’ve been agnostic as to whether this depression would
be inflationary or deflationary. Or both in sequence, with inflation
first, followed by a credit collapse deflation; or a deflation followed
by a runaway inflation. Or perhaps both at the same time, just in
different sectors of the economy – e.g., prices of McMansions collapse
because people can’t afford to live in them, while the prices of rice
and beans skyrocket because that’s all people can afford.

At the moment I’m leaning towards a deflation in most areas. Why?
Because the purchasing media in the U.S. is primarily credit based. If a
mortgage defaults, what happens to the dollars it represents? They
literally disappear, which is deflationary. If a bond defaults, the
same thing happens. If stocks and property prices crash, the dollars
they represent vanish. If people or businesses don’t borrow, the money
supply fails to expand; in fact, many are trying to pay back loans,
which is deflationary. Even so, contrary to popular opinion, deflation
is much better than inflation.

Because today’s dollar is just paper and credit, and because
deflationary conditions will create a clamor for many more of them, the
government will eventually succeed in its inflationary efforts. It’s
true, as Bernanke has said in a moment of wry wit, that they can dump
$100 bills from helicopters to prevent deflation. But it’s not likely
since, in our fractional reserve banking system, the primary way the
money supply is expanded is through the granting of loans, not the
printing of paper, the way it was done in Weimar Germany and Zimbabwe.
One problem with credit-based inflation is that at some point, banks
become afraid to lend, and people afraid to borrow – a time like right
now. In fact, people may even become too afraid to leave their dollars
in banks. They’re coming to realize the FDIC is thoroughly bankrupt.

Here’s a speculative scenario. To solve these deflationary problems and
resolve Ben’s helicopter conundrum, maybe the Fed will go into the
retail banking business by directly taking over the hundreds of
institutions that are now failing. The average American would feel safe
depositing directly with the Federal Reserve. And the Fed could lend
as much as they want, without the restrictions imposed by actual
capital or pesky shareholders.

Ridiculous? I think not, certainly not after GM, Fannie, and the rest.
Certainly not when you consider that this depression is still in only
the second inning. It would be one way to head off deflation.

Be that as it may, or may not, at some point after the deflationary
waters have receded as far as possible, an inflationary tsunami is
going to wash ashore, to the surprise of all.

Everybody knows how bad things were in Weimar Germany, and what a
catastrophe hyperinflation has been in Zimbabwe. But those were agrarian
economies, with people still quite close to the land. If it hits in
the U.S., as highly specialized and urbanized as it is, it will be an
unparalleled disaster. And not just for the U.S., because the reserves
of almost all governments are mostly U.S. dollars. And dollars are used
as the de facto currency by the average man in about 50 countries. All
told, there may be as many as seven trillion of the things held
outside of the U.S., and, at some point, everybody will be trying to
unload them at once. At which time they’ll lose value very, very
quickly.

So, far from being something to rely on, and very far from being as
good as gold, the dollar is going to be a lead player in the
catastrophe called the Greater Depression. And all the other paper
currencies are going down with it. Pity the fool who doesn’t see this
coming.
Or, for that matter, what’s going to happen to interest rates.

Interest Rates

The government is doing everything in its power to keep interest rates
as low as possible. There are many reasons for this. Low rates make it
easier for people to support their debt burdens and borrow more. Low
rates inflate the value of stocks, bonds, and real estate – and the last
thing the government wants to see is a meltdown of the markets. But,
perhaps even more important, it’s a lot easier for the government to
service $12 trillion of official debt at 2% than at 12%. That much of a
rise in rates alone will add over a trillion to what they need to
borrow to keep the giant Ponzi scheme going.

Of course it’s a fool’s game. Eventually (I’ll guess between six and 24
months), when their creation of dollars eventually overcomes the
credit markets’ destruction of dollars, consumer prices will go up. That
evidence of inflation will cause interest rates to rise, with all the
short-term negative effects the government so fears. But higher rates
are absolutely necessary to get out of the depression. Remember, it was
the high rates of the early ‘80s that set the stage for the boom that
followed.

Rates – the price of money – shouldn’t be controlled by the state, up
or down, any more than the state should control the price of oil, or
bread, or toothpaste. One of the major reasons the USSR collapsed was an
inability to make correct economic calculations, and much of that was
due to their arbitrarily fixed interest rates. One reason why Japan has
been fading into the economic background over the last two decades is
that the government has artificially suppressed rates, in the vain hope
of stimulating the economy. All they’ve gotten is excessive levels of
government debt, which will result in the destruction of the yen. And
what will be tens of millions of impoverished, and very angry, Japanese
savers.

The same thing is in process of happening in the West due to suppressed interest rates.

The Next Steps Down in the Markets

With interest rates depressed to near zero, stocks, bonds, and property
in the Western countries are as good as they’re going to get –
especially after a very long boom in all three. When rates inevitably go
higher, stocks, property – absolutely bonds – are likely to head much
lower. That’s entirely apart from the fundamentals under them, which
are truly ugly. In turn, that will bankrupt pension funds across the
economy, many of which are already severely underfunded.

These pension funds are likely to be the centerpieces of the next leg
down of the evolving crisis. Will the government bail them out? Perhaps,
although after the misadventure of poor taxpayers throwing money at
rich traders at Goldman and AIG, the public doesn’t like the ring of
that term. More likely it will nationalize them, assuming their assets
in exchange for a special class of its paper. In the interest of
“fairness,” that will happen to small and solvent funds as well as
large and bankrupt ones.

After that, the next problem area will be insurance companies. And not
necessarily because they’ll suffer from the same problems, like
derivative trading, that sunk AIG. Even the well-managed ones have their
assets invested primarily in commercial loans, commercial property,
bonds, and stocks.

How This Will End

Nassim Taleb has popularized the concept of the Black Swan: an event
that no one thought was possible, actually happening. Naturally, it
takes everyone by surprise. To that lesson from zoology, let me suggest
one from astronomy. Let’s call it the Financial Asteroid Strike theory.

It’s well known that there are millions of pieces of sizable space
debris floating around the solar system. It’s just a matter of time
before something crosses our path at an inopportune moment, as has
happened so many times in the past. Unlike the Black Swan, it’s well
known that Financial Asteroids exist. It’s just that really serious
ones appear so rarely that people conduct their lives as if they never
will. It’s been such a long time since the last depression that people
see it as something distant and academic – like the Chicxulub or
Tunguska asteroid strikes. Until the actual moment it hits, everything
is completely normal. Then everything changes radically.

I’d sum it up by saying that a Financial Asteroid Strike takes much
longer to happen than you might expect, but once it actually gets
underway, it happens much more quickly than you could have imagined. We
had a strike in 2008. But they tend to come in clusters. I expect more
to enter the atmosphere fairly soon.

The question is whether the next one is going to wipe out all the
economic and financial dinosaurs or just flatten the trees for some
miles around.

Either way, it’s far from being all gloom and doom.

How This Could Be a Good Thing

Everyone, certainly including myself, prefers good times to bad times.
But much of the good times of the last two decades were a result of an
entire civilization living above its means. It was great fun while it
lasted, but the party is over. The result will be massive unemployment,
lots of business failures, and huge investment losses. These things
are most unpleasant, but inevitable. That said, I always like to look
at the bright side.

And what might that be?

Let’s restrict ourselves to just one of the lead actors in this drama: the United States of America.

The bankruptcy of the U.S. government will, at least at some point, lead
to a big drop in the number of government employees. This is a good
thing, since little of what they do serves a useful purpose; most are
an actual impediment to production.

With some luck it could result in the sale of agencies that have some
value, e.g., NASA, the Smithsonian, and the National Parks – to private
enterprise. It will also force a vast retrenchment of the military,
although only after more costly wars make that necessity very obvious.
It will force a decentralization of power, with more devolving to the
states and municipalities. It will mean much less regulation, since
there won’t be the personnel or money to enforce it. It will also mean
much less taxation for the same reasons, even though the state will try
desperately to collect more, and will absolutely succeed in the near
term.     

Internationally, it seems to me a sure thing that organizations like the
UN, the IMF, the OECD, and so many more, will be totally hollowed out
or even disappear. At a time when governments are straining to maintain
themselves, they’re unlikely to ship scarce capital abroad. So the
people who are worried about the UN taking over the U.S., One World
Government and such, will have to find something different to fret
about.

As domestic currencies the world over are inflated away, some medium of
exchange and store of value will have to be agreed on. I don’t see any
realistic alternative to gold. China is going to be a focus of change
in this regard (among many others). The stupidity of the Chinese
government buying U.S. government paper in order to enable Americans to
continue consuming the things Chinese factories produce will come to
an end. That will be an impetus to demands for an alternative medium of
exchange.

But if the U.S. and governments of other advanced countries lose power,
governments in places like Africa (in particular) will collapse;
Somalia is a model of things to come there. That may sound like a
horrible thing, but – notwithstanding teething pains – it’s a big step
forward. Deprived of free money, free weapons, and lots of free bad
advice that have entrenched kleptocracies, the Africans are likely to
make real progress after the Greater Depression plays itself out.

The transition period, however, is likely to be messy almost everywhere.

Can we prevent the status quo from falling apart, and preclude these messy changes? Further, should we, if we could?

Entirely apart from the fact that change is an essential part of life –
and I think the status quo is in dire need of some real change
(although absolutely not the kind Obama and his posse might have in
mind) – I actually don’t think there’s a realistic solution to the
problems the world is facing in this decade.

Yes, there are solutions that the government could proactively bring
about – almost entirely by doing less, rather than more. But the odds
of the U.S. voluntarily defaulting on its debt, abolishing the Fed,
using gold as money, abolishing all agencies not specifically
designated in the Constitution, eliminating the income tax, and cutting
back on military expenditures by about 90% -- among other things – are
so small as to be considered a fantasy.

In fact, the concept of invoking changes of that scale are too scary for
most to even contemplate. But they’ll happen anyway. Which means these
things aren’t going to happen voluntarily, under some kind of control,
and in a more or less orderly manner. Even so, because anything that
must happen will happen – all these things and more will actually
happen and, in the happening, will be most unpleasant and dangerous.

It seems to me that the upset we’re looking at could be the biggest
thing since the Industrial Revolution. Or perhaps the French Revolution
is a better analogy, although I expect it’s going to be a bit of both.
It seems entirely possible to me that we could have another American
Revolution, as unlikely as that seems among a nation of commuters and
suburbs-dwelling reality TV watchers.

But it’s hard to see how it could be anything like the first one, which
was led by thoughtful, rich, free market-oriented farmers and
merchants. More likely this one will center on people like Sarah Palin
and Sean Hannity on the one side, and Michael Moore and Nancy Pelosi on
the other – strident, antagonistic, and bent, but also full of
charisma and certainty. I don’t see much chance of collegial and
reasonable compromise.

The best advice is not to be around the watering hole when two
antagonistic groups of chimpanzees are hooting and panting at each
other, getting ready to fight for control of it.

I’m afraid the current state of affairs is corrupt through and through.
From the top of the financial world in New York, to the top of the
political world in DC, right down to the average man on the street, 50%
of whom aren’t obligated to pay income taxes but feel entitled to be
net recipients of government largesse at the expense of others. Even
among those that have assets, there’s no feeling of shame in gaming the
system any way possible. There’s no longer any onus to being one of
the 40 million people on electronic food stamps, or defaulting on one’s
mortgage and continuing to live in the house, and collecting
indefinitely extended unemployment benefits. Bankruptcy is just
something you do when needed.

Frankly, it’s a mystery to me how the U.S. in particular, but most of
the developed world, is going to escape from the very unpleasant
consequences of its very stupid past – and current – actions. 

I’ve just scratched the surface of the possibilities for the next ten
years here. What’s clear is that some patterns of production and
consumption are unsustainable; they will stop. What’s not clear is what
new patterns will replace them. But that’s not so worrisome; what’s a
matter of more concern is what forms of political and social
organization will appear.

But let me leave you with a final bit of good news. Most of the real
wealth – science, technologies, capital and consumer goods – will still
be here. There’s just going to be a change in ownership. And it’s
possible to position yourself to get more than your share.

Based on the above, what looks good to me – on a long-term basis – over
the years to come? In general, stocks, bonds, and property are dead
ducks, and headed much lower. But when a real bottom arrives, perhaps
even in this decade, fortunes will be made buying back into them. Gold
and silver, even though they’re no longer cheap, are going much higher;
they’ll be what you’ll trade for things that are cheap. Agricultural
commodities are going to do well. The trillions of currency units being
printed all over the world will definitely ignite more bubbles, which
should present fantastic speculative opportunities. And because the
political situation will be hairy, diversify your assets outside of
your home country.

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NOTW777's picture

oh so the author is a ZH member

RockyRacoon's picture

Are you aware that you can edit your own post or amend it if it has not been replied to?

Would save us a lot of your sprinkled avatar all over the place.

NOTW777's picture

"USSR collapsed peaceably"

 

and just happened over night? outta the clear blue  wow, who saw that coming?

is this harvard or yale or some other madrasa?

tmosley's picture

Wait, wait, wait.  Weimar Germany was an AGRARIAN economy?

Allow me to roll my eyes at this absurd statement.

cossack55's picture

TN, you are bummin me out.  Compare small farms in Germany in 1923 and small farms in US in 1923 to todays count.  It is arguable that we could have been considered agrarian compared to today.

Getagrip's picture

Post WW1, most of Germany's production was from farms. Most everything else "industrial" was dismanteled and sold off to pay debt...

Imminent Crucible's picture

Maybe you forgot that the Weimar hyperinflation ended in 1923.

In 1923, the entire world was dominated by agrarianism, including the U.S.

Most of the country didn't even have indoor toilets.

When the house doesn't have a crapper, I call it "agrarian".

NOTW777's picture

"Let’s look at a couple of other examples: Haiti and Mozambique."

oh yeah - its the same thing. really??

 

isnt our commander from kenya

NOTW777's picture

"The best advice is not to be around the watering hole when two antagonistic groups of chimpanzees are hooting and panting at each other, getting ready to fight for control of it."

 

so is this personal experience talking?  a flashback? chimps at the waterhole?  GS wants an interview

DosZap's picture

For this man, yeah, and a hell of a lot more.

 

RockyRacoon's picture

Ok, I've had it. 

Thank you for your specific and piercing rebuttal of the points the article made.

Odds are you stopped reading at some pet peeve sentence and discounted the entire thesis.   Why even post a comment at all?

Goldenballs's picture

In the future we are all likely to learn what true friends are,people you thought were will turn out not to be,and the guy down the street who helps you will become your friend.The true story is that the downfall of the West has happened through greed,sold out at the top not the bottom.The world will not change in the way this article expects.We have the brains,we have the people,we can print the cash,what we don,t have are the leaders.The reason the West gets poorer is because we import all this shit,we assume that this will carry on,in the near future this will stop and then we will have to rebuild our nations.The system is broken and not to our national benefit so we have to junk the system or adapt it to our needs.This will happen sooner than we think as to many people are affected.Obama,Cameron and the rest of the nodding dogs will be swept away,everyday better times come nearer as the masses will eventually speak.When people have nothing to loose Politicians and the elites have the most to fear,I hope they remember this at their next conference,payment on results as the peoples patience is wearing very thin.Gold and Silver is a barometer of whats really going on,it shows the affliction of instability,lack of confidence and lack of confidence in our socirties.

rocker's picture

GB'S   You just don't get it. The rich elite want as much as they can get and do not care about the consequences.

minus dog's picture

Sure, the masses will speak.  But will it be some text message-esque garbage, spelled poorly and abbreviated with nonsense words?  We're talking about people who put up the size of their last dump as their facebook status.

Rodent Freikorps's picture

Must be nice to just do the hand wave tech advances. Perhaps the author could give a hint what they might be? Nanotech?

We need cheap power. We are building windmills. Good plan.

StarvingLion's picture

We don't even have sane property rights.

Neoliberalism = Transaction Volume rules

which leads to complete lawlessness.  A zillion lawyers but no law, go figure.

NOTW777's picture

"Somalia is a model of things to come there."

"it’s a big step forward"

great advice, beheadings, murder, stone age brutality

 

this could be the dumbest article of the year

Wynn's picture

you have so much to say, perhaps you should start your own blog

cossack55's picture

This idiot could be listed on the Dumbass Blog network out of DC.

Dapper Dan's picture

"this could be the dumbest article of the year"

What kind of asshole would make a statement like that after posting 7 comments about the article.  I guess the MSN told their employees to go home and comment on any blog that gets more viewership then their own. 

I am Dapper and I approve this comment!

gwar5's picture

I don't think for one second the world is going to end in 2012 because the Mayans predicted it. They just got lucky.

max2205's picture

I want the 5 min back I wasted reading this crap.

IQ 145's picture

 Yes, exactly. But you have to have a sense of humor; its the internet, you know; and people know how to type. I mean, it's really pretty high quality ignorant sophmoric verbal salad. My personal favorite was; "Haiti and Singapore started out the same---". I laughed so hard I had to stop and wipe my eyes with my tee shirt. The amazing thing to consider is that this is a human being who actually imagines that they know something; or that they have something figured out.

Cathartes Aura's picture

pardon me while I cut in line behind you here IQ, but I can't be arsed to continue scrolling further past the same voter-exhortations & the inevitable Tea Party jokes. . .

I too laughed each time Haiti was mentioned, and no mention of the history of amrkn interference & undermining - I mean, even Wiki has more information than offered in the post, how much work does one need to do?  here's a very quick place to start to understand Haiti, it's oil & possible gold reserves, the FACT that it is host to one of the largest embassies in the amrkn global inventory:

http://snardfarker.ning.com/profiles/blog/show?id=2649739%3ABlogPost%3A1...

I could go on, but why bother. . .

aaronb17's picture

I don't get your position that raising taxes is somehow part of the problem.  If we would just raise taxes, everything would get better -- including, importantly our federal deficit.  But you've all been so brainwashed by the elites who are sucking wealth out of the system (rather than allowing it to be reinvested, as happens with higher taxes) that you are spouting their propaganda for them.

Look back at American times of prosperity -- they always follow hikes in taxes.  Look back at the really bad times.  They always happen after taxes are lowered.

When were income taxes as low as they are today?  You have to look all the way back to 1929.  Wow, those low taxes really helped the economy then!

Of course, you won't be convinced, because the elite have hired an endless stream of charismatic people to tell you that low taxes are good, and high taxes are bad.  You've bought it, and I strongly doubt you're going to admit how wrong you've been.

cossack55's picture

Hey moron, here is an idea. Why don't you pay my f*cking taxes so we can get more of our troops killed in afganland. Stupid shit.

gwar5's picture

I agree with the other people rolling their eyes at you.... The Private Sector pays the bills for everything and Obamazuela is killing the private sector.

Raising REVENUES is the goal, not raising taxes. Raising taxes actually reduces revenues. Why?

Raising taxes REDUCES revenue because people who produce things, like me and John Galt, can go on strike against high taxes until we get paid fairly for the risk of increasing our economic activity.

The greedy ones are the ones who expect something for nothing from the GOV. (Eg John Kerry parking his boat in low tax CT instead of MA to save $500K prop taxes)

Cutting taxes and expenses led to the roaring 1920's. Higher taxes and confiscation of other stores of value such as gold killed the recovery from the depression after 1929.

Miss Expectations's picture

Can't you be stupid someplace else?

minus dog's picture

Is that some kind of joke?  I see now, I've had it wrong all along.  We need to crank up taxes and 'reinvest' in more fat people sitting in government buildings shuffling paper.  It's a miracle, the ho-ho's have fallen from my eyes and I can see now.

But seriously -

"Raising REVENUES is the goal, not raising taxes. "

Your goal and my goal.  Not the Big O's goal.  Both the president and the administration have stated explicitly that they'll choose higher rates of taxation over higher levels of revenue.  Apparently we have some here who agree with that policy wholeheartedly.

Fred Hayek's picture

This is a really silly example of believing that correlation is causation. 

Taxes were fairly low in the 20's.  The great depression started in 1929 and continued till WW2.  A lot of economic historians think that Roosevelt massively raising taxes in 1937 plunged the U.S. back into nearly the same depths of misery as it had experienced back in 1932 after conditions getting better from '33 to '36. 

Taxes were relatively high during the Eisenhower administration.  If you think this is a model for U.S. policy, please explain how to simultaneously replicate the utter destruction of most of the civilized world's industrial base leading into this period.

You can poke holes in this imputed causality all through U.S. history.

But I would suggest that arguments about taxation are somewhat beside the point.  The real issue is spending.  Our corrupt whore congressmen, senators and state officials simply spend more money the more you give them.  Forbes magazine had a piece rating the states with the worst debt problems. 

http://www.forbes.com/2010/01/20/worst-debt-states-business-wall-street-debt-10-states_slide.html

The states in the worst trouble are all true blue.  They have higher tax rates.  They take in more money.  Doesn't matter.  They simply spend even faster. 

The thinking that's the product of brainwashing is the idea that you solve the problem by taking more money from citizens.  It's a spending problem.  It always has been.  It probably always will be.

rocker's picture

FH, I know your daddy. Try this:

 

The Share of USA Income gains Going to the

Top 1 Percent at Highest Level Since 1920. 

1923 to 1929 was 70% to the Richest

1960 to 1969 was 11% to the Richest

1976 to 1979 was 33% to the Richest

1982 to 1989 was 41% to the Richest

1992 to 2000 was 42% to the Richest

2002 to 2007 was 62% to the Richest

…………………………………………………

The Share of USA Income gains Going to the

Bottom 90 Percent at the Lowest Level Since 1920.

1923 to 1929 was 18% to the Poorest

1960 to 1969 was 62% to the Poorest

1976 to 1979 was 43% to the Poorest

1982 to 1989 was 22% to the Poorest

1992 to 2000 was 29% to the Poorest

2002 to 2007 was 12% to the Poorest

 

What was that low tax rate for WHO ???????????????

Fred Hayek's picture

If you don't define your terms you can make statistics say almost anything.  Do you really think 6 times as much of american income went to group X at one time as went to them at another? 

What is income?  At various times in the last century, tax policy has been to apply a high official tax rate to income of those in the highest tax bracket and force those people to take reimbursement in other forms. 

The funniest thing about your stats is that some of the numbers actually work directly counter to your argument.  For instance, the period from 1960 to 1969 includes the huge Kennedy tax cuts.  That was, according to your numbers, the best period for the poor.  So, sticking to your statistics, the solution is to have massive across the board tax cuts. 

chopper read's picture

since when did America become a place where "the poor" are owed something for being such?  DID OUR ANCESTORS COME HERE FOR OPPORTUNITY OR HANDOUTS?  (insert predictable "slavery" rebuttal here) 

 

i'm happy to donate to charities all day long, but what the fuck, "robin hood" rocker? 

 

STOP ADVOCATING CHARITY WITH OTHER PEOPLE'S MONEY.  ...even if it does make you feel important. 

 

the world is a "poor" place, unless you get off your arse and make it otherwise.

 

(of course, i'm excluding those who print money and fractionally reserve lend in which case - stop!).    

Rusty Shorts's picture

Here is an excerpt from Bill Bryson's recent book "At Home" about this particular period:

"The Eiffel Tower was the most striking and imaginative large structure in the world in the nineteenth cetury, and perhaps the greatest structural achievement too, but it wasn't the most expensive building of its century or even of its year.  At the very moment that the Eiffel Tower was rising in Paris, two thousand miles away in the foothills of the Appalachian Mountains in North Carolina an even more expensive structure was going up - a private residence on rather a grand scale.  It would take more than twice as long to complete as the Eiffel Tower, employ four times as many workers, cost three times as much to build, and was intended to be lived in for just a few months a year by one man and his mother.  Called Biltmore, it was (and remains) the largest private house ever built in North America.  Nothing can say more about the shifting economics of the late nineteenth century than that the residents of the New World were now building houses greater than the greatest monuments of the Old.  America in 1889 was in the sumptuous midst of the period of hyper-self-indulgence known as the Gilded Age.  There would never be another time to equal it.  Between 1850 and 1900 every measure of wealth, productivity and well-being skyrocketed in America.  the country's population in the period tripled, but its wealth increased by a factor of thirteen.  Steel production went from 13,000 tons a year to 11.3 million.  Exports of metal products of all kinds - guns, rails, pipes, boilers, machinery of every description - went from $6 million to $120 million.  The number of millionaires, fewer than twenty in 1850, rose to forty thousand by century's end. Europeans viewed America's industrial ambitions with amusement, then consternation and finally alarm.  In Britain, a National Efficiency Movement arose with the idea of recapturing the bulldog spirit that had formerly made Britain pre-eminent.  Books with titles like The American Invaders and The 'American Commercial Invasion' of Europe sold briskly.  But actually what Europeans were seeing was only the beginning.   By the early twentieth century America was producing more steel than Germany and Britain combined - a circumstance that would have seemed inconceivable half a century before.  What particularly galled the Europeans was that nearly all the technological advances in steel production were made in Europe, but it was America that made the steel.  In 1901, J.P. Morgan absorbed and amalgamated a host of smaller companies into the mighty US Steel Corporation, the largest business enterprise in the world had ever seen.  With a value of $1.4 billion it was worth more than all the land in the United States west of the Mississippi and twice the size of the US federal government if measured by annual revenue.   America's industrial success produced a rollcall of financial magnificence: Rockefellers, Morgans, Astors, Mellons, Morgans, Fricks, Carnegies, Goulds, du Ponts, Belmonts, Harrimans, Huntingtons, Vanderbilts and many more basked in the dynastic wealth of essentially in exhaustible proportions.  John D. Rockefeller made $1 billion a year, measured in today's money, and paid no income tax.  No one did, for income tax did not yet exist in America.  Congress tried to introduce an income tax of 2 per cent on earnings over $4,000 in 1894, but the Supreme Court ruled it unconstitutional.  Income tax wouldn't become a regular part of American life until 1914, and in the meantime any money that was made was kept. People would never be this rich again."wake up and smell the dogshit...

Hulk's picture

If you enjoy Bryson, you may enjoy blue highways by william least heat moon...

Rusty Shorts's picture

I've gone on to Mark Twain

Strom's picture

Correlation does not equal causation.

 

I don't know if what you're saying is true, but asserting that tax hikes cause prosperity is pretty "out there". Any proof? Any statistical significance?

 

What if taxes were raised because of budget deficits due to tax revenue dropping during a recessionary period? Since growth follows recession (at some point), it seems that higher taxes caused the growth, when in fact the growth would have occurred whether taxes were high or low.

Vernon Wormer's picture

WTF? I'm about 15 minutes from living on less than half of my earnings. Raise taxes. You are a fool.

chopper read's picture

aaronb17, you really should rethink your own thesis. 

 

let me guess, attending community college on a taxpayer-backed student loan?

 

i'm going to enjoy watching worms like you suffer when the shit hits the fan.  you deserve it, bigtime. 

gwar5's picture

Countries go broke and reboot all the time -- just not our country in our lifetimes.

The difference is that the USA is the global mothership for the concepts of human natural rights, representative government, democracy, free markets and has the reserve currency.

I expect to feel more changes than an Iceland or Argentina collapse can produce, with geopolitical disruptions and realignments but as long as the world, especially the American middle class, does not devolve from core beliefs and values, we will be fine.

Rodent Freikorps's picture

I keep wanting to go there...and then I think of a nuclear Iran. And a doomsday cult with gene splicers, and I go all cold again.

The idea of some microbiologist saying, "as God wills" scares the crap out of me.

Some Kipling for ya:

They do not preach that their God will rouse them a little before the nuts work loose.
They do not preach that His Pity allows them to drop their job when they damn-well choose.
As in the thronged and the lighted ways, so in the dark and the desert they stand,
Wary and watchful all their days that their brethren's ways may be long in the land.

Raise ye the stone or cleave the wood to make a path more fair or flat;
Lo, it is black already with the blood some Son of Martha spilled for that!
Not as a ladder from earth to Heaven, not as a witness to any creed,
But simple service simply given to his own kind in their common need.

And the Sons of Mary smile and are blessèd---they know the Angels are on their side.
They know in them is the Grace confessèd, and for them are the Mercies multiplied.
They sit at the feet---they hear the Word---they see how truly the Promise runs.
They have cast their burden upon the Lord, and---the Lord He lays it on Martha's Sons!

plongka10's picture

I think the rest of the world left the Mothership a while ago. Don't spout off about human natural rights when you have Guantanamo on your doorstep. Representative government? Ha! Democracy? Have you really taken a good , hard look at your country lately? Free markets? Please pull the other one. The only thing the good ol' USA has going for it at the moment is tactical superiority. So what are you gonna do? Nuke everyone cause you want your ball back? 

Rodent Freikorps's picture

You tell 'em. I keep explaining that sufficient merciless brutality up front ends the need for all the subtle stuff the lawfare douches whine about.

Old school Roman. That's the ticket. With nukes.

The most feared words in all the world should be, "The Americans are coming, and they are pissed."

 

Rodent Freikorps's picture

Soviet Union died years ago. You should really try to keep up.