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Guest Post: Subprime Government And The Liquidity Trap, Parts I and II

Tyler Durden's picture


Submitted by nopat

Subprime Government and the Liquidity Trap

Part I

Intragovernmental debt holdings have been one of the more underreported topics during the last few economic cycles.  This isn’t surprising.  We’ve
turned the federal debt argument into a legal, rather than financial or
moral, debate where the fairness doctrine of universal applicability
means any inconsistency of logic on the part renders the whole invalid.  The
result of this is the public grossly misunderstands the burden of proof
to be the lack of controvertible evidence, and with it any hope of
meaningful discourse is lost in the chicanes of grandiose political
gestures.  Arguments get boiled down into easy-to-swallow pills ready for mass consumption.  We
rally against illegal immigration without questioning who built our
houses, and condemn illegal drug use while washing down an oxycodone
with a highball of scotch.  National debt is now far too high and government spending and waste far too pervasive.  We must stop at nothing to rid ourselves of this indentured servitude.
Oh, dear Faust, if it were only that easy.
all political debates, the rub isn’t the national debt as a whole, it’s
the composition of the national debt between publicly-held and held by
agencies.  To be fair, publicly-held debt is the larger amount – $9.4T of the $14T, or two-thirds.  But
focusing on the public portion of the national debt means the federal
government can still dip its fingers in the other third of the pie that
is the intragovernmental debt holdings without invalidating the “debt =
the devil” position voters love casting, like a pair of bunched-up
panties at a Tom Jones concert, their ballots towards.  Clinton’s
sepia’d legacy will be defined by the moment he paid down the national
debt, if by “paid down” you mean “increased” $588B between 1996-2001 by
raiding the Federal Trust Fund.
The whole
thing works just like any institution sitting on a ton of cash: due to
the timing between assets and liabilities (receiving money and paying
expenses), it makes perfect financial sense to put that cash to work
provided there’s an asset class with low enough risk so as not to
disrupt operations.  And there’s no single riskless asset class like US Federal Debt, backed by the full faith and credit of the US Government.
One of the reforms Lyndon Johnson ushered in with his Great Society was the creation of the General Trust Fund.  The government isn’t “The Government”, it’s a collection of agencies waging a pitched battle for precious taxpayer resources.  Now,
on the rare occasion that spending is less than projected, or as is
more likely, tax receipts earmarked for a specific agency came in above
what was budgeted, this “surplus” is pooled into a general trust and
lent out to other agencies at a rate assumed similar to a government
market issue maturing and/or callable after 4 years.  In
other words, a medium-term to long-term Treasury note with terms set
accordingly including interest paid back to the issuing agency. 
In a manner of speaking, it was a way to become “half-pregnant”.  For
agencies like the SSA collecting 40 or 50 years of taxes from an
individual before a withdrawal would be seen, this represents a massive
source of funding for government operations.  Without
having to access the capital markets, interest rates would remain lower
than they ordinarily would and the drag on the economy would be
reduced.  More importantly, it allowed politicians to expand the size of government without having to increase the direct tax burden.  For
the generation of guns-and-butter baby boomers who were raised during
the unrivaled prosperity of post-WWII America, capitalism was now like
being an organ donor, something at the bottom of a form you could opt
into.  It became as much of an inalienable
Constitutional right as free speech, turkey at Thanksgiving, and the
best education American tax dollars can buy.
Now, this is where the story takes a bit of a turn.  The dollar is the de facto reserve currency, and has been since Bretton Woods.  When
emerging economy wants to access the capital markets, investors
demand the transaction to occur in dollars to ensure sufficient
liquidity – that, in the event things fall apart quickly, there will be
sufficient physical currency to be able to exit their positions.  The same applies for commodities, precious metals, and a whole host of other asset classes.  This
influx of capital increases pressure on the currency markets to the
effect of driving down the dollar (where capital is leaving) and
increasing the value of the foreign currency (where capital is
entering).  To keep their goods cheaper for
export, foreign central banks intervene by using their new influx of US
dollars to buy assets priced in US dollars, causing dollars to increase
in value relative to their currency.  Given the
need to quickly enter and exit these positions in response to changes in
the market, the preference is for the next most liquid asset other than
dollars – US Treasuries.
That’s the inside joke when we get into a pissing match over trade.  A country wants to keep its currency cheap, so it makes our currency more expensive.  The more expensive our currency, the cheaper it is for us to borrow.  Borrowing devalues the currency, and the cycle continues, for as long as there is a buyer, dollars will be printed.  Without a buyer, the currency becomes cheaper, borrowing costs increase, and inflation grips the economy.  That’s
the trade – we get their goods plus rock-bottom financing.  The economy
expands, unemployment drops to the floor, and tax receipts grow.  Trust
funds burst at the seams, the cost of borrowing from now lower than
ever, allowing the unthinkably easy out of cutting taxes and expanding
entitlement services.  In return, they get our inflation.  All gain, no pain.  To
a guns-and-butter baby boomer, it’d be inconceivable any other way. 
Any less, and the inequity of fairness would be worthy of protest.

Part II

Well, at least that’s the way it’s supposed to work.  Except when it works too well, then it doesn’t work at all.  And for the past 40 years, it’s been working exceedingly well.  Which is to say, it’s about to fail miserably.

The interesting thing about the post-war baby boom and our guns-and-butter generation isn’t what happened during or as a result of this population tidal wave, but what didn’t happen:  the birth rate in America abruptly fell during the mid-60s, and continued to fall even through to today.  Compounding the problem, on one hand you have increasing life expectancies and the expansion of benefits placing financial burdens on the retirement system.  On the other hand, increasingly competitive labor markets and trade liberalization placed further importance on education and technological adoption, which both increased the displacement of workers as the domestic value chain moved upstream and delayed the entry of individuals into the labor pool well into their 20s as they traded off starting a family for attaining college educations.  These lengthened dependant obligations (from both ends of the curve) have necessitated longer workforce tenures, and are simultaneously acting as an artificial floor to wages for those already at the peak of their earnings trajectory while creating a ceiling as the next generation is kept in an advancement holding pattern, denied the skills and experience needed to achieve their own maximum earnings potential.  The divide between rich and poor is as much a generational problem as it is access to education, technology, and capital resources.


The other interesting thing about the post-war baby boom was the impact on the savings rate.  The rising percentage of income coming from transfer payments (i.e. entitlement programs) as a result of displacement on one end of the economic spectrum coupled with multiple streams of household income and smaller family sizes on the other drove an insatiable consumer demand that depressed the household savings rate, increased demand for foreign goods, and lowered borrowing costs as a vicious cycle was created.  Attempts at intervening in the markets to protect trade and standards of living did little more than fuel government spending as the domestic value chain moved even higher, displacing more workers and shifting the demand for low-wage labor overseas.


Unless you’ve been living under a rock for the past 3 years…it should be pretty obvious this plan hinges on consumer spending.  Now, consumer spending can come from one of three areas: wages, investments, and borrowing.  Well, wages haven’t moved a whole lot over the past decade, and for that matter neither have investments.  Which leaves borrowing.  Lots of borrowing.  Where possible, from ourselves.  Free money, after all, is free money.

Except when it isn’t.  Part of accessing the General Trust means having to pay interest, which the SSA has been more than willing to accept and the rest of the federal government has been more than willing to pay.  For the past 20 years, each time it accesses these funds, it does so at lower and lower costs, with ever more funds to access as tax revenues have continued to grow.  With borrowing costs lower than at any point in history, this should be a no brainer.

If only it were that easy.

The government at large faces an epic dilemma of where to come up with the cash to keep itself moving forward without drawing too much of a shock to the system.  Nearly 1 in 5 is employed in the Public sector, likely more once you take into consideration all the private industries that live specifically off of government contracts.  Almost $0.30 of every $1 of gross earnings is a government paycheck of some form.  Taking into account that social security benefits paid by your employer isn't income, given it goes directly into someone else's pocket, the picture only gets worse.  Public sentiment is clamoring for a reduction in the federal deficit without an increase in the per-capita level of taxes.  Current spending levels are predicated on cheap and easy access to capital markets, which have left the central bank in the precarious situation of being unable to increase interest rates without increasing the overall costs to government, which can't reduce its size without contributing to a greater economic downturn.  As it stands, the SSA can hope to bring in $114B of interest revenue on the debt currently outstanding, less than what it did in 2010.   Unfortunately, there isn’t any capital left in those funds to roll the interest rates over, and unless there’s a miraculous recovery in the labor market (maybe Bill Hicks’ idea of using the elderly for stunt doubles will come to fruition, at least one can hope), payments will continue to outstrip receipts and a draw-down on $2.6T of the SSA trust will deprive the government of much needed oxygen to keep the machine moving forward. 


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Sat, 04/09/2011 - 21:35 | 1154191 Ahmeexnal
Ahmeexnal's picture

And BP will not pay billions in penalty, only millions.

Sat, 04/09/2011 - 22:35 | 1154293 Mark McGoldrick
Mark McGoldrick's picture

It doesn't matter what BP pays back to the government, because it's just fiat money, anyway.


These debts and penalties denominated in fiat  paper dollars are just scams, orchestrated by George Soros and the Shapiros. If the debts had been denominated in gold, silver, hams or PepperRidge Farm Pepperoni rolls, the penalties would be more meaningful - a true blow to the gut.  

However, by penalizing BP in fiat dollars, BP essentially gets to pay its penalties in counterfeit, Monopoly money that doesn't exist in the first place. So it really doesn't matter if the penalty is $10 or $10B.  It's all counterfeit, anyway.

Is this right?  After so many junks today, I'm just trying to fit in tonight.


Sat, 04/09/2011 - 23:03 | 1154327 Ahmeexnal
Ahmeexnal's picture

Nice try Math Man. Next time at least change your IP.

Sun, 04/10/2011 - 00:12 | 1154398 Conrad Murray
Conrad Murray's picture

He may be on to something:

DXY April 20, 2010 - 81.05
DXY Current - 74.85

Gold April 20, 2010 - 1142
Gold Current - 1475

Regular Gasoline April 20, 2010 - 2.83
Regular Gasoline Current - 3.73

Wendy's Jr Bacon April 20, 2010 - 0.99
Wendy's Jr Bacon Current - 1.29

We should get some sort of consideration here...

Sun, 04/10/2011 - 00:16 | 1154406 Conrad Murray
Conrad Murray's picture

PS - There is no inflation.

Sun, 04/10/2011 - 22:23 | 1156498 Ted K
Ted K's picture

We got "Different Strokes" to the world!!! Hmmmm!!!

Sat, 04/09/2011 - 23:11 | 1154335 DeadFred
DeadFred's picture

Thank you for the effort but if you don't believe in Jesus you can't fake Christianity, if you don't believe in Mohammed you won't pass for for a Muslim and if you aren't a zerohedger at heart your posts won't quite cut it.  Keep trying, maybe you'll get the faith.

Sun, 04/10/2011 - 01:13 | 1154483 Bananamerican
Bananamerican's picture

" We rally against illegal immigration without questioning who built our houses"

the fuck you say....

i KNOW the head chopping, mass grave digging, gang banging, border sneaking, "resource" utilizin', bribe taking, revanchist, illiterate, shit smearing bastards didn't build mine

Sun, 04/10/2011 - 01:17 | 1154489 captain_menace
captain_menace's picture

I'm fairly certain that I've eaten a meal or two prepared by those who were not "fully" legal.

Burp.  And if memory serves... they were fine meals indeed.

Sun, 04/10/2011 - 01:29 | 1154495 Bananamerican
Bananamerican's picture

I'm sure there are quite a few small businessmen who've retired early thanks to them...

businesses large and small who welcome their cheap labor and or ponzi dollars, army recruiters, city managers, politicians and homeowners who neither "ask" about their status nor "tell".....Fuck them ALL


From top to bottom, short term thinking has completely fucked this country..."Burp"


Sun, 04/10/2011 - 01:37 | 1154504 captain_menace
captain_menace's picture

Well, when I was a younger man, I spent a season on a tree-planting crew.  Half the crew were illegal immigrants.  For every one tree that an American planted, an illegal Mexican would plant two.  Doesn't take a genius to figure out the math.  I'd hire all Mexicans (regardless of citizenship status) if I were running a tree-planting operation.  They were better at the work, and I can say this having done the work myself.  And they were good cooks too... burp.

Sun, 04/10/2011 - 02:18 | 1154520 Bananamerican
Bananamerican's picture


if having an entire country full of mexicans was such a boon, Mexico should be heaven on earth....or are you counting on the magic alchemy of "the american dream" to transmute the peoples of a failed State/Culture into Supermen?

Face it, MEXICANS have run away from other MEXICANS....and they've come up here the way pathogens invade a diseased host...They are nothing more (in aggregate) than Visigoths with mustaches.

Look, I'm glad you have gas & are useless at tree planting but I've seen J-lo's ass....& i don't...give...a...shit!

Sun, 04/10/2011 - 02:30 | 1154542 captain_menace
captain_menace's picture

I figured you wouldn't give a shit.  It's all good.

Good luck with your farming endeavors. 

Sun, 04/10/2011 - 02:44 | 1154546 Bananamerican
Bananamerican's picture

and you with your Mexi-fed natural gas project...

They'll like you...You pet them

Sun, 04/10/2011 - 08:09 | 1154681 BigJim
BigJim's picture

Can you tell me the difference between the government controlling who gets to work (and who doesn't), and any other kind of protectionism or cartelization? I'm sure you like being able to buy stuff made elsewhere, or at least having the choice. Yet according to you, if I want to employ someone, I have to check with Big Brother to find out if He thinks it's OK and they're sufficiently 'American' enough.

It seems to me that most of the perceived problem with 'illegals' is (I'm led to understand) that they can claim benefits from the US government without having paid taxes.

The problem here, though, isn't that they're claiming these benefits; the problem is that the US is a socialist state handing these benefits out to anyone in the US, regardless of whether they've paid into the pot or not.

Get rid of socialism, and only the hard working will immigrate into the US. They will drive up productivity, and everyone will benefit. And they won't claim state benefits because there won't be any state benefits to claim.

The US was founded and built by people who would be considered 'illegals' now - your ancestors included.

Sun, 04/10/2011 - 09:07 | 1154731 ibjamming
ibjamming's picture

You don't get's a polite way of saying "no brown people"...and I agree.   I want NO brown people around me whenerver possible...I just don't like them...and isn't that my RIGHT?  The right of association.'re missing the point...they shouldn't be "in the country to be applying for the job".


It's a culture thing...I huess you're not old enough to remember America BEFORE the fucking "civil rights" movement destroyed it.  Oh the good old days...

Sun, 04/10/2011 - 10:23 | 1154786 John Wilmot
John Wilmot's picture

"Can you tell me the difference between the government controlling who gets to work (and who doesn't), and any other kind of protectionism or cartelization? I'm sure you like being able to buy stuff made elsewhere, or at least having the choice. Yet according to you, if I want to employ someone, I have to check with Big Brother to find out if He thinks it's OK and they're sufficiently 'American' enough." -Big Jim

Two words, NATIONAL SOVEREIGNTY. We have individual liberty with respect to one another, but we are part of a collective with respect to non-citizens: that is the meaning of a sovereign nation. A regulation fixing a minimum wage is a violation of individual liberty; while a regulation fining employers of illegal aliens is the proper work of the government of a sovereign nation. The alternative is housed at Brussels, which incidentally is a shit-hole of a city, the Detriot of Western Europe..

Sun, 04/10/2011 - 13:24 | 1155130 Bananamerican
Bananamerican's picture

Wilmot FTW

Sun, 04/10/2011 - 11:51 | 1154915 Midwest Prepper
Midwest Prepper's picture

Yes, I agree that it is Mexicans fleeing Mexicans.  And I have also witnessed firsthand the awesome work ethic of these illegals. 

We will see a culling of the herd as soon as we eliminate citizenship for "anchor babies" and make it clear that, while we appreciate your hard work, we are not giving you and all your dependents all the welfare benefits (food stamps, health care that is better than I can afford, WIC, free school lunch, reduced tuition at college, etc).

The country is bankrupt and we think it's "unkind" to cut benefits that we cannot afford.  How kind is it to anyone that we let so many people on the liferaft that every single one of them drowns??? Well, here we are... the raft is sinking.... I just wish that moron Teddy Kennedy were still alive to watch the fruits of his labor.

Mon, 04/11/2011 - 01:19 | 1156839 FreedomGuy
FreedomGuy's picture

We should remember that we were the most popular destination for several hundred years before welfare, foodstamps, Medicaid, Social Security and the rest of the redistributionist crap. We also had unlimited immigration and it turned out pretty well. If you weren't brave and willing to support yourself and accept the risks of living didn't come. We had a Darwinian natural selection advantage in our immigration. Our problems eminate from socialism.

That is part of point of this article. We have artificially funded the voracious appetite of the leviathan state and now the system is breaking down and the bill is coming due. It's not because of Mexicans or anyone else. It's because of the fruits of socialism and the endless lies that go with it.

Sun, 04/10/2011 - 10:36 | 1154797 falak pema
falak pema's picture

I did't know ZH was a religious sect...whose holy circle had as commonality some hidden dogma...other than logic and analysis of naked facts...alike naked, unadulterated, attractive feminine ductility,  whose only true existential mystery lies in its ability to defy logic to the point of making a complete fool out of that primal tool of the first Archimedean lever; that of male endeavor.

Sun, 04/10/2011 - 12:03 | 1154940 Kayman
Kayman's picture

Gosh falak...

I think I hear a hand clapping in the forest....

As to the topic, I think most here at ZH are aware that the endgame is at hand.

Will this slow-motion economic train wreck continue, or will we hit the wall ?

Thanks for another great article Tyler.  A lifeline to sanity.

Sun, 04/10/2011 - 12:20 | 1154980 cosmictrainwreck
cosmictrainwreck's picture

good response. I was gonna post simply "WTF?"

Sun, 04/10/2011 - 01:14 | 1154488 captain_menace
captain_menace's picture

I agree with you.

But I was sad to see that you didn't add cans of Dinty Moore beef stew to your list of valuable assets.  Come on, PepperRidge Farm?

Sun, 04/10/2011 - 08:11 | 1154686 BigJim
BigJim's picture

You really are a master of the specious.

Debt-based fiat money is indeed a scam. It is monopoly money to the Fed and the banking cartel, because they can create it at will while the rest of us have to work for it, and pay interest on something that cost them virtually nothing to create.

But as long as it has some value, and BP aren't allowed to print it, then BP paying a fine in the billions still costs them.

Now do you understand?

Sun, 04/10/2011 - 12:07 | 1154953 Kayman
Kayman's picture

Don't waste your time BigJim, Mark either is having us on or he cannot tell the fuckee from the fucker.

Sun, 04/10/2011 - 02:18 | 1154535 SparkyvonBellagio
SparkyvonBellagio's picture

Doesn't the Evil A'hole remind you of BerNank?

Sat, 04/09/2011 - 21:51 | 1154223 vxpatel
vxpatel's picture

In a country where the numbers are rounded to the nearest 100,000,000,000


I have full confidence in our elected officials to focus on the things that really matter:



Sat, 04/09/2011 - 23:05 | 1154329 I am Jobe
I am Jobe's picture

How about for drugs? WTF is wrong with these lawfucking makers.

Sun, 04/10/2011 - 12:12 | 1154965 Kayman
Kayman's picture


Its a conman's trick. They don't want you looking at the real issue.  We are broke.

So instead of dealing with hard choices, the criminal banking cartel and their political whores enlist the MSM to create artificial "deadlines" with a shell game of saving trinkets.

Sat, 04/09/2011 - 21:53 | 1154227 Central Bankster
Central Bankster's picture

So how long until they nationalize "private pensions", aka 401ks?

Sat, 04/09/2011 - 22:05 | 1154253 Selah
Selah's picture


Three to six months...


Sat, 04/09/2011 - 22:08 | 1154255 sschu
sschu's picture

... nationalize "private pensions", aka 401ks ...

IMHO, we will be given the "false choice" of redeeming our 401ks to avert a currency collapse.  2-4 years.


Sat, 04/09/2011 - 22:23 | 1154285 Inibo E. Exibo
Inibo E. Exibo's picture

I'm sitting here pondering cashing out of my pitiful 401k, using half of it to buy silver and the other half to help a friend by investing in his farm.  I'm thinking a little bit of real money and fresh vegitables sound nice. Part of me says I'm crazy; part of me is wondering what am I waiting for.

Sat, 04/09/2011 - 23:54 | 1154383 bankonzhongguo
bankonzhongguo's picture

After I did my farm thing (40 acres plus another 160 if it gets so crazy I can't leave the county), I just stopped worrying.

Something about eating fresh food (better nutrition helps the mind think) let me stop worrying and learned to love the bomb.

Knowing that I can buy, sell or trade (and grow) food for me and my family in addition to all the little weird things that keep me busy, lets one stop being a passive investor in markets that you have zero-hope in penetrating against the likes of GS and the Inter-Alpha Group.

Stop watching CNBC and plant a yarm (yard-farm) with your family.

Throw some ganga in it just to give The Finger to The Man.

Sun, 04/10/2011 - 01:13 | 1154487 Bananamerican
Bananamerican's picture

recommend any sites to get going?

Sun, 04/10/2011 - 13:24 | 1154526 Bananamerican
Bananamerican's picture

thanks so much ya gassy Menace ;);););););););););););)


Sun, 04/10/2011 - 10:44 | 1154810 Another Texan
Sun, 04/10/2011 - 09:39 | 1154754 -Michelle-
-Michelle-'s picture

Yes, this.  The more we plant, the less I worry.  Of course, it could all be taken away in one fell swoop, but at that point, it's almost beyond hope.

My retirement dreams have gone from MSM-induced to wanting to have a little land with a garden and orchard.  However, in the past couple of months we've realized that there's no point in waiting around for that.  We don't know if this is the house we'll spend the rest of our lives in, but we're starting to treat it like it is.  If we'd started planting 5 years ago when we first moved in, we'd be well-established by now.

In the past week, we've put in 12 trees: 2 pecan, 2 peach, 2 plum, 2 pomegranate, 2 banana, 1 orange, and 1 lemon.  We've got potatoes growing in trash cans.  We have what I think are the cheapest container gardens around: kid's wading pools.  They're filled with strawberries, carrots, tomatoes, and lettuce.  We've got cucumbers and onions and peppers and a bunch of herbs growing too.

Instead of watching TV, I'm practicing skills.  Baking bread.  Sewing.  Knitting.  Making soap.  We're homeschooling.  Everything we purchase is evaluated based on merit instead of impulse.  It is a 180 degree change in our thinking.  I regret we didn't do this sooner, but I'm thankful that we're doing it now.  I'm also thankful for an understanding husband who has come to appreciate all of my planning and prepping.  The threat of no pay for military over the last few days elicited no more than a shrug from either of us.

I have no illusions about how difficult it's going to get, but I'm done being frightened of it.  We will continue to do what it takes to make sure our children are fed, clothed, educated, and loved.

Sun, 04/10/2011 - 20:56 | 1156221 Bananamerican
Bananamerican's picture

i like the kids wading pools idea...with drain holes?

Mon, 04/11/2011 - 10:06 | 1157521 -Michelle-
-Michelle-'s picture

Yes.  We drilled a series of holes in the bottoms and then lined them with some leftover window screening (the coated kind) to keep the soil from draining out.

It may not be the most beautiful garden out there, but my plants are doing very well.

Mon, 04/11/2011 - 01:31 | 1156852 FreedomGuy
FreedomGuy's picture

I like your style. While I realize that things will get worse, I hope not so bad that we have a complete breakdown in society compelling the growing of one's own food. Good luck to all of us.

Sun, 04/10/2011 - 09:43 | 1154759 Dental Floss Tycoon
Dental Floss Tycoon's picture

"Throw some ganga in it just to give The Finger to The Man."

That ganga just might be your downfall.

With county and law enforcement budgets tight there is increasing interest in confiscating property.

This has been going on for a long time and is increasing.

Just type “confiscating property drugs” in a Google search and you will see what I mean.

Sun, 04/10/2011 - 11:54 | 1154924 Iam Rich
Iam Rich's picture

Absolutely 100% this.  Do not give them a reason, they will take it.  Your finger to the "man" is your silver, your gold, and your garden.

Sun, 04/10/2011 - 09:11 | 1154733 New_Meat
New_Meat's picture

CB-not until the demo crowd gets back into power in the house.

although the skids are greased.

- Ned

Sat, 04/09/2011 - 21:58 | 1154234 Rusty Shorts
Sun, 04/10/2011 - 00:51 | 1154235 honestann
honestann's picture

Oh, dear Faust, if it were only that easy.

The answer to this article is... IT IS THAT EASY.

That's right.  Get frugal.  Get out of debt.  Never borrow again.  And avoid the money-suction scams developed by the predators-that-be to steal your income.  Stop paying them, one way or the other.  Either stop earning profits [on the books], or stop paying, or leave the jurisdiction.  Do not feed them any more.

Stop thinking in terms of "society".  Such a mindset will not work.  Start thinking about your own life, your own income, your own expenses, your own behavior.  And ignore the sewer that is the rest of humanity.  We must COMPLETELY reject the notion "their fate is ours" and "their expenses are ours"... just as the predators and parasites must accept the exact same thing.  We must "just say no" to their scams.  We must simply take care of our own self and our own lives, and refuse to be sucked into the schemes of others.

NOBODY and nothing will solve the "problems of society".  Society has a terminal disease... and it should, must and will die.  Let society die.  Let individuals who produce live.

It is time for Atlas Shrugged, part 1... quit the system.

Sat, 04/09/2011 - 22:00 | 1154241 AN0NYM0US
AN0NYM0US's picture



checking in, hopefully things are going well considering the circumstances - a giant oak falling on ones house is never a good thing - godspeed to you and the family

Sat, 04/09/2011 - 22:18 | 1154276 RockyRacoon
RockyRacoon's picture

Most certainly!  Godspeed.

Sun, 04/10/2011 - 02:14 | 1154528 sagerxx
sagerxx's picture

Second that!

Sun, 04/10/2011 - 02:08 | 1154524 defender
defender's picture

Godspeed from me as well, I hope that this gives you a chance to do some of those upgrades that you always wanted.  As a side note, make sure that the insulation that you put in is as good as you can get it.  This winter the heating cost is going to be a killer.

Sat, 04/09/2011 - 22:01 | 1154246 sschu
sschu's picture

Seems like a lot of words to say we are insolvent.  SSA has lent our baby-boomer SS receipts to pay for welfare and corporate handouts and other government "investments".

Soon they will need the money and it does not exist.  What a shocker ...  shocking I say!


Sun, 04/10/2011 - 02:29 | 1154540 narnia
narnia's picture

This article could have been 2 sentences.  Baby boomers are collecting social security & Medicare, so the SS & Medicare trusts need liquidity.  The SS & Medicare Trusts aredrawing down intergovernmental receivables from the Treasury, necessitating more borrowing or taxing on top of existing escalations in debt.

This incremental change doesn't help, but it is really not the killer.  The killer is 4-5% short term rates on $20T of debt.     

Sun, 04/10/2011 - 12:25 | 1154991 Kayman
Kayman's picture


The corollary to paying real interest on impossible debt, is that the criminals have already bonused themselves out of having to deal with this monster debt.

Hank Paulson, Bernanke, and Geithner greased the wheels for these criminal slime buckets, by robbing you and your children's future.

And the grinning teleprompter master is riding shotgun to this countries grave.

The banking criminals have it made; this country is lost.

Sat, 04/09/2011 - 22:11 | 1154261 LesterB
LesterB's picture

So... there it is.. ZH has jumped the shark. nopat has posted.

Sat, 04/09/2011 - 22:12 | 1154263 RockyRacoon
RockyRacoon's picture

U. S. A.    R. I. P.

Sat, 04/09/2011 - 22:12 | 1154266 tom a taxpayer
tom a taxpayer's picture

nopat - Thanks for this analysis and insights on the intragovernmental albatross that has been flying under the radar.

Sun, 04/10/2011 - 07:47 | 1154670 Mike2756
Mike2756's picture

+1, excellent article.

Sat, 04/09/2011 - 22:13 | 1154268 gwar5
gwar5's picture

Nopat, exactly what is with this WE shit, do you have a mouse in your pocket ir something?

You just described the perfect socialist -- entices illegal immigration to displace domestic labor, takes Oxycotin and washes it down with EtOh, doesn't pay their bills, and doesn't mind if the government does the same. In fact, it's considered a liberal virtue to spend more than you earn. # Winning. 

Yeah, we're fucked up as a country but don't lump us all together. Over half get it. It's the 20% dragging the rest of us down the black hole. (It's all in the stats, baby)

Sat, 04/09/2011 - 22:27 | 1154292 Pepe
Pepe's picture

yeah keep on thinking will be the immigrant somewhere

before you know it

Sun, 04/10/2011 - 01:25 | 1154493 captain_menace
captain_menace's picture

If it's all about the stats, then I really need to fully understand.

Is it exactly 20% that's dragging us down?  Or is it more like 20.99213%?

When it comes down to accounting, I like to be able to reconcile to the nearest whole unit...


Sun, 04/10/2011 - 02:16 | 1154532 sagerxx
sagerxx's picture

"In fact, it's considered a liberal virtue to spend more than you earn."

Whereas Dubya always kep' his budget in bounds...

Get off the L-R binary bullshiat gwar5.  It ain't doing you any favors...

Mon, 04/11/2011 - 01:34 | 1156860 FreedomGuy
FreedomGuy's picture

Our country is 100% immigrant. I suspect similar things were said about the Irish, Italians, etc. Socialism is the problem. Part of socialism is not enticing illegal immigration. If anything, it is the opposite. Socialists are generally protectionists to cover their own inflated labor and business costs. They can't compete.

However, part of being a nation is borders and enforcement. Illegal immigration, especially with our unlimited socialist benefits IS part of the problem, but definitely not the whole problem.

Sat, 04/09/2011 - 22:26 | 1154284 Holodomor2012
Holodomor2012's picture

"We rally against illegal immigration [because we know] who built our houses [and they are undercutting an already exploited labor market]"

Sat, 04/09/2011 - 23:24 | 1154354 maximin thrax
maximin thrax's picture

When the builders were looking over their shoulders for ICE agents to come take their workers, little did they know that it was not luck but the TPTB extending credit to the illegals that allowed them to work "under the radar." Video games, cars houses; it was what illegals could buy through credit obtained form their employment, far more than what they built, that made the federal government look the other way. Hell, you can be an illegal and get "in-state" tuition in certain states - which is great at a time where much of the expansion in consumer debt is college tuition. Just another dimension of the effort to expand the base of the debt pyramid for the enrichment of the financial elite and for maintaining tax revenue, built block-on-block by even more, imported debt slaves.

Sun, 04/10/2011 - 01:20 | 1154492 Bananamerican
Bananamerican's picture


Sun, 04/10/2011 - 11:40 | 1154889 InconvenientCou...
InconvenientCounterParty's picture

I get a sense that some of you "chosen ones" haven't done much reading outside the klan book of the month club.

You might try "Empire Building for Dummies". Chapter 2 is "locate a source of cheap labor." Ch. 3 is "commence exploitation".

Wake the fuk up. Even Hitler understood chapter 2 & 3. The racial birthright is basically a psuedo-religion propagated to control weak minds. Feel the anger, the passion, ready to die for the cause? it's working.


Sat, 04/09/2011 - 23:48 | 1154378 slewie the pi-rat
slewie the pi-rat's picture

kinda confusing to me, props.  i guess i'd thought they already rejected it.  is this the deal that the president vetoed in January?  or a new one the people are now rejecting?  maybe the term "deal" should be "offer".  these people just aren't gonna cover the bankster losses and the int'l bankster cartel can go experience carnal knowledge of itself, too!


Sun, 04/10/2011 - 02:14 | 1154530 defender
defender's picture

I like that the people of Iceland have finally gotten sick of this and started to go after the banksters.  A few months back there were stories about houses getting messages painted on them. 

Sat, 04/09/2011 - 23:28 | 1154358 Rick Blaine
Rick Blaine's picture

I always think about this clip when I hear talk of liquidity traps and the Bass-ZIRP trap...

Ackbar: "It's a trap!"

...and just because it's one of the coolest sequences ever...






Sun, 04/10/2011 - 05:31 | 1154607 ebworthen
ebworthen's picture

Good stuff.

Lando knocked the Dish T.V. antenna off the Millenium Falcon; now Han and Chewie won't be able to watch the announcement by the Empire of the raising of the debt ceiling, taxes, and increasing the retirement age of Storm Troopers to 75 (and if they don't pass a budget the Storm Troopers won't get paid next week!).

Sun, 04/10/2011 - 16:10 | 1155574 slewie the pi-rat
slewie the pi-rat's picture

+++ to you & mr blaine, too, eb!

my pirate ship is similarly ill-equipped.  Han & Chewie, "deprived" like slewie.  alas!  no dish or cable!  Hahaha!


Sat, 04/09/2011 - 23:56 | 1154382 tony bonn
tony bonn's picture

hair-brained schemes always end this for nothing and chicks for free is not the policy of a great nation.

Mon, 04/11/2011 - 08:27 | 1157205 Diogenes
Diogenes's picture

It's hare brained as in March hare, when they are said to go nuts.

Sun, 04/10/2011 - 00:27 | 1154420 I am Jobe
I am Jobe's picture

American sheeples are fucked i must say . Yeap I have a 401K they say. Many folks I work with don;t even know what they elected and why. Idiots.

Sun, 04/10/2011 - 01:29 | 1154497 captain_menace
captain_menace's picture

You can't blame sheep for being sheep.

And besides, they taste good, and provide me with nice wool for my clothes.

Sun, 04/10/2011 - 10:34 | 1154796 John Wilmot
John Wilmot's picture

...or wolves for being wolves. 

Sun, 04/10/2011 - 15:06 | 1155436 captain_menace
captain_menace's picture


Sun, 04/10/2011 - 00:49 | 1154456 robobbob
robobbob's picture

this is a fantastic and eye opening article. well, in a world is going to end sort of way.

Sun, 04/10/2011 - 02:14 | 1154529 Quantum Nucleonics
Quantum Nucleonics's picture

As bad as social security's finances might be, it's nothing compared to Medicare & Medicade.  Though there is no "debt" outstanding for these programs, their unfunded liabilities are an order of magnitude larger than SS's... which is saying someting when you are talking trillions.

Sun, 04/10/2011 - 05:25 | 1154603 ebworthen
ebworthen's picture


How can you save money when your healthcare costs just for "insurance" go up 15% per year? 

Poof!  Savings gone.

How can you save when fuel costs go up and the value of your dollar go down?

How can you save when you get no raise in four or five years but the inflation/dollar devaluation = a loss of income of 20-40%?

BTW - The tail end of the baby boomers and the front end of the Gen X'ers are being jettisoned for 20' somethings that will work for 1/2 and have no kids or mortgage.  What the fuck is that going to do to tax revenues and the mortgage / housing industry?  Oooops.

Sun, 04/10/2011 - 06:27 | 1154624 zen0
zen0's picture

I thought the concept of liquidity traps was some kind of keynsian fantasy based on the inability to be able to think of two margins and once and the failure to understand time preference, or have I been misled?

Sun, 04/10/2011 - 09:13 | 1154736 New_Meat
New_Meat's picture

u got the concept, except it is too fuzzy for normal people to understand

Sun, 04/10/2011 - 10:05 | 1154773 The Axe
The Axe's picture

If the US government can kick Citibank and its balance sheet down the road, don't look for the federal government to rollover anytime in the next 10 years..or ever..


Long ink...

Sun, 04/10/2011 - 10:28 | 1154791 Urban Redneck
Urban Redneck's picture

The last time I did an analysis of Treasury holders was February 2009:

Total Public Debt $10.8T 100% (Numbers Rounded)

Total Government Held Public Debt $4.37T 40.5%

Of which -

   SSI $2.2T 20.7%

   CS, FS, DOD Pension Funds $1.0T 9.1%

   All Other Intergovernment $1.15T 10.7% 

In the intervening 2 years the percentage of the Public Debt owned by Government subsidiaries has dropped from 40.5% to 33%, while the amount has remained relatively constant.

Total Public Debt Debt has meanwhile increased from $10.8 to $14.3T.

So the extent of the previous pilfering of the public's pockets is being masked the massive issuance of new debt over the last two years.  And now the FED, which is excluded from intergovernmental holdings, is an even bigger owner of debt than SSI (the previous #1 and way ahead of China, even then). 


Sun, 04/10/2011 - 11:01 | 1154828 Hannibal
Hannibal's picture






Sun, 04/10/2011 - 11:19 | 1154856 Fix It Again Timmy
Fix It Again Timmy's picture

Iceland sends a big "Fook You" to the bankers...

Sun, 04/10/2011 - 12:40 | 1155003 avonaltendorf
avonaltendorf's picture

no pat saw 30 cents of every dollar of national income as government payola, plus private sector income from govt contracts. He forgot to add state and local spending. The total is north of 45 percent. The tipping point of no return is 51 percent, which I predicted (long ago) that we would hit in 2015. Doesn't matter how high the taxes or meager the entitlements in outyears of 2020 or 2030. When "all govt" disbursements outstrip private GDP, higher taxes and austerity can't create new wealth to be looted.

Sun, 04/10/2011 - 21:45 | 1156367 PulauHantu29
PulauHantu29's picture

I asked my girlfriend to 'splain this to me in a way the so that "an average" American would understand:


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