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Eric Sprott On Ignoring The Obvious

Tyler Durden's picture





 

By Eric Sprott of Sprott Global

Ignoring The Obvious

Not a day goes by without hearing about the fiscal cliff, the debt ceiling or another political deadlock. We would not disagree that some of these are important issues that need resolving but, in the grand scheme of things, they are relatively superficial.

As we all know, central banks around the world have been frantically expanding their balance sheets. While exceptional times might warrant exceptional measures, Figure 1 below paints a rather troubling picture. The monetary base, the amount of money in circulation in the economy, has expanded at an incredible pace. Since the mid-80s, the U.S. monetary base had been very stable at around 5-6% of GDP. Through fractional reserve banking, this amount was sufficient to maintain annual inflation around 2-3%. With the banking system collapsing in 2008-2009, it was necessary for the Fed to increase the monetary base. However, banks are now in much better shape than they were in that period and the benefits of monetary expansion seem to be waning.

The Fed is not the solution to every economic and social woe and trying to hide real problems (eg. structurally high unemployment and rampant poverty, unsustainable income inequality and exploding government liabilities) with money printing achieves nothing constructive.

FIGURE 1: U.S. MONETARY BASE AS A % OF GDP
maag-1-2013.gif
Source: Federal Reserve Bank of St. Louis, U.S. Department of Commerce: Bureau of Economic Analysis

Employment

First, while we are supposed to be in the midst of an economic recovery, about one in five Americans are on food stamps (Figure 2). As the chart below shows, this measure of poverty has been fairly steady for the past year. We also find it hard to reconcile this data point with the headline unemployment numbers, which seem to be improving. We prefer a more comprehensive measure of unemployment, commonly referred to as U6, which includes discouraged workers and those working part time against their will. By this measure, we see that “Total Unemployment” has come down, but remains extremely elevated at around 14% of the labour force. Moreover, food stamps and “Total Unemployment” tend to move together. If food stamps users stabilize at current highs, we believe that it is a sign that the natural unemployment rate in the U.S. economy is now significantly higher than it was pre-crisis.

FIGURE 2: EMPLOYMENT IS NOT AS GOOD AS IT SEEMS
maag-1-2013-2.gif
Source: U.S. Department of Labor: Bureau of Labor Statistics

Income Inequality

Second, income inequality has been growing steadily since the mid-1980s. Figure 3 shows the share of total U.S. income earned by the middle class and the top 5% of households. As of 2011, the top 5% of households brought home over 22% of all income generated in the country, whereas the middle 20% of households (quite literally the middle class) got less than 15%. Coupled with the unemployment picture, this shows that a majority of the U.S. population has been losing ground to the most wealthy. In a society that relies on consumption for 70% of its economic activity, this certainly does not bode well for the future, since the wealthiest traditionally do not consume much of their income. To top it off, the recent “fiscal cliff deal” just reduced disposable income further by increasing payroll taxes by 2% for all those working, putting additional strain on the working class and their discretionary spending dollars. (See Figure 3).

FIGURE 3: SHARE OF AGGREGATE INCOME RECEIVED BY HOUSEHOLDS
maag-1-2013-3.gif
Source:  U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements

Government Obligations

Another obvious problem is the liabilities of the Federal Government. The current cash reporting basis that the Department of the Treasury uses, vastly understates its deficit and future liabilities. Some estimates put the current unfunded liabilities of the Federal Government at about $222 Trillion and show an increase in the deficit from 2010 to 2011 of around $11 Trillion, which represents about 70% of the U.S. total GDP.1

Simple back of the envelope calculations can be made using the Treasury’s “Financial Report of the United States Government – 2012”, which comprises a detailed breakdown of its future financial obligations for health care, social security and other government services.2 This reporting is similar to what every corporation is mandated to calculate for the purposes of U.S. GAAP reporting.

Of course, accounting can always be “massaged” to improve one’s situation. This problem is most acute when there are many assumptions, like for pension and benefits accounting (a.k.a. social security and Medicaid/Medicare). ShadowStats makes the necessary adjustments and finds that for 2012 alone, the deficit amounts to $6.9 Trillion.3 This represents about 45% of annual GDP. While laudable, the current haggling by policy makers for a meager $2 Trillion in deficit reduction over 10 years represents only the tip of the iceberg.

A significant part of these deficits is caused by current and future health care spending. The Deloitte Center for Health Solutions recently published a report entitled “The hidden costs of U.S. health care: Consumer discretionary health care spending”, in which they analyze the many components of health care spending and how those expenses are underreported in official numbers. Figure 4 shows their estimates for total health care spending by age group for 2010.

FIGURE 4: TOTAL HEALTH CARE COSTS BY AGE - 2010, $ BN
maag-1-2013-4.gif
Source: The hidden costs of U.S. health care:
Consumer discretionary health care spending, Deloitte
FIGURE 5: U.S. POPULATION 65+ YEARS
maag-1-2013-4-2.gif
Source: US Census Bureau 2012 National Population Projections 

 
What is striking - but not that surprising - is the very large increase in health care costs faced by seniors. The report cites that “Seniors and Baby Boomers account for 64 percent of health care costs, but comprise only 40 percent of the U.S. population.” For seniors, total health care costs represent, on average, approximately $30,000 per person per year. Other estimates by Carnegie Mellon University professor Paul Fischbeck (although a bit dated) show that these annual costs increase dramatically as people age, reaching as much as $45,000 for 80+ year olds.4 Considering that GDP per capita was about $46,800 in 2010 and the income inequality mentioned earlier, these are figures that would put most households in dire straits.

Also, structural trends will lead to an ever greater share of the nation’s income being dedicated to health care. Figure 5 above shows the evolution of the U.S. population for the 65+ age group, as forecasted by the U.S. Census Bureau. The U.S. will end up with a steadily increasing segment of its population (from 13% in 2010 to 20% in 2030) composed of persons aged 65 and over. This matters for two important reasons. First, this means a smaller workforce contributing to GDP growth and paying taxes to support government programs. Second, and this is related to the first point, this trend will put tremendous pressure on social security and health care spending in the country, thus leading to structurally higher deficits.

These facts are by themselves troubling, but coupled with the population trends described in Figure 5, they become alarming. To illustrate the impact of overall population aging on total health care costs, we use the per capita numbers implied by the Deloitte study and apply them to the U.S. Census Bureau projections for all age groups. While we believe that those numbers fundamentally underrepresent health care inflation, we inflate per capita costs for each age group using the average “medical care” component of the U.S. Department of Labor Consumer Price Index. Finally we assume a 4% nominal GDP growth, which some might argue is overly optimistic when taking into account the smaller workforce we discussed earlier. In any case, Figure 6 shows the results of our simulation.

Only with the change in the composition of the U.S. population, total health care costs are forecasted to go from 22% of GDP in 2010 to over 30% in 2040. These are huge numbers! To put them in perspective, in 2011 total U.S. GDP was $14,500 Billion, so an increase from 22% to 30% of GDP would represent a $1.2 Trillion increase in health care spending in that year. If we increase the health care inflation rate by only 100bps, we calculate that by 2040, the share of GDP attributed to health care will jump to 40%.

FIGURE 6: HEALTH CARE SPENDING AS A % OF GDP
maag-1-2013-5.gifSource: US Census Bureau 2012 National Population Projections,U.S. Department of Commerce: Bureau of Economic Analysis, U.S. Department of Labor: Bureau of Labor Statistics & The hidden costs of U.S. health care: Consumer discretionary health care spending, Deloitte

According to the Deloitte study, about 60% of those costs are borne directly by households and the remaining 40% by the public sector (30% to Medicare and Medicaid). This means that households, of which the majority is either poor or in the declining middle class, will face an even larger squeeze in their discretionary spending.

Conclusion

To conclude, 20% of the population is on food stamps, an ever increasing gap between the wealthy and the rest and ever-increasing health care spending are all deep rooted and immensely important problems that get a ridiculous fraction of the attention that they deserve. The impact of these issues on both government finances and future economic growth are enormous.

As we discussed, the purpose of asset purchases by the Fed might no longer be improvements in the real economy, but rather a more subtle financing of U.S. government deficits. However, in the long run, expanding the money supply inevitably leads to inflationary pressures. Luckily for the Fed and the U.S. government, there is so much slack in the labour market that inflation might be years away. And, if we are right about the long run unemployment rate being structurally higher, then the Fed has all the room it needs to continue Quantitative Easing (QE) to infinity. This might allow them to continue to hide the true financial position of the government for many years to come.

Nonetheless, the rising GAAP deficit and the sheer size of the U.S. Federal Government’s liabilities to its citizens makes it clear that one day or another, services (health care, social security) will have to be cut. Financial alchemy can hide reality, but it does not provide any tangible services.

Europe’s (unresolved) experience with its debt crisis provides an insightful window into the future. Austerity measures in Ireland, Portugal, Spain and Greece have caused tremendous pain to their citizens (25% unemployment rates) and wreaked havoc in their economies (double digit retail sales declines).

Are we going to ignore the obvious?

 


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Sat, 01/26/2013 - 11:17 | Link to Comment IridiumRebel
IridiumRebel's picture

http://www.youtube.com/watch?v=WaPni5O2YyI

 

This is the next ZH story......

Sat, 01/26/2013 - 11:30 | Link to Comment francis_sawyer
Sat, 01/26/2013 - 11:44 | Link to Comment IridiumRebel
IridiumRebel's picture

Oh I see....we got a Saturday morning wanker on a downvote trek. I love little fuckers.

Sat, 01/26/2013 - 12:08 | Link to Comment AssFire
AssFire's picture

Are we going to ignore the obvious?

Like the real reason people are buying the shit out of guns:

They fear the federal government.

Sat, 01/26/2013 - 12:49 | Link to Comment francis_sawyer
francis_sawyer's picture

Your government HATES you & wants you DEAD...

The GOOD NEWS is that, to accomplish that task, they're going to have to go through a process, which necessarily involves 'funding' [whereby taxpayer dollars are spent]... Since there aren't enough, they are therefore borrowed into existence [& some 'mysterious', NEVER TO BE NAMED, money machine then prints what's needed, out of thin air, to accomplish that task]...

The BAD NEWS is that your neighbor, & probably most of your friends & even family are oblivious to all of the above [& the 'hidden hand' behind that motive], & instead prefer the status quo... Therefore ~ by proxy, THEY HATE YOU & WANT YOU DEAD TOO...

The 'facilitators' of the STATUS QUO, as described above, all claim to be be doing 'GOD'S WORK'... Therefore ~ by proxy, GOD WANTS YOU DEAD TOO...

Have a nice day... :-)

Sincerely,

francis_sawyer

Sat, 01/26/2013 - 12:48 | Link to Comment Xibalba
Xibalba's picture

population control though vaccines.  

Sat, 01/26/2013 - 12:51 | Link to Comment francis_sawyer
Sat, 01/26/2013 - 13:31 | Link to Comment negative rates
negative rates's picture

CHARTS, are all kinds o tools for all kinds o fools!

Sat, 01/26/2013 - 13:56 | Link to Comment JungleJim
JungleJim's picture

Already been implemented, check out the Anthrax vaccine problems, how about the "flu" vaccine that was killing old folks a few years ago, research "mandatory vaccinations" which you will be seeing more of in the future ...

Sat, 01/26/2013 - 14:03 | Link to Comment hooligan2009
hooligan2009's picture

umm...or coffee plus vicodin plus viagra plus WoW plus big brother plus...

outside the box..if you can have everything done for you for free by bots..are you healthy?

Sat, 01/26/2013 - 13:37 | Link to Comment Bad Attitude
Bad Attitude's picture

"Fear the government that fears your guns." - Unknown

"Political power grows out of the barrel of a gun." - Mao Zedong

"When the people fear the government there is tyranny, when the government fears the people there is liberty." - Thomas Jefferson

This new gun control push isn't going to go away any time soon - this feels so much like the political situation after the Stockton schoolyard massacre (1989, in California, a state with tough gun control laws that didn't stop the perpetrator), but with a dramatically compressed timeline. The gun-grabbers are going to hold on tight. The anti-gun propaganda is going to be relentless. There are going to be more tragic mass-killings to feed the anti-gun propaganda frenzy. (I'll leave it to the reader to decide if these tragedies are a product of conspiracies, or simply a product of crazy people.)

The positives include a recent poll that found that 65% of gun owners said they would defy new firearms restrictions, (http://reason.com/24-7/2013/01/24/poll-two-thirds-of-gun-owners-say-theyll) and that everybody is buying all the firearms and ammunition they can get their hands on.

Sat, 01/26/2013 - 14:49 | Link to Comment americanspirit
americanspirit's picture

"Are we going to ignore the obvious?" Yes.

Sat, 01/26/2013 - 20:08 | Link to Comment secret_sam
secret_sam's picture

This may be true, and if so, it is unfortunate.

The Federal government should not be feared.

People who are afraid often make unwise decisions, or act rashly.  There's very little call for this when thinking about FEDGOV.  Resident Americans are far more likely to be assassinated or imprisoned by a local police force than any agency of the Feds.

FEDGOV is a dancing bear, a dinosaur, a steam-powered computer network. 

Don't be AFRAID.  Be PREPARED. 

Make THEM do the work.

Sat, 01/26/2013 - 11:38 | Link to Comment IridiumRebel
IridiumRebel's picture

Jeez! Three Downvotes? Anonymous just declared war on the US Justice system and their web presence. I am not a part of Anonymous, but they supposedly have a nuclear option. Just saw it on CNN and thought I'd share....never again. I will leave the reporting to TD and ZH....Let's see if we can get to 15 downvotes huh?

 

 

downvoting now......

Sat, 01/26/2013 - 11:48 | Link to Comment Svendblaaskaeg
Svendblaaskaeg's picture

"Jeez! Three Downvotes?"

Could be a browser (Opera) fault? - I just gave you a +1 (after reloading the page) and it returned 2 ups and 5 downs

Sat, 01/26/2013 - 11:51 | Link to Comment IridiumRebel
IridiumRebel's picture

We all know Eric Holder is secretly here. It was probably him. We are at 7.....Come on Holder! Let's get to 15!

Sat, 01/26/2013 - 11:59 | Link to Comment Svendblaaskaeg
Svendblaaskaeg's picture

I still think it's my bloody Opera browser, it has done it before on other sites, adding to uppers or downers that is, never made reversed votes on other sites though...very sorry if it really is my browsers fault! - if anyone knows if this is possible please chip in!  

Sat, 01/26/2013 - 12:05 | Link to Comment IridiumRebel
IridiumRebel's picture

Well luckily for you and me I could give two shits about being downvoted. 

Sat, 01/26/2013 - 12:19 | Link to Comment mess nonster
mess nonster's picture

...which is why it's all you talk about.

I think Ananalmous is a psyop. Agents provocateurs. Opt out, bitchez.

Sat, 01/26/2013 - 12:44 | Link to Comment IridiumRebel
IridiumRebel's picture

Ummm....I have a collective TWO posts on anonymous with some relative periphery posts. This is the only thread amongst hundreds that i have discussed it because I wanted the ZH take which is usually enlightened. Alright, I admit it it. I am Janet Napolitano. 

Sat, 01/26/2013 - 16:33 | Link to Comment Just Ice
Just Ice's picture

There seem to be at least 5 gubmint trolls at the ready on ZH to downvote any undesirable politically related posts...especially if the majority of your information is linked, (the thought being people will not click offsite for something fellow readers have found unmeritorious).  If they can pile the negative votes up before you get any green arrows, all the better (for them).  Don't sweat it, just recognize it is what it is.

Sat, 01/26/2013 - 12:28 | Link to Comment adeptish
adeptish's picture

Diebold...

Sat, 01/26/2013 - 12:25 | Link to Comment SafelyGraze
SafelyGraze's picture

a modest proposal

1. the payscale for an employee of the federal reserve system shall be indexed to the the median salary of US citizens (whether employed, unemployed, disabled, retired, not seeking employment, or other) who are above the age of 15 years. for example, a governor's salary shall be 10 times this median salary, where 10 is the index.

2. the indexes shall be adjusted only by a specific act of congress, limited in scope and containing no other provisions.

3. the pension of all vested employees of the federal reserve system shall be an annuity, not indexed to inflation. the annuity shall be a fixed percentage of the employee's cumulative salary. for example, the annuity shall be 10 percent of the employee's cumulative salary.

4. the percent shall be adjusted only by a specific act of congress, limited in scope and containing no other provisions.

part 1 gives a natural incentive to fed employees to promote employment

part 3 gives a natural incentive to limit (actual) price inflation

the salaries and pensions would be reasonable -- even generous -- as long as the populace is employed and price-inflation remains low.

parts 2 and 4 give congress a natural incentive to consider how the electorate will react to future raises (measured against median salary) for fed employees.

 

 

Sat, 01/26/2013 - 13:02 | Link to Comment tip e. canoe
tip e. canoe's picture

stop making sense

Sat, 01/26/2013 - 14:00 | Link to Comment hooligan2009
hooligan2009's picture

heh..

Sat, 01/26/2013 - 14:05 | Link to Comment Temporalist
Temporalist's picture

I like the ideas but the problem with laws is that the people with means can change them or completely ignore them all to their benefit.  They, people that have the means, will allow any law to pass with the knowledge that people will forget or become apathetic eventually and the law will become meaningless or be changed outright.

 

It should be very apparent that the US Constitution has been trampled on and discarded long ago.  Why amend something that is no longer regarded as necessary or useful by the very people that pledge to abide by it and protect it?

Sat, 01/26/2013 - 16:49 | Link to Comment Drachma
Drachma's picture

“But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

Frederic Bastiat, The Law

Sat, 01/26/2013 - 12:35 | Link to Comment TPTB_r_TBTF
TPTB_r_TBTF's picture

Why do you use such a shitty browser?

If you know it sucks, why do you stay with it?

Sat, 01/26/2013 - 13:21 | Link to Comment Svendblaaskaeg
Svendblaaskaeg's picture

"Why do you use such a shitty browser?"

I have a personal Opera account with all my links and notes collected over years, and its made by an Norwegian software company and they store the data, I don't trust Google   

Sat, 01/26/2013 - 11:52 | Link to Comment Xibalba
Xibalba's picture

just tells you who's on ZH nowadayz

 

 

 

Fuck you arswhores

 

Long live ANON

Sat, 01/26/2013 - 11:54 | Link to Comment IridiumRebel
IridiumRebel's picture

Long Psy Ops

Sat, 01/26/2013 - 13:02 | Link to Comment BobPaulson
BobPaulson's picture

No doubt it is compromised on many levels but the strength of a distributed network is that even when compromised it just operates at a diminished capacity. Bacteria have that advantage over centralized large organisms. There is probably an appropriate Ho Chi Minh quote in there but you get my point.

Sat, 01/26/2013 - 12:23 | Link to Comment seek
seek's picture

Three sockpuppet accounts out of the DoJ is more likely. Remember, on ZH, downvotes are upvotes for truth by TPTB.

Unless it's all downvotes, in which case it means the poster was a spam whore or a troll with no entertainment value.

Sat, 01/26/2013 - 12:57 | Link to Comment Atomizer
Atomizer's picture

 

 

Every road traveled comes to a fork. Only you can make a decision. There are many levels of information you can seek on the internet. I’ll start you on ground level.

Click me

 

As you head down into sub levels, make sure you leave your cyber hygiene at the door step. LOL

Sat, 01/26/2013 - 12:43 | Link to Comment 11b40
Sat, 01/26/2013 - 11:45 | Link to Comment Never One Roach
Never One Roach's picture

If the balance sheets have been expanded so much the last 2 years, why have the PMs been stagnant?

 

Is debt destruction that vicious?

Sat, 01/26/2013 - 11:46 | Link to Comment IridiumRebel
IridiumRebel's picture

Let's ask Jamie Dimon.

Sat, 01/26/2013 - 11:56 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"Banking is like a jet engine, it's too complicated for you debt-slaves to understand, just keep paying my interest and bonuses." - Jamie Dimon.

Sat, 01/26/2013 - 13:39 | Link to Comment Five8Charlie
Five8Charlie's picture

It sucks in everything around it, makes a lot of noise, and blows out lots of hot air?

Sat, 01/26/2013 - 14:05 | Link to Comment Haole
Haole's picture

Suck - Fuck - Blow

Sat, 01/26/2013 - 13:56 | Link to Comment WmMcK
WmMcK's picture

I know congress is bought ...

2% blending ...

Burn it down ...

+1 for Dylan R.

Highly recommended: http://www.godlikeproductions.com/forum1/message2119074/pg1

Sat, 01/26/2013 - 16:31 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

PMs are stagnant because they've been turned into fiat. All the paper gold out there now gives them the ability to play all sorts of games with the price. The naked shorts on silver are a paper ploy that screws with the real price of physical. PMs are fiat now, sorry.

Sat, 01/26/2013 - 13:45 | Link to Comment Creepy Lurker
Creepy Lurker's picture

I watched that vid, and it led me to this one, which is even better.

http://www.youtube.com/watch?v=EKlKGB3YwjE

Sat, 01/26/2013 - 14:36 | Link to Comment q99x2
q99x2's picture

No reason exists to have certain things on the internet except for Govt to use them against the citizens. And, I don't think they are on the internet unless the Govt has plans to use them against the general population. Mission critical data and operations as well as banking, energy and transportation are on their own fiber. So if anything happens you can be certain the FEDs did it - Holder, Napolitano, Clinton, Halliburton, Blankfein and Dimon. And if they didn't do it then it was them anyhow.

Sat, 01/26/2013 - 11:20 | Link to Comment Stonecold
Stonecold's picture

Hyperinflation is possible with high unemployment.  They did it in Zimbabwe

Sat, 01/26/2013 - 11:32 | Link to Comment booboo
booboo's picture

Honest questions.

How do banks make money in a hyperinflationary environment?

How do Federal, state and local governments fair under hyperinflation with fixed money supplies (taxes)?

Sat, 01/26/2013 - 12:13 | Link to Comment dwdollar
dwdollar's picture

Bankers and governments want to print forever without hyperinflation happening.

Hyperinflation is what happens when people discover how rigged the game has become. It's basically a run on the central bank.

Sat, 01/26/2013 - 14:00 | Link to Comment WmMcK
WmMcK's picture

“I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.”

Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders
(in 1924, that's right, we've been here before, bitchez.)

Sat, 01/26/2013 - 12:18 | Link to Comment hooligan2009
hooligan2009's picture

answers:

banks make money by printing it...kep in mind that in hyperinflation moeny is worthless so banks can print all they like and be "correct" in an accounting sense, but are left looking at piles of cash that are worth...nothing

federal governments hope that wages (and taxes) go up at the same (hyper) inflation rate as the overall economy. unfortunately, doing something "real" (like fixing a pipe or repairing a car) in exchange for another "real" thing, (like cutting your hair or fixing your teeth) drops the fed right out of the entire system. in short the federal government fails. dimisnishing taxes are collected and no benefits are paid; debt and deficits become meaningless. corporates have to increase wages and salaries in order to retain staff and face hyperinflating input costs.  

state and local governments try and get by on consumption and property taxes. the value of goods transacted electronically gets hyper inflated as does the value of a house. these taxers hope that wages go up by a hugely inflated amount and that companies can keep raising prices of products. people have no money to buy products and so local transaction taxes fail to keep pace, resulting in the failure of local and state governments; people clean their own streets and look after their own trash and security.

in short, the system resets. people are the items of value, provided they are not sick or elderly and can do something useful.

Sat, 01/26/2013 - 14:38 | Link to Comment Harbanger
Harbanger's picture

"How do banks make money in a hyperinflationary environment?"

They manipulate prices and buy physical assets with the printed money before it pops.  Become your own central bank before it's too late, bitches!

Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves. — Norm Franz

 

Sat, 01/26/2013 - 11:23 | Link to Comment Gloomy
Gloomy's picture

So Sprott says the crisis is years and years away!! Time to sell all my gold and silver holdings and join the stock market parade!

Sat, 01/26/2013 - 11:26 | Link to Comment IridiumRebel
IridiumRebel's picture

I just bought a fuckload of Netflix! Fuck Yeah!

Sat, 01/26/2013 - 13:11 | Link to Comment BobPaulson
BobPaulson's picture

If the collapse were that easy to predict in time, you could buy in and get out at the last minute. Sure, the rigged casino is doomed but calling that moment is the big variable IMO. All the shoe shine boys have already predicted the crash. I have been wringing my hands about it fir eight years, have made a good bit on bullion but am in no position to retire to my massive off grid survivalist ranch yet. My prognostication have so far been difficult to turn into a feeling of safety about it.

Sat, 01/26/2013 - 11:30 | Link to Comment Rainman
Rainman's picture

To compound their catastrophic folly, .gov is rapidly outlawing all beloved consumable vices so that the geriatrics can survive into their slobbering 100's as wards of the State. Idiots !

Sat, 01/26/2013 - 11:33 | Link to Comment Positive Dennis
Positive Dennis's picture

I agree, there will be no crash in 2013. We hard money types underestimate the power of the status quo. Even Japan has a few years of drifting before Ragnarök.

Sat, 01/26/2013 - 11:46 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Perhaps, but supply lines do have hard limits and history is pretty clear on how fast a currency can die when people lose faith in it's value for future redemption of real assets or labor.  The whole "flation" debate is pointless as the issue is really about the reliability of all these paper promises and the failure of humanity to fully understand that things are deteriorating exponentially. The only thing of any real substance that is backing the Federal Reserve Note now is the U.S./U.N. military, but the exchange of real goods and services in other currencies or hard assets is excellerating.

Sat, 01/26/2013 - 11:58 | Link to Comment Positive Dennis
Positive Dennis's picture

Yes, it is coming, but when? I am selling into what I think will be a multi year rally. It is a suckers rally.

Sat, 01/26/2013 - 13:04 | Link to Comment Positive Dennis
Positive Dennis's picture

As long as interest rates are low, we will be fine. This observation is why I think things will not crack up for some time. But eventually a tipping point will be reached and then we enter uncharted territory. Here is a rent blog of mine on interest rates. http://www.prophecypodcast.com/journal/2013/1/25/interest-rate-explosion...

Sat, 01/26/2013 - 11:40 | Link to Comment tradewithdave
tradewithdave's picture

Is it okay to ignore this? Jus' saying'..

Sat, 01/26/2013 - 11:42 | Link to Comment Never One Roach
Never One Roach's picture

<<In a society that relies on consumption for 70% of its economic activity>>

 

If you've started taking a closer look at your budget for the New Year and are trying to scale back some of your extra expenses, don't overlook your credit card statements for extra fees in the near future. The consumer advocacy group Consumer Action advises consumers to be on the lookout for "checkout fees" that some retailers may be tacking on to credit card transactions starting January 27. While this practice is banned in 10 states, consumers are encouraged to be on alert for these fees that would legally be passed from merchant to consumer.

 

After the settlement and new agreement, some retailers would be permitted to impose a surcharge for credit card purchases.

 

http://finance.yahoo.com/news/retailers-may-begin-charging-swipe-1558398...

 

 

 

 

Sun, 01/27/2013 - 22:18 | Link to Comment akak
akak's picture

 

After the settlement and new agreement, some retailers would be permitted to impose a surcharge for credit card purchases.

As it should be, as the banks charge the retailers a certain percentage on every credit card transaction.  It is only right and proper that these costs be passed along directly  to the consumer.

Sat, 01/26/2013 - 11:43 | Link to Comment Dr. Engali
Dr. Engali's picture

I don't know if Anonymous is phyops or not , but these attacks on government web sites sure stinks of a set up to clamp down on the web.

http://www.zdnet.com/anonymous-hacks-us-sentencing-commission-distribute...

Sat, 01/26/2013 - 11:45 | Link to Comment IridiumRebel
IridiumRebel's picture

interesting take doc.

Sat, 01/26/2013 - 11:51 | Link to Comment Dr. Engali
Dr. Engali's picture

It's for our own good of course, cyber security will protect us from those scary hackers..... Think of the children man.

Sat, 01/26/2013 - 12:01 | Link to Comment IridiumRebel
IridiumRebel's picture

This site makes my mind feel like a fucking pretzel. I think I have things figured out and then someone posts some mind twisting shit that kinda makes sense and I begin to drool and contemplate not in that order. DAMMIT ZH

Sat, 01/26/2013 - 12:38 | Link to Comment AssFire
AssFire's picture

I agree with their supposed beef about the laws and penalties for using technology,

hell as of today you can be prosecuted for unlocking your cell phone...But, if this was

really anything more that a ploy to assert more control- the decryption keys would have been sent out.

In the sick world of government, politics and banking- nothing happens by chance.

Sat, 01/26/2013 - 11:50 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Bingo.  Nothing is ever as it seems, and this is and has always been about power and control. 

The MIC relized that they were going to have their budget cut in 1999, they had to do something to get control back over congress and direct more funding to their interests.  They have been very successful.

Sat, 01/26/2013 - 11:53 | Link to Comment IridiumRebel
IridiumRebel's picture

Well, shit. I guess I shouldn't "like" their Facebook page. OOH! A puppy dancing on my friend's timeline! BRB.

Sat, 01/26/2013 - 13:32 | Link to Comment max2205
max2205's picture

Nationalize everything health related now before it's too late!

Fucking everyonein this sector is wag overpaid and services wag over priced.

 

Like GM in the 50ns

 

Sat, 01/26/2013 - 11:54 | Link to Comment nmewn
nmewn's picture

I share the same concern doc.

Whether or not they (Anonymous) are...government(s) will never let a good crisis go to waste...of they're own making or someone elses.

Sat, 01/26/2013 - 12:26 | Link to Comment Dr. Engali
Dr. Engali's picture

I agree nmewn. If they were serious they would do a lot more damage to something systematic , but instead they take over web sites. It's all to convenient for TPTB if you ask me.

Sat, 01/26/2013 - 12:36 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Again, the "doctor" is using his head.  This spot on.  Impress me, interupt a major power facility etc., these guys need to read the monkey wrench gang.

Sat, 01/26/2013 - 12:42 | Link to Comment Dr. Engali
Dr. Engali's picture

It's funny how something just seems to happen right when they push for legislation. And it's really funny how they just happen to have a 10,000 page bill ready to be signed, but the fuckers can't pass a budget in four years.

Sat, 01/26/2013 - 12:51 | Link to Comment IridiumRebel
IridiumRebel's picture

DING DING DING! We have our post of the day.

Sat, 01/26/2013 - 14:01 | Link to Comment Bad Attitude
Bad Attitude's picture

Yup. Legislation ready to introduce, manufactured crisis, propaganda push in the mainstream media coupled with politicians saying they have the "solution," public support grows for the proposed "solution," legislation formally introduced, politicians vote for the legislation because it is the "will of the people," the legislation becomes law. Then everybody reads the new law and realizes how they just got screwed.

Then, the cycle starts all over again.

Sat, 01/26/2013 - 22:50 | Link to Comment BidnessMan
BidnessMan's picture

Never let a crisis go to waste. 

Sat, 01/26/2013 - 12:30 | Link to Comment hooligan2009
hooligan2009's picture

spartacus?

Sat, 01/26/2013 - 14:08 | Link to Comment BLOTTO
BLOTTO's picture

Dr. E

.

I am with you on that. Its just that we've been hoodwinked for so long...on every major front...its hard to figure out the truth and the real motive.

.

But it very well could be a setup for the reason you stated. Information is powerful and the internet is full of it for free. 'They' don't like that at all.

Stay tuned...

 

Sat, 01/26/2013 - 15:47 | Link to Comment Banksters
Banksters's picture

The regime cannot exist with the internet in its current state.   As Napolitano recently stated, a cyber attack on critical infrastructure is imminent.    In the name of national security, internet 2 will be rolled out.   

Sat, 01/26/2013 - 22:04 | Link to Comment rufusbird
rufusbird's picture

This all deserves a little drill down investigation.

 

Sat, 01/26/2013 - 11:51 | Link to Comment brucyy
brucyy's picture

Income inequality ? yah, redistribution and socialism is the cure for everything.

You shall be all equal in misery  , said our beloved brother Ben from the church of monetization.

 

Sat, 01/26/2013 - 11:53 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"Income inequality ? yah, redistribution and fascism is the cure for everything."--  FIXED

Sat, 01/26/2013 - 12:01 | Link to Comment nmewn
nmewn's picture

They are one and the same thing. Top down statism run by an oligarchy, for the benefit of the oligarchy.

Exhibit A: Tim Geithner.

Exhibit B: David Gregory.

Exhibit C: Jon Corzine.

Sat, 01/26/2013 - 12:13 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Bullshit.  when I help a neighbor or relative get back on their feet I am participating in socialism.  When I steal valuation, money, or hard assets from them to support my failing business models, I am a fascist.  Big fucking difference.

You just happen to be good at identifying who the fascists are.   I'll be impressed when you roll the guillotines.

Sat, 01/26/2013 - 12:16 | Link to Comment nmewn
nmewn's picture

"Bullshit. when I help a neighbor or relative get back on their feet I am participating in socialism."

No, you are participating in charity AND its voluntary.

Sat, 01/26/2013 - 12:24 | Link to Comment Temporalist
Temporalist's picture

When people are confusing charity and socialism...things are really bad.  Socialism is state directive; charity is individual elective.

Sat, 01/26/2013 - 12:32 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Then there is no such thing as a socialist government since govenment never engages in charitable behavior, right?

 Again, you missed the fucking point, we all see exactly what the problem is and know exactly who the fascist evil fucks are, yet, nothing changes.

Impress me, roll the fucking guillotines already, otherwise, shut the fuck up.

Sat, 01/26/2013 - 12:46 | Link to Comment nmewn
nmewn's picture

My point was, government SHOULDN'T engage in charitable behavior at all, because once started, it will always grow with needs becoming wants and desires until it is looked at as a source to PROVIDE everything.

Socialism.

And for the LAST TIME...fascism is a derivative of socialism.

Read up on the influences of Mussolini, Hitler etal and get back to me before "you lose your head" over something you don't even understand completely.

Sat, 01/26/2013 - 12:58 | Link to Comment LawsofPhysics
LawsofPhysics's picture

I agree, the gov should not do anything aside from protect private property and the law of contracts, but we have come to fascism from captialism and are well on our way to another fascist state, again nothing has changed. I dislike all "isms" as they seem to all end up in the same place. Everyone be sure to use their ZH names when the guillotines roll, until then I reamain unimpressed and will continue to strenghten my tribe.  For now, you are free to do the same, if you so choose.

Sat, 01/26/2013 - 23:49 | Link to Comment Hedgetard55
Hedgetard55's picture

nmewn,

 

     He is a douchebag. Pay no attrention to the fool.

Sat, 01/26/2013 - 12:59 | Link to Comment Temporalist
Temporalist's picture

No you are missing the point that people are not here to dicusss what you want in your narrow terms just because you've deluded yourself into thinking that is so. 

 

If you think that people define socialist government as it being charitable you're wrong or babbling inanities to hear yourself.  Go write your manifesto and think out your ideas first before spouting them nonsensically in a public forum.

 

I couldn't care less if you are impressed you think much too highly of yourself.

 

Sorry the world can't be fixed to your liking and by your timeline.  I'll get right on that for you.

Sat, 01/26/2013 - 13:01 | Link to Comment LawsofPhysics
LawsofPhysics's picture

BOTH capitalism and socialism seem to get us to the same fascist endpoint.  Sad, guess the gov should have stuck with defending private property and the laws of contracts.

Wake me you actually do something about it.  I have to run now.

Sat, 01/26/2013 - 13:23 | Link to Comment nmewn
nmewn's picture

"BOTH capitalism and socialism seem to get us to the same fascist endpoint."

No they don't.

Under true capitalism, the too big to fail investment banks would have been destroyed...not saved by the state. Its what capitalism does, it cleanses and purges the unviable.

Surely anyone can see this.

Sat, 01/26/2013 - 13:29 | Link to Comment WmMcK
WmMcK's picture

"I was married to a socialist and a communist. Neither would take out the trash" - Zsa Zsa

Sat, 01/26/2013 - 13:32 | Link to Comment nmewn
nmewn's picture

It just doesn't work ;-)

Sat, 01/26/2013 - 13:51 | Link to Comment Temporalist
Temporalist's picture

So you'll be sleeping then, just waiting for others to "do something"?  Don't practice what you preach; typical.

Sat, 01/26/2013 - 12:34 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Sat, 01/26/2013 - 12:37 | Link to Comment nmewn
nmewn's picture

Plus one.

On the point of charity, one may not wish to provide it to the neighbor or the investment banker or a relative because they are evil little pricks of nature who should be allowed to wallow in the misery they have created for themselves.

Sat, 01/26/2013 - 12:47 | Link to Comment Dr. Engali
Dr. Engali's picture

Agreed , but in my book when the state takes property from one to give to another... that's fascism, no matter what it's called or how much lipstick is put on it.

Sat, 01/26/2013 - 13:06 | Link to Comment LawsofPhysics
LawsofPhysics's picture

The state should have a role in protecting private property and enforcing contract law,  nothing else.

Sat, 01/26/2013 - 19:01 | Link to Comment are we there yet
are we there yet's picture

Never heard of Joe Stallen being called charatable.

Sat, 01/26/2013 - 22:46 | Link to Comment BidnessMan
BidnessMan's picture

Maybe you have heard of Joe Stalin being called charitable? 

Sat, 01/26/2013 - 12:45 | Link to Comment LawsofPhysics
LawsofPhysics's picture

You are confusing behavior with a system of governance.  Unless you are saying that governments never exhibit charitable behavior.  Is that what you are saying nmewn?  We know who the evil fucks are, yet nothing has changed.

The point you are missing is that there needs to be some real fucking consequences for bad BEHAVIOR.

Not one damn thing changes until then.  Socialism supports charitable behavior, fascism does not.

Just saw your other post, very much on the same page.  Get your tribe in order. 

Sat, 01/26/2013 - 12:49 | Link to Comment nmewn
nmewn's picture

"Just saw your other post, very much on the same page. Get your tribe in order."

I think we're talking past each other.

My tribe is in order and ready for anything ;-)

Sat, 01/26/2013 - 12:59 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Be sure to use our ZH names on the street when/if TSHTF.

Sat, 01/26/2013 - 13:26 | Link to Comment WmMcK
WmMcK's picture

"I'm the dead guy on the $500 bill".  Please let me in (to the "speakeasy").

Sat, 01/26/2013 - 11:54 | Link to Comment Downtoolong
Downtoolong's picture

the purpose of asset purchases by the Fed might no longer be improvements in the real economy,

It was never about that

but rather a more subtle financing of U.S. government deficits,

and subsidization of Wall Street profits and transfer of all wealth to the richest people, who are allowed to gamble and double down indefinitely until they hit a winner. There's nothing subtle about it.

 

Sat, 01/26/2013 - 13:09 | Link to Comment Barbaric relic
Barbaric relic's picture

the purpose of asset purchases by the Fed might no longer be improvements in the real economy,

 

You're right, Downtoolong, it was never about improvements in the real economy  but the financing of U.S. government deficits is only a byproduct of providing trillions in subsidies to the banks.  Eric seems to be pulling his punches a bit in the article with his downplaying of inflation -- doesn't shadowstats give a much higher estimate for inflation?

Sat, 01/26/2013 - 12:06 | Link to Comment John Law Lives
John Law Lives's picture

"As we discussed, the purpose of asset purchases by the Fed might no longer be improvements in the real economy, but rather a more subtle financing of U.S. government deficits."

The Fed is not being "subtle" re. monetizing debt.  Any informed person is fully aware that is precisely what they are doing, and they will keep doing it.

 

"Luckily for the Fed and the U.S. government, there is so much slack in the labour market that inflation might be years away."

If you accept their calculation for CPI, you can claim this.  I do not accept it.  Energy costs and food costs and health care costs and tuition costs (i.e. costs that are relevant to many of us) have certainly been rising at a rapid clip.  I don't care if iPads are cheap.  I don't need one or want one.  In fact, I have never purchased any Apple gadget in the last 20 years.

 

"This might allow them to continue to hide the true financial position of the government for many years to come."

They may attempt to obfuscate the true position to uninformed nimrods, but they can't hide it from informed people.  ZH informs whose who want to be informed.

 

Sat, 01/26/2013 - 12:09 | Link to Comment yogibear
yogibear's picture

"If you accept their calculation for CPI, you can claim this.  I do not accept it. "

Look around you and at grocery bills, gasoline, services (oil Changes,dinning, transportation fares) etc. All have gone up.

The Federal Reserve and the government play this game of see no evil, speak no evil and everyone will believe.

 


Sat, 01/26/2013 - 13:51 | Link to Comment KTV Escort
KTV Escort's picture

Finally, on page 2 of the comments section, a well-reasoned response to Sprott's conclusion. Thank you John Law Lives.

Interesting Sprott is so cautionary, as opposed to the over the top noise found on KWN these days.

Sat, 01/26/2013 - 14:26 | Link to Comment Temporalist
Temporalist's picture

At the top of the page, below each article, you will see "X comments per page" which allows you to fit many more comments on page one (and all pages thereafter) so you don't have to get to the next page.  The point is what is page two for you is still page one for me as I have 200 comments per page.

Sat, 01/26/2013 - 12:01 | Link to Comment Catullus
Catullus's picture

Sprott still speaks like a "respectable" central banker. Slack in the labor market has nothing to do with it.

Play a counterfactual in your mind: if gasoline had been a dollar a gallon more expensive over the past 3 years, where would unemployment be? More to the point: at what price of fuel does it no longer make sense for the average person to no longer go to work? There are plenty of discretionary things Americans can give up, but a $1 more would probably wipe $100 a month from most people's net. Knowing that most people save nothing, there would be a significant quality of life downgrade for most. And that's when you put upward pricing pressure on labor, because the supplyof labor at the current prices begins to dry up.

The "slack" in the labor market is a non-sequitur to price inflation.

Sat, 01/26/2013 - 12:45 | Link to Comment dwdollar
dwdollar's picture

"More to the point: at what price of fuel does it no longer make sense for the average person to no longer go to work?"

Yes, but more importantly... If the USD has zero risk (apparently) for investors, there is a point where it doesn't make sense for the average American worker to work, regardless of the price of gas. Why work when Uncle Scam can just print a welfare check (without consequence) for anyone who doesn't want to work?

Sat, 01/26/2013 - 13:34 | Link to Comment WmMcK
WmMcK's picture

RE: (A)t what price of fuel does it no longer make sense for the average person to no longer go to work?
Depends -- I used to take mass transit to the WTC. Motivation matters more than the price of gas.

Sat, 01/26/2013 - 12:01 | Link to Comment Atomizer
Atomizer's picture

 

 

Double talk interpretation of IMF lingo..

We must restore confidence by reform, acceptance thru paper shuffling monetary growth instruments must become the new collective norm.

- Managing Director Christine Lagarde

 IMF's New Financial Data Query Tool - Jan 23, 2013. Now you can become a critic like myself, always challenging the IMF bullshit loans.

Sat, 01/26/2013 - 12:10 | Link to Comment nmewn
nmewn's picture

Tim Geithner:
None of those 19 banks are at risk for insolvency. Now, again, these banks, they bear the biggest responsibility for making sure that they can reassure investors that they're going to be strong and viable in the future. We'll indeed help them do that if that's necessary, but they bear the responsibility for making sure they can convince their investors and their creditors that they can get through this with a strong, viable franchise, and I think they're going to be able to do that.

Charlie Rose:
All right, so you're confident that these banks will be able to go raise this capital over a six month period.

Tim Geithner:
Reasonable confident, and --

Charlie Rose:
And if they don't?

Tim Geithner:
If they don't, they can come to us and we'll provide it.

Charlie Rose:
The government will provide. And this is additional TARP money?

Tim Geithner:
That's right.

Sat, 01/26/2013 - 14:53 | Link to Comment Temporalist
Temporalist's picture

Charlie Rose is a suckass dispicable statist elitist shill. 

Watch the video with Sir James Goldsmith where CR clearly is taking a feed in his ear about what to say to side with the statist keynesian witch Laura Tyson (I warn that listening to the witch can cause severe vomitting and diarrhea).  One can see the testing of talking points that they try to attack with such as "protectionism" is what people agianst globalism are really about.  Also many of the comments under the videos are worth reading for their comic value.

http://www.youtube.com/watch?v=4PQrz8F0dBI

http://www.youtube.com/watch?v=SZTzPmn-87w (about 1:50 in to this one it gets really good about the divorce between corporations and their marriage to government)

http://www.youtube.com/watch?v=A_hiEvTNV5k

http://www.youtube.com/watch?v=yonUgZ2Y6Qs

http://www.youtube.com/watch?v=YW6KkF6aa_A

http://www.youtube.com/watch?v=IDxufaKZLjc

 

Sat, 01/26/2013 - 12:03 | Link to Comment yogibear
yogibear's picture

Bernanke should go down as the great debt enabler.

Sat, 01/26/2013 - 12:37 | Link to Comment tsx500
tsx500's picture

how about the great traitor ?!

Sat, 01/26/2013 - 12:04 | Link to Comment Inthemix96
Inthemix96's picture

I have tried and better tried to come up with a better and more succinct word to describe the shenanigans of these theiving swines, and it all keeps coming back to "Cunts".

So there for, from now on they are all Cunts, each and every one of them, no exceptions.

Cunts.

Sat, 01/26/2013 - 12:18 | Link to Comment Atomizer
Atomizer's picture

Yes. Now wrap your mind around this message from long ago. Winks

Kuntz

Sat, 01/26/2013 - 12:30 | Link to Comment Inthemix96
Inthemix96's picture

Nice one atomizer,

Never a better soundtrack to follow the deeds of the fuckers and cunts running the show.

Cunts

Sun, 01/27/2013 - 19:49 | Link to Comment Boozer
Boozer's picture

I do love that word.

Mon, 01/28/2013 - 17:25 | Link to Comment Ludwig Van
Ludwig Van's picture

*Cunt* singular or *Cunts* plural are precisely the terms I've come to land on over the last few years, due I think to style of action: A guy can't just honestly and forthrightly *steal* a thing; he has to connive and collaborate with other sneaky pussies to keep up appearances of legitimacy. Fucking cunt.

Sat, 01/26/2013 - 12:26 | Link to Comment moneybots
moneybots's picture

"Austerity measures in Ireland, Portugal, Spain and Greece have caused tremendous pain to their citizens (25% unemployment rates)"

 

Booms cause busts.  Austerity measures are not the problem and are not what has caused the pain.

 

Weimar Germany skipped austerity measures and what happened in 1923?

Sat, 01/26/2013 - 12:39 | Link to Comment the grateful un...
the grateful unemployed's picture

the VA now provides long term nursing care benefits. so one government agency pays for services to another. VA to Medicare? what that does is give government control over the level of services.

food stamps will move into medicaid, so that usage will imply indebtedness, just like that guy who goes to jail for two years, has to pay back the welfare money his wife and kids received while he was doing time for growing a pot plant in his garage. welfare on the cuff.

the real trick for bernanke is to transfer the debt on his balance sheet, and UST, to the american consumer, in exchange for what?

dropping IOUs out of helicopters. we all know that money represents a liability, its only a matter of making it real.

 

 

Sat, 01/26/2013 - 12:52 | Link to Comment valkir
valkir's picture

OT but this could spark biggest fire

http://www.afp.com/en/news/topstories/death-toll-port-said-clashes-now-22-egypt-ministry

20,000 police and military forces defend the court,the mob start to attack government buildings.

Sat, 01/26/2013 - 13:28 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Anti-government protest already errupted on Friday and had nothing to do with the death sentence against the soccer rioters. The protesters showed their disappointment about the Mursi government due to lack of social and democratic reforms. The government deployed tanks and troops against the protesters and 7  people were shot dead. The harsh verdict came on Friday, triggered the violent protests on Saturday. Most media all over the soccer rioters and seem to ignore the political protests, which started on Friday peacefully. 

http://www.france24.com/en/20130126-army-deployed-suez-clashes-egypt-morsi

Sat, 01/26/2013 - 13:08 | Link to Comment TrulyStupid
TrulyStupid's picture

The root cause of the financial malaise is malinvestment, public and private. The social spending on foreign wars is the biggest boondioggle of the lot. Money spent here produces no return whatsoever to the investors and only guarantees the clamour for more wars. The main source of private malinvestment is in the derivative markest (weapons of financial mass destruction)... the losses from which would have brought down the whole banking ponzi if not for huge government subsidies and artificially low interest rates. Although welfare spending is excessive, it does produce a return (local and state government taxes are paid) and in some case prefunded (Social Security). Eliminating only welfare spending in this environment will have no effect on the ongoing deficits and will in fact result in only in creating more unemployment and less consumer spending.  There is no free lunch in all of this... we need to eliminate NON-Productive spending (malinvestment) and keep the pump priming spending going.

 

 

Sat, 01/26/2013 - 14:13 | Link to Comment the grateful un...
the grateful unemployed's picture

i'd take it a step further and say the whole capital investment scheme is broken and has been for years. wall street funds only new companies with the shortest window to profitability.

the faux financial collapse of 2008 did not mean the end of money for small businesses, that was going on before the bankers took all the TARP money and ran. SB has been pissing up a rope for a long time, a problem which could be fixed any number of ways, (but Congress gets campaign money from wall street, and not Dad's Lawn Mower Shop.) its also possible that the CU's could do some business lending, but the BANKSTAS hate them more than they hate small business.

not that the corruption ends with the beltway, and the great white way, it runs all the way down to mayors of towns like mine, which were taking redevelopment money to build corporate franchise zones, because they pay their taxes and they never go out of business.  (not true but if you were mayor would you want a new MCD or Dad's Lawn Mower Shop?) corporate franchises kick back the RD money to them (we have a brand new City Hall, offices for rent, mostly empty)

so no joke the two best small businesses to start, are a food truck or a marijuana dispensary. subsidies for bricks and mortars go to corporate types, and they can't figure out how to regulate either one. ( i think there's a ref to a Cheech and Chong movie in here)

Sat, 01/26/2013 - 14:16 | Link to Comment AgAu_man
AgAu_man's picture

Don't think anyone called Sprott out on his flawed logic. When everyone is looking in one direction (rising health care costs), no one seems to be looking in the other direction: Value Chain Analysis of said costs.

That's because most people -- including 'analysts' -- are clueless on basics of what most Supply Chain managers do regularly: Analyse the line-item cost parameters and their drivers.  But that would be too deep and would involve some real heavy lifting of research and deeper Excel work. Most people & analysts would rather copy/paste high-level data and conjure rabbits to the applause of a gullible and amazed audience (of simpletons).

Put simply, Mr. Sprott, when costs are (too) high, one does NOT just proclaim (the Neocon mantra) to "Cut services!"  While that might be a part of the solution, one looks to cut COSTS in the entire value chain!   Real companies, especially consumer electronics companies that live on free-market dynamics, do this ALL the time. But I guess that the middle-men of health service industry -- and it IS an 'industry' -- i.e. the little-value-add Insurance Companies don't want you or us looking in their direction.  They, like you, seem to want to conjure the rabbit by only cutting services -- this leaving their lifestyles intact.

Nice bit of sophistry, Mr. Sprott!  We need more scientists, engineers and other lucid thinkers & doers, fewer lawyers, bankers and shill-ass analysts.

Sat, 01/26/2013 - 16:38 | Link to Comment Michelle
Michelle's picture

Health care costs are out of control and have been for decades and there are many reasons why, but how do we pull the plug on these rising costs and get them back to an affordable level where most everyone can pay CASH for services without insurance? Insurance seems to be the common denominator and now that ObamaCare is set to hit are we going to see just a short-term rise or are costs going up into perpetuity?

I was talking to my uncle a few months ago about the cost of his last child's hospital birth in Oregon in about 1960. $25 for a 3 day hospital stay and $35 for the doctor. He paid CASH.

 

Sat, 01/26/2013 - 14:31 | Link to Comment jplotinus
jplotinus's picture

Dear Eric Sprout,

You say:

"Nonetheless, the rising GAAP deficit and the sheer size of the U.S. Federal Government’s liabilities to its citizens makes it clear that one day or another, services (health care, social security) will have to be cut."

That observation does not follow from anything else you wrote. Your conclusion is arbitrary and capricious. It reflects nothing more than a personal priority statement. One could just have easily, and more validly have stated:

"Nonetheless, the rising GAAP deficit and the sheer size of the U.S. Federal Government’s liabilities to its citizens makes it clear that one day or another, military spending (weapons, pretextual wars) will have to be cut."

Get your priorities straight.

Sat, 01/26/2013 - 14:53 | Link to Comment spooz
spooz's picture

I took issue with that statement as well.  Cutting the COST of services is not cutting services.  Providing health care in a more cost effective manner is in our power, but steps on too many crony toes. There are plenty of models out there for providing cheaper, more efficient health care, primarily through some sort of universal health plan.  Commenter "John Lynch" had this to say about the map in the link below:

"These comparisons with other countries only stir up ideological animus. We don't have to look abroad to compare health care systems. We have an excellent point of comparison right here in the good old US of A. 

It's called the Veteran's Health administration (VHA). It, too, is far from perfect - and gets probably more negative publicity about it's gaps and gaffes in care than it deserves, while our private health care system doesn't get nearly enough.

But here's the bottom line: the VHA serves an older and generally sicker patient population than the general US population, yet has far better treatment outcomes at lower costs - even for tertiary care services like open heart surgeries. That's because it's actually managed, unlike our fragmented private health care "system".  And it's managed better because it's doctors are generally VHA employees whose incomes aren't increased by doing more surgeries and procedures than are necessary.

The VHA budget benefits when they prevent type 2 diabetics from progressing to the complications of diabetes, whereas in the private system the opposite is true - less disease, less income.

A friend who's a right wing ideologue was shocked when I informed him that the VHA health care he loves so much - are you sitting, righties? - is the only form of actual socialized medicine in America. Not just socialized health insurance like Medicare, but honest-to-goodness socialized medicine that controls both the financing AND the delivery of medical care (which Medicare does not, of course).

And it works. Patient satisfaction scores for the VHA average over 85%, while those for private sector hospitals in America are in the 50-75% range.

Imagine that."

http://www.theatlantic.com/international/archive/2012/06/heres-a-map-of-...

Sat, 01/26/2013 - 15:53 | Link to Comment the grateful un...
the grateful unemployed's picture

you're like that curmugeon who says, "more money does make a teacher any better.."

no, but less money for teachers will make things worse....

Sat, 01/26/2013 - 16:02 | Link to Comment spooz
spooz's picture

That simple minded comparison is supposed to address the fact that VHA "government" health care does better than the private system for less money? Because the fact is that doctors earning less at VHA hospitals does not translate to worse outcomes.

Sat, 01/26/2013 - 16:21 | Link to Comment LongOfTooth
LongOfTooth's picture

The FY 2012 DOD budget was something on the order of $535B.

The U.S. has something like 726 bases on foreign soil.

For what purpose?  To project power and influence worldwide.  

For whom, the American people?  More like for the banksters, multinationals and the new world order crowd.

By letting this sort of crap go on, imo, the American people have pissed away a good thing.

Humpty Dumpty sat on a wall...........

And nobody could put the pieces back together again.

 

 

 

Sat, 01/26/2013 - 16:10 | Link to Comment Pseudolus
Pseudolus's picture

All worthy stuff.

Lets heed Cromwell; "Consider ye may wrong"

Rather than pillory the concept that "deficits don't matter" etc - why don't we consider what would have to be the case for someone to say this and for none of the above to matter

Put oneself in the psychpath's shoes, so to speak

The system is perhaps somewhat other than economic science would have us think

Sat, 01/26/2013 - 18:02 | Link to Comment devo
devo's picture

It's 15% on food stamps, actually. This number compares with soup kitchens (i.e. before food stamps) during the Great Depression. Food stamps hide the poverty, which is better for morale.

Does ZH want people to starve and/or believes charities would feed all these people?

Sounds like another Koch brothers propaganda piece.

Article is a good example of focusing on the symptom of disease rather than the cause. Making citizens angry with one another rather than those who caused the misery. Also, how about action rather than talk? Tell people where to organize so they can hold the people responsible for the poverty accountable. "Organize at xyz where we will lynch Jamie Dimon and Bernake". That's better than this crap where you try to turn citizens/victims against one another over the internet. The State and status quo love this; it takes blame off them. Can you imagine Trotsky or Che Guevara writing blogs instead of taking action? Amount of anger unaccompanied by action comes off as ZH wanting a certain bearish outcome so they can profit without hard work (hypocritical imo). 

Also, fuck Bernanke and short Amazon.

Sat, 01/26/2013 - 16:33 | Link to Comment QQQBall
QQQBall's picture

Good Article. Had to laugh about health care spending - discretionary chart... closer to my monthly spending

Sat, 01/26/2013 - 17:25 | Link to Comment cognus
cognus's picture

To Answer the Author's Question:  Yes. Of course the official USA will ignore the obvious.  Can anyone name a western developed nation that has preceded us over the edge of the curve, which did not deliberately ignore?  it doesn't pay politicians to "go austere".

For how long now has Japan kicked the proverbial can down the road?  that's the 'gold standard'.... just keep on a'kickin'

 

Sat, 01/26/2013 - 21:12 | Link to Comment Radical Marijuana
Radical Marijuana's picture

"... structural trends will lead to an ever greater share of the nation’s income being dedicated to health care."

USA does NOT have a "health care" system!

The USA has "profit from disease" systems.

"Are we going to ignore the obvious?"

Yes, obviously, of course, WE SHALL!

The fundamental ways that we think and talk about all these topics is backwards. Therefore, everything we end up actually doing is backwards. Everything is surely going to keep on going backwards.

The basic paradox with respect to human problems is that when people could not agree and ended up in conflicts, then those who were the best at deceits, and backing that up with destruction, were the ones that prevailed through those conflicts. Thus, the entire history that made War King, then made Fraud King.

Everything that the USA does is based on huge lies, backed up with lots of violence. Since the violence cannot make those lies become true, the country just keeps on getting more insane! Are we going to continue to ignore the ways that we have become insane? The answer is obviously yes, because we ARE insane!

We are taught to understand everything by using various kinds of false fundamental dichotomies, as the basis of our thinking, and we are taught to go to the wrong pole of those false dichotomies as the way to establish unity! The USA has totally become a system of debt slavery, backed by wars based on deceits, which are runaways towards debt insanity, and even more insane wars.

Every aspect of our culture is inside of militarism, and every aspect of that is expressed and understood through the maximum deceits possible. Thus, every possible way that we operate our society is done by professional liars, and immaculate hypocrites. Those who are the best at that are those who rise in the ranks to become the most successful, and therefore, most able to make the decisions that control other people's lives.

Not underless we went through a series of political miracles to understand militarism, would we be able to understand anything else. Everything in our society is illustrated by our society changing the Department of War to become the Department of Defence. "National security" has become runaway psychotic bullshit, in a classic, over the top, Orwellian fashion. The USA is systematically destroying itself, due to believing too much in its own bullshit. In every way, the USA is controlled by huge lies, backed up with lots of violence, and that especially includes the ways that we deal with its problems. War Kings became Fraud Kings, and the language of the Fraud Kings almost totally dominates the society that they rule over. Of course, I WISH it was not that bad. However, it is actually so bad that it would be impossible for me to overstate how bad that is! Are we going to continue to deliberately ignore that, and go even more insane? Absolutely, indubitably YES!

Sun, 01/27/2013 - 01:01 | Link to Comment silverdragon
silverdragon's picture

The Americans and Canadians are both out of Silver, so the spot price goes down?

Are you f*ckin kiddin me?

You couldn't make this sh*t up!

Sun, 01/27/2013 - 01:12 | Link to Comment silverdragon
silverdragon's picture

Great comment AgAu_man.

Call it like it is!

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