Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The costs of maintaining a sclerotic, cartel-state Status Quo infected with incurable diminishing returns eventually exceed the carrying capacity of the real economy and the Status Quo collapses in a heap.
On the surface, the Status Quo appears stable, if not quite healthy. This stability is illusory, however, for the Status Quo has a fatal disease: diminishing return.
The basic idea of diminishing return is closely related to marginal utility and marginal return: the more capital, energy and labor committed to a project, the lower the return/yield/output.
Diminishing return works in two ways:
1. Output (yield) remains stable, but it requires an ever-increasing input of capital, energy and labor to maintain that output.
2. Input remains stable but output (yield) constantly declines.
To survive, the Status Quo must maintain the same output: the stock market must be held aloft at current levels, entitlements must be paid, the National Security State must either expand or maintain its current global reach, and so on.
What's hidden from view is the rising input costs to maintain this illusion of stability. Consider the Federal Reserve's campaign to elevate the housing and stock markets. First the Fed need only threaten to buy mortgages and Treasury bonds to trigger a market rally. But soon this is not enough to keep the market aloft, so the Fed unleashes a campaign of quantitative easing (QE1) with an eventual end date.
This pushes the market higher, but once the artificial stimulus ends, the market feels gravity once again and rolls over. To maintain the necessary output--a rising stock market--the Fed must increase each dose of QE.
But the return on this ever-increasing input diminishes. Like an organism fed a stimulant, markets habituate to the artificial stimulus and quickly become dependent on ever-increasing doses to maintain the output (i.e. the "high").
In 2012, the Fed announced essentially unlimited QE to infinity. There can no longer be any hint of an end to the quantitative easing, or the output (the market) will fall off a cliff.
That's the problem with diminishing return: eventually the input is so costly the system implodes. The Fed has already injected the patient (the economy) with massive doses of financial crystal meth to maintain the stock market's "high." Unfortunately for the Fed, the market demands a bigger dose to keep the high going, but the larger dose will prove fatal.
Illustrating the other mechanism of diminishing return is the Higher Education Cartel, one of the monopolistic rentier arrangements that dominate our economy (banks, the mortgage industry, national security, healthcare/sickcare, etc.).
Even as the cost of attending college have skyrocketed by 600% (adjusted for inflation), the output--the value of that education--has declined. A recent major study,
Academically Adrift: Limited Learning on College Campuses, concluded that "American higher education is characterized by limited or no learning for a large proportion of students."
Meanwhile, student loans exceed $1 trillion, only 37% of freshmen at four-year colleges graduate in four years (58% finally graduate in six years), and 53% of recent college graduates under the age of 25 are unemployed or doing work they could have done without going to college--retail clerks, waiting tables, etc.
The Educrat Industry blames the economy for its own abysmal failure to actually provide a measurable yield on the immense sums spent on higher education, of course, but the reality is that higher education fails to prepare students for work in the real economy.
What higher education excels at is maintaining an ever-increasing input of cash while its output/yield declines. the same is true of all the other fiefdoms and rentier arrangements that dominate our economy.
The input needed to keep the Status Quo stable must be taken from other potentially more productive investments. Taxes notch higher as the state scoops ever greater sums into its maw to fund its failing fiefdoms and diminishing-return cartels, and it borrows trillions of dollars to fill the gap between tax revenues and ever-rising input costs.
All that borrowed money has a cost, too, of course--interest. The costs of maintaining a sclerotic, cartel-state Status Quo infected with incurable diminishing returns eventually exceed the carrying capacity of the real economy and the Status Quo collapses in a heap.
this is going very s-l-o-w-l-y
Old lady warning that we need a war to straighten the US out and how gold and silver are vital for survival during and after. This is real shit right here.
http://youtu.be/QlosxAwuQ1Y
Entropy, bitchez!
Moves her hands like a rapper.
Smith is Brilliant. Has he made any money in the market???
You mean the 'regular' market or the gloom, doom and boom segment?
When?? We all know the collapse is inevitable, but the money line on this bet is WHEN
The when will be much longer than we imagine....when TPTB control everything they can then try everything and walk on air much longer. They will stand on stacks of bodies before crashing.
I don't believe their standing army will stick around for that.
The old new normal. Get used to it
Take your morning after pill everyday
It's the sunk costs fallacy. Technological advances have run the course and can no longer mitigate the eventual downfall of an advanced society.
Finite resources. Time to move on. Endgame near.
Hey, what's going on here, no mention of the "Central State"!!
It was Ravi Batra who first correlated
a concentration of wealth threshold with
depressions just as R/R did with
sovereign debt scuttling growth,
more or less, but actually mostly
validly.
Krugman Admires Rogoff
http://pages.citebite.com/s1p5l2m4j3dof
Krugman Says
Garbage In Garbage Out
Though
http://pages.citebite.com/u1c5m2j0q7dvu
http://pages.citebite.com/u1c5m2j0q7dvu
See The 2.2 Not -.1% With
Debt To GDP Over 90%
Blunder
http://www.peri.umass.edu/236/hash/31e2ff374b6377b2ddec04deaa6388b1/publication/566/
The Result Of The Totality Of
The R/R Study Is Close To The
Result Of Its Critics', However.
http://www.nytimes.com/2013/04/26/opinion/reinhart-and-rogoff-responding-to-our-critics.html?_r=1&
http://www.econbrowser.com/archives/2013/04/reinhartrogoff.html
http://www.econbrowser.com/archives/2013/04/the_contributio.html
But No One Mentions The Cost
Of Shafting That Comes From
Monopoly, Risk Filtering,
Gatekeeping And Pay To Play.
And Then The Privatizers
Have A Free Hand. Omits
Loss Sharing, Free Reserves
For Years, Liquidity Trap, The
"Static," "Fragile" Monopolistic
Effects Not Just In Banking
But Other Major Sectors, With
Privatizations Symptomatic
Concomitant And Additive
To That, Sustaining Wars, Etc.
http://goo.gl/K5bCx
This Understates The Case.
Who Knows How Much Left
The Country. The Fed/
Congress Are Desparately
Reflating The Last Bubble
That Created The Mess.
TBTF Still Prevails.
Rinse And Repeat.
But, back to Ravi Batra.
So the ultra rich ran out of non ultra
rich to lend to for juiced returns in the
late ‘20s but kept lending anyway.
This time round was a repeat but with
the ability to securitize, hedge, and even
bet against the debt risk.
The more the non ultra rich is harvested
the more it is only adversity offers a quick
way to make lots of money.
The Easter Islanders ate their trees.
The ultra rich, because of monopoly and
control, have incentivized it for themselves.
Of course, some think mortgage backed securities
were sometimes purposely welcomed with unqualified
mortgagors as their basis for sale to one’s customers
while shorting same for oneself.
Otherwise hedging and risk management would
be perfectly “market progressive--” anti-fragile
(in a non-social darwinist sense for me.) Pure
S/D --perfect info/entry implies -0- profit.
A mathematical absurdity. The opposite is
consummate monopoly. Markets are fine,
presenting no need to jump off terraces, but
they do need process rationally informed,
but still fair, but then again with compassion
no impinged by discipline and efficiency where
such things, as in health care, as patients and
doctors are central to the system rather than
companies enjoying immunity from anti-trust,
repeal of which was expressly rejected in open
Congress.
As to process and markets, health care’s a
great place for explaining.
Epidemiology and clinical realities shape the market,
with germs, disease processes and accidents
persistently disinterested in price motivations.
There the inability to move between states, often,
for a job or r.e. op owing to exclusions, and/or the
eventual reality, for many, of the choice: “go naked”
or “premium death spiral” was replaced with
an elaborate profit box-based scheme with classes
of coverage matched to abilities to pay, but
remarkably with incremental patient risk advancing
patients toward eligibility for subsidy by virtue of
those risks increasingly impoverishing them.
So what was supposed to be affordable care becomes
what are you good for care.
The opposite is risk equalization, unitizing, so as to
enable fair distribution in the manner of this
http://en.wikipedia.org/wiki/Problem_of_points
Monopoly historically in the U.S. is
1) blanket the market with it
2) only then exact what the market’s worth for you, fully.
More?
This is from an org. more generally thought
of as sort of centrist/ centrist-right, and though
I’m “market progressive” (read centrist-left)
I’m happy to oppose monopolistic structures
with them.
The greatest sign of a protected profit box
existing is this:
http://pages.citebite.com/i1y4m1t7o7pxu
So what’s supposed to be a fee going from
the carriers to the government is really a
back door tax on the patients to help finance
the plan.
But by its own self description it takes us to 21% of
GNP by 2019 (I’d be amazed seeing it that “low,”)
but it’s mostly from hiring more gatekeepers aiding
monopoly, risk filtering and pay to play, and because
of the cartel itself. How do we know that?
Simply because most unreimbursed care had all
along been passed through by “cost shifting.”
This turns that into a profit center.
It would be very different in a non-monopolistic,
doctor/patient-centric, risk equalized system,
especially with corp’s required to answer to
doctor/patient material management input
committees, having to show a public benefit
annually, having a vibrant insurer-doctor
risk adjusted market (batting averages make
no sense in med--if I treat my own boo boo
my batting avg is 1000,) and with clinical
rationalization allowing patient and doctor
satisfaction to naturally coincide with economic
efficiency.
There’s bound to be a cost surplus. It’s the nature
of the field (full tilt science and all?)
Physicians need then to form cross-organizational
last mile practice rationalization committees, including
informing precisely what methodologies can be made
simultaneously more practice-effective/economically
efficient.
Dominated by “accountable care,” combined with
carrier-doctor market enhancement, fee for service
can still thrive but find itself often unmarketable
where the odd focus of inefficiency, for whatever the
reason, may exist.
The statutory profit boxes (set by Tiers: brown’s
is apx. 40% after a 60% medical loss ratio, the
narrowest profit box being 15%, until one’s own
tax dollars, to the extent they’re still available
after monopoly this and monopoly that, underwrite
one’s subsidy owing to now being financially
eligible for it, though that’s figured on a you/not
your family’s cost flim flam and using modified
adjusted gross income, which adds income, making
it harder for you to qualify. It’s also calculated by
an army of new persons hired for that purpose, who
will do it “presently” based on guesses consisting
mostly on your prior year’s tax return; but, it you fail
to quality, and if it’s a bad guess, and if you need help,
you’re really in a tough spot.
We all will be anyway cause the industry’s using just
go away deductibles and control of doctors to
enable the structure and the profit.
Nader:
http://www.economicpolicyjournal.com/2009/12/nader-blasts-obamacare.html
http://www.pnhp.org/news/2013/april/insured-but-unable-to-afford-health-care
http://link.springer.com/article/10.1007/s11606-013-2460-y/fulltext.html
I very nearly never do this, ZH, but this time there’s
just so much original above.
http://evernewecon.weebly.com/index.html
http://www.nomiprins.com/thoughts/2012/11/10/real-danger-of-obamacare-insurance-company-takeover-of-healt.html
http://www.guardian.co.uk/commentisfree/2012/dec/05/obamacare-fowler-lobbyist-industry1?INTCMP=SRCH
http://pages.citebite.com/p8i5t8h6mphi
http://www.dailykos.com/story/2009/10/14/793112/-Schumer-Leahy-Take-on-Insurance-Antitrust-Exemption-Video-Added
http://news.yahoo.com/insurers-nervous-over-prospect-romney-victory-115914066--finance.html
On that accountable care vs. fee for service thing.
It really needs some balance lest underutilization
becomes problematic. Most new reformers think
that’s a red herring, when in fact, it’s a real issue
relating to many complaints.
The idea is the mix of accountable care dominance,
repeal of immunity from anti-trust, lack of
hostility toward fee for service so that outcomes
can be compared meaningfully, risk adjusted,
showing of public benefit, and material physician’
committee and patient committee and physician
cross-organizational committee involvement
keeps the focus on patient-doctor centrality and
and ties that process very tightly with the
bed-to-lab, lab-to-bed process.
Practice rationalization as reflected in coverage
design throughout the system would be efficient
economically cause it would be efficient in terms
of doctor and patient satisfaction and outcomes.
Accountable care more or less means skin in the
game. TBTF means absence of skin in the game.
Where it’s virtually unavoidable buying
market controlled insecticide related fructose
foundational GMO’s, then, there also, for instance,
it hardly matters what’s going on economically
in the aisle at Acme or Ralph’s or Wegman’s, or,
for that matter, at the tractor store.
That market control means the ability to extract
what people are good for.
Cable’s the natural monopoly ostensibly.
So it should have a profit box like health care’s.
(It has no restriction currently.)
Health care shouldn’t have a profit box.
That is, if you’re going to have an anything-centric
system, a health cartel becomes like the paid
software that ate open source. You can have it
state centric, union centric, doctor centric, hospital
centric (the old Blue Crosses--still better than
carrier cartel centric,) or market-progressive
patient-doctor-centric.
I go with that one.
Market-progressive patient-doctor-centric.
Evernewecon, you are an asshole!
If you want to post something of that length, first, learn how to format a post here you moron, and second, POST A FUCKING LINK INSTEAD!
Dipshit!
Thank you. My biggest peeve was that he quoted Krugman to start off that epic troll, and your points are equally valid. What happened to quality trolling? I never thought I'd say I miss Robo, but seriously, I miss Robo.
I love the handle, he obviously has fallen for the fallacy of new economics.
The death spiral of the Keynesian quagmire has disproved this theory over the last half century or so.
Moar Debt is the cry of all the new economists, even in the face of the slow grind to the bottom, they continue their chant, MOAR, MOAR, MOAR.
Just think, what was once wrong is now right and vice versa.
DaddyO
This post is nihilistic nonsense. Get back on your meds.
STARVE THE BEAST!!!
Yeah... like how the same amount of Federal Reserve Notes get me less bullets and less sardines month after month.
"Don't run away, we are your friends!" - Martian leader, 'Mars Attacks'
[shoots people, mayhem everywhere]