When The Real Cost is Hidden, Making Good Decisions Is Impossible

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When good decisions are no longer possible, bad decisions are inevitable.

If we had to summarize the response of the Federal government and the Federal Reserve to the structural financial crisis of 2008-2009, we could say that both institutions went all-in to obscure the real price of credit and capital.
The real cost of credit and capital is discovered by open, transparent markets. When a central bank sets the price of credit, it destroys the market's price-discovery process. When the government subsidizes certain types of credit, for example, home mortgages and "cash for clunkers" auto loans, it destroys the market's price-discovery process.
This distorts not just the price of credit, but the price of everything purchased with credit. This is the origin of bubbles, and of the resulting busts.
The state and central bank manipulate the price of money (credit and capital) to incentivize decisions that the state and bank want people to make. The state and central bank want people to consume more to prop up a dysfunctional economy, and since most people don't have the cash to consumer more, the state and Federal Reserve want people to go further into debt, as this is the only way people can buy more stuff.
These institutions are terrified of recession (translation: a reason for people to vote out the ruling party of bought-and-paid-for toadies) and the creative destruction of unfettered capitalism, which eventually wipes out leveraged speculation and all those who indulge in such risky gambles--for example, all the banker and financier cronies that the Fed protects.
When the real price of anything is subsidized, manipulated or obscured, people lack the information needed to make good decisions. Lacking the information of the real price, they can only make bad decisions. There is no way to make good decisions when the information is incomplete or misleading.
When a commodity--for example, water--is collected and piped at great expense to farms and cities and then given to consumers at a subsidized price well below the actual systemic costs of collection, purification and delivery, then the water is squandered, for it is priced as if it were forever free and abundant.
When credit (capital) is priced at near-zero by the central bank, people squander the "free money" on mal-investments and risky speculations. This is the rational response to anything that is nearly free and abundant; why bother conserving it or using it wisely?
Having access to nearly free money from the Fed is the equivalent of having no skin in the game. If you lose a speculative bet, just borrow more from the Fed. Since it costs almost nothing to borrow enormous sums, There is no need to put any real capital (i.e. your own money) at risk. And with no skin in the game, then there's no upper limit on leverage or risk: the money is nearly free, and the gains (if any) are yours to keep.
Obscuring the true price via subsidies or manipulation necessarily leads to bad decisions. And what are the consequences of serial bad decisions? Disaster.
This dynamic--that obscuring the real price necessarily leads to bad decisions--is scale-invariant. If a parent gives a child false price information or subsidizes the cost of a choice, the child cannot make good decisions based on the distorted data: their only choice is a spectrum of bad decisions.
The same is true of households, communities, enterprises, states and nations.
As a result of policies that explicitly distort the price of credit and capital, we are making bad decisions as individuals and as a nation. If the real cost of credit/capital is 7%, then the only way to make good decisions is to begin with the price of money being 7%. Lowering the price to 0% generates bad decisions.
When good decisions have been precluded by distorting the price of everything, only bad decisions are possible. If you wonder why the Status Quo is well and truly doomed, you can start with this: good decisions are impossible, and so bad decisions are inevitable.
Administrative note: email responses will be near-zero for the next week or two. Thank you for your understanding.

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Relentless101's picture

It's as if they only learned economics in order to be able to avoid every rational decision that it provides. This shit is like ECON 101. But not pHD, so what do we all know?

NotApplicable's picture

TPTB know that some knowledge is too dangerous for dissemination.

Guild 101

Tasty Sandwich's picture

Mundus vult decipi, ergo decipiatur.

pods's picture

Same can be said about dating a stripper?

My buddy was always crazy about them.  And they were always batshit crazy.


Tasty Sandwich's picture

I don't pay prostitutes for sex; I pay them to leave.

- Charlie Sheen

Jack's Digestible Ideas's picture

"If we had to summarize the response of the Federal government and the Federal Reserve to the structural financial crisis of 2008-2009, we could say that both institutions went all-in to obscure the real price of credit and capital."


Wouldn't it be more accurate to say they were doing this before the crisis broke out?


As in: In response to market actions forcing the price discovery of credit and capital, the Feds went all-in to obscure the price of fucking everything.

Fuh Querada's picture

wha's with the decapitation part?

Otto Zitte's picture

In other words they're taking us all down with them in order to secure their pithy existence. Don't worry, in 50 years they'll all be dead, dead, dead. Bwahahaa

Fuh Querada's picture

Economics is a disgusting, bloody abortion masquerading as an academic "discipline".

Dick Buttkiss's picture

Statist economics (Marism, Keynesianism, Monetarism) is a disgusting, bloody abortion masquerading as an academic "discpline."

There, fixed it for ya.

Tasty Sandwich's picture

Bad decisions are more fun anyway.

ParkAveFlasher's picture

Even information can be planned for obsolescence.  Maximum employment, bitchez.

gcjohns1971's picture

Maximum Employment refers to the number of people that can fit into the small number of jobs and businesses they do not restrict from existence.

What happens when they can't restrict job creation and business anymore?

Dollar Bill Hiccup's picture

The trend is your friend,
Don't fight the FED,
Yeller's a fella
Whose real name is Fred

B2u's picture

They put someone in charge named Janet

She must know what she is doing, dammit

but she never will be bold

just doing what she it told

cause she comes from another planet.

markovchainey's picture

Damn it, Janet!  You're a slut!

Anusocracy's picture

Yeller's name is Spike.

That was the name of the dog that played Old Yeller.

kchrisc's picture

Isn't that a bear that shits in the woods?!

DOGGONE's picture

What in the world do you mean by "When The Real Cost Is Hidden ..."??

Could you possibly mean like the first two charts here:
"The Public Be Suckered"

i_call_you_my_base's picture

Geithner cited mispriced risk as the central cause of the financial crisis on NPR yesterday. His solution to the problem of mispriced risk was to do it more and harder.

DOGGONE's picture

High capability deceivers NEVER show decisive, simple evidence like
but rather use such as "mispriced risk".

fallout11's picture

"A fool and his wealth are soon parted."

kchrisc's picture

"If we had to summarize the response of the Federal government and the Federal Reserve to the structural financial crisis of 2008-2009, we could say that both institutions went all-in to obscure the real price of credit and capital."

They went "all-in" to keep the ponzi going.


"My guillotine is all-in, blade, basket and all."

carbonmutant's picture

The truth is that the current administration doesn't have a solution to what's coming...

Vampyroteuthis infernalis's picture

The current administration doesn't have a solution to anything. They are the problem.

Something is amiss among the liberal elites. Pushing there extreme social agendas as of lately shows signs of desperation. Something big is a brewing.

seek's picture

Of course something big is brewing. It's the reset.

They're stuffing as much as this shit into the world as they can in hopes some of it gets sucked up into the next government and social system.

As it stands when it all collapses everything goes local (at least for a time) and because they're centralized control freaks that work mostly at the federal level, they lose virtually everything they've worked on if they can't wedge some of it into localized governments. Top-down management's a bitch when there's no top.

Hydesrevenge's picture

That soution is a fulll scale realization that the public has been screwed for the political class.

OC Sure's picture




"Now there are three things in the soul which control action and truth-sensation, reason, desire...

What affirmation and negation are in thinking, pursuit and avoidance are in desire; so that since moral virtue is a state of character concerned with choice, and choice is deliberate desire, therefore both the reasoning must be true and the desire right, if the choice is to be good, and the latter must pursue just what the former asserts."

- Aristotle

Translation: Everything showable is identifiable and therefore knowable; decision making is no exception.


oddjob's picture

The real costs are skewed by USD hegemony, interest rates are ship smoke.

Sudden Debt's picture


Nutflush60's picture

Great piece/

Add to that the David Tepper's of the world advising to buy, even though they are bright people and know the market is distored.


Tepper speaks tomorrow at 7:30 PM ET at the SALT conference in Vegas. Will be interesting to watch the futres closely at that time. I think a lot of the rally Monday was people trying to get in front of exepcted bullish comments by Tepper

Spastica Rex's picture

Marketing ~= Deception

Pairadimes's picture

You have three choices, America:


1: Rise up armed in large numbers, demand constitutional government and the end of the Fed

2: Hope that someone will be elected President who reduces the federal government by the right two-thirds

3: Sit on your ass until all your freedoms are gone and uniformed strangers come for your weapons and your gold


From here, my money is on #3.

DOGGONE's picture

Any way you can see to get this in everybody's face?

seek's picture

#4 simply wait for a enormous, overextended system that's already dead to collapse upon itself. Optionally do nothing if you're a producer to accelerate the process.

Fuh Querada's picture

All you have to do is interpret the Coppcock Indicator.

rtalcott's picture

When The Real Cost is Hidden, Making Good Decisions Is Impossible

Thank you for a statement of the obvious

Polymarkos's picture

He's a MOTO. Got an award and everything.

kevinearick's picture

Reaching 4 Nothing Magicians

A home is where parents teach their children to be productive. A house is a revolving piece of paper, a debt parading as an asset corporation, masquerading as a home. Of course the critters want abortion and civil marriage; they don’t want the weight of the empire they are so busy building on their shoulders. Don’t waste your time on a plan to build economic prisons and expect not to find yourself inside with no exit. If you project a conscience upon the unconscionable, who is to blame?

The vast majority in a late stage empire, what you are looking at, will gleefully engage the machine, technology, to hide the truth from themselves, that they are homeless. Empires are consumers herding up to occupy space, with the intent to control all commerce, extortion of producers. That’s what all those licenses, certifications, degrees and titles are all about, entitlement to the extortion pie. It’s always Edison vs. Tesla.

The critters haven’t backed themselves into the REIT hedge to make money; the Fed does that for them, with consumer margin control. Contrary to popular assumption in the press, America is not eternally young. Its elderly majority is married to debt inflation. What has Asia, the majority’s purported future, gained for all that printing, other than a global real estate glut hidden off-sheet, some pretty boys playing polo, a brand new 50-yr-old Navy, and Henry Kissinger?

There are no more kids coming from small towns to feed the global cities, with technology to exploit the countryside. The empire owns everything and nothing, and its consumers are turning on each other for lack of producers that will accept debt slavery as wealth. Most of the human DNA on this planet will not be here 25 years from now (what you replace it with is up to you).

The upper middle class equal rights crowd wants theirs, and each wants an equal part of yours, to leave you in poverty, and the legacy landed class wants the same, their property and your rent. Together they produce nothing but paper, with increasingly shoddy merchandise to show for it. All contracts, including civil marriages and empire constitutions, are made to be broken accordingly. The rate of divorce and poverty, lost purchasing power and increasing debt, are not random accidents.

Human behavior cannot be changed in real time. The empire solution before, during and after this latest artificial crisis is the same, a train to Democracy – stealing land, controlling commerce and feeding an empire of bankrupt consumers. The slave and the slavekeeper are one and the same, with recognition delayed by the miraculous ‘invisible hand’ of peer pressure. The consumers are pricing themselves out of business, from the bottom up.

The price of the vacant house held off-sheet, extortion, goes up as the value of the home goes down. Empires exterminate fathers because fathers nip extortion in the bud, kicking their own children over the cliff, which is a mole hill selected by the children for the purpose of extortion. Without fathers, that mole hill becomes a real cliff, and if you think dad will not kick this empire over the cliff, you are sadly mistaken.

Dad doesn’t have to do anything. Nero burns down his own empire every time, increasing prices on falling demand in a demographic bust, backfilling with the illusion of monetary expansion and fiscal control. Everyone everywhere is not stupid just because the manufactured majority votes the assumption in. You can be producer, consumer or any ration you want, any time you want, male or female, in any class, but if the circuit is not completed, there is no circuit.

Childbirth is painful for a reason. You don’t prepare by getting fat, dumb or lazy in a controlled environment for the purpose. A lactation nurse is a highly paid oxymoron. All proteins are not created alike, and dad only appears to have been exterminated, within the empire, by the feminist and her warmongering eunuch, products of government as demand and supply, always trying to hide their tracks with ever more laws.

The empire is in the dead zone and the headwind coming isn’t just any wind. The consumers are once again waiting for their mythological savior, which isn’t coming, surrounded by a fusion/fission reactor they cannot see, because they are waiting for someone else to do the work, for them to efficiently organize. Regardless of system, you have priorities, a budget and a feedback loop. All empire mechanisms are a feedback loop bait and swap designed to hide the reality of supply-side economics, until they can’t, by which time the organizers hope to be dead and gone.

A marriage must be focused on producing productive children to satisfy the ongoing concern assumption underpinning the actuarial and accounting misdirection of civil incorporation, but most separate at the slightest challenge, running to the past for shelter, bred to do so by debt as money, bemoaning the loss of privacy required to public consumption all along the way, male and female alike, all damsels in distress. Terrified of raising their own children, they busy themselves enacting laws to regulate yours, off their property, subject to rent.

You might want to place the integral before the derivative, because that is the one and only true exit. All others implode, by design. The electrons only appear to travel across the surface. Watch out when you go fishing in deep water. Space travel is a spiritual, not an intellectual or physical problem, and you already have all the resources required to revolve the building around the elevator. You might want to get off the surface, or have another meeting and make another plan.

Empire can only yield extortion taxation. Development is incremental in its own time, but quantum relative to mass, which can only see itself and its derivatives, in the past. You are not going to watch a labor market develop. It’s there until it isn’t, and it isn’t until it’s there. America pissed away its future, chasing paper tigers, only to become a paper tiger.

Let others eat paper and gold. Labor works for its children. Discount rent, collect wages beyond the empire horizon, leave civil marriage to play with its toys, and consider how those stars are connected in time to create electricity, and vice versa. Once you have transformation, transmission is automatic.

An empire can only offer bait, so you want to cover all cover all costs and profit to begin the first phase, so the empire can walk, as it always does, back into the past. It’s just a stupid empire, running on automatic, with leaders pretending those price and wage controls actually work, for a crowd that wants to be misdirected.

Homelessness is not a lifestyle; it’s a deathstyle. Love in Action, keep your latest drugs, you’ll need them, to produce and consume more poison. Empires don’t work, and power is work. The key to understanding Tesla, the man, is to understand the ground you stand and walk upon; it’s a conductor and an insulator, depending upon your purpose.

The old-timers are not going to come looking for you, place an ad in Buffet’s newspaper, or post on Facebook. You have to put in some effort. “The best place to begin is the beginning,” but, of course, the majority cuts the very first corner, does not have what is needed, and spends all its time in the past, seeking what is no longer needed. Of course they have dismantled all the safeguards, trying to steal your heritage. What did you expect?

Don’t play fetch for the empire and expect not to be bitten by the old-timers dog, bred for the purpose. If the old-timer isn’t there, you either don’t need help or you are in the wrong place, at the wrong time, doing the wrong thing. America is weak because the majority of its children are weak-minded. Bloodlines thin with atrophy. The empire just reached a little too far, again, going nowhere fast.

Empire money is other people’s debt, producing inflation, which taxes the participants out of their homes. It’s automatic, non-recurring drugs for productive assets. Fixing the elevator is not the hard part. Sending all the empire educated firefighters somewhere else to light their fires is the job. If you want to find the mechanic, go to the basement.

But I’m old, sitting at a desk, with nothing more than a pen to support me, scribing into an algorithm built for the purpose. Pay no attention, tl:dr. War is like Battle Reversi, for consumers. You can always build a port in the storm. Labor doesn’t care what anyone trades for oil. The demand for empire technology will fall and the price will increase, inverting the pyramid and crushing the participants.

Hitler was a mama’s boy, trying to prove he was the man, as were all the ‘great’ leaders, of consumers. Collecting mama’s boys with feminist debt never ends well. Swimming in a pool at the gym is no substitute for swimming in the surf, with rocks as a teacher. Buffet is just a collector, one of many.

espirit's picture

Did read.

My wife and I procreated our replacements.  A son that takes lives, and a daughter that saves lives.

Got to keep the Matrix energized.

scrappy's picture

That was one of the best posts I have read ever.

It led me to some articles I would like to share with you wise kevinearick



Just a sliver of what you laid out, but at least I am trying.

Coming to the conclusion that this model is not worth participating in.


kevinearick's picture

Constantine spent much of his reign in military conflict… kill or ignore what it doesn’t understand… unwilling to change, unable to grow, it will prune itself until there is nothing left, even as the branches it left for dead grow into a verdant new forest of green and Green…enter Sainthood.


Atomizer's picture

The Nine Most Terrifying Words

Fuck off. You can no longer hide. BIS, Centralbahnplatz 2, 4002 Basel, Switzerland. Lets start at the top and let the counterparts shit their pants in fear. Our financial system is broken. You will become a by-product in a world you failed to create.


proLiberty's picture

Once society abandons free pricing of production goods rational production becomes impossible. Every step that leads away from private ownership of the means of production and the use of money is a step away from rational economic activity. ...

Without calculation, economic activity is impossible. Since under Socialism economic calculation is impossible, under Socialism there can be no economic activity in our sense of the word. In small and insignificant things rational action might still persist. But, for the most part, it would no longer be possible to speak of rational production. In the absence of criteria of rationality, production could not be consciously economical.

Socialism: An Economic and Sociological Analysis
by Ludwig von Mises (1st published in 1951)

PART II THE ECONOMICS OF A SOCIALIST COMMUNITY, Chapter 5, The Nature of Economic Activity

Page 105 in the pdf: