Guest Post: Now That The Easy Stuff Has Failed, All That's Left Is The Hard Stuff

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The easy fixes--throwing around trillions in "free money"--have all been tried. Now the only choices left are the hard ones everyone has avoided for four years because they're politically impossible.

I want to elaborate on a key point in yesterday's entry 'The Resilience and Fragility of the Status Quo': now that we've run through all the easy fixes, all we've got left are the hard choices. You know, facing the music, dealing with reality, making the cuts, taking the losses and tossing aside the impossible promises.

The irony is that completely surrendering to the vested interests hasn't fixed what's broken, but neither will overthrowing them. Getting rid of the parasitic financial Elites would be a positive first step, but that won't magically make Medicare a sustainable promise. Medicare is careening off the fiscal cliff regardless of who's nominally in charge of the political machinery, for the reasons listed yesterday: demographics, the technological destruction of paid work and the diminishing returns on debt.

Here is the easy stuff that's already been done:

  1. Paper over every problem with trillions of yuan, euros, yen, dollars, etc. Print it, borrow it, conjure it electronically, but flood the vested interests with essentially "free money" to stop the political pain caused by vested interests screaming as their slice of the swag is threatened by financial collapse.
  2. Twist, bend, fold or break the rules to insure the flood of free money flows to all the vested interests. "Rules are made to be broken," especially in legal systems in which the Central State and its regulatory machinery have been captured by vested interests.

"When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it." Frederic Bastiat, 1850 (via Scott)

That describes the easy part: surrendering to the vested interests. From the point of view of the vested interests, what was the point of buying political power other than securing and protecting our interests in times of crisis?

But the vested interests are short-sighted, and so their "solution"--free money for us-- is politically expedient but financially disastrous. Medicare is careening off the fiscal cliff precisely because the simulacra "reforms" (Obamacare, etc.) are complexity shields behind which the vested interests retain their share of the national income and their political influence. What better mechanism for control than a convoluted 1,300 page bill with hundreds of opportunities to influence regulations to protect your fiefdom?

The same can be said of the Dodd-Frank financial reform bill, which ceded unprecedented powers to the Federal Reserve while creating hundreds of nooks and crannies in 4,500 pages of regulations (many yet to be written--the lobbyists are still writing them) for financial vested interests to exploit.

Lobbyists aren't hired to understand the big picture, they're hired to secure a swollen river of free money for their vested-interest clients. Public unions, banks, Big Pharma, for-profit hospital chains, insurance companies, defense contractors, etc. don't care where the swag comes from or how it's skimmed, they only care about getting their share of it.

In Survival+ and Resistance, Revolution, Liberation I discuss profound political disunity as an operative dynamic of devolution.

This describes not just the political battle between the 0.5% and the 99.5%, but the diverging interests of the various vested interests and Elites. It would be tidy if all the Elites were united, but as pressures build and systems are pushed to extremes, the interests of Elites diverge to the point that the system is pulled apart. None of the Elites are willing to act in the best interests of the nation, and so their self-absorbed greed becomes a destructive force that cannot be controlled.

The decline of the Roman Empire had this subtext. In Victorian England, the landed Elites who skimmed rents fought a political war with the Imperial "free trade" manufacturers who profited from the expansion of the Empire and the industrial workforce. The manufacturers won and the landed Nobility, though still immensely wealthy, took a back seat.

The collapse of Medicare/Medicaid would be a catastrophe for all those skimming billions in profits from the fraud-laced, bloated sickcare system. The same can be said of the crippled mortgage/real estate industry, the insolvent banking system, the bloated defense industry, the out-of-control National Security Complex and so on.

On a local level, the implosion of state, county and city finances is a catastrophe for public unions and all the other vested interests living off local government.

I call the war over dwindling resources and income streams internecine conflict between protected fiefdoms. Each fiefdom will fight to the death to protect its power and share of the swag, right up until the moment the government declares bankruptcy, the account is emptied, and the checks bounce.

Politicians and the Federal Reserve responded to the pain of their financial Overlords by ignoring both prudence and the rules as they fell over themselves to shovel free money to the vested interests. The trillions of dollars were borrowed from future taxpayers, of course, but who cares about them? They don't even vote, much less give campaign contributions.

This disregard for the future and the fundamentals of fiscal well-being is about to reap consequences. The Powers That Be counted on "time healing all," as if the mere passage of time would magically heal a broken economy and political machine.

Time heals all--unless you have an aggressive cancer. We have multiple aggressively metastasizing cancers--moral, political, demographic, technological and financial. The Status Quo has chosen to ignore these fast-growing cancers because it was politically expedient to quiet the powerful vested interests with trillions in bailouts, backstops, free loans, guarantees, "stimulus spending," and so on.

That was easy to do, but it didn't fix anything.

Now there are obstacles to this sort of irresponsible pandering: it is no longer fiscally or politically possible to hand another $23 trillion to vested interests. If the easy stuff is gone, that leaves only the hard stuff on the menu. The hard stuff has been ignored for four years precisely because it is politically impossible: how do you take away entitlements that have been promised to politically potent constituencies? How can you slash the income stream or profits of vested interests? You can't, unless you want to lose your own power.

So toady politicos and their apparatchiks are squirming and twisting, trying not to visibly break impossible promises while continuing to divert billions to their their donors and insider pals. The problem is that this approach will bankrupt the nation and spark an overthrow of the Status Quo.

The system has been pushed to extremes: the expectations are impossibly high, the promises are impossibly generous and the sums of money demanded by the vested interests "just to stay afloat" are stratospheric. The "run to fail" levers have all been pushed to the maximum, and it is simply too politically painful to make any real-world adjustments that might save the system from imploding.

Nobody wants a crisis, yet a crisis is the only thing that can save the system from implosion.

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diogeneslaertius's picture

straight up, no chaser

(unfortunately if you follow my analysis they will not give us a correction [maybe many small false ones a la 2008 prelim phenom], we are looking at a long slow burn as the ready NA for a bloc struct like the EU)

GetZeeGold's picture



Just checked the mulligan's empty all right.


vinayjha's picture

Central banker think free money morphin will save the world. This idiots don't know they are destroying their currency.

Cdad's picture

Ummmm....yes, they do understand.

i-dog's picture


"The Powers That Be counted on "time healing all,""

Bullshit ... it's a controlled demolition ... in accordance with their published 'Agenda 21'.

CHS is just ... another dumb fucking sheep!

SelfGov's picture

The right-wing scary-ass version of Agenda 21 is unimplementable and unenforcable given resource constraints.

On an infinite planet I would worry. On Earth, not so much.

diogeneslaertius's picture

and now a terrifying perhaps, they know they are destroying currencies in order to pave the way for a One World Currency

collapse the USD and front rhe SDR with the RMB and zombie Euro


in 30 years no one will even remember how it happened and if they do, tin foil hat jokes and or NDAA

+1 for suiting up and taking the field tho chief

linrom's picture

Yes they do. Why do you think gold is at $1700. They'll swap fiat for gold. In the end they plan on coming ahead, just like others buying gold.

diogeneslaertius's picture

hit me before i lose my nerve

GetZeeGold's picture



You can always spot the cherries at Fight Club.


slaughterer's picture

WTF, does Charles Hugh Smith just roll out of bed, send his PayPal payment to ZH and write out some steam-of-consciousness macro-skeptical surrealism from his dreams every day?  

Cdad's picture  He rolls out of bed everyday and writes about painful TRUTH...presumably with Zero payment and Zero compensation [besides talking his book] in an attempt to point out what is now so obvious, even a banker can [and does] understand it.


slewie the pi-rat's picture

only a true neoCon could write that here

the "economics" we are involved in is due to a political decison or three made while gBushjr was at the helm

once that political decision was made, the US goobermint made a tremendous effort to attempt to rein in the banksters

it may even be working

not, you want to tell us the economic disaster based on the noting-but-lies from the neoCons and the world-wide fraud didn;t happen, or doesn't matter?

this is the path the POLITICAL decision leads down

now you want to play holier that now that this is not the "proper" economic path?  and we MUST change political course back to those who led us to it and into it?

go fuk yerself c-dad

you are living in la-la land

maybe you can get mittens elected from there;  the idea that the disciple of the prophet moroni (as translated from the "egytian" golden tablets found in newYork under the same angelic guidance which led "smitty" to "find them") will mean anything except more militarism and socialist bullshit is some very amazing "fortune-telling" indeed!

why didn't he run for a second term in mass?  simple:  he couldn't win!  so he tried this with his "party" instead

mittens' dad was the goobernator of michigan during the boom years of american industry;  he has been as carefully groomed for this as randPaul is being now

so what?  he is what he is!  so is rand!  political tools of the uber-elite, imo

Cdad's picture

It would seem that some folks are not very good about remembering to take their anti psychotic medications on daily basis.  Proper dosing at regular intervals is very important.  Follow your doctor's instructions, and speak to your doctor before discontinuing use.  

slewie the pi-rat's picture

 <--< YES

 <--< NO

slewie opinion poll:  should US Mint-produced gold and silver coinage be restored as LEGAL TENDER in the US as per the US Constitution and not subject to the fuking "collectibles" and OTHER TAXES?

yes or no? VOTE!

...please...  L0L!!!

why are you responding to YOURSELF in this manner?

are you confused?

thinking of going off yer meds?

can you tell us what they are?

i have 1 (one) presription:  for "water pills" 25mg 1/day for slightly elevated BP;  other than that, i smoke the chronic and enjoy coffee and tea but don't use ETOH

but nothing i do is unlawful or crazy in my 'hood

what does your doctor or doctors proescribe for YOU  to stay more "healthy"?

you are a toy-boy propagandinst for the neoCons, c-dad!

yes, you have MANY friends her too!

someone is in la-la land, over the recent political HISTORY of the USA

you, perhaps? 

just drop the propwash and get back to commenting more realistically, ok,  son?

and since i've been open and honest (just in case you weren't replying to "self") howzabout you taking a turn?

what "innocent" drugs have they put you on?  feel free to use an extra page if needed, ok?

do you use weed?  ETOH?  what do you drink as a "morning beverage" and what do you "wash down" with it?

huh, shithead?

you gonna get pwned if yer not careful, asswipe!

i am "unpopular" b/c i stand up to tyler and his religious right propwash about the FED

so fuking what?  i care what yer bots "think"?

nope, not me!  and maybe you should stop and think before making much more of an ass of yourself...?

tyler has, btw...

francis_sawyer's picture

All your Sisyphus are belong to us...

slaughterer's picture

I mean, look at this phrase: "toady politicos and their apparatchiks are squirming and twisting" WTF does this mean?

slewie the pi-rat's picture

there is not one word about him or the EU here;  just a deflection getting good grades from fellow ideologues...?

you are a true neoCon as is mittens

not to mention annCoulter!

you're losing yer cred too c-dad, be careful! 

you can vote for whomever you please, btw

and you can "fight" all the way to the election;  but it is just partisanship, not wisdom or understanding

the idea that CHS can think straight about what is happening historically due to neoCon militarism and its lying is quite a stretch no matter how important it is to the toy-boys to "rehabilitate" him

Cdad's picture

I suppose if I could have flow charted my reply within the comment section of ZH, I might have drawn a box and placed in it the words "politicos and apparatchiks" and then drawn an arrow moving downward from there to another box in which the word "Draghi" appeared...thus making my point more clear for those who might be struggling with certain medication issues.

My apologies, but I currently do not have the ability to create a flow chart in the comment section of ZH.

teahouse's picture

and we... goooooo......

Frank N. Beans's picture

same ol' same ol', blah blah blah

how many different ways can you write about the same thing?  endless

CrashisOptimistic's picture

Try this.

There isn't going to be a boom moment.

Draghi is never going to march out to a microphone and say "I resign.  The Germans won't allow anything to happen and nothing will.  I will waste no more of my time and because they won't ever say it, I will: I am dreadfully sorry for the millions of Europeans who are going to starve to death because of these obstructions.  God bless you all and good luck, you're going to need it."

That's never going to happen.  The European way is to make happy, positive announcements all the way down.  It will be steady, deflationary erosion of all activity, with daily announcements of how something is now going to be better.

Ignore it.  There is no market.  There is only serial government intervention/manipulation.  Ignore it all.  

Forget stocks, forget bonds and forget gold.  Buy farmland.  Things of value can come from it, and pretty much nothing else.

Vincent Vega's picture

I gave you a plus one as my thoughts are substantially similar to yours. However, I will continue to buy PM's.

Brazillionaire's picture

Nice job of putting in terms that even I can understand! And it is obvious that this is exactly what we are witnessing.

ElvisDog's picture

Umm, farmland? That's a nice, enticing, highly visible, completely immovable asset to plow your capital into. Your farmland investment would only be a good one if the rule of law continues to be upheld (i.e. someone doesn't steal or emminent domain away your farmland) and/or if multiple government entities don't tax and regulate you into oblivion. Gold has two things that farmland does not - it's portable and you can hide it from view.

slewie the pi-rat's picture

yo, "crash"~~~

why is "draghi" the answer to the fact that CHS is full of shit?

you and c-dad on the phone together?

lasvegaspersona's picture


your eye is on the wrong ball. the Euro is a young health currency. The old bull with a quadrillion in derivitives is the dollar.

Ignore Draghi and keep an eye on USG spending. That will be the hyperinflatio nary trigger.

lasvegaspersona's picture


your eye is on the wrong ball. the Euro is a young health currency. The old bull with a quadrillion in derivitives is the dollar.

Ignore Draghi and keep an eye on USG spending. That will be the hyperinflatio nary trigger.

Cult_of_Reason's picture

This market is completely retarded, and addicted to the central planners and Hilsenrath rumors.

dadichris's picture

Lets publish the names and home addresses of the 0.5%.

And let nature take its course...

Sofa King Confused's picture

Finally, someone with a real solution


pismo10's picture

Perfect summary. The largest "vested interest" and the only one that matters by far is the new welfare class developed over the last few decades who will vote you out of office immediately if you cut their gravy. Bankers, etc have very very little to do with it. They are a very small number. The big votes that need to be kept happy are the 175 million Americans on welfare, one type or another.

lasvegaspersona's picture

Losses will not be taken, cuts will not be made, realities will not be faced. Hyperinflation is the painless way out (suicidal but painless at first) that has ALWAYS been the plan. Deflation is just the way things SHOULD happen....if the rules weren't changed...but the rules will be changed. Plan accordingly.

Zero Govt's picture

Yes Charles, no point re-arranging the deckchairs, just let the bitch (Govt) sink 

Pseudo Anonym's picture

so what:

the interests of Elites diverge to the point that the system is pulled apart.

a few oligarchs will walk away with all of it; just like in russia; that's the idea.  then, instead of 0.5% it will be 0.0001% against the rest. sweet.


DosZap's picture

If O gets back in fo 4 mo yrs, you will get your crisis,after Moochelles speech, if that did not scare the hell out of Americans nothing will Goobermint owns the people, and they will provide all, ALL.

Not one word about the upcoming American kids living the American dream, or doing for them selves.

O 's talk had Me & I in it over 60 times.(YOU did not create those jobs, Me & I did it).

Wonder who pays for all this free chit?, no explanation given, but we know it's coming from those savers, and business men and womens hard labors.

We are truly fragged.

RiskAverseAlertBlog's picture

There is no saving this system from imploding. It is 0-V-E-R. Please. With that in mind, then, the many valuable social achievements of past generations need not be thrown away to satisfy the fantasies of the present generation led to believe this system can be saved. This imperial abomination was made to implode. Now it is 0-V-E-R, period. Will you have courage to start thinking like a revolutionary American, the likes of whom once said, "Don't tread on me," leaving us only to add, "How dare you piss on our grandparents grave!"

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